What Artificial Intelligence means for Financial Independence

“By the pricking of my thumbs,

something wicked this way comes.”

– Shakespeare’s Macbeth


The machines are coming…or have they already arrived?

In the year 2000, artificial intelligence still seemed like a distant dream.  The tech revolution had begun but soon deflated when people realized the early tech startups weren’t really producing much economic value.  It was a quasi shell game that the market eventually squashed, and tech as an industry retreated into the spotlight behind the usual titans like banking, oil, and pharma.

And then Google, Apple, Amazon and Facebook entered the picture, and the true tech revolution began.  This has resulted in many changes to our way of life, the main being that we have uploaded our lives to an infinite platform, the internet, and, like the sun, everything now revolves around it.  The various products and apps that help us live more efficiently are just the simple result of the invitation that we handed to the tech industry to come sit at the table of humanity and ponder the future of human progress.  Well, we now know what comes next: many of the jobs we have right now will probably not exist in 15-20 years.

The value of work and not-work

Now, I don’t mean to say that every job will disappear in 15-20 years (estimates say that will happen about a hundred years from now, give or take a few years).  But between 30-40 percent of jobs will likely undergo some form of automation in the next 10-15 years.  It won’t be just people who drive trucks that will become self-driving, or cashiers who will let a machine scan all the items in your grocery cart.  It will be the most routine office jobs that exist in most industrial economies.  So the question that needs to be asked is: what does this mean for the idea of financial independence?  And another, deeper question: will robots rickroll each other?

Financial Independence is not really a desire to retire from all work, but merely the desire to have an option to not have to work full-time.  It doesn’t mean being wealthy and being able to buy vacation houses, but it does place a high importance on the cultivation of wealth.  Much like a garden of plants and vegetables that will wilt if they aren’t watered regularly and taken care of, your overall wealth will suffer if you don’t cut the weeds once in a while.

Financial independence is inexorably tied to labor/work.   If people didn’t work so much and weren’t so stressed out with it, financial independence wouldn’t exist as a movement.  What will happen once the work part is removed from the equation? Will people still strive to cut the financial weeds, and make sure they have everything in order? Will people still be satisfied with buy-and-hold or will they go for more risk?

Ruby with a robot
Ruby with a robot (semi-blurry, whoops)

You mean…I won’t need to work?

One reaction to your career disappearing in 10-15 years is, “Great! I won’t have to work anymore! Just sit back and let the machines do it better.”  Yes, but how will you replace your primary source of income? This question is even more important to people who live in expensive cities, like New York and Los Angeles, because they have no margin for error.  Will governments institute a global version of UBI (Universal Basic Income), or some sort of robot tax, or will things become so cheap that we won’t need that much money anyway?  No one knows what solutions will be created when automation arrives.  Perhaps there won’t be solutions, perhaps governments will be paralyzed by indecision and won’t address these issues properly.


Let’s look at an example

Let’s say that you are 35 years old and want to retire at 50.  You plan for it, set everything in motion, reach the age of 45 and realize you only need to work 5 more years.  You have money set aside, you have an emergency fund, your investments are boring but give you a nice 4-6% every year, and you don’t buy expensive new cars or have big mortgages.  And then you get laid-off forever because a Sales Automated Reporting Algorithm (named Sara to give it a human touch, because nothing screams empathy more than a robot with a human name) will do your job better than you and five of your co-workers, and pretty much anyone in your industry.

Now take a guy in your company who is the same age as you.  He’s been everything but frugal the last 10 years, he buys new cars every few years, and he will be laid off at the same time as you.  Let’s then say that both of you will receive some sort of monthly job loss benefit (maybe 50% of your former salary?) from your former corporation.

Does this mean that striving for FI was pointless? Maybe the first thing that comes to your mind is, “Why was I frugal for these last 10 years when people who spend money wastefully get to be in the same situation as me? They don’t need to work and are now taken care of!” In a sense, it’s an understandable reaction, because, technically, you both are in the same boat.  You both “retired” at the same age, but you sacrificed a hell of a lot more than he did.

If that is your reaction, then, as Gust Avrakotos liked to say in Charlie Wilson’s War, “Get past it.”  You and your wasteful co-worker may both be in the same boat of early retirement, and drawing down the same income, but you will still be in a far healthier place financially.  Like I said previously, no one knows how income will be redistributed, or how policies will be implemented.  Will certain industries get more protection than others? What will happen to house prices? These questions and many others mean that the near-future will have volatility and price pressures that people 30 years ago couldn’t have dreamed about.

What does it mean to be FI in the Age of AI?

That’s why I believe the case for financial independence has never been stronger.  In fact, not only stronger, it actually turns out that FI-focused people have correctly predicted the future: a future which is moving rapidly away from a single-source-of-income workforce.  Since we don’t know how this will be handled by corporations/institutions/people, it is now more important than ever to save smartly, invest wisely, diversify your income streams (side hustles), and be better prepared than the majority of the population.  People who are striving for FI are far ahead of the curve, and that will only become more important as automation becomes as common as a toaster oven.

P.S.: Twenty years from now, all blog posts will be written by writing algorithms.  Grammar will be perfect and spelling mistakes eliminated, but it remains to be seen whether bad puns will survive.

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