This is the text of a report I’ll be presenting for my family this year at Christmas. It’s got a US-centric point of view, targeting an audience between fifth grade and age 52. I’m not sure it’s for everyone, but I wanted to share it in case it’s useful.
We keep having conversations about the future. It doesn’t always feel like it’s easy to understand what keeps me up at night. What gives me encouragement. What seem like sure bets.
Why my optimism and my pessimism are arranged the way they are.
I want to fix this disconnect. I want to explain some things I’ve learned.
I have two passions in life. Leisure and curiosity.
I have spent my life finding the ultimate means of getting them to feed into each other in a positive feedback loop.
What’s a feedback loop? I want to explain that. In a feedback loop, you find that putting energy into something causes that energy to multiply—to feed on itself. Explosive growth, instead of slow, piece-by-piece growth.
Trying to make leisure and curiosity drive as much of my life as possible, I have taken a strange, satisfying path.
As a result of my travels so far, I’ve learned about class, economics, labor, electronics, software, entertainment. Never a whole category. I’m too lazy. I want to get back to the fun part, not endlessly plumb every corner of every topic.
I want to know the fun bits. Then I want to move on.
What’s amazing about the story I want to tell you is that good timing matched up perfectly against my lazy curiosity.
I stumbled into an economic trapdoor just by following my imagination.
That is not an endorsement of imagination. Many other personality traits have a better chance of giving you more choices in life.
It just happens that my imagination seemed to be captured by computers. Everything my curiosity chased happened to have an economically useful outcome.
Put simply: wondering about shit made me money.
It’s that simple. I got to play a lot of hands of poker because I’d been accidentally hoarding the chips my whole childhood. I scrounged each and every one of them up by playing with computers.
I want to give you a recap of what went right so you can make decisions about the future you want to have.
Before we get going, I want to take a moment to reboot how we think about money.
Money is very difficult to understand. I don’t just mean the systems and study of money, like economics. I don’t want to get lost in that cave right now.
I’m talking about your daily experience of money. How money works, how we relate to it.
I want you to think about money in terms of choices.
More money means more choices. Let’s go over some examples.
If I want to go on vacation, money defines a lot of my options.
If I have $5 in my pocket, I can’t afford much more than lunch.
If I have $500 in my pocket, I might be able to crash on a friend’s couch in another city.
If I have $5,000, I could fly into Paris, stay somewhere cozy for a few days, even visit a few other cities.
By $50,000, your vacation options exist in a realm I don’t have the class experience to tell you about.
At $5, I can have a crummy sandwich.
At $50, I can have something with a friend.
At $500, I can feed several people, or add a live show to the night’s festivities.
At $50 you can have a cheap cell phone, with a touch screen.
At $500 you could have a tablet, a laptop, a game console, or a fancy phone.
At $5,000 only the most specialized industrial or scientific computers are out of range.
What’s important to note is that the buckets stack.
With $5,000 you can still have whatever computer you want at the $500 or $50 level.
So money equals the choices that are available to you at any given time. Generally, more choices are preferable to less. More choices made means more influence on the direction of your life.
It’s important to understand that not all of this is in your control. Eventually, money can stack up to choices that include shaping laws and culture.
The people who have money have a lot of incentive to use its influence to create more money—for themselves.
In the United States, the stats show that individual voters don’t have influence over national policy. Instead, the organized interests who can amass the most money are likeliest to create change.
To an extent, this makes sense. We’re stronger together than we are apart.
What throws things out of balance is how much extra power people get to exert as their choices stack up.
Right now, as a percentage of wealth, the rich sacrifice so much less than do the bulk of American taxpayers.
Oh god. We have to talk about taxes. Please don’t fall asleep.
If money equals choices, taxes become a very important conversation.
We’re taught to think of taxes as boring. For us, they are.
“Doing taxes” is the process of reading rules about how much money you have to give away.
But taxes, really, are about paying rent.
If you go rent an apartment, it might come with some services. Maybe an intercom system, a way to receive packages, a swimming pool, a weight room.
You pay for a place to stay, but you also pay for the conveniences.
Taxes are rent for where you live.
Paying taxes lets your city, your state or your country have more choices.
Do we put in roads? Probably convenient.
Do we fund a court system? It would help people resolve disputes.
Do we offer free education? Only if we want a brighter future.
Unfortunately, having choices has other costs: time and energy choosing. That applies for us individually, but it’s even easier to see it in action when you look at it in terms of a city or a country.
When you have so many choices, making them becomes a full time job. Governments all exist to make choices based on the needs and interests of the people they represent.
Mayors, governors, presidents—they’re all professional choosers.
President George W. Bush once famously declared:
“I’m the decider.”
About that, he was right.
Remember feedback loops? They apply here too. More choices means more choices that include gambles to increase how many choices you have.
Gambles are necessary to make progress in the world.
Gambles exist when you make a choice without knowing for certain what you’ll get in return. Gambles have three parts: reward, cost, information.
Imagine running a red light:
You’re gambling that no one is coming on the other street. If you’re right, you keep going, maybe save a few minutes. If you’re wrong, there are a few ways for you to have a bad day, all of them expensive.
But information is where this gamble gets interesting. If you’re in the middle of nowhere, you can see in all directions, you’ve come to a stop, and it’s 3 AM, you have enough information to know you’ll probably be fine.
If you were speeding through a busy city, you would know running the red light would be very dangerous—you might even know it by seeing cars in front of you. The information you have completely changes your experience with the gamble.
Imagine visiting a casino:
There’s a slot machine.
Information is pretty fixed here. You have no way of knowing how honest the machine is, beyond what you know about the local government. Hopefully they have and enforce rules for how much the machine has to pay out.
What’s strange is how reward and cost interact.
The gamble gets interesting for its cost. If you have $100,000, losing $500 wouldn’t hurt too much. Doubling it wouldn’t be amazing either.
If you only have $1,000, you’d be losing half of your money, which would hurt. But doubling it would feel incredible.
Gambles are complicated because sometimes their pieces tangle together. At the casino, the cost and the reward often travel in opposite directions.
Imagine starting a business:
A very common yet very complicated gamble.
Business costs are completely variable. You can start a company with a small loan and the sweat off your back or you can sink billions of dollars into it.
Information varies completely as well. You have to know not only how many people exist who will pay for what you’re selling, but also how successful you’ll be in finding and persuading them.
That’s already a lot of uncertainty.
Then we come to reward. The spectrum of business success runs from humiliating failure all the way to becoming the richest person in the world.
Businesses are clouds of gambles stacked together, creating yet more gambles in front of them, like a speeding train that lays its own track.
Make the wrong gamble, you might run out of track.
Ride or die
The train analogy is important because you can’t avoid gambling. Even not acting is gambling—the gamble that everything will be fine if you do nothing.
It’s often a very bad bet.
Class is a complicated subject.
The simple version of class is that it’s a consequence of how much money you have.
That doesn’t tell you a lot.
But in the context of choice, class makes more sense.
People enjoy other people who are like them. They like having the same things to talk about, having shared experience, the same ideas about right and wrong.
As you change the number of choices you get to make, you’ll also change the kinds of experiences you’ll have.
If you never get to leave the country, you won’t have much beyond questions to ask someone just back from Asia. If you’ve been there yourself, now you have shared experiences to talk about.
If your choices are narrow, you’re likely to meet other people with narrow choices.
If your choices are many, you’re likelier to encounter others with many choices.
Generally, you’ll have a mix people of all types. But class is about averages. How much your access to choices groups you in with other people who have similar number of choices.
“The American Dream” is a concept that promises that even if right now you have few choices, working hard entitles you to more choices in the future.
It’s a nice idea. But it doesn’t always work out that way.
In the United States, the likelihood of your making more money, and therefore having more choices, than your parents has declined over the last few decades. There are consequences.
Class and gambles
Class impacts your gambles.
For the wealthy, most gambles are inexpensive.
But for others, choices and money are limited. Gambles are hard to take on.
This a driving factor in limited class mobility. If you can’t afford to make gambles that open up more choices, your limited choices remain the same.
Sometimes you hear about people who receive a sudden windfall of cash. Maybe an inheritance or a lucky lottery ticket. Sometimes they end up losing it all, back to where they started.
Part of this comes from the fact that class educates you on making choices and gambles.
The choices that are available at $1 million are very different from those available with $10,000. Without an education on how to effectively manage the additional money, it’s very easy to use it unsustainably.
Class education is inherited from parents and updated by peers and mentors.
Frustratingly, so much of it is unspoken and informal. It’s not always clear what you learned about the choices in front of you, and not always clear when you’re unprepared by your class education even to make a choice.
For example: for-profit colleges are disproportionately attended by lower income students. They feel differently about a gamble at a for-profit college than do those who have more money.
Class also serves to pool choices.
The more choices your friends have, the more choices you can benefit from.
If you have no friends who own businesses, you’ll always be at a career disadvantage compared to someone who knows dozens of business owners. Whether they hire you, or perhaps pay your company to serve theirs, these connections matter.
Like education, these connections are inherited as well. Some get lucky, with parents whose connections to others have a huge impact on career outcomes.
Class is about multiplication
At minimum wage, in the United States, you make $7.25 for every hour you work.
The wealthier you are, the higher the multiple of money you make per hour.
Skilled workers in the United States might make anywhere from $50 an hour all the way into the hundreds.
The more money each hour of your work yields, the more comfortable your life will be—and the more choices you have.
True wealth exists when an hour yields money for you whether you work or not. This might come from investments, from owning a company, or otherwise setting up a mechanism that generates income without your direct effort.
If you have to gamble , you may as well try to keep your gambles smart ones. The more information you have, the better your bets can be. Here are some observations that’re likely to impact a lot of the gambles you might make.
Robots are coming
The way to get rich is to make money even when you’re sleeping.
In the past, people did this by owning plantations or factories.
Today, you can achieve the same effects with computers.
Computers will run a store for you. Computers will keep track of how much stuff you have and how much money you made.
Computer-driven machines can build things, computer-driven cameras can catch speeding cars. Computers can even brew coffee.
In a lot of cases, computers help humans do their jobs. But as computers grow more and more helpful, it becomes more possible to replace the human entirely.
People used to visit record stores and ask a human for help picking music. Now a computer can introduce you to new music and even sell it to you.
Calling someone on the telephone used to require asking a human to connect you. Today, phone calls are 100% computer-driven.
Getting the news used to require buying a paper from a shop or having it delivered by a teenager. Now news arrives instantly, through your phone.
How does this trend continue?
The next job on the brink of extinction might be the cashier. You can order and pay for a taco with your smartphone. When enough people are comfortable to do that, restaurants will save money by replacing cashiers with computers that talk to your smartphone.
Fast food has been a foundation of making money for decades—you don’t need to know a lot to make a hamburger, so it’s a job open to anyone willing to do the work.
But fast food thrives on the sort of systematic processes that computers love. Always use this much meat, this much ketchup.
Those rules would be easy for a computer to learn. All that’s missing is machinery that’s able to make it possible at a price that’s cheaper than people. We’re not there yet.
But remember what happened with the telephone.
Driving is one of the most common jobs there is. Whether you’re driving a taxi, delivering a pizza or hauling cargo, lots of people make money using a car.
Self-driving cars are around the corner.
Robots are coming. Faster and cheaper than they’ve ever been in the past. This is going to impact people’s access to choices—to money—in a very big way.
Computers are our birthright
Everything that we are is information.
Information in our genes determines how our bodies work and grow. Our memories and experiences are information that shapes who we are and how we think. When we talk, we move information between our minds.
Computers are machines built in our image.
They’re exceedingly simple compared to our minds. They don’t have our complexity.
But they’re able to work with information very quickly. Their simplicity allows for rigid, predictable results. They can’t replace a brain—but they can amplify its abilities.
Computers are not always easy to understand at first. But their power comes from following rules that can be understood.
Remember how I said that computers allow you to make money while you sleep?
Your ace in the hole is that we and the computers are of the same essence. You can know their secrets.
Once you understand them well enough, you can begin using them to influence your gambles.
Computers can modify a gamble in any way. They can increase your information, they can lower your costs, they can multiply your rewards.
Only by understanding computers can you outrun them
Computers continue to eat away at jobs. No job, no choices.
One job that the computer has a hard time eating, though, is that of the person who builds things with the computer.
One day, that job will probably go away with the rest.
Until then, the closer you are to making the computer do things, the more choices you’ll be able to buy. Knowing how much a computer can multiply rewards makes people eager to gamble on you.
You can also create your own rewards cheaper than at any previous point in history.
Computers are the keys to the kingdom. They’ll let you win in culture, politics or business. You can use them to distribute your creativity, your arguments or your products.
The better you understand what they can do, the less surprised you’ll be when they come for the next set of jobs.
How I got lucky
My curiosity happened to lead me toward something that reduces effort expended while multiplying the rewards of that effort. Because I liked it. Because it felt good.
Every time I used what I learned from the computer, I found someone to pay me for it.
First it was the electronics stores, hiring me to sell video games and cell phones.
Then it was working in Internet marketing.
Then it was making software.
I always thought it was fun. And the computer did all of the hard work.
Not everyone is lucky enough to have their imagination lead them past something that can so reliably pay the bills.
But everyone can find a way to include computers in their plans for building their future.
You ignore them at your peril.
For me, computers have given me incredible access to choices. What city I want to live in, whether or not to live alone, what kinds of foods I want to eat, the trips I want to take, even the clothes I wear.
My generation has had it rough in the choices department. After a terrible financial crisis in 2008, lots of people my age didn’t even get to choose whether or not they’d live with their parents as grownups.
Lack of jobs took choices away from them.
I’ve been lucky to have the choices I have. But I want you to take luck out of the equation as much as possible.
Apply and understand automation and computers before they’re applied to you. Use them to help shape the world around you, instead of letting them shape choices out of your grasp.
Ask questions. Experiment. Find ways to weave your passions in the loom the computer gives you. Whatever it is you care about, there’s a way to make the computer help.
We’ve been making tools since we first came down from the trees. Building tools is our birthright. Computers are a continuation of eons of history.
They just happen to be the most powerful toolbox in history: a toolbox that can create infinitely more toolboxes.