Sometimes I look back on the changes of the first half of the 20th century, and I try to put myself in the shoes of someone growing up in that time and imagine what it must have been like to experience life in that period. I think back to 100 years ago, which is really a short amount of time in the grand scheme of things; short enough for us to be connected by the memories of the living and the recently departed.
Someone living 100 years ago would have seen the beginnings of a nascent car industry, but they would not yet have seen the profound changes that widespread motorization would have on a society, letting people live further from their work and in more spacious lots and homes, but also bringing with it the problems of air pollution and traffic accidents. However, the automobile displaced the still worse problems of dirty, congested streets filled with manure.
Today, we take it for granted that we can send a message around the world effortlessly and seamlessly, and that you can read this blog post anywhere in the world you have an Internet connection. A century ago, the radio and telephone were emerging technologies and that sort of many-to-many communication did not exist.
There’s no doubt that technological advancement and capital accumulation have led to a vastly richer society. When my grandmother was young, she used to ride her bike five miles to get to school, whether it was sunny, rainy, or snowy. There were many chores to do and many younger brothers and sisters to take care of. Wanted to wash clothes? Well, forget about throwing it in the machine and going back to watching TV: There was no TV and no washing machine.
When I look back at how much things have changed, I feel grateful to be living in today’s world. We often like to romanticize the past, but it’s a little hard to be nostalgic about the truth of high infant mortality, disease, and real hardship, when you consider how ordinary people actually had to live, not merely the lives of the rich and powerful as glamorized by Hollywood.
…Where’s my flying car?
If one focuses on more recent times, it’s a little harder to see how things have been changing. When I grew up, cars, TVs, and radio were already widespread. The technology has gotten better but we’re already long past the disruptive phase. By now we were supposed to have flying cars and personal jetpacks… right? Shouldn’t we be well on the way to colonizing space by now?
The truth is there has been a lot of change in recent times, but you need to look a little harder to see it. Communications improvements like the Internet and mobile phones have greatly increased access to information for the average person. No longer is the spread of information limited to those with large budgets and official channels; now, anyone with an Internet connection can make their voice heard around the world. This is speeding up the flow of information and it’s changing how we see the world. People can now have “friends” living thousands of miles away from them; geographical boundaries are not as important as they once were.
New technology also brings with it new problems.
Adapting to a changing and uncertain future
One of the main goals of Invest It Wisely is to explore the different ways to maximize our lives — not just today, and not just when we’re retired, but over the entirety of our lifespan.
I recently read Future Imperfect, a book by David Friedman which explores how technology may change privacy, communications, and life as we know it. All technologies have the potential to be put to good use as well as misuse, and David explores both sides of the coin.
Here I’m going to look at a few of the biggest changes which are likely to come, and how we can adapt to these changes and benefit from them.
Privacy is changing
The world is becoming more transparent. Satellite imagery in conjunction with face-recognition software may have played a role in Bin Laden’s capture and death. Scandals erupt and people are fired over information placed on Facebook and similar sites. CCTV cameras, mobile devices and license-plate recognition software track us as we move about a city.
As far as the public sphere is concerned, privacy is nearly dead. As CCTV proliferates and cameras become smaller and easier to hide, we will soon come to a time where every step made outside one’s own home will likely be recorded in some fashion. It probably won’t be too hard to spy inside a home; either: even today it’s very easy to listen in to conversation and see what’s going on through the windows of someone’s home.
The important question is whether all of this surveillance power is kept in the hands of an elite, or whether the watched can also watch the watchers. It’s my belief that the spread of media and information has had a great impact on the way that war is conducted by leading western powers, and it has also had effects on internal policy such as police brutality and violence.
Widespread surveillance technology raises the ghost of 1984 and government CCTV within one’s own home, but even if we don’t get to that point I think we need to be aware that everything we say and do in public may be recorded without our knowledge, and may also come back to bite us.
At the same time, privacy is also increasing if you know where to look for it. It’s possible, though still not straightforward, to setup communications on the Internet so that it is difficult to tell what a person is sending and receiving, and with whom they are communicating. I’m not one of those people that believes that privacy is only for those who want to commit immoral acts, because sometimes you need to hide information from those who would commit an immoral act against you. Privacy is needed not only so that thieves can’t use your private information to make purchases in your name and things like that, but for those who live under repressive regimes, the ability to communicate unimpeded is vital to exercising basic human rights.
Did anyone ever believe that the Internet would pose serious competition to brick & mortar a couple of decades ago? As someone who shops regularly at Amazon.com, I think brick & mortar has some serious competition today.
In some ways the digital revolution is only beginning. We are seeing the birth of the first truly distributed digital currency, Bitcoin, which has now reached more than $10 million dollars in circulation. Where does this price come from? Nothing more than pure supply & demand. The currency is based on a distributed peer to peer network and its ultimate quantity is fixed. Nobody can gain an unfair advantage by changing the quantity. Whether or not it is ultimately successful, gets attacked by the government or is simply the first stepping stone on a long path to the future doesn’t matter; this is history in the making and sooner or later I believe that this sort of technology will be commonplace.
Whether it’s Bitcoin or something else, we can easily imagine a future where it’s very easy for a government to connect all transactions made using its official currency, but difficult for it to connect transactions made using distributed currencies. This will have profound implications in terms of a government’s ability to finance spending, redistribute wealth, and levy taxes. It may also make it easier for criminals to hide activity which few would approve of. At the same time, it may wrest economic power away from those with privilege and distribute it more evenly, the same way that the Internet has been pounding on traditional media and giving a voice to anyone with a connection.
The danger comes in the connection to the physical world. We all must live in the real world, where we do not have the freedom of bits and bytes, and an encrypted connection isn’t much good if one can remotely sniff out your keystrokes and steal your password. Digital currency could be stolen in a matter of milliseconds. In fact the Bitcoin model doesn’t even use a password at the moment, and I feel that security is one of its strongest weaknesses as it exists right now.
The main lesson to take away from all this is that it is important for us to live a moral life because everything we say and do is increasingly visible and will be increasingly scrutinized in the future. It has always been somewhat true that those who are dishonest and cheat eventually lose in the end, but enough have gotten away with it that this behavior has remained attractive for some. This sort of behavior will be less attractive going forward.
At the same time, moral doesn’t always mean what is legal, and what is illegal is not necessarily immoral. Sometimes it takes history and the passage of time for us to realize this.
Employment is changing
It is only a short generation or two ago where the notion of lifetime employment with a specific firm was commonly accepted and expected. The reality for people today is different, with a job change every few years and a career change every decade being much more commonplace and expected today.
In not too long from now it is entirely conceivable that robots will take over much of the menial jobs which humans don’t like doing today, but not only that, artificial intelligence will gradually take over more and more of the mind jobs as well. I don’t believe that machines and AI will never displace humans so the question becomes a matter of when, and not if.
This isn’t necessarily a bad thing. A world with a huge amount of capital abundance created by the productivity of machines and AI would be one where work isn’t really necessary because the basic human needs of food, water and clothing would be extremely cheap and available to all. One can argue that we’ve already considerably advanced on this road in comparison with 100 or 200 years ago; think back to my grandmother and her life as a young child only 70 years ago, and the life of a young child today. We’re not there yet and not everyone in the world is on the train yet, but we’re on the way.
As our lifespans continue to lengthen, will long term care insurance become more or less necessary? Will these people simply be content with their basic necessities? A world with no absolute poverty could still be a world with huge income inequality, and even well-fed and well-clothed people get unhappy when there are people with 1000x the income and wealth that they have. Envy is an emotion that has not served us too well since we left the tribes and entered the cities.
I think it’s still a while before we get there, though. For now, the reality is that we face increasing competition mainly from other humans: people in China, India, and elsewhere that want to have the same living standards that people in the West do. Do they deserve it? If the customer thinks so, then you bet they do.
As individuals we can often fall into the trap that employment is a dichotomy between employee and owner, or employee and manager, and that they hold all of the keys. It’s not quite like that though. First off, a job doesn’t exist because an employer or owner creates it; it exists because a customer has a demand for that good or service. Nobody gets to have a job just because they think they deserve it. Whether we are employees, owners of a business, or contractors, we must never forget that ultimately, we are there to serve the consumer. They are the ones that create our employment. Our work is useful only insofar as it is valued by the person paying for the work.
When it comes to investing, most people believe that it’s not wise to hold all of your eggs in one basket. I believe this applies to employment as well: it’s never wise to place all of your fortunes in the hands of one company. When all of your income comes from one salary, you have a lot of risk the same way you’d have a lot of risk if you held everything in one stock. Because companies sometimes grow inefficient and complacent over time, and sometimes they make mistakes, the consumer may switch their dollars over to another firm that’s better at satisfying their wants, switching your job to someone else along the way.
Our retirement is not guaranteed. To become more resilient against employment risk and to better deal with change, I believe it’s very important to build up capital and side income and diversify where your money is coming from. This can be done by building up savings and investing it, and it can also be done by starting side businesses and building up side income, and placing some of the money saved in a high interest business bank account. This is easier said than done (if I had a magic formula then I’d already be independently wealthy) but along the way, your guiding light should be “how does this benefit the other person”? Wealth is not a zero-sum game; when we become wealthier legitimately by serving the other person in trade, we are both better off for it.
There is so much I didn’t touch on, such as how changes in medicine and genetics will greatly increase lifespans and redefine old age. The biggest trap we can fall into is assuming that things will always be the way we know and understand them. While it is true that some things, like human nature, don’t change all that much, the way in which that nature is expressed has changed drastically. War at some points in history was an act of total annihilation, with cities razed to the ground and the population killed in an act of mass slaughter. This kind of behavior isn’t really accepted today except by a few trolls in YouTube comments.
For 99% of human history, the idea that some humans could be the property of other humans was also widely accepted. This was not always racially motivated, but was also based on religion, gender, and sometimes it was just a consequence of the loser of a battle facing either slavery or annihilation. The idea that no man can be property of another is a very recent development that has little historical precedent and is a testimony to the power of ideas.
So, as you can see, even the way that humans behave can change a great deal. It’s all about incentives.
Not all of the changes coming will necessarily be good. They may be good so long as everyone wants to do the right thing, but sometimes people wanting to do the right thing end up doing something horrible in the name of the good, and sometimes people do something horrible because they are horrible.
As individuals we only have so much power, but we can shape our own lives. We can’t predict exactly what will come down the road, but we can make ourselves more adaptable and resilient to change. It’s not very likely that the way things are today will be the same 40 years down the road; will social security still exist then? Will countries still have the same borders that they do today? Will I be able to continue in this line of work for the next 30 years? We need to start thinking more like 21st century humans.
Things seldom stay the same way; this is why bubbles always eventually burst and why nobody can defy the truth forever. Some politicians believed they were intelligent enough to coordinate an entire economy; history proved them false. Others believe that they can stop change by simply legislating against it; history will eventually prove them false as well.
The only way to deal with change is to accept it and to seek the truth. In Jim Rogers’ A Gift to My Children: A Father’s Lessons for Life and Investing, Jim tells us the importance of thinking for ourselves and never accepting the wisdom of others at blind faith.
Life is change, and change is life. Those that work against change are ultimately working against life and for death. To remain alive, we must work at not becoming fossilized in our ways and mode of thinking. Nobody else lives your life for you; you live it for yourself. You owe it to yourself to experience it to the fullest of your own potential.
So, reader, for those of you that made it this far, what do you think about the future and how a changing world will affect your own life? What is your own approach to a world of uncertainty and change? I personally sometimes worry that I’m letting life become too static and that I am not being proactive enough in my own personal development, but hindsight is always 20/20. I also sometimes wonder if all of these new technologies will truly benefit everyone, or only a well-connected few.
I want to enjoy life in the present, but at the same time I realize the importance of having a vision for life down the road. This is why I am keeping savings high and spending low, because I believe I’ll have that much more freedom later on and that the sacrifice will be well worth it. I also believe that nothing is certain, just like no road is perfectly smooth, and for the same reasons we put shock absorbers in cars I also view my savings as a buffer against the uncertainties and unexpected events of the future.
Finally, I am optimistic and hopeful. More and more, people will have access to opportunities previous ages could only have dreamed of, and more and more, people’s lives will be defined not by where they were born and other such random facts of life, but by the possibilities that the future presents to them and the path they choose to follow.