“Money” and “Wealth” are two simple concepts that people often use interchangeably. Growing up, I have always thought these two are the same. That turns out to be a mistake. They are two different things — i.e., money is a medium of wealth, but wealth is not all money.
Let’s talk about money first. It usually comes with a currency sign and can be in the form of paper or digital credit. A simple enough concept we typically don’t overthink about. At its essence, money is a fictional concept that we humans together have faith in, just like religions, corporation entities, and even Bitcoin. If we look at human history, it was a big breakthrough when humans collectively decide to take this concept of “money” for trades instead of real goods. Money allows convenience and enables faster trades when you don’t have to drag a sheep for shoes. Money is a medium of wealth, but it’s also an enabler for speedier wealth creation. So when we say “how to make money,” we mean “how to make wealth.”
Now let’s talk about wealth.
On a macro level, wealth represents a society’s overall living standard, wellbeings, and goods it possesses. And these tangible and intangible kinds of stuff are created by humans working collectively in a flexible fashion.
For example, living in the modern world, we don’t need to ask for or get to the know the person who makes our clothes, preps our food or build our shelter. We have this massive system called “Division of Labor” — with each member making things that other people want. More importantly, we can do it flexibly within either a small commune group or a thousand-person entity called a multinational corporation. It’s a powerful thing. In the animal world, for example, bees can have a perfect “division of labor” system, but the structure is very rigid, and there are certainly no corporations among the bees.
Humans are the only species who can create wealth on a massive, systematic level and yet in a flexible, adaptable fashion. And that’s how we create wealth for humanity as a whole.
Now let’s zoom in to a micro-level. An often-used phrase “turn lemon into lemonade” does capture the essence of creating wealth. In this case, one lemon at a time. For example, on a hot summer day, a little girl — also a future entrepreneur — bought a lemon for $0.5, squeezed it, and put into a cup. Now it’s sold for $1.5. Then that extra $1 is wealth that didn’t exist before she squeezes the lemon.
It’s important to note that the dollar sign (money) is a measurement of wealth but not wealth itself. Now let’s say if the little girl doesn’t sell the lemonade but instead drinks it herself. Does that wealth disappear? No. The wealth was still created because it had improved one’s living condition by quenching the maker’s thirst on a hot summer day. Other examples would be that if you decide to renovate your house by yourself — the end product would definitely increase the value of your home (assuming you don’t have a terrible decor taste.) But even if you don’t sell it, the renovation improves your well beings and life condition. And that’s wealth.
So making wealth is about making stuff people want, for oneself or others. Once we establish that, we can then dig into the topic of how to create wealth fast.
You would generally need two qualities: 1) make things not just for yourself, but for many others**; 2) make things once, but they can be used by others many times. In business terms, the first one is called “total addressable market,” and the second is “scalability or leverage.” There is a reason that investors love technology business because it usually resembles both qualities. If we look at the most valued companies and the wealthiest people today, most of them are undoubtedly in or related to the technology business (Financiers can get wealthy too because they usually master the quality of “leverage.”) It’s not coincident.
I believe it’s important to have such a mental framework for money v.s wealth, as wealth is the one we are seeking to create, and money is often a measurement of that. So “how to make money” turns out to be a false question. What we really want to have is to create wealth. To do that, we will need to make things other people want — hopefully, many people will want it; ideally, we want to make it once but sell it many times. Simple yet tricky, for that it’s the essence of technology entrepreneurship and venture capital.
Either you are a founder or a VC; what we stand behind is the startup entity that’s going to change the world. Often time it's hard to tell if the evolving market is big enough, especially if you only get to stare at the current one. Think Airbnb vs. hotels in the early days; think Google vs. Yahoo plus thousands of other search engines; Think Salesforce vs. on-premise CRM solutions. There was no way to know if the majority of people in the future would need the stuff you are building/ funding now. Hence the inevitable uncertainty of wealth creation. Unless you can envision. Or imagine.
Albert Einstein’s famous quote goes:
“Imagination is more important than knowledge. For knowledge is limited, whereas imagination embraces the entire world, stimulating progress, giving birth to evolution.”
The longer that I am in the technology and investment business, the stronger I hold on to such belief: the ability to imagine is the key for the ultimate wealth creation and is what separates a great Founder / VC vs a good one.
And in venture, being great is where it all matters.
**we can go more in-depth on the first quality — i.e., make things. I do believe what to make matters. There is a substantial difference in making things that will drastically increase society’s productivity versus diminish it, although both ways can make the makers very wealthy in the short term. But that would be the topic for another post.
For a long time, I’ve had this old poster that illustrates the mechanics of the first steam engine in my office. One might wonder what does a steam engine has to do with the “groundbreaking” technology companies a VC gets to interact with. The answer is “drastic productivity improvement.” The poster helps remind myself that with each tech breakthrough, it unleashes a tremendous amount of productivity — thus, value and wealth — within the society. Like how the industrial revolution freed up labor and accelerated production, the age of AI Automation is going to generate significant value for humanity in multiple ways.
Why AI Automation matters now
The term AI is not new — it originated in the 1960s among computer scientists. However, the real breakthroughs came within the last decade when we have developed new algorithms/ techniques set of Machine Learning (a subset of AI), Deep Learning (a subset of ML), Reinforced Learning and Transfer Learning, etc. Because of those, coupled with an abundant amount of data for training, cloud computing, and sophisticated advancements of hardware AI chips, we are seeing highly valuable tech products being created every day based on such breakthroughs.
AI automation can materialize itself into multiple forms of products:
1) New product/category. Examples include self-driving cars, voice-enabled IoT, etc. Without AI being the backbone, we wouldn’t be able to enjoy these products;
2) Help with existing products’ scalability. Chatbot, virtual executive assistants, and face/image recognition would be in this category. It’s the territory where we used to have products in place but were either a) rule-based or b) man-powered and not scalable;
3) Inject efficiency and efficacy into software products. This is the category I’m most excited about as it will have profound implications for both B2B software / SaaS and enterprise customers across multiple industries and verticals. Think high-accuracy fraud detection, robotics/ smart manufacturing, predictive maintenance, and auto business insight, etc.
What has happened?
Over the past five years, investors have rushed into the AI space without thinking too deeply about the hype cycle. Namely, we have funded many self-driving cars/trucks/tractors and the related sensor components, but few can claim victory just yet. Instead, the abundance of capital inevitably diminishes the upside return and typically excludes startups’ purpose in solving a real market need.
That being said, one of the benefits of re-examing the AI investment landscape is that most of the hype dust is settled and we now have a clearer view of this new macro trend. The trend is going to boost humanity’s productivity to the next level.
Characteristics of the new “AI-first” species
What the new AI automation presents is a unique landscape shift that will make many incumbents struggle to adopt. On the other hand, it will also give rises to many “new species**” companies that are AI-first.
Last few times when major landscape shifts took place, we have had “new species” rose in response to the new world. Think Industrialization (Ford Motors), Computer (IBM, Intel, Apple, Microsoft), Internet / Cloud / Mobile (Salesforce, Amazon, Google, Facebook). Iconic companies were created when they can ride major tech tides.
This time is no different. Except the unleashed productivity will likely be in the trillions of trillions of dollars, and the impact will last centries. That’s why we need to study and take a closer look at the early characteristics of these “AI-first” companies — the new type of specie that they are.
In the next post, we will examine the interesting characteristics of these AI-first species…
**As strange as it might sound, when I was a kid, I was fascinated by Darwin’s book “On the Origin of Species.” The work not only lays out how animals adapt to a new environment, but it also paints a competitive dynamics between the old and emerging species that leads to such adoption/evolution. Even as an adult, I still love books and documentaries about nature.
It has absolutely delighted me when I find out how similar it is between nature and our business world — i.e. bio-ecosystem vs market dynamics, landscape shift vs new tech breakthroughs, startups & incumbents vs new & old species. How the business world evolves is really not that much different than our mother nature.
This started with something silly. I ran into some click-bait youtube videos with dramatic thumbnail photos (of course!). They showed the drastic differences of “before v.s after 30-day burpee challenge.” It was at the beginning of the lockdown, so I thought to myself, “why the hell not? I’ve got time..”
So it began.
I downloaded a free app to count my daily progress. The app allows me to start at a lower count (30 burpees a day) and then gradually increase to 175 burpees a day. Truth to be told, I only made it halfway: I wrapped up 100 burpees on the 15th day, counting close to 1000 burpees finished over two weeks. The reason being that I found it increasingly difficult to combine 100 burpees a day with my regular resistant training since my major muscles were fatigued all the time. It was a big bummer since I really felt great, even having made it only halfway. It improves my strength and conditioning, and I hope I would be able to pick it up once again in the future soon.
One thing a YouTuber who was doing the challenge said had echoed in my head, which I’m paraphrasing here: “as you are doing these mindless, repetitive burpees every day, your mind is conditioned into this ‘fall and get up, fall and get up’ mode, just like life…”
Well, who knew burpees could be so zen!
This is my second attempt in cold showering. I tried it the first time when I was catching up with my friend Aki last year. And through him, I learned about the Wim Hof Method (TLDR: his own breathing technique + cold shower). It was actually somewhat extreme to me. But I gave a try regardless. And the very second day, I caught a cold. So I stopped.
For whatever reason, I bumped into those “cold shower changed my life” videos again during the lockdown (The AI must be targeting me). So I gave it another try: only this time, I didn’t start with cold water immediately. Instead, I took my regular warm shower and then switched to cold water for the last 1–2 min when I needed to rinse off.
Interestingly, time always seems to slow down when you watch your hand is on its way to turn on the cold water, like a slow-motion playback. During those moments, a few thousand things are going through in your head — things like “wait a minute, didn’t you just do that yesterday when you were screaming like a little girl” and “why am I doing this, it’s still not too late!”
But I must say, cold shower worked for me this time. It’s a great way to start your day (some people take it both morning and night time, but hey, I’m not that crazy… yet).
I think it does take your body a few days or even a few weeks to become fully adjust to the cold shower norm. But this is where you realize that the human body is a very powerful, adaptable machine. Despite how uncomfortable it is in the beginning, your body and mind will learn to adapt. Psychologically, cold shower trains our minds to be okay with consistently stepping out of the comfortable zone; and it helps our bodies act on impulses, in a good way.
I think I will keep doing the cold shower thing :)
Reading before bed
I feel lucky that I have been more conscious of setting aside time for reading over the past two months. Before the lockdown, life seemed to pass us by so fast with travel, social occasions, etc. and if I were lucky, I might get some weekends to catch up on the books I’ve been meaning to read.
Since I am not able to travel as frequently now, the anti-social quarantine time does provide a safe bubble for a more stable routine. Although it’s still to be seen, I have been somewhat consistent in setting aside 1 or 2 hours for reading before bed.
For me, I like to mix a few books at the same time. Currently, I’m reading Exhalation by Ted Chiang (fiction), Unlocking the Mysteries of Birth & Death: A Buddhist View Life by Ikeda (non-fiction) and The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail by Clayton Christenson (Business — a classic, can’t believe I’m only reading it now).
Yep. I tried it again too. Not my thing. It only resulted in many late-night binge eating and self-loathing :(
I enjoy cooking. It provides me with a time and space where I can just focus on one thing. As strange as it might sound, cooking is kind of relaxing for me. In the past, I have been a long-time subscriber to meal prep services like Plated and Blue Apron. Each time I finished a well put together plate, I feel a sense of accomplishment. (I’m an easily satisfied person ;)
I used to not understand why anybody (mostly the weight training guys) just let the boring meal-prep boxes suck the joy out of their lives. However, as life gets busier, I turned into one of those meal-prepping joyless guys.
I usually do it once a week and prepare six meals at once. I leave out Friday / weekend for the “fun meals”— that is, I can order take-out and eat whatever I want on the “cheat day.”
Embarrassingly, those “cheat days” often become “cheat weekends,” but luckily haven’t turned into “cheat week” yet. We will just have to see.
I was lucky enough to get my hands on a PC in the 90s, among the first waves of families owning a computer in China. My first programming language was BASIC. It sounds so ancient (and basic!). And it was. The TIME magazine wrote a long piece on this language, and it was fun to read, especially by staring at the old “minimalist” interface again.
During the shelter-in-place, I felt it might be a good opportunity to brush up on the coding skills again. Only this time, not with BASIC. I’m picking up Python, and reading up all I can on AI / ML. We will see how it goes.
Breathing matters. I didn’t realize how important it is paying attention to our breath. By being conscious of our breath, we are actually sending an active signal to our brain and body to help us live in the moment.
For most of the days, I keep meditation twice a day. And because I know that maintaining consistency is more important to me than the duration, I only keep each session at roughly 5 -10 min. So that I know even at the most tiring night, I would be able to practice it before bed.
Journalling via audio
This new habit has been incredibly helpful to me. I used to keep a habit of doing a five-minute journal for several years until I find myself often too tired to type/ write at the end of the day. However, thanks to the new AI, I now can easily do audio journaling while having my words transcribe simultaneously (amazing how accurate the AI service could be).
Coupled with daily meditation, the journal helped me uncover a lot of weakness in me and help me reflect on a lot of deep unresolved emotions that were not previously discovered. As funny as it might sound, my journal notebook has been an incredible therapist for me and has helped me recognize some major personal growth hurdles. I think I will keep doing that.
So here are the few things I picked up during this lock-down time. As the world is turning more upside down, it’s ever important to keep our inner peace and use this window to do more self-reflection. I thought it might be interesting to document the strange period this way.