Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the All Thoughts podcast.
Speaker 2: I'm Tracy Alloway.
Speaker 3: And I'm joll Wisenthal.
Speaker 2: Joe, I have a headline for you, go on THEO.
Speaker 3: Is a good day for headlines you brought this June sixteenth.
Speaker 3: You have a lot of headlines you could That's right,
Speaker 3: you could choose from.
Speaker 2: But one in particular. I'm sure you saw this already.
Speaker 2: SpaceX extends gained to seventeen percent, set to overtake Microsoft
Speaker 2: in value.
Speaker 3: I had a feeling I think at some point did
Speaker 3: they also overtake Amazon like all of those Yes, I
Speaker 3: think in the last week. I mean we're traveling the
Speaker 3: week of the SPACEXIPO. They just captivated everyone and day
Speaker 3: after day, and there are there any number of superlt
Speaker 3: you know what Bloomberg would really like super relatives. It's
Speaker 3: like the largest gain.
Speaker 2: Since x, the biggest and more stats than superlatives, right.
Speaker 3: Well, I suppose, but there was also one I saw,
Speaker 3: I guess yesterday. So June fifteenth was the world's five
Speaker 3: hundred richest people collectively added three hundred and sixty six
Speaker 3: billion dollars to their wealth. There is the single biggest.
Speaker 3: The numbers get bigger over time. There are some it's
Speaker 3: some big times for the market, a.
Speaker 2: Nice day for them. But the crazy thing about SpaceX is, Okay,
Speaker 2: you have this company. It's now worth two point seven
Speaker 2: trillion dollars or something on twenty billion dollars of revenue
Speaker 2: from twenty twenty five, and I can't even do you know,
Speaker 2: if we're talking about valuations, you can't even do a
Speaker 2: traditional price earnings ratio because there's no earnings, there's just sales,
Speaker 2: and the price to sales ratio is more than one
Speaker 2: hundred something like that.
Speaker 3: You know, look like, I don't even know where to
Speaker 3: big game. I mean, you've seen this.
Speaker 2: Because its superlative.
Speaker 3: Yeah, true, super I mean the argument that's being made
Speaker 3: is that there's a lot of arguments being made and
Speaker 3: people it's like, oh, it's actually an AI company because
Speaker 3: of all the GPUs and data centers that they've built.
Speaker 3: They really do have, and we've done an episode on this,
Speaker 3: an extraordinarily commanding lead in space and satellites and starlink,
Speaker 3: et cetera. The revenue is what it is, I don't know.
Speaker 2: But also I think it's fair to say things feel
Speaker 2: a little bit speculative. Yeah at the moment, right, you
Speaker 2: see a headline like that, seventeen percent, that's overtaking a
Speaker 2: stallwart of the tech industry in the space of it's
Speaker 2: been less than a week, right.
Speaker 3: Yeah, I mean look, I mean the other thing is,
Speaker 3: look these companies and we're going to get these other
Speaker 3: big IPOs later in the year with open AI and
Speaker 3: Anthropic presumably. I mean, Space has been around for a
Speaker 3: long time. The historically companies came public much earlier, et cetera.
Speaker 3: So obviously it does have twenty two thousand employees. It's
Speaker 3: a big company, but the revenue is what it is,
Speaker 3: and if you're looking at it from a sort of
Speaker 3: like valuation based metric, you would have to say, at
Speaker 3: a very minimum, investors are are you have to be
Speaker 3: banking on very rapid growth in the very short term
Speaker 3: in the coming years to expect good returns here.
Speaker 2: Right, So obviously one of the big talking points.
Speaker 3: Do you know I'm looking at the d S page
Speaker 3: for Space, do you know where it's headquartered? No, actually,
Speaker 3: Star based Texas, So they so they have their own
Speaker 3: town in Texas that they got to name. But that
Speaker 3: is their corporate info. On the des page Star based Texas, Well.
Speaker 2: That's definitely worth two point seven true. Yeah, So all right,
Speaker 2: the big talking point in markets is obviously valuations. All
Speaker 2: of this AI frenzy, is it a bubble? Is it not?
Speaker 2: But even if you think that a lot of this
Speaker 2: is speculative, yeah, my big question is what do you
Speaker 2: actually do at this point?
Speaker 4: Right?
Speaker 2: Because so much of the market has been momentum driven recently,
Speaker 2: AI enthusiasm is pretty much everywhere. So we talk a
Speaker 2: lot about waitings in the indices, the benchmark inducees of
Speaker 2: big tech, but also, as we discussed recently with Torsten
Speaker 2: Slock in his great presentation at our live show, the
Speaker 2: AI factor is basically embedded in pretty much every stock
Speaker 2: at this point in time.
Speaker 3: Look, I'm the way I look at it for my
Speaker 3: own investing in my retirement. Did I very have like
Speaker 3: sort of very boring, normal index based investing. It's like, look,
Speaker 3: I may be missing out, but these are great returns, etcetera.
Speaker 3: I'm not managing other people's money, you know, other people
Speaker 3: like this is luxury, you know what I'm saying. It's
Speaker 3: like I have the luxury of being able to say
Speaker 3: these are fine returns. I'm just getting from the S
Speaker 3: and P or whatever roughly, and that's fine. It's a
Speaker 3: great year. And if like, you know, I'm not all
Speaker 3: in on two X levered Korean memory stocks, but I'm
Speaker 3: still like, these are great returns. Had I been, had
Speaker 3: someone been paying me to manage their money, I don't
Speaker 3: know if they'd be happy to get market returns right now.
Speaker 2: Yeah, that's right. So this poses a bunch of interesting
Speaker 2: questions obviously, Yeah, the big one being are we in
Speaker 2: a bubble or not? And then I guess the next
Speaker 2: biggest one being well, what do you actually do?
Speaker 1: Yeah?
Speaker 3: How do you stay saying that's right?
Speaker 2: How do you stay safe in a giant market bubble?
Speaker 2: And we do, in fact have the perfect guests, someone
Speaker 2: who has managed to do that over the years. More
Speaker 2: or less, I think we're gonna be speaking with Jeremy Grantham.
Speaker 2: He is the co founder and long term strategist at GMO,
Speaker 2: as well as the author of the new memoir The
Speaker 2: Making of a Perma Bear, The Perils of Long Term
Speaker 2: Investing in a Short term World, and famously the Caller
Speaker 2: the accurate caller of many previous yes, including dot com,
Speaker 2: which is the parallel that everyone keeps using. So Jeremy,
Speaker 2: thank you so much for coming on odd lots.
Speaker 4: It's a pleasure. Thank you for having me.
Speaker 2: So what do you recommend investors too at this point
Speaker 2: in time, because it seems like there's no escape from
Speaker 2: AI enthusiasm.
Speaker 4: To put it mildly, well, my simple advice is usually
Speaker 4: try and avoid the high. Check the numbers and one
Speaker 4: hundred times sales. Pretty well, that's the job for you.
Speaker 4: It's easy for kind of market historians to be having
Speaker 4: a good time. These are extraordinary times. It's seldom been
Speaker 4: more interesting. I'm thrilled to be alive when all the
Speaker 4: major issues that I have spent my life studying and
Speaker 4: particularly the last fifteen years are coming to a head
Speaker 4: basically at the same time. And to find that being
Speaker 4: met by the highest priced market in history, give or take,
Speaker 4: is extraordinary. And I think in fifty years market historians
Speaker 4: will look back and talk in awe of SpaceX and
Speaker 4: read as a kind of novel slash joke its perspectives,
Speaker 4: and compare it with the stories they tell about the
Speaker 4: south Sea Bubble. You know, an undertaking of such enormous
Speaker 4: value that it cannot cannot be at this time revealed
Speaker 4: it scoped up a lot of money and ran off
Speaker 4: with it, and they deserved it.
Speaker 3: The naming of your book the making of a Perma Bear?
Speaker 3: What is like when I read that title? Should I
Speaker 3: have perma bear in air quotes? As in like people
Speaker 3: perceive you to be a perma bear?
Speaker 4: Or do you voted quotes?
Speaker 3: And it interesting? Yeah, because because a I don't you know,
Speaker 3: I associate you with like warning about the markets can
Speaker 3: get over their skis and understanding market history, et cetera.
Speaker 3: On the other hand, I look at GMO's holdings and
Speaker 3: positioning and I see, you know, I do not see
Speaker 3: funds that are just overwhelmingly in treasuries, in gold and
Speaker 3: safe haven assets. I see ownership of Meta and Microsoft.
Speaker 3: This does not look like the portfolio of someone who
Speaker 3: I would think of as a quote perma bear unquote.
Speaker 4: When I was seventy, I figured it was time to
Speaker 4: leave my colleagues in charge of all the day to
Speaker 4: day decisions. I have nothing to do with the portfolio today.
Speaker 4: My only job is to study long term existential threats
Speaker 4: to the market and society, and that includes the making
Speaker 4: and breaking of the great bubbles. Which is fine because
Speaker 4: I have always, for fifty years at least, considered the
Speaker 4: making and breaking of the great bubbles to be the
Speaker 4: only thing that really matters. The rest of the time,
Speaker 4: show up for work, keep your nose clean. You're doing fine.
Speaker 4: But the forming of these spectacular bubbles and their breaking
Speaker 4: really separates the men from the boys.
Speaker 2: So you touch on this in the book. But when
Speaker 2: we're in the midst of a major bubble and people
Speaker 2: are seeing crazy returns like seventeen percent on SpaceX, what
Speaker 2: do you tell clients they're missing out on these huge gains.
Speaker 2: I assume you're encouraging them to be patient, to wait
Speaker 2: for that mean reversion. But how do you actually handle
Speaker 2: the pressure of having a customer, a client who is
Speaker 2: under pressure to at a minimum meet their benchmark with
Speaker 2: great difficulty.
Speaker 4: It's always been difficult dealing with clients in a major
Speaker 4: ball market. Luckily, we've had quite a bit of experience
Speaker 4: because since Greenspan, we've gone from one overpriced market to
Speaker 4: the next, starting with the tech bubble and then the
Speaker 4: housing bubble, and then in the sense the end of
Speaker 4: twenty one was a spectacular overpriced market and now this
Speaker 4: So we've had a lot of experience and we were
Speaker 4: more careful at handling the clients now than I think
Speaker 4: we were in the Tech Book, where we famously lost
Speaker 4: half our book of business in two and a quarter years.
Speaker 3: Actually, what does that look like in practice? And I
Speaker 3: understand that you're not active day to day in the
Speaker 3: security selection, but obviously people who work for you are,
Speaker 3: and they're very active, and obviously in the client handling.
Speaker 3: What does that actually look like in practice? Good client
Speaker 3: management at any firm.
Speaker 4: In our case, being as honest as you can be,
Speaker 4: lay the facts on the table, make them as clear
Speaker 4: as you possibly can, try and take out one hundred
Speaker 4: percent of the hype, and kind of engage with your
Speaker 4: client so that they understand exactly how you see the
Speaker 4: market working, why it does this, why it does that,
Speaker 4: how it's in general price. And that's a long, continuous job,
Speaker 4: and it keeps going in the bull markets and the
Speaker 4: band markets. What changes really is the client's level of excitement.
Speaker 4: They become careful and miserable for a while, and they're
Speaker 4: excited and jumping up and down for a while. But
Speaker 4: our process of trying to deliver the facts as we
Speaker 4: see them doesn't really change much.
Speaker 2: So I think a lot of people would probably agree
Speaker 2: that markets feel a little frothy at the moment, But
Speaker 2: I think there's also a mentality. Again, it goes back
Speaker 2: to this momentum factor that's dominated in recent years. But
Speaker 2: I think there's a mentality that everyone just assumes they're
Speaker 2: going to be able to get out before everyone else.
Speaker 2: Everyone's going to head for the exits at the same time,
Speaker 2: so you enjoy the gains and then hopefully you're slightly
Speaker 2: smarter than everyone else and you manage to save yourself
Speaker 2: before the bubble actually bursts. How do you go about
Speaker 2: thinking about timing of the bursting of bubbles? What are
Speaker 2: the signs that you actually watch out for in terms
Speaker 2: of when everyone is heading for the exits all at once.
Speaker 1: Wow.
Speaker 4: I have a few rules that have worked more often
Speaker 4: than not. The one that's most interesting to me has
Speaker 4: only flashed four times since nineteen twenty five, and that
Speaker 4: is in the early phases of the bubble. That is,
Speaker 4: we define a bubble as a rare two sigma event
Speaker 4: and based on the price only and when it breaks
Speaker 4: through that. Let's assume nineteen twenty eight, you have a
Speaker 4: huge move and the stocks that lead it for going
Speaker 4: up sixty eighty percent for the year, and then in
Speaker 4: nineteen twenty nine, the junkie flyers start to go down.
Speaker 4: It's not that they underperform a rising market. The market
Speaker 4: goes up thirty five percent to the peak in twenty
Speaker 4: in October, they can't even get the sign right. The
Speaker 4: previous year's leaders, the spectacular movers, start to decline and
Speaker 4: they spent the whole of twenty nine going down. And
Speaker 4: by the time the market broke, the S and P
Speaker 4: Low Priced Index, which regrettably was discontinued years ago, was
Speaker 4: down almost forty percent. Priced Index were a bunch of
Speaker 4: fallen angels with enormous volatility, very highbatis and they had
Speaker 4: had his spectacle in nineteen twenty eight, and they started
Speaker 4: to decline. Why is that? I have a theory that
Speaker 4: this is relates to mister Prince's unusually honest answer, why
Speaker 4: is he still in the bull market? As long as
Speaker 4: the music's playing, I had to keep done, and that,
Speaker 4: of course is the name of that game. But he
Speaker 4: doesn't have to dance with Puma Tech. Puma Tech was
Speaker 4: the most advanced spec in ninety nine, which was a
Speaker 4: hell of a good year to be the most advanced
Speaker 4: dock and you don't have to go off the cliff
Speaker 4: in Puma Tech. You go off the cliff in Coca Cola.
Speaker 4: That's the ideal, and that's exactly what happened in nineteen
Speaker 4: twenty nine. People in that case actually Coca Cola. They
Speaker 4: gravitated to the Coca Colas and the radios and away
Speaker 4: from the junk, and the junk started to decline. That's
Speaker 4: an incredible signal, the greatest prime primal scream from the
Speaker 4: stock market ever. And nothing like that happens again. You
Speaker 4: have underperformance of high flyers, but you never have them
Speaker 4: go down in the decently rising market until drum roll
Speaker 4: nineteen seventy two. The top of the nifty to fifty,
Speaker 4: the SMP goes up seventeen, the average SMP stock goes
Speaker 4: down seventeen, so I can remember the numbers forever. And
Speaker 4: then we have the biggest bear market since the Great Depression.
Speaker 4: That was a truly miserable bear market seventy three seventy four,
Speaker 4: whether you had small cap, large cap, quality, junk, everything
Speaker 4: went down fifty percent, and then when adjusted for inflation
Speaker 4: closer to sixty five. An absolute monster. And nothing like
Speaker 4: it happens again until two thousand. In the year two thousand,
Speaker 4: you may remember, the growth stocks peaked horrific in February,
Speaker 4: the rest of the SMP did not. The rest of
Speaker 4: the SMP rose about fifteen percent, so you had a
Speaker 4: coequal high in October, but the growth stocks for down
Speaker 4: forty percent, having been as low as fifty percent by then,
Speaker 4: they rallied a little, and back in September you had
Speaker 4: the SMP as high as it was in March of
Speaker 4: two thousand. Just amazing deviation between the growth stocks who'd
Speaker 4: been making spectacular running in ninety eight, ninety nine and
Speaker 4: early two thousand and the rest of the market that
Speaker 4: continued up, and then you had very sharp break the
Speaker 4: end of two thousand, a steady break in two thousand
Speaker 4: and one, and then to rub it in a miserable
Speaker 4: minus twenty two percent in two thousand and two, and
Speaker 4: nothing like that happens again until twenty twenty one. In
Speaker 4: twenty twenty one, you may remember the mean stocks peeled
Speaker 4: off by the middle of the year. Kathy Wood and
Speaker 4: her portfolio were going down. By the end of the year,
Speaker 4: they were off thirty five forty percent from their peak.
Speaker 4: And yet during that same six months, the s and
Speaker 4: p powered ahead. It's really quite remarkable when they get
Speaker 4: the sign wrong. And unfortunately that I had an adventure
Speaker 4: with quantum Scape. Quantum Scape turned out to be a
Speaker 4: meme start without my knowing it, because I had a
Speaker 4: huge position personally. And the reason I had a huge
Speaker 4: position is that I was offered an opportunity to invest
Speaker 4: several years earlier on an all or nothing basis. I
Speaker 4: took this big position or I had nothing. So I
Speaker 4: took a deep breath, and it was much too big
Speaker 4: for our foundation, which we have for the protection of
Speaker 4: the environment, the Grantham family, and so I had to
Speaker 4: own it personally. So it was the only stock that
Speaker 4: I It was a very big chunk and it came
Speaker 4: as a spac at four times my investment, better than
Speaker 4: a kick in the pants ten dollars a share, up
Speaker 4: from two and a half, and within three months it
Speaker 4: was one hundred and thirty one and let me should
Speaker 4: talk about one hundred and thirty one at the end
Speaker 4: of twenty twenty. That was the very first start to
Speaker 4: peek out at over one hundred and thirty was bigger
Speaker 4: than General Motives, and it was a battery research lab.
Speaker 4: They were going to design with any luck a solid
Speaker 4: state battery, and they still may, but they still have
Speaker 4: not got a battery on the market. So this wasn't
Speaker 4: like SpaceX. This had no sales forget no profits, and
Speaker 4: were selling for more than general motives. Actually, I think
Speaker 4: that is more speculative SpaceX, which I think is a
Speaker 4: very very high hurdle.
Speaker 3: I'm glad you brought back twenty twenty one because that
Speaker 3: was a weird year, wild time in a way that
Speaker 3: really was See. I would argue the twenty twenty one
Speaker 3: was actually much more wild than right now because of
Speaker 3: the proliferation of quantum scapes, which was one of many
Speaker 3: stories that you could tell. You could go back to
Speaker 3: the Rivian valuation at its peak or numerous others escape
Speaker 3: it is much okay, okay, all right, all right, fine,
Speaker 3: but let's talk about AI for a second, because obviously
Speaker 3: we reached back towards memories of the dot com bubble
Speaker 3: or twenty twenty one. But I'm looking at a chart
Speaker 3: on my terminal right now of Nvidia revenue. So in
Speaker 3: twenty nineteen, in Vidia had revenue of eleven point seven billion,
Speaker 3: and in twenty twenty five it had revenue of one
Speaker 3: hundred and thirty billion, so the revenue has gone up therefore,
Speaker 3: I think by over ten x in six years. We
Speaker 3: talked about and everyone said, oh, market, the very high valuations.
Speaker 3: Can't we say that the investor in Video in twenty
Speaker 3: nineteen was getting the mother of all deep value investing,
Speaker 3: given what we now know in retrospect about what its
Speaker 3: earnings were about to do well.
Speaker 4: Obviously, if you're clad, Voyant was the sure sure a
Speaker 4: deep value opportunity. And Video obviously a brilliant company, and AI,
Speaker 4: by the way, is a spectacular important development. But and
Speaker 4: Video the biggest piece of luck I think I can
Speaker 4: think of in the last thirty years. You have all
Speaker 4: your money and chips made for playing games, and suddenly
Speaker 4: it turns out that that is absolutely the right design
Speaker 4: for AI, and you have such running start that it
Speaker 4: may take you tell me five years, ten years. It
Speaker 4: doesn't seem like the ultimate mode. It seems like the
Speaker 4: ultimate head start in a game where a head start
Speaker 4: is worth a ton of dough. It is worth a
Speaker 4: tent tuple in your sales, but it's only a head start.
Speaker 4: Other people Google gearing up to be competitors in the
Speaker 4: next decade of course, there will be plenty of competition,
Speaker 4: maybe even technologies that end run the current type of chip.
Speaker 4: These things happen, History is full of them.
Speaker 3: Can let me just push on that again. So I
Speaker 3: take your point about in video having this incredible mode
Speaker 3: from maybe arguably stumbled into the technology backwards because they
Speaker 3: were obviously in video games before. But like I'm looking at,
Speaker 3: say even a Microsoft twenty twenty annual revenue of one
Speaker 3: hundred and forty three billion twenty twenty five annual revenue
Speaker 3: of two hundred and eighty billion. So we see the
Speaker 3: biggest companies in the world doubling real business in the
Speaker 3: span of five years, which does not feel to me
Speaker 3: anything like what we were seeing. And I have fond
Speaker 3: memories of nineteen ninety nine myself. That's when I got
Speaker 3: personally interested in markets. These are gigantic businesses still putting
Speaker 3: up huge growth numbers that lap Wall Street forecast year
Speaker 3: after year.
Speaker 4: Yeah. And for the record, when Microsoft first appeared in
Speaker 4: a tradable portfolio, yeah, for GMO, it was in our
Speaker 4: value stream. We had a value stream and a momentum stream,
Speaker 4: and we only bought the most attractive ten percent, and
Speaker 4: we did that each month for twelve months, so we
Speaker 4: had twelve little portfolios, each one the best ten percent
Speaker 4: for each month of the year, and Microsoft entered the
Speaker 4: cheapest value decile and stayed there until July of ninety nine.
Speaker 4: And that's because our value model looked to add long
Speaker 4: term future earnings and dividends projected as best we could,
Speaker 4: and we did that through projecting return on equity, and
Speaker 4: we did that by looking at how return on equity
Speaker 4: regressed to the mean and which factors affected the rate.
Speaker 4: Certain factors slowed it down. Market domination, price setting that
Speaker 4: you could prove slowed it down, way way down, and
Speaker 4: Microsoft was the perfect example of this. It had very,
Speaker 4: very low volatility. It was clearly overwhelmingly the price setter,
Speaker 4: and consequently our model said it was worth nine times book,
Speaker 4: not seven times book, but it was selling it. So
Speaker 4: if you have a good value model, you can buy
Speaker 4: these things. You can see them on occasions coming along.
Speaker 4: And yes, it's done spectacularly well and has had then
Speaker 4: particularly a much better mode to me than Nvidia has today.
Speaker 4: But if you will allow me a minute here, if
Speaker 4: you look at the NAG seven, you look backwards in
Speaker 4: history and you can say with a pretty clear conscience.
Speaker 4: Each one dominates their seven different niches. They have near
Speaker 4: monopolies on a global basis. Even Tesla has a jump start,
Speaker 4: the biggest and the best for a long time in evs.
Speaker 4: And you have Amazon beginning to dominate retail, Google Research, etcetera, etcetera.
Speaker 4: Seven decent monopolies dominating the world Justice Department, et cetera.
Speaker 4: Perfectly sound asleep. No one is interested in pulling a
Speaker 4: Teddy Roosevelt. They're not going to jump in and slash
Speaker 4: and burn and divide eggs on into seven different pieces.
Speaker 4: They're letting these things grow and fix and set their
Speaker 4: pricing and make tons and tons of money. And then
Speaker 4: you look forward starting from today, does it look anything
Speaker 4: like that? Doesn't it look like seven companies deciding they're
Speaker 4: all in the same market AI that moving the most
Speaker 4: powerfully with the greatest investment is dominant. Are they not
Speaker 4: seen here beating their chests and saying, my two hundred
Speaker 4: billion in investment in a single year is bigger than
Speaker 4: you're one hundred and twenty seven yard boo? They know
Speaker 4: how much gets paid off to the first mover who
Speaker 4: grabs the market. They all want to be the first.
Speaker 4: There can only be one, as they say in the movie,
Speaker 4: and there's seven of them fighting it out, it could
Speaker 4: be a very messy, blood curdling game. I suggested that
Speaker 4: they have it outside the White House. What a comparison.
Speaker 4: Just imagine ten years from now looking back and saying
Speaker 4: you couldn't see the difference between seven easy monopolies and
Speaker 4: a dog fight of seven dishes, rich companies, huge cash flow,
Speaker 4: huge understanding of the virtues of being dominant, all deciding
Speaker 4: at the same time to fight out in one market.
Speaker 4: And you could say, yes, there was the cloud, what
Speaker 4: about that? And the cloud was a nice, well behaved oligopoly,
Speaker 4: Three of them genteellly deciding to compete in genteel ways,
Speaker 4: exactly the right thing to do if you find yourself
Speaker 4: in that position, and clearly not the approach that is
Speaker 4: being adopted this time. We have seen huge investment. You
Speaker 4: look back that idea heavy, capital light. You look Forward's
Speaker 4: hope they're idea heavy, but they are capital heavy this time.
Speaker 4: It's like a watershed in almost everything that matters between
Speaker 4: the past and the future, and nobody seems to be
Speaker 4: talking about it in that way. And I don't get it.
Speaker 2: Well, can I just ask related to this point, the
Speaker 2: dot com bubble has come up a number of times
Speaker 2: in this conversation. Do you actually have a preferred historical
Speaker 2: analogy for the situation that we're facing now, because we've
Speaker 2: been through technological revolutions associated with speculative manias before, ranging
Speaker 2: from I guess what I would say are pretty real
Speaker 2: ones like the railroad bubble and the Internet, to kind
Speaker 2: of crazier ones like we're all going to go deep
Speaker 2: sea diving. Yeah, totally and get rich that way. You
Speaker 2: are a car I'm a sir, of historical financial market bubbles,
Speaker 2: which one is most similar to the current period that
Speaker 2: we're in.
Speaker 4: Ah, So people tend to think a bubble, Oh, it
Speaker 4: has to be somehow a con job, and it's exactly
Speaker 4: the opposite. The great bubbles are the biggest ideas for decades.
Speaker 4: So the only one as big as AI is possibly
Speaker 4: the railroads. Of course, everybody could see that the railroads
Speaker 4: were going to change the world. You arrived at the
Speaker 4: railway station in a horse and buggy, for heaven's sake,
Speaker 4: and you went seven miles an hour, And then you
Speaker 4: got on a train traveling at sixty miles an hour
Speaker 4: and went a couple of thousand miles. I mean, it
Speaker 4: was utterly revolutionary. So what happened. Everybody could see that
Speaker 4: the railroads were going to change the world, which they did.
Speaker 4: Everybody wanted to have a piece of it, and they could.
Speaker 4: Everybody put their money in it, and you had the
Speaker 4: biggest bust on both sides of the Atlantic that you
Speaker 4: could imagine, and everybody lost their money in railroads and
Speaker 4: out of the ashes, the tracks were still there, the
Speaker 4: locomotives were still there, the demand was still there, and
Speaker 4: it changed the world. And then you fast forward to
Speaker 4: the internet. Powerful idea, clearly, by the way, accompanied by
Speaker 4: a lot of silly stuff as well, but underneath it
Speaker 4: a very powerful idea. So you had Amazon go up
Speaker 4: six or seven times in ninety nine, and when the
Speaker 4: market broke, it went down famously, infamously ninety two percent,
Speaker 4: check it ninety two percent, And then it rose from
Speaker 4: the ashes, just like the railroads, and inherited the retail
Speaker 4: market more or less. To have a great bubble, you
Speaker 4: have to have decent economic times. The better off, the
Speaker 4: better the bubble. You have to have easy money, The
Speaker 4: better and easier, et cetera, the better the bubble. And
Speaker 4: you have to have a fabulous idea, and you have
Speaker 4: to have it so obviously be important that everybody can
Speaker 4: see it. Now, they're very very rare events, aren't they.
Speaker 4: This one is as big as anything but the railroads.
Speaker 4: I am not even prepared to say it isn't bigger
Speaker 4: than the railroads. It may be, but they're the two
Speaker 4: super champs. Besides them, I think the Internet is a
Speaker 4: bit of a piker, but they're the two colossal ones.
Speaker 4: If ever, there was a massive idea that will change
Speaker 4: is already changing the world, it's AI. Does anyone not
Speaker 4: know that? I think everybody knows it. Does anyone want
Speaker 4: to put their money in it? I think SpaceX et
Speaker 4: cetera gives us a pretty good idea. Ninety percent of
Speaker 4: the value if you read the prospect prospectus is based
Speaker 4: on AI, even though that particular AI seems to be
Speaker 4: having its bottom cacked by two or three others as
Speaker 4: we sat. But wouldn't let facts get in the way
Speaker 4: of a really good story. And this is an absolute classic.
Speaker 4: It checks everything off one after another which haven't been
Speaker 4: checked off many times in history. So this is it.
Speaker 4: If you think this is not a bubble, you are
Speaker 4: going to be in for a bitter disappointment.
Speaker 3: In your book, you talk about how competitive you are
Speaker 3: and growing up and wanting to play all different types
Speaker 3: of games. How do you channel competitiveness in a productive
Speaker 3: manner career wise so that it doesn't hinder you, or
Speaker 3: it doesn't make you chase performance, or doesn't make you
Speaker 3: worry about one year's performance versus another competitors, like, how
Speaker 3: do you make the competitiveness instinct be a good thing?
Speaker 4: I think, try and bring it to bear on a
Speaker 4: few areas that matter to you, starting with obviously the
Speaker 4: most important, playing a decent game of doubles in tennis,
Speaker 4: and every point has to be played as if your
Speaker 4: life depends on it, and you pick partners and opposition
Speaker 4: who do the same, and you have a wonderfully good time,
Speaker 4: and then you look around for other things. And for
Speaker 4: me it was ideas. And I could have made a
Speaker 4: lot more money if I'd focused on profit maximizing, but
Speaker 4: for me, the idea was the dominant principle, and the
Speaker 4: idea of being competitive was everything hinges on trying to
Speaker 4: outthink the enemy. The easiest way for me, it always
Speaker 4: seemed was to be longer and wider and more comprehensive
Speaker 4: and stand further back than the other guy. And what
Speaker 4: you quickly realize when you do that, so no one
Speaker 4: else is even trying, So this is not a fair fight.
Speaker 4: Everybody is focused on the near term and if you
Speaker 4: want a profit, maximize that's not a bad idea. And
Speaker 4: very few people are attempting to be in the market
Speaker 4: and simultaneously asking questions that are several years out and
Speaker 4: even to some extent a decade or two. So it's
Speaker 4: been very easy for me to be both competitive and
Speaker 4: cheerful and often wrong.
Speaker 2: Since we're talking about career development now, I suppose is
Speaker 2: it important when you're a perma bear, or more accurately,
Speaker 2: when you're perceived to be a perma bear, to distinguish
Speaker 2: yourself in some way from other bears who are out there,
Speaker 2: Because again, at this particular moment in time, there are
Speaker 2: a number of high profile commentators who would say that
Speaker 2: AI is a bubble So how do you actually stand
Speaker 2: out from I guess the bubble calling crowd.
Speaker 4: Yeah, I have no idea. I have only made two
Speaker 4: unmitigated bullish calls. The market has a really hard time
Speaker 4: telling the difference between hey, this is overpriced this is
Speaker 4: going to make you less money over the next twenty
Speaker 4: years than it would do if it was half priced.
Speaker 4: They're just kind of mathematical realities. And because you say that,
Speaker 4: they oh, you said the market was going to collapse,
Speaker 4: you have been burished forever. Now when I want to
Speaker 4: be really bearished and recommend you get out of the market,
Speaker 4: I say so. And I've only done that twice. On
Speaker 4: July the fifteenth, two thousand and eight, I wrote a
Speaker 4: quarterly letter which basically which actually said abandonship, soave keeper
Speaker 4: the French equivalent, and actually quoted the nursery rhyme, don't
Speaker 4: be brave, run away, lift to fight another day. Do
Speaker 4: not take any risk you don't have to take. We
Speaker 4: all have restrictions on how much we can get out
Speaker 4: of the risk taking business. But do not take anything
Speaker 4: you don't have to. Okay, that's pretty clear. And the
Speaker 4: last thing that we had been bullish about was emerging markets,
Speaker 4: and I said, I've changed changed our mind. We think
Speaker 4: this is the end of the line. Sell any emerging
Speaker 4: that you can. And we did the biggest trade that
Speaker 4: we had ever done, getting rid of the last of
Speaker 4: our emerging I must say shortly before we published the letter.
Speaker 3: Well, ye, sorry, which year was the emergency? Oh? Okay,
Speaker 3: god yes?
Speaker 4: And may I say that following that in four months,
Speaker 4: emerging market half. I think it was the biggest sharpest
Speaker 4: decline in the history of any major indates from July
Speaker 4: fifteenth to November fifteenth, and actually slightly before that the
Speaker 4: whole indix halved. And the other bearish one was at
Speaker 4: the end of twenty twenty one, where the quarterly letter
Speaker 4: was called let the wild rumpus begin, right. That meant,
Speaker 4: now get your tail out a boid. The market, I'm
Speaker 4: happy to say, S and P went down like a
Speaker 4: rocket ship minus twenty five, growth stocks down thirty five,
Speaker 4: mag seven down forty and the bond market had the
Speaker 4: worst year in the history of the bond market. And then,
Speaker 4: as I also like to say, my nice spare market
Speaker 4: was rudely interrupted by JATGBT, and the economy that was
Speaker 4: doing its usual thing of gracefully moving into a mild
Speaker 4: recession because animal spirits were going down, was also changed
Speaker 4: by massive and increasing capex spending on AI which dragged
Speaker 4: kicking and screaming the animal spirits of the rest of
Speaker 4: the economy. They didn't change easily, by the way, the
Speaker 4: S and P the rest of it went down for
Speaker 4: another ten months, but they kept going so powerfully in
Speaker 4: the market, so powerfully in the Kampex business that they
Speaker 4: changed the game. That's only happened once in history. And
Speaker 4: I don't know how to predict things like that anymore
Speaker 4: than COVID and new things are a pain. There aren't
Speaker 4: happily many of them, but they're the two most interesting
Speaker 4: ones in my career. COVID was novel. How do you
Speaker 4: treat novelty if you're a historian, you don't. You have
Speaker 4: to work it out on other principles. And this AI
Speaker 4: interruption of what was a perfectly ordinary and I thought
Speaker 4: predictable their market because it flagged my great discrepancy between
Speaker 4: the market leaders going down as the blue chips continued up.
Speaker 4: How do you do that? I don't know.
Speaker 3: Yeah, this is really striking. You know, we recently we
Speaker 3: had toursed and Slock at one of our events talking
Speaker 3: about this sort of imperviousness of the AI trade to
Speaker 3: what traditionally we'd call macro. So what you described, You're like, Okay,
Speaker 3: here comes the expected, as you said, probably would have
Speaker 3: been a shallow recession, and now we see this investment,
Speaker 3: this capital expenditure. There's completely they could It does not
Speaker 3: seem like the companies care all about the fact that
Speaker 3: the Fed hasn't cut rates, has expected, et cetera. These
Speaker 3: classically macro indicators that we did recession, business cycle, et cetera.
Speaker 3: Had just seemed to be blown out of the water. Yeah,
Speaker 3: blown out of the water by the AI trade.
Speaker 4: Yeah. And I must say that overwhelming interest in interest
Speaker 4: rate and the interest rate predictions has left me totally
Speaker 4: cold for the last fifty years. I leave that to
Speaker 4: other people. I think it's in general wildly exaggerated. I've
Speaker 4: lived in a world where for fifty years, the increasing
Speaker 4: data GDP ratio of the US economy, the Japanese economy,
Speaker 4: and every other economy has been predicting imminent collapse, and
Speaker 4: the ratio has gotten higher and higher, and then is
Speaker 4: predicted double collapse, and it still keeps rising. The only
Speaker 4: function of interest rates is that it makes debt easier
Speaker 4: to acquire, and the function of easy acquire debt is
Speaker 4: that it helps the economy. One little problem. If you
Speaker 4: go back to Alan Greenspan, you find that before he
Speaker 4: gets there, there is a very very slow increase in
Speaker 4: debt to GDP ratio, just because the financial business is
Speaker 4: becoming more complicated. And then after him it rises at
Speaker 4: forty five degrees and it goes from a small fraction
Speaker 4: of GDP. If you throw in all debt, it triples
Speaker 4: and quadruples, and it does it over thirty years. You
Speaker 4: have biggest economy in the world thirty years to test.
Speaker 4: What happens quadrupling of the debt to GDP and the
Speaker 4: growth rate goes down. So how can debt be a
Speaker 4: real mover of growth rate when you've had that wonderful
Speaker 4: macro test seen from looking back over forty years, huge
Speaker 4: increase in debt, decrease in GDP growth rate, very strange.
Speaker 4: So I leave all that stuff way alone, if you
Speaker 4: will let me back up. I was saying too clear,
Speaker 4: get out of the market. Calls plenty of the market's overpriced.
Speaker 4: The market has been overpriced since two thousand. I admit it.
Speaker 4: It's been overpriced, and we have said so the whole time,
Speaker 4: because looking back at the twentieth century, the twenty first
Speaker 4: century has been overpriced. They used to sell at fifteen
Speaker 4: times earnings. We have been selling at twenty three times earnings.
Speaker 4: That is not a small fraction of an increase. It
Speaker 4: has been a different world the twenty first century, but
Speaker 4: based on history, it's been overpriced, and of course it
Speaker 4: still ist. But I have made two bull calls in
Speaker 4: my life. The only time for the first ten years
Speaker 4: we got quoted was in something called the Wall Street
Speaker 4: Letter long deceased. I think it was attached to the
Speaker 4: Wall Street Journal, and it was a weekly kind of
Speaker 4: gossip thing about the industry. And they're hidden in the
Speaker 4: tail end actually of that letter is my first opportunity
Speaker 4: to quote. And it's July eighty two, and the pe
Speaker 4: of the S and P is seven times, and I say,
Speaker 4: I think we're close to an unprecedented rally in both
Speaker 4: the stock and the bond market. And I've always been
Speaker 4: thrilled to give people copies of this this near letter.
Speaker 4: And then the market shoots up and we become more
Speaker 4: careful for a long long time, and then finally the
Speaker 4: market comes down in on nine and by miracle that
Speaker 4: only occurs once every two lifetimes, we published a letter,
Speaker 4: one pager. Only two of those were done in my
Speaker 4: career of thirty years letter writing. It's called reinvesting. When terrified,
Speaker 4: and I think is the best thing I wrote, mainly
Speaker 4: because it was short and it just said, you won't
Speaker 4: call the bottom of the market. Don't bother with that,
Speaker 4: don't even try it. Just concentrate on the fact that
Speaker 4: the market is cheaper than it's been for twenty two years.
Speaker 4: Even on our seven year forecast, you're dealing with twelve
Speaker 4: percent a year compounded returns in the S and P
Speaker 4: equivalent to a higher numbers in emerging and foreign equity.
Speaker 4: Get together a plan, take it to your committee. Any
Speaker 4: plan is better than no plan. You have got to
Speaker 4: start recycling your money back into the market. And the
Speaker 4: good news is, as far as I'm concerned, it only
Speaker 4: counts if you wrote it saying it is too peripheral.
Speaker 4: I guess washed away into the ether. But I wrote it,
Speaker 4: and we sent it to the Wall Street Journal, who
Speaker 4: didn't get back, and day by day, four days passed
Speaker 4: until my advisor on propaganda and I decided to hello
Speaker 4: with this. Let's post it ourselves, And because of that delay,
Speaker 4: we posted it the day the market hit It's slow
Speaker 4: six hundred and sixty six on the S and P
Speaker 4: five hundred, less than one tenth of where it is today.
Speaker 4: My god, this has been a bullmarker.
Speaker 2: Oh thank you for reminding two podcasters that it only
Speaker 2: counts it. No, it's good, should be fair. We do
Speaker 2: write some stuff, so there is that.
Speaker 4: Can I just talking I sympathize, but.
Speaker 2: Can I just go back to you were talking about
Speaker 2: how investors seem to have, to some extent become more
Speaker 2: comfortable with higher price to earnings ratios versus say for
Speaker 2: much of the last century when it comes to value investing,
Speaker 2: we all know that value has been losing recently to momentum.
Speaker 2: Does it feel at all to you that something has
Speaker 2: structurally broken in the sense that investors are much more
Speaker 2: focused on price nowadays, they're much more focused on short
Speaker 2: term gains rather than longer returns. And at the same time,
Speaker 2: you've had a lot of retail money flow into the
Speaker 2: market courtesy of new platforms Robin Hood, and whenever I
Speaker 2: think about Robinhood, I think about clicking buttons, and remember
Speaker 2: they used to have the animation where it would like
Speaker 2: celebrate if you're chased to trade. That's a lot of
Speaker 2: new money coming into the market that potentially thinks differently
Speaker 2: to the way investors for much of the nineteen hundreds.
Speaker 4: Actually thought, I think in every bubble it gets very
Speaker 4: much like this. And you said, much more focused on price,
Speaker 4: not in the sense that they're looking for bargains, much
Speaker 4: more focused on momentum.
Speaker 2: Right, That's what I mean.
Speaker 4: Yes, rice rises rapidly and they like it, and the
Speaker 4: value is irrelevant. You know, this is what happened in
Speaker 4: the South Sea bubble, and this is what happened in Tulips,
Speaker 4: and what happened in the railroads, and that's what happens
Speaker 4: in the nifty to fifty and the tech bubble. It's
Speaker 4: what always happens. This is not remarkable, by the way,
Speaker 4: this isn't even spectacularly overpriced compared to Japan. Japan is
Speaker 4: the mother and father of all bubbles. In nineteen eighty nine,
Speaker 4: it's sold for sixty five times earnings. And if that
Speaker 4: doesn't make a value manager wake up in the middle
Speaker 4: of the night screaming once in a while, nothing will.
Speaker 4: Because we went up finally to thirty five times earnings
Speaker 4: in the tech bubble, never having been over twenty one.
Speaker 4: That's pretty spectacular jump. But Japan had never sold over
Speaker 4: twenty five times earnings, and when up to sixty five
Speaker 4: and I'm happy to say we survived that quite well
Speaker 4: through good luck. And the good luck was that international
Speaker 4: investing had only just come in and we were selling
Speaker 4: people their first international portfolios that they had ever had,
Speaker 4: including Havid Yell. And that is quite remarkable, by the way,
Speaker 4: how slow the US was. Scotland and so on had
Speaker 4: been doing this foreign investing for a long long time,
Speaker 4: but not It was not fashionable in the US. Because
Speaker 4: of that, no one was comparing international with an international index.
Speaker 4: It was only two or three years or two or
Speaker 4: three months that they had had in international portfolio. They
Speaker 4: were comparing it with the S and P because all
Speaker 4: their competitors were still in the S and P. And
Speaker 4: the novelty there was betting International against the S and P.
Speaker 4: It was winning. The international was so far ahead that
Speaker 4: we could underperform because of Japan, and we underperformed by
Speaker 4: ten points a year for three years, and we lost
Speaker 4: no business at all, and we had a decent market share,
Speaker 4: and then of course Japan broke. The lesson from Japan
Speaker 4: is pretty clear. The biggest bubble in the history of
Speaker 4: the stock market of an important stock market, second only
Speaker 4: to the land bubble in Japan of coincident more or
Speaker 4: less coincident timing? And what was the price you paid
Speaker 4: for having it go from twenty five to thirty to
Speaker 4: forty to fifty to sixty sixty five? And the Solomon
Speaker 4: Brothers team went around at sixty to sixty five explaining
Speaker 4: that the bond raid in Japan was so low it
Speaker 4: should be one hundred times. I am not kidding you.
Speaker 4: I'm not getting it. What is the price you paid
Speaker 4: the last twenty years? Really not ten years? Thirty five
Speaker 4: years have to go by before you get back to
Speaker 4: a high. And I don't think even that is adjusted
Speaker 4: for the modest inflation that they had. I mean, you
Speaker 4: want to have a bigger bubble and a better bubble,
Speaker 4: go ahead, just be advised that the correlation with a
Speaker 4: longer and worse decline is pretty well wong.
Speaker 3: You know, we could talk for another hour just on
Speaker 3: international all these things, but I have one last question.
Speaker 3: You're known for having a lot of personal sort of
Speaker 3: like other interests besides investing in particularly related to the environment,
Speaker 3: climate change you talk about You wrote a letter I
Speaker 3: believe last year about plastics and other forms of like
Speaker 3: dangerous to the environment. Do you have any optimism at
Speaker 3: all that AI in particular will be of service to
Speaker 3: humanity in tackling some of these concerns that you have
Speaker 3: about sort of ecology and so forth.
Speaker 4: God, I wish I knew. The spectacular thing about AI
Speaker 4: is the degree of difference of opinion. You know, often
Speaker 4: you find that the rank and file have one view
Speaker 4: and the hot shots who know the most have a
Speaker 4: different view. But this is not like that. This is
Speaker 4: you have no Belt prize winners who disagree violently. You
Speaker 4: have real experts who studied it for thirty years who
Speaker 4: disagree violently. You have the rank and file with as
Speaker 4: much experience as they could have, who disagree violently. There
Speaker 4: is simply no agreement on the future of AI. It
Speaker 4: will either make us all incredibly rich. We'll sit on
Speaker 4: the beach and be served by robots, or the robots
Speaker 4: will go one step further and get rid of us
Speaker 4: inadvertently or deliberately. This is not bad. This is the
Speaker 4: ultimate complexity that one has ever heard, and you cannot
Speaker 4: possibly know what is going to happen. You can only
Speaker 4: plan for a while range of outcomes. But we know
Speaker 4: for a fact that it chews up enormous amounts of electricity.
Speaker 4: We know for a fact that that is associated with
Speaker 4: an awful lot of carbon dioxide production and real pressure
Speaker 4: on the environment, So we start knowing that it will
Speaker 4: be tough. And by the way, you make robots, every
Speaker 4: twenty minutes, these humanoid robots have to go off, take
Speaker 4: a coffee break and plug themselves in. They will run
Speaker 4: through energy like we have no idea. We can hardly
Speaker 4: support the energy demands of current AI confined to your laptops.
Speaker 4: The energy demand of having machines running around will dwarf
Speaker 4: that beyond recognition. We will have to have multiples of
Speaker 4: the global energy production that we have now. We are
Speaker 4: simply living beyond our means. The real experts who studied
Speaker 4: for thirty years say we need one point seven planets
Speaker 4: to maintain the current level of income in a sustainable way,
Speaker 4: and if we want to live like Americans, we need
Speaker 4: five planets. And AI in the best of all possible
Speaker 4: worlds might help address this, But it's hard to imagine
Speaker 4: AI becoming self aware and being better at everything than
Speaker 4: we are. It's hard to think of an example, as
Speaker 4: Jeffrey Hinton would say, where a smarter civilization, a smarter
Speaker 4: species has been dominated by a comparatively stupid species, we
Speaker 4: somehow implicitly rely on their benevolence. We are not spending
Speaker 4: that much time and money trying to design a benevolent AI.
Speaker 4: We are spending money trying to design a more powerful
Speaker 4: competitive devil. Take the hindmost type of AI. It's inherited
Speaker 4: our style. You know, humans have been the survival of
Speaker 4: the fittest. Grab what you can, why you can, don't
Speaker 4: worry too much about three or four years from now.
Speaker 4: I find that exactly the same in corporate America and capitalism.
Speaker 4: By the way, we don't act as if we value
Speaker 4: our grandchildren. We play soccer with them at the weekend,
Speaker 4: as I'd like to say, and we help pay the
Speaker 4: school fees. But then we go back to work for
Speaker 4: a chemical company or fossil fuel company and act as
Speaker 4: if we mean to kill them more. It's a strange nature,
Speaker 4: except it's the same as every other species on the planet.
Speaker 4: Grab what you can live for today, and here we
Speaker 4: are doing the same. Something we all recognize is a
Speaker 4: bigger danger than anything we've ever met before, living with
Speaker 4: a with another intelligence that is going to be inevitably
Speaker 4: much more than we are. And we are left worrying
Speaker 4: about pees when the survival of our species is at stake,
Speaker 4: When are strangely, our climate is going to hell, not
Speaker 4: as we used to think in twenty thirty, forty years,
Speaker 4: but now our baby production is going to hell, not
Speaker 4: as we used to think in fifty years or one
Speaker 4: hundred years, but now China is producing futility or eate
Speaker 4: of one A baby production that every thirty years has
Speaker 4: that in ninety years is an eighth and career is
Speaker 4: a third of its baby production each thirty years, a
Speaker 4: ninth in sixty years, a twenty seventh, i e. They're
Speaker 4: out of business in a single lifetime unless it changes,
Speaker 4: and it has been changing, but it's been changing steadily
Speaker 4: for the worst. Sixty five percent of all countries are
Speaker 4: below replacement, and quite a few, like China, are way
Speaker 4: way down towards one, and nobody cares. We are not
Speaker 4: programmed to worry about long term slow burning problems, and
Speaker 4: they're all coming to bear together, and they're compounded by
Speaker 4: our ignorance or lack of concern about the risks of AI.
Speaker 4: This was going to be a very exciting.
Speaker 2: Time exciting slash terrifying.
Speaker 3: Also, if we need five planets. I think you just
Speaker 3: made the ball case for space ax.
Speaker 2: I was just gonna make the same joke. Oh my god,
Speaker 2: I shouldn't have let you. I shouldn't have let you
Speaker 2: go first.
Speaker 4: There's another way to resolve that, though, and that is
Speaker 4: to have a billion people and not eight or ten
Speaker 4: or twelve. And the interesting thing is, if you asked
Speaker 4: a society to please have fewer children when they wanted more,
Speaker 4: you wouldn't have a prayer unless you used force. But
Speaker 4: we are going to have a dramatic, sustained drop in
Speaker 4: our population by sheer luck. We are the first generation
Speaker 4: in history who are deciding to have for perfectly good reasons,
Speaker 4: one hundred good reasons, we've decided to have fewer children.
Speaker 4: And if we keep doing this, we go out of business.
Speaker 4: It's quite simple. If you don't have two point one healthy,
Speaker 4: well educated children, you're on your way out. And almost
Speaker 4: nobody does. In the developed world, and even in Sub
Speaker 4: Saharan Africa, baby production is falling like a stone. It's
Speaker 4: just falling from a very high level, falling from seven
Speaker 4: babies per mother to four. They have lost more babies
Speaker 4: over the last fifty years than Europe has. It's just
Speaker 4: that they've lost them from a much higher level.
Speaker 2: All Right, we're going to have to leave it there,
Speaker 2: but Jeremy Grantham, thank you so much for coming on
Speaker 2: off Ards.
Speaker 4: Well, thank you for allowing me at least two minutes
Speaker 4: to talk about serious.
Speaker 2: Of course, something other than pe ratios.
Speaker 3: Yeah, anytime, and you're always welcome back. Thank you so
Speaker 3: much for coming on the podcast.
Speaker 4: Thank you, Joe.
Speaker 2: I'd love talking about historical bubble.
Speaker 4: Yeah, me too.
Speaker 2: And I guess I should like shout out some of
Speaker 2: our really old episodes at this point on very esoteric
Speaker 2: bubbles like the Florida l the Catfish bubble. I did
Speaker 2: think the point about the change in the mag seven stocks, Yeah,
Speaker 2: this sort of watershed moment, this idea of a cage
Speaker 2: fight on the White House lawn. And I guess a
Speaker 2: change in corporate strategy where everyone is really tackling the
Speaker 2: same area of business. Yeah, that was interesting.
Speaker 3: No, it's super interesting. Like ten years ago, you could
Speaker 3: draw a very clear line between what Google's business was
Speaker 3: Meta's business, Right, you can't do that the same degree
Speaker 3: when both of them Meta they're not right at the edge,
Speaker 3: but they're trying to they want to be in the
Speaker 3: game as like a model maker. They're also spending both
Speaker 3: spending enormous amounts of money on kepitle expenditures and so
Speaker 3: where like they really are like no longer the sort
Speaker 3: of dominance of their verticals. But I have to say,
Speaker 3: like his conversation there at the end, and he's like, well,
Speaker 3: will the robots be our butler's on the beach or
Speaker 3: will they accidentally kill us? Or will they purposely kill us?
Speaker 3: Or will humanity extinct ourselves because we're stop having babies?
Speaker 3: Like yes, it sort of does make you like, why
Speaker 3: are we wasting time talking about PE ratios? Like when
Speaker 3: these are like the big questions that were like right
Speaker 3: up against yeah, like why are we talking about PE ratios?
Speaker 4: Ever?
Speaker 2: How do I prep my portfolio for? You know, it's
Speaker 2: very important?
Speaker 3: It was like the is Kevin worsh gonna cut at
Speaker 3: his first interest rate? Like that will not very likely
Speaker 3: be a particularly important question or moment ten years from now,
Speaker 3: Like that's probably not what's anything will hinge on that
Speaker 3: in the grand scheme of fing That's.
Speaker 2: True, But again this sort of goes back to the
Speaker 2: big tech argument. But if you couch everything in existential terms,
Speaker 2: then you can justify anything, right, which is what we're
Speaker 2: seeing right now in big tech. I realize I just
Speaker 2: naturally went from talking about the extinction of humanity back
Speaker 2: to big tech valuations. So yeah, I apologize for that.
Speaker 3: You know, it's interesting. You know, we did that episode
Speaker 3: about the history of rope recently, and you know, in
Speaker 3: that book, and he made the point on the podcast
Speaker 3: that you know, we went for about a million years
Speaker 3: maybe not I don't know if it's humans, but maybe
Speaker 3: right before humans. Well there was literally one invention and
Speaker 3: that was the hand axe. And then you think about
Speaker 3: like in the last few years alone between CHGBT and
Speaker 3: GLP ones and evs, et cetera. And Jeremy is making
Speaker 3: that point like history was a little bit boring, you know,
Speaker 3: the nineteen fifties like oh co copen new factory. That
Speaker 3: was news and what that means is literally and other
Speaker 3: people have said this like time is speeding up, like
Speaker 3: there are just more events per day happening.
Speaker 2: Hired Joe.
Speaker 1: I'm tired.
Speaker 3: I'm tired. But that it's good for the news business.
Speaker 3: It's not so good for our producers.
Speaker 4: All right.
Speaker 2: On that note, shall we leave it there, Let's leave
Speaker 2: it there. All right, this has been another episode of
Speaker 2: the Authoughts podcast. I'm Tracy Alloway. You can follow me
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