Blackstone’s Jon Gray on the Labor Market Winners and Losers of AI

In a recent meeting with investors, Jon Gray, the president of Blackstone, played a clip of the 1967 classic film “The Graduate.” It was the famous scene where Dustin Hoffman’s character gets pulled aside by one of his parents’ friends at his own college graduation party for some awkward career advice.

“I just want to say one word to you,” says the Mr. McGuire character, “Power.”

In the original scene, McGuire said, “plastics,” reflecting the space-age economy of the 1960s. The message behind Gray’s edit was that power is the new plastics in an age of electricity-hungry AI.

Gray made the comments as part of a presentation to explain Blackstone’s plan to generate returns off the AI boom while avoiding reckless, overexuberant investments. In doing so, he made a case for which professions are most likely to thrive in the AI boom, which won’t likely be affected, and which stand to be massively transformed.

The September 17 comments, which the firm later uploaded to YouTube, reflect a larger societal conversation about the coming AI revolution that is still unfolding.

Gray compared the AI revolution to two other massive economic changes: the industrial revolution and the dot-com boom. Both eras reshuffled the deck for labor, with farmers laying down their shovels and moving to the factories and software developers growing at the expense of encyclopedia salespeople, causing some industries to boom, some to contract, and previously unimaginable jobs, like social media influencer, to be created.

The main difference this time around is that the change will be even more rapid, said Gray, noting that ChatGPT was the fastest product to reach 700 million consumers in history.

Here are some potential winners and losers of the AI economy, based on Business Insider’s reading of Gray’s September 17 presentation. Blackstone declined to comment.

Winners

Instead of directly investing in Generative AI companies, Blackstone has adopted a “picks and shovels” approach, investing in the infrastructure that will power the boom.

“If you have young college graduates, I would tell them power is the way to go,” Gray said.

Massive labor shortfalls among the electricians and plumbers necessary for the growth in data centers puts these jobs in a favorable position. Relatedly, a LinkedIn study recently found that oil and gas jobs are one of the fastest-growing areas for new grads, alongside skilled trades.

Blackstone’s $100 billion data center platform, led by its US data center giant QTS, showcases how growth can lead to jobs as well. Gray said the company has grown from $10 billion when it was purchased in 2021 to $70 billion, and while Gray didn’t directly mention the people who staff data centers, these skilled professionals will surely be in high demand.

Blackstone and QTS have been investing in a homegrown talent pipeline to train these workers, amid a labor shortfall in these data centers.

For now, investors in AI are also winners of this boom, with stocks at all-time highs.

“There is no question that when you get this kind of excitement, you are going to get excesses,” Gray said, warning of speculatively-built data centers that don’t have a tenant in mind.

“Will it start to create bubbles?” he asked, “We’ve got to keep our eyes on this.”

Historically, crashes caused by overexuberant investing have led to widespread layoffs in the financial industry. The finance and insurance industry saw record-high layoffs in 2008 and then 2009 following the subprime mortgage crisis, reaching nearly 100,000 separations in both years per the Bureau of Labor Statistics.

Losers

During the presentation, Gray showed some slides suggesting AI may already be disrupting some industries. The slides were based on a recent Stanford study that suggested AI may already be replacing the least-experienced workers (ages 22 to 25) in certain white collar jobs, including software developers and customer service agents.

The slide showed that hiring for young people in these roles started to lag 40-to 49-year-olds at the end of 2022. By contrast, the employment rates of young stock clerks and health aides kept pace with their older peers during this time period.

“Early programmers are being displaced,” said Gray, calling it “a Claude code effect,” referring to Google’s generative AI coding tool.

The same is happening in customer service, “as AI gets better at answering phones” and “answering questions.”

Gray highlighted the firm’s investment in “rules-based businesses” as another place where AI has the power to transform “legacy businesses.” AI’s ability to follow rules in businesses like accounting, healthcare claims, or marketing compliance is part of the opportunity that led Blackstone to invest in AGS Health, Citrin Cooperman, and Norm AI, he said.

While Gray’s comments were only about efficiency, they raise questions about the implications for workers. While some experts have suggested that AI could simply increase efficiency for companies, allowing them to do more with the same number of workers, AI disruption still raises the prospect of job cuts.

It’s still “early days,” said Gray, but the technology is already having an impact at Blackstone. The investment giant has built out an in-house video team to do everything from shoot its infamous holiday videos to make its presentations, like Gray’s September 17 talk, more sleek. Generative AI isn’t up to par just yet, but it’s much cheaper, Gray said.

To highlight this, he played two versions of the same Blackstone commercial set in the 1849 Gold Rush. The first was filmed outside of Vancouver, and cost $1 million when tallying up the cost of travel, lodging, wages, and video editing, Gray said. The second commercial is “not quite as good yet,” but costs “a lot, lot less,” Gray said. “It was made on the eighth floor here with two guys in a couple of hours,” Gray said.