Guest speaker Anthony Walsh joins the hosts to discuss the history of artificial intelligence, the questionable strategy of investing in revolutionary technology, personal experiences with real estate investing, retirement risks and benefits, common misconceptions about real estate, and the impact of opioids depicted in the Netflix series 'Painkiller'.
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Quick takeaways
Investing in revolutionary technology like AI may not be a sound investment strategy.
Real estate propaganda often perpetuates false narratives about the safety and profitability of real estate investments.
Improving financial literacy is necessary to help individuals make informed decisions about their money.
Deep dives
The Myth of AI as a Silver Bullet for Investing
Artificial intelligence is often seen as a breakthrough technology, but its potential does not necessarily translate to higher expected returns. AI has gone through many cycles of extreme hype and disappointment, with innovation happening but not always meeting the peak of hype. Even if the current iteration of AI is revolutionary, it doesn't guarantee success in investing in AI-related stocks. Throughout history, revolutionary technologies have been associated with asset price bubbles, leading to extreme price increases followed by sharp declines. Novice investors often end up losing money in these bubbles. Therefore, investing in revolutionary technology like AI may not be a sound investment strategy.
The Truth About Real Estate Investing
Real estate is often portrayed as a safe and lucrative investment, but the reality is more complex. Historical data shows that the average real increase in home prices after accounting for inflation, taxes, renovation costs, and fees is only around 0.3% per year. The notion of real estate being safer than stocks is also a misconception, as real estate investment trust funds have shown higher volatility than the stock market on average. Real estate propaganda often perpetuates these false narratives, leading people to believe in the inherent safety and profitability of real estate investments.
The Importance of Investment Education
Many people lack a comprehensive understanding of money and investments. The field of finance is vast and constantly evolving, making it difficult for individuals to keep up with all the relevant information. As a result, misconceptions and misinformation persist. This lack of knowledge is evident even among educated individuals, including politicians and leaders in finance and economics. More investment education is necessary to bridge the gap and help people make informed decisions about their money. By improving financial literacy, individuals can better assess their own investment knowledge and make sound investment choices.
Importance of Diversifying Investments
The speaker discusses the importance of diversifying investments to mitigate concentration risk. They highlight the concern of having a significant portion of wealth tied up in local real estate and the limited liquidity it offers. They also mention the challenges faced in accessing capital without borrowing against it. The speaker shares personal experiences, such as costly home repairs and the burden of tracking expenses for accounting purposes. Ultimately, they emphasize the decision they made to sell the rental properties to achieve greater diversification, liquidity, and debt reduction.
The Value of Money Changes Over Time
The speaker explains how the value of money changes as people age. They note that a dollar amount is not worth the same to everyone, citing examples of a 10-year-old with $1,000 feeling incredibly rich compared to a 70-year-old with the same amount. They discuss how money is generally worth more when younger due to lower lifestyle inflation and greater appreciation for experiences. The speaker highlights the importance of balancing financial planning with health considerations, as well as the statistical realities of life expectancy. They encourage finding a middle ground that maximizes enjoyment while maintaining financial security.
AI is not new and financial mis-education is rife. These are two ideas that form the foundation of this episode, which features insights from Ben Felix, Mark McGrath, and guest speaker Anthony Walsh. To start our conversation, we explore the history of artificial intelligence and what it might mean for the future and beyond. During this Mark to Market segment, Mark McGrath shares his experience of owning property and becoming a landlord before we look back on Episode 155 with Don Ezra, where he revealed his thoughts on planning for life after work. Anthony Walsh, author of People Are Lying To You About Money joins us to discuss his efforts to remedy the lack of financial literacy among everyday people, how he approaches financial planning as a risk-averse person, and his move from lean FI to Coast Fi. He also shares his thoughts on the relative value of money, the importance of planning according to financial wellness and health, and more. Join us today to hear all this and so much more!
Key Points From This Episode:
(0:04:07) The cycles of AI development, excitement, and disappointment in technological history.
(0:15:01) How technology bubbles impact investors and why investing in revolutionary technology is a questionable strategy.
(0:18:50) The paradox of skill and how it applies to investment strategy.
(0:23:40) Mark to Market Segment with Mark McGrath on real estate and rentals.
(0:34:50) Looking back on Episode 155 with Don Ezra on planning for life after work.
(0:37:03) Introducing today’s guest: Anthony Walsh, who wrote People Are Lying To You About Money.
(0:40:17) Four types of lies people tell about money and why most people are financially illiterate.
(0:48:46) How Anthony navigates financial planning as a risk-averse person.
(0:53:25) What motivated his move from Lean FI to Coast FI and the relative value of money.
(0:55:10) The importance of planning according to financial wellness and health.
(0:57:19) The after-show; shows and series your hosts have been watching and a book recommendation.