The single most important thing you can do to build long-term wealth; Why regulating AI is difficult; Susan 'Trash Can' Tilson, Citizen Activist

1) The single most important thing you can do to build long-term wealth and ensure your financial security might seem like a no-brainer.

But for many people – particularly younger folks – it can be a hard concept to understand.

Today, I'll share a story about my 25-year-old middle daughter, Emily, that underscores this critical lesson: max out on tax-deferred retirement plans via automatic payroll deductions, starting with your first job and continuing the rest of your working life.

If you do this, even if you never earn a big salary, you'll be well on your way to retiring comfortably thanks to the magic of compounding...

In late 2021, after earning her degree from Wake Forest University and quickly leaving her first job, Emily started a new job at Madison Square Garden Sports (MSGS). She was working with season-ticket holders for the Knicks basketball team and Rangers hockey team.

As with any new job, she had to fill out lots of paperwork – including designating how much of her paycheck she wanted to have withheld and allocated to the 401(k) that Madison Square Garden ("MSG") offers to all salaried employees.

I told her to tell MSG to withhold the maximum amount, which was $19,500 that year (it's $23,000 this year thanks to cost-of-living adjustments), and then automatically have it invested in the S&P 500 Index.

Two weeks later, when she received her first paycheck, she called me, quite concerned, saying, "Dad, my paycheck is only $200!"

I explained to her that because it was near the end of the year, the entire $19,500 would be withheld across only a few paychecks – hence, the piddly amount she received.

But once the new year started, the withholding would be across 26 biweekly paychecks, so this was a short-term problem.

I added: "The lower your paycheck, the happier you should be, because it means more is going into your retirement account."

"But how am I supposed to live on $100 a week?" she asked.

I explained:

Every penny that you can get into a retirement account is worth its weight in gold. Because you won't have to pay any taxes on it for the next 40 years, it will compound at a higher rate and you'll have a lot more money – likely many times more – to retire on.

This is only temporary, so Mom and I will happily lend you enough money to get through the year – that's how important it is to max out your retirement plan each year.

So that's what we did – and Emily has been saving like crazy ever since.

Again, maxing out on tax-deferred retirement plans via automatic payroll deductions is critical for building long-term wealth – even more so if there's an employer match.

And for readers with young adult children or grandchildren, make sure to tell them how important this concept is to set them on the path to a strong financial future.

(For additional helpful insights – especially for younger folks – I've also quoted Emily twice in recent weeks with her tips on how to use LinkedIn to find a job... See my April 30 and May 10 e-mails for more on this.)

2) Last week I wrote twice about artificial intelligence ("AI"), which I believe is "important – revolutionary, even."

But given its power, it's critically important that the sector be monitored closely by regulators, politicians, and the media so we avoid the tremendous negative "externalities" that plague pretty much all of the major internet platforms like TikTok, X, Facebook, and YouTube.

The way bad actors (especially foreign ones) have weaponized these platforms to mislead, manipulate, and harm people around the world is deeply troubling.

And the dark side of AI – and the behavior of the "tech bros" who run the sector – is once again in the headlines today.

It comes after actor Scarlett Johansson released a statement blasting OpenAI for using an "eerily similar" voice to hers for the company's new GPT-4o chatbot even though she twice declined requests to provide her voice.

This New York Times article has the story: Scarlett Johansson Said No, but OpenAI's Virtual Assistant Sounds Just Like Her. Excerpt:

Days before OpenAI demonstrated its new, flirty voice assistant last week, the actress Scarlett Johansson said, Sam Altman, the company's chief executive, called her agent and asked that she consider licensing her voice for a virtual assistant.

It was his second request to the actress in the past year, Ms. Johansson said in a statement on Monday, adding that the reply both times was no.

Despite those refusals, Ms. Johansson said, OpenAI used a voice that sounded "eerily similar to mine.” She has hired a lawyer and asked OpenAI to stop using a voice it called "Sky"...

She is the latest high-profile person to accuse OpenAI of using creative work without permission. Over the past year, OpenAI has been sued for copyright violations by authors, actors and newspapers, including the Authors Guild of America and the New York Times, which sued OpenAI and its partner, Microsoft.

OpenAI has already backed down. But this incident once again raises the question of whether regulators will be able to protect us from the dark side of AI – and be able to do it without strangling the dynamism and innovation that have made us the world leader in this key area.

That's going to be difficult, as this recent Vanity Fair article makes clear: Why Congress's AI Plan Was Doomed From the Start. Excerpt:

After close to a year of study, Majority Leader Chuck Schumer and a bipartisan group of senators on Wednesday released their "roadmap" to regulating artificial intelligence – a report, the working group said, designed to "stimulate momentum" for AI legislation that will "ensure the United States remains at the forefront of innovation in this technology"...

The report, broad in scope but often thin on details, calls for $32 billion in emergency spending – to put safeguards around the rapidly developing technology, but also to "avoid creating a policy vacuum that China and Russia will fill." The goal, the senators say, is not to establish a sweeping package regulating the technology, but to inform individual bills addressing AI as it relates to national security, job loss, and, most immediately, the risks it poses to the upcoming election...

But the prospects for such legislation remain unclear, particularly in a divided Washington.

As an American, I'm worried that Congress will fail to reach agreement on how to regulate the sector, and therefore it will continue to be the Wild West.

But looking at all this as an investor, the lack of regulation probably benefits the companies best positioned in this area – including two of my favorites, Alphabet (GOOGL) and Amazon (AMZN).

3) My wife Susan and I were annoyed when, about six months ago, New York City removed the trash can that has always been on the corner outside our building on 98th Street and Fifth Avenue.

We pick up even the tiniest pieces of litter – including, sometimes disgustingly, other dogs' poop – as we walk Rosie (the Wonder Dog) and Phoebe (the Wonder Pup) in Central Park every morning and dispose of it in the cans just inside the entrance to the park between 97th and 98th Streets and around the East Meadow.

But with the trash can on our corner missing, we had no place to throw away what we picked up on the way from the park to the entrance of our building...

So Susan did something about it. Last week, she used the NYC311 app (New Yorkers can download it here), filed a complaint and, much to our surprise, the can was back on our corner the same day.

So I've given her a new nickname: Susan "Trash Can" Tilson, Citizen Activist! Here she is with our dogs and the replacement trash can:

Many of us assume that big-city bureaucracies will be unresponsive, but you don't know until you try!

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.