Michael Batnick and Ben Carlson host this episode of Animal Spirits, discussing the viral AI doom research from Citrina that predicts massive unemployment and market crashes by 2028. The piece argues that AI will lead to widespread white-collar job losses, creating a negative feedback loop of reduced consumer spending and economic contraction.

The conversation explores the human element of technological disruption, with Batnick expressing concern about the personal impact on families who may face job displacement. They examine whether AI represents a fundamentally different threat than previous technological revolutions, drawing on insights from Boom Bust about historical technology adoption patterns and Influence The Psychology of Persuasion regarding human behavior and network effects.

The hosts also cover the ongoing market rotation, with software stocks experiencing their worst performance since 2008 while global markets show remarkable breadth. They discuss the Blue Owl private credit crisis, real estate market dynamics, and cultural observations about AI adoption, movie runtimes, and entertainment recommendations.

AI Doom Scenario Sparks Market Anxiety and Personal Concerns

Citrina Research's viral piece predicts 10% unemployment and 40% market decline by 2028, with AI causing white-collar job displacement and reduced consumer spending in a negative feedback loop

"We had overestimated the value of human relationships. Turns out that a lot of what people called relationships was simply friction with a friendly face" - Batnick quotes the most concerning line from the research

The piece specifically targets financial advice, tax prep, and routine legal work, claiming AI agents will find "nothing tedious" and eliminate the need for human intermediaries

Batnick expresses personal anxiety about people in their lives who will be "impacted in a material way, and they don't know it yet," leading to cascading lifestyle changes

Technology Adoption Patterns Challenge AI Displacement Theory

Boom Bust co-author noted to The New York Times: "I can't remember a boom with such active hostility to it" - unprecedented negative sentiment toward AI compared to electricity, bicycles, and motor cars

Carlson argues real estate already faced internet disruption through Zillow, yet people still choose human agents for transactions, demonstrating persistent preference for human relationships

Drawing from Influence The Psychology of Persuasion, Carlson notes "you look to see what other people are doing and then you do it yourself" - human nature and network effects cannot be eliminated by AI

Gavin Baker tweets that insufficient compute capacity makes the 2028 scenario unlikely: "AGI is an event horizon with significant compute dependence"

Software Stocks Crash While Global Markets Show Resilience

Software stocks experienced their worst month since October 2008, with Microsoft down 30%, ServiceNow down 57%, and Salesforce down 52%

Despite Mag 7 being in an 11% drawdown, the equal weight S&P is only down 2%, showing remarkable market breadth with 66% of constituents outperforming

Global stock markets show strongest breadth in over 20 years, with the number of markets more than 2% above one-year peaks at highest level since 2004

Batnick implements contrarian strategy, buying Microsoft, CrowdStrike, Salesforce, and ServiceNow: "I'm running into the fire. That's the only thing I know how to do when I'm scared"

Private Credit Crisis Hits Blue Owl and Blackstone Funds

Blue Owl stock crashed 60% amid private credit concerns, with CEO deflecting responsibility and claiming surprise at market reaction to their 30% redemption offer

Blackstone's private credit funds show 26% software exposure, creating vulnerability to AI disruption fears beyond traditional credit risks

Monthly inflows into Blackstone's largest fund dropped from $1.1 billion in November to $600 million in January, with further declines expected

Market pricing implies 21% cumulative defaults if Blue Owl's discount reflects pure credit losses - equivalent to "GFC level or worse" according to Covenant Light analysis

Economic Fundamentals Remain Strong Despite AI Fears

Tech employment represents only 2.3% of overall payrolls and software publishing just 0.4%, limiting potential labor market impact despite high-profile layoffs

Corporate earnings calls show resilient consumer spending: Walmart CEO notes "spending continues to be resilient" while Capital One describes consumers as "stable"

Truist Financial EVP observes: "Consumers' beliefs don't match their behaviors... watch what people do more than what they say, and you'll learn a lot more"

Revenue growth at multi-year highs with unemployment at 4.3%, inflation benign, and interest rates falling - creating disconnect between AI fears and economic reality