Summary
Transcript
Technological breakthroughs cause all kinds of ripples through the financial markets and not really in the way you would think. When we go back and look at every major technological breakthrough from the automobile all the way to now AI, they have these hidden financial ripples that could either make or break your financial future. Now I learned this as a young investor starting out during the late 90s dot-com bubble and then I started a tech company after that crash. I went on to have a big fortune 500 exit and now I’m a partner in a venture capital fund and we use these cycles to help chart the future.
Now spoken all around the world on the power of understanding these technology cycles and how they’re playing out today and guess what it always works out the same way. Now tech advancements have a huge impact on your investments and while everyone’s worried about massive unemployment and impending recession that you know AI could potentially cause there’s a hidden force of play that set in the stage for something much bigger and much more unexpected but the real question for us is what does this mean for us as investors? So in this video I’m gonna break down how technological innovations lead to more than just efficiency gains.
We’re gonna look at the short-term and the long-term economic impacts, explore how they trigger money printing and most crucially show you why these shifts could actually cause asset prices to skyrocket but only in certain types of assets. So stay tuned because what you’re about to learn could completely change the way you view the market and guide your next big investment move. So let’s go. Alright we’re about to break this down so let’s just jump right in. Now the first thing you have to understand is that everything happens in cycles.
We have summer, spring, winter, fall, right? We have boom and bust. Everything has cycles and part of the reason why it’s because that’s the way the world’s set up but also human nature takes things too far and back the other way but specifically we’re talking about technology cycles and more specifically technological revolution cycles. Okay so they always happen in a very predictable way and if you understand this, this is gonna be the key to you unlocking potentially generational wealth. That’s the way I see it. Okay let’s break this down. So the first thing is there’s all types of cycles, four-year cycles, eight-year cycles, 30-year cycles, 250-year cycles.
This is a 50-year cycle. Now I call this a technological revolution cycle. You might have heard it called the K-wave cycle, conjointing wave. They happen 40 to 60 years. I think they happen about every 50 and we can trace this back for hundreds and hundreds of years and really since we all pretty much lived in dirt and brick houses. So we have right here the Industrial Revolution. That was in 1771, 1780 ish and that was the first time we had like mechanized machines that could do the work of 5,000 men.
But what do those 5,000 men do? Well turns out they went and did science, medicine, engineering, things that we needed. About 50 years later steam engines and railways, about 50 years later steel, electricity, heavy equipment, about 50 years later oil and automobile production, about 50 years later we were at the microchip which brought telecom, telecommunications, personal computers and the internet and if you’re doing the math about 50 years later puts us right here today. So we can trace this out and we can see exactly what happens here which helps us plan our future.
Now the important thing to understand about these is they all happen in a pretty predictable cycle. So they happen again over a 50 year period and they work like this. So you have this old technology that’s sort of dying and the new technology picks up and takes off. It overlaps like that. So we sort of have this big bang, bang this iteration where it takes off. Then we have the surge and then we have this chasm. You might have seen the chasm. We have to cross the chasm and then we have the deployment phase.
I project that we are right about here in this current phase. So I’ll tell you what this is in a second but we are getting going which we can see how the markets are evolving based on the technologies that we have today but the thing that we want to break down specifically about the market and as investors to understand is that it causes disruption something we know called creative destruction. The new creativity destroys the old way and it replaces an old way and so for example when automobiles were created a technological revolution in 1908 it replaced the horse and the buggy.
So the horse and buggy went down and the cars went up. Now the part of that I want to show you here is that this happened in about a decade. Alright so it happens really really fast and each new one happens that much faster because it builds on the one of the one previous. So cars replaced horses in this example but the question is now for the one that we’re going into now which I’ll break down for you is are humans the horses? We can see this article that just came out a few months ago basically said that that now we are the horses the disruption of labor by humanoid robots.
So now we have robots doing the labor of humans we have self-driving taxis all throughout the United States that are replacing the work of humans and of course AI in businesses is replacing the work of humans and so are we the disruption now and what does that do to us? What does that do to financial markets? Okay we’re gonna answer that but what we really want to think about is over the long term of course technology boosts growth because for example technology is simply as simple as carrying a brick. If I had to carry bricks across a distance and maybe I need to get a whole bunch of people to carry bricks but then technology human ingenuity I create a wheelbarrow.
Now I put six bricks into a wheelbarrow and now one person could do the work of six people. So technology always boosts efficiency and it’s no different this time of course the telephone made it more efficient than writing a letter and today I can video conference instead of having to fly across the country. So each one boosts efficiency and today we’re seeing the boost of AI and really what I’m calling decentralized technologies. Yes AI is centralized in a sense like who controls the LLM or who feeds it although we’re seeing lots of competing ones the rise of decentralizing ones but the way that I’m looking at it is now one person could do the work of 10, 20, 50, 100 people.
Sam Altman said that with AI now we’ll see the first single person company become a billion dollar valuation and so now instead of needing hundreds and hundreds of people in a giant corporation I have one little business and I can be anywhere in the world so it’s also decentralizing but we can see right here that there will be almost 100 million people working in the AI space just by next year alone. So on one side there’s lots of prosperity lots of growth but on the other side maybe a lot of low-level jobs get replaced.
It says by 2025 approximately 97 million people will be necessary to fill the work demands of the surging industry. So again in the industrial revolution back in the 1780s a machine did the work of 5,000 men but what do those men do? Now they no longer need to be in the field picking cotton or beans or whatever it was so what do they do? Well turns out like I said they went to do higher value things and so these are higher value jobs that’s a bonus for you if you’re a worker you can learn new skills you can make more money.
It also boosts efficiency so we can see AI expected to improve employee productivity by 40%. That’s a massive gain, 40%, and that’s by 2035. So what happens when workers get more efficient? Well then businesses get more efficient. They don’t need as many workers. They don’t need to spend as much time to get the same output. When that happens, what do you think happens?
Well, what we’ve seen in the past is we see massive growth or boost in corporate profits obviously, right? Corporations lower their expenses. They don’t need as many people and their revenues or the profitability rise. So we can see this over a long period of time. Technology hadn’t really been changing much. You can see the difference right here. But then in the 80s, we started getting, you know, some big business started using computers, things like that, and we could see the productivity going up.
But right here in 2000, back to the dot-com boom and bust, we can see that everything changed right here and we went on a completely new trajectory. And now with the rise of AI and decentralized technology that we’re on right now, as I said, we’re starting one as of about a year ago, and you can see how much faster things are taking off right now. Okay, so now that you understand that, let’s take a look at short term and long term. Okay, so on the short term what happens though is there’s a short term pulse. So immediately there’s this mass new productivity, right? And what happens is we get fast gains in productivity but unfortunately lots of people get displaced.
So what we can see again going back to the industrial revolution, creating the machine that could do the work of 5,000 men, all those people went out of work temporarily. But then they learn new skills and they got higher paying jobs. But in the short term, they’re all out of work.
And so when the car replaced the horses, all the buggy makers and all the horse breeders went out of work. But then they found new jobs and so each one sort of has this short term pulse. Now we can see this charted out when the internet jumped up. But we had sort of two things that happened in the year 2000. We had the rise of the internet which, of course, as I said, made things much more efficient. I can now buy things from anywhere in the world without having to travel there. But we also saw China enter the WTO at the same time and so lots of jobs went to China.
So we saw this massive drop in employment. So we had this huge drop in people working. So what happens when that happens? Well, as you might imagine in this job switching, job loss, job switching area, which let me say just side note, I’m not one of the people that thinks that AI is gonna replace all humans and we don’t need to work anymore.
As I said, it loses some jobs but it opens us up to do higher value tasks. We’ve seen that in every single technology cycle. It’s ever been there. Here’s the problem that I see though, I’m just gonna throw this outside note. Number one, in the past, in the industrial revolution, when electricity replaced candles as light, when automobiles replaced horses and buggies, in those environments we did not have a giant welfare state. And so people were forced to go learn new skills and forced to up level their lives as a good thing because they got higher value, higher paying jobs.
We move society forward. I’m afraid today with so many people dependent on the government, they’re talking about UBI, welfare, all these different types of things that maybe people aren’t as incentivized to go learn these new skills today. If you’re like, well, I’m out of a job, I need someone to take care of me as opposed to like, you’re a human, you can learn new things. So that’s my bit of advice and for those of you that are motivated, this could be a massive opportunity for you to up level your life. But back to the point of this and our investments. So we have a fast gain, we’re gonna have a lot of job losses as we go through this switching period because of the government intervention. It could take longer than in the past.
When that happens, what happens next? So second, third, fourth order thinking. Well, if we have lost a lot of a big job loss, well then we have a decline in wages. So now they’re not making as much money. Well, if they don’t make as much money, what happens? Well, then they’re not paying any taxes. Hmm, you start to see the problem. And if you have a loss of jobs and a loss of taxes, then what happens? Well, the government runs in to solve and see issues.
Their income goes down but at the same time their expenses don’t go down. As a matter of fact, their expenses go up because now they have to help support all these people like we saw in 2020, sending out trillions of dollars of stimmy at the same time as their wealth is going down. Now we can see this right here where this is from the United States government, the CBO Congressional Budget Office, and they’re projecting here we are 2023, 2024 right here. They’re projecting the debt and the deficit to continue to skyrocket.
And when I say skyrocket, I mean like literally skyrocket. So that means they’re gonna have to run a bigger deficit. That means they’re gonna have to run more debt. That means they’re going to have to print more money. Okay, the paradox in is that a productivity pulse, industrial machine, a horse and buggy or a car, I should say, internet, phones, personal computers, each one of those pulses creates a deflationary shock because people go out of work and spending goes down. But the paradox is this deflationary shock creates more liquidity needed.
So the governments are gonna have to step in and fire up those money printers, fill those things up with ink and just let them run hot as Jerome Powell would say. Okay, now sovereigns, the governments, the central banks, they’re gonna do what they do. And what do they do? Well, what’s the saying, if all you have is a hammer, the whole world looks like a nail. And I guess for the sovereigns if all you have is a money printer then everything looks like it could just be papered over. And so that’s exactly what we would expect them to do. And we expect them to do that because that’s what they do. So here we have, remember I showed you back in 2000 and now here we have 2008 when we had this massive deflationary shock. What did the central banks do?
Well, they fired up the money printers. Look at the rate of growth of the money supply here, the Fed balance sheet and look how it absolutely exploded. They do what they’re gonna do. Now, of course, when that happened, what does that do. Well, you can see this is corporate profits after-tax that had been pretty flat. And right about here, 2008, we had the productivity boom here in 2000. Corporate profits started going up, the money printer and we’ve been up ever since. And we know this. You see me talk about this all the time. If you don’t understand global equity, you’re not gonna understand why markets are going up and down. And as the liquidity, as the money supply continues to expand, the black line, I’m sorry, the orange line, the black line is the S&P 500, they move in about 95% correlation.
So you can see they’re moving up almost exactly. So when the government’s gonna print the money, then we know that the assets are gonna go higher. Now, the reason why we continue to see the assets going higher is because of what I’ve broken down. But more importantly, it’s why we also see the continuation of the divide between the rich and the poor. It’s pretty easy to understand, I’m sure you’re well aware of this, but maybe you don’t understand the numbers behind it.
But the rich get richer because the rich own assets. The poor get poor because they don’t own assets and they depend on their pay. And the problem is, is that assets move up at the rate of money expansion, monetary expansion, which is about eight or nine percent. Meanwhile, wages go up at the rate of GDP, which is about 1.5 or two percent.
And you can start to see why we end up like that and it’s only going to be exaggerated. Okay, but and now that we know all this and so it seems pretty inevitable, so history tells us that it’s a repeatable cycle. What does this mean to us who are trying to build our wealth, trying to protect our wealth as investors? Well, I already gave you some stuff if you’re an owner of a business or an employee. But as an investor, we have to think about this.
So not all assets move up the same. I showed you the S&P 500 moves up at the rate of money supply increase, which means you’re basically running in place like a treadmill. You’re not getting ahead, at least you’re not drowning so that’s good at least. But not all assets work the same. Now, back to the 50-year cycle. So what we know, if I pull this back up, what we know is in these 50-year cycles each one of these cycles drives the financial markets, right? So what do I mean by that?
Well, over the last 50 years, the telecom cycle what drove financial markets for the last 50 years? Telecommunications, personal computers and internet exactly. Over the over this boom from the age of oil production and automobiles mass production, what dominated markets in that period? Ford, GM, GE. What dominated markets in this cycle? Steel and oil. You’re starting to get the drift. You can see that each one of these new technology cycles gets a new set of people rich. So you can see of course in this age we had Jeff Bezos.
We can name others, of course in this one we had Henry Ford with the automobile. We had JP Morgan here, Andrew Carnegie, Steel, Cornelius Vanderbilt with the railways, Rockefeller with oil. So each one of these technology cycles pushes a new type of asset and a whole new group of people get rich. So now that you understand that then you have to ask yourself the next question which is whoa what assets will be going up in this technological revolution cycle and so let’s take a look at that. So really what this six technological revolution cycle is representing is what I call centralized versus decentralized systems.
And we can see that the centralized systems are failing here while we’re in the rise of decentralized systems. And so this is Bitcoin, cryptocurrency networks. This is AI, as I said is also that. We also have a new platform that I’m really keeping an eye on called Noster. It’s a new way to do communication. I believe most of social media as we know it will be forever changed based on this new communication protocol that we have and you can already see this playing out. So again they drive financial markets and so look at Bitcoin alone just right here since 2020 we’ve seen it go up 900%.
900%! Why? Because this is part of this next technological boom that’s gonna happen over the next 50 years. You need to get on board just like the last 50 years you had to be involved in the tech and the telecom and the internet. Now we need to be on board decentralized systems. We can also see this in the rise of Nvidia. Why? Well Nvidia is riding the AI wave. And again I look at AI is sort of a same period it’s up 1800%.
Absolute miracle with no real relation to anything of anything that we could really measure but what it is is it’s riding the trend and this trend is going to be massively strong. And what we can see if we look at, remember I showed you the S&P 500 basically moves up with the money supply, if we look at other assets, so in this case we have gold and Bitcoin mapped against the money supply and we can see that it outperforms.
It’s about an 80% correlation. All right, so Bitcoin’s moving up at a 8.9 times sensitivity to the money supply which means for every 10% of increase in money supply you get a 90% increase in Bitcoin. And so these are the areas that we want to be invested over the next 50 years. This is the trend. This is the new telecom internet. This is the new automobile mass production. This is the new oil, steel, railways etc. right here.
But remember there’s probably going to be a short term pulse that will be a deflationary pulse followed by a massive increase in liquidity which will push these assets to new all-time highs. So now that you understand that from a business owner perspective, from an employee perspective, and from an investor perspective you should be equipped to go ride the next wave.
But let me know what you think. Leave me a comment down below and do you think this will play out like all the other ones in history or is this time different? Let me know in the comments down below. Of course as always give me thumbs up if you like the video. If you don’t you can give me thumbs down that’s okay at least tell me why in the comments down below so I can make better videos. And if you want to know more about these technology cycles watch this next video right here.
That’s what I got to your success. I’m out.
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