[Music] Hey team, if you are anything like me, you're trying to figure out, “Should I go out and acquire one of these old economy businesses with existing product market fit and infrastructure and profits and all the rest of it? Or do we live in a world of technological innovation evolving at a rapid pace? Should I go in that direction and walk away from the old economy and march straight into the new economy?” I'm going to break down the solution to that problem in this video and talk about how Small Business 2.0 is going to occur starting now. My name is Walker Deibel. I am the Wall Street Journal's best-selling author of Buy Then Build and creator of the elite accelerator, Acquisition Lab. I talk about Ron Davidson's book, “The Fourth Economy,” and what Ron did was he looked at… I don't know Ron. What Ron Davidson did in The Fourth Economy was look at the economic development of the Western world through Eli Goldratt's Theory of Constraints. Eli wrote a book called “The Operator”. I think I read it 20 years ago… “The Goal”. It's called The Goal, and in it, he talks about how identifying the constraint and then exploiting the constraint elevates that constraint over time and includes it and moves the constraint to the next thing, which creates ongoing improvements in business and increased throughput, in his words. So what Ron Davidson did was he said, “, look. Let's look at the economy.” And the first constraint that there ever really was land. Let's use blue. And so it all turned into how do we acquire as much land as we possibly can so that we can work on whatever, growing the… it was the agricultural revolution. So it was all about food and all of that stuff. Cotton, whatever. Land was the constraint, and you had to acquire land and get land. And we can go all the way back to how many wars were fought over trying to get more land for certain countries. And then the next constraint was capital. During the Industrial Revolution, people needed capital in order to buy factories; buy machines. If you look at Eric Jorgensen, my actual friend. Eric Jorgensen wrote a book called “The Almanack of Naval Ravikant,” and in it, he talks about how the Naval sort of thought that the next level was, it was people. It was people. So it was… basically, call it labor. So it was labor. But I'm going to say that I think capital was the thing that was driving the acquisition of labor during the Industrial Revolution. And then, what sort of happened was there was this kind of knowledge constraint. In other words, if you wanted to make more money after the Industrial Revolution got established, the next constraint was really education. It was going out and acquiring the knowledge, acquiring more knowledge and information so that you could become a knowledge worker because there were the knowledge workers that ended up making the most money during all of this period. Also, the evolution of the service industry came out of, I guess you could say home services didn't, but knowledge service workers, lawyers, this kind of thing. So then you've got… this is where Ron Davidson says, “Look, the next constraint that we live in now, since 2020,” I think was his argument, “is entrepreneurship.” Entrepreneurship. And he says, “It's hard enough,” and let me be clear, what he's saying is, Eli Goldratt's Theory of Constraints says you need to identify and then exploit the next constraint, okay? Ron Davidson comes up with the concept in the economic sense of investing in the prior constraint has diminishing returns in terms of economic value. For example, if we all went out today and started acquiring more land for agriculture, probably, not the best of all of these. We could argue that all day long, there are certain segments, but, it's one of these where you want to be focused on what's the next constraint. Entrepreneurship is hard enough that few people are still doing it, but this is the area, so it's no longer. How do I get a job doing this thing? It's, “How do I create a job doing this thing?” And by the way, Naval had this concept where I'm gonna almost merge these together for him, but basically, he came up with no knowledge for him. I'm gonna merge these together. I'm gonna call it scale. What he said was that he identified the fact that there's a new economy. Essentially, this is the new economy that doesn't have an increased marginal cost for replication. So, in other words, if I want to make these markers, every single marker I make has some kind of cost associated with it. And then I've got to ship it out to the guy in St. Louis, Missouri, or wherever it's going. So there's shipment, there's manufacturing, there's labor, there's all this stuff that's production. Whereas software and most internet-run businesses without inventory all have this kind of scalability. That allows them to be sold with no additional marginal cost. One of the things we talked about in Buy Then Build was we took the idea of Ron Davidson's, what he called the fourth economy, and we said, “Look, Ron Davidson believes that entrepreneurship is the fourth economy and it's the new constraint that we live in today.” Then in Buy Then Build, I talked about look, what we also have is this enormous 10 trillion in business value from old economy baby boomers that needs to change hands. It's almost half of the U.S. economy. It's absolutely massive. And living in between here, we can use the capital, the prior constraint that's no longer an issue, and identify here's acquisition entrepreneurship. It's born. It's just in this huge volume of supply for entrepreneurs to come in and elevate. Now, what I want to add here is I think that the fifth economy is the thing that's going to take this to the next level. Let's talk about it. So what's going on is you've got this entrepreneurship constraint over here. You have this 10 trillion dollar baby boomer supply, and this is that old economy. And then you throw on… let's just throw on Naval Ravikant's limiter, of saying, “Hey, this is scalable products.” And so at first glance, scalable products in an old economy. So new economy and old economy have opposing value propositions. And it's hard to understand where the overlap might exist. But what I'm going to tell you is that the most valuable companies that exist today are the ones that actually live right here. Tesla is not a car company. It's a software company with cars. Apple doesn't make phones. When I say phone today, we almost think of smartphones. But what they did was they took software and applied it to the phone. All day long, you come up with a hundred different examples for in here, but the point is it's a merging of the two where extreme value is created. So how do I, Tesla… Walker, Tesla, and Apple are not these small businesses that are transferring, and that's true... but what I want to say is how can we merge these together and live really in this space right here? Because this, right here, is the little thing that's going to make the big difference in the next couple of years moving forward. So here's what I want to talk about. Tim Urban writes probably my favorite blog out there. It's called Wait But Why, and he wrote this article on AI. I want to say, I don't know, three, four years ago, I feel I read it. It's called “The AI Revolution”, I believe. And in it, he makes this observation that, look, if you have human development over time, a thing. All right, you might see this sort of growth curve or whatever. And, the thing is he's you don't really under, we don't really understand the impact that AI is going to have. Now I know everyone's been talking about AI for the last year or so, and it's because we're starting to understand what could actually happen here. So here's what Tim Urban says, which is, “Look, if you draw two lines, all right, and we say this is all of human knowledge in these two lines.” This top line here is Einstein, or, pick the smartest guy who ever lived, and the little line is, the town idiot. It's the dumbest person alive right now. And, in the big scheme of things, the gap is fairly narrow. And so what he's saying is AI is getting ready to grow so exponentially that we don't even understand how it's going to go. And so, AI has been growing exponentially, Carrying along. But the concept is that it's about to shoot up straight up this because it can start to feed on itself. And so it can actually get from where it was four years ago to the most common theory of when AI will actually hit full human brain is about 2040. And I think that, if you go into the technological singularity which should be a different video, but a lot of people think it's going to be 2030. So there might be elevated human brains as early as 2030. But anyway, so the concept here is that by 2040, it's going to be as smart as we are. Which means when you think about artificial intelligence today, 2024, here, right now… and what I'm going to say is by the end of this year, 12 months away, we all know what's happened to AI. And how we're all starting to integrate it and think about it and talk about its impact. But the thing is that, when you think about what AI is going to be 12 months from now, I think that most of us don't even quite comprehend the fact that it's going to be two times as strong as it is right now. So, my wife is a former teacher. We hang out with a lot of teachers, and we get to talking about how I can tell if these students are using ChatGPT to write their papers and stuff, and I can show them look, let me show you how I would write a paper. Because I can write a middle school-level paper or a high school-level paper just from general knowledge using AI tools. But I can't actually write anything for Buy Then Build or for the Acquisition Lab or any content that I'm making because it can't piece together all of these things and come up with unique thoughts. We'll get there. However, I'm trying to explain it to these teachers, it's a calculator. Imagine when the calculator came out, and all the teachers were like, “Yeah, but all the students are cheating. They're just using a calculator.” This is the same thing. It's just a three-dimensional calculator that we've never quite seen before. And we don't really know what to do with it in terms of education. Look, what I'm trying to say is we have a new calculator for business. And that's where this is going to become really awesome. And so if we start this kind of drill into what this growth is going to look like over the next year, it's going to be so exponential that it's going to be the businesses that can embrace and implement artificial intelligence are going to be the ones that absolutely destroy their competition. And the ones that don't and feel it's happening to them are going to be the ones that aren't elevated. So this is going to become really key. And what I want to highlight is the kind of… what do we call this? Adoption life cycle of AI. Let's call it the adoption life cycle of AI. And what's going to happen is when you start with AI, right now with ChatGPT, we check it out, and we type things in, and we're like, “Oh my gosh, this is so cool.” And what we're really doing is playing. So play. That's step one of using artificial intelligence. You're just playing. It's just down here, getting used to it, seeing what it can do, all these other things. I'm going to switch colors so you can see it better. Then the next thing is using AI in your business to build systems. Systems. Using these things to increase the speed in which work happens. Creating SOPs, all of these things. Then, the next phase is going to be products. So what products out there can we integrate into the business so that we can do everything faster with fewer people and, all this kind of stuff? Increased customer service, customized customer service, all of this. Then, the last is going to be something along the lines of development. People who are actually building their own AI tools, potentially for increasing network externalities or services, proprietary services to customers, and things like that. But here's the point. That's a little beyond what most people need to do. So I think the sweet spot is going to be right here in terms of the small businesses that are able to adopt and implement AI systems and AI products into their business. They are going to be the ones that can live right here, and both hit the next limiter and take advantage of all of the massive supply that we have as well as exploit our new constraint here in 2024. So guys, ultimately, I believe that AI is the fifth economy acquisition. Entrepreneurship + AI = SMB 2.0. It's the companies that are able to embrace artificial intelligence and implement it. So I think that as we're thinking about buying existing companies, what we need to be doing is thinking about what are the AI tools that I can adopt over the next year or two and implement into the operations of the business. Listen, if you want to buy a company in the next 6 to 24 months, check out the Acquisition Lab. We're the elite provider. We anchor in world-class education. We have coaching sessions almost every single day. I think we have 14 advisors right now, a private Slack channel. We have a search forum where we work with our members to go through different deals. We've got tools and resources and modeling tools and, supplier networks. And we are a vetted community, a truly vetted community. Maybe 30 percent of applicants are actually extended an invitation to enroll. This is because we only want to bring people into the community that we feel can actually execute on this topic. And so, as a result, it's just been so amazing to see the results. We've got well over 200 million in member acquisitions. We do about 100 million a year. We'd love to see you on the inside. Check it out. Thanks.