‘AI will change the way we work. But it will take time, and then it will go fast’ – The Irish Times

Wall Street is hedging its bets. While the S&P 500, the world’s most followed stock market index, keeps hitting record highs every other day amid a three-year bull run, gold, which usually moves in the opposite direction to shares, has been on a tear of its own.

The price of the safe-haven asset has jumped more than 50 per cent so far this year to breach $4,000 (€3,443) an ounce for the first time.

Reasons for the gold rush abound. Many market strategists say the precious metal is being used as a hedge against economic uncertainty caused by Trump administration tariffs.

Some point to a fall this year in the value of the dollar, the currency in which gold is priced. And others say gold is a safe bet in case the artificial intelligence (AI) boom that has been fuelling the stock market starts to fizzle out.

But, for Ron O’Hanley, chairman and chief executive of State Street – a leading administrator to the global investment management industry and one of the biggest asset managers in its own right – the reason for the anomaly may be more simple.

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“In some ways, gold is an indicator of what investors’ beliefs are about long-term inflation prospects,” O’Hanley says, speaking to The Irish Times in Dublin this week.

There are good reasons to be concerned about rising inflation over time.

“If you look at government debt levels, there’s been a fundamental change if you think about the ’08 period to where we are now,” he says. “The pandemic proved quite costly in the taking on of government debt.”

Global government debt surged from 58 per cent of gross domestic product (GDP) in 2007 to 93 per cent last year, or almost $100 trillion, driven by the borrowings to support businesses and households during Covid lockdowns, according to the International Monetary Fund.

Some investors believe central banks may, eventually, tolerate higher inflation to reduce the real burden of public debt.

So, why is the equity market continuing to rise? “In aggregate, consumer debt levels are in pretty good shape relative to where they were in the past. Corporate debt levels are also in pretty good shape,” says O’Hanley.

“That is a good signal to the equity market.”

The impact of the so-called Magnificent Seven tech stocks that have driven the S&P 500 in recent years – Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla – is now starting to broaden to other companies, he says.

Official interest rates are continuing to decline. Meanwhile, corporate earnings are, for the time being at least, also holding up well – with the consensus forecast among analysts pointing to 10 per cent earnings per share growth this year in the US – even as many industries are absorbing much of the impact of tariffs, rather than passing them on to customers.

A survey published by KPMG last week found that just a fifth of US businesses have passed on over half of new tariff expenses.

O’Hanley, whose group has $49 trillion of assets under custody and administration (almost the equivalent of the US and EU economies combined, measured by GDP), is on the fence – publicly at least – on the long-term effects of US president Donald Trump’s protectionist trade policies.

“That’s the $64,000 question that everybody’s asking. And probably the entity that is asking it the most is the Federal Reserve. There is a school of thought that the tariffs are a one-time price reset and they shouldn’t actually reset inflation expectations. Others say this has a rolling impact that will be cumulative – and in a way that we just don’t know.”

The biggest challenge is ongoing uncertainty, as many tariffs are still not finalised, he says, more than six months after Trump’s Liberation Day speech. The broader question is the future of globalisation.

“Whether you call it deglobalisation or a reordering of globalisation, we’re going to see change – and national interests become much more prominent,” he says. “We’re in a period of adjustment. And the biggest challenge to investors and companies is that it’s very hard to make a decision that has long-term implications when you’ve got this kind of uncertainty.”

It must be disorienting to ponder for someone whose career began at the dawn of the era of hyperglobalisation.

Following the completion of a master’s in business administration (MBA) at Harvard Business School in 1986, Hanley joined management consultancy McKinsey, where he would end up as a partner and head of the firm’s investment management practice worldwide.

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He subsequently joined Mellon Financial Corporation in 1997 and went on, following the group’s 2007 merger with Bank of New York, to serve as the wider BNY Mellon group’s asset management arm.

Hanley also spent a four-year stint in a senior role at Fidelity Investments before joining State Street in 2015 as head of the investment management arm.

State Street traces its roots back to 1792 as Union Bank in Boston. Fifty years ago it shifted its focus from commercial banking to the plumbing work that takes place after shares and bonds are traded – like clearing, settlement and custody – as well as asset management.

State Street set up an Irish operation in 1996 and has since become one of the largest international financial services employers in the State, employing about 2,300 people in offices in Dublin, Kilkenny, Naas, Co Kildare, and Drogheda, Co Louth.

Almost a decade and a half ago, the investment arm bought Bank of Ireland Asset Management (BIAM), once the crown jewel of the Irish bank. BIAM had €26 billion of assets under management (AUM) at the time.

The US group had $49 trillion of assets under custody and administration as of the end of June. Its asset management arm, rebranded as State Street Investment Management this year, had $5.12 trillion of AUM.

While O’Hanley’s appointment as incoming CEO of State Street in November 2017 marked the culmination of his career, a report in The Boston Globe the next day drew attention to a less flattering episode from his distant past.

It reported that he withdrew from Vanderbilt University Law School in 1983 after admitting to plagiarism as editor-in-chief of the Vanderbilt Law Review. A day after the report, he issued an email to staff, acknowledging that “as a student I made a big mistake”.

State Street stood by O’Hanley. A spokeswoman said at the time that he had fully disclosed the matter and the organisation supported him “unequivocally”. His “track record as a corporate leader and his achievements both at State Street and in his previous roles speak for themselves”, she added.

Under O’Hanley’s tenure as CEO, which officially began in January 2019, the group’s assets under custody and administration have jumped 55 per cent, while assets under management have more than doubled.

While the softly-spoken executive is a lower-profile figure than many other bosses of top US financial institutions – such as JP Morgan’s Jamie Dimon, Larry Fink of BlackRock or Jane Fraser at Citigroup – he is well regarded in the asset management and administration world.

Last year, Global Custodian, the go-to publication for the industry, gave him a lifetime achievement award.

The past three years have seen State Street take out $1.3 billion of running expenses, driven by the use of AI to do more mundane tasks normally carried out by entry-level workers, O’Hanley told a conference in June.

He said the underlying global headcount fell by 4,000 last year – even as the headline figure jumped 13 per cent to 53,000 as it consolidated an Indian joint venture into the group.

“It’s interesting to see all the excitement in AI as if it was invented in 2023,” he says now. “But we – and others – have been on this AI journey for many, many years.”

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Machine learning has long been used for one of the most important daily tasks of State Street: calculating the net asset value (NAV) of tens of thousands of funds.

“Fifteen or 20 years ago, markets would close and a flurry of activity would start to work out what happened in a fund that day – the buys, the sells, the corporate actions, the dividends paid and received – to come up with a net asset value. It typically took an hour and a half to produce and send on to clients.

“What’s happening now, with machine learning, is that the NAV is being calculated transaction by transaction every day. That was, if you will, a prior generation of AI.”

State Street is currently teaming up its software engineers with what he calls “AI buddies”. And it is encouraging employees to continually think differently about how AI can be used at work.

“I’m often amazed at some of the ideas that come up. Some you might think of as trite, but they’re actually changing work in a fundamental way.

“For example, take the end of a financial period. Again, that’s a time when a lot of people spring into action. All that work has now shortened. Is it reducing the number of people? Not really. But time that was spent on identifying ‘what happened’ is collapsing. That’s created more time for the ‘so what’ of what’s happened – the analysis around it.”

Most importantly, it’s left time to consider the ‘now what?’ – what are we going to do next?” he says.

“AI will change the way we work. But, like a lot of change, it will take time, and then it will go fast.”

Will AI lead to dystopian scenario of the robots taking over white-collar jobs, or create a future where people are free to enjoy greater leisure and personal fulfilment?

“I think neither is going to happen. For the most part, it will change the nature of work for the positive,” he says.

“It’ll put new requirements on employees. It will also have implications for the education system. We need to move away from a way of thinking, where people go, ‘I know exactly what my child needs. They need to go to coding camp and be prepared to be an electrical engineer.’ In future, you need to be a problem solver and you need to be a lifelong learner.”

O’Hanley (68) says he spends about 60 per cent of his working life away from Boston. He has been in Ireland this week for a series of meetings and to speak at a convention in Dublin on Thursday.

He has Irish roots on both sides of his family tree. Forebears of his mother, whose family name was Fagan, moved to the US in the 18th century.

“The O’Hanley’s were famine emigrants from Roscommon in the late 1840s,” he says. “They took the classic journey, with a couple of generations in Canada before making their way down to the Boston-Rhode Island area.”

O’Hanley also speaks about State Street’s commitment to regional Irish towns and cities, even as rival BNY Mellon recently decided to close its offices in Wexford and Cork – affecting hundreds of jobs – to improve “operational efficiency”.

Dublin’s position at the epicentre of a national housing crisis makes it more important to spread the company’s Irish operations to attract and keep “talent”, O’Hanley says.

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“The housing crisis isn’t unique to Ireland. Our home city of Boston is equally challenged when it comes to housing. It’s a global problem.”

The CEO says he’s “actually quite encouraged” by Government efforts to boost housing supply.

While economists say the Government faces major challenges meeting its target of delivering 300,000 new homes by 2030, home builders have concluded that Budget 2026 measures aimed at rebooting apartment building – together with new apartment construction guidelines unveiled during the summer – have moved the dial significantly and will help narrow the viability gap for apartment construction.

“But, like everybody else,” O’Hanley says, “we’d like to see more, faster.”

CV

Name: Ron O’Hanley.

Job: Chairman and chief executive at State Street.

Age: 68.

Lives: Boston.

Hobbies: He is an avid offshore sailboat racer.

Something you might expect: Ron serves on the board of directors of the Federal Reserve Bank of Boston and on several industry and not-for-profit boards, including the Ireland Funds.

Something you might not expect: He competed in the 2025 Admiral’s Cup for the Royal Irish Yacht Club in Dún Laoghaire. In 2023, his boat set the course record for the Dún Laoghaire to Dingle race.