2482: AI Labor Displacement and the K-Shaped Housing Affordability: High-End Housing and the New Economic Divide with Adam Taggart

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So far the event's been fantastic. Lots of great speakers, so many good contacts. Just the amount of different people you see here and meet here is probably the biggest benefit, and the speakers are unbelievable, and it's jam-packed with content. Basically can't miss a speaker. If you're on the fence at all about this, If you're even considering it, just jump on, do it. You won't regret it. You're gonna be able to close those time windows that you think take forever. Just do it. It'll be a great experience for you as an investor, and you're gonna be able to learn just through osmosis through all these great people you're around.

Welcome to the Creating Wealth Show with Jason Hartman. You're about to learn a new slant on investing, some exciting techniques and fresh new approaches to the world's most historically proven asset class that will enable you to create more wealth and Freedom than you ever thought possible. Jason is a genuine self-made multimillionaire who's actually been there and done it. He's a successful investor, lender, developer, and entrepreneur who's owned properties in 11 states, had hundreds of tenants, and been involved in thousands of real estate transactions. This program will help you follow in Jason's footsteps on the road to your financial independence day. You really can do it. And now here's your host, Jason Hartman, with the complete solution for real estate investors.

Good day, Empowered Investors, and greetings from beautiful Napa, California. I've been on a little whirlwind tour. Uh, went to CPAC in Beverly Hills last week and then flew up to Napa for another event, headed to San Francisco in a Lyft ride right now as I speak. So hope the audio quality is good. Anyway, we've got a great interview for today. As you know, I was interviewed by Adam Taggart a couple of months ago and played that interview on the show, but then I decided to have him back on the show. He was on many years ago, and his former partner Chris Markinson has been on as well. And I'm sharing that interview with Adam here today, my interview of him and his outlook on the economy and the markets. But we just concluded our monthly masterclass And remember, those are totally free every month. Just go to empoweredinvestor.com/wednesday because they are on the 2nd Wednesday of every month to register for those. And we'd love to have you join us for those. We had a great one today on tax planning. Sometimes at these masterclasses, we get highly paid experts to come and consult with you for free, answer your questions, and help you save on taxes and various things. The theme changes every month. So be sure to join us for those every single month without fail. And also our investment counselors are available to help you get year-end deals. And let me tell you, the builders are making deals right now. So we have some great properties at great prices with fantastic incentives, and you can still close by the end of the year and lock in your tax deduction this year. So just go to empoweredinvestor.com, check out the properties page, fill out any web form or call 1-800-HARTMAN, press extension 2, and our investment counselors would be happy to help you. Anyway, here we go, and let's go to the interview with Adam.

It is my pleasure to welcome Adam Taggart to the show. He is the founder and host of the Thoughtful Money Show. I was recently a guest on his show, and he usually has people who aren't quite as optimistic as I am on the show, so we'll kind of dive into some of these topics today and see where Adam thinks the economy and the markets are going. Adam, welcome. How are you?

I'm great. Pleasure to be here, Jason. And you reminded me when you appeared on my channel that we've done this a long time ago. I want to say like 14+ years ago or so when I was with a different business partner at a different company. But it's so nice to see you again.

Yeah, I think I did 2 with you and maybe 2 with Chris Martenson over the years, or maybe 3 with Chris. I'm not sure. But yeah, Well, I discovered his Crash Course many, many years ago. You know, I want to say like circa 2007 maybe.

Yeah.

Or something like that. And got really into it. And, you know, maybe that kind of tees up our, our sort of way to start the interview. I mean, you know, you're definitely more bearish than I am. You know, you've spent many years kind of showing people the problems, this, you know, this debt that now exceeds $40 trillion, all of the issues. And, and Chris talked about a lot of those in the old days— species extinction, war, the economy, this sort of housing concerns. A lot of concerns. Yeah, there's a lot of things there, right? How do you see how it's kind of played out since then over the years?

Sure. And let me qualify your comments. While I don't disagree, I probably am maybe a little bit more bearish, if you will, than you, but I am not ideologically so. And just to let your viewers know, if they're not familiar with me, my day job is a host at Thoughtful Money, where I interview people from all over the economic and financial spectrum. investors, economists, analysts, et cetera. And while a good number of them have concerns, and we will definitely dig into those, not everybody is bearish. And I don't screen ideologically one way or the other. I just bring in people who are data-driven and then let them tell me what the data is telling them at any given moment about where things are headed. To your bigger question about sort of as we saw the world through the lens of The Crash Course and then what became Peak Prosperity, and the tagline there was, Was it the next 20 years are going to be totally unlike the past 20 years? Yes. There's been a lot of truth in that. But one of the things that the journey really instilled in me is a sense of even if you feel like you can get the destination right, the pathway is really, really hard to predict. And there is so much unknown that you don't want to tie yourself to the mast too tightly on any one outlook or ideology. And to borrow a term from George Soros, who I'm not a huge fan of, but he talks about reflexivity. And our system is highly reflexive. And so, when we start looking like we're going to be heading over a cliff, human beings are really smart. There's a lot of things that both humans do and just systems do to try to right-size, try to mean revert, et cetera. And so, I will say that based upon where it looked like things were headed back in 2027, when you were watching the original Crash Course, I think things have ended up on large part, much better in a lot of areas than we thought. In some areas, just as bad or worse. But all in all, I think the world still works. There's still a lot to be optimistic about in the world. There's still a lot to be pessimistic about. But I guess to answer your question, I think I'm much more balanced. And while I think things like the purchasing power of fiat currency, I still feel like is a pretty sure bet that that's going to continue to decline as time goes on. I think our debts and deficit spending will increasingly catch up with us over time, things like that. And some parts of resource scarcity will come to bite us. And, and I think some of that's getting accelerated in some way by the move to deglobalize right now that's going on, which I think is a trend that's not going to get reversed. We're going to see that increase over our lifetime. You know, there are certain things like that that I've got confidence in, but I'm much more able to hold things loosely here and to be open to the fact that, yeah, maybe in 2 or 3 years that's really going to bite, but there might be a lot of opportunity between now and then to really prosper in a lot of other ways.

You make an interesting distinction. You talk— and I, you know, I'm, I'm going to mess this up, so just correct me. Yeah, go ahead, tell me what the distinction is. But you, you say that you are bullish on human potential but bearish on, I think, human nature. Is that the way you put it?

That's a great way to say it. I didn't use those words, but I wish I had. Yeah, I think it's great.

Tell us about that.

Yeah. Um, well, there's a quote from Churchill's that I mentioned a lot and it was about Americans, but I think it's, I think it applies to humans in general where he was asked about his thoughts on Americans and he said, I love Americans. He said, you can always count on them to do the right thing after they've exhausted every other single option that's out there. Right. And so that kind of goes to the human nature part of things. You know, we generally tend to be lazy and selfish and we want quick returns and we We want it all now. We don't want the repercussions. And I think that that's reflected on an individual, societal, and governmental basis. I'm painting with a super broad brush here, folks. But I do think that over time, humans, they respond to incentives. And when it starts getting too painful to follow the path you want to go down, you change your mind and you find a better path that's not quite as painful. And I think that that's sort of writ large how we're going to make it through our future from here. I do think there are things like things we can't escape, um, you know, historical cycles. I don't know if you're familiar with, um, Neil Howe's, uh, work with the Fourth Turning, where, you know, those are kind of the times in the cycle where repercussions catch up with us, right? And we have to kind of tighten our belts and we have to find a different way of doing things.

Right. And just before we move on, let's just explain that to the listener. So Neil Howe and his late co-author wrote a book called The Fourth Turning, and it basically describes how these changes happen every 90 years or So, and about the span

of a human lifetime.

Yeah. And so he would say that we are in the 4th turning now. This turning is a negative turning in his eyes.

Uh, so if, you know, if you want to elaborate on that at all, and, you know, I think he really says we're going to hit the, I guess, the sort of important or main part of that in, in about 2030, 2032, I believe.

Yeah, though, so well said. So you can think about these turnings, and there are 4 of them, kind of like seasons, right? Spring, summer, fall, winter. The Fourth Turning is winter. You may have seen the meme, hard men create good times, good times create weak men, weak men create hard times.

Or strong men create—

Strong men, yeah. So, that's the spirit of the Fourth Turning. So, in the Fourth Turning, it's your weak men have come into power, and these systems that have been working for the past seculum, this 80-year period, start to fall apart, and then they need to be replaced by something that's going to work better for the future. And then coming out of a Fourth Turning, you go into a First Turning. And that's usually where things start getting really better, and you lay the foundation for a whole new cycle of prosperity. So, you're absolutely right. Neil pegs us in the middle of the current Fourth Turning. And even though we're kind of halfway through it, the change of a Fourth Turning kind of goes exponentially as you go through it. So, Not a lot of change at the beginning, but once you get halfway, from halfway to the end, things really change. So, historically, fourth turnings have been associated with war and big civil unrest. So, in American history, it's been things like the American Revolution, the Civil War, World War II, that type of stuff. He's not saying we are destined to have to go through a war that big here, but he sort of says, you know, just prepare for that type of societal change. It's going to be kind of on that level of magnitude. So, you know, You could see institutions that have been around for 100 years or more perhaps go away and get replaced with something new. You could see a brand new political party or even political system come out of this. Who knows? We don't really know yet. And like I said, I'm not here to beat my chest and say, oh my God, we're going into Armageddon. I'm just here to say, look, seems like we're going through a lot of change. And in a lot of cases, we're going to have to deal with things that we pushed off to the future. We kicked the can. The can can't be kicked anymore. And maybe it might be a painful transition, but I am totally open to the fact that there may be a much better future on the other side of this. So I'm not trying to sell fear. And as a matter of fact, I kind of compared to my, the old days with Peak Prosperity where we kind of talked about everything, I kind of narrow my focus these days much more just to the economy, the macro situation, what the markets are up to, and really just try to help people build wealth throughout, protect and build wealth through all this.

Yeah. Okay. So, what should people be doing right now in your eyes?

Well, I think they should have an eye to defense. And what I mean by that is not this— I'm not saying this is the time to get in the bunker and just move all to cash and own gold guns and cans of food. But things have been so good for so long in the markets and generally in the economy that I think you have to prepare yourself for some sort of reversion to the mean. And usually when systems revert to the mean, they don't just stop on the mean, right? They overshoot. And so, you know, we haven't had a real recession since 2008.

Well, yeah, I guess you could take out COVID, you know, because it was really—

I mean, recession-wise, officially, it was blink and you miss it. I mean, it was—

Yeah, it was, right?

Yeah. So, you know, we have a whole—

If you print enough money, you can solve every problem.

Well, exactly. And we've gotten very used to that, right? We've gotten very used to the Fed put. We've gotten very used to the swift reaction function of our central planners. to step in and make everything better when we feel any pain. And now with COVID some dangerous precedents we set, like sending checks directly to households. The next time we feel any pain, you can totally bet that the choir of voices clamoring for that is going to be super-duper loud. So, my point is the last bear market we've seen was back in the Great Financial Crisis. So, we've got a generation of investors now that haven't really seen one. We've got a generation of financial advisors, Jason, that haven't seen a true recession or a true bear market. So, in a lot of ways, we are underprepared for the other side of the coin. Like I said, I'm not talking about some massive calamity, some massive credit meltdown like we saw in the global financial crisis. I'm just talking about a garden variety bear market here, right? So, if you look at the past 4 years of the stock market alone, We've had double-digit returns every single year. In fact, most years were above 20%. That's just not statistically normal, right? So at some point, the pendulum's going to shift the other way. There's a lot of things that could maybe put some additional pressure on things, um, swing from prosperity to, you know, tougher times ahead. Again, I'm not predicting that that's exactly going to happen. I'm just telling you that you are very late in the game statistically for the secular bull market that we've been in and this long string of really nice returns in the stock market. And so, you should have an eye to defense that just says, hey, look, crisis doesn't have to happen. But if things just mean revert, if we just go back to historical cycles and historical norms, things are going to get a bit tougher here. It's going to be less fun. So, how do I make sure I'm less vulnerable to that?

It sounds like, and correct me if I'm wrong, that really you're Your argument is reversion to the mean. Just go, you know, things have got to sort of move back to the trend line. Is there more to that than just—

There definitely could be more to that. So like, you know, we could talk about the explosion in debt. Our federal debt, our national debt has more than quadrupled since the global financial crisis, right? We are deficit spending to the tune of what, like 6%, 7% of GDP? Which are— that's what you see in recessions. But we have been, not just in the current administration, but in previous ones before as well, we are basically spending like we're in emergency situations, but we're not. These are actually the good times. So all that stuff creates long-term issues that you're gonna have to pay for.

Well, so the long-term issue to me is inflation.

Inflation. Inflation's a really big one there, right? And we are starting to pay for that, right? So obviously we saw the crazy inflation from COVID And that's somewhat of an aberration, right? Because we just released trillions and trillions of dollars into the economy in a way we'd never done before. We are definitely dealing with the hangover of that, but we're also— we haven't changed our spending habits, as I mentioned, and that's giving us a continued inflationary impulse. Now we have a bunch of supply shock issues like what we're doing right now with oil prices, given the war in Iran. And that is now trickling into The credit markets, where bond yields are now relatively high, they're actually very normal. This is one of the mean reversions I was talking about. If you look at the long-term scope over many decades of bond yields, we're still probably below the mean here at 5%, but we have an economy that is 4 times as indebted as it was before the Global Financial Crisis now, which was the last time we were at 5%. So these, these issues matter more today than they did in the past. Um, so this is the kind of stuff I'm talking about.

Yeah, so I don't think they're quite as bad as everybody says for a few reasons, and just go ahead and like debate these reasons with me for a moment.

Well, and I agree, and just to be super clear, when you're growing your economy at over 5%, that, that heals a lot of bills,

right? Yeah, it sure does. It sure does. So number one, The numbers aren't adjusted for inflation. Okay. So we have to adjust the numbers for themselves in a way. Right. The numbers cause the inflation, but then you also have to adjust them for inflation. So when you say the debt is much greater than it was in the GFC, you're right, of course.

And just to be clear, it's $8 trillion versus $40+ now. But yeah.

Yeah, I get it. Yeah. It's just multiply times 4. Right. Or 5. It's much greater, but we do have to adjust it for inflation, just to be fair. Right. And we also could consider adjusting for things like population and maybe a run rate on GDP and so forth. But the famous last words of any investor is, this time it's different.

Absolutely.

Yeah. But I want to just— I mean, it's a snarky thing to say.

Right. It's got its validity, but maybe it really is different, right? You know, like, are we going through a revolution with technology and so forth that— I just want to hearken back to the dot-com era for a moment.

Sure.

And I remember I had filed a patent on a dot-com company called Publicity Lab in maybe 1999, okay, or 2000.

I just remember the, the giddy atmosphere of the dot-com bubble. Sure. I remember getting a videotape of a CNN documentary called GetRich.com. And, you know, they profiled everybody, including Elon, you know, who was just getting like insanely rich. I remember visiting startup companies where they had, you know, every expensive exotic car out front. And, you know, these companies were built on just fake money. It was all just venture capital pouring into these companies that didn't have real business models. And so the price was paid, everything recalibrated, and, you know, here we are a quarter of a century later, right? But they talked a lot back then about the new economy, right? And there wasn't really a new economy. So I may be arguing with myself here, but Take some of that and, and maybe address the question of, is it different this time?

Sure. I just wanted to share one thing real quickly because you mentioned it. So I graduated Stanford Business School in, uh, oh, June of 1999.

Wow, you were right in the thick of it.

Right, right in the thick of it. So this was the Time magazine cover, getrich.com. Of the profile photos here, 2 or 3 of them were classmates of mine at Stanford. So that's how crazy it was back then being in this. What was your major? Well, that was getting an MBA.

Okay.

So yeah. Um, so, uh, so anyways, I, I, I remember very well how bananas it was. I think there's a lot of similarities you can draw this time, a lot of potential similarities, but I think a lot of really important differences. Let me start with the similarities. When you have a new transformative technology build out, You don't know how much is too much. You don't know where the level is between undercapacity and overcapacity until you pass it. You just have to run after it. And then you eventually at one point say, oh gosh, you know what? We built too much. Right. So we did that with railroads. We did that with laying fiber during the dot-com bust. We're doing that now.

George Gilder has been on the show several times and he spoke at one of our events and he was talking about Global Crossing and WorldCom and all the players at the time. I remember, uh, I remember first meeting him around 2000 or maybe 1999. And, you know, that there was the same kind of giddiness back then about the, you know, the blogosphere. And, you know, it was just crazy. Yeah.

But, and there was crazy stuff, right? We remember all the companies that were selling eyeballs and nobody had earnings and a lot of them didn't even have revenues, right? But the internet ended up being— proving transformative, right? What happened was, is we just, we just thought it was all going to happen tomorrow and we pulled way too much of the justifiable valuation of what we thought would happen from this transition into today, when it ultimately took a lot longer to materialize than we thought. Is AI going to happen like that? I don't know for sure. Nobody does. But I think we are in that same similar phase where there's a bit of a mania. And I understand what got the mania going. But I think we have brought— highly likely brought too much of tomorrow's valuations into today for a lot of these companies. And particularly in the earnings estimates going out. So, one of the differences between then and now, the dot-com bust and now, is there are real earnings for these companies. But we can debate the quality of those earnings. So, in a lot of cases, you're taking cash flow that otherwise would go to the balance sheet in terms of retained earnings, and you're buying a lot of infrastructure right now, which is why companies like Nvidia are just minting money here right now because people can't get enough Nvidia chips. Fast enough. We don't yet know what the incremental earning potential of that infrastructure is. The big question is, what's the return on AI investment going to be? We don't know. I think it's actually going to be fairly substantial. I just don't know over what time. And so, I can definitely see either A, as we're seeing a lot of companies say, hey, look, my compute costs keep going through the roof, but my incremental revenue is growing at a much smaller rate. So companies themselves might slow their roll a little bit. Like, ah, I was throwing some money at this initially, but I'm not seeing the return yet. So I'm going to slow down how much I'm spending on it. Or you just might see like real-world constraints coming in here where there just might not be enough copper to build out the data centers as fast as the analysts think they're going to. Or there might not be enough permitted land to make it happen as fast enough. Or there might be not enough public support. We're seeing a lot of pushback going against these things. So I could just see a lot of things that could bring down the rosiness of the earnings projections that would probably cause some sort of material correction at some point in the AI stock complex, which would then weigh on the markets given how massive a percentage of the overall market the AI system has become. But the technology's real. Like I said, these are real earnings this time. It's not all phantom earnings the way that it was during the dot-com. I think this is something that is going to happen, just like with the nuclear arms race. We pursued it as aggressively as we did, not just because we wanted the technology, but we did not want our adversaries to win in it versus us. And so, I think the commitment of not just the corporate space, but the government space at the sovereign level to making sure that the investment is there to win in this, I think you don't want to bet against that at all. So, where I'm going with all this to the spirit of your question, Jason, is I'm totally open to the fact that it could be different this time. And I also— this is going to be interpreted probably as a partisan comment, but it's not intended to be. I just think this administration— What's wrong?

Hey, wait a sec. It's so funny. Why do people apologize for being partisan? Seriously. I mean, everybody gets to believe in something. That's fine. Be partisan.

Well, so I like to— I've kind of built my brand on just calling shots, right? So, I don't care.

Okay.

Who's proposing it or not.

Well, you must believe in something, right? Like, you must believe in one side or the other.

Oh, no, absolutely. But again, I'm not ideologically tied to one side or another. But I do think this administration has pursued a lot of economic policies that are very pro-growth. And I think that's pretty hard to argue against. But a lot of these policies are policies that I think we as a country wanted to pursue for many years, if not many decades. But we let a lot of other constraints get in the way. And just one small example of that would be like nuclear energy, right? There's always been the opportunity there to really tap into the phenomenal power and carbon-free emissions and always-on baseload power and stuff of nuclear. But we just let other non-market forces gum up the works for us. I think we've—

I blame Jane Fonda. I think we should sue Jane Fonda for all of the increase. There should be a class action lawsuit against her. And maybe her director, studio, who, you know, whoever was involved in the China Syndrome movie, because that movie was the thing.

And the higher cost burden that everybody has faced because she ruined nuclear power, she should pay for it. And so should all the co-conspirators. That should be a RICO lawsuit.

It should be a racketeering class action lawsuit for just putting out completely false fearmonger information.

I mean, it's— See, you—

That has cost people so much money, it's insane.

You will probably get a lot of support in the comments from this. The only thing I would say in quote unquote her defense there is we let it happen, right? We let ourselves get influenced and we let, we let the lobbyists and the activists, you know, change policies to ones that we're now long-term regretting. So anyways, I do think that we are laying the policy foundation for higher growth going forward. And then if you tack on top of that the benefits of AI, To the spirit of your original question, things could be different this time. I'm totally open to the fact that we may have a higher average economic growth for the next decade based upon, you know, the track that we're laying right now.

There are people out there, many YouTubers, who say we're in a new kind of stock market where the powers that be will just not let the stock market decline. I mean, you know, what do you make of that? That's just such a— it's almost totally a silly comment to me.

But I, I totally understand it though. I totally understand it. And I think I think in practice, it's accurate in the sense that I think investors believe that there's a Fed put and now a Treasury put backing this market up. And I was just doing an interview before this one with a financial analyst.

But that can't last forever because that is defying the laws of physics, right? You can't have that forever, right?

You can't, and you can't be in perpetual rescue mode because then the rescue mode doesn't work anymore, right? So, the danger is you expect that they're going to step— they'll always step in at the first sign of danger, but increasingly they realize they can't. And so, they still will, but things will have to get bad before they do, and you can lose a lot of money in between now and bad.

Yeah.

And so, to just go through this blindly of like, well, I'm going to get rescued, it's a dangerous, dangerous assumption. And, I was just talking to this financial advisor before you, and he was lamenting that we are seeing a greater exposure to equities across regular investor portfolios than we ever have. There's supposed to be some split between equities and bonds. And not only is it lopsided to equities for all age cohorts, but the age cohort for which it is the most weighted to equities are the oldest age cohorts. It's the boomer portfolios. And so, these are the people who need to be de-risking the most right now, Because they're getting into the latter half of their lives. They don't have time to make up for a big drop in the markets, and they are like fully in stocks at this point in time. So it is a real societal danger that has emerged from this overconfidence that, yeah, we're just always— they're never going to let this thing drop.

Yeah. Be careful of that. Be careful of that, folks. That cannot last forever. Well, Adam, what else would you like to share with people? What question am I not asking you that's important? I was surprised to say you— well, I was surprised to hear you be so polite about George Soros. He's a criminal if you ask me.

Yeah, yeah. Well, look, um, and I think it's mostly because I know there are others that can, can say all the nasty stuff way better than I can. But again, I, I call it as I see it. And, and actually, I think on his theory of reflexivity, there's something very valuable. Oh, sure.

But you know, let's talk about reflexivity for a moment. You know, when I first heard that term, that, that was sort of the primary Soros ideology, if you will. And, you know, when he was partners with Jim, uh—

Rogers.

Yeah, Rogers. Thank you. Jim's been on my show several times. I couldn't think of his name for a moment.

Great guy.

But yeah, great guy, really, uh, polite Southern gentleman. But, uh, you know, I, I just don't know what the big deal is about reflexivity. I mean, that seems kind of obvious to me. That doesn't seem like any PhD-level form of thinking. You know, of course people are going to react to markets and conditions. I mean—

I agree with you, but my journey in finance has really taught me that, um, it's not that to become successful in building wealth you have to understand some sort of arcane physics that nobody's ever thought of before. A lot of it is, is understanding kind of the commonsensical foundational elements of wealth building. And a lot of times, I think people, they either just do a bad job of the simple things, right? The discipline and commitment of just, yeah, these are simple rules, but I got to actually just keep pursuing them in a disciplined and committed way, or they overcomplicate it. And so, I think to your point, yeah, reflexivity is kind of a commonsensical thing. But to your point, people are like, hey, look, they're never going to let this thing crash. How can they let this market crash? There's too many people who are too invested in this market. But you and I know it's a deeper story than that. Things are reflexive. As the central planners start to intervene, it starts to take more and more intervention to provide the same amount of support. And so, they can't intervene all the time because they basically diminish the strength of their firepower. And as we just said, you get to a point where they're going to have to let it correct so that the firepower they still have left— can actually be effective. That's an example of reflexivity, but the simple thought is, oh, they could never do that. So, fair point, but I also think, again, these commonsensical fundamentals, oftentimes as simple as they may seem, are the most powerful.

I do want to get back because I interrupted my own question there for you. So, let's get back to that in a moment. But since we're talking about reflexivity and central planners and not letting markets crash, I mean, maybe let's apply that to the real estate market, uh, for a moment. Uh, yeah, that's— most of our audience is interested in real estate investing. You've been extremely bearish on the housing market.

But to be super clear, I, I have interviewed people who are extremely bearish.

Okay.

I try not to put my finger too hard on the scale one way or the other.

Got it. Okay.

And I did have a pretty optimistic guy on, Jason Hartman. You ever heard of him?

That's true. Yes, you did. Hats off to you for equal time, right? But But I think the same is true of the housing market, although the levers are dramatically different, right? The levers are usually— you think of interest rates as the lever, but then you look at the homebuilders' response. You know, we have a housing shortage and we need those homebuilders building more homes. But when rates go up, you know, the builders' stocks suffer, the homebuilder stocks suffer, and the builders pull in their horns. Sure. And so, you know, it's kind of like they're making the problem of housing affordability worse and worse and worse through the policy of trying to attack inflation. And interestingly, inflation is wonderful for homeowners and home investors, even though philosophically I'm very much opposed to it. But I play the cards I'm dealt, right? But what do you say about the housing market? Do you think in a different way, that's sort of another— it's such a big part of the economy that I don't know if they could let the housing I don't

know how they can support the housing market without really intervening the way that they did back during the bust of bubble number 1, where the Fed came in and was just buying trillions of mortgage-backed securities and stuff like that. I think they are very gun-shy to do that again, but I leave it to the experts like you to tell people where they think the housing market is headed. I do think the housing No surprise to anybody. I think the housing market's quite challenged right now. And I think the longer that bond yields continue to rise, things aren't going to get any better for there. To your point about the builders, and I'd be curious to hear your thoughts on this, because I think they're more informed than mine. Not only do the builders, when they get conservative, they build less, and that makes shortages worse.

And it puts upward pressure on prices and rents. Right.

Well, I'm going to say, in what they build, I believe they shift the mix of what they build, and they're building for who's buying, which are the wealthy people, right? So to a certain extent, they make the imbalance in the unaffordability even worse because they're building less, but what they are building is higher-value properties. And therefore, you know, there's less inventory and less affordable inventory left over for everybody else who just wants a roof over their head.

It's very hard for builders to build entry-level housing because there's just not much money in Well, that's very hard to squeeze a profit.

Yeah, because— sorry to interrupt, but I feel at a macro level, I find myself saying this to a lot of entrepreneurs, which is there's kind of only really 2 business models left. There is either go big at scale, right? So you got to be just gargantuanly large at scale, low margins but high volume. And that takes a lot of— you got to raise a lot of capital up front to be able to do that. Or you go after the high-end market. And I feel like that's kind of what's happening in housing. And I'm not even sure how people go after scale anymore. I mean, unless you're doing multifamily, but just in terms of being out there building, you know, affordable single-family homes, I just don't see much incentive out there to do that.

I agree. I think the affordability problem is going to persist for a very long time.

Yeah. And this is a big question I have. If you, you know, you sort of asked what are some other things I think about. It is the sort of K-shaped economy, which is even though they might let the system correct to a point where it gets painful first, the reaction function of our central planners will always be to intervene. The instinct of our elected leaders will be to deficit spend. The instinct of Federal Reserve will always be to increase the money supply. And so, who benefits from that? Asset owners.

Yeah.

Right? Who gets hurt by that? People who don't have assets but have a rise in their cost of living, right? Which is kind of everybody else, right? And hopefully AI might be able to balance some of this out again. And there's some arguments you can make from that. But I worry really, to me, I feel like one of the greatest unanswered questions about AI right now is 2 questions. One is how many jobs is it going to displace? And how quickly? And then secondly, what are we going to do with all that displaced labor?

Yeah.

And there's Keynes, the famous economist. He had this warning called technological displacement, where he said, if a technology can do the job better than a human, you replace the human. Makes absolute sense. But he said, you got to be careful at the pace at which you displace the human labor, because if you displace it so fast that you can't repurpose it to another constructive use, you end up creating a societal crisis, the cost of which is greater than the benefits of the technology. And that's the thing that I'm really worried about with AI here is I can easily see it displacing tens of millions of low-skilled service labor jobs. These are the people that are having trouble finding affordable housing, or these are the people that are getting screwed the most from the rise in cost of living. And I don't know where their income comes from after that.

Yeah. It's a very It's a really complex equation. And I don't know either, you know, I have a— I really struggle.

I think about it all the time. But, you know, we've, we've had AI for several years now, right? And, you know, the layoffs happened, and then the hiring backs happened. And the big corporations aren't getting the lift they thought they'd get from it. And they haven't been able to replace as many people, but you just use it yourself and you think, gosh, this is amazing, right? You know, but let's just talk about about really what most

AI really is. Okay, I remember when I got my first calculator when I was a kid, and I think that calculator cost like $79 in those days' dollars, which I would adjust for inflation being hundreds of dollars today. Okay. And it just did basic math, you know, it didn't do anything complicated at all. It was just a simple Casio calculator. You know, I can see it in my mind now. I remember what it looked like and everything. I, I wonder if I still have it somewhere. And, and, and, you know, essentially the AI we're all using is just a word calculator. You know, it's just a calculator with words. That's, that's really all it does is pick the next word. You know, it's a, it's a massive, super complex, trained on, you know, trillions of parameters calculator. And so, yeah, the calculator displaced some people. Everything

displaces some people. And, and, you know, if you look at like the Labor Department data, they'll tell you that I think the only job that has really been replaced by technology over the last— I don't know, don't quote me— but like 100 years is elevator operator. You know, we, we tend to push our own buttons in elevators nowadays. Occasionally there is an elevator operator, by the way.

Yeah, I mean, yeah, but I mean, you've been around enough to see like secretaries.

Yeah, right.

I mean, that was, that was a massive There were what they called typing pools.

Okay, in companies there would be a typist, just, you know, like rows of them, a typing pool. Okay, sure, give it to the typing pool. That's what they said.

And they got all killed by the word processor. But, but, but even just secretary, like executive assistants. And I've been out of corporate America for a long time now, thankfully. But my understanding though, I could see it before I left, but my understanding now is that very few people have a dedicated Technology is your assistant. Yeah, technology is your assistant, right? So, so it's interesting. So I've interviewed guys like Ed Zittrain, who is an incredible AI bear. Like, he thinks that there's like virtually nothing there in terms of the technology. This is all just massive malinvestment that we're spending, right?

Yeah.

And then I've interviewed some, you know, major AI bulls. And again, I think the truth probably falls somewhere in the middle, which is, you know, the, the AI that we are at least used to right now, right, isn't truly Generative AI, or, you know, what was it called? Uh, agentic, whatever, the super intelligent.

Well, generative, then agentic after that.

Yeah, it is generative right now, um, which is sort of like, okay, you've told me this and my word calculator says this is the most likely thing that, that you want as the answer. But, you know, AI is being used to do all sorts of things now. And, and, um, you know, we see that it's, it's, you know, solving math problems that have gone unsolved for, for centuries and stuff like this. Yeah. So, it's not just like a fancy word processor anymore. I mean, there's real value to this stuff.

No question. I was just saying the way most people use it, that's what the public uses.

Yeah, absolutely. But I can certainly see the potential within a couple of years, or let's even be generous and say 10. All of a sudden, we pretty much don't need anybody, especially once you combine it with the robotics revolution that's going on right now. So, it's not only just the intelligence of the talent stack, but it's also the labor stack as well, where you're not going to need baristas, you're not going to need truck drivers, you're not going to need a lot of these high-volume kind of middle to lower-class service jobs.

With robotics, you mean? You're talking about the robotics side of it basically, right?

I'm talking about both, as a smart robot, right? Right.

Yeah, sure. Sure. Okay. So, but the thing is, Because that's always true with any technology, right? Every technology lessens the need for the human muscle, and this one for the human intellect. And, you know, beyond what you said about solving math problems, really, I think the most exciting part of AI is the recursive self-learning AI that teaches itself to do things. That's the most amazing thing of all, right? So it's not that people will lose their jobs. I mean, I remember watching documentaries movies that were made in the early '70s and news stories made in the early '70s about how, you know, the birth of electronics— those were tubes, right, back then mostly? Yeah. And maybe some, some chips, but not many. And, uh, automation was just going to make it so people only need to work 2 days a week, right? And that didn't happen because we all just wanted more stuff. And, and so we all work a lot because, you know, but we could if we wanted like that same life. We could work less. We just— Madison Avenue has just told us we all need more stuff, right?

Well, yes and no. I mean, there, there is a real cost of living crisis for a big chunk of, of society who, even if they want to just work 2 days a week and be their best selves, they can't. They've got to put food on the table. To me, again, this all comes down— and I'm not— look, you can easily push back on my concerns as Malthusian or Luddite or whatnot. To me, it all comes I think it goes back to the scale and the speed of the displacement here. In almost every other technical displacement, computers, et cetera, it opened as many doors as it closed, right? There was a way for those people to transition to something else. What I worry about here is it's going to happen so fast, it's going to be so broad-based, and especially with a robotic component, there is just not going to be a need for these people. Right. In fact, there's an increasing disincentive to hire human labor. We're expensive. We're messy. We're complicated. Lawsuits. We want to take vacations. Our kids get sick. We want to sleep.

We want to be babysat, basically.

Yeah. And even that, we just, again, like a third of the day, we need to be unconscious, right? And so, we come with OSHA regulations and all sorts of things.

I get it. I totally get it.

So, that's what worries me about this one here. I hope I'm wrong. absolutely acknowledge that it's going to open some phenomenal opportunities for more entrepreneurial-minded people. But that's a thin slice of the right tail of the general population distribution.

But Adam, Adam, the part of that I didn't say yet, and this is what I'd love for you to weigh in on, is the part that says, you know, humans always want more. And literally, we're sitting at a time now where we're having this discussion, where we can't imagine the future products and services that will, we will soon want. And I'll just give you a dumb example. Okay?

Sure.

You know, when I was a kid, and I was so happy when we got our first dog, I was about 15 years old, right? And you wouldn't dream of— and I don't even think they existed. Maybe they did. I didn't know about them. You know, when the dog needed a bath, taking it to the groomer, right? Like, you give the dog a bath in the backyard, right? That's right.

Yeah.

And so all of these these services and products that we never knew we'd needed, that we couldn't even imagine at the time. They didn't really exist. And prosperity increased, and, you know, people were displaced and then offered new things, new products and services that we didn't even imagine. You know, I think that's where this opportunity is. And now you could say, well, AI could just do all those things. Maybe you're right. I don't know. I just don't know.

Yeah, I don't know either. And maybe we'll have a Jetsons future and that'd be awesome. And look, I would love to be wrong here. And I actually am long-term very optimistic here. To me, this is all about the transition phase, which again, I just think could be measured in a decade or two. It could be a really unfun decade or two until AI provides all the essentials for life so that if you don't want to work or can't find work, you still have food and a hot shower and a roof over your head and all that. type of stuff, right?

And you can noodle on philosophy all day long or something.

So, I'm going to show you what makes me pessimistic about that, which is we have given everybody the collective world's knowledge in their hand for free pretty much, right? And yet, we still have a massive education crisis in this country. We still have people who are paying— going into debt to pay way more money than they can afford to get useless degrees. We have kids reading at, at, uh, reading grade levels far below their age, things like that.

That's all the fault of the National Extortion Association, the NEA. But yeah.

I mean, we can say that, but I mean, anybody who wants a cutting-edge, top-of-the-line education can get it for free in their hand. We just don't have the societal, you know, whatever, uh, moxie makeup, uh, to lean into that collectively. Now, we have people who are making the most of this by far. Absolutely. Absolutely. But it is a small majority of the— versus the rest of people that are out there. So when people say, oh, we'll have all this time and you'll be able to invest in art and, and be your best self, I'm just like, no, we kind of watch pornography and cat videos, you know, when we're left to our devices.

Well, no, we— social media is the biggest thing. Okay, that took the wind out of the sails of the pornographers when social media came about.

Yeah, but the point is, is rather than push ourselves to our highest selves, we kind of devolve to our lowest Yeah, yeah, I don't

know, there's, there's definitely an argument there. And, you know, the idle hands, idle time is the devil's workshop, right?

So—

Well, let me say this, I don't want to end on, on depressiveness here. I just say that that's, you know, that, that's the— for me, that's the— I'm totally open to AI creating a phenomenal new future for us, but the transition process there, that's the unanswered question that worries me. Let me tie this together if we can, which is Sure. Look, if there's a takeaway I want the audience to take from this conversation is there's just a lot of potential ways that things could go right now. There's a lot of great tailwinds in certain areas. There's a lot of growing headwinds to be concerned about in others. And so I think what you want to just take here is a prudent, comprehensive view of what could happen, and then take steps to lean into the advantages that you can exploit and take steps to decrease your vulnerabilities where you have them. And from a wealth-building standpoint, which is really the world that I live in, I highly recommend that people, especially if you've been really leaning into the markets and you're sitting on a ton of gains and you're kind of just on autopilot like, hey, the markets are great. They've been great. They're going to continue to be great. That could happen. But as I said earlier, there's a lot of reasons to expect that the path from here to there Uh, is, is going to be a lot more volatile going forward than what we've enjoyed, you know, for the past 5 to 10+ years.

Good stuff. Adam, anything I didn't ask you? Anything you want to just say before you go to wrap up this discussion and put a bow on it?

Sure. Just real quick. It's really important to remember and keep in mind that money is a means. It's not the end in itself, right, Jason? Your goal is not to die atop a big pile of cash.

That would be— that would— I would consider that a big waste.

Yeah, your goal is to make a lot of cash that you can then use to make the world better and have the experiences that you want, right? And do the good in the world that you want to do. So it begs the question, well then, what is really true wealth? And it— the research is actually pretty clear on this, and it's pretty simple, folks. It's quality relationships. So it doesn't have to be a lot of relationships, but these are, you know, at our core, we are We are tribal primates and we see the world through our interactions with others. And so, we just get a ton of fulfillment out of those relationships. And the simple way to think about this is the old, like, do you have anybody you could call at 3:00 AM, Jason, and know they would pick up the phone and help you if you were in need? Right? So, you want to invest in your relationships. You want to have meaning. Super important for humans to feel like the world was at least just a little bit better off because you existed today. And then the last thing is good health, because without good health, the rest doesn't matter. So just keep in mind, folks, as important as it is to try to chart your financial course through life or any of the issues that Jason and I were talking about, the places you really want to put your focus are in those 3 areas: your relationships, your purpose, and your health.

Adam Taggart, thanks for joining us.

Pleasure as always, Jason. Thanks so much for having me on.

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