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Why a Secure Financial Future Will Require Entrepreneurial Skills

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The rise of robots and the fall of jobs

In my latest ebook, “Inside My Mind,” I talk about something most real estate investors miss—robots.

If you’re a real estate investor, you may be scratching your head right now. How in the world do robots relate to investing in property?

It’s simple, really. Once statistic I mention is as follows: it’s estimated that robots “will take the place of 40 to 50 percent of all McDonald’s employees.” What does that mean? It means that many jobs will be eliminated by the rise of robots and AI. And it won’t be just McDonald’s jobs either. According to The Guardian, 6% of all jobs could be lost to automation by the year 2021. That’s just a few years away. And that’s just the beginning.

But again, what does this have to do with investing? As I write in my ebook, “I’m keeping an eye on the robot phenomenon because real estate is based on only one thing: jobs. That’s it. If there are no jobs, there’s no real estate.”

Does this mean that real estate is a bad investment? The answer is only if you buy it wrong. As I point out, it is an illiquid investment. You can’t just back out. So you need to be confident you’re making the right projections based on what is happening in the market. If you get too sunny, you might get burnt.

Employees are screwed in the age of robots

But the rise of robots, as scary is it might be to some folks who made poor investments, is even scarier to those whose jobs will be replaced.

When I was growing up, my poor dad would always tell me that I should go to a good school so that I could get a good job. To him, financial security meant building a career at a big company that paid well.

As I got older and wiser about money, I realized that my poor dad was wrong. Rather than having a good job being the most secure place financially, I learned that it was the least secure.

Why? Because you had no control. You could be fired or let go at the drop of the hat. If the company you work for is mismanaged, you can do little about it. And you pay the most in taxes. The entire employment system is build to benefit the owners and investors and to minimize the power and security of employees. That, for instance, is why a company like Snap can offer an IPO with shares where no one can vote. And because people do not have financial intelligence, they eat it up.

Today, more than ever, being an employee is the least secure position to be in financially. This is precisely because of the rise of automation and AI. Most employees, however, have no idea that their job could be in jeopardy. Many experts are likening the coming wave of robots to the Industrial Revolution.

And as Tyler Cowen, writing for BloombergView points out, the economic impact of the Industrial Revolution was staggering. As he writes:

By the estimates of Gregory Clark, economic historian at the University of California at Davis, English real wages may have fallen about 10 percent from 1770 to 1810, a 40-year period. Clark also estimates that it took 60 to 70 years of transition, after the onset of industrialization, for English workers to see sustained real wage gains at all.

If we imagine the contemporary U.S. experiencing similar wage patterns, most of us would expect political trouble, and hardly anyone would call that a successful transition. Yet that may be the track we are on. Median household income is down since 1999, and by some accounts median male wages were higher in 1969 than today. The more pessimistic of those estimates are the subject of contentious debate (are we really adjusting for inflation properly?), but the very fact that the numbers are capable of yielding such gloomy results suggests transition costs are higher than many economists like to think.

But whose jobs will be affected, really?

Most people would rather not focus on these unpleasant facts. And if I were a betting man, I’d wager that most employees, if polled, would say they do not believe that robots could do their jobs. But they’d be wrong. According to an article in Wired, “Oxford University researchers have estimated that 47 percent of U.S. jobs could be automated within the next two decades.”

And as Martin Ford, the author of “Rise of Robots,” says in the same article:

I see the advances happening in technology and it’s becoming evident that computers, machines, robots, and algorithms are going to be able to do most of the routine, repetitive types of jobs. That’s the essence of what machine learning is all about. What types of jobs are on some level fundamentally predictable? A lot of different skill levels fall into that category. It’s not just about lower-skilled jobs either. People with college degrees, even professional degrees, people like lawyers are doing things that ultimately are predictable. A lot of those jobs are going to be susceptible over time.

In short, we’re not just talking about flipping hamburgers at McDonald’s.

So what’s the solution?

Many experts, including Ford, believe the answer to all these lost jobs lies in some form of universal basic income.

Personally, I don’t know if such a system could work. If history is any indication, it won’t. Generally, when given handouts by governments, people are less incentivized to work than they were before.

So, what is the solution? To me, it is an increase in financial education that encourages entrepreneurial thinking.

As I mentioned earlier, my poor dad thought having a good job was the most secure thing you could do financially. Conversely, my rich dad, who was my best friend’s father, taught me that being an entrepreneur was the most secure thing you could do.

Many people balk when they hear this since the cultural mythos around entrepreneurship is that it is inherently risky. But my rich dad taught me that for those with the right financial IQ, it was not. The reason for this is that you have more control, pay less in taxes, and aren’t at the mercy of others.

This is why I’ve advocated for years for true financial education in the school system (not just classes on how to put money into a 401(k) and balance a checkbook). If you want to know what I would include in such a financial curriculum, you can read a post I wrote last year called, “15 Must Have Financial Education Lessons to Gain True Financial Literacy.”

In a near future where robots will take many jobs, I believe that entrepreneurship is the key to financial security. At its core, entrepreneurship is based in innovation—finding ways to make money solving problems both large and small. This is difficult to automate because it is not predictable. In the future, the highest-paid people will be those who don’t do predicable tasks like lawyers and accountants but instead will be those who create new solutions and opportunities. That will be our entrepreneurs.

At Rich Dad, our goal is to help as many people thrive while others struggle to survive. The robots are coming. If you want to thrive, increase your financial IQ starting today, and start building a future where you kiss being an employee goodbye and can become an entrepreneur. Your financial security might just depend on it.

Original publish date: March 21, 2017

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