The Asset Revolution: Wealth Creation in the AI Era
Introduction: The Changing Landscape of Wealth Creation
Over the past two decades, the United States has experienced a controversial economic transformation that has reshaped how wealth is created and distributed. Real wage growth has remained modest while asset appreciation has accelerated dramatically, creating an ever-widening wealth gap between asset owners and wage earners. This divergence represents a structural shift in how prosperity is generated in modern economies.
Following my article on The Fast Money Generation, I am optimistic about how future generations might experience a different relationship with wealth creation. The economic paradigm is shifting once again with the rise of artificial intelligence, and understanding how this revolution will alter people’s wealth (for better or for worse).
The Shift to Service Wage Income
The zenith of American manufacturing occurred immediately following World War II, when approximately 30% of U.S. jobs were in the manufacturing sector vs. today where it is less than 10%. Wealthier Americans increasingly directed their spending toward services like entertainment, travel, wellness, and financial management, creating entirely new economic sectors and career paths.
The technology era that began in the 1990s revolutionized service industries through exponential improvements in computing power. Moore's Law—the observation that computing power doubles approximately every two years while costs halve—enabled the proliferation of personal computers, smartphones, robotics, and interconnected systems that dramatically enhanced productivity and created new service categories. Today, services account for approximately 80% of America's GDP.
The Divergence Between Wages and Assets
A common quote, "Back when an average 40-hour-per-week job would support a family of five with a house, a car or two, and annual vacations, passive income was a luxury." In that era, a stable wage provided sufficient financial security for a comfortable middle-class lifestyle.
Today's economic reality is markedly different. "Passive income is a critical component of any investment strategy, particularly for people looking for financial freedom." This shift reflects the diminishing power of wage income relative to capital income in creating financial security and building wealth.
The data clearly illustrates this divergence, as visualized in the figure above. When adjusted for inflation, real wage growth has been remarkably slow, averaging only 0.75% annually over the long term, with periods of stagnation and even decline. Meanwhile, assets have experienced substantially higher appreciation rates. For example, the S&P 500 index has grown at an average annualized rate of approximately 8% over the past two decades, including dividends, resulting in a 4.7x increase in value.
This historical shift caused the people owning the assets of the service economy (i.e. the S&P 500) to generate substantially more wealth than those employed by the service economy.
Technology's Transformation of Service Industries
We now stand at the threshold of another economic transformation, artificial intelligence, driven by the convergence of abundant electricity, specialized computing hardware (GPUs), vast amounts of digital data, and sophisticated large language models (LLMs). This combination has created a realm of intelligent computing that can replicate many cognitive functions previously exclusive to humans.
The impact of AI on employment is already substantial and projected to grow exponentially. According to International Monetary Fund research, almost 40% of global employment is currently exposed to AI, with this figure rising to approximately 60% in advanced economies. By 2030, McKinsey projects that activities accounting for up to 30% of hours currently worked across the U.S. economy could be automated with generative AI.
Beyond job displacement, AI and automation have already influenced wage dynamics. Research indicates that early AI and automation implementations have contributed to wage suppression of up to 70% in certain sectors since the 1980s.
Repositioning for the AI Era
The Fast Money Generation must adapt to this new economic reality by prioritizing their personal balance sheets over income statements or they will never exit the ‘rat race’. The optimal strategy involves using AI tools to enhance productivity and earnings while systematically redirecting those earnings into asset ownership.
The AI revolution will likely free human cognitive capacity from routine tasks, potentially unleashing unprecedented creative potential. People don’t need to spend the mindspace and time to deal with basic tasks and chores in life and work. No need to drive, no need to fix things around the home, no need to do back office functions at work, no need to physically move things in a warehouse. The advancements from Nvidia, Tesla, FigureAI, and a wave of AI software agents are going to substitute our physical presence in certain labor functions. Another way to say it, our AI agents and humanoid robots will contribute to our household wages. Side effect, we will also have more time back in our lives.
That being said, I don’t expect humans to just go sit on a beach and have their robots conduct the services needed to make an income. I expect humans to reprioritize their days to focus on asset building. Several assets that are likely to retain or increase their value in the AI era:
Human Creativity (Innovation & Entrepreneurship)
Community Groups and Social Networks
Corporate Equity (Being a shareholder)
Brand Building
Land and Real Estate
Natural Resources and Raw Materials
People always ask me “what I should be doing if my job is replaced by AI in the coming years?” I think you should hedge your career risk through asset ownership. This might mean investing in technology companies likely to benefit from the same AI advances that could disrupt your current profession. For instance, if you work in animation and anticipate disruption from generative AI, acquiring stock in content platforms like Netflix or Disney could provide financial protection against industry transformation.
Move from Labor Income to Capital Income
The way we conceptualize work and wealth creation will likely undergo profound transformation in the coming decades. The traditional emphasis on wage income as the primary path to financial security is giving way to a new paradigm centered on asset ownership and capital appreciation.
The AI revolution, while disruptive to traditional employment, also creates unprecedented opportunities to leverage technology for wealth creation and to redirect human energy toward higher-value creative endeavors.
The future belongs not to those who cling to outdated economic models but to those who adapt to the new reality of asset-based wealth creation in the intelligent computing era.