IF someone you respected called you a capitalist, would you be insulted or honoured?
Take a moment to consider your response. Your likelihood of failing or succeeding as an economic entity in the future is woven into your answer to my simple question.
Times are tough now and, sadly, will only grow tougher.
Entrenched demographic and technological trends will ensure only those who plan well, work diligently, and continue learning throughout their adult lives will be able to build and then protect their future wealth.
Burying our heads in the figurative sand is not going to change the reality of skyrocketing global competition and escalating tensions we will all face in earning a living and paying our bills in the decades to come.
Also, two megatrends, one demographic and the other technological, will make things worse by gathering momentum:
1. Humanity is ageing; and
2. Artificial intelligence is evolving.
Medical and nutritional advances are helping us live longer. At the same time, human birth rates in too many countries are falling, which explains the rapid greying of many countries, most notably in Europe and Asia.
As lifespans creep upward while birth rates dip, the median age of Earth’s Homo sapiens rises.
Therefore, we will observe a maturing of the overall human workforce as fewer babies are born to step into jobs a quarter of a century later.
That’s one of the two key reasons Malaysia’s long steady retirement age of 55 has, in the last several years, moved up — first for our relatively large public sector (with about one civil servant for every 20 Malaysians) and later for our private sector — to 60.
In the richer, greyer developed world, official retirement ages of 65 to 67 are normal, with 70 projected to be the next temporary retirement age plateau.
The other obvious reason people will need to toil for more years is the rising cost of living.
However, economic duress is not the only motivation for people to work longer. Those who believe they can keep contributing to society are constantly discovering ways to stay employed.
I am no exception. I turned 53 last month. In the “good” old days, I would be facing retirement in a mere 23 months, or in May 2019 to be precise, as that is when I am scheduled to turn 55. But I love my work and don’t want to stop!
So, God willing, if I stay hale and hearty, my key career goal is to keep working at least till May 2039, when I turn 75.
Obviously, though, no genius is needed to figure out the way I will do my work in the 2030s will not be how I carry out my duties for my clients today.
That World of Tomorrow will be different — in some ways just subtly and in others, dramatically!
The biggest reason for those differences will be the second change I mentioned: AI
or Artificial intelligence is evolving.
The rise of the machines has already meant that in decades past, countless blue collar industrial jobs were lost to sturdier, shinier, tireless, more accurate, more cost-effective robots.
These days, even lower level white collar jobs are being phased out by self-learning AI-driven systems that suck data from the Cloud and crunch all of it using increasingly sophisticated algorithms aided by ever faster computer circuitry.
So make it your goal to become a super-high value gold collar worker. That means morphing yourself into a much-needed knowledge worker who is essential to (and irreplaceable within) your business. That will permit you to keep growing your active income.
As for boosting your passive income, thankfully all those changes will not alter what is the best performing asset class in any well-diversified portfolio.
Admittedly, it will always be wise for you to spread your risk across various asset classes by saving and investing in cash, fixed income (bonds), investment real estate, and alternative investments such as commodities.
But the supercharger of your long-term portfolio will continue to be equities (business ownership).
As the pace of innovation accelerates, countless businesses will be birthed.
Most will fail
So how best might we invest effectively in equities even as we find ourselves having to expend more and more of our precious time just to stay atop our industry or profession?
I can think of two ways:
1. Invest in stable, high dividend-paying stocks; and
2. Invest regularly in well-chosen equity funds so you may harness the power of DCA (dollar-cost averaging) to build wealth steadily over several decades without having to track good, bad and ugly companies yourself.
Bottom line: Put your capital to work for you so you won’t always need to toil for money. That, by the way, will transform you into a savvy, successful, sophisticated capitalist.