WEBVTT - An AI bust is coming. But when? And who will be hit hardest? 0:00:07.560 --> 0:00:10.080 There's a battle brewing over which country will come out 0:00:10.080 --> 0:00:13.680 as the leader in AI, and the United States is 0:00:13.680 --> 0:00:16.560 betting the House economically that it will come out on top. 0:00:17.360 --> 0:00:20.280 I'm Samantha Selinger Morse, and you're listening to The Morning 0:00:20.280 --> 0:00:24.439 Edition from The Age and the Sydney Morning Herald. Today, 0:00:24.480 --> 0:00:28.760 international and political editor Peter Hartcher on what previous infrastructure 0:00:28.760 --> 0:00:32.320 booms like the craze for building railways in the 1840s, 0:00:32.320 --> 0:00:35.720 or the.com boom of the 1990s, tells us where this 0:00:35.720 --> 0:00:39.640 will lead economically and which countries might be hit hardest 0:00:39.640 --> 0:00:49.240 in an AI bust. It's August the 6th. Peter, welcome 0:00:49.240 --> 0:00:49.960 back to the podcast. 0:00:50.000 --> 0:00:50.760 Pleasure, Samantha. 0:00:51.000 --> 0:00:53.920 Okay. I'm so looking forward to this because many of us, 0:00:53.920 --> 0:00:56.240 we think of AI, we think of maybe our mate 0:00:56.320 --> 0:00:59.720 who's using it to craft a wedding speech, or perhaps 0:00:59.720 --> 0:01:01.960 some of our friends who use it to, you know, 0:01:02.000 --> 0:01:06.000 cheat at uni on on essays. But you've pointed out 0:01:06.000 --> 0:01:07.800 in your most recent column, it's actually sort of the 0:01:07.800 --> 0:01:10.880 cornerstone or it will be of any country's given power. 0:01:10.880 --> 0:01:13.200 So just remind us, how is that? 0:01:14.319 --> 0:01:17.400 Well, the threshold question really is, do you want to 0:01:17.400 --> 0:01:20.760 be a country in control of its own fate or 0:01:20.800 --> 0:01:23.840 a country that is at the whim of other countries 0:01:24.200 --> 0:01:27.400 that have greater technological advantage than you do? You could 0:01:27.400 --> 0:01:30.560 use a parallel going back to the times of imperialism 0:01:30.560 --> 0:01:34.880 and colonialism, the countries that had the technological edge of 0:01:34.880 --> 0:01:38.039 being part of the early part of the industrial revolution 0:01:38.040 --> 0:01:40.440 were the countries that took over all the other countries. 0:01:41.240 --> 0:01:45.759 So AI is a new level of capability now, which 0:01:45.760 --> 0:01:48.680 will be not not all, but one of the distinguishing 0:01:48.680 --> 0:01:51.960 factors between countries that can control their own destiny and 0:01:51.960 --> 0:01:56.600 sovereignty and the countries that can't. That's the core proposition. 0:01:57.160 --> 0:02:01.960 Okay. No small, no small thing. But there's also the potential, 0:02:01.960 --> 0:02:05.720 and you've written about this to unleash major chaos, right? 0:02:05.760 --> 0:02:07.920 Which as part of, I guess, your ability or a 0:02:07.920 --> 0:02:10.760 country's ability to take over possibly another country. So I 0:02:10.760 --> 0:02:13.239 guess tell us about that, whether in the context or not, 0:02:13.280 --> 0:02:16.200 of maybe recent AI launches or just what the capacity 0:02:16.600 --> 0:02:18.760 is at the moment or what it will be. 0:02:18.800 --> 0:02:24.520 Yeah. Well, to create chaos, I mean, absolutely, countries can 0:02:24.520 --> 0:02:29.000 already do that using warfare, kinetic warfare. This is a 0:02:29.000 --> 0:02:32.799 new type of chaos. And we've had a we've had 0:02:32.800 --> 0:02:36.200 a fair flavor of it through. One example is cyber 0:02:36.200 --> 0:02:43.200 attacks and, you know, great outages, failures online. This AI 0:02:43.280 --> 0:02:48.079 takes this stuff to a new level. In fact, a 0:02:48.080 --> 0:02:50.600 couple of weeks ago, I quoted the former head of 0:02:50.600 --> 0:02:54.760 the Australian Signals Directorate, the. The ASD is a highly 0:02:54.760 --> 0:03:02.930 sophisticated secret signals interception and Surveillance agency. It's, I suppose, 0:03:02.930 --> 0:03:07.610 the equivalent of America's NSA, National Security Agency. Rachel Noble 0:03:07.610 --> 0:03:11.010 Rachel said to me that, um, she said, this is 0:03:11.010 --> 0:03:16.290 already totally, uh, operating in our systems. We're already completely 0:03:16.290 --> 0:03:22.130 dependent on it. Everything from space, GPS, cyber security, she said, 0:03:22.169 --> 0:03:25.170 for example, we're going to need it to defend against 0:03:25.210 --> 0:03:28.649 other countries, she said. Already, we know ASD has put 0:03:28.650 --> 0:03:35.210 out advisories that they have detected Chinese malware implanted throughout 0:03:35.530 --> 0:03:39.570 critical infrastructure systems and sites in Australia. Very hard to 0:03:39.570 --> 0:03:44.210 detect inactive. We need to be able better to to 0:03:44.250 --> 0:03:47.090 track it. This is what she told me. And she 0:03:47.090 --> 0:03:50.730 was a top signal spy for the country. And AI 0:03:50.770 --> 0:03:55.570 gives China greater capacity to do more, uh, to potentially 0:03:55.570 --> 0:03:58.890 disrupt other countries. And as Rachel Noble said, this malware 0:03:58.890 --> 0:04:02.970 sits on your system until, the hostile state decides it's 0:04:02.970 --> 0:04:05.050 the moment they want to activate it. Push the button 0:04:05.050 --> 0:04:07.330 and knock out all your systems. She said. We need 0:04:07.330 --> 0:04:10.730 a better capacity to detect it, and our enemies will 0:04:11.050 --> 0:04:14.890 want a better capacity to inflict it. So it's really 0:04:14.890 --> 0:04:20.050 basic nation state, uh, state on state warfare in a 0:04:20.050 --> 0:04:24.570 new dimension. It's geopolitics by other means. 0:04:25.210 --> 0:04:27.890 And we're already seeing it, I believe. There's been reports 0:04:27.890 --> 0:04:32.570 that the United States military reportedly used Claude, I think 0:04:32.610 --> 0:04:35.250 AI built by anthropic in the bombing of Iran and 0:04:35.250 --> 0:04:39.730 before that, the Venezuela raid in January. So and further 0:04:39.730 --> 0:04:42.130 to that, you've written that the US is betting its 0:04:42.130 --> 0:04:45.050 economic house on AI. So what do you mean by that? 0:04:45.089 --> 0:04:50.250 Yeah. Well, part one of your question, uh, a famous 0:04:50.250 --> 0:04:54.850 professor of international relations, Hal Brands, has has written that 0:04:54.850 --> 0:04:59.650 all wars are AI wars from now on. And already 0:04:59.690 --> 0:05:01.970 we see examples, as you say. It doesn't mean that 0:05:01.970 --> 0:05:04.810 because you have AI, you'll win the war. Like with 0:05:04.810 --> 0:05:07.290 any type of power, you have to deploy it intelligently 0:05:07.290 --> 0:05:10.529 in pursuit of a sound strategy. If you I mean, 0:05:10.570 --> 0:05:13.490 take the case of the US, we've talked about this extensively, 0:05:13.490 --> 0:05:16.130 but the US against Iran doesn't matter how much raw 0:05:16.130 --> 0:05:18.650 power it has in pursuit of a stupid strategy, it 0:05:18.650 --> 0:05:21.290 will fail. So you still need to have good strategy. 0:05:21.290 --> 0:05:26.050 But if you have two countries with equal strategy and capability, 0:05:26.410 --> 0:05:29.050 AI is a potential source of advantage in all countries, 0:05:29.050 --> 0:05:33.370 of course, will want that advantage. As for the Americans 0:05:33.410 --> 0:05:36.650 getting their economic house on AI, there's a few ways 0:05:36.650 --> 0:05:41.050 you can slice this particular salami. One way is that 0:05:41.050 --> 0:05:45.330 the huge surge of investment to set up the infrastructure 0:05:45.330 --> 0:05:49.370 for this industry is responsible for, depending on the month, um, 0:05:49.529 --> 0:05:52.849 most economic growth in the US or down to about 0:05:52.850 --> 0:05:55.610 a third of economic growth in the US. So this 0:05:55.610 --> 0:05:58.010 is just one industry. Just think of the size of 0:05:58.050 --> 0:06:01.210 that economy and all the industries across the whole thing. 0:06:02.010 --> 0:06:05.610 And this one sector is accounting for between a third 0:06:05.610 --> 0:06:09.890 and and two thirds or more of US growth in 0:06:09.890 --> 0:06:13.609 any given month or quarter. That's that's one dimension. Another 0:06:13.610 --> 0:06:17.170 dimension is look at the stock market. And this is 0:06:17.170 --> 0:06:19.810 where it gets out of control. So the the actual 0:06:19.850 --> 0:06:23.850 hard investment in systems and data centers and chips and 0:06:23.850 --> 0:06:27.290 all of that stuff. Four of the big American tech companies, 0:06:27.290 --> 0:06:31.810 the so-called hyperscalers until this year, are estimated to have 0:06:31.810 --> 0:06:37.770 spent or have disclosed investment of 1.1 trillion USD in 0:06:37.770 --> 0:06:44.089 setting up their AI structures. Right. So that's Amazon, Google, meta, Microsoft, 0:06:44.529 --> 0:06:47.370 and they're estimated to spend this year on top of 0:06:47.410 --> 0:06:51.770 that 1.1 trillion. Another 745 billion USD. So that's just 0:06:51.970 --> 0:06:55.330 just four of the companies just in in, you know, 0:06:55.330 --> 0:06:59.210 up till today essentially to the end of this year. Uh, 0:06:59.450 --> 0:07:03.610 but then looking beyond that, there are credible estimates that 0:07:03.610 --> 0:07:08.210 the whole sector will spend $9 trillion in physical investment 0:07:08.210 --> 0:07:11.010 in this sector over the next four years to 2030. 0:07:12.850 --> 0:07:16.290 So to put that in perspective, total US annual GDP 0:07:16.290 --> 0:07:21.090 is $30,000,000,000,009 trillion in investment in one sector. You can 0:07:21.090 --> 0:07:27.810 see this is a huge new source of investment and activity. 0:07:28.010 --> 0:07:30.290 But then so that's the physical investment. Then you get 0:07:30.290 --> 0:07:33.010 to the stock market where all the speculation is going on. 0:07:33.010 --> 0:07:35.330 And that's where it really gets out of control. The 0:07:35.330 --> 0:07:41.410 market capitalization today, uh, it fluctuates, but, uh, today approximately 0:07:41.610 --> 0:07:45.010 won't change that much in the next 24 hours of 0:07:45.010 --> 0:07:48.970 all AI related companies on the US markets is 27 0:07:48.970 --> 0:07:54.210 trillion USD, again compared to 30 trillion annual GDP. So 0:07:54.770 --> 0:07:58.489 just the size of the market value of those companies 0:07:58.490 --> 0:08:01.260 is roughly the size of the entire output of the 0:08:01.300 --> 0:08:05.780 US economy in a given year. Now you could say, well, 0:08:05.820 --> 0:08:10.340 isn't that good? That's impressive. Yeah, it's a huge transformative technology. 0:08:10.380 --> 0:08:13.900 Why not put a lot of money into this? Well, 0:08:14.740 --> 0:08:18.500 the problem, Samantha, is that this is a classic investment frenzy, 0:08:18.540 --> 0:08:19.100 a boom. 0:08:19.980 --> 0:08:21.300 And we know it follows a boom. 0:08:21.540 --> 0:08:24.700 Yes, we do know what comes after a boom. Um, 0:08:25.100 --> 0:08:26.580 also starts with the letter B. 0:08:26.620 --> 0:08:27.100 Yeah. 0:08:27.220 --> 0:08:29.540 Um, two ways of coming at this one. I'll read 0:08:29.700 --> 0:08:33.220 from a paragraph from the Bank of International Settlements annual 0:08:33.220 --> 0:08:36.819 report in June. The Bank of International Settlements is often 0:08:36.820 --> 0:08:39.939 called the central Bank of Central Banks. It coordinates all 0:08:39.980 --> 0:08:42.420 the central banks around the world. And they put out 0:08:42.420 --> 0:08:45.260 an annual report on risks to the economy and as 0:08:45.260 --> 0:08:50.300 well as prospects. Um, they talked about instructive parallels being 0:08:50.340 --> 0:08:53.700 the canal mania of the 1830s, the British railway mania 0:08:53.700 --> 0:08:58.780 in the 1840s, the electrification exuberance of the late 1920s, 0:08:59.140 --> 0:09:02.300 and the.com boom of the late 1990s, they all shared 0:09:02.300 --> 0:09:08.059 one common tray a genuine technological breakthrough that attracted capital 0:09:08.059 --> 0:09:12.060 in excess of what commercial returns could ultimately justify. These 0:09:12.059 --> 0:09:16.140 episodes ended with an eventual reversal in investment inducing, economy 0:09:16.179 --> 0:09:21.780 wide recessions bust and the current Wall Street frenzy the 0:09:21.780 --> 0:09:26.740 bank described as bearing resemblance to these precedents. So that's 0:09:26.740 --> 0:09:29.459 that's one we have. This is a standard pattern. There 0:09:29.500 --> 0:09:33.540 is a real technological breakthrough. But investors in the excitement 0:09:33.700 --> 0:09:36.100 and shall we say, greed of wanting to get in 0:09:36.100 --> 0:09:39.380 on the boom. Yeah. Go over the top. Invest way 0:09:39.380 --> 0:09:43.900 more than the the actual underlying companies and technologies can 0:09:43.900 --> 0:09:47.580 ultimately return. Yeah. And they go market collapses. And there's 0:09:47.580 --> 0:09:50.940 so much wealth tied up as there is today in 0:09:50.940 --> 0:09:54.140 those shares that when they crunch, it drags the whole 0:09:54.140 --> 0:09:57.700 economy down. And as they've said, the most recent was 0:09:57.700 --> 0:10:01.820 the.com boom from 1999 20, which we well remember. The 0:10:01.820 --> 0:10:03.580 other way of looking at this is just to get 0:10:04.340 --> 0:10:11.220 a gauge, I guess, a numerical indicator. The best I think, 0:10:11.260 --> 0:10:13.820 and I wrote a book about the US, I. In fact, 0:10:13.820 --> 0:10:17.540 I predicted the global financial crisis in a book I 0:10:17.540 --> 0:10:21.060 wrote called Bubble Man about Alan Greenspan. My great crime, though, 0:10:21.059 --> 0:10:25.060 Samantha was. I was two years early. Um, uh, but, 0:10:25.100 --> 0:10:28.700 you know, um, that's worse to be. 0:10:28.740 --> 0:10:31.300 Now, you know, keep all your good ideas. Just bank them. Yeah, 0:10:31.300 --> 0:10:32.940 just thank them for a couple of years, and you'll. 0:10:32.940 --> 0:10:34.740 Only push the button when you see it starting to crumble. 0:10:34.780 --> 0:10:35.500 Yeah, exactly. 0:10:35.540 --> 0:10:40.660 But, uh, this measure is market capitalization. So the total 0:10:40.660 --> 0:10:44.020 value of shares on the market in this industry compared 0:10:44.020 --> 0:10:47.380 to or the overall market, total stock market compared to 0:10:47.380 --> 0:10:54.460 a country's GDP. Uh, historically, when you get significantly over 100%, 0:10:54.460 --> 0:10:58.300 when the market capitalization is more than the total value 0:10:58.300 --> 0:11:02.660 of the underlying economy in a given year. That's a 0:11:02.660 --> 0:11:05.340 red zone territory where you can expect there's going to 0:11:05.340 --> 0:11:07.380 be a bust. On the other side of it, in 0:11:07.380 --> 0:11:10.059 the case of the.com boom, it got up to about 0:11:10.100 --> 0:11:15.540 140 150% of GDP. Wow. Um, at the moment, with 0:11:15.540 --> 0:11:19.939 the AI frenzy in Wall Street, it's up above 200% 0:11:19.940 --> 0:11:22.860 of GDP. So this is really out of whack. 0:11:23.300 --> 0:11:25.700 Uh, it's currently at two. Wow. 0:11:25.740 --> 0:11:30.540 Yeah. Okay. So there's 27. Is the AI related stocks 0:11:30.540 --> 0:11:34.820 alone $27 trillion worth. But if you take the whole market, uh, 0:11:34.860 --> 0:11:38.140 covering all US industries, and that's, that's the comparative measure 0:11:38.140 --> 0:11:42.580 that I'm using, it's well over 200% of GDP. So 0:11:42.580 --> 0:11:47.100 by historical standards, in recent centuries, this is a whopper. Uh, 0:11:47.100 --> 0:11:50.020 and as you say, with a boom, the bigger the boom, 0:11:50.020 --> 0:11:53.420 the bigger the bust. Timing is the tricky part, but 0:11:53.420 --> 0:11:57.020 it will bust. So, uh, there are a couple of 0:11:57.020 --> 0:12:00.949 the ways in which you can not only see the 0:12:01.270 --> 0:12:05.590 the patterns, but you can see the dimensions and hence 0:12:05.910 --> 0:12:08.910 the original phrase you use. The US is betting the house. 0:12:08.950 --> 0:12:09.350 Right. 0:12:09.390 --> 0:12:10.069 On AI. 0:12:11.790 --> 0:12:12.750 After the break. 0:12:13.150 --> 0:12:16.150 If you're in a competitive market, you can't afford to 0:12:16.470 --> 0:12:19.630 be charging way more than your competitor. I mean, look 0:12:19.670 --> 0:12:22.870 at what the Chinese system has done with electric vehicles, 0:12:22.870 --> 0:12:24.950 where they now command 60% of the world market and 0:12:24.950 --> 0:12:26.150 the Americans are being crushed. 0:12:34.429 --> 0:12:36.590 Okay. So you know how I love to ask you 0:12:36.590 --> 0:12:39.150 to pull out your crystal ball. So does any of this. 0:12:39.150 --> 0:12:41.870 And the precedence, does any of this suggest when this 0:12:41.870 --> 0:12:44.590 AI bust might be coming for all of us? 0:12:45.750 --> 0:12:49.270 Well, uh, I'll just dust off the crystal. 0:12:49.309 --> 0:12:49.790 Yeah, exactly. 0:12:49.830 --> 0:12:50.350 It's gone very. 0:12:50.350 --> 0:12:51.270 Foggy. Yeah, yeah. 0:12:51.510 --> 0:12:54.069 Well, there's a famous quote from John Maynard Keynes, the 0:12:54.070 --> 0:13:01.470 noted British economist, who said that markets can remain irrational 0:13:01.470 --> 0:13:05.110 longer than you can stay solvent. In other words. 0:13:06.190 --> 0:13:07.189 Just trying to tease that out. 0:13:07.190 --> 0:13:07.390 Yeah. 0:13:07.429 --> 0:13:10.470 In other words, bull markets run longer than anybody expects. 0:13:10.510 --> 0:13:10.950 Okay. 0:13:11.070 --> 0:13:15.030 So who knows. But this is a well advanced bull market. 0:13:15.030 --> 0:13:17.710 We saw it take a hit. It was a big scare. 0:13:17.710 --> 0:13:21.110 Big shudder. A couple of weeks ago. Hit the Korean market, 0:13:21.110 --> 0:13:25.390 hit the US market and had reverberations around the world. 0:13:25.830 --> 0:13:29.350 It could happen at any time. You need a displacement event. 0:13:29.390 --> 0:13:32.790 A displacement event can be any shock that changes. The 0:13:32.790 --> 0:13:36.350 outlook can be a change in official interest rates. Monetary 0:13:36.350 --> 0:13:39.469 policy right. It can be an investment shock or it 0:13:39.470 --> 0:13:42.030 can be a shock from a competitor, let's say China. 0:13:42.030 --> 0:13:44.309 Well, this is what I wanted to ask you about 0:13:44.309 --> 0:13:47.910 because if the US is betting its house economically speaking 0:13:48.110 --> 0:13:50.990 on AI, I guess tell us what's happening with China 0:13:51.030 --> 0:13:54.390 because there's really a battle now, right? It's really China 0:13:54.390 --> 0:13:56.190 versus the USA in terms of who's going to come 0:13:56.230 --> 0:13:58.790 out on top in terms of AI capability and infrastructure 0:13:58.790 --> 0:14:01.710 and so forth. So tell us how China is doing then. 0:14:01.750 --> 0:14:03.030 Are they also betting the House? 0:14:03.150 --> 0:14:07.750 Well, the orthodoxy until early last year was that the 0:14:07.750 --> 0:14:11.110 US was years ahead of everybody, including Chinese friends. 0:14:11.150 --> 0:14:11.630 Yes. 0:14:12.110 --> 0:14:15.030 And then early last year, there was the so-called deep 0:14:15.070 --> 0:14:18.750 seek shock, deep seek being the Chinese company that produced 0:14:18.790 --> 0:14:23.550 a new AI model, which was, uh, at the same 0:14:23.550 --> 0:14:27.510 or similar level to frontier models in the US, just 0:14:27.510 --> 0:14:32.990 as capable. Yeah. But had two advantages. One much cheaper. 0:14:33.310 --> 0:14:36.350 It had been developed at a cost of about 8% 0:14:36.430 --> 0:14:40.550 of the ChatGPT equivalent that it was compared with, and 0:14:40.590 --> 0:14:44.990 used far fewer chips. And like all the Chinese models 0:14:44.990 --> 0:14:49.150 coming onto the market, its so-called open weight versus the 0:14:49.150 --> 0:14:52.230 US ones, which are all closed systems, open weight simply 0:14:52.230 --> 0:14:55.630 means you can anyone can download these models and you 0:14:55.630 --> 0:14:57.710 can tinker with them. You can customize them according to 0:14:57.710 --> 0:15:01.190 your own company's needs or institutions needs or whatever it is. 0:15:01.510 --> 0:15:05.950 The American proprietary systems are all tightly locked and closely guarded, 0:15:06.630 --> 0:15:10.990 and that rattled everybody. But pretty soon the juggernaut on 0:15:10.990 --> 0:15:16.950 Wall Street resumed. Just overlooked that. But it's happened repeatedly now, 0:15:16.950 --> 0:15:19.910 and the latest one was just two weeks ago, when 0:15:19.910 --> 0:15:24.030 a company called moonshot produced its new model, Kimmy three, 0:15:24.430 --> 0:15:27.470 which again, was right up there in the top, uh, 0:15:27.510 --> 0:15:31.110 comparable with the top 2 or 3 most advanced and 0:15:31.110 --> 0:15:35.510 most expensive US models. But the advantage of the Chinese 0:15:36.390 --> 0:15:39.830 offering of Kimmy three is that you could operate it 0:15:39.830 --> 0:15:43.670 at one third the cost, and it's open weight, so 0:15:43.670 --> 0:15:46.550 you can model it to suit yourself. So this gave 0:15:46.550 --> 0:15:49.390 the market a big shock. Uh, Wall Street took a 0:15:49.430 --> 0:15:52.190 hit again, but it only took a couple of days. 0:15:52.190 --> 0:15:54.550 There was some strong earnings results from the big American 0:15:54.550 --> 0:15:57.790 tech companies. And the market said, oh, let's just get 0:15:57.830 --> 0:15:59.710 on with this. We're in the middle of the Bulls 0:15:59.790 --> 0:16:02.150 are running. Let's just keep running. And they did. And 0:16:02.150 --> 0:16:04.430 so the market recovered and will and will continue for 0:16:04.430 --> 0:16:10.590 a while. But this is a really important moment because 0:16:10.590 --> 0:16:14.390 it shows that the the Chinese system, first of all, 0:16:14.390 --> 0:16:17.950 is capable of producing not just 1 or 2. There 0:16:17.950 --> 0:16:21.550 have been multiple of these companies now, AI startups that 0:16:21.550 --> 0:16:26.550 are capable of producing top notch competitive AI models that 0:16:26.550 --> 0:16:29.950 cost a fraction, a small fraction of what the US 0:16:30.390 --> 0:16:33.990 companies are producing. Now. If you're in a competitive market, 0:16:33.990 --> 0:16:38.790 you can't afford to be charging way more than your competitor. 0:16:38.830 --> 0:16:41.270 I mean, look at what the Chinese system has done 0:16:41.270 --> 0:16:44.310 with electric vehicles, where they now command 60% of the 0:16:44.310 --> 0:16:47.390 world market and the Americans are being crushed. Look at 0:16:47.390 --> 0:16:52.910 the next one, which is humanoid robotics, where Musk. Elon 0:16:52.910 --> 0:16:55.790 Musk has been bragging about how he's going to produce 0:16:55.790 --> 0:16:58.550 this great robot. They're still struggling to get it into production. 0:16:58.550 --> 0:17:02.840 The Chinese, in the meantime, I've got 180 manufacturers already 0:17:02.840 --> 0:17:06.280 selling humanoid robots. Fully functional on the global market. More 0:17:06.280 --> 0:17:10.399 than 300 models and last year accounted for 90% of 0:17:10.400 --> 0:17:16.480 the global market. Because quality is good, price is cheaper. EVs. 0:17:16.520 --> 0:17:19.600 Humanoid robots are. Now we're going to see this play 0:17:19.600 --> 0:17:21.080 out in AI. 0:17:21.440 --> 0:17:23.840 So essentially what you're saying is the American AI market 0:17:23.880 --> 0:17:25.760 is is it inevitable then. Are we at that point 0:17:25.760 --> 0:17:28.199 where it's inevitable that the AI market in America and 0:17:28.200 --> 0:17:30.560 elsewhere is just going to be crushed by the Chinese 0:17:30.600 --> 0:17:31.080 AI market? 0:17:31.119 --> 0:17:34.439 It's not inevitable. And Lord knows this is this is 0:17:34.440 --> 0:17:38.359 frontier stuff on the technological frontier. So anything can happen. 0:17:38.400 --> 0:17:38.920 Right. 0:17:39.080 --> 0:17:42.120 But if you if you were a betting person, you 0:17:42.119 --> 0:17:46.719 would look at, for example, the technological tracker maintained by Aspi, 0:17:46.760 --> 0:17:51.359 the Australian Strategic Policy Institute, which is an internationally recognised benchmark, 0:17:51.359 --> 0:17:55.720 where they say of the I think it's 64 technologies. 0:17:55.720 --> 0:17:59.120 They rate as critical advanced technologies in the world today. Yeah. 0:17:59.440 --> 0:18:02.600 China is leading the US in 59 of those, nearly 0:18:02.600 --> 0:18:07.240 all of them. And the Chinese technological momentum is surging 0:18:07.240 --> 0:18:11.119 and carrying the Chinese systems to the fore in almost 0:18:11.119 --> 0:18:17.359 every sector. So the the pattern and the momentum is 0:18:17.359 --> 0:18:22.960 distinctly with China to catch up to or surpass the 0:18:23.000 --> 0:18:27.800 US in various multiple almost all technological fields. This is 0:18:27.800 --> 0:18:31.240 why it's on the cusp with AI now on the 0:18:31.240 --> 0:18:34.680 cusp of seeing which way this goes. So we've talked 0:18:34.680 --> 0:18:38.000 about the massive investments in the trillions of dollars that 0:18:38.000 --> 0:18:42.960 the US companies are making. Last year, according to Stanford University, 0:18:42.960 --> 0:18:46.800 they have a lab that monitors all things AI. According 0:18:46.840 --> 0:18:51.560 to them, Chinese private sector investment in AI last year 0:18:51.560 --> 0:18:55.560 was just 12 billion USD 12 billion. At the same time, 0:18:56.080 --> 0:19:00.280 each of the major US companies is spending many multiples 0:19:00.280 --> 0:19:03.000 of that, each one of them spending in collectively trillions 0:19:03.000 --> 0:19:06.560 against 12 billion. No wonder the Chinese can charge lower 0:19:06.560 --> 0:19:10.440 prices because they have lower capital outlays. So this contrast 0:19:10.440 --> 0:19:13.480 is striking. And it's increasing. And we'll see where it goes. 0:19:14.040 --> 0:19:16.520 Okay. So if everyone though is partaking in this AI 0:19:16.560 --> 0:19:20.800 boom and therefore a bust is headed presumably at some point, 0:19:20.840 --> 0:19:24.040 possibly even a recession, does that mean that China would 0:19:24.040 --> 0:19:26.920 be slightly insulated from that? Like if it's spending way 0:19:26.920 --> 0:19:29.320 less than, say, everybody else is, or in particular the 0:19:29.320 --> 0:19:33.199 US is? Might it be less vulnerable to a bust 0:19:33.200 --> 0:19:35.959 or a recession than, say, America or even us? 0:19:36.600 --> 0:19:40.119 Exactly right. It's it's a really important point, because if 0:19:40.119 --> 0:19:43.040 you're only spending that much. So while the Wall Street 0:19:43.040 --> 0:19:46.600 companies have got AI companies and related to AI companies 0:19:46.600 --> 0:19:50.600 have got capitalization of 27 trillion outstanding in the marketplace, 0:19:51.760 --> 0:19:55.879 the Chinese equivalent is about 4 trillion. So, you know, 0:19:55.920 --> 0:19:58.119 the US crash has got that much to fall. The 0:19:58.119 --> 0:20:01.160 Chinese crash has only got that much to fall. We 0:20:01.200 --> 0:20:03.760 head into this phase with the US having bet the 0:20:03.760 --> 0:20:06.359 House on AI, whereas China has just bet maybe a 0:20:06.359 --> 0:20:08.119 couple of the bedrooms, right? 0:20:08.160 --> 0:20:10.439 Okay, well, I wanted to I guess just to wrap up, Peter, 0:20:10.440 --> 0:20:15.040 I wanted to talk about, I guess, what's happening more immediately, perhaps, uh, 0:20:15.040 --> 0:20:18.520 in things that threat, perhaps the American market and beyond. 0:20:18.960 --> 0:20:21.280 Because of course, Donald Trump still has two and a 0:20:21.320 --> 0:20:24.520 half years left of his presidency. So his economic stewardship 0:20:24.520 --> 0:20:26.080 will be around for a while. 0:20:26.119 --> 0:20:26.480 But I'm sure. 0:20:26.480 --> 0:20:27.320 It'll pass in a. 0:20:27.320 --> 0:20:27.639 Breeze. 0:20:27.680 --> 0:20:29.639 Oh that's right. Yeah, I'm sure it'll be effortless for 0:20:29.640 --> 0:20:32.560 everybody involved. But he is struggling right now, isn't he, 0:20:32.560 --> 0:20:36.240 to rein in the economic chaos that he has arguably 0:20:36.240 --> 0:20:38.760 unleashed with this war with Iran? The chaos sort of 0:20:38.800 --> 0:20:41.639 comes and goes. The market reacts, goes up and down, 0:20:41.640 --> 0:20:44.040 depending on what's happening with the Strait of Hormuz. So 0:20:44.040 --> 0:20:47.159 I guess just tell us the latest. Is Trump any 0:20:47.160 --> 0:20:50.200 way to inking a deal with Iran that will convince 0:20:50.320 --> 0:20:53.760 the Iranians to reopen the Strait of Hormuz and not 0:20:53.800 --> 0:20:57.200 impose shipping fees for entrance, because that's sort of been 0:20:57.200 --> 0:20:58.679 the long running. I mean, it's been going for a 0:20:58.720 --> 0:20:59.200 while now. 0:20:59.240 --> 0:20:59.560 Yes. 0:20:59.600 --> 0:21:01.320 And it's the markets don't like it. 0:21:01.359 --> 0:21:01.560 Yes. 0:21:01.560 --> 0:21:02.920 We've seen this two step dance. 0:21:02.960 --> 0:21:03.240 Yes. 0:21:03.280 --> 0:21:04.320 Well, nobody really likes it. 0:21:04.400 --> 0:21:05.000 No one likes it. 0:21:05.000 --> 0:21:10.119 Everybody would like to have a predictable supply of oil, fertilizer, hydrogen, 0:21:10.119 --> 0:21:12.679 all the other things that flow through the Strait of Hormuz. 0:21:13.680 --> 0:21:16.280 But we've seen this two step dance from Trump many times. 0:21:16.520 --> 0:21:18.119 And one day it's going to be he's going to 0:21:18.119 --> 0:21:21.040 end their civilization the next day. They're great friends and 0:21:21.040 --> 0:21:22.000 and smart people. 0:21:22.040 --> 0:21:22.680 That's right. 0:21:22.840 --> 0:21:26.560 Um, so yesterday it was going to be the biggest 0:21:26.560 --> 0:21:28.800 attack since World War Two. He was about to launch 0:21:28.840 --> 0:21:33.399 on Iran. Right. And then today, not only does he 0:21:33.440 --> 0:21:36.760 say they're negotiating, but Scott Bessent, his Treasury secretary in 0:21:36.760 --> 0:21:40.320 the last few hours, has said that a deal is imminent. 0:21:40.640 --> 0:21:43.640 At the same time, however, the Iranians are saying there 0:21:43.640 --> 0:21:45.040 is no negotiation whatsoever. 0:21:45.080 --> 0:21:46.600 That's right. So take your pick. 0:21:46.640 --> 0:21:49.280 And then on Monday, I think Trump was saying all 0:21:49.280 --> 0:21:50.959 they do is make me angry. They just make me 0:21:50.960 --> 0:21:54.320 more angry. I think he was saying that the Iranians 0:21:54.320 --> 0:21:58.560 were unbelievably duplicitous. But apparently Scott thinks things are going great. So. 0:21:59.290 --> 0:22:00.929 Well, Scott thinks it's going well. And of course, the 0:22:00.930 --> 0:22:03.250 Iranians have a different view because they say that twice 0:22:03.250 --> 0:22:06.210 now where the US has commenced attacks on Iran last 0:22:06.210 --> 0:22:08.530 year and then again this year, they were in the 0:22:08.530 --> 0:22:11.050 middle of negotiations with the US across the table at 0:22:11.050 --> 0:22:15.010 the time the Americans launched hostilities. So they would see 0:22:15.010 --> 0:22:18.530 the duplicity coming from the other side. Yes, but look, both. 0:22:18.570 --> 0:22:22.250 They've both got themselves in this Gordian knot of antagonism 0:22:22.250 --> 0:22:28.330 and distrust. And it's it's impossible to know how and 0:22:28.330 --> 0:22:32.290 when that will ultimately resolve. So we'll come back next 0:22:32.290 --> 0:22:33.850 week and we'll have another look. 0:22:34.010 --> 0:22:36.970 That's right. Well, thanks, Peter, as always for your time. 0:22:37.290 --> 0:22:38.609 Pleasure to chat with you, Samantha. 0:22:43.730 --> 0:22:47.450 In other news today, experts say concerns about recent buyers 0:22:47.450 --> 0:22:51.010 going into negative equity in the current downturn are overblown. 0:22:51.210 --> 0:22:54.330 With less than 1% of home owners in negative equity 0:22:54.330 --> 0:22:59.010 across Australia, AI could deliver the national economy a desperately 0:22:59.090 --> 0:23:04.169 needed productivity boost worth almost $120 billion, and support the 0:23:04.170 --> 0:23:07.810 creation of tens of thousands of jobs, according to nation 0:23:07.810 --> 0:23:12.409 leading analysis of the burgeoning boom. And former international English 0:23:12.410 --> 0:23:16.450 cricketer Ben Stokes believes that cricket's relationship with alcohol has 0:23:16.450 --> 0:23:19.290 not moved on as the game has become more professional, 0:23:19.290 --> 0:23:22.129 but denied that the England team he captained for around 0:23:22.130 --> 0:23:27.850 four years had a drinking problem. You can read more@theage.com.au 0:23:28.010 --> 0:23:36.570 or smh.com.au. Today's episode was produced by Kai Wong. Our 0:23:36.570 --> 0:23:40.210 executive producer is Tammy Mills, and our podcasts are overseen 0:23:40.210 --> 0:23:44.210 by Lisa Muxworthy and Tom McKendrick. If you like our show, 0:23:44.210 --> 0:23:46.810 follow The Morning Edition and leave a review for us 0:23:46.850 --> 0:23:49.889 on Apple or Spotify. Thanks for listening.