Brandon Donnelly — Daily insights for city builders. Published since 2013 by Toronto-based real estate developer Brandon Donnelly. — Page 340

As someone who collects NFT art , I now see a lot of AI-generated images. Usually I can tell when an image was generated by a computer, but sometimes it's hard to tell and I'm sure eventually I won't be able to tell. But if I'm being honest, today I find that I have a bias toward art that was created without any AI prompts. Maybe that changes in the future, or maybe it doesn't.

Either way, the marginal cost of producing new content, such as images and videos, has now gone down to zero as a result of AI tools. ( Here are some of my crappy creations.) That means that, if you aren't already, you're soon going to be faced with a deluge of things created in this way. This will almost certainly become the dominant form of content that we consume.

I don't think that we need to be scared by this future, but I do agree with Ben Thompson and others that it's going to make authenticity and human-content more valuable. In other words, we're probably going to need to know what is digitally scarce and what is just another thing generated by AI. Thankfully we have a suitable technology for this: it's called a blockchain.

There is no such thing as an investment with absolutely zero risk. But you can get pretty close to zero-risk with things like US Treasuries and other government bonds, which is why when people think of the "risk-free rate of return" they usually think of instruments like these.

Not completely risk free, but pretty damn close.

Over the last cycle, and specifically between 2009-2021, the risk-free rate was at historic lows. What that meant is that if you wanted to generate any sort of meaningful return, you had to both look to other types of assets, such as real estate, and you had to take on more risk.

How this usually works in practice is pretty simple. Find asset. Figure out how much said asset yields (or could yield). And then decide if the spread you'll be earning above the risk-free rate is worth the amount of incremental risk you think you'll be taking on.

One challenge in bull markets is that it can get very competitive for assets, which can lead to investors accepting lower spreads. But regardless, the underlying idea remains the same. If you're going to take on more risk than no risk, you should be compensated for it.

Today, the problem is a different one. 2022 led to a " sea change " in the market. The risk-free rate is much higher, and that means that previously attractive assets yields are now no longer attractive. Things need to be reset.

It doesn't feel like this has happened yet, but it has to eventually. That is, assuming rates don't go back to 0-1%, which I don't believe they will.

There is an old saying that if you can find something you love to do, you’ll never work a day in your life. But this is probably bad advice.

Here is a simple graph, from Seth Godin , to help explain:

The problem with fun things (y-axis) is that they’re fun. So lots of people want to do them. And if there’s a small or no market for said fun thing, then it’s probably a hobby. (Hobbies are still important.)

Sometimes you can be fortunate where something that previously had no market eventually has a big market. Take, for example, tinkering with computers in the early days.

This is what Chris Dixon was getting at when he said that what the smartest people do on the weekend is what everyone else will do during the week in ten years.

But if this doesn’t happen or if a big market already exists — and you do want to be successful at something fun — it’ll likely follow a power law.

Meaning, you’ll need to be the very best in the world and it’s almost certainly going to be a “slog”. (Bottom right quadrant.) One example of this would be the phenomenon of “starchitects.”

And that’s pretty much it for the fun stuff. The rest of this graph is for things that are difficult, which means that 3 out of these 4 quadrants are difficult and/or a slog.

This is not nearly as much fun as not ever working.