I often write on Quora.com, where I am the most viewed writer on financial matters, with over 689.8 million views in recent years.
In the answers below I focused on the following topics and issues:
- What made Amazon successful?
- What are the benefits and risks of investing in stocks of companies that mine for precious metals like gold and silver?
- What are the benefits of investing in an ETF?
- Who has to pay U.S. taxes as an expat?
- Which industry should a person join if he is in it purely for the money?
- What will people do when artificial intelligence machines can do everything better than us?
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What made Amazon successful?
Do you remember the Fire Phone?
Neither do I.
Yet, at the time, it got a lot of fanfare.
It flopped badly.
Most of Amazon’s projects have failed.
Yet a tiny percentage of their projects have been incredible successes.
Look at AWS:
Even many of the most successful small and medium-sized firms fail more often than their competitors, limit their downside, get one or two huge successes every few years and keep adapting.
Too many firms of all sizes become conservative and lazy after the initial success.
Often, once a company becomes too big, compliance and other “business prevention” business units becomes more important than those departments focusing on taking risks and innovation.
What are the benefits and risks of investing in stocks of companies that mine for precious metals like gold and silver?
Gold and silver mining companies aren’t always linked to the metal’s price, even if there can be a correlation.
Some private companies, say private equity, raise money to extract gold and silver.
Those projects are high-risk and high-return. You could easily lose your capital or make 10x because the result depends on finding the gold.
In terms of mining stocks listed on the global stock markets, the main risks are:
- Political instability. Miners are often mining in unstable countries. That could mean:
-More taxes on mining companies
Look at what has happened in Niger recently. It isn’t about gold and silver but shows the risks in the commodities business (Uranium in this case).
- Ability to access capital at reasonable rates of interest
And let’s not forget, like any individual stocks, you also face individual company risks.
The CEO might make the wrong decisions, or the company might not innovate.
That is a risk for all individual stocks in every industry versus buying a fund or ETF.
Some investors buy mining stocks because they are uncorrelated with much of the general market.
Mining and energy did well last year when the general stock markets fell.
At other times, they significantly underperform.
What are the benefits of investing in an ETF?
The main benefits are:
- They are low-cost
- You can get broad-based diversification without buying thousands of individual stocks and bonds.
- They are easy to buy, as they are available on most investment solutions.
Here is the primary downside.
ETFs can be sold instantly.
You would think this is only a positive.
Traditional index funds take a few days to sell.
Therefore, if you have an emergency, ETFs can be sold more quickly.
Yet the evidence shows that this ability means more people actively trade.
Here is the founder of Vanguard, Jack Bogle, explaining why he doesn’t like ETFs.
It isn’t that he was against them because he thinks the performance will be worse than traditional index funds.
Merely, he thinks the ability to sell so quickly encourages bad investor behaviour.
The data supports this view.
Since the massive increase in do-it-yourself (DIY) and ETF investing, more people are panic selling during stock market crashes.
In comparison, if people are locked into solutions, like index funds through retirement accounts, they are less likely to sell out and make active changes.
That isn’t to mention that more ETFs have become narrow rather than broad-based ones, as he mentions in the video.
Who has to pay U.S. taxes as an expat?
If you live in the US, you have to pay taxes, as you are a resident.
If you are living outside the US, you also need to declare taxes (meaning you have to put in a tax return even if no taxes are due) as a US-specified person.
US-specified persons include non-citizens, such as green card holders.
I would always get proper tax and legal advice, which this answer isn’t, and consider renouncing citizenship, which an increasing number of Americans living overseas are doing.
Every year, a new record is broken due to this issue.
What will people do when artificial intelligence machines can do everything better than us?
When was the last time you watched a robotics race?
Or, for that matter, a greyhound race?
For most people, the answer is never, yet almost all of us have watched humans racing.
But machines and some animals are:
- And don’t get tired
The fact is, watching humans is more interesting for most people.
The same is true for other things in society.
Self-service has been around for ages and is quicker, but human service still exists, as some of us enjoy it, whilst others prefer automated service.
When I go to airports, I am always amazed at how many people prefer the manned gates to the e-gates, even though more and more people prefer using the machines and dealing with people in that situation is much more stressful than at a restaurant.
So, it isn’t so simple as to say that machines are better than people, so we will all be out of a job or a business.
There will always be areas where people want to deal with people.
The people most at risk don’t currently focus on the human side.
For example, those who are just focused on being excellent at maths or a hard skill, and aren’t in the human or trust business.
Let’s put this another way. Would you automate many legal tasks as a business owner? Probably the lower tasks.
But now, imagine you were facing a trail that could lead you to going to prison or losing assets in a divorce case.
You would probably prefer a human to work in tandem with AI, because there is a lot of emotional stress as well.
That isn’t to mention that I have heard these predictions in the past.
- Emails would destroy letters. Nobody would send letters anymore
- Amazon would destroy books (actually, physical book sales are at record highs in the UK and some other places).
- Western Union would go out of business (I have heard that since at least 2007), as it is no longer needed due to technology.
- AI would dismantle call centre jobs at home (in fact, some banks boast that they don’t outsource to AI or to India, and you can speak to a local person if necessary). Just a few months ago, one of the digital banks I use boasted that their value added is that they assign me an account manager, whereas competitors are automating.
- People would, net, lose jobs to machines. I have heard that since the 1990s, and it has been predicted for a hundred years.
Henry Ford once threatened unions for automation over a hundred years ago.
So, I wouldn’t read too much into this yet.
AI is indeed something different to what we have seen before.
It could be a fourth industrial revolution, but it will also create new jobs and might actually make more people focus on what is human and can’t easily be replaced.
I suspect you might need to worry more about humans using AI in ten years than AI itself.
Imagine how much more efficient others will be with this tool.
It is already changing investing, business and many other domains.
Which industry should a person join if he is in it purely for the money?
In the 1980s in LA, there was a huge boom in the plastic surgery industry.
There was an imbalance between supply and demand.
That was probably because plastic surgery wasn’t traditionally seen as a high-status career for doctors.
Doctors’ pay in this area was much higher than in other specialisms.
What happened next?
Many people trained to be plastic surgeons, and the average wages plummeted.
More recently, in the UK, there was a shortage of drivers.
Truck drivers were making 70,000 Sterling a year, which is about $90,000, which is about double what the average wage is, and much more than double in many areas of the country.
Media outlets said, “don’t bother to go to university”.
Then, many people trained to be drivers, and wages returned to where they were before.
The point is, unless a job is truly dangerous or terrible, these things are temporary.
So, the only sustainable way to earn a lot is one of the following ways
- To get world-class at something. If you are good (or perceived to be good) at something, you can’t be replaced. Most tennis stars make nothing. The top ones make tens of millions or more. Most actors make nothing, but George Clooney never needs to worry about getting work and making good money because he has a personal brand and is perceived to be world-class in his field.
- Get good at highly scalable skills. Examples are branding (especially personal branding), negotiation, sales and marketing. This is especially the case if you combine it with a hard skill. “Dr Pimple” is a doctor who, almost for sure, earns more than 99.9% of doctors. Is it because her skills are so much better? Who knows, but it is more likely that she has eight million followers online and is also at least very good at what she does.
- Earn from running a business and leveraging other people’s skills.
- Once you have made it, invest in assets. That way, your unearned income will one day exceed your earned income.
- Obviously luck, like being born into the right family, but you can’t rely on that.
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Adam is an internationally recognised author on financial matters, with over 694.5 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.