Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each
Speaker 2: day for insight from the best in markets, economics, and
Speaker 2: geopolitics from our global headquarters in New York City. We
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Speaker 2: sound with stocks looking for a third straight day of gains.
Speaker 2: Daryl Kronk of Wells Fargo with optimism ahead, writing this,
Speaker 2: we expect stock prices to march hard by year, rent
Speaker 2: driven primarily by earnings growth that should broaden some more
Speaker 2: cyclically or insed areas.
Speaker 3: Daryl joins us now for more.
Speaker 2: Darrel.
Speaker 3: Good to see you, you too join.
Speaker 2: A bit of heat coming out of the American story.
Speaker 2: It's not bad, just a little bit of heat coming
Speaker 2: out m services. Job openings will get claims later roast tomorrow.
Speaker 3: It's not a good thing.
Speaker 4: I think it's a good thing. You want that economic growth.
Speaker 4: I mean, we walked into this year thinking the economy
Speaker 4: would run hotter than most of our friends up and
Speaker 4: down Wall Street, right, So we were a good half
Speaker 4: a point above an economic growth. We thought rates would
Speaker 4: be higher, we thought inflation would be meaningfully higher than
Speaker 4: the consensus. We were almost a full point ahead of
Speaker 4: everybody else on your end CPI for twenty twenty five.
Speaker 4: And we think earnings will deliver. I mean you're already
Speaker 4: seeing it here in the fourth quarter. We're on a
Speaker 4: run rate of about five percent revenue growth and just
Speaker 4: over ten percent earnings growth. Five percent revenue growth is
Speaker 4: the real element, I think, right, because you can drive
Speaker 4: that down in operating leverage through the margins and straight
Speaker 4: to the bottom line. So if you can maintain that
Speaker 4: kind of revenue growth and get decent nominal growth, let's
Speaker 4: call it two and a half percent GDP growth with
Speaker 4: we're gonna say three to three and a half percent inflation,
Speaker 4: are your end targets three point three?
Speaker 1: That's five and a half six percent nomenal If you.
Speaker 5: Think that the economy was run hot last year, is
Speaker 5: some of the uncertainty that we see right now coming
Speaker 5: from policy that hampers corporate spending. Is that a feature
Speaker 5: not a bug to help with the disinflationary process, where
Speaker 5: otherwise some of these pro growth policies can be somewhat inflationary.
Speaker 4: I I guess the way we've thought about, at least
Speaker 4: is when the dust settles at year end, the positive
Speaker 4: policy impacts.
Speaker 1: Need to outweigh the negatives.
Speaker 5: Right.
Speaker 4: And you've got both ends of it, right, So you've
Speaker 4: got tariffs and immigration you can call negative, and you
Speaker 4: can call deregulation and.
Speaker 1: Tax cuts positive.
Speaker 3: Right.
Speaker 4: We haven't got to the ladder yet, right, we're still
Speaker 4: kind of you know, stewing on it.
Speaker 1: We've been all about, you know, early.
Speaker 4: Days, tariffs, what we do, control of the border, all
Speaker 4: that stuff. So ironically, the markets have weathered that quite well, right,
Speaker 4: I mean we're sitting here in a tight band, whether
Speaker 4: you look at the stock market, the bond market, right,
Speaker 4: which we're talking about with the tenure, thank you, We
Speaker 4: remember that, you know, when the Feds first started cutting
Speaker 4: rates in September of last year, rating the TENUREUS three seventy, right,
Speaker 4: it's four forty five today. All of that's term premium, right,
Speaker 4: because the long end of the curve is term premium,
Speaker 4: a growth premium, and an inflation premium almost fifty fifty.
Speaker 1: Or fifty five basis points.
Speaker 4: So that's term premium, which is just a function of
Speaker 4: the uncertainty around the policy.
Speaker 5: Okay, so if you do get some of that term
Speaker 5: premium taken out of the system, if you have longer
Speaker 5: term yell, it's returned to sort of where they were
Speaker 5: back on September eighteenth. How much is that part of
Speaker 5: your call for the broadening out?
Speaker 6: How important is that.
Speaker 5: To see the rotation out of just some of the
Speaker 5: magnificent seven stocks into the rest of the index?
Speaker 1: Well, certainly.
Speaker 4: So what I would say is this, like when you
Speaker 4: think about twenty twenty five and what has to happen,
Speaker 4: You've got two fives that need to happen. Tenure needs
Speaker 4: to stay below five percent, right, Unemployment rate needs to
Speaker 4: stay low five percent. Earning's growth needs to deliver, and
Speaker 4: earning's breadth needs to broaden out to your point, Inflation
Speaker 4: needs to stay less than three and a half percent.
Speaker 4: The dollar, if you want to measure it by the
Speaker 4: why needs to stay below one ten, right, And the
Speaker 4: positives of policy need out to outweigh the negatives, right,
Speaker 4: If you get those things to happen, I think you're
Speaker 4: in a good place and markets can do quite well.
Speaker 4: Any one of those spiking above some of those thresholds
Speaker 4: start to inject risk into outlooks and the system.
Speaker 7: Basically, I want to pick up on your point about tariffs,
Speaker 7: and now you're saying the market's weathering it pretty well.
Speaker 7: But isn't the market just pricing in the fact that
Speaker 7: there will be eleven hour deals like we saw with
Speaker 7: Canada Mexico.
Speaker 4: Yeah, I mean I think you have to separate, right,
Speaker 4: you know the old adage of like you've got to
Speaker 4: take President Trump seriously but not literally.
Speaker 1: We were learning that quickly, right.
Speaker 4: Not all tariffs are created equal, right, remember Trump one
Speaker 4: dot Oh, the tariffs were very surgical, right, it was
Speaker 4: washing machine parts, solar panels and stealing aluminum.
Speaker 1: This time, they're very broad. They're like a stick, right.
Speaker 4: Twenty five percent on Canada, twenty five percent on Mexico,
Speaker 4: ten percent on China.
Speaker 1: They're at the country level, right.
Speaker 4: So we're using the emergency powers and instead of three
Speaker 4: oh one two thirty two powers this time, right, which
Speaker 4: is a very different equation. I think, when it's all
Speaker 4: said and done, you know, the the Canada, Mexico.
Speaker 1: And call it the friends.
Speaker 4: Tariffs including the the Eurozone are more about leverage and
Speaker 4: getting what you want. China is more about geopolitics. Right,
Speaker 4: That's where the real rub is with China. And I
Speaker 4: would expect the durability the Chinese tariffs to stick and stay,
Speaker 4: and that means very specific things for certain industries.
Speaker 1: Right.
Speaker 4: We still get most of our tech hardware and a
Speaker 4: lot of our semis from parts of China.
Speaker 1: Right.
Speaker 4: Autos are a big element there, Metals, energy prices, those
Speaker 4: are the areas. So it's gonna it's gonna come down
Speaker 4: to those segments, sectors and industries that where the tariffs
Speaker 4: are going to matter as they get applied.
Speaker 8: Him.
Speaker 7: Are you concerned at that point then about inflation rising,
Speaker 7: because this is the opening salvo when it comes to
Speaker 7: Chinese tariffs.
Speaker 1: Yeah, I I.
Speaker 4: Mean as I said, I I think are the inflation
Speaker 4: is You can call it stick year, you can call
Speaker 4: it more durable, whatever you want to call it. If
Speaker 4: if when we walked into this year, the rest of
Speaker 4: the streets said, you know, if you measured us CPI
Speaker 4: as they were saying two to two and a half,
Speaker 4: we were at three point three right, which is that
Speaker 4: full point a head.
Speaker 1: Which is why when you.
Speaker 4: Look at go back to Atleasa's tenure, I know we
Speaker 4: got to keep coming back to this, which is why
Speaker 4: our ten year Sorry John didn't she yes.
Speaker 3: She doesn't own the ten year bond.
Speaker 4: Why we have the tenuere a year end this year
Speaker 4: at four seventy five, Like we don't think when we
Speaker 4: were doing the math right about everybody else was in
Speaker 4: the threes on the ten year right for year end
Speaker 4: twenty five.
Speaker 1: You can't make that math work right. So I think
Speaker 1: rates are higher.
Speaker 4: I think inflation is more durable, and that inflation premium
Speaker 4: is the year goes on gets stacked into the into the.
Speaker 3: Eelds scope best. And they said, so it's a bradmos.
Speaker 5: Ye.
Speaker 3: Well, I.
Speaker 7: Spoke Aid last night and they said, no, he watches
Speaker 7: everything every indicy. They're like, also, he looks at the
Speaker 7: barrels on the market. He wants to know where oil.
Speaker 2: Is everything, no doubt about that. But I think coming
Speaker 2: into this year, just bigger picture, we thought maybe because
Speaker 2: they were going to run this hot, there would be
Speaker 2: a risk that the deficit would get away from them.
Speaker 2: The treasury yields would run away as well. January, you'd
Speaker 2: started to push up back towards five percent. We've retreated
Speaker 2: by forty basis points. When you hear the Treasury Secretary
Speaker 2: say things like I'm focused on the tenure yield, how
Speaker 2: much comfort do you take from that? Because we talked
Speaker 2: about this to close out last year. Would they be
Speaker 2: constrained regulated by stocks or regulated by bunts? I think
Speaker 2: a lot of people thought that maybe they might be
Speaker 2: regulated by the bond market. Do you take any comfort
Speaker 2: from that?
Speaker 1: I do think that's the right focal point.
Speaker 4: Right, rates matter in this environment because it matters for
Speaker 4: equity evaluations, It will matter ultimately for earnings, it matters
Speaker 4: for small caps. Right, So I look, there was a
Speaker 4: lot of short positions sitting right on the four and
Speaker 4: a half percent line on the tenure that scrambled to cover,
Speaker 4: which is why we ended up at four forty yesterday
Speaker 4: on the back of the Treasury refunding, which was no news, right,
Speaker 4: And we didn't see, you know, Treasury Secretary Busset turn
Speaker 4: around and say I'm going to start layering out more
Speaker 4: and heavier auctions in the ten and thirty year, right,
Speaker 4: the three, the ten and the thirty were all spot
Speaker 4: on where expectations were and have been for the last
Speaker 4: four months. So this whole idea that they're going to
Speaker 4: stop issuing as many bills and start issuing more long
Speaker 4: bonds maybe in the future, but it's not in the
Speaker 4: current right. And if that happens, then you start increasing supply.
Speaker 1: Right. The risk you run is the auctions get sloppy, John.
Speaker 4: And we saw that back in October of twenty twenty three,
Speaker 4: where there just wasn't enough demand. Everybody was crowding to
Speaker 4: the short side of the curve on the demand, and
Speaker 4: the bid tocover ratios on those long auctions were messy.
Speaker 2: And then yet it made some changes, and it looks
Speaker 2: like those changes might be sticking, at least for now. Now,
Speaker 2: I'm just going to see it Downald Trunk wels Fanka
Speaker 2: joining Guess now is at Mills of Raymond James now
Speaker 2: ed welcome to the program. I wonder what consequences this
Speaker 2: might have, if any, for the tax cuts over the
Speaker 2: next few months.
Speaker 8: Yeah, John, there's a lot to talk about here, because
Speaker 8: you know, the first thought I have is, as soon
Speaker 8: as the Treasury Secretary says Donald Trump is not focused
Speaker 8: on the Fed lowering rates. We're almost near guaranteed getting
Speaker 8: a headline from Donald Trump saying the Fed needs to
Speaker 8: lower the front end of the rates.
Speaker 9: I do think that.
Speaker 8: When I hear these comments, it is going to be
Speaker 8: difficult to do as much of the tax cuts as
Speaker 8: Republicans want to do. Another thing in that interview, Treasury
Speaker 8: Secretary Besson said that they should do a score that
Speaker 8: would allow Republicans to make the tax cuts permanent, extending
Speaker 8: out current baseline. If we are going to see a
Speaker 8: four or five trillion dollar plus increase in the debt
Speaker 8: and the deficit over the next ten years, that's more
Speaker 8: than what the bond market's been looking for. And finally,
Speaker 8: I guess the thing I would highlight here is that
Speaker 8: in Trump one point zero, everyone was focused on the
Speaker 8: equity market and that was the barometer of Trump's success. Increasingly,
Speaker 8: clients at Raymond James have been asking me, is the
Speaker 8: bond market the new barometer? And last night Treasury Secretary
Speaker 8: best And kind of made that official that we're going
Speaker 8: to be watching the tenuere to see how successful Trump
Speaker 8: policies are going to be.
Speaker 6: And ed, isn't that.
Speaker 7: Because the bond market has a seat at the table
Speaker 7: when it comes to what you're discussing this huge tax
Speaker 7: bill and whether or not they can go as far
Speaker 7: as they'd like to go.
Speaker 8: Yeah, And when I've talked to folks in and around
Speaker 8: kind of the Trump administration, one of the things that
Speaker 8: they want to highlight is tax cuts are only one
Speaker 8: part of the story. They want to talk about the
Speaker 8: deregulatory agenda. They want to talk about, Doge. They want
Speaker 8: to talk about the amount of money that's going to
Speaker 8: be collected Anne Marie from all of the tariffs that
Speaker 8: are going into place. And so if you want to
Speaker 8: get what the Treasury Secretary is describing, I think the
Speaker 8: market has to be prepared that there's going to be
Speaker 8: other sources of tax revenue that's coming in and other
Speaker 8: cuts to the federal government spent. And so the aggressiveness
Speaker 8: that we are seeing right now by Elon Muskin Doge
Speaker 8: is part and parcel giving political cover for the Hill
Speaker 8: to go a little bit further or a lot further
Speaker 8: than they thought they might be able to do.
Speaker 7: Well, let's discuss how they're going to do that. Centators
Speaker 7: will sit down with Trump this weekend and they're talking
Speaker 7: about this two path bill. I caught up with Congressman
Speaker 7: Jason Smith yesterday, who still wants this one big, beautiful bill,
Speaker 7: but that seems to be collapsing in real time. What's
Speaker 7: your take on the next steps for the Republicans in Congress.
Speaker 8: Well, next step, Sammary, is getting a budget. You can't
Speaker 8: start the budget reconciliation process. You have nothing to reconcile
Speaker 8: until you pass the budget. And so this is where
Speaker 8: the fact that Republicans have as slim as possible of
Speaker 8: a majority, you lose one vote, you can't get this done.
Speaker 8: So Donald Trump is also going to be having a
Speaker 8: conversation later today with House Republicans. He's going to see
Speaker 8: if he can get them to pass something to start
Speaker 8: the process. They're still fighting over process. Until you figure
Speaker 8: out the process, you can't get a bill. I absolutely
Speaker 8: still think we're going to get the tax bill done.
Speaker 9: It could be permanent.
Speaker 8: They could add tax cuts to this if they use
Speaker 8: the score that they're talking about. But until there is
Speaker 8: leadership from the White House to instruct them on what
Speaker 8: to do, we don't know what we get from the
Speaker 8: Hill until that point.
Speaker 5: And I loved how we started this conversation about how
Speaker 5: important the tenure is and how this might be the
Speaker 5: ultimate check on the market. I thought that the photograph
Speaker 5: that we showed really set it up perfectly. Where you
Speaker 5: have Donald Trump in the middle, and you have Scott
Speaker 5: Besson on one side, bond representative, and then you have
Speaker 5: Howard Lutnik on the other side, who in some ways
Speaker 5: the stock representative, growth representative, trying to get some of
Speaker 5: these other things across. Who has the louder voice, the
Speaker 5: louder influence over the man in the middle, Donald Trump,
Speaker 5: at a time where there are a lot of competing egos,
Speaker 5: a lot of competing wishes, and it's not clear just
Speaker 5: how constrained some of those people are going to be
Speaker 5: by say the ten yield.
Speaker 8: Yeah, Lisa, I guess my flippant answer to that would
Speaker 8: be the last person who spoke to him. That's what
Speaker 8: we have seen countless times. In this he has once
Speaker 8: again instilled what we'd call a team of rivals. And
Speaker 8: we've seen this and elsewhere too on trade on Tariff's
Speaker 8: there is a huge match between Team Econ, which is
Speaker 8: Scott Bessen's World versus Team Tariff that is Lutnick. That's
Speaker 8: going to be Jamison Greer, as mentioned, he's having his
Speaker 8: hearing today for US Trade representative.
Speaker 9: That's Peter Navarro.
Speaker 8: So what I've been instructed to do when I'm listening
Speaker 8: to all these competing voices is find areas of commonality,
Speaker 8: and that's going to be the likely policy. And one
Speaker 8: of the things that I think the market has been
Speaker 8: missing is the most dubvish view coming out of that
Speaker 8: kind of team of rivals on tariffs is only starting
Speaker 8: at two point five percent of a universal tariff and
Speaker 8: getting to somewhere to ten to twenty percent. If that's
Speaker 8: the dubbish view, I want to know what the hawkish
Speaker 8: view is.
Speaker 5: At that point ed, how do you advise clients? How
Speaker 5: do you advise companies that want to make plans, want
Speaker 5: to understand what their footprint should look like, want to
Speaker 5: understand where they can expand in the world. Are you
Speaker 5: telling them to just hold off and that frankly, they
Speaker 5: will not know just what.
Speaker 6: That hawkish view is and how high.
Speaker 5: It could go.
Speaker 8: Yeah, I'm not telling them to hold off, but I
Speaker 8: am telling them to expect volatility. I was at a
Speaker 8: conference yesterday down at our headquarters in Saint Pete at
Speaker 8: Raymond James talking about how volatility is back and that
Speaker 8: you have to kind of not react to everything to
Speaker 8: get some of the big conversation right. And so there
Speaker 8: are a number of things out of this administration that
Speaker 8: could be viewed as market positive. There are other things
Speaker 8: that could be viewed as market negative. The way in
Speaker 8: which they implement that, the timing in the degree, all
Speaker 8: are going to be the big conversations of twenty twenty five.
Speaker 9: But don't stay paralyzed.
Speaker 8: Because we stay paralyzed, you miss out on a lot
Speaker 8: of opportunity. Been doing this job for a while, I
Speaker 8: can always tell you the risk, but that has not
Speaker 8: been the right strategy before, and I don't think it's
Speaker 8: the right strategy now, Lisa.
Speaker 2: Sequencing matter is that I think we've all been saying
Speaker 2: out over the last several months. We wanted to know
Speaker 2: what would come first. We found out the focus was
Speaker 2: on trade, and pretty quickly for this market. At the moment,
Speaker 2: I wonder how quickly things could change again when we
Speaker 2: really start to see what's going to happen with the
Speaker 2: tax package. When do we start to get a better
Speaker 2: idea of the contours of That's it going to take weeks?
Speaker 3: Months?
Speaker 8: How long I think we'll get some idea within the
Speaker 8: next couple of weeks. As I mentioned, you have to
Speaker 8: pass the budget first. In Republicans, if we can get
Speaker 8: a budget in the February March time period, people will
Speaker 8: get optimistic on what can get done.
Speaker 9: And then I want to see what score they're using.
Speaker 8: It's a technical thing, but if they use a score
Speaker 8: that says extend out current policy, which is what the
Speaker 8: Treasury Secretary is expecting to say, that's where we have
Speaker 8: the conversation about these tax cuts being permanent.
Speaker 9: That's not priced into the market.
Speaker 8: If we are in March and April talk about permanent
Speaker 8: tax cuts as a high probability event, that's a market
Speaker 8: positive from where I sit.
Speaker 9: It might have an impact on the.
Speaker 8: Tenure that the Treasury Secretary does not want, and that
Speaker 8: might be the binding constraint.
Speaker 9: But I do expect.
Speaker 8: That we will have moments of clarity followed by everything
Speaker 8: falling apart before it ultimately gets done. And one thing
Speaker 8: I say about DC is that things appear impossible right
Speaker 8: up until the moment they're inevitable. But I do think
Speaker 8: it is inevitable this year we will get something done
Speaker 8: on tax cuts.
Speaker 2: And this was brittiant looking forward to being on the
Speaker 2: journey with you as most of frankmonc jans on a
Speaker 2: path forward for the year had Sonya masking a ups
Speaker 2: stop and buying for more Sonya get to see you?
Speaker 2: What are you looking for from tomorrow's number? And to
Speaker 2: Jonathan Pingo's point of ittakes this why is January so
Speaker 2: hard to forecast?
Speaker 10: You know, January tends to be quiet, seasonal. There's also
Speaker 10: weather effects as well, so we have this impact of seasonality,
Speaker 10: and we've had this historically, I think for at least
Speaker 10: a few years that is amplified in January compared to
Speaker 10: other months. But in addition, here we're going to have
Speaker 10: benchmark revisions, so the underlying assumptions of how we're estimating
Speaker 10: data might change as well from the Census Bureau. So
Speaker 10: we're looking forward to hundred k. But really, as we've published,
Speaker 10: this is just an exercise and predicting noise.
Speaker 5: An exercise and predicting noise, we should collect these and
Speaker 5: exercise and predicting noise in a random number generator.
Speaker 6: This is fantastic.
Speaker 5: I am curious about what your takeaway is, just more
Speaker 5: broadly from the random number generator, you know, exercise and
Speaker 5: noise the stagnancy of this market. That's not a stagnation
Speaker 5: of this market. The idea that we're not seeing a
Speaker 5: lot of hiring or we're not seeing a lot of firing.
Speaker 5: Do you take that as being implicitly a negative, suggesting
Speaker 5: a brittleness that makes this labor market more susceptible to
Speaker 5: some sort of shock. That's the way some people have
Speaker 5: been describing it.
Speaker 10: Well, that's possible, yes, and tariffs could be one of
Speaker 10: those shocks, actually, and we would expect the unemployment rate
Speaker 10: to go up if there if the tariffs against you know, Canada, Mexico,
Speaker 10: China are in fact sustained, especially Canada and Mexico. But
Speaker 10: on the other hand, the US is doing considerably better
Speaker 10: than the rest of the world, so that is a.
Speaker 6: Strength for us.
Speaker 7: Of course, JP Morgan had this survey and they talk
Speaker 7: about inflation teriffs of the biggest impact on markets in
Speaker 7: twenty twenty five.
Speaker 6: I know we're just joking here, but no seriousness.
Speaker 7: Doesn't even matter what the non farm payroll number is tomorrow.
Speaker 10: In terms of the exercise and predicting noise, probably.
Speaker 6: Less so well.
Speaker 10: Of course, in a sense we would expect, you know,
Speaker 10: I if for example, the number comes in considerably lower
Speaker 10: than what the market expects, I would think the market
Speaker 10: would react. Of course, now the number comes in close
Speaker 10: as usual, folks are probably going to look through it
Speaker 10: more and refocus on tariffs.
Speaker 6: Well, okay, so let's talk about tariffs.
Speaker 7: Then you don't think Canada Mexico get implemented and implemented,
Speaker 7: but we still have China. This is just the opening
Speaker 7: salvo Trump set himself and he says he's going.
Speaker 6: After the European Union next. How do you think about
Speaker 6: terrorts the rest of the year.
Speaker 10: We would think of it as if they were to
Speaker 10: get implemented. There are really two ways to think about it, right,
Speaker 10: two paths. One is just the thread of tariffs that
Speaker 10: is causing uncertainty already for businesses, and we've seen this
Speaker 10: in the ISM manufacturing survey for example, LSM manufacturing as
Speaker 10: well and others regional surveys. And the other one is
Speaker 10: the actual impact of tariffs if they were to get
Speaker 10: implemented and they had staying power. And in the latter
Speaker 10: case it's a bit easier to estimate, though there's still
Speaker 10: considerable uncertainty. We would expect a bigger hit to grow send.
Speaker 2: Inflation, actually something largely absent from this conversation. An absent
Speaker 2: I would say, from the news conference with Sham and
Speaker 2: Power in the past week. Why are conversation about the
Speaker 2: files in Los Angeles and the disruption we all expect
Speaker 2: in the economic data.
Speaker 3: What happened to that story?
Speaker 10: Well, that's a terrible it's a terrible tragedy, of course,
Speaker 10: but unlike the staying power of tariffs, we would expect
Speaker 10: there to be rebuilding exercise and reversion to trend from.
Speaker 2: So you're not expecting any disruption in the economication in
Speaker 2: the weeks to come.
Speaker 10: We are expecting this to show up in the in
Speaker 10: part in the NFP, for example, later this week, but
Speaker 10: we're not expecting this to be an effect for.
Speaker 6: The rest of the year.
Speaker 3: Necessarily that would persist.
Speaker 2: Got it, Sonya, It's going to see you as always,
Speaker 2: Sonya Meskan, There of ubs on the data we get.
Speaker 2: Tomorrow's read Halfmanley, co founder of manis Ai and author
Speaker 2: of Superagency What Could Possibly Go Right? Without AI Future
Speaker 2: joined us now read It's good to see you, I
Speaker 2: said as you walked into the room. There's a book
Speaker 2: I need to read What Could Go Right? Because I'm
Speaker 2: very worried about what things could go wrong. Let's put
Speaker 2: it that way. You in the book approach something really important.
Speaker 2: But as we make these technological revolutions, these advancements over
Speaker 2: human history, actually it benefits human agency. And I'm worried
Speaker 2: that maybe with AI it goes in a different direction.
Speaker 2: Help me out and tell me why it could go well.
Speaker 11: The short answer is it gives you superpowers, right, and
Speaker 11: it gives you superpowers across a large number of things.
Speaker 11: Everyone should go try chat, GPT, inflections, pie and traffics Claude.
Speaker 9: Give it a try.
Speaker 11: You can find what should I make for dinner? How
Speaker 11: do I get medical advice that's available to me? How
Speaker 11: I might have a difficult conversation with a colleague? You know,
Speaker 11: how might I actually do things in parenting that might
Speaker 11: be different? You know, all of those things are are
Speaker 11: our superpowers.
Speaker 2: That we get each Run Lisa round to the bus,
Speaker 2: I am. Do you want to share with the audience
Speaker 2: what you do?
Speaker 5: You can You can manipulate what your kids look at
Speaker 5: if you send them links to things that then change
Speaker 5: their algorithms that then give them more news feeds in
Speaker 5: their in their feed. I mean, there are ways that
Speaker 5: you can kind of play the system a little bit,
Speaker 5: and I think that that's proper.
Speaker 11: Yeah, exactly. And by the way it helps them learn,
Speaker 11: it gets some news about the environment around them. I mean,
Speaker 11: this is one of the things that is if you're
Speaker 11: not actually in fact using these AI agents to learn
Speaker 11: right now, you should. And like, for example, one of
Speaker 11: the ways that I do when I approach a difficult subjects,
Speaker 11: for example quantum computing, I stick a technical paper in
Speaker 11: and I say, explain this to me like I'm twelve.
Speaker 3: Superpowers, superpowers.
Speaker 2: Yes, okay, So my next question is going to be
Speaker 2: how should we participate and how we shake this intelligence?
Speaker 2: And Leaser has given us one ie, Dick, could you
Speaker 2: give us an time?
Speaker 11: Well, I think part of the key thing is my
Speaker 11: very first chapter is about chat GPT, where humanity enters
Speaker 11: the chat. You've got hundreds of millions of people who
Speaker 11: are interacting with it, and the company watches what works
Speaker 11: and what doesn't work and then improves it. So by
Speaker 11: simply going and experimenting and getting which kind of things
Speaker 11: are the things that help you elevate your agency, then
Speaker 11: actually in fact helps the company know, oh these things
Speaker 11: really work, Oh these things need to be improved.
Speaker 5: At the same time you talk about technical papers, and
Speaker 5: one thing that AI does really well is work with
Speaker 5: technical details, not so much, the social not so much.
Speaker 5: When you have to have certain biases that are baked
Speaker 5: into some of these algorithms, what are the limitations to
Speaker 5: this in sort of broad raised application at a time
Speaker 5: where people are saying this could do qualitative jobs and
Speaker 5: there could potentially be a lot of biases baked in.
Speaker 11: So every major group is working intensely on biases. And actually,
Speaker 11: one of the things that we did with Inflection and
Speaker 11: PIE personal intelligence PUN intended was to teach it to
Speaker 11: be kind and empathetic, to have EQ as important as IQ.
Speaker 11: And actually you see that now in the tropics claud
Speaker 11: and other things, as it's kind of spreading and so
Speaker 11: you can actually have these kinds of interactions be trained
Speaker 11: in them, and this is kind of reinforcement learning by
Speaker 11: human feedback to actually be much better than your average human.
Speaker 5: The reason why I find this so fascinating is because
Speaker 5: I think about my children and what careers they potentially
Speaker 5: could have, and I'm like, no, not programmer, because that's
Speaker 5: going to be dead. You know, all of these other ones.
Speaker 5: Probably if you can be empathetic, human those human skills
Speaker 5: are probably going to be more needed. That's what people
Speaker 5: are saying. Are you saying those two are going to
Speaker 5: go out the Waydow? I mean, what is this due
Speaker 5: to employment?
Speaker 11: So first, I actually think programming skill jobs aren't going
Speaker 11: out the door. I think there's human application, but I
Speaker 11: think it's also human application of like.
Speaker 3: EQ as well.
Speaker 11: So the fact that you have a for example, say
Speaker 11: a medical assistant that can help you with something, or
Speaker 11: a coach that might be able to talk with something,
Speaker 11: doesn't mean you don't want a human coach. It's more
Speaker 11: coaches the better right and being able to make it work.
Speaker 7: You're talking about AI for the good, but what about
Speaker 7: AI in the hands of adversaries?
Speaker 11: Well, so superpowers, superpowers for terrorists, superpowers for criminals, superpowers
Speaker 11: for rogue states. That's one of the things that we
Speaker 11: need to be careful about how we navigate. Once again,
Speaker 11: all of the major groups actually have security groups that
Speaker 11: are working on this to try to make sure and
Speaker 11: that's I think part of the having call so called
Speaker 11: red teaming plans and kind of trying to make sure
Speaker 11: that that's as minimized as much as possible.
Speaker 7: How do think the US government should be approaching this.
Speaker 7: The market's freaked out because of deep seek and how
Speaker 7: much potentially the CCP is putting money into their version
Speaker 7: of AI. But when you're in China and you want
Speaker 7: to look at things on deep seek that are particilarly
Speaker 7: critical to the CCP, it will not show you. So
Speaker 7: how does the US government go about this?
Speaker 11: Well, so I think it's important that the US government
Speaker 11: kind of continues some of the threads that the previous
Speaker 11: executive order did, which is, you know, you have red
Speaker 11: teaming things that you actually do world leadership about what
Speaker 11: kind of things are happening. I mean there's connections in
Speaker 11: the UK AI Safety and Suit and the US one
Speaker 11: and the French one, and I think these are important
Speaker 11: to do. But I think that this is one of
Speaker 11: the things where there will be multiple AIS and part
Speaker 11: of the reason why I want AI not to just
Speaker 11: be artificial intelligence or amplification intelligence, but also American intelligence
Speaker 11: as part.
Speaker 1: Of what we're doing.
Speaker 7: What do you make then, of the tech industry being
Speaker 7: very close to this administration. I'm not just talking about
Speaker 7: your former friend Elon Musk. I was at the White
Speaker 7: House yesterday and Bill Gates was walking.
Speaker 6: Into the West Wing for meetings.
Speaker 7: Do you think they can help the administration basically get
Speaker 7: to there faster when it comes to safe AI.
Speaker 11: In the short absolutely, I think it's if you said,
Speaker 11: of any kind of Western democracy government in the world,
Speaker 11: most especially, of course, you know, American presidency, American government,
Speaker 11: should they be connected with the tech industry talking about
Speaker 11: how tech creating the future? What are the things that
Speaker 11: we can do to make better American industry, better, American society,
Speaker 11: better lies for American citizens? The short answer is absolutely what.
Speaker 2: You make in the backlashed against Dale Musk more recently
Speaker 2: about hazing film from the government, Well.
Speaker 11: In government, the move fast and break things maybe should be,
Speaker 11: you know a little bit more compassionate and judicious.
Speaker 3: Is that what you think the price should be.
Speaker 11: I think that the question should be is trying to say, hey, look,
Speaker 11: there's reason government doesn't work like companies, even though I
Speaker 11: think there's efficiency that's really good and we need to
Speaker 11: respect those reasons too.
Speaker 7: Do you feel that you're going to basically get some
Speaker 7: sort of repudiation because of where your politics were ahead
Speaker 7: of this election, and given how Trump has basically cosied up.
Speaker 6: To a lot of individuals in the tech world.
Speaker 7: I have not seen you yet at mar Lago in
Speaker 7: inauguration or walking into the West.
Speaker 11: Look, I think the thing that we most want as
Speaker 11: American citizens is for our government to succeed, to succeed
Speaker 11: for our industry, succeed for our citizens. And so that's
Speaker 11: what I most want, and I think we all do.
Speaker 5: You have been an incredible investor. You are an early
Speaker 5: investor in open Ai, you invested in LinkedIn, just so
Speaker 5: many of the behemoths currently. Do you see a lot
Speaker 5: of upstarts right now that look like they could become
Speaker 5: the next big thing in some of this machine learning technology.
Speaker 11: So the short answer is yes, although picking them is
Speaker 11: one of the difficult things about being a venture capitalist,
Speaker 11: and there's a lot of different options. Back a few
Speaker 11: years ago, I was arguing that we were five large tech.
Speaker 3: Companies heading to ten.
Speaker 11: But I wouldn't necessarily have predicted that Nvidio would have
Speaker 11: so quickly become one of those, you know, into the
Speaker 11: seven and then going to ten. And so I think
Speaker 11: that's we are in that progress, and I think there
Speaker 11: are a number of startups that are creating amazing technology.
Speaker 11: And then the question is product market fitt scale.
Speaker 5: What do you think the next technological evolution is going
Speaker 5: to be? They could potentially be a sort of chat
Speaker 5: GPT moment or a deep seek moment, or one of
Speaker 5: these sort of breakthrough A has.
Speaker 11: One of the things I think we're going to see
Speaker 11: this year. All of the major AI companies are working
Speaker 11: on amplifying coding and one of the things like for example,
Speaker 11: you know for your kids other things, thank you will
Speaker 11: be yes, you have to bring up the UH will
Speaker 11: be Actually all of us will have a software engineering
Speaker 11: assistant and that will make all of our work a
Speaker 11: lot better. And that's one of the things I think
Speaker 11: hasn't yet entered the consciousness. So I think that's one
Speaker 11: of the things that's coming. And then, of course, you know,
Speaker 11: with what I'm doing with Manus, I'm hopeful that we
Speaker 11: will have some really great early results in caring cancer and.
Speaker 2: How we can accelerate the scientific process. I say, we're
Speaker 2: rulled up with you on that page. You're very successful.
Speaker 2: Thank you sir. Ready to appreciate your time. Thank you,
Speaker 2: good to see it. Rid Hoffman, Manus AI, and a
Speaker 2: whole lot more. This is the Bloomberg Surveillance Podcast, bringing
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