Thinking of best long term investments for the next decades, I came to the following conclusions.
With the advancements in AI technology in the next 10-20 years, the cost of intelligence, manpower, and construction is expected to decrease significantly. As a result, prime real estate ownership, farmland, and locations with precious resources will likely become valuable investments.*
- The emergence of AGI (Artificial General Intelligence) will lead to rapid developments in other technologies, such as fusion power, which will greatly decrease energy costs.
- With companies like Boston Dynamics making strides in creating realistic robots with superior intelligence, we can expect to see a decrease in the need for human labor and access to intellect.
- This will lead to a reduction in the costs associated with construction, manpower, and other creative and intelligent pursuits.
- Despite the decrease in costs, land will still be limited, particularly in prime real estate locations. While construction may be cheap, the scarcity of land in desirable locations will make these properties highly sought after.
- The increasing availability of open-source AI development will lead to increased competition, making AI technology more accessible to individuals and small businesses.
- Even with advancements in agriculture and food production, precious resources will continue to be highly valued, particularly those used in the production of computer chips.
Thoughts? Comments? Criticisms?
It makes sense in the medium term, but if/once brain uploading becomes a thing, the competition will be for the memory/processing power rather than actual land. Maybe get dibs on geothermal power, a nuclear reactor, or some orbital setup with plenty of solar panels.
So buying NVIDIA stock seems like a better play then?
NVIDIA's moat seems unlickly to last forever, especially if programming is automated. Anyway, expecting property rights to be respected seems silly to me.
We had best implement Georgism to fund a UBI soon.
Seems like perhaps directly investing in the nascent AGI, if such an option was available, would be a better bet.
I do think some amount of real estate investment makes sense, if the land is directly giving you value currently (e.g. a place to live) since a mortgage is a loan over a longer time period than the likely time to AGI, and thus is a good way to bet against a 'nothing interesting happens' future.
If decreases in costs arise from decreased incomes to people then I might wonder about some of the political economy aspects here. I could see a case where income distributions become further skewed and particularly skewed towards those who are capturing the economic rents from land's scarcity perhaps driving support for something like the Georgist Land Value Tax regime as a necessary solution to the social inequalities. That would take pretty much all the gains from the pure land appreciation.
I might also question the claim about land scarcity. Square footage is often a limiting factor but land use intensity is probably more important. AI could perhaps identify large improvements in technology that allows huge increases in output from the same area of land. Think things like has occurred in cities -- look up, not across. AI might add to that type of solution to the limited area of a plot of land. Vertical building is about shifting from area to volume. AI might be able to provide ways to multi-task the same space.
Similar innovations are occurring in farming (vertical, underground) and I would think that AI might find additional productivity improvements in production of food.
Things like a functional metaverse where we can go to the virtual office and it be indistinguishable from what we do today would also have an impact on both the need for existing space and likely reduce the existing demand for existing space.
I like this line of thinking - it's about actual limited resources rather than abstractions like "capital" or "interest rates". But I suspect it's got the same problems, especially uneven distribution of changes in an anti-inductive way (because competition for acquisition knows more than you do).
Identification of "prime" real estate locations is likely to be difficult and competitive. It seems unlikely that all land will become outsized in importance, only ... what? Farmland likely to be about as valuable as today - the automate-able high-yield acreage is worth a whole lot, the barren rocky deserts very little. Some mineral rights will go up a lot in value, but that's pretty forecast-able, and likely priced in. Housing and cities are primarily limited by regulation and economics, and ALSO there are lots of companies using pretty sophisticated models to predict values, better than most individuals can.
I think it's likely that GDP growth, as captured by publicly traded stocks, will significantly outpace growth in demand for any land that doesn't involve raw resource extraction. For example, GDP might 100x over a few years, while world population grows by a mere 5%. In that scenario, wouldn't stocks be a better investment than a plot of farmland?(Edit: It's true that a general increase in wealth levels implied by the GDP 100x scenario would also drive up residential land prices significantly, but that new wealth would be unevenly distributed, and you want your marginal invested dollar as close to the actual source of wealth generation as possible, not invested in secondary effects.)
Also, at the extreme, AI can generate new land in the form of seasteads/O'Neill cylinders, though of course one might benefit from investing in ex. mineral rights for some period of time before the asteroid mining begins.(disclaimer: have not thought deeply about this, am not an expert, not investment advice, etc.)
Despite the decrease in costs, land will still be limited, particularly in prime real estate locations. While construction may be cheap, the scarcity of land in desirable locations will make these properties highly sought after.
As a thought experiment, suppose we developed a method of transit that enabled you to go between any two locations in the US within 30 mins. I think in this case, real estate prices become more uniform.
If you exclude land near "natural wonders" like Yosemite, prime real estate is prime because of its travel-time proximity to other people. For example, NYC is expensive because you're close to cultural production. If we had a way to get to downtown Manhattan from Sedona, AZ, prices in Sedona would become about equal to those in Manhattan.
The upshot is we don't know what the future prime real estate locations will be. If we enter an era of rapid technological progress and decreasing energy costs, transit will become both faster and less expensive but the exact form of it isn't clear, so we don't know which areas will end up being "linked" or whether the transit developments will apply uniformly to all land.
You've got 2 forms of valuation:
1. Physical proximity to an industry hub. This is why bay area real estate is so valuable - it's physically close to a large industry, and there are currently advantages (in productivity and access to financial resources) to that location. AI may zero that out - AI models are productive anywhere on earth, and the whole model of startup finance may work differently.
2. Mineral rights. But there are alternatives : undersea mineral rights, antarctic mineral rights, lunar mineral rights. It may mean if you own some chunk of kansas it isn't meaningfully more valuable than it was before.
Like others, I think your best bet is either tech company index funds like QQQ or individually investing in the current high fliers in AI that take outside investments. (so meta and google and nvidia, not openAI)