578: Everyone is chasing AI gold. What will the miners need?

Imagine telling a farmer 200 years ago that someday, people would make a living helping businesses get found on Google. First, you'd have to explain Google, then the internet, then computers. And yet, when we talk about AI, we tend to assume we can already see all the jobs that will ever exist. We look at what people do today, consider what AI might replace, and start subtracting. The concern is reasonable. If a machine can do something you spent 20 years learning, that's a big deal. Telling someone to be excited about the future doesn't pay their mortgage. But there's another side to the equation, and history gives us a reason to consider it. As we moved from an agrarian society into an industrial economy, machines transformed work. Factories needed machinists. Railroads needed engineers. Electrical systems needed electricians. Entire careers emerged that previous generations couldn't have imagined. Then came the internet. It was a terrible development if you owned a video rental store. Newspapers lost classified advertising, and travel agencies faced customers who could book their own flights. Meanwhile, we got online retailers, web developers, digital marketing agencies—and people making a living talking into a microphone and sending you emails like this one. I think we need to leave room for the same possibility with AI. If a business can produce more at a lower cost, ideas that were once too expensive become possible. Something that required 50 employees and millions of dollars might become something a few people can build. That creates the potential for more businesses, more commerce, and jobs we don't even have names for yet. The transition won't be painless, but I wouldn't bet against our ability to find new things to do. As an investor, this feels a little like the California Gold Rush. Everyone wants to find gold—to own the next AI company before it becomes a household name. I'm just as interested in what all those miners will need. The new economy will need power, buildings, equipment, and transportation. There may be opportunities in supplying those needs even if we can't predict which companies will win. Transportation makes this particularly interesting for real estate investors. If you could work or sleep during your commute, would you live farther from your office? If fewer people needed parking, what could happen to that land? If moving goods became cheaper, would the ideal location for a warehouse change? Those questions get to the heart of what makes real estate valuable. Our job as investors is to see where the puck is going—and understand how technological change could create demand for something we can own. This week on the Wealth Formula Podcast, Marc Scribner of Reason Foundation joins me to explore autonomous transportation and what it could mean for real estate and the broader economy. We discuss what's happening, what's still speculative, and where investors may need to rethink their assumptions. Everyone is looking for the next big thing. I want to understand what the next big thing will need.

When you finally start making some real money, you don't necessarily realize what that really means. In a way, you've just started another business. Think about it. The money you've earned and saved now has a job. Its job is to make more money. That makes you the CEO of the business of your own money. Now imagine you started a business with a few million dollars of your hard-earned capital. Would you hand it over to someone else to run, check in two or three times a year, and basically hope they were doing a good job? Of course not. You'd want to know how the business was performing. You'd look for ways to increase revenue, reduce expenses, minimize taxes, manage risk and make better decisions. So why do so many high-paid professionals treat their money completely differently? They hand it over to a financial advisor and essentially say, "You deal with it." I think a big reason is that the financial industry has programmed us to believe that investing and personal finance are too complicated for us to understand. I don't buy that. If you became a successful physician, attorney, business owner or other high-paid professional, I'm guessing you have enough intelligence to understand your own money. Probably more than the person managing it for you. That doesn't mean you should do everything yourself. I certainly don't. But there is a huge difference between getting professional help and outsourcing your financial brain. You should have your own investment philosophy. You should understand what you own and why you own it. You should understand your tax strategy, your risk, and where you're trying to go. Then your financial advisors, CPAs, attorneys, and other professionals become what they should be: experts helping you execute your vision. My conversation this week on the Wealth Formula Podcast with MC Laubscher got me thinking about all of this. We were talking about family offices and how wealthy families manage their money very differently than most high-paid professionals do. And the more we talked, the more I realized that the biggest difference may not be access to some secret investment. It's how they think about their money. They treat their wealth like a business. They are involved. They are intentional. They surround themselves with experts, but they don't simply hand over responsibility for their financial lives. You don't need hundreds of millions of dollars and a formal family office to start doing the same thing. There is nobody in the world who will ever care as much about your money as you do. So maybe it's time to start treating your wealth like the business that it is. This week's conversation with MC is a good place to start. - Learn more about Wealth Formula Banking at www.wealthformulabanking.com Get MC's new book: https://producerswealth.com/books

AI may ultimately change the world. It may also be covering up how weak much of the current economy really is. Both things can be true. We keep asking whether "the economy" is strong or headed toward recession—as if every part of it moves together. But what if significant parts of the economy are already contracting while an extraordinary spending boom in one narrow area makes the overall numbers look fine? That is more than an academic question. It changes how you invest. If economic growth is broad, today's resilience means one thing. If it depends heavily on government borrowing, asset-rich consumers, and a handful of technology companies pouring enormous amounts of capital into AI infrastructure, it means something else entirely. And AI doesn't have to crash for that to become a problem. The spending simply has to stop accelerating. Then there is real estate. The same conditions making many projects unworkable today are also preventing tomorrow's competition from being built. In multifamily, that creates an interesting paradox: the ugliest part of the cycle may also be laying the groundwork for the next opportunity. But only for investors who buy at the right basis and can survive the debt in the meantime. This week on Wealth Formula Podcast, I speak with economist Dr. Anirban Basu about what is really holding up the economy, where the headline numbers may be misleading us, and how investors should think about the risks and opportunities developing beneath the surface. Are we looking at a genuinely strong economy—or a weak economy being supported by a few unusually powerful engines? Those are two very different investment environments.

That's a question I get a lot from investors, and the answer isn't as simple as the math might suggest. For years, the calculation was pretty easy. When mortgage rates were extremely low, borrowing money was cheap compared with the returns you could reasonably expect from investing that capital elsewhere. Even today, with mortgage rates above 6%, you can still make a mathematical argument for keeping a mortgage and investing your money instead—particularly if you believe your investments will compound at a higher rate over the long term. But let's take the math out of it for a moment. There's also a powerful psychological argument for owning your home free and clear. No mortgage payment. No worrying about whether your investment income will cover the house if your cash flow suddenly drops. Whatever happens in the markets or the economy, you know you have a roof over your head. For some people, that peace of mind is worth more than squeezing out a few additional percentage points of return. The obvious downside is that you may have hundreds of thousands—or even millions—of dollars of equity trapped inside your home. But what if there was a middle ground? In my recent conversation with a reverse mortgage expert, I learned some things about these products that genuinely surprised me. For example, did you know that with certain reverse mortgages, you can establish a line of credit and not use it at all? And while it sits there unused, the amount available to you can actually grow over time—potentially at a rate around 6% depending on prevailing rates and the terms of the loan. I had no idea. That creates an interesting possibility: owning your home without a traditional monthly mortgage payment while still maintaining access to some of the equity you've built up. Reverse mortgages have been around for years, but I realized there was a lot about them that I simply didn't understand. This week on Wealth Formula Podcast, I sat down with a reverse mortgage expert to separate fact from fiction and explore when this often-misunderstood financial tool might actually make sense.

Whether or not you currently invest in real estate, you've probably heard people talk about the enormous tax advantages that come with it. You hear about people like Donald Trump paying no taxes. You hear people complain that wealthy real estate investors somehow play by a different set of rules. Well, actually they do. But what exactly are they doing? A huge part of the answer comes down to one seemingly magical word: depreciation. Here's what's strange about depreciation. We all know that real estate tends to appreciate over time. But for tax purposes, the IRS generally treats the building as though it is wearing out and losing value. For residential real estate, that building is normally depreciated over 27½ years. So, very simply, if you buy a rental property, you can deduct a little bit of it as lost value every year for 27½ years. But this is where something called a cost segregation study comes in. A cost segregation study is essentially an engineering analysis that looks inside the building and says: Not everything we bought here is really a 27½-year building. Some components may qualify as personal property with much shorter depreciation schedules—things like certain flooring, cabinetry, appliances, electrical components serving specific equipment, and other items. Other components, such as certain landscaping, parking areas, fencing and site improvements, may qualify for 15-year treatment. Instead of depreciating everything over 27½ years, you're identifying portions that can potentially be depreciated much faster. That's great but it even gets better: bonus depreciation. Bonus depreciation can allow qualifying shorter-lived depreciation schedules identified through a cost segregation study to be deducted much more rapidly—including, under current law, 100% in the year it is placed in service for qualifying property. Now think about what that can mean. In my own experience with multifamily properties, I've often seen somewhere around 30% of the depreciable basis reclassified into shorter-lived categories. The actual number obviously varies tremendously from property to property. But consider the math. If you're putting 20% or 30% down on a property and a cost segregation study generates a first-year depreciation deduction of a similar magnitude relative to the purchase price, you may effectively generate a tax deduction comparable to much of the cash you initially invested. That's an extraordinary concept. And importantly, depreciation doesn't necessarily stop there. You still have depreciation deductions associated with the remaining basis in the property in subsequent years to offset rental income. But here's the catch. Having a big depreciation deduction doesn't necessarily mean you can offset it against your salary or other active income. For most investors, rental real estate losses are considered passive losses. Generally, those losses can offset passive income, but they can't simply be used to wipe out W-2 income. So if you are an owner in a surgicenter or dialysis center, you can potentially offset some of that income if it is passive—but not your W2 paycheck. That's where something called the "real estate professional status" becomes incredibly important. Under the tax code, qualifying as a real estate professional generally requires spending more than 750 hours during the year in real-property trades or businesses in which you materially participate, and spending more than half of your total working time in those real-property trades or businesses. There are additional material-participation rules, so this isn't simply a box you check because you own some rental properties. But when the requirements are met, rental real estate depreciation losses can potentially become nonpassive and therefore usable against other types of income. And here's where this gets really interesting for high-income professionals. If a married couple files jointly, only one spouse needs to satisfy the real estate professional tests. Imagine a physician earning significant W-2 income whose spouse legitimately qualifies as a real estate professional, and the couple meets the applicable material-participation requirements. Depreciation losses from their real estate portfolio may potentially be used against that physician's W-2 income. That can be a massive tax-planning opportunity. In some households, the tax savings can be significant enough that it may even be worth considering whether the lower-earning spouse should devote substantially more time to managing the family's real estate investments instead of working another job. Now, if that's not going to work for you, there's another strategy I've brought up before that you should understand and that may allow someone who isn't a real estate professional to use real-estate losses against active income: the so-called short-term rental loophole. The simplified version is this: under certain circumstances—most notably when the average guest stay is seven days or less—a short-term rental isn't treated as a "rental activity" under the normal passive-activity rules. If you then materially participate in operating that property, losses generated through depreciation and cost segregation may potentially be treated as nonpassive. That means someone with a full-time job may potentially generate depreciation from a qualifying short-term rental and use those losses against active income without qualifying as a real estate professional. Now remember, none of what I am telling you should be considered tax advice. There are very specific rules around all of this, and this is absolutely an area where you want a good CPA who understands real estate taxation. But the larger point is simple: investing in real estate can have some enormous tax advantages that are just not available anywhere else. And depending on your income and circumstances, we're not talking about saving a few thousand dollars. These strategies can potentially have a life-changing impact on your after-tax wealth. So in this week's episode, we're going to get into the nuts and bolts of the engine that makes this all happen: the cost segregation analysis.

Every once in a while, it's useful to zoom way out. Most of the time, we look at the economy as a collection of separate stories. The federal government is running enormous deficits. Stock market valuations are near historic extremes. China has emerged as America's greatest strategic competitor. Defense spending is ramping up. And hundreds of billions of dollars are pouring into artificial intelligence. But what if these aren't really separate stories? What if they are all consequences of a much larger transformation that has been taking place for more than 50 years? For most of modern economic history, there were hard limits on how much money and credit could be created. Gold was ultimately the constraint. Once that constraint disappeared, the world changed dramatically. Credit exploded. Global trade expanded. Interest rates fell. Asset prices soared. And American consumers were able to buy trillions of dollars of goods from the rest of the world without the old requirement that trade eventually balance. That system created extraordinary wealth. But it also had consequences that few people anticipated. One of the biggest beneficiaries was China. Over several decades, China went from a poor country to an industrial superpower and America's primary strategic competitor. Now that competition is producing another massive shift. The United States is preparing to spend significantly more on defense, semiconductors, advanced manufacturing, energy and technology. At exactly the same time, we are witnessing another enormous investment boom: artificial intelligence. The largest technology companies are now spending hundreds of billions of dollars building the infrastructure necessary for AI. And that raises some fascinating questions. Are we witnessing another speculative technology bubble? Or are we at the beginning of a productivity revolution significant enough to justify today's extraordinary investment? Could both be true? And what happens if artificial intelligence eventually makes not only information, but intelligence itself—and perhaps even labor—abundant? At that point, we may be talking about something much bigger than the next economic cycle. We may be talking about the evolution of the economic system itself. That's the subject of my conversation with economist Richard Duncan this week on Wealth Formula Podcast.

Why is housing so expensive in some American cities—and why does it seem like we can never build enough of it? We tend to blame everything from interest rates and developers to investors and population growth. But a big part of the answer may be much simpler: in many of the places where people most want to live, we've made it extraordinarily difficult to build more housing. My guest on this week's episode of Wealth Formula Podcast is Dr. Jan K. Brueckner, professor of economics at the University of California, Irvine, and an expert in urban economics and real estate markets. We talk about the basic economic forces that shape our cities, why housing affordability has become such a serious problem, and how zoning and other land-use restrictions can drive prices higher by limiting supply. We also get into upzoning, the push toward greater housing density, and why economists are generally so skeptical of rent control—even though it can certainly benefit the tenants who already have it. For those of us who invest in real estate, this is an especially interesting conversation because these policies don't just affect housing affordability. They can fundamentally change supply, rents, property values, and ultimately the economics of investing in different markets.

For the last three years, commercial real estate investors have been waiting for a dramatic reset. The expectation was straightforward: higher interest rates, a wall of maturing loans, and distressed sellers would eventually force prices sharply lower, with the correction happening all at once. Instead, the great real estate reset is happening—but it's happening in slow motion. Today, we're seeing selective opportunities where quality multifamily assets can trade at discounts of 30–40% from prices just a few years ago. Naturally, many investors wonder if they should keep waiting for even better deals. But how much better could they actually get? One of the most interesting insights from this week's guest is that today's transactions don't necessarily represent a market that is still falling—they represent a market that simply isn't functioning normally. Most of the deals getting done involve either distressed sellers who have no choice or trophy assets that always command a premium. The vast middle of the market remains frozen as buyers and sellers continue to disagree on value. In other words, these distressed trades may not be evidence that everything gets cheaper from here. Instead, they may represent some of the best opportunities created during this slow-moving reset. This week's guest is Peter Muoio, one of the country's leading commercial real estate economists, and he helps us take a deeper dive into what's really happening. We discuss why today's environment is fundamentally different from 2008, why the so-called "wall of maturities" has become a slowly rolling wave instead, what finally ends the price discovery process, and why uncertainty—not a lack of capital—has become the biggest obstacle to a full market recovery. We also discuss why multifamily fundamentals may improve as new supply fades, why institutional capital is waiting patiently on the sidelines, and why some of the most overlooked opportunities may emerge from sectors investors have largely abandoned. If you've been wondering whether commercial real estate has already reset—or whether the best opportunities still lie ahead—I think you'll find this conversation both practical and thought-provoking. Learn more about Situs AMC: https://www.situsamc.com/ Sign up for Wealth Formula Investor Club: https://wealthformula.com/

Link to Harry Moser's Resources blog: https://reshorenow.org/blog/reshoring-initiative-resources/ For decades, one of the easiest ways to increase profits was to manufacture products where labor was cheapest. Companies built factories in China, Southeast Asia, and Mexico, while consumers enjoyed lower prices and shareholders benefited from higher margins. It became conventional wisdom that globalization was irreversible. But what if one of the biggest investment trends of the next decade is the exact opposite? Today, the United States is making an unprecedented push to bring manufacturing home. Through the CHIPS and Science Act, the Inflation Reduction Act, and a growing list of incentives for industries ranging from semiconductors to pharmaceuticals to advanced batteries, hundreds of billions of dollars are being invested in rebuilding America's industrial base. This isn't nostalgia for the factories of the 1950s. It's about economics. COVID exposed just how fragile global supply chains had become. Geopolitical tensions with China highlighted the risks of depending on overseas production for everything from computer chips to critical medicines. Companies have also learned that the cheapest supplier isn't always the least expensive once shipping delays, inventory costs, quality problems, and geopolitical uncertainty are factored into the equation. In other words, businesses are beginning to optimize for resilience—not just the lowest sticker price. That shift has enormous implications for investors. If manufacturing continues moving back to the United States, the beneficiaries won't just be manufacturers. Industrial real estate, automation companies, robotics firms, machine tool manufacturers, utilities, natural gas infrastructure, logistics companies, and even regional housing markets could all experience significant tailwinds. But perhaps the most surprising consequence has nothing to do with factories. It has to do with people. For decades, we encouraged nearly every high school graduate to pursue a four-year college degree. Meanwhile, vocational education and skilled trades steadily lost prestige. Yet many of the jobs America increasingly needs today aren't additional marketing majors or middle managers—they're electricians, industrial maintenance technicians, CNC machinists, welders, automation specialists, and mechatronics experts. Many of these careers pay well into six figures while offering strong job security and growing demand. Then there's the wildcard that seems to be influencing every major economic discussion today: artificial intelligence. At first glance, AI seems like it should reduce the need to bring manufacturing back to America. After all, if robots and software can do more of the work, why not simply automate factories overseas? The reality may be exactly the opposite. As automation and AI reduce the importance of labor costs, other factors become far more important: proximity to customers, reliable supply chains, intellectual property protection, faster delivery, and national security. If labor becomes a smaller percentage of total production costs, manufacturing closer to home often makes more economic sense. Ironically, AI may not eliminate the need for American manufacturing—it may strengthen the economic case for it. Of course, that raises another important question. If factories become increasingly automated, what kinds of workers will actually be in demand? Will AI create millions of new high-paying technical jobs, or will it limit how many workers these new factories ultimately require? Those questions don't just matter for workers. They matter for investors trying to understand where capital, jobs, and economic growth are likely to flow over the next decade. This week on Wealth Formula Podcast, I sit down with Harry Moser, founder of the Reshoring Initiative, to discuss whether America is truly entering a manufacturing renaissance, why companies are rethinking decades of offshoring, how AI is changing the economics of domestic production, whether skilled trades may become more valuable than many traditional college degrees, and where investors should be paying attention as one of the largest structural shifts in the global economy continues to unfold. More about Harry Moser: Harry founded the Reshoring Initiative, leading the effort to bring manufacturing jobs back to the United States after a distinguished career at GF AgieCharmilles, where he served as President from 1985 and retired as Chairman Emeritus in 2010. His work has earned widespread recognition, including induction into the IndustryWeek Manufacturing Hall of Fame (2010) and the Association for Manufacturing Excellence (AME) Hall of Fame (2021). He was also named Quality Magazine's Quality Professional of the Year (2012), FAB Shop Magazine's Manufacturing Person of the Year, and received AMT's Al Moore Award (2026). Harry has been a leading advocate for U.S. manufacturing policy, participating in President Obama's 2012 White House Insourcing Forum, winning The Economist debate on outsourcing and offshoring, receiving the Manufacturing Leadership Council's Industry Advocacy Award (2014) and the Made in America Reshoring Award (2019). He was recognized by former Commerce Department Chief Economist Sue Helper as the driving force behind the modern reshoring movement, appointed to the U.S. Commerce Department's Investment Advisory Council in 2019, and has testified before both the House Commerce and Small Business Committees as well as a U.S. Senate commission on strengthening American manufacturing.

Most investors spend nearly all their time thinking about how to make money. They analyze returns, evaluate risk, search for opportunities, and try to identify the next great investment. But there is another side of wealth building that receives far less attention: How much of what you make do you actually get to keep—and continue compounding? Taxes on investment gains can be one of the most destructive forces in wealth creation, not simply because of the check you write today, but because of everything that money could have earned in the future. Consider an investor with a $10 million gain in California. A combined capital gains tax bill approaching $3.7 million would leave only about $6.3 million available to reinvest. That is not merely a one-time loss of $3.7 million. It is also the loss of every dollar that $3.7 million might have produced over the next 10, 20, or 30 years. At a hypothetical 10% annual return, $3.7 million could grow to nearly $25 million over 20 years. That is the true cost of the tax: not just the original payment, but the decades of compounding that disappear with it. This is why sophisticated wealth planning cannot focus exclusively on generating returns. We must also consider how assets are owned, when gains are recognized, and whether taxes can be legally deferred so that more capital remains invested. My guest on this week's Wealth Formula Podcast is Brett Swarts, founder of Capital Gains Tax Solutions and author of Building a Capital Gains Tax Exit Plan. Brett specializes in a strategy known as the Deferred Sales Trust, which he says may allow certain investors and business owners to defer capital gains taxes when selling highly appreciated real estate, businesses, stocks, or cryptocurrency. In this episode, we discuss how the strategy works, the legal structure behind it, its costs, its audit history, and the important limitations investors should understand. We also walk through practical examples involving real estate, business sales, and Bitcoin. This is not about avoiding taxes illegally. It is about understanding that when and how taxes are paid can dramatically affect long-term wealth. Because making money is only half the equation. Keeping more of it working for you is where compounding becomes truly powerful.