Scott: AI isn’t just changing tech. It’s transforming how we work, earn, invest, and reach financial independence and early retirement. Today, we’re breaking down exactly how we use AI and how this could impact your financial independence.
Mindy: Hello, hello, hello and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen and with me as always is my Grok is his AI of choice, co-host, Scott Trench.
Scott: Mindy, great to be here with my Gem men eye of a co-host, Mindy Jensen. We haven’t talked about AI very much here at Bigger Pockets money. I think it’s kind of been overblown and underblown in discussions around how it’s going to impact finances and those types of things. I think enough time has passed now and you and I have both gotten comfortable enough using AI here at Bigger Pockets Money to help us power what we’re doing. Well we can kind of talk about what we’re seeing here and and kind of distill the notes that we’ve we’ve gathered from, you know, various research and and and thoughts from people who are much more, you know, obsessed with the topic of AI, I think than either of us. So I think this will be a great discussion and I think this is a real impact to the fire journey and I think there’s real opportunities here for folks to use this technology to power things forward. I also think there’s a lot of unknowns left and that that will get fleshed out over the next two or three years.
Mindy: Yeah, I have historically not been super excited about technology and changes in technology and it did take me a while to embrace AI just because I don’t like tech. I did a couple of things with chat GPT earlier in the year. I asked it a question. It’s like, is the sky blue? And it’s like, no, the sky is magenta or like whatever garbage answer it gave me. It was like, oh, AI has a long way to go, like I’m not even going to bother using it. But then at Fincon this year, so many presentations were focused on AI and I thought, maybe I do need to start looking at this a little bit more. What I’m using AI for is idea generation. Not so much fact finding because they can find a fact about anything if it’s true or not. The idea generation opportunities are amazing and finessing the language that I’m using. It’s great for specific things and it’s really bad at other things. What are you using AI for, Scott?
Scott: I’m using it almost all the time in increasing levels. What one of the areas that I’m having the most fun with is like a CEO at bigger pockets, software development was the expense center. It was really expensive. And I I I kind of describe it to you like this, Mindy. like imagine you’re trying to paint a picture, like you’re an artist, right? Trying to paint uh a painting. And the process you’re using to paint the picture is you tell somebody what you want and you put some parameters around it, and then it goes into the the queue for the technology queue, and it comes out two to three to six months later and it’s kind of what you wanted, but then you need a couple of iterations, then you go back and and and you know, every two weeks you get your next cycle of iterations out of that. That’s kind of like what software development used to be like for a big portion of my career at bigger pockets. Now that same output is literally I type in a few sentences into the AI and it spits out like what I’m asking for. And it’s not perfect. It’s riddled with errors, but I can fine tune it one prompt after another. And in a day, I can get a working prototype that would have taken me six months. And that is a truly remarkable situation. The AI will then coach me on how to hook it up to a back end. The Resource Library is a perfect example of this. There’s going to be problems with it, but it’s so fast and so quick to get these things out and then I can iterate and build from there um and put them put in the rest of the building blocks around it. That’s incredibly powerful. and and I think that’s just one example. Another way I’m using AI all the time is I have these thesis, right? So I think we’ve talked about how I’m obsessed with Denver office lately. Like something’s going on. How can you buy a building that sold for $100 million bucks for $7 million? You know, 100 million bucks a couple years ago to $7 million today. Well it’s because they’re all empty, but like what does that mean? So I can type in my thesis to the AI and get feedback. I say great it. It calls out real weaknesses. I can have a quality kind of discourse to to beat this thing up. And then I can bring that polished artifact to a human for that next level of discussion. And that is definitely making me smarter. That is not like me surrendering to the AI or the AI doing all the work. This is a discourse and I think it’s really helpful. The AI is dead wrong on a bunch of stuff frequently and I go in eyes wide open with that. but it also brings up really good suggestions and thoughts too. It can be right and provide data in some cases that challenge things. as long as I am disciplined enough to fact check all of the things that it says. I do that a lot to polish ideas and get them ready for discussion with with with folks. And um I do it a lot with vibe coding and I think it’s going to be very powerful in terms of creating great stuff over time. I think you take a humanity doing this at large and you’re going to find folks moving much, much quickly, much more accurately over time, um especially as the AI gets better at being real about stuff and stops hallucinating and you can trust it a little bit more over time. Well, and with this progress comes some uh pitfalls, Scott.
Scott: I think that’s true, but that’s like with any technology, right? Like I think AI is a lot like social media, right? You know, my my social media is filled with J Scott’s posts about the economy and it’s filled with entrepreneurs talking about best practices and it’s filled with personal finance nerds sharing what’s going on in in their lives. It’s filled with my friends. And I’ve largely over time been able to move on from the political phrases on the right and left that used to suck me in. I could not look away from the super hardcore maga or the super hardcore liberal people posting all day just like how much they hate the other party. I I couldn’t get into that. but like that was bad. But I’ve moved away from that. my feet is now filled generally speaking with productive stuff. And I think other people can fill their feet up with stuff that’s not productive. That’s not making their minds. And I think social media has that amplification effect. I think AI will do the same thing. If you’re using AI to better yourself and to really beat up on ideas and and and get feedback and using it thoughtfully and carefully, and not trusting what it says implicitly, but using it to question things and then questioning it in turn. I think it’s really it’s an amplifier of your of human capabilities. I think there are probably other uses of AI that are totally unproductive and or that will cripple people like if you’re using it to write all your papers in high school and never learn how to write, that’s going to cripple you for life. And I think that’s going to be a really damaging output. It’s a tool, it’s a power tool and there are really powerful applications of it and there are ways to really hurt yourself with it.
Mindy: Yeah, jobs are going to be massively affected. Even three to five years ago, technology was the field to be going into, but now it’s one of the most affected job markets with the rise of AI. You are seeing this yourself where you had a huge line item in your budget for developers and coders when you were the CEO of Bigger Pockets and now you’re able to do this same work way faster. weeks, weeks, months faster.
Scott: And it’s not the same types of work, you know? There there are certain limitations, but the workflows that I’m able to adapt the AI coding tools too. I can’t do some specific things. I can’t do certain full stack stuff that requires deep back ends yet. But I can build front-end applications in a way that is multiple orders of magnitude, at least two to three orders of magnitude cheaper than what used to be the case, you know, for 10 years. That’s just super recent, right? The latest updates in the last six weeks for AI Studio have made that possible in a way that wasn’t possible even as as far as October of this year. So it really is remarkable the pace that this thing is moving at to take simple instructions and build complex outputs that understand what you’re looking for and then spin it right back out to you. It’s not perfect, it requires lots of iterations still, but it’s getting better all the time and it’s it’s really powerful and something’s changing here. that’s actually true. In order to to build even the MVPs of stuff that we now have on Bigger Pockets money, I would have needed months and hundreds of thousands of dollars at bigger pockets to build.
Mindy: All right, we are going to jump out for just a moment, but we’ll be right back after this quick word from our show sponsors.
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Mindy: Welcome back to the show. How is all of this stuff being generated, Scott? AI runs on electricity and in data centers and these data centers are massive and I’m starting to see municipalities saying no data centers in our area because of the electric suck that they are. I’m hearing that Elon Musk wants to take his XAI and put those data centers in space. A sister company to his XAI is SpaceX and Starlink. So there’s all these interconnections that are happening. Are they going to do it right away? No, but what kind of head start or massive impact will this have on that AI versus other AI when you’ve got the simultaneous like all of these juggling plates, you’ve got the municipality saying no. You’ve got a data center in space where the electricity is infinite because they’ve got the solar panels to and clearly I am only regurgitating what Carl has said to me because he does the deep dives into this, but you’ve got solar panels powering these data centers in space with the infinite sun, they can follow the sun around the earth and never have a dark night. There’s just so many things to be thinking about. This will give more preference to AI companies that have data centers in space maybe if this works out. There’s all these moving parts to start thinking about with regards to your investments. Maybe you invest in a company that goes to the moon, maybe you stay in index funds, which is going to be good because it’s going to be in all of them, but you’re not going to have that meteoric growth that some other people are making these small bets on these companies with these huge reward prospects. It’s a fascinating time to be here, but it’s also a little scary if you’re not financially independent yet and maybe your job can go away.
Scott: I think that’s right. So I just talked about my use of AI at a local scale. There’s implications all around for what that what that means I think for folks. But if we zoom way out to the highest level, you know, the beginning of this year, I think there was an assumption that the you know, the MAG 7 and these these big AI players would, you know, like chat GPT, would spend, you know, somewhere in the ballpark of $300 to $400 billion on AI infrastructure. That’s just the CAPEX, so this is the basically the chips um and and the relatively minimal cost ability of the data centers, chips are really the major expense here. That has been pushed up to 400 to 423 billion for the estimate for 2025. So this is a true arms race among these competitors. From my perspective, I think that this is a really big global risk for the economy and the United States, the company’s valuations here because I think there’s a real problems with this dynamic for their ability to generate future profits despite the obvious power of the AI that they’re building and the applications that I can see personally every day in what I’m using. Here are a couple of risks that I see. First, that CAPEX is going to be functionally obsolete within a few years. I think Nvidia estimates that their chips are going to be 20 times more powerful than they are now in the next three years. So whatever you’re building now is that $400 billion basically depreciates to zero or close to it over the next two or three years. And so that’s a huge problem. You don’t have to just generate you know, a good return at 10% return on that. You’re now going to be competing with whoever buys the next $400 billion in chips in 2026, 2027. And so I think that’s reminiscent of airlines to me, in to a large degree, right? You know, and Warren Buffet has this famous quote about airlines, I’m going to butcher it, but basically if you take the total, you know, EBITDA or total profit of the combined airline industry over last 100 years, it’s close to zero even as that investment has unquestionably increased the freedom of travel and quality of life for billions of humans on this planet over that time period. I think AI has a potential to be impactful in that same way, while also being a pretty big financial risk for the people who are investing in it, right? And and and these guys at the the top, like Mark Zuckerberg, they’re not like unaware of that risk. I think he has a quote where he he’s talking about how, yeah, it’s a huge risk to invest, you know, these tens or hundreds of billions of dollars in AI, but it’s also a huge risk not to invest in there and get left behind by the competition. And so, you know, I think meta’s going to catch up to these other players in the next couple of years on that front. and I think it’s going to be an arms race for a long time. So I’m pretty worried about that. And then like what you said, you know, there’s a great episode, I listened to the Pro G with Scott Galloway podcast every once in a while. I really admire um some of the things that he does over there. He had a great discussion a while back about the electricity use for AI. and one of the problems with electricity is that when you build a big data center, the demand for power goes up 5 or 10%. It doesn’t increase the price of electricity for everybody else by 5 or 10%, it increases it by 50% because electricity grids are have fixed infrastructure environments and power plants that provide electricity. And so it just get a little bit more expensive for that next extra bit of electricity use. It gets a lot more expensive. And I think Americans around the country are seeing their electricity bills going up 30, 40, 50% over the course of 2025 to 2026. and with a big portion of that increased demand being driven by data centers, I really do not think the American population is going to get behind, you know, building Sam Altman’s or Mark Zuckerberg or Elon Musk’s next $100 billion in wealth at the cost of their increased electricity bill. Something’s going to change there and that’s going to have a major economic input. That’s like there’s two inputs to AI, basically, chips and electricity. If one of those inputs is going up in price at a pretty rapid clip and the other requires a relentless pore in inflow of just preposterous amounts of cash, that’s a problem. So I’m worried about the financial prospects of the companies that are generating this cool technology even as I use it, but I have good reason for that because I move between all the AIs all the time, right? New one comes out over here, it’s better. I switch to that immediately. It’s free. You know, even the paid versions are like 100, 200 bucks a month. um it’s just not meaningful for the better product at that point in time.
Mindy: I don’t really have anything to comment on that because you’ve put a lot more thought into this than I have. Let’s pivot it a little bit and talk about careers, Scott. Like I said before, technology used to be the career to go into and now those jobs are getting spit out by AI, chewed up and spit out by AI and people are not keeping their technology jobs. They’re having a harder time when they get laid off, they’re having a harder time finding another job in technology. What are some ways people can protect themselves with their career when they’re not already five?
Scott: I just read a great book here. It’s called Good Economics for hard times. And it was really it’s really thoughtful here because you know, one of the things that a free market economist might argue is, well, if the jobs are displaced, then people get new jobs, right? And what you find in practice is, you know, people don’t move that quickly between jobs, right? It’s very hard to get a worker who’s been doing something for 15 years to pivot to a new career in there and that there’s a cost in society for that. And that the gains from AI are going to aggregate in the hands of a few people who are really able to exploit those opportunities. Maybe it’s the Sam Altmans or these these billionaire AI folks, maybe they get crushed via the competitive dynamic I just discussed earlier and somebody else who uses the tool for free to build a business will make a lot of money. I don’t know what that looks like. but there will be disruption and those profits will aggregate in somebody’s hands at the expense of these other folks. And so I think that the only rational play is continues to go back to fire. Become financially independent early in life and make that a priority. It just de-risks all of these situations and what it does for you is it gives you time to kind of absorb those hits and those losses and those disruptions. And it gives you the flexibility to actually pursue the opportunities that emerge in a freer way than somebody who who can’t, right? Somebody who is is not pursuing fire, somebody who who is stretched the limit and living paycheck to paycheck whether by choice or necessity, in there is going to have a very hard time abandoning that job. They’re going to have to double down and double down and double down and work harder and harder and harder. And they may just lose. That’ll end up in a catastrophic consequence for them versus the person who’s pursuing fire and finding that situation harder and harder and harder may move on. Maybe they have a a couple months or even for a long period where they’re unemployed or looking for the next opportunity, but they’ll have their mind open and be able to actually find a winning position that gets behind a tailwind on there. I think there’s going to be lots of disruption and lots of opportunities to seize and those opportunities are going to be seized and realized by a few well-positioned, lucky, but also prepared people. And that the disruption is going to be an issue for for society to grapple with. How do you deal with all these people that are left behind that thought they were signing up for a 30-year career or 15 years into it, still 15 years left on the mortgage? And this disruption is really killing them and their opportunities. That’s going to be a challenge that we’re going to have to grapple with and I think that I don’t know how that’s going to end, but I don’t think it’s going to be as smooth as this idea that, oh, new opportunities will emerge, right? You have people that have been horse and buggy driver for 30 years and all of a sudden everybody gets a car, which is what AI happened here. Those horse and buggy drivers don’t just like move on to the next thing immediately. It’s going to take them time. And that’s going to be a challenge.
Mindy: Okay, Scott, that’s enough doom and gloom for this episode. Let’s talk about how you can use AI on your F journey. I think one of the greatest ways to use AI is to look at your financial situation, upload your financial situation to your favorite AI and ask it to analyze your situation, analyze your spending, analyze your investments, analyze your entire financial situation and see what it has to say. It can look at things in a in a completely unemotional way whereas, you know, those of us who are human have a little bit harder time separating our finances from our emotions. So just having it be unemotionally looking at your financial situation is a huge win for you.
Scott: I think that your answer is right, right? Just go in and plug in your challenges, your opportunities. I have no problem plugging in some of my financials to the AI, asking for feedback, and then don’t trust it implicitly, but like anything else in life, take what it has to say and say, hm, there’s some good here. There’s some real stuff that I wouldn’t have thought of that I’m going to modify my plan based off. And there’s some wildly wrong crap that this thing is spitting out here because it’s it’s that’s that’s how it always is with my experience with AI. There’s a very regular amount of this stuff is trash. This is not a human, but it is capable of providing very good inputs to a large variety of situations as long as I’m willing to acknowledge that there’re going to be a number of errors. So for example, that health and fitness protocol we discussed this on a recent episode for for New Year’s goals. Of course I built parts huge parts of that with AI. I built most of it based on a book called Bigger leaner stronger by Mike Matthews. Thank you Mike Matthews. We really appreciate you. You’re welcome on the Bigger Pockets Money podcast. anytime you want to talk about uh fitness uh there. built it based on that, but then I also plugged in a lot of things with AI and kind of help help me customize it. And then I brought that to my doctor and he was like, yeah, this is all good. A couple tweaks here and there to fix these things. This one’s unnecessary, you don’t need that. That’s what AI powered with human expertise can do. And I think that that’s the answer. And if you do that over time, you’re going to find opportunities. As long as your position is not precarious. If your position is precarious, and precarious, I mean you’re living paycheck to paycheck, you’re not moving along this path to financial independence. I think the disruption is going to be a real threat to you. But I think if you’re using this and you’re on the path of financial independence, you’re going to find opportunities and I think that this community at Bigger Pockets Money is very likely to be among on average, the huge relative winners from AI in society these days. It’s just a free way to get better at everything if you choose to use it and maximize its potential.
Mindy: Okay, Scott, you just said two things in the last five minutes that I really want to highlight. You said all the different AIs are free and get used to using it. So when I first started using it, I was using it incorrectly. Hey, chat GPT, give me an actual fact. And it would spit out, you know, sometimes it was facts and sometimes it was wildly inaccurate. And as I learned to use it more, I’ve learned, like I say, please do this. You don’t have to say please with chat GPT, but I feel
Scott: I also use please and thank you because you know, when when the AI is the overlord, I want them to remember my polite uh manners interacting with them.
Mindy: Yeah, and I like to give lots of information. I didn’t at first. Please give me a list of this. And they would spit out a list and I’m like, well, that doesn’t help me at all. Oh, because I didn’t give you more context. I know what I’m thinking, but I didn’t put more information in there. So I have gotten in the habit of just kind of brain dumping instead of asking for one thing. I’m like, here’s the scenario. Let me tell you all about this. Let me set the scene. And chat doesn’t care that I’m typing a book out because then I get really great information. So I want to tell everybody who’s like, oh, maybe I do want to start using it or I haven’t used it yet, but I’m interested or maybe Mindy is finally doing it, so I’ll do it too. Go onto an AI and create a free account and start learning how it works. Start learning what kind of inputs you could put in there to get back the kind of suggestions and information that you’re looking for. I’ll ask for sources. Please cite the sources that you’ve used. Oh, I know this source is factually inaccurate, so I’m not even going to click on that. but then I know that this source is a really good source of information, so I will click on that and, you know, get more information about whatever it is that I happen to be looking. But you’re not going to learn how to use it in one day. So start practicing. Plus it’s free.
Scott: there’s a range, right? But but you know, the most expensive AI that I can find right now that that I would I would have any chance of reasonably using is the super heavy grock which I paid for for two months and we’ll probably move on from whatever the next one leap frogs it and there like that’s it. Like that’s expensive, but this is not a prohibitive cost for most of these to to get to get basic basic access for most of these AIs for most of the people again who are listening to a bigger pockets money podcast. You don’t have to spend that much money on AI to really begin using it for many different applications in for pretty high free load. And that’s why I’m like, how can this possibly end in the amount of profits that are needed to justify the valuations of these companies, especially when you know that the next model is coming out six months from the next guy and the next one, and the next one, and the next one for the next several years until we reach engineering limits for how efficient chips can be. And that could be a while. So this is this is here to stay and it’s, you know, I don’t know, I’m not prognostica about what the ramifications of artificial general intelligence are and if we’re all going to be in the Matrix one day or not. But for now, there’s huge disruption. It’s currently here and the opportunities are immense for those who have the flexibility to go and pursue them and the threat is real for the folks who don’t. All right, I’ll be back with some thoughts after this.
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Mindy: Thank you for your attention on that prompt break. Welcome back to Bigger Pockets Money.
Scott: That’s a great place to end, Scott. That is really awesome.
Scott: Except you can use AI for budgeting and I think that is an excellent way to use the AI. You upload your budget and you ask it to look for big wins. You ask it to re-evaluate your spending and see where your potential holes are. AI can be a really powerful helper, but you shouldn’t rely on it completely. Like I said what I think it does so well is that it separates the emotion from your finances and as a human, I’m just not capable of doing that.
Scott: One other place that I’m using it is I use Khan Academy and a couple of other apps for my three-year-old now. I’m like like some people are like no screens or whatever. I’m like no there’s going to be screens for her whole life. And to me it makes all the sense in the world that if you give a kid, you know, 20 or 30 minutes, you know, a couple days a week on one of these apps that is educational, it knows what her skill level is. It knows what she knows, it knows what she doesn’t know. It can teach her the letters, it can remind her of the ones that she already knows and those types of sounds. That’s really powerful, right? I think education in a general sense is really ripe for disruption in the United States of America. and that AI is going to be a central part of that, right? Because, you know, I could see a world in the future where learning happens at the child’s individual pace on these individual apps with human intervention, right? Like I can’t just leave my three-year-old and let her play on the the app. I’m there with her. We’re we’re singing the songs together and and talking through that stuff. and there’s there are a lot of evidence that says, hey, that learning is really powerful on these apps if the adult is also sharing them on the kid. It’s not just, you know, have this thing go babysit your kid for a little bit. But if you’re doing that, I mean, this is a real advantage. It’s a real power in education that I think will be really impactful. I’m not sure where that ends or how that goes, but I think there will be great inequality in terms of educational outcomes for folks who are able to adapt this technology to individual outcomes and learning experiences. So it’s just like where where does that end? I don’t know, but there’s a really long tail. This is just getting started and I think whatever you were typing into chat GBT a year or two ago or Grock or whatever, you’re getting a very different output already and that’s going to only continue to to change in the next couple of years.
Mindy: Yeah, I love that you use Khan Academy, Scott. I like the Khan Academy and the Bro and Sis Math Club. Those are great for teaching math to your kids.
Scott: It’s just great. It teaches her how to draw the letters, to say them, you know, to recognize the patterns and stories. We were just on the other day, you know, and I was like, I didn’t even realize this, but my child did not understand the concept of first in line, right? It’s like it’s like she’s she she’s doing very well in these other things. How long would I have gone without having an opportunity to really assess that particular thing? I don’t know. But like it knew and it it taught her that on there and then she struggled with it so it brought up again in a few minutes. It was really remarkable to watch her learn that item. Like I I’m not an expert in early childhood education. This thing is and I can do that along with her and I can see kind of what it’s doing and why it’s so healthy for her.
Mindy: Yeah, and her brain right now is such a sponge. Shove all that math that you can into her brain.
Scott: We’re very good at counting and all that stuff. I don’t I don’t think we’re, you know, we’re we’re not getting into any addition. She’s three. you know, this is not but it’s just like, hey, we’re not a couple times a week. So anyways, I I’m getting off on tangent, but I think I think that if if if they can impact you there, it can impact you in your personal finances. I think that, you know, there’s every reason to believe that AI can give you a a good first draft for then human review in personal financial planning, in my health plan, in ways to resolve conflict with friends or family. Like I’m getting frustrated. I type it in, how should I respond? It’s like, you bonehead don’t do that, right? And and that’s a pretty like it’s an instantaneous thing there. Like that can help like all of those things that helps with in in these areas and I think, you know, you can’t get dependent on it, you can’t do it too much with it, but it’s a really powerful tool that I think if you can adapt smartly, you’re going to have reap huge advantages.
Mindy: I agree. All right, Scott, this is super fun, but we should get out of here now. I think I’ve exhausted all of my AI knowledge.
Scott: Sorry, Mindy, I went on a rant with this. I got I got you I really got going here after three cups of coffee and this is our third podcast we recorded today. Really appreciate it and thanks for I guess in this case letting me rant about it for a good chunk of the show today.
Mindy: I thought it was great, Scott. And we would like your commentary. Please email Mindy at biggerpocketsmoney.com or Scott at biggerpocketsmoney.com. We would love to hear from you about AI or literally anything on your mind.
Scott: Yeah, educate us on on where we we we need to look look into more. I I would love to do more research on this and really get get clearer on what the implications of this technology are going to be for the personal finance community.
Mindy: Yep. And Scott, another plug for our 31-day challenge. If you want to get a holistic view of your financial situation, join our Bigger Pockets Money DIY Personal finance challenge. It is free. It is a 31-day email challenge every day for 31 days. You will get emails sent to your inbox with a daily task to help you gather up all your information, put it all in one place, think about where you want to be, etc, etc. And then at the end of those 31 days, take all that information and upload it into one of your favorite AIs and see what they say about your financial situation. So you can join us at biggerpocketsmoney.com/31dayys. That’s biggerpocketsmoney.com/31days.
Scott: Let’s do it.
Mindy: That wraps up this episode of the Bigger Pockets Money podcast. He is Scott Trench. I am Indiy Jensen saying, peace out, Rainbow Trout.
