Why Your Future Is Going to Be Awesome

The robots are coming! Well, actually, they’re already here in a variety of industries, but artificial intelligence is absolutely going to be a huge catalyst for economic expansion and betterment. 1500 Days, in this post, looks at the coming waves of the future, and how those will translate into a totally awesome ride for all of us.

One thing about index funds bothered me. I understood how index funds worked and why they’re better; it’s very difficult to pick single stocks over the long term. However, there was something that I didn’t understand: Why does VTSAX go up and to the right over the long-term?

For VTSAX to grow ever bigger, there has to be economic expansion. In other words, gross domestic product (GDP) has to consistently grow. This was my big question: What is the mechanism behind this?

I asked a lot of smart people and no one seemed to have the answer. But then, I heard Warren Buffett talk about it at one of his annual meetings. He said something like this: Population growth and productivity gains are what causes economic expansion. The latter is more important than the former.

The first one, population growth, is obvious. More people need more stuff to live. Productivity is more complicated. I’m not an economist (hell, I can barely find my keys on an average day), so I won’t even try to explain it. If this nerdy stuff interests you, dig deep into Wikipedia.

Are you still here? Great! If you didn’t click over to Wikipedia, consider these excerpts that are relevant to the rest of this post: In a famous estimate, MIT Professor Robert Solow concluded that technological progress has accounted for 80 percent of the long-term rise in U.S. per capita income, with increased investment in capital explaining only the remaining 20 percent

Economic growth has traditionally been attributed to the accumulation of human and physical capital and the increase in productivity and creation of new goods arising from technological innovation.

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