3 Easy Steps to Avoid Being Disrupted by AI

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Our production capacity will continue to increase by orders of magnitude through automation, robotics, and generative AI.

With the rise of generative AI, we have scaled intelligence, and we’ll just multiply the number of productive agents as they can be easily spun off and replicated in the cloud.

Essentially, we can now ‘inject life into dead rocks’; silicon, made from sand, can be animated by means of Large Language Models (LLMs) and energy to make it ‘talk’ and perform intelligent tasks.

This revolution removes two major limitations in our economy: intelligence and labor.

🌞 Energy is also currently being disrupted, with the declining cost curves of both solar energy and battery storage. Solar energy is already the cheapest form of energy.

A simple formula to measure human productivity and efficiency is to divide the total productive output by the cost to produce it.

output πŸ‘†
_____             =    productivity πŸ‘†πŸ‘†

costs πŸ‘‡

With the costs of intelligent labor dropping by a factor of approximately 1000x and the cost of energy declining as well, we’re poised to see a huge surge in our economy.

How do you protect yourself against this rapid change?

Step 1: Relax and Enjoy the Show

Firstly, relax. On average, life in the future will be significantly better than it is today.

No. of publications on happiness per year (source)

Today, most people live much better lives than those in the 1920s, 1820s, or 1720s. In the future, most people will live even better lives than we do today.

We don’t know exactly how it will play out, but as a society, we’ll find ways to redistribute wealth.

Technological progress will be accessible to everyone.

Today, you can access thousands of lectures from MIT, Harvard, and Stanford professors online. You can read the Finxter newsletter for free. πŸ‘‡

The smartest people on earth freely share their knowledge. Just 20 years ago, this level of free and high-quality education was inaccessible to most of the world.

Free and open-source LLMs today not only democratize access to information but also to intelligent labor.

In a few years, most of us will have access to ‘cyberslaves’, i.e., mechanical and digital robots that work for us essentially for free. This will enable us to consume at a much higher level if we choose to do so.

Step 2: Work for and Invest in Star Businesses

The BCG Growth-Share Matrix is a strategic business tool developed by the Boston Consulting Group. It categorizes a company’s business units or products into four quadrants based on their market growth and market share.

The quadrants are:

  • πŸ’« Stars (high growth, high market share),
  • ❓ Question Marks (high growth, low market share),
  • πŸ„ Cash Cows (low growth, high market share), and
  • 🐢 Dogs (low growth, low market share).

Richard Koch (Investor, Entrepreneur, Multi-Millionaire)

Star businesses are leaders in high-growth industries. They are the disruptors and the future’s big companies. Most economic value will be generated by these businesses.

Business and life is driven by extremes, not averages. The average business is, well, average, so-so. It won’t change your life. A star business can.

Virtually every business that has made many people millionaires or billionaires is or was a star business – the leader in a high growth market. I’ve been a fan of star businesses for the past 30 years. The idea has never failed me. As far as I know, it has never failed any of the thousands of people to whom I’ve introduced it.

It never ceases to amaze me. How is it that most people work so hard going nowhere much, while the few super-charged star ventures create so much with so little?

Yet it is so. Stars are the place where the universe creates good fortune. They are the source of new wealth. Stars are the place to invest. They are the place to work.


source

A rising tide lifts all boats. If you work for or invest in a star business, you can be confident that you’re on the right side of change. You are in a growing and proliferating environment.

The growth means not only that your stock options, income, investments, and finances will grow, but your career and skills will also rapidly develop because a growing environment always demands more work than there are people available to do it.

If you’re willing to go the extra mile in a star business, you’ll always get the opportunity to step up and take more responsibility, increasing your income and career prospects.

Investing primarily in ‘Stars’ in the BCG Matrix makes sense for a few key reasons:

  1. High Market Growth: Stars operate in high-growth markets, indicating a rapidly expanding customer base and increasing demand. This environment often provides significant opportunities for revenue growth.
  2. High Market Share: Stars have a high market share, demonstrating they are leaders in their respective markets. This position often comes with competitive advantages like brand recognition, customer loyalty, and economies of scale, which can lead to higher profitability.
  3. Future Cash Cows: As the market’s growth rate begins to slow, Stars have the potential to evolve into Cash Cows, business units that generate consistent, high returns with less need for investment. This transition can secure a company’s financial stability in the long term.

If you invest in a star business that continues to succeed, you’ll benefit not only from the growing market but also from the increasing market share (winner takes all!) and profitability (efficiencies of scale).

This can be a life-changing investment!

πŸ“ˆ Examples of high-growth industries. AI won’t change the presence of a few long-term high-growth industries – in fact, it’s a high-growth industry by itself. Here and here is a list of high-growth industries.

Step 3: Become an Investor in Scarce and Desirable Assets

You should invest in scarce and desirable assets to protect your economic value.

Example of a scarce and desirable asset – Alphabet stock GOOG

As our production capacity increases through automation, robotics, and generative AI, and as the money supply expands through inflation, so will the price of scarce and desirable assets when measured in the expanding units of currency and goods.

What are scarce and desirable assets? Anything that can’t be easily produced or replicated.

For example, land is scarcer than buildings. You might be able to build a house using a fleet of robots. But you cannot create more land on earth.

Here’s a list of ideas, although many are not recommended. I give you my recommended answer after the list:

  1. Land and Real Estate: Especially in prime locations, the supply of land is inherently limited and cannot be increased, making it a classic example of a scarce asset.
  2. Fine Art and Antiques: Original works of art and historical antiques are one-of-a-kind items that cannot be reproduced authentically, adding to their scarcity and value.
  3. Rare Collectibles: This includes items like rare stamps, coins, vintage cars, and limited-edition luxury goods, which are highly sought after due to their rarity.
  4. Precious Metals: Gold, silver, platinum, and palladium are limited in supply and have intrinsic value, often seen as a hedge against inflation and economic uncertainty.
  5. Crypto: Bitcoin has an upper limit of 21 million. There will ever be only 21 million, no matter how much innovation and productivity growth exists.
  6. Gemstones and Jewelry: High-quality diamonds, rubies, sapphires, and other gemstones are rare and hold significant value, often increasing over time.
  7. Vintage Wines and Spirits: Certain wines and spirits become more valuable as they age and as their availability decreases.
  8. Limited Edition Luxury Items: High-end luxury goods released in limited quantities can become more valuable over time due to their scarcity.
  9. Historical Artifacts: Items with historical significance, such as ancient artifacts, manuscripts, and fossils, are irreplaceable and often highly valued.
  10. Rare Books and Manuscripts: First editions and original manuscripts, especially of significant historical or literary importance, are scarce and desirable.
  11. Domain Names: Particularly short, catchy, or relevant domain names can be incredibly scarce and sought after.
  12. Intellectual Property Rights: Patents, copyrights, and trademarks for highly successful inventions, literary and artistic works, and brands.
  13. Cultural and Heritage Sites: Ownership or rights associated with historically significant properties or locations.
  14. Natural Reserves: Unique natural areas or ecosystems, often protected for conservation, can be scarce and valuable.

πŸ’‘ Recommended: Star businesses are scarce and desirable assets because they are difficult to build. Stars are more scarce than question marks, as anyone can start a new business in a growing industry, but only a few can lead it.

Keep investing a portion of your income and become financially independent, slowly and steadily. As a high networth individual, you can enjoy the productivity gains and don’t need to fear the rapid disruptions.

Become an owner of star businesses and scarce and desirable assets.

Let’s stay on the right side of change!