Recent studies have found that 4 out of 10 companies are laying off workers in 2024, with the vast majority “knowledge workers” (people who are paid to think) who are being replaced by Artificial Intelligence (AI). While that will certainly be the catalyst for the 2024 Recession it also ushers in a new Megatrend that you better be prepared for and one that will be among the largest of this century: the replacement of “knowledge worker” jobs with AI. And there will be major winners and losers from this transformation.
The Losers
The “losers” at the hands of this Megatrend are numerous:
- Those who are employed as “knowledge workers” will see their jobs evaporate and those that are able to keep their jobs will be in constant price competition with a huge oversupply of workers who are competing with an ever-expanding AI replacement. The incomes of “knowledge workers” will decline precipitously as a result. For example, Google is reportedly gearing up to lay off 300,000 employees in its ad sales unit alone in favor of AI.
- Any business that sells to high-end “knowledge workers” and that includes expensive homes and condos in “knowledge worker” cities as well as luxury brands such as Louis Vuitton and Gucci and even expensive products like Tesla. They call this concept the “Richcession” and the stats support that hypothesis.
- The luxury tourism industry as the end of the “knowledge worker” is a global issue and there is no country to pick up the slack when the high-end American tourism falls off a cliff. And this will impact markets and products that appeal to this audience.
The Winners
- Any business that has a customer base that includes few, if any, “knowledge workers”. This would include mobile home parks, NASCAR races, and all those American institutions that cater to what is referred to as a “blue collar” audience that work with their hands and can’t be replaced with AI.
- Any business that is a necessity and is built on a foundation of affordability going into the pending recession.
- All shareholders in businesses that can replace their expensive “knowledge workers” with cheap AI which not only reduces labor cost but is no longer at the mercy of employment law as AI is open 24/7, doesn’t need health care, and can’t sue its employer for harassment. It’s every HR department’s dream.
Why mobile home parks are the perfect contrarian hedge to all of this
Amidst all the anarchy of the end of the “knowledge worker” era will stand one asset that has an almost unfair advantage over all the others: the asset class that is perfectly positioned and welcomes its arrival. And that’s the good old fashioned trailer park. Why are mobile home parks the perfect hedge to all of this turmoil?
- Mobile home parks are built on a foundation of people who work with their hands. It’s hard to find an industry has less “knowledge workers” as customers than mobile home parks. Our largest single job function is fast-food and mobile home park residents do those jobs that keep America functioning such as food preparation, delivery, construction and all those jobs deemed “essential” during the Covid crisis.
- Mobile home parks have around half of their tenant base as retired individuals. When many Americans retire, they downsize and that often includes moving into a mobile home park. As a result, probably at least half of the tenant base in many mobile home parks are retired households. This makes them impervious to the end of “knowledge workers” – even if they were one in the old days.
- Mobile home parks are a necessity and not a luxury business. When America hits recessions all of those luxury niches are tossed aside as there’s not enough money to pay the bills and also splurge. And the number one necessity for all Americans is housing. As a result, mobile home parks never have to worry about demand.
- Affordable housing will soon be the hottest product in the U.S. The average single-family home in the U.S. is $400,000 and the average apartment rent is $2,000 per month. Against this backdrop mobile home park living (the U.S. average lot rent is $300 per month) looks incredibly cheap. The 2024 Recession will trigger the biggest spike in affordable housing demand ever recorded.
- Recessions lead to lower interest rates and lower cap rates. Mobile home parks are a part of real estate and all real estate sectors perform better in lower interest rate environments. If you own a mobile home park as the rates go down it pushes up your park’s value even in the absence of significant net income growth.
- Recessions tend to eradicate inflating operating costs. Inflation pushes up operating costs for all businesses, and mobile home parks are no exception. However, the pending recession should end the cost increases and even potentially change that direction.
- There is not one single shred of a component of mobile home parks at risk from technology. Since AI is destroying the “knowledge worker” it’s a reasonable question as to if there are other gaping holes that technology can use to sink other businesses going forward. Fortunately, mobile home parks are not based on any form of technology and have no risk of obsolescence as a result. You can’t live in the “cloud” and mobile home parks have no moving parts.
Conclusion
The “knowledge worker” Megatrend will be one of the big news stories for years to come. Fortunately, the impact will actually be positive for mobile home parks which happen to be perfectly positioned for this turn of events. For everything else, the future is not so promising.