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PaperclipPerfector  2mo ago (text post)   3340 thread views

Small-Scale Question Sunday for February 18, 2024

Do you have a dumb question that you're kind of embarrassed to ask in the main thread? Is there something you're just not sure about?

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How are you changing your investment/savings strategy as AI timelines get shorter? I’m still in my boring ol’ index funds but have decreased my savings rate down by 5-10%.

I know very little economics, but the popular sentiment seems to be that interest rates will get very high and raw capital will be incredibly important in a post-AGI world. Does this matter for the average person like me who just wants to be financially independent in his 40s?

I don't understand, if you believe in shortening AI timelines, why are you in index funds and not tech? Why aren't you on the NVIDIA train with me? Surely an AGI world means that AI related companies are swimming in rivers of gold? NVIDIA, ARM, Microsoft, TSMC, Facebook, AMD, whoever makes memory, whoever makes robots...

Index funds means boring stuff like Walmart and Coca Cola, unless you mean tech index funds.

Because being ‘in tech’ doesn’t really mean being ‘in tech’. Google and Meta are ad businesses reliant on the rest of the economy being in good shape; Microsoft is reliant on the same thing for both its enterprise and consumer businesses. There is no world in which a ton of labor is automated and many businesses disrupted but tech stocks inexplicably stay at super high valuations.

Surely the companies with the largest and most powerful AI models will make profits from the development of AGI, since they'll be the ones doing it? Non-tech companies don't have the compute, they'll be the ones being automated. Microsoft, Facebook and so on will be the ones automating.

Omdia estimates the biggest H100 customers for the past quarter were Meta and Microsoft, each purchasing 150,000 GPUs. Those two companies were responsible for 300,000 units, with the other 200,000 going to Oracle, Tencent, Google, and Amazon, which reportedly bought 50,000 each.

I've been thinking about this a lot lately. I'm still working this out. Initially, I invested a bunch in Google because of the amount of data they have, but then started investing in other things like Microsoft, Nvidia, ASML, TSMC, and some energy and mining stocks. I've been trying to figure out who will benefit the most from AI. I started out thinking it would be the companies with the most data, but now I'm looking for ways to invest in electric utilities and the companies that will benefit from a huge investment in the electrical grid.

I'm also thinking that real interest rates will fall if there is an AI boom. My best idea is to buy low price-to-earnings ratio companies with lots of long term debt, but I'm not sure about this strategy.

The concern is that most asset prices will collapse if real interest rates rise unexpectedly, so I want investments that will be protected form that and ideally even profit from it.

My tech stock investments have done really well, but the price-to-earnings ratios are getting concerningly high and I'm not sure they'll actually be the ones to benefit the most. My energy stocks haven't done that well, but I'm going to hang onto them for now.

This might all be a wasted I'm worried the government is just going to confiscate everyone's wealth. I likely have a big inheritance coming in 20 or 30 years, and I'm wondering if maybe I should just find some country to live in that is friendly

If AI destroys labor prices totally then we’ll live in a very different society. Why would the majority of the population accept people who happened to be rich in 2025 staying rich forever while everyone else has to live off welfare forever? There’s no way most people will accept that deal. Manna / Elysium scenarios are unlikely, elites aren’t fast enough to cement power so absolutely, while corporations without people with disposable income to consoom product coupled with extreme AI-related deflation will lead to an asset price collapse in every class that will affect the wealthy more than the poor.

My prediction: the government will continue to create more jobs (by regulatory means in the private sector, by making firing people more expensive, and directly in the public sector) and most people will still have to work at some point.

Let's say you have a big inheritance coming in 20 or 30 years and you're worried the government is going to engage in mass wealth redistribution once robots take everyone's job. Let's say you also expect to have some decent savings of your own by then. What's the best way of protecting this wealth? Is there some country you can move to that would likely not take my wealth? Is there some financial arrangement you can enter into to insure against the wealth being taken before you get it?

Diversification of assets. Holding physical assets (art, precious metals in your possession etc). There's plenty of information about how to do this out there, even though it is generally geared towards addressing collapsing nations.

I'd have my primary place of residence be a significant store of wealth. Even if they redistribute everyone's wealth and confiscate investment properties, I can't see them taking anyone's home. If your home happens to be a McMansion/Estate, well someone has to live in it and it's title belongs to you so...

Regarding Inheritance in 20 or 30 years: If you have a good relationship with your family it might be a conversation you can have now. Plenty of parents distribute some wealth to their children long before their deaths for tax reasons and to help them get into expensive property markets. You could get some of your inheritance in your possession now before potential future changes in tax/inheritance laws make a full transfer of wealth impossible.

Hard to predict how the global economy would change. I’m in a not dissimilar position and I’ve made peace with it. Tax havens aren’t a huge help; they exist, ultimately, because the largest Western nations allow them to (like Switzerland’s banking laws until the US decided they’d had enough). There’s no reason not to stash money around if you have it, maybe gamble some in crypto, have some in different things all over the place. But I’m skeptical that it’ll make much of a difference.

The best strategy, I’d say, is to find and move to the highest quality (not just richest) country you can; resilient systems of government and competent peoples will manage the transition best. For my money, the world’s best two countries to weather a big social transition (as a citizen) are Denmark and Switzerland. New Zealand will probably be fine too. The rest may be a crapshoot. I think economic systems may change in unpredictable ways, but the most stable places to live probably won’t.

You can’t borrow against a promised inheritance from someone who can still change their will while alive. Perhaps in countries where parents cannot disinherit their children, like France, it is different - i’m not sure.

I don't get this take at all. If we're in a world where we're basically fully labor-post scarce, that applies to defense too. If nobody needs people to operate factories, nobody needs people to fight wars either. The relevant question will be where exactly did all the power accrue? A government? A single corporation? Many corporations?

Technology has tended to consolidate power.

A stone age man might lead a band of 20. A Celtic chieftain might lead 20,000. King Louis XIV ruled 20 million. Today, Emperor Xi rules over 1 billion.

The default assumption is that the technology of the future will place ever more people under the rule of ever fewer.

That was part of the reason OpenAI started – to democratize the future. Not looking good today. https://twitter.com/elonmusk/status/763283865238577153

That’s the thing, the ‘evil elites’ scenario requires, in a crisis, extreme coordination between a fractured elite class in which they somehow very quickly agree to genocide the plebs and then just do it, and that just doesn’t seem likely.

Yeah, there would be no need to kill the plebs. In a future bifurcation between Eloi and Morlocks, the Eloi would simply take any resources they need and allow the Morlocks to mostly live unmolested with whatever is left.

We don't kill criminals, the homeless, the chronically unemployed etc now so I never understood why AI would change anything.

And if they are revolted against, use drone armies to suppress, etc.

This future is scarily plausible. It would require a coup in the western world, because voting.

On a slightly different note, what do you guys spend your money on?

I have a very high savings rate primarily because there isn't really anything I want to spend my money on. The only major expense I see among peer that I don't have is traveling.

Mortgage, private school tuition, major home renovation.

I do most of the home renovation work, but materials are expensive and sometimes I need a contractor to do something and it becomes very expensive.

I've 4 children, a wife and a mortgage.

Car, rent, and food uses up most of my after-tax income.

Apple keeps putting products at a faster rate than I can buy them..

Fellow high savings rate enthusiast here, I save 80% of my income. I spend on food/groceries, car repairs, and hanging out with friends. I'm a single 26-year-old guy and live with my parents, so no rent.

I travel maybe once a year, but I usually visit places where I have existing friends and family so that I can save on accommodation and transport. I recently took a two week vacation to the East Coast of the US from Dubai (my home base) for ~2k USD, lived with friends and family and basically had 0 accommodation costs, ate at diners and fast food joints and backyard cookouts, etc. No one even comprehends let alone believes I went to the US for 2k USD. They think I lived with bedbugs and rats. But most people have a distorted idea of how much travelling actually costs because they think of travelling + living in luxury.

The above won't even be an issue if you are travelling to non First World destinations. Just don't have the 5-star luxury hotel instagram worthy experiences.. You will still experience a new country, smell new smells and see new things.

I live like a broke college student even though I make a tech worker's salary. I understand this makes me profoundly uncool in this day and age where just about everyone else in my demographic are major spendthrifts and live paycheck to paycheck (Seriously, GenZ and Millenial financial habits are atrocious). I also take a get a lot of shit from people calling me straight-up cheap and miserly to my face. But I like the idea of sitting on some raw cash so that I can finance anything from a car to a vacation last minute.

I mean, having friends and family that can give you a room is doing a lot of the work here.

Do you and your peers have families and houses with yards to accommodate families? Activities and education for the kids? Those (along with certain health issues) are things that can take up any amount of money you're willing to throw at them. I probably make less than you, but am currently spending much of it on a mortgage for a house with a decent amount of space and two cars to get around the kind of area with a decent amount of space.

Travel Guns Backpacking gear Spouse Offspring

I’m sorry I gotta laugh at “the average person like me who just wants to be financially independent in his 40s” since that’s such a rare slice of the population.

I do share the intuition that either the robots will deliver us from scarcity or eradicate us, and so either way I should spend more in the moment. CoastFIRE is good enough.

The “average” part refers to my current life situation and income level, not the financially independent part :)

Still, shooting for FI in your 40s is not average as a goal!

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