Step 3 – Invest in an AI-first economy
In this module, you’ll learn why it’s important
to invest in our new AI economy.
In addition, you’ll learn what investments
you should be making now to ensure your success.
Who will be the world’s first trillionaire?
Who will win and who will lose in the new
AI economy?
During the agricultural revolution, we had visionary societies like the Sumerians, Egyptians, and Chinese.
They all capitalized on the key technologies
of the agricultural revolution.
As a result, they became some of the largest
and most powerful civilizations on Earth.
During the industrial revolution, we had visionaries like John D. Rockefeller, Thomas Edison, and Henry Ford.
They all capitalized on the key technologies
of the industrial era.
As a result, they became some of the wealthiest
and most influential people on the planet.
During the information revolution, we had visionary companies like IBM, Microsoft, and Google.
They all capitalized on the key technologies
of the information age.
As a result, they became some of the wealthiest
and most powerful corporations on the planet.
During the AI revolution, there will likely
be future visionaries.
They will also capitalize on the key technologies
of the age of AI.
As a result, they will likely become some
of the wealthiest and most powerful
people, businesses, and governments
on the planet.
In fact, many experts predict that
the world’s first trillionaire
will likely be created from
wealth generated by AI.
The AI revolution will likely have a significant impact on our economy and capitalism as we know it.
These changes will require that individuals,
businesses, and governments
need to adapt in order to function
in an AI-first economy.
First, we’re seeing a shift in returns to
capital vs. returns to labor.
Returns to capital are essentially how much money
you can make by investing in capital assets.
These include investing in machines, software,
data, and more.
Returns to labor are essentially how much money you can make by soliciting your labor for income.
This includes physical labor, knowledge work,
and highly specialized labor.
Over the past few decades we’ve seen a continuous
upward trend in returns to capital.
As a result, the value that you recieve from
investing in capital assets continues to increase.
On the other hand, we’ve seen a continuous
decrease in returns to labor.
As a result, the value that you recieve from
each hour of your labor continues to decrease.
Essentially, labor is becoming cheap and automation
is becoming highly profitable.
This phenomena is referred to as “The Great
Decoupling”.
Essentially, productivity in the USA continues
to rise year after year.
However, somewhere in the 1970s labor compensation
broke away from the productivity-gain trend.
This diverging trend will likely continue
and become amplified with further AI automation.
Second, data may likely become one of the most valuable resources in our information economy.
Those who have the most data,
and the ability to enable AI with data,
will wield tremendous power
in our information economy.
In fact, there are data sets that exist today
that are currently valued at over a billion dollars.
Think about that that’s just a bunch of ones and zeros
in a computer somewhere
worth over a billion dollars.
Third, the AI revolution will likely lead
to a significantly more non-linear economy.
Those with smart machines will have even more
power
and those without smart machines, unforuntately,
will likely have even less power.
It will become progressively harder for individuals,
small businesses, and even some governments
to compete with large established tech companies.
How should you invest in an AI-first economy?
What should you be doing today to capitalize
on AI automation?
First, before you make any other kinds of
investments, be sure to invest in yourself first.
The best way to leverage your time, money,
and resources is to invest in:
your education
and your career.
We’ve already covered this in depth in the
previous two modules.
However, it is important enough to be stated
again.
The best investment you can make right now
is an investment in yourself.
Second, invest in AI solutions to solve real-world
problems.
No matter who you are there are AI solutions
available today (or soon will be)
that can solve a wide variety of problems
that you face on a daily basis.
If you’re a business owner, you can use AI
to improve business operations.
Invest in AI to make better decisions, build
smarter products, or automate manual labor.
If you’re an employee or a contractor, you
can use AI to increase your own personal productivity.
Invest in off-the-shelf productivity-enhancing
tools that will automate
the parts of your job that are monotonous,
repetitious, or inefficient.
And outside of work, we can use AI solutions
make our lives more enjoyable.
There are many AI products and services
today that can simplify your life
and eliminate chores that
you don’t enjoy doing.
However, you need to let economics drive
these AI solutions.
The benefit you receive from an AI solution
must be greater than
the cost to automate and maintain that solution.
Otherwise, it’s not a worthwhile investment.
Third, don’t depend solely on your labor for
income.
Your labor is going to become progressively
less valuable as we automate more jobs.
This includes manual labor, knowledge work,
and even highly specialized labor.
Instead, you need to begin putting your money
into wealth-generating assets.
These include investing in companies, selling
your own products, or providing automated services.
Your labor can only make you money
while you’re working.
So most people only make money roughly eight
hours a day.
However, wealth-generating assets can make
you money twenty-four hours a day.
So those that invest in wealth-generating assets are essentially making money even while they sleep.
Fourth, invest in the economy as a whole.
On balance, the AI revolution is ultimately
going to lift the entire economy.
You don’t need to outsmart the markets to
make money in this new economy.
You just need to invest in the economy as
a whole.
Now, it’s important that I note that
I’m *not* a financial advisor,
so I can’t offer you any
specific financial advice.
However, what I can do is tell you about my
own personal investment strategy,
so you can do your own research and come up
with an investment strategy that works for you.
First, I diversify my investments
to reduce my overall risk.
I do this using index funds with
very low expense-ratios.
For example, I use Vanguard’s Total Stock
Index Fund and their World Stock Index Fund.
Index funds spread your investments across
the entire stock market to minimize your overall risk.
Essentially, the entire global economy would
have to collapse for me to lose all of my money.
And if that happened, we’d likely have much
bigger problems on our hands.
Next, I buy low and hold all my investments.
I don’t day-trade, speculate,
short sell, or try “timing the market”.
Instead, I invest regularly in my index funds,
I put extra money in when the market is low,
I keep all my investments long-term,
and I rebalance once a year.
Finally, I have a safety net
during economic downturns.
I have just enough in the bond market
and semi-liquid assets
to cover me during a recession,
if I should happen to lose my income.
And I progressively grow the size of this
safety net as I get closer to retirement
– during the years that I would
likely need it most.
It’s a ridiculously simple yet highly effective
investment strategy
endorsed by many of the top experts
in the world.
Fifth, invest early for compound growth.
Exponential curves like the growth of GDP
per capita in the USA
start out slow and then explode quite rapidly.
The sooner you invest in the AI economy, the
better off you’ll be (exponentially).
The next Googles, Amazons, and Microsofts
are out there now or soon will be.
However, you don’t need to find them yourself,
your index fund will find them for you
when the time is right.
You just need to invest in the whole economy
now so your investments
will reap the reward of long-term
exponential growth.
To recap our third recommendation:
invest in an AI-first economy.
Invest in yourself first,
invest in AI solutions to real-world problems,
don’t depend solely on your labor for income,
invest in the economy as a whole,
and invest early for compound growth.