The GREATEST Wealth Transfer Just Started - Prepare NOW | Cathie Wood

we are on track for our fourth straight week of declin we have entered a technical correction down 27% it is the worst day in 50 years I think we're going to see the SNP go down 86% from the top and the NASDAQ 92% Wall Street is bleeding there was a mass selloff on Wednesday investors lost as much as $1 trillion 1 trillion in a day I really think we're going into a deflationary period and most people have never seen that it really hasn't existed since the Great Depression we are not contrarian just to be contrarian you ask what's so contrarian that we buy stocks when they've dropped 30% this is going to be a very volatile part of your portfolio and some people have understood that and other people have not understood that if you're going to ask me at one point in this you know is there anything you would leave us with if you fight you're probably going to lose all right Kathy Wood thank you so much for coming on the iced coffee hour it is an honor it is oh thank you thank you Jack and Graham I'm delighted to be here so the first question is you seem like a very busy woman how many ETFs do you manage we just uh launched in Europe with three uh and then eight here uh and then we also sub-advised for mutual funds in Japan so that may be some of what you're seeing there are a number of mutual funds there and what's the assets under management currently so we're approaching $25 billion uh that includes the Bitcoin ETF yeah why should people listen to you I've been in the business for more than 40 years I've seen lots of Cycles you may be asking that now because uh uh for for a couple of reasons in 2020 as we really boomed during covid we could do nothing wrong and everything we said people you know were clinging to uh although they did not cling to something that I did say at that time which was keep some powder dry because I knew that boom was UN unsustainable uh so now 3 years later we've been on the down cycle we went two years down we had another nice burst in 2023 and this year has been a little bit challenging so um I have been through a lot of cycles and Truth wins out if it's on the topic of innovation and investing in Innovation I've been managing money since uh 1990 uh a as the world went into the teken Telecom what became the bubble uh and I also saw the bust and so I have a frame of reference and and it is this that the seeds for everything that we are doing now in terms of investing in Innovation those seeds uh those Technologies seeds were planted in the 20 years that ended in the tech and Telecom bubble and they've been germinating for the past 2025 years uh we've been monitoring them we are ready for prime time I think biggest surprise to me and maybe one of the biggest reasons uh your listeners uh might uh find this interesting is the teken Telecom bubble you had investors just throwing money at dreams those were just seeds dreams today is the reality those seeds have germinated and they are blossoming now and yet investors are scared to death they are investing in very few stocks you've heard about the Magnificent used to be seven then they threw Tesla out and then it was six and then it was one Nvidia uh we know that a very concentrated market like that is either very very good in terms of what it says about the future or very very bad and we can show you a chart you can uh post it showing that the concentration that we have just seen in the mag six is higher than it has ever been in history going back to the Great Depression Great Depression in the 1920s and early 1930s we saw similar concentration why was that cash was King just like cash in the mag six is King but back then cash was King because the unemployment rate soared to 25 % now we're at 4.1% real GDP dropped 30% real GDP is still growing maybe more slowly 1 and a half% but growing and uh prices were deflating 25 to 30% so the reason for the concentration in the Great Depression which again were higher concentrated now was because the situation was binary is this company going bankrupt or not and it was also during a time of great Innovation telephone electricity and internal combustion engine completely changed the world so what was the number one stock back then the the equivalent of Nvidia today uh it was AT&T telephone uh it was just proliferating throughout uh throughout the world uh so what does that tell us how does that inform us about today if you look at what happened after the peak in that concentration back then the market broadened out it started rewarding more companies than just the few being wed a rewarded at Peak concentration and we actually think that's what's going to happen now that this period of concentration towards the mag6 has been a function of two things one fear interest r R soared 22 fold in little more than a year's time and we're still seeing the Fallout especially in real estate but now in in other sectors um that shock a led to this desire for cash and if people were going to dabble in the equity Market they they move towards the the high cash uh oriented stocks and those that might be helped by this thing called artificial intelligence just like uh AT&T was helped by this thing called the telephone back in the depression uh now I think we're going to broaden out which will reward our strategies we think dramatically because we are not in the mega caps let me ask you this how did you get started with investing like what what piqued this interest I was in college I was 20 years old I met um and one of my professors was art laugher art laugher I don't know if that name means anything probably not it's uh in economic circles it's called The laugher Curve and it has to do with taxes uh and we can get into that if you'd like but I met him I was taking his courses at the University of Southern California and I was so enthusiastic about what he was teaching and I just wanted to gob it all up I was passionate um he struck a responsive cord and um he knew that a company Capital group uh downtown LA was looking for a person to come in and do kind of statistical work Grump work I would say uh and so that's how I got introduced to this world um and I was supposed to do the grunt work and I did do it but uh the person I was replacing they were going to bring in one and a half people I was the half and I said to myself back then I am not going to be the half I want this job I want the whole thing and so I was going to school full-time working full-time but the first project they put me on uh was Hong Kong 1997 that just gives you a sense of how long-term oriented I was in college in the late 70s so 197 77 and they my first project was 1997 uh Capital group Premiere research firm investment firm and I said wow they're paying us to learn I love this the world is our oyster we get to learn about what the world's going to be like in 20 years uh and so that started my my uh love affair with the business I would say and uh the 80s and the '90s so those those were the first two decades real Decades of my investment career they were the um it it was really active management coming into focus and style and um it was you know an incredible time and what were the predictions for 1997 well 1997 um and I realize this is coming this 1997 seems like it's coming out of the blue that was when England was going to turn Hong Kong over to the Chinese so and it was called two countries one system something like that and so we were trying to understand how would that change investing in GL globally MH uh and so that's why the year the specific year so that's that how close was your prediction or like what you were researching to what actually happened in 1997 do you remember we thought it was what was going to happen uh was that China was going to flourish I mean Hong Kong was going to flourish it already was flourishing it was sort of the financial center of Asia at the time but the question was would China bringing China into the equation uh cause a boom uh and our prediction was yes that it would and um and that is what happened and in fact what we didn't predict though was that uh that that the World Trade Organization would invite China in in the very early 2000s and that would reinforce the the the financial boom and you know bring us almost 20 years of really Asia flourishing and capital group at the time in the 70s was one of the very few American uh managers who thought anything outside the US was interesting we were very myopic the the business was back then and capital was very adventurous really I think one of the first firms to set up offices in Switzerland and in very and in Tokyo uh Hong Kong so um you know it was it it was a great call for for a capital group but before we get into that as you can tell from this episode with Kathy AI might just be the most important new computer technology out there it's storming every industry and literally billions of dollars are being invested so buckle up the problem however is that AI needs a lot of speed and processing power so how do you compete without your cost spiraling out of control well that's why it's time to upgrade to the next generation of the cloud Oracle Cloud infrastructure or our sponsor oci for those una aware o O is a single platform for your infrastructure database application development and AI needs oci also has 4 to eight times the bandwidth of other clouds offers one consistent price instead of variable Regional pricing and of course Nobody Does it Better Than Oracle so now you can train your AI models at twice the speed and at less than half the cost of other clouds so if you want to do more and spend less like uber 8 by8 and datab Bricks Mosaic take a free test drive of oci at oracle.com sisted once again guys you can try it completely for free at oracle.com oracle.com thank you so much Oracle and back to the podcast now I've noticed when you're researching you some of your most popular topics and videos are on bitcoin yes I'm curious when did you first hear about Bitcoin 2011 uh Brett winon our who is our chief futurist at ARC now but who was the senior analyst on our research uh on strategic change at my prior firm he came in uh just he had read an article I don't know if it was in must might have been in the economist and he started talking about Bitcoin and crypto generally and we were like what and so that happened one day but then he became fixated on it and brought we had a brainstorm every Friday and every Friday there would be a new story about Bitcoin now it was so young back then right this is back when it was about a dollar right yeah yes and uh there was no way to play it and so we were thematic so we were looking at it and trying to understand it and try to figure out is there anything here this is a technology yes but it's also a monetary system you know could this play the three roles of money and so you know it was an interesting topic when we started Arc the two things we lumped back then uh so this was 2014 were artificial intelligence and blockchain Technology but we lumped them into NextGen internet because they were both even though AI has been around since the 50s uh the very big breakthrough the provocative breakthrough uh was as a result of image net and deep learning in 200 12 so we're trying to figure out is you know is this important will this move the field of AI forward so that we'll have meaningful Investments so as I would say within the first two years we separated Next Generation internet into artificial intelligence and blockchain technology so they became two of five Innovation platforms the other three are robotics energy storage and uh multiomic sequencing these are the five major platforms that are evolving today sort of like telephone electricity and internal combustion engine th those were multiple platforms evolving at the same time about a hundred years ago um now we have five evolving and again this is unprecedented and you know just pretty exciting so Bitcoin was back then 2011 and our first investment um and this was I mean we had to ask permission from the New York Stock Exchange can we put it in an ETF and they said yes you can you can put this gbtc into your fund but only 1% and we said great they didn't say that it couldn't rise from 1% and so we let it rise and of course so it moved from $250 when we got in in September of 2015 so toward the end of 2017 uh I think it hit $20,000 so swish yeah what does Bitcoin solve it solves a lot of things to us Bitcoin means three things one it's a new technology um blockchain technology is a new technology but to simplify it um all we're doing here is layering into the internet uh the the layer that developers forgot to build in in the early 90s because no one understood that Financial Services or Commerce would take place on the internet so I was there and I remember agreeing with everybody I will never put my credit card on the internet this is not secure right and so they never built it in so blockchain Technologies of all types are an answer to that this is peer-to-peer technology taking a lot of middlemen out of traditional Financial Services taking layers of fees out and those fees are anywhere from 2 and a half to 4% of Any Given transaction that's the first thing a tech technology the second is it's a monetary system so and each one of these words is important it's the first Global private meaning no government oversight digital decentralized rules-based monetary system in history it is a very big idea and my former Prof or now friend art laugher couldn't be more excited he's about to turn 84 and this has rejuvenated him uh because he says this is an opportunity to go back to the US preed uh so pre 1913 when we were um basically using private money uh so it it will give the dollar a run for for it it's money so to speak why do you think that older people are less receptive to bitcoin like Warren Buffett or Charlie Munger so against it and it seems like young people love it yeah anyone over the age of 50 for the most part either they don't know about it or they're very skeptical why do you think that is I think partly it's technology that there's discomfort you know Warren Buffett H famously has said if I don't understand it and I don't understand most technology I'm not going to invest in it um now he did did invest in IBM kind of at the wrong time so that proved uh um you know to be to reinforce what he was saying however he he didn't give up he did invest in Apple and that's been you know a grand slam for him so but very little interest in technology and a lot of people pay attention to him especially more value oriented investors um where you know in in technology you've got very often you have to invest aggressively a company has to invest aggressively in the short term for go short-term profitability in order to be able to scale longer term in this new technology value stocks tend to be um you know what you see is what you get immediately uh so there's a little bit more faith in the future I would say when it comes to Tech investing and you know maybe I mean I'm certainly over and uh you know I'm all about technology so a bit of maybe an exception there um but I do think there's just a general discomfort especially because they lived through the tech and Telecom bubble and bust and they weren't looking at it with the perspective I just shared with you which is okay these seeds were planted back then they weren't ready and so if you weren't doing the kind of research we're doing in terms of trying to figure out when Technologies are ready for prime time then they were going to get hurt and a lot of people did get hurt back then and so that's that's a a memory uh losing money is uh is painful it's uh you know I know there are studies you probably know the studies where it's much more painful to lose money than it is enjoyable to make I think the risk reward on that was the the gain of a dollar was equivalent to like the loss of $2 so like the loss feels twice as worse as like gaining a dollar yes uh the Third Way To Think of Bitcoin so we've got um technology Global monetary system and a new asset class which is why we are really excited and you know the arc 21 shares Bitcoin ETF is a a good example ex Le um we have enjoyed tremendous inflows and I'd like to think it is because we wrote our first piece on Bitcoin in 2014 uh We've earned our Stripes uh we had our first white paper with art laugher could Bitcoin serve the three rolls of money that was 2015 and then we wrote our second white paper Bitcoin ringing the bell for a new asset class that was 2016 and finally the SEC approved um earlier this year a Bitcoin or many Bitcoin ETFs uh so we think institutions have not moved very aggressively thus far into Bitcoin why it's because they need to do their due diligence they need to we've we've spent 10 years doing this so we're very comfortable um you know if you look at uh Black Rock for example until I'm going to say three years ago um uh Black Rock was pointing to the you know negatives associated with Bitcoin and then of course there was the conversion and fantastic fantastic I think Black Rock has done a lot for this movement of Bitcoin into a new asset class but we've barely got begun on that uh what price targets do you have for Bitcoin everyone loves this yes so um we are in print uh uh our base case is 650,000 but that base case was set uh before the SEC approved uh the Bitcoin ETFs uh and so uh we are more convinced now that our bull case of 1.5 million by 2030 is the the the more likely case do you think Bitcoin is currently a singularity or do you think it will be that in the future and when will that be so when you say Singularity as it relates to bitcoin what do you mean like you can't contain it at a certain point oh I think we we've passed escape velocity there's no way to shut Bitcoin down um and China tried and all the activity that was in China just migrated there's no oversight it there's no throat to choke and it has proliferated to such an extent and is serving a really important role especially in Emerging Markets where people you know of various countries if their leaders either don't understand economics or there's corruption and um they lose purchasing power and wealth you know to the tune of 50% in a very short period of time even this year Egypt I think it was the beginning of March devalued the Egyptian pound by 40% and so having an insurance policy like Bitcoin is really important in Emerging Markets so the bare case for Bitcoin isn't even that it could just go nowhere but that it will 20x in 5 years I mean you've seen the corrections are violent because it is so early and so young um the the corrections used to be 95% now they're more like 75% that's a lot so I don't want anyone to think that it's straight up and to the right because the corrections are pretty violent um they're getting less so and I think as Bitcoin moves more into mainstream investing the volatility will go down dramatically uh so it's not like we're saying it won't go down um it will it's a new asset class and there are a lot of I would say weak holders they get in because of fomo so fear of missing out and then they lose 20% and then they get out you know they cut their losses so that exacerbates moves down so Michael sailor said something that was really interesting and I I think I don't want to misquote him but he said the only true threat to bitcoin is a competitor that is somehow better Bitcoin is backed by the largest computer network in the world and therefore it is the safest crypto currency or crypto asset out there it has not been hacked the base layer has not been hacked I don't think any other crypto asset can say that so you know this is like a giant neighborhood watch you've got a lot of people whose livelihoods have been built on bitcoin starting with the miners uh in theit Bitcoin ecosystem and they are all watching to make sure that uh this ecosystem is as robust and hack proof as possible now hypothetically speaking what would it take in Bitcoin to convince you that you were wrong well there is one thing that the Bitcoin Community is watching and that is quantum Computing but H as I always say when it comes to risks half of the solution is understanding the problem and so now developers are thinking in terms of quantum proofing uh so so I I think that is something we should consider seriously and I am happy that you know the developers are considering it seriously uh because again half the solution do you think there are any other drawbacks to bitcoin well many people would call drawbacks like higher cost than other Solutions slower um slower transaction settlement times but to us those are features not flaws um because it's part of why it is the safest ecosystem in uh in the crypto asset world so we don't look at those as as issues we look at them as really uh they've been built into the ecosystem to to assure its success as the safest uh crypto asset ecosystem and how do you see the regulatory environment changing for Bitcoin or cryptocurrencies in general what has happened us has been the worst uh uh Gary Gensler is I've said many times has been a menace to to our ecosystem and has pushed a lot of innovation associate with Bitcoin and other crypto assets into the rest of the world so much so that many of the innovators who have moved to other parts of the world whether it's Switzerland or Berlin or uh London or Hong Kong uh Singapore they will not deal with us investors even that's how bad it got why why why because they they think they'll be tainted because we are regulated by us regulators and why are us Regulators so strict like more than any other part you know when you're a regulator uh there's a lot of power seeking and we know the history of the SEC and the cftc H you know they've you know they've buted heads over the years right um and we saw this during the derivatives the evolution of derivatives in the in the '90s uh and finally you know with I think a Supreme Court ruling they both regulate it but regulate different parts of it that is what I think was going on there's a power struggle in the regulatory ecosystem this is my perview this is my purview and so we may go to the Supreme Court again I don't know um I think that was the main issue yeah to me it seems a bit like because we've worked with a lot of lawyers yeah and there overly cautious and they don't want you to you know do anything that could you know put you in in you know Harm's Way let's just say so I almost think of regulators as like being overly cautious on everything like not even take a risk not even do anything that could cause any casualty to a investor I just say yes that is true but now there's something called regulatory Arbitrage and so that's what I mean by other countries very interested in attracting in ation are one-upping us and I'll give you our first example when we started Arc in 2014 was drones and the Federal Aviation Administration so Amazon was on its 9th generation drone back in 2014 and the FAA would not let Amazon fly its own drones on its own property outside it is only in recent months since that has changed but in the meantime one of the companies in our uh Venture fund zipline has seems to have ingratiated itself with the regulator's meaning it has what we've observed is it has taught The Regulators prepared them every step of the way you know for what they were attempting to do no surprises whatsoever uh so the FAA did start opening up a couple of years ago to zipline zipline has um a pilot going with Walmart in uh the Dallas Texas area to deliver Parcels so um and so zipline beat Amazon to its own game which is really interesting so but this regulatory Arbitrage other countries when so Amazon went to Hong Kong UK Australia India to test out its drones and then then the FAA became a little bit more uh understanding I don't know why they didn't give the green light to Amazon sooner uh but they did start giving the green light although really quick if you run a business like us you know that handling the back office finances could be a pain it's a huge headache you have countless cards receipts and payments to keep track of and then as your team grows you add more company cards receipts and payments all of this could be a real nightmare and very confusing and time intensive to keep track of but it doesn't have to be that way with the sponsor of today's episode ramp ramp is the corporate card and spend management software designed to help you save time and put money back in your pocket with ramp you get full control and insight into company spend issue cards to every employee with customized limits and restrictions and you can automate expense reporting so that means no more chasing receipts and endless expense reports because ramp software collects and categorizes expenses in real time letting you close your books 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as any other team you'll find out but our starting point is top down what does that mean we Center our research around something called rights law and when we hear of a new technology so I I mentioned the five platforms they involve 14 different Technologies so when we're when we're looking at a new technology and this is all we do so we better we better find these Technologies as they are evolving we will take a look at it and say okay how quickly are the costs associated with this technology going to fall and there's a very predictable way to find that out so have you heard of Mo's law in the semiconductor space that's the having thing or the doubling it's twice the power at the same cost every 18 months to two years roughly that's very roughly it so that is a function of time every 18 months to two years so it's worked extremely well in the semiconductor industry until recently now semiconductors are hitting up against the laws of physics and so what's working better is what we use for every technology and it's called rights law w r ght um Theodore Wright was a civil Aeronautics engineer in in the early days of airplane manufacturing and he just happened to notice uh as he analyzed the costs that for every cumulative doubling in the number of airplanes produced there was a cost decline consistent today we can do that for you know all the sequencing Technologies DNA RNA protein we can do that for robotics uh blockchains artificial intelligence uh uh energy storage Robotics and we have a number associated with each one and what we have to do is say okay as the units go up and the costs come down how when will those costs and lower prices open up this technology to a whole new sector especially the consumer um and so that's that that is what we do and um as we're doing the work looking at this new technology and trying to figure out that cost decline we are we do a lot of our research in social media we're putting questions out there hey or we're putting our research out there saying hey this is what we're finding out anybody know anything about this and we'll get CEOs calling in of companies who are in the space that is very often how we find new companies we're starting this top- down research and you know that we have a dialogue going out there so uh and we also have brainstorms we have a brainstorm every Friday um and that will be where all of our analysts will be getting together and uh about half of the people on the call are are outside they're outside of Ark but they're passionate about Innovation and they're willing to spend two hours every Friday brainstorming and very often we will get an idea uh just like aha okay one of the ideas very early on was when we did our autonomous taxi work so Robo taxi work many people think that you know Robo taxis as they proliferate and we think we're getting close to Prime Time there that traffic jams will go away no they won't because if the costs come down the way we think um there's going to be much more congestion many poor many people will take Robo taxis and so that pushed us up into the sky that's what started our evall work so electric vehicle takeoff and Landing work so one thing will lead us to another and in fact very early on we learned that Nvidia was going to be the AI play of the century um in 2014 when Tasha who has done a lot of our Robo taxi work going through original research white sheet of paper what's an autonomous vehicle and going in doing research in academic you know in in universities um on social media learned that the the brains or the central nervous system of a robotaxi are going to be gpus no one knew that at the time they were just PC gaming chip companies nothing Nvidia was nothing more than that it was commodity and that's when we started legging into Nvidia in a big way interesting okay so so help me understand you're saying that that rights law that sounds kind of like if I'm using this correctly economies of scale where like obviously as it gets bigger it just becomes cheaper to produce you're applying that to probably AI so AI access gets cheaper so then that will then proliferate across everything and everyone then can then use AI so then you're betting that on these probably smaller market cap companies now that they have access to cheap AI are gonna just explode you've got it there there's a lot of drama going on in these price declines so AI for example um based on our work when you combine hardware and software for every cumulative doubling and that this unit and this is the most important thing we have to find what is the unit Dynamic we're mention we're measuring here and it is it is amount of data per unit of computing power for every cumulative doubling of that cost decline when you combine both hardware and software 48% but the drama is the perear number that 48% that cumulative doubling is happening in less than a year's time so that AI training costs are dropping 75% per year AI inference costs so you put into chat GPT a question you know the answer the costs associated with that the inference costs down 85 to 90% per year that's why AI is booming how do you respond to criticism and how do you know what to listen to and what is should just be disregarded there's a lot of noise out there because we are on social media yeah you know I have a very thick skin I used to face it more inside the industry and and still have that uh and maybe even inside my own companies because what we were doing at each of the firms especially the last one was so different uh rights law cumulative doubling starting from the top down all of that was so different that you know people just didn't understand it and so uh that turned into to perhaps a lack of respect for it which you know I would prefer to explain it and you know help help show them some of the things I'm explaining to you um so so that they can see the Merit in it you know so just to give you a sense on on on on Tesla how much how much hatred spewed out 2018 2019 production hell it's going bankrupt you're idiots you know know and a lot of that was for clickbait and and we just didn't pay attention to it because we knew those people weren't doing the work uh the people who are doing the work they want to engage with us to understand why we think what we're thinking and like how did you even if they understand rights law there's something that's not connecting uh those are the people we really Listen to Because and I can give you an example um in Battery Technology uh the the semi truck batteries uh Carnegie melan has a a professor focusing only on batteries that's all he does he DMD us he dm'd Sam chorus who does all of our battery work and said I I I think you're wrong on this I think uh and so they compared notes and actually Sam was half right or maybe all right I don't know but they they morphed so that research on both sides was better think about that that's a university Professor all he does is batteries that's huge for us that's the kind of DM we will respond to that's fascinating and that's 100% true like we will get comments that will be negative and they're talking publicly on a public forum but then in the DMS people are always so kind and hardly ever do people surprisingly I feel like send criticisms over DMS and if they do I'm way more likely right I'm like way more likely to respond to it and it seems like it's actually criticism rather than just like a flagrant you know just trying to make fun of you or offend you or something like that it's it's like a different nature the people are trying to get just public uh endorsement almost that they're trying to promote themselves by critically talking about another person but when it's private you know it's sincere and they're not doing it for the wrong reason a great Point alt together Arc has three in a half million followers I think on X and so when when people are you know hating on us or whatever maybe that's exaggerating a bit but not really um then they know they're going to get a lot of publicity because of the number of followers so we're a Target and so that's the and we understand that it comes with the territory but we would never meet uh if we were doing things the traditional Financial way we wouldn't meet the people we're meeting and they wouldn't have as vital an interest that we're getting our research right right so just to give you a sense of that what are we doing from the top down we are sizing the markets these uh innovators are going after we're they're not doing that but they're vitally interested in it you know how big is big and so they want us to get this top down work right because they also want to know okay how big is this opportunity I am I am chasing here uh so it's a win-win do you think that maybe that works to your advantage to be a little bit more controversial in a sense of picking Investments that maybe people are more emotional about like Tesla was a great example of that Bitcoin has been a great example I mean Roku is a great example coinbase great example Jim chos I think he's shutting down because he shorted uh coinbase we are not contrarian just to be contrarian but because we start from a different point of view the top down it it's inherently controversial you know we are for example um you mentioned Tesla in the early days you know we were making what to many people sounded like a crazy forecast about how quickly electric vehicles would take off the traditional auto manufacturers back in 2016 17 we're saying maybe in the 2030s and oh by the way that we have the install base and we'll be there and uh Tesla you're a flea you know that that's how they often treat the innovators early on um but we knew that Tesla's DNA was so different and we also knew what rights law was saying about Battery Technology drivetrain technology and that those costs for every cumulative doubling were dropping 28% per year and uh particularly because Tesla built its cars on top of the Consumer Electronics battery uh which is laptops and cell phones whereas no other autom manufacturer was doing that they were creating you know this huge battery that kind of looked like an engine or certainly the same form factor not l in the bottom of a car right so they weren't talking the same language sure that battery uh was probably late 20s early 30s but Tesla's battery was ready for prime time if he could engineer it correctly and they didn't think he could so we were just talking a different language that's all what do you think the biggest risks are for the stock market these days in 2024 2025 I really think we're going into a deflationary period and most people have never seen that um in fact it really hasn't existed since the Great Depression and any company that is highly leveraged and doesn't understand that prices are going to be falling for two reasons I'll get into that in a moment any company that does not understand that and has a lot of debt is going to to be in trouble because falling prices um means it will be very hard to service that debt certainly the way they expected to um so why deflation and this is this is really controversial I came out of an economics background and so uh I do something called in the no every month on employment Friday and we've been building this deflation theme for a while now and now it's happening um so you're seeing McDonald's cutting prices uh you're seeing even Starbucks uh cutting prices where are they cutting prices CU I I go to the same Starbucks every single day one cup of venty coffee 352 on the dot hasn't changed Well you aren't buying one of their package deals that they are now cutting prices on so yeah okay yeah so it's believe me for Starbucks doesn't do this but they they they've broken down and they're doing this now for for some kind of breakfast special I think uh for not much more than you're paying for your my my understanding with that those that Starbucks is somewhat losing popularity among some younger people also because there's so many other places out there and their prices are so high because Starbucks is expensive it is well yeah I mean how hard is it to make a coffee you make it at home for 20 extractions from a bean and water you know yeah you make it well bean prices are going up a lot so coffee prices he owns a little coffee company so he's got he's got to defend the bean prices I I just use C egg and put a little pod in there and I even the C eggs are expensive a dollar $120 each but much less expensive my old habit was Starbucks right yeah so but yeah but my point with Starbucks I think they're kind of losing popularity well and part of its pricing and what has brought that on so there are two reasons we think prices are going to fall one uh during covid and the supply shock it was almost permission for companies who would never raise prices by 20% to raise them by 20% Which they did including cereal companies you know and a lot of Necessities real wages did not go up that much maybe they did for some union workers that got 10% per year for four years but that's not many people in fact probably that's less than well certainly it's less than 10% of the people in the United States probably less than 5% the rest they're real wages didn't go up their wages didn't go up to compensate for that and so now we're starting to see the saving rate which hit 32% when there was all this fiscal stimulus you know just giving checks for not working now those are gone uh so the saving rate has gone from 32% at the peak to to three I think it's 3.9% very low by historical standards and we're also getting to a point where if you look at various surveys people who are making more than $100,000 a year so roughly two times the national average the percentage worried about you losing their jobs is increasing dramatically and I think that's because of all the tech layoffs a lot of tech layoffs if you've noticed and that's because they're harnessing artificial intelligence uh as their margins are under pressure so we're seeing prices go down and hitting profit margins what happens what is the easiest way to salvage those margins the easiest way is to unfortunately lay people off if you have technology to take over what they're doing um because labor is the biggest cost in an organization for for for the most part so I do think the unemployment rate is going to go up and cyclically prices are coming down you know we're we're hearing about every day there are prices coming down so Walmart's cutting F uh prices on either five or 7,000 different items Target of course and Costco as well Best Buy um so we're seeing this now more broadly uh food broadly food you know food away from home definitely that's a bad reason that's sick pressures the good reason is innovation I just gave you some statistic some statistics on how quickly costs are falling uh if those companies are smart they're turning those cost declines into price declines so that the units can continue to proliferate and drive cost down you know economies of scale efficiencies and uh so that's a good reason why because when you cut prices in these new technologies units boom okay that's good for the economy but then there's another bad thing that happens if electric vehicle prices are going to continue falling let's say if elon's right we will get a 20 to $25,000 car in the next year or so what's going to happen to the prices of gas powerered vehicles right um they can't cut prices that's a mature technology the cumulative doublings not going to happen for a 100 years why are EV prices falling so much lately it depends are you looking including used cars like used the used Market oh oh oh that's because Herz started proliferating its uh its Fleet with Tesla vehicles in particular that why Elon was so against Herz buying their cars well he probably expected what has happened so the reason hurts did uh put them into its Fleet is because the maintenance associated with an EV is 60% lower than the maintenance associated with gas powered vehicle I mean they have you know I don't know a sixth of the parts or something much less can go wrong but what they didn't anticipate is the infrastructure is not ready quite yet for cars that have been in accidents for them to be for there to be replacement parts in any short order and so I think that's the main reason I we think they're making a big mistake taking them out because that's going to happen and if we're right what I just described this prices continue falling in the electric vehicle world and new vehicles have to gas powered vehicles have to try and match them that will take up all of their profit margins uh and that will continue to put pressure on the use car market which went crazy what's one of your most provocative opinions when it comes to investing well I don't this should not be provocative but we look out our investment time Horizon is five years in the public Equity markets and we are willing to buy companies that are losing money now especially in uh the early stage Technologies like multiomics most people right now have a one time Horizon when it comes to that kind of company we have a 5-year investment time Horizon and let me just give you a sense many people say oh well you'll just buy anything no matter what the valuation as long as it's in you know The Sweet Spot of innovation that's not true what we do is we make the assumption that um so our our the valuation metric we choose is e is Enterprise Value so that's not just Equity market cap but it's fixed income as well so the entire capital structure is what we take into the numerator and then ebit da Eid da is earnings before interest taxes depreciation and amortization that number if you use the S&P 500 and you adjust for uh stock-based compensation which we feel is important when it comes to Innovation companies they need to be aligned with shareholders um the S&P is is over 20 times on that basis our portfolios today I've never seen the premium so low are about 25 or 26 times normally we're much higher I would say normally we're double that but what we assume is that in five years that our multiple is going to be a market multiple actually we we are at 1819 sub today's market multiple and so there's a massive headwind from evaluation that we assume in the next five years and what we must believe or our analyst must believe is that the revenue growth and margin expansion associated with these new technologies is going to overwhelm that headwind to deliver a minimum hurdle rate of return of 15% at a compound annual rate uh so that's 15% on average per year now we have not done that because the interest rate shock has been it was so severe we had never seen anything like that in history never but if you look at two dat from inception to date we are in the double digits nearly 11% um uh but our goal is 15% minimum over o certainly over the next five years and uh you know our rate of return expectations based on the stocks in the portfolio right now are are multiples of that here's an interesting question do you think the stock market should be open 247 well we're dealing with um the crypto asset World being open 247 and um and so we have conversations at night around crypto assets so it certainly extends the workday I think it would it would develop into a Cadence you know there's a a a time during the evening that most of the activity will occur it's as one Market's closing and another one's opening so I think we'd probably have to hire I mean I wouldn't mind it I think if I wouldn't mind it if markets were truly efficient I feel that markets are so inefficient right now because our world has our not ours arcs the traditional Asset Management world in the public Equity Market uh has gone passive or you know the the the various strategies out there hug benchmarks so for example the mag 6 according to Morning Star in June the average large cap uh manager in the US had 45% of his or her portfolio in the mag 6 45% average that means some were over 50% that's no way to manage money now you can say well it's been right well there's been a little bit of a self-fulfilling prophecy there and I think as the market broadens out that will change does it mean the mag 6 will fall apart I don't think so I just don't think they will do as well as the as our portfolio for example but the rest of the world is not positioned that way you know going to try and get into the stocks that we've been legging into as the market has been treating them very poorly which is some which is a bit of a contrarian way of managing money you ask what's so contrarian that we buy stocks when they've dropped 30% most most uh strategies when when they describe what they do momentum is a part either price momentum of the stock itself Revenue momentum earnings momentum M um um and as I just described to you we have a 5year Time Horizon so they're talking about this quarter when they say momentum uh we're not relating to each other right so if we think that because they missed their operating margins by 0.3% or 30 basis points and and that they have told us that they're sacrificing short-term profitability to invest more in R&D in an area that we think is really important and it's down 30% for that reason we're going to be buying that stock so we are what's called a liquidity provider when you you get those massive sell-offs not every stock but if it's a stock in our universe and we think this is ridiculous they have no idea how big the story is going to be over the next five years we'll be buying it the other side of that and we got a lot of publicity around Nvidia that like when when we did this if we think a stock uh has become so momentum driven just momentum for momentum's sake and there were reasons Invidia just shocked people with their revenue and uh earnings growth so we still own it in some portfolios but you know we pull away from that kind of a stock because we figure okay if Nvidia is going to deserve this Valu if it's going to deserve $3 trillion in market cap which is nearly 15% of the US economy but if it's going to deserve that then it must be serving other companies that are going to benefit enormously from it and so far you're not feeling you're not seeing huge upside surprises for that reason and what do you say to investors who believe that's too risky and say it's safer to invest in a broad Market ETF pass ly like something that maybe you know tracks the S&P I will say it'll be less volatile um and because the pendulum has been swinging towards indexation and the broad-based indices in particular this has been a winning strategy over the years if we're right and these five Innovation platforms involving 14 different Technologies are going to transform the world as we know it the S&P M 500 is the world as we know it now it will catch up slowly over time but as we learn with Tesla it took uh until nearly $500 billion dollar in market cap for Tesla to have four a four quarter moving average of profitability with the last quarter profitable that's the snp's rule um a lot of our companies will probably be you know now they're you know 1 to two billion or 5 to 10 billion and they'll be similarly 200 to 500 billion and that's okay the C S&P will catch up um but it will also have some losers those companies that are going to be disintermediated disrupted destroyed and you know so it'll have that weight nonetheless it'll be less volatile than we are we're a nice hedge to the value traps that are in traditional benchmarks those companies that are going to be disrupted by the new world uh were a hedge we've had some value manager saying I wouldn't own one stock in your portfolio but I know my biggest risk is a value trap in the portfolios I do own and so yeah I I'll use you as a hedge 1 to 2% of My Equity exposure so I've been traveling quite a bit over the last couple of years from Mexico to Croatia Thailand Japan the Philippines and I know that language gaps can be quite intimidating and unfortunately prevent people from seeing the world but guess what guys you don't need to worry about that anymore with today's sponsor Babel Babel is the language learning platform designed for real people having real world conversations their fast 10-minute lessons are handcrafted by over 200 expert linguists to help you start talking in your new language in as little as 3 weeks because talk is the key to learning any new language Babel's tips and tools are grounded in the real life stuff you'll actually need so everything is focused on conversation and you'll be ready to talk wherever you go in fact I was actually just in Mexico a couple of months ago and I got to say it was incredibly helpful to have Babble to help me brush up on my Spanish skills so I can talk better with the locals order at restaurants get drinks and honestly just find my way around better it overall just helps me be more comfortable and confident in a foreign country and a big piece of this confidence comes from Babel's speech recognition technology which helps you refine your pronunciation and your accent so don't pay hundreds of dollars for Tutors or waste hours on an app that doesn't really help you speak the language and for a limited time we have a very special discount that is up to 60% off your Babel subscription just for our listeners at babble.com again get up to 60% off at babble.com that's spelled b a bb.com rules and restrictions May apply speaking of Tesla how often do you speak to Elon Musk you'd be surprised how little we do I mean we can if we wanted to talk to him we could talk to him I think almost any time he knows we're not going to bother him unless there's something really important you know we have a five-year investment time Horizon we've put our Tesla Model out for the public to see and um it's gratifying to have at the shareholders meeting to have Elon three times mention our research as being closest to what he believes the Mark will be so as long as we feel like we're on the right track um we're not going to be bothering Elon we want him to use his Brilliance on all of his companies and many people do ask that question well isn't he distracted by all of these companies he is the Maestro he is the Maestro of what we're calling the convergence between them and among the technologies that that we're researching he understands that the key to the new world is data big data and so he's generating data out of all of these companies and one of the most surprising places neuralink in the healthcare Arena they're generating all kinds of data about the brain it what what are neural networks in AI they're patterned after the brain so you know he's got that data he's got all the real world driving data from Tesla you know the 5 million robots roaming around the world who are sending data back every day on the corner cases you look at X that might be some of the most valuable data out there and uh boring has Transportation data so he's getting data from all over the place and and of course x uh xai now would be another place that he's seeking to generate data so he understands that the winner winners in the new world are going to have the best data most comprehensive data the most reliable data in the world and you know I often say that the big surprise out there is multiomic data you know the biological ecosystem might be the most valuable data out there and so that's why many people say why are why are you so invested in this space that has acted so terribly uh the multi-mic space and uh the reason is we think the most profound applications of AI are going to be in healthcare going to cure disease is there anything that you think is misunderstood about Elon whether that's just from you know viewing him online or from private conversations that you've had with him that you think should be known by people everybody's well aware of his very high standards so but and we did a podcast with Elon in March of 2019 and this is where I learned what I'm about to tell you he is a very good and honorable person he is trying to do right by the world and uh you know I I I don't think people understand that I don't think people understand what a good honorable decent person he is I sure on Twitter he he says some outrageous things and like you know I don't I don't know what what Spurs him in any given moment and maybe venting or something so I don't look at what he tweets unless it's about the companies and the technology then I'm all over it but and so are our analysts but um I know from speaking um with him that he is he is a very good person the other thing is many people think he's so headstrong that it's his way or the highway um you hear that a lot coming out of his companies but what he said to us back then and I've heard him say this in other venues as well is the most important thing that we could do arc our analyst team and what I could do is um if we vehemently disagree with him on something to call him on it and you know we don't vehemently disagree I know I I didn't call him on it I I I just remember saying something it was minor but you know he took it in and I could tell modified at least what he said about it so that's good to know that's kind of what's also been mirrored by other people that we've spoken to that have also spoken to Elon and I always thought that's really good to know because if he was like secretly a super villain I think with all of that data access yes in fact quite the opposite he's the first person to warn that AI could be used for nefarious purposes and let's watch out so the more he knows about it and you never know what he's doing to protect Humanity against ourselves when you think there's that danger with AI like you hear Elon Musk saying it's going to take over the world it's going to be destructive it it could be a bad thing do you believe in that all Technologies can be used for uh for nefarious purposes you know that's why we have cyber security the way we now so yeah I do I do I mean from the simplest examples of you know we all know what a Hallucination is now from chat gbt and can you imagine a sales team generating emails to customers saying wow I'm so productive now and and you know in the email you know the there's a big insult of the customer your product sucks I think Elon is almost implying they could be like the downfall of humanity like we could have a Terminator sort of instance where AI becomes self-aware starts communicating could take over the world like do you think any of that is possible like can we go down that path I'm going back to my premise which is half the solution is understanding the problem and I am so glad that there's so much science fiction out there along those lines that uh you know a lot of people focused on technology today have been reading science fiction for years so they are thinking about this problem maybe as narrowly as relating to their own companies but you know you get enough people worried about the same thing you lower the risk uh that it happens and then you've got big thinkers like um Elon and others who uh want everyone to be aware that you know there are nefarious actors out there yeah what are your thoughts on the housing market yeah it's interesting we just did every week I I do an economics meeting um at first I I did it just to see if anyone would be interested um in the firm and it's unbelievable how many people are interested one of the reasons is housing okay do I rent or do I buy and you know the unaffordability or the affordability index uh for housing as you know is at uh9 yeah it's lower than 0809 which is really saying something that gives you a sense of the shock uh that started when the FED raised interest rates 22 fold and locked people into their 2 and a half% mortgages they can't sell uh uh they can't sell and unless their price is going to go much higher than it is right now uh so I think the housing market is pretty stuck and it's interesting we U uh knowing your interest in real estate I asked the team my analyst team today you know okay what are you thinking in terms of housing here what's because I had heard a number of them were thinking about buying houses here and they said they've done the analysis now our analysts are of course in the investment world so they're thinking like investors and doing a tradeoff analysis uh because their tradeoff is okay am I going to use this money to put into housing or am I going to use it to put into the stock market and I'll just keep renting and they do that analysis and it doesn't make sense to buy a house it doesn't and they were doing some analysis one um uh our Nick Gus an associate portfolio manager apparently has a program and he puts in the interest rates and the rent and uh the P purchase price and just to see so he's thinking rent Buy and or invest in housing and um the only thing that makes sense to him right now is renting yeah the New York Times has a calculator that goes through every single variable that you could think of from your investment returns closing cost for housing repairs for housing everything and in most cases renting makes sense and will be more profitable anywhere between 10 to 20 years wow with investment returns it's only around year you know 20 do you start to break even depending on the market in your investment returns obviously you know you could you they could fluctuate if the market goes down over the next 10 years we have no idea but 10 to 20 years just to break just to break even so I mean if you buy a house with the intention of keeping it for the rest of your life it could make sense assuming rents are increasing I I think when I did it 3 to 5% a year yeah so but uh so what would change that of course is prices coming down interest rates coming down that could CH so this world of deflation that I'm talking about I'm not predicting it for housing I'm I I it's not what I do and you know um but when I hear that when I hear that and people say okay this is not going to change then I think well how could it change well if prices came down and interest rates came down that's how it could change I don't know if that will happen um but you know a lot of people are stuck like baby boomers are stuck in their homes okay at some point they are going to make a decision all right I'll take a hit on the house it's worth a lot more than when I bought it I thought I'd get you know 20% more than I am going to get especially during covid um so fine so we could see a little bit of that kind of decision- making at the margin so i' I'd look out for good deals still you know because the one thing you can do in your own house is you can change a lot of things right you can do Renovations you can suit it to your own lifestyle um you have to go jump through hoops to do that and but I feel like as a renter you could do something similar by moving you could you could you could especially there is so much Supply coming online um there's uh I think a million units in multifam dwellings uh that will come onto the market new uh during the next year and a half uh we have not seen that kind of Supply since the 70s when Real Estate was a tax shelter which it is not now it's not compared to what it was back then um and so we're already starting to see rents coming under pressure here in St Pete and there's a lot of people moving to this area so the the supply is also coming up yeah the only flip to that is that multif family is increasing a lot but not single family and so for single family rents are actually increasing whereas multi family rents are declining so if you want an apartment great deals right now and one thing one of the reasons I've been watching multifam is because of private Equity private credit there was just a wall of money just waiting to get into that and into some Investments so what was that it was from o from 08 to really until now um it it basically was a search for yield so what did this private Equity do they bought multif family dwelling units leverage them up you know to get maybe a 15% yield so to speak so if rents are now coming down uh leveraging up will in hindsight look like a very bad idea so I think I think there's trouble brewing in private Equity when it comes to real estate myself now that's just a guess it's not my world I just look as an economist and say okay there was a reach for yield for you know almost well how many years would this be 10 yeah 16 yeah for that long and it was it was a no lose situation for a very long time whenever I see that I say okay then there was too much of that that happened and there will be hell to pay just like with China uh in China when it came to property after China entered the World Trade Organization around 2000 uh the right thing to do at during every massive correction and they had big Corrections in property every time you a person bought the dip and they won they won they won they won until they didn't and I think in China the real estate issue and the overwhelming debt load is much worse than people understand and we're beginning to see it in all kinds of numbers this week luxury watch numbers came out rishma and uh Swatch they're down 25 to 30% in China which is dragging their entire sales down by 10 to 25% think about that these companies have never seen anything like that people aren't talking about this how do you feel like that's all affecting the middle class here in the United States with housing prices being the way they are stock markets at alltime highs prices are you know still Rising throughout a lot of segments do you think the middle class is in some ways kind of screwed no I think the middle class now has a lot of power because as we've watched other Cycles what really causes the cycle it's when not not as much when lower income they've been killed by this environment not when they get hit it is when the middle class starts to change its behavior that we have big cycles and the middle class is changing its behavior and insisting on lower prices they're trading down to private label if they don't get lower prices so now we're seeing Brands who have never had to cut prices now they've never raised prices the way they did during covid but they've never had to cut prices before they're cutting prices they are cutting prices and it is the middle class and I think that's going to be the same with rents you know the middle class will double up uh you know and so forth so I think the middle class I know a lot of people say ah they're screwed um I actually think they have a lot more power and that they should use it you know they have a lot more bargaining power than they know is any part of you concerned about the national debt or do you think that that's kind of like a false threat everyone's saying oh it's getting bigger it's getting bigger you know obviously it's it sounds like a very scary number when you when you think about it but does that even affect the average person will it ever affect the average average person is it fine if it just keeps climbing and we never pay it off um you know I started in the business and this controversy was plaguing Ronald Reagan when I started in the business so I thought about it a lot and this can go one of two ways it's well publicized now that our interest bill is higher than our defense bill this is terrible right um so when I say one of two ways if we move into an environment that encourages more Innovation because there is so much Innovation and it is booming it's going to happen no matter what it's just how quickly it's going to happen if there is more uh incentive for Innovation I think we will grow our way into a much better situation much like we did during the Clinton Administration uh the growth rate of nominal GDP was faster than the growth rate of debt so debt to GDP started falling um and I think that could happen again it probably will happen the question is how fast it will happen if we get into a regime where and I think regulations are a killer they're they're a killer when it comes to this especially for small businesses which is where a lot of innovation does take place or at least risk taking takes place um if we if we get rid of regulations and I think that's part I I haven't seen the entire Republican plank here but I'm pretty sure that would be part of it that would be huge and taxes to encourage Innovation you know writing off Capital spending 100% in the first year writing off R&D 100% you know just the um including software um in in the first year uh things like that I think we could grow our way out because we're at such a beautiful place in terms of innovation history we haven't been here since the last Roaring 20s in the 1900s telephone electricity internal uh combustion engine right so here we are with these five major platforms 14 different Technologies converging and they will cause explosive growth but they'll also cause they'll also cause harm to parts of the economy that do not adjust and I always say one of my biggest messages if you're going to say if you're G if you're going to ask me at one point in this you know is there anything you would leave us with get on the right side of change in all kinds of ways education uh investment career um just get on the right side of change because you'll ride spectacular waves we really do think they will be spectacular but if you don't if you fight this uh and and people don't like change if you fight then you you're probably going to lose well you know what before we go into that if you're a business owner you know there's no better sound than hearing and if you want to hear a buch more then it's time to get started with our sponsor Shopify Shopify is the global e-commerce platform that has already helped transform millions of businesses worldwide for example Shopify is an endless list of Integrations thirdparty apps 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stock market forever or just keep everything going and keep printing more money to keep things running well first of all I don't believe from a government I believe government spending yeah is taxation just g equals T and what does that mean so it's not helping the stock market that I know the the stock market looks at what's going on right now as low multiples that's why it's so surprising the the valuations are where they are especially for the Mega caps um so that's and when I say government spending equals taxation what does that mean either they're going to have to raise taxes which we do not think they should do or there will be inflation so you inflate your way out of the debt right right pay it off with cheaper dollars or um will be a cut in government spending um to to to actually take taxes down we're hoping that growth growth associated with Innovation will be you know help with that last last way of doing things so I do not believe the government is helping the stock market here I actually think it's hurting underneath the the valuation in the market in terms of monetary policy if you look at M2 growth it's it's start it went negative in uh 23 January of 23 and we just moved positive now that was after a huge surge but I think uh I think that the FED has neutralized uh the impact of money on on the stock market and I think we know that all too well because our strategy in terms of what you're talking about was the biggest beneficiary in 20 and I didn't like that even though it helped us tremendously that boom uh was too much too soon and we were punished in 21 and 22 mightily so no way did monetary policy help Innovation strategies or long duration strategies like ours in fact it hurt all long duration strategies including bonds bonds had the worst selloff in uh 21 and 22 since well the 1700s has never been this bad so all long duration assets I think I think the opposite is going to occur now rates are going to come down if we're right on deflation good and bad deflation uh and I if the cycle continues to weaken as the consumer saving rate forces consumers to cut back and margin pressure forces companies to lay people off I don't think it's 0809 at all and in fact I think we've been through an a a rolling recession since the minute the FED started raising rates housing went down immediately right soon as they raised housing started moving down and by some measures housing is down 40 50% still so housing commercial real estate office and multifam so somewhat hous related as well Autos are Punk Capital spending is falling even with the so-called inflation reduction act even with all of that being thrown at it capital spending is falling and now I think inventories and consumer spending will will will be very soft but that's the end of the recession it's not we're not looking into the beginning of a recession and that's why we are positive do you have any predictions for the new Tesla Roadster I know in the interview that did with Don Lemon Don was asking him a lot of questions trying to pull information about it he was saying like oh well does it have a wing does it have a steering wheel does it have you know is it a collaboration with SpaceX you know does it use like like normal is it going to I don't know is it gonna fly do do you have any ideas I don't want to be the guy that's asking if it's GNA fly but do you think it's going to fly we don't we don't know that but I mean the only thing that uh Elon said he he actually said this during our podcast he said that he thought supersonic flight would be electric that' be that'd be Super Sonic airflight uh I don't think he was linking it at all to what he was doing at Tesla but uh that's the only thing that I've heard him say we we don't we spend much more of our time researching robotaxi you know that is the most important question is this going to happen and how soon and uh you know I think the odds have gone up dramatically as we've seen and and felt these FSD upgrades week you know every few weeks uh so we spend much more of our time thinking about that as you know even energy storage or the humanoid robot we're doing work on it but if you look at our Tesla model which is out there we we don't have anything for the humanoid robot that's a huge call option and so the Roadster put in that category we have nothing for it we we we don't need it for this stock to really um take off during the next few years yeah now we ask this to everybody just and we get a wide range of opinions and and commentary if you're between the ages of 25 and 50 in America is it your fault if you are poor well America is both of my parents are immigrants from Ireland and they moved here because this is the land of opportunity you know your lot in life in other count countries where families into which you were born often determine how successful or not you will be that is not true in this country we celebrate we celebrate you know people who are who use their Ingenuity and their grit and determination and their belief in themselves and maybe a higher power that you know that they can um they can reach the moon so to speak uh so is it their fault I think there are some people who you know have have started in such unfortunate circumstances here that is also true it's true anywhere in the world where it is awfully hard um you just need again to get a few breaks but you have to look for them you have to seek them out I mean even in my own case I Met Art laugher and you know I became like I wanted to learn everything from him and he loved that he loved my determination and my grit and you know and and he gave me he introduced me to the company that accepted me and gave me my big break so I always say you know you if you're in a vicious cyle you know those can be horrible and and there and sometimes it's mental health and so so you know sometimes there you need exogenous forces to help you but you must seek that help um important is to get into a virtuous cycle and that is very possible in this country it's hard it's not easy but it's very possible you know I remember when I moved to New York I was so scared because there was that song If you anatra song if you can make it here you can make it anywhere and I was like oh my gosh does that mean it's very hard to make it here so I remember I remember thinking you know I was you know out to conquer and I I was so motivated and I think that's you know I think you can motivate yourself you can but I also think seeking out mentors critical seeking out mentors who who believe in you critical and they are out there and they want to help especially those who have been helped you know um that's one of the reasons that you know in terms of trying to give back well starting a company is one way to do that especially if we can help people achieve their dreams in in terms of you know whatever they're doing uh for Ark uh but also in education I um started a foundation and we've taken arc's research search and made it age appropriate for the sixth grade and now seventh grade and then next year eighth grade and we are uh in all of the public schools in pelis County um as part of the science curriculum this is not after school this is although we're doing after school in summer as well and what we're doing our research we give it away you you see it on our website that's not being taught in schools and when I say getting young people on the right side of change means in middle school when there are lots of forks in the road at that time uh inspiring them and helping them understand look if if this inspires you if this technology inspires you go for it go for it follow Sam the Drone man Sam chorus who does uh our drone work follow him on X and follow who he follows you can do this and of course now with a tutors assistants you know we're going to be seeing a lot more do it yourself uh in terms of education and so I think that's also very important important for anybody to understand not just students in school but we're all going to be students I'm a student every day I'm a student I'm learning something every day and I have to learn it given what I do but others can learn too and you know enter whole new worlds we think so um I know I danced a little bit around your question but there are situations where you know they're most unfortunate but they have to know this country does provide the opportunities just find the right mentors and then go for it yeah this one I'm just personally curious about how do you deal with the volatility of the market and seeing such large swings because I'd imagine for you just like in a single day could be up or down you know hundred million do do you just become desensitized to it at a certain point well I'm sensitized to it from this point of view I think about our clients and I think it's critically important for us to educate our clients we're not going to be your entire portfolio and some people in 2020 we were their entire portfolios and you know we were trying to say no no no no no now we have papers we're writing papers and so we should be a small allocation and um and and understand this is going to be a very volatile part of your portfolio we're the closest to a venture capital Fund in the public markets we've always said that and some people have understood that and other people have not understood that so closest thing to a venture capital fun we have a five-year investment time Horizon we hope you do too uh and so I do think about our clients I think that our Distributors our partners um are the important conduits for that message but we need to be out there more as well and it's very important for us to say look if we've just doubled in a short period of time you need to take profits you need to rebalance right because that will give you the psychological wherewithal that when we drop 50% you will you will add us add back to this portfolio because over time we should outperform the broad-based markets buy a lot from this level so I think about it from our client's point of view are we preparing them enough what whichever part of the market we're in and we've been in a very tough part of the market um and just convincing people you know there's too much of momentum driven investing it's really bad you know if you're buying High and selling low I mean I would think that's a very basic you know tenant that you're trying to teach your audience do not buy high and sell low think about the other way of doing this that's a much more productive way of investing but in terms of day-to-day on the professional side we've got a five-year investment time Horizon and we're surfacing evidence yay or nay every day you know are these companies har harnessing AI as quickly as we thought they would no we've made some important sales in this first half of the year because these companies um were not and this is moving very quickly and they don't understand you don't have time if you don't do this others will and so this cleansing out period I think has been very important for us with this 5year investment time Horizon so what we do in the short term you know when the Market's treating all our stocks in the same way we will sell one and benefit longer term from tax losses there and buy another stock that is also down and out yeah but even in terms business aside in your own personal psychology Forbes estimated this is forb so we don't know how accurate this is but they estimated your net worth to be at like 400 million in 20121 $140 million today that's is this is Forbes once again so we don't know how accur it is how does it feel to have swings because some days I'm sure you're up 10 $10 million some days you're down how does it even bother you like the things that bother an average person maybe like getting a bad haircut I'll get a bad haircut and I'll be like this is unfortunate itens all the time all the time thank you Jack Jack locked out with this haircut I lucked out with this one and it will be very unfortunate or maybe you know like for example it rained recently in Vegas and it I needed to replace the flashing around my chimney and then Water started bubbling up through my FL and it's like you know for me it's like oh come on but how do you get bothered by normal you know what could probably be considered pretty trivial things to you does that bother you at all anymore with such like having to remain stable through so much volatility yeah it's interesting to hear that number I don't hear those numbers so I don't even think about it frankly but um in terms of those numbers they have no idea how much Ark is worth uh they have no idea how much crypto I have they just have no idea so I I'm very blessed I built I was a big saver I I took whenever I had a bonus in my early days I saved 100% of it 100% now I came from that kind of family they never had debt uh you know depression babies in Ireland no less so that was kind of uh drummed into me but that Bas and that Bas became so so important to risk-taking in you know in in the future just starting my own business if I hadn't done that and if I didn't have that mentality I I wouldn't have been able to fund this business for almost four years by myself you know so the degrees of freedom that I have had thank God really started in my earliest days uh in the business just saving everything so in other words you know saving equals investment that is an identity in economics uh that's how I was thinking about okay I'm saving and believe me it was in Bonds in the beginning because interest rates were at 15% and even zero coupon bonds so I was really taking a risk when people were thinking inflation would never come down um so but that gave me the base upon which to build my business and not to take out any debt to do so so it's a mindset and so I have that base and I can take risks um but that's why when you ask the question I think about our clients much more when it comes to volatility I think about our Distributors I just know this is tough on them and that we need to be there but I also know um one of the reasons I left the traditional part of the business is no one is doing what we are doing certainly not then now they're doing it in the form of ETFs but not actively managed they're just throwing spaghetti at the wall and seeing which funds stick you know whereas we're very holistic this is all we do disruptive innovation we're going to you know live and die on this and you know I think you want us to to be you know focused on this because there is so much happening and I think when people see how quickly all of this takes off um we've started to see it with AI but we're we're probably in a pause period with AI now which many people are saying oh okay what's going on and that pause period has to be with Enterprises saying okay how do we do this you know this is really important strategically but how do we get all our data in one place how do we clean it up how do we integrate it who do we work with you know how do we organize ourselves so it doesn't happen you know um we've got big big Enterprises to you know to to turn around here what's something that you wish more people knew about you personally what they don't know because I don't talk about this much you know I don't and I don't want to get emotional but I don't talk about my children much because everybody talks to me about my profession and they're the ones who you know they've watch me go through this and you know Caitlyn my oldest I have three she'd be five and and we're in the let me see we in ' 08 how old would she have been so she uh at that time 13 years old mommy how is your market today you oh my gosh you know because those were Wicked days huh that's Graham's dream it really is yeah what oh to have a have a child that question to have a child who cares about investing and the market and saving like my I have about investing she cuz I was trying to get her involved in equities not until not until crypto did my children really become interested in investing honestly not into my son two girls no my son yes he was interested the girls no crypto though now they're averaging in you know that that would be my advice in a very volatile category so that's what people don't know is how much my children went through not in a bad way you know I think it's good that I was an example in in a certain way uh for them but you know I know it I know it's molded their thinking about the way the world works you know how volatile I can be out there even though I didn't try to bring it home with me I didn't I I mean my my father I mean every day when I I was growing up my father would come home because he was a design engineer but politics he was not good at politics and it was tough and my mother was kind of his counselor so we listened to that you know every every night and I did not bring home work but it was our nanny who was just trying to gauge she'd keep a uh she'd keep her tabs on the stock market and especially when we're going through rough times she she'd say okay we're not not going to tell your mother that tonight you know if something had really gone wrong uh but I'd always find out eventually how has having kids changed her life there's nothing like it people you know if you if you don't have children you can't possibly understand what it is like to have children it is you know I often when I'm reading when I go to a memorial service for let's say someone who has died what do you hear what do you hear more than anything uh about What mattered you know mother father yeah their children children you know if it's a mother uh you know or yeah it is it is the family it is just so critically important and uh well I highly advise it you know it's uh it's lifechanging in many many ways sure you lose like I was never more exhausted I had three children in 5 years never more exhausted during those years I would you know all weekend because the The Nanny wasn't working on the weekend ah we're going to do this ourselves at the end of the weekend I'd be walking on Monday morning and of course you're using a different part of your brain and a different part of your body and all of that stuff but Monday mornings were almost like okay all right now let's get back to this and let's uh but it was good to be using different parts of the brain and Graham just recently got married I did he's probably going to have children within the next five years he's not in any Rush okay do you have any advice for him have children that would be advice um you know my mother always said this she was 27 when she got married which was at that time she's again from Ireland she was practically a spinster today that's a considered a kid um and 27 you know she always would say make sure and get your traveling all the things you really want to do out of the way but I will turn that around a little bit and say I think she did that because we were really financially strapped and so we couldn't do it um today I think it's incredible to introduce children to places around the world new you know I mean we moved around all the time so it broadens the mind and certainly with my children they traveled and love to travel as well uh maybe even more than I do um to see different parts of the world and so I don't even think that true anymore it just depends what kind of vacation want how chaotic you want it to be not chaotic preferably yeah but if you can afford itth take children don't deprive them yeah yeah I would love to hear you talk just in the future more about being a parent about having children and raising kids in today's environment I would love to hear more of that from you more of a personal side because I think people know your thoughts on business and the economy and stocks but just uh you know something that's closer to you I think is really important yeah what role does religion play in your life uh very Central to my life and that people do know I I have said that I mean definitely one of the reasons I started this company you know and it wasn't it was more it wasn't to start this company and and it was more about you need to do this because the world needs this and you know this is the new creation and you know passive is not creating anything you know that that's allocating Capital to more of the past than the future given how quickly we think the future is going to evolve passive investing I would say I mean it really got going in the 90s but the tech and telom bust gave it a a big push and you know for for years the world didn't change for years the world you know the five Innovation platforms that I'm talking about sure the seeds were planted during the 20 years that had ended in ended in the tech and Telecom uh bubble but you know we had the transistor and that was good but the world wasn't changing so quickly now it is changing quickly and so we're a voice out there you know for the new creation we're here to procreate and to create was there ever a time that you've doubted your faith or has it always remained Paramount in your life you know it's so interesting I think I think it's a gift and I think I was born with a gift now has it deepened over the years absolutely and uh certainly tough times you know in hindsight they're they're not tough when you have perspective but when you think you're going through tough times and don't have perspective that's really when it deepens I think for most people so we got to settle a debate this a bit off topic on Reddit and there's a a photo on Reddit okay and 50% of people think this is you 50% say this is someone else is this a young photo of you in college just end the video right here um it's been going on for such a long time I would say I can tell I'm pretty sure this I I I don't think this is me because I didn't really wear bangs that much I knew it that much we we didn't get exactly you know the answer but th this one is you this that might be almost the same photo I think that's the same photo you you have no idea this has been going on for years okay looks more like me but I didn't wear bangs that often I did wear bangs uh when I first when I first uh moved to New York I think but it's not a resounding yes or no it's not a resounding yes it looks familiar but uh that second one no you've settled something that has been going on for the last four years online oh really it's mostly settled mostly settled yes mostly we call it 90% settled we're not 100% well if that's the same person I know that that that other one is not that is not who I am just the angles are different that's incredible wow we did it all right Reddit you're welcome guys you're welcome thank you so much for your time we really appreciate it we'll link to all of your information Down Below in the description as well this has been a pleasure we really really appreciate it thank you so much Jack thanks so much thank you guys so much for watching we are here in Florida for you guys so enjoy and until next time till next time