WEBVTT - Henry Blodget on AI, Dot-Coms, and What's Changed In 25 Years 0:00:02.800 --> 0:00:16.720 Bloomberg Audio Studios, Podcasts, Radio News. 0:00:18.000 --> 0:00:22.040 Hello and welcome to another episode of the Odd Lots Podcast. 0:00:22.120 --> 0:00:24.480 I'm joll Wisenthal, and I'm Tracy all the way. 0:00:24.720 --> 0:00:28.400 Tracy, you know, I can never get enough talking about 0:00:28.560 --> 0:00:30.560 late nineties dot com. 0:00:31.120 --> 0:00:34.280 I know you're just gifting episodes to yourself at this point, 0:00:34.320 --> 0:00:35.599 but that's fine. I'm into it. 0:00:35.680 --> 0:00:38.040 That's always been the case for all the years we've 0:00:38.080 --> 0:00:41.280 done this podcast. I've made that comment here and there, 0:00:41.600 --> 0:00:45.120 but you know, recently it has a particular salience because 0:00:45.120 --> 0:00:48.720 people are trying to understand AI. We had that conversation 0:00:48.880 --> 0:00:52.319 down in DC several weeks ago with Blair Levin talk 0:00:52.360 --> 0:00:56.480 about some of the similarities and dissimilarities between AI and telecoms. 0:00:56.760 --> 0:00:59.320 So at least we have an excuse for these conversations. 0:00:59.400 --> 0:01:01.720 There is definitely a newspeg I'm looking at a chart 0:01:01.800 --> 0:01:04.800 of super Micro right now. They just put out results 0:01:04.840 --> 0:01:07.040 that I guess we're disappointing because the shares are down 0:01:07.120 --> 0:01:10.679 about twenty percent. We're recording this on April thirtieth at 0:01:10.800 --> 0:01:14.080 ten to oh four am. And Joe, can I just 0:01:14.120 --> 0:01:17.240 say we can labor this intro as much as you 0:01:17.319 --> 0:01:20.800 want about like similarities with the early two thousands tech bubble. 0:01:21.240 --> 0:01:24.080 But I'm just excited to speak to your old boss. 0:01:24.200 --> 0:01:26.319 That's all I want to get out of this conversation. 0:01:26.560 --> 0:01:27.560 Just Joe stories. 0:01:27.800 --> 0:01:31.360 Okay, that's fine. So this is an episode that I've 0:01:31.400 --> 0:01:35.400 wanted to make happen for a very very long time, 0:01:35.640 --> 0:01:38.600 and the timing is suddenly working out. I don't even 0:01:38.640 --> 0:01:40.440 know what we're really going to talk about, but we'll 0:01:40.480 --> 0:01:43.720 have a good conversation. Yes, we are speaking to my 0:01:43.880 --> 0:01:49.200 old boss. So a couple of major caveats or disclaimers, 0:01:49.360 --> 0:01:54.240 et cetera. I owe this guest a huge chunk for 0:01:54.440 --> 0:01:58.320 my own career and the success and the good fortune 0:01:58.320 --> 0:02:01.480 that I've had in my career. We're going to be speaking, 0:02:01.560 --> 0:02:04.840 of course, to Henry Blodgett. He's the editor of a 0:02:04.840 --> 0:02:08.280 new publication called Regenerator. It's gonna be focused on innovation 0:02:08.440 --> 0:02:10.639 and business and news and tech and stuff like that. 0:02:11.040 --> 0:02:13.440 Of course, the connection to me is that he is 0:02:13.480 --> 0:02:16.800 the founder of Insider. When I joined, I think it 0:02:16.840 --> 0:02:21.000 was called Silicon Alley Insider, and then Business Insider, and 0:02:21.000 --> 0:02:24.280 then Insider. I'm not exactly sure what the final iteration 0:02:24.440 --> 0:02:27.400 of the name was. And of course Prior to that, 0:02:27.680 --> 0:02:30.359 several years earlier, he had been a tech analyst at 0:02:30.440 --> 0:02:33.320 Merrill Lynch, one most famous analysts of the sort of 0:02:33.680 --> 0:02:37.240 tech sector. And of course have to acknowledge the second 0:02:37.360 --> 0:02:41.000 caveat or disclaimer here, which is he was famously or 0:02:41.040 --> 0:02:44.760 infamously prevented afterwards from working on Wall Street. Have to 0:02:45.480 --> 0:02:48.320 mention that maybe it'll come up. But with all of 0:02:48.360 --> 0:02:52.040 this throat clearing out of the way, Henry thrilled to 0:02:52.120 --> 0:02:55.040 have you on the podcast. Finally, this is a little weird. 0:02:55.040 --> 0:02:57.320 I'm actually a little nervous, if I'm being totally honest, 0:02:57.560 --> 0:02:59.880 I'm actually I don't usually get anxious ever in any 0:03:00.160 --> 0:03:03.160 setting anymore. I'm a little anxious talking to my old boss. 0:03:03.200 --> 0:03:05.000 Well, it is great to be here. It's a privilege. 0:03:05.000 --> 0:03:06.639 You guys do an amazing job. And I would say 0:03:06.639 --> 0:03:08.239 the student has become the master. 0:03:09.280 --> 0:03:11.720 No, but for real, thank you so much for coming 0:03:11.720 --> 0:03:14.359 on odd lot. It's really excited. I'm trying to think. 0:03:14.280 --> 0:03:15.320 Oh, this is very sweet. 0:03:15.400 --> 0:03:15.519 I know. 0:03:15.680 --> 0:03:18.120 No, I'm like actually a little bit like a verklemped. 0:03:18.320 --> 0:03:20.400 I'll ask a question, yeah, Tracy, the. 0:03:20.320 --> 0:03:22.120 First question, want to collect myself. 0:03:22.280 --> 0:03:23.320 How did you find Joe? 0:03:23.480 --> 0:03:23.880 Oh? 0:03:24.240 --> 0:03:28.160 I wonder if he remembers I was aware of Joe 0:03:28.560 --> 0:03:32.320 at another publication. I can't remember what it was, and 0:03:32.480 --> 0:03:36.040 I can't remember whether I hired Joe or Julie Hansen 0:03:36.120 --> 0:03:38.800 hired Joe or somebody else. But there he was, and 0:03:38.840 --> 0:03:42.440 we were in an environment where I was surrounded by 0:03:42.720 --> 0:03:49.320 a newsroom full of very eager, excited folks. And again 0:03:49.560 --> 0:03:53.520 and again and again the one who differentiated himself by 0:03:53.560 --> 0:03:58.880 his incredible fascination with and mastery of all things. And 0:03:59.520 --> 0:04:02.920 it's a big We were to write with an internet metabolism, 0:04:03.160 --> 0:04:08.120 which is somewhere between talk radio and magazines, whereas a 0:04:08.120 --> 0:04:10.160 lot of other folks wanted to come in and basically 0:04:10.160 --> 0:04:13.280 recreate the New Yorker. And so we spotted your talent 0:04:13.600 --> 0:04:15.920 very fast, and then your career took off like a 0:04:16.000 --> 0:04:17.640 rocket ship, and we were lucky to have you as 0:04:17.680 --> 0:04:18.279 long as we did. 0:04:18.680 --> 0:04:21.880 I like the idea of people just not finding Joe, 0:04:21.880 --> 0:04:24.480 but just being aware of Joe. It's sort of like 0:04:24.480 --> 0:04:27.400 like the Mister Bean intro, where you just fall out 0:04:27.400 --> 0:04:30.800 of the sky. Joe's just there and everyone kind of 0:04:30.880 --> 0:04:31.760 became aware of it. 0:04:31.960 --> 0:04:35.000 So there's actually a very elegant connection to all of this, 0:04:35.160 --> 0:04:38.960 which was the first time we met was during you know, 0:04:39.000 --> 0:04:41.640 it's like probably Tech Week in New York, and we 0:04:41.680 --> 0:04:45.440 met at a party at Gracie Mansion when Michael Bloomberg 0:04:45.520 --> 0:04:48.039 was the mayor and now we're here at Bloomberg and 0:04:48.120 --> 0:04:50.520 so we met. I was at Paid Content. I was 0:04:50.560 --> 0:04:54.640 covering earnings. You guys at Silicon Alley were covering earnings 0:04:54.680 --> 0:04:57.479 and so forth, and we chatted, and then several months 0:04:57.560 --> 0:05:01.080 later I joined all right, enough about all the personal stuff. 0:05:01.640 --> 0:05:03.919 No, I'm gonna have more questions, but go on. 0:05:04.640 --> 0:05:07.680 You know, I love talking about the late nineties, and 0:05:08.400 --> 0:05:11.120 we'll get small picture, but big picture when you look 0:05:11.160 --> 0:05:15.279 at this incredible enthusiasm for AI and it sort of 0:05:15.279 --> 0:05:18.200 cooled off obviously in the market over the last several months, 0:05:18.400 --> 0:05:21.640 but from a business perspective, it's tons and tons of 0:05:21.680 --> 0:05:25.400 AI interest. You know, what reminds you of the late nineties, 0:05:25.600 --> 0:05:28.320 whether it's telecom or just dot com, and what feels 0:05:28.320 --> 0:05:29.160 dissimilar to you. 0:05:29.560 --> 0:05:33.559 Well, stepping back, if you look at AI as a sector, yeah, 0:05:33.560 --> 0:05:36.880 that is very reminiscent of what happened in the late nineties, 0:05:36.920 --> 0:05:40.039 where in the mid nineties the Internet came along, everybody 0:05:40.080 --> 0:05:42.080 knew it was going to be huge. Yeah, there was 0:05:42.120 --> 0:05:46.480 suddenly a huge scrum of investment capital attracted to it. 0:05:46.560 --> 0:05:49.600 We had this experimentation for five years where a lot 0:05:49.640 --> 0:05:52.000 of people were making money hand over fist. Then we 0:05:52.040 --> 0:05:56.000 went through a devastating crash, which is normally the pattern. Here. 0:05:56.600 --> 0:05:59.000 The same thing is happening within the AI sector. But 0:05:59.040 --> 0:06:01.800 I should step back and say, just to check, I 0:06:01.839 --> 0:06:06.720 looked at the broader tech sector and we are categorically 0:06:06.880 --> 0:06:09.760 not in a tech bubble right now. You look at 0:06:09.800 --> 0:06:12.200 the big Magnificent seven, whatever you want to call them, 0:06:12.440 --> 0:06:18.200 they are trading at high but arguably reasonable earnings multiple. 0:06:18.240 --> 0:06:20.200 And that was the case say six months ago, two 0:06:20.279 --> 0:06:21.080 before we had. 0:06:21.000 --> 0:06:24.599 Some higher multiples, but still thirty times earnings or thirty 0:06:24.600 --> 0:06:27.920 five times earnings for the video, which is the big 0:06:28.040 --> 0:06:31.000 AI stock or the most direct way to play it. 0:06:31.040 --> 0:06:33.240 But yes, if you look in the private markets, and 0:06:33.279 --> 0:06:34.840 this is one thing that's very different is all of 0:06:34.880 --> 0:06:37.080 this is happening in a private right now, So we 0:06:37.120 --> 0:06:39.040 don't have a very good view of the financials of 0:06:39.080 --> 0:06:39.760 these companies. 0:06:39.760 --> 0:06:41.640 But all you need is like a PhD in a 0:06:41.680 --> 0:06:44.440 white paper, you're getting like half a billion dollar valuations 0:06:44.440 --> 0:06:45.000 for these starts. 0:06:45.080 --> 0:06:48.000 That's right, Yes, it's extraordinary. And I think one thing 0:06:48.160 --> 0:06:50.599 to look at to sort of check the sanity of 0:06:50.640 --> 0:06:53.200 it is, let's look at the biggest one, open Ai. Ok, 0:06:53.440 --> 0:06:55.960 they just did a huge round where they raised forty 0:06:56.080 --> 0:07:01.520 billion dollars at a three hundred billion dollar value. Six 0:07:01.560 --> 0:07:06.159 months to twelve months earlier, investors were being declared absolutely 0:07:06.320 --> 0:07:10.080 insane for investing at one hundred billion and one hundred 0:07:10.120 --> 0:07:12.360 and fifty and now here we are at three hundred 0:07:12.520 --> 0:07:16.640 and So what does that mean? Is it clearly insanity? Well, 0:07:16.920 --> 0:07:20.080 if you look at open AI's fundamental business based on 0:07:20.240 --> 0:07:23.880 what we know, which is again very secondhand and so forth, 0:07:24.400 --> 0:07:28.080 they are doing something like twelve billion dollars of revenue 0:07:28.080 --> 0:07:32.560 this year. Now, stepping back, that is an incredible number 0:07:32.680 --> 0:07:35.280 for a company that is five years old. This company 0:07:35.400 --> 0:07:37.800 is growing a faster rate than pretty much any company 0:07:37.800 --> 0:07:39.920 in history. And if you look at one of the 0:07:40.480 --> 0:07:43.720 financing models from a year ago at one hundred and 0:07:43.760 --> 0:07:48.240 fifty billion dollar valuation, apparently the projection was that they 0:07:48.240 --> 0:07:50.800 would do one hundred billion dollars of revenue in twenty 0:07:50.840 --> 0:07:54.160 twenty nine. If that is the case, and I would 0:07:54.200 --> 0:07:57.200 assume that that number is probably higher now given that 0:07:57.200 --> 0:08:01.200 they've jacked the valuation up, then we're looking at three 0:08:01.280 --> 0:08:05.760 times revenue twenty nine erska. A lot has to go right. 0:08:06.240 --> 0:08:09.760 But if you believe that open ai is going to 0:08:09.920 --> 0:08:13.440 win this next wave in the same way that Google 0:08:13.640 --> 0:08:17.920 or Amazon ultimately won the Internet wave, three times revenue 0:08:17.920 --> 0:08:20.600 for that, even given that they're burning five billion dollars 0:08:20.640 --> 0:08:24.120 a year, you know, you can see how professional investors 0:08:24.200 --> 0:08:27.200 who really actually do know the numbers are getting there. 0:08:27.600 --> 0:08:29.880 So I would just say if you look at that, 0:08:29.880 --> 0:08:32.480 that is probably the justification. And then the other thing 0:08:32.480 --> 0:08:35.040 that people forget, or at least I don't hear when 0:08:35.040 --> 0:08:38.760 I hear this disgust, is that most professional investors are 0:08:38.760 --> 0:08:42.880 investing in preferred stock. That's very different than public markets 0:08:42.880 --> 0:08:46.560 where we're buying common because you have downside protection. Basically, 0:08:46.559 --> 0:08:49.080 for soft Bank and the others who just invested in 0:08:49.120 --> 0:08:53.320 open Ai at three hundred billion, to lose money, open 0:08:54.080 --> 0:08:57.360 has to be liquidated at less than forty billion, Otherwise 0:08:57.360 --> 0:08:59.120 they get all their money back off the top, and 0:08:59.160 --> 0:09:02.000 they may even have provisions in the deal that give 0:09:02.080 --> 0:09:05.000 them a ratchet on top of that that give them 0:09:05.040 --> 0:09:08.280 a return. So it's very hard to really know what's 0:09:08.320 --> 0:09:11.000 going on. But that's that's the thing. So stepping back again, 0:09:11.120 --> 0:09:14.000 you look at that and you say, whoa based on 0:09:14.040 --> 0:09:17.480 today's numbers, Yeah, that is a fantastical valuation, but this 0:09:17.600 --> 0:09:20.720 is probably what investors are looking at now. Another point 0:09:21.080 --> 0:09:23.840 that brad Gersner and others have made about this is 0:09:24.080 --> 0:09:26.280 if you look back in the nineteen nineties, what happened 0:09:26.280 --> 0:09:30.240 with the internet companies. We had the premier companies like 0:09:30.320 --> 0:09:33.839 Amazon and Yahoo had these phenomenal valuations, and then there 0:09:33.840 --> 0:09:37.600 were all of the secondary companies that looked similar, did 0:09:37.640 --> 0:09:39.800 the same thing. We're in the same market, and a 0:09:39.840 --> 0:09:42.920 lot of investors who missed the big ones came roaring 0:09:42.920 --> 0:09:46.840 into I gotta get into Licosts or Excite or info 0:09:47.000 --> 0:09:51.640 seek or CD now they're cheaper than Amazon. I will 0:09:51.720 --> 0:09:54.959 just say that pretty much all of those companies went 0:09:54.960 --> 0:10:00.160 to zero. So the idea now that you can escape 0:10:00.320 --> 0:10:05.439 the incredibly high open AI valuation by investing in Anthropic 0:10:06.080 --> 0:10:11.200 or groc or any of the secondary ones. Maybe that works. 0:10:11.280 --> 0:10:15.000 Maybe there's room for dozens of companies, but if past 0:10:15.080 --> 0:10:17.920 his prologue here, there's gonna be one winner, which and us. 0:10:17.960 --> 0:10:20.640 The last thing I'll say is by the way, it 0:10:20.720 --> 0:10:22.760 might not be open AI because if you look at 0:10:22.800 --> 0:10:27.640 the big winners of the nineteen nineties, Yahoo would and 0:10:27.640 --> 0:10:32.320 they got creamed by Google, which came in during the crash. 0:10:32.640 --> 0:10:36.160 Amazon almost went bankrupt. You did not have to buy 0:10:36.160 --> 0:10:38.880 it in the late nineteen nineties, although I did, and 0:10:38.920 --> 0:10:43.040 then we wrote it down ninety something percent. It almost 0:10:43.080 --> 0:10:45.640 went bankrupt, and then finally seven years later it went 0:10:45.640 --> 0:10:48.080 to the moon. But these things play out. I do 0:10:48.160 --> 0:10:50.960 think we'll have the same sort of pattern in this 0:10:51.040 --> 0:10:53.080 sector that at some point will hit a peak everything 0:10:53.080 --> 0:10:55.720 oh crater. Everyone will pile on and say, oh see 0:10:55.720 --> 0:10:57.880 how stupid every one buddy was, and then a few 0:10:57.880 --> 0:11:00.880 companies will go on and make all of the money 0:11:00.920 --> 0:11:03.120 that was lost worth it for the folks who were 0:11:03.120 --> 0:11:03.640 in the winners. 0:11:03.800 --> 0:11:07.320 I'll just say two things. Having been worked at actually 0:11:07.320 --> 0:11:10.440 two venture backed startups paid content which did sell for 0:11:10.440 --> 0:11:13.319 a little bit to The Guardian and also Insider. I'm 0:11:13.400 --> 0:11:16.840 very intimately familiar with the concept of preferred stock versus 0:11:16.880 --> 0:11:20.000 common stock and how that gets treated in an acquisition. 0:11:20.440 --> 0:11:23.000 And one thing Tracy that I was like working with Henry. 0:11:23.280 --> 0:11:27.360 He actually knows numbers and remembers these details which I 0:11:27.400 --> 0:11:28.760 appreciate in these conversations. 0:11:28.880 --> 0:11:31.480 Yeah, I can tell. Okay, Henry, you just went through 0:11:31.520 --> 0:11:33.720 all the AI stuff, So I'm just going to ask you, 0:11:34.000 --> 0:11:35.440 what's your favorite memory of Joe? 0:11:35.800 --> 0:11:38.240 No, okay, okay. 0:11:38.000 --> 0:11:41.680 Okay, I won't, I want, I wont okay. On AI, 0:11:41.840 --> 0:11:43.960 it strikes me that one of the big parallels, and 0:11:44.000 --> 0:11:47.360 you just touched on it there. But it's the narrative, right, 0:11:47.440 --> 0:11:50.079 and it's the idea that AI is going to change 0:11:50.120 --> 0:11:52.360 the world. Back in the nineties, we had the whole 0:11:52.520 --> 0:11:55.000 the Internet's going to change the world, which was true. 0:11:55.120 --> 0:11:57.520 It was true that the Internet changed the world, just 0:11:57.679 --> 0:12:01.360 potentially not in the way analysts had been forecasting at 0:12:01.360 --> 0:12:04.280 that time. Talk to us about I guess the story 0:12:04.360 --> 0:12:07.680 that is being built around AI. And as a former 0:12:07.720 --> 0:12:10.640 Wall Street analyst, I imagine you are very, very familiar 0:12:10.720 --> 0:12:14.040 with the importance of narrative slash stories in pitching some 0:12:14.080 --> 0:12:15.679 of these investment ideas. 0:12:16.040 --> 0:12:19.800 Yes, I think that if you look at the idea 0:12:19.880 --> 0:12:23.640 behind what's happening with AIS, it's a revolutionary new technology 0:12:23.760 --> 0:12:27.280 that will smash into the economy and have major changes. 0:12:27.360 --> 0:12:31.080 And one of the theories that sounds right to me, 0:12:31.320 --> 0:12:33.880 certainly based on the Internet and other technologies that have 0:12:33.960 --> 0:12:36.880 come in, is that the economy will now adapt and 0:12:36.920 --> 0:12:39.560 there will be three kinds of companies. There will be 0:12:39.600 --> 0:12:44.680 traditional companies that refuse to use AI and ultimately lose 0:12:44.720 --> 0:12:46.959 their competitive advantage, or maybe they are in a business 0:12:47.000 --> 0:12:49.120 that has nothing to do with AI, maybe paint or 0:12:49.120 --> 0:12:51.120 something like that, so it doesn't matter. There will be 0:12:51.120 --> 0:12:54.920 companies that try to integrate AI into their traditional operations, 0:12:54.960 --> 0:12:57.440 and those would be analogous to the clicks and mortar 0:12:57.520 --> 0:13:00.679 companies back in the nineteen nineties and since. And then 0:13:00.720 --> 0:13:03.439 there will be companies that are built around AI, so 0:13:03.640 --> 0:13:06.120 they're not providing the technology, but they are using AI 0:13:06.200 --> 0:13:08.280 in a new way, and that's giving them the ability 0:13:08.320 --> 0:13:11.719 to be vastly more productive or grow at a much 0:13:11.720 --> 0:13:14.280 greater rate. And so I think that that's the way 0:13:14.360 --> 0:13:17.120 we'll see the economy adapt. And I do think the 0:13:17.200 --> 0:13:20.640 storytelling it's not directly related to AI, although part of 0:13:20.679 --> 0:13:23.600 it is one of the stocks that fascinates me right now. 0:13:23.679 --> 0:13:26.440 And this will be the exception to my declaration there's 0:13:26.440 --> 0:13:32.079 no bubble in broader technology. Is Tesla. Tesla has always 0:13:32.120 --> 0:13:35.480 traded at a multiple that has almost nothing to do 0:13:35.559 --> 0:13:38.280 with its current operations and everything. 0:13:37.840 --> 0:13:41.320 To do with Elon some imagined future business that's going 0:13:41.400 --> 0:13:44.600 to produce a mountain of cash, and it's always six 0:13:44.679 --> 0:13:45.720 to eighteen months away. 0:13:45.840 --> 0:13:48.280 People used to talk about Steve jobs ability to create 0:13:48.280 --> 0:13:53.040 a reality distortion field. Elon Musk is much better at 0:13:53.080 --> 0:13:55.640 it than Steve Jobs. Was to the point where he 0:13:55.720 --> 0:13:59.160 can go on an earnings call on a disastrous quarter 0:13:59.520 --> 0:14:05.280 like Tesla had, tell a story about robotaxis and humanoid 0:14:05.400 --> 0:14:09.080 robots and trillions of dollars of revenue, and he's going 0:14:09.160 --> 0:14:12.840 to go from spending less than a tiny percentage of 0:14:12.840 --> 0:14:14.840 his time at Tesla to a little bit more of 0:14:14.880 --> 0:14:17.520 his time at Tesla, And in the week since the 0:14:17.520 --> 0:14:20.520 stock is up twenty percent. That is because of two things. One, 0:14:20.560 --> 0:14:23.440 Elon's ability to tell an amazing story, and that is 0:14:23.440 --> 0:14:25.920 what leaders have to do. They have to rally people 0:14:25.920 --> 0:14:29.760 to work together to create a better future. And then two, importantly, 0:14:29.840 --> 0:14:32.640 it's not just storytelling. Elon has done on the business 0:14:32.640 --> 0:14:37.160 side some things that are simply astounding. One of the companies, 0:14:37.320 --> 0:14:39.960 if you created only one of the companies he's created, 0:14:39.960 --> 0:14:43.280 that would be a hall of fame performance for most entrepreneurs. 0:14:43.440 --> 0:14:46.960 He's created a of them, the rocket company, the satellite 0:14:47.000 --> 0:14:51.000 internet company, Tesla, which you people, forget, no new car 0:14:51.000 --> 0:14:54.240 companies to survive for seventy five years, and suddenly he 0:14:54.280 --> 0:14:58.320 builds one, and even now in its demolished state, Tesla 0:14:58.440 --> 0:15:01.120 is still has the single best selling car on the planet. 0:15:01.240 --> 0:15:05.440 It's amazing. So that's what storytelling is, and so much 0:15:05.480 --> 0:15:07.840 of what I think Michael Moritz from Sequoia said this 0:15:07.880 --> 0:15:10.280 the other day, so much of what he would teach 0:15:10.640 --> 0:15:13.120 in business school if he were teaching a course, is 0:15:13.560 --> 0:15:16.800 not finance or financial analysis or accounting, but how to 0:15:16.800 --> 0:15:19.760 tell a story and get your not just your investors, 0:15:19.760 --> 0:15:23.000 although that's important, but your employees on board and excited 0:15:23.040 --> 0:15:25.000 about this great thing that you're going to build, and 0:15:25.040 --> 0:15:27.800 the suspension of disbelief. And I do think that Elon 0:15:27.920 --> 0:15:30.280 Musk is extraordinarily good at that, and by the way, 0:15:30.320 --> 0:15:32.760 Sam Altman must be extraordinarily good at it too, or 0:15:32.800 --> 0:15:50.360 they wouldn't be where they are, you. 0:15:50.280 --> 0:15:53.280 Know, going back to the late nineties or I guess 0:15:53.320 --> 0:15:56.840 the early two thousands. You know, obviously we remember Ao 0:15:56.880 --> 0:15:59.720 well time Warner is the deal that we associate with 0:15:59.760 --> 0:16:03.120 a peak of euphoria. But from a sort of actual 0:16:03.240 --> 0:16:07.280 fundamental standpoint, what was the first sign to you that 0:16:07.560 --> 0:16:10.200 a cool wind, a cool breeze was coming on. Do 0:16:10.240 --> 0:16:12.200 you have a memory of like, oh, maybe some of 0:16:12.240 --> 0:16:15.120 these growth forecast because when you think about, well, what 0:16:15.200 --> 0:16:19.240 could dent private AI valuations or what could even dent 0:16:19.600 --> 0:16:22.720 you know, public one, or what could invented tesla, was 0:16:22.720 --> 0:16:25.280 there a moment is like, huh, is not quite living 0:16:25.360 --> 0:16:27.640 up to what I thought in terms of some of 0:16:27.640 --> 0:16:28.600 the numbers, et cetera. 0:16:28.960 --> 0:16:32.760 Yes, definitely, But I should also say this benefits from 0:16:32.760 --> 0:16:35.000 the twenty twenty hind side, sure, which is if you 0:16:35.040 --> 0:16:37.880 wanted the one of the features of these periods of 0:16:37.920 --> 0:16:39.640 market history, and if you look at all of them, 0:16:39.680 --> 0:16:41.040 you go back to two lips. So you look at 0:16:41.040 --> 0:16:44.800 the nineteen twenties or the PC bubble in the early 0:16:44.880 --> 0:16:48.200 nineteen sixties or seventies I think, or eighties, you know, 0:16:48.240 --> 0:16:50.640 they all share these features. And one of the things 0:16:50.760 --> 0:16:53.680 that I remember very clearly about the nineteen nineties is 0:16:54.160 --> 0:16:58.160 pretty much every year you had a deafening chorus of 0:16:58.200 --> 0:17:01.520 people saying, this is lunacy, it's just a bubble, it's crazy, 0:17:01.640 --> 0:17:05.320 it's a fad. And every year there was a pullback 0:17:05.440 --> 0:17:07.959 of twenty to thirty percent, where everybody freaked out, and 0:17:08.000 --> 0:17:11.240 you had enormous numbers of stories written saying, see, everyone 0:17:11.359 --> 0:17:14.440 was a moron, they were all insane, and it's over now. 0:17:14.880 --> 0:17:16.639 And then I like how. 0:17:16.520 --> 0:17:19.000 Henry talks in business inside our headlined. 0:17:21.119 --> 0:17:23.719 We would then roar off to new highs, and then 0:17:23.760 --> 0:17:26.080 the same thing would happen the next year. So if 0:17:26.760 --> 0:17:30.040 any one of those had led to the crash, we 0:17:30.040 --> 0:17:32.320 would all look back and say, see that was the thing. 0:17:32.600 --> 0:17:35.159 And I will say that the other thing you find 0:17:35.400 --> 0:17:38.399 in these bubble periods is that they're two kinds of people. 0:17:38.960 --> 0:17:41.199 There are the people who think that the world is 0:17:41.240 --> 0:17:45.080 forever different and all the old valuation metrics can be 0:17:45.160 --> 0:17:48.959 discarded because it's different this time and so forth. And 0:17:49.000 --> 0:17:52.199 then they're the people who think, no, we are in 0:17:52.320 --> 0:17:55.879 a bubble, but I'm going to ride the bubble right 0:17:55.920 --> 0:17:58.200 to the end, and then I'm gonna get off right 0:17:58.200 --> 0:18:02.320 at the top. Boddy else crashes. So I would say 0:18:02.359 --> 0:18:05.200 that by nineteen ninety eight, and I wrote a lot 0:18:05.200 --> 0:18:07.399 about this at the time, I was very much in 0:18:07.480 --> 0:18:09.520 the we are in a bubble camp, but I was 0:18:09.600 --> 0:18:12.920 also in the camp of the internets of profound technology 0:18:12.920 --> 0:18:15.880 that's going to radically change things and create very huge companies. 0:18:15.960 --> 0:18:21.040 So my investment recommendation early on at Merrill Lynch was, hey, 0:18:21.119 --> 0:18:23.560 if you're good, by the way, don't touch these things, 0:18:23.680 --> 0:18:26.320 if you're not incredibly risk tolerant, because there's just way 0:18:26.359 --> 0:18:29.680 too much risk. But if you are, buy a few 0:18:29.720 --> 0:18:32.720 of them so you have some diversification, and plan to 0:18:32.760 --> 0:18:34.760 hold them for five to ten years. And that's what 0:18:34.800 --> 0:18:37.879 I did myself. And I look back at in my 0:18:37.960 --> 0:18:41.760 investment in AML, my investment in Yahoo and others, and say, 0:18:41.760 --> 0:18:44.600 what on earth was I thinking? What an idiot wish 0:18:44.600 --> 0:18:49.480 I hadn't. Fortunately, my investment in Amazon, despite almost going 0:18:49.480 --> 0:18:53.920 to zero, that actually over ten years paid all back. 0:18:53.960 --> 0:18:55.560 So that is the way to do it. And you know, 0:18:55.760 --> 0:18:59.000 no public investors are investing in AI now, but if 0:18:59.000 --> 0:19:01.520 you were going to, I think that sound and I 0:19:01.560 --> 0:19:04.200 would even tighten the screen tighter, which is like, only 0:19:04.240 --> 0:19:06.639 invest in the best ones because everybody else is going 0:19:06.680 --> 0:19:10.159 to be toast. But with that big preamble, what was 0:19:10.200 --> 0:19:10.719 the moment? 0:19:11.359 --> 0:19:13.600 So in two. 0:19:13.440 --> 0:19:18.080 Thousand, as I recall part of what it happened, part 0:19:18.119 --> 0:19:20.119 of what was fueling the bubble. And you find this 0:19:20.200 --> 0:19:23.199 in every bubble, is that there is something that is 0:19:24.680 --> 0:19:29.200 goosing the fundamentals of the companies that is actually attached 0:19:29.200 --> 0:19:32.040 to their valuations and what's happening in the markets. And 0:19:32.119 --> 0:19:35.600 so I was really looking for that. And usually it's debt, 0:19:35.760 --> 0:19:38.560 like people are borrowing margin dad or the dead and 0:19:38.600 --> 0:19:40.760 in the telecom sector in the nineteen nineties, that's what 0:19:40.760 --> 0:19:43.639 it was. All these telecom companies buying, borrowing so much money, 0:19:43.760 --> 0:19:46.760 they're buying all the Cisco equipment, everything else. And eventually 0:19:46.760 --> 0:19:50.840 that train stopped and crashed. But in the consumer internet sector, 0:19:50.840 --> 0:19:53.639 which is where I was focused, like advertising, I was 0:19:53.760 --> 0:19:56.639 looking for that leverage. I knew that the problem was 0:19:56.680 --> 0:19:58.560 that you get embedded in the leverage in the system. 0:19:58.960 --> 0:20:01.439 And in the star summer of two thousand it started 0:20:01.480 --> 0:20:04.479 to break down, but I still didn't see what it was. 0:20:04.560 --> 0:20:06.919 And you know what it was. What it was was 0:20:06.960 --> 0:20:10.919 the incredible public market appetite for these securities, both on 0:20:10.960 --> 0:20:14.359 the death side and the equity side. And so every 0:20:14.400 --> 0:20:16.120 new company, as you said, I think there was something 0:20:16.200 --> 0:20:18.960 like four hundred companies that went public in nineteen ninety nine, 0:20:19.080 --> 0:20:21.200 just insane. Every new company would go out and raise 0:20:21.240 --> 0:20:24.000 thirty million dollars. They would immediately spend five million on 0:20:24.080 --> 0:20:26.719 a portal deal with Yahoo, and they'd spend five million 0:20:26.760 --> 0:20:30.159 on Sun Microsystems servers, and they'd spend five million on 0:20:30.240 --> 0:20:33.600 Oracle and so forth. And they were all losing huge 0:20:33.600 --> 0:20:35.960 amounts of money. So what was actually happening was even 0:20:36.000 --> 0:20:38.560 though they weren't borrowing money, they were getting money from 0:20:38.560 --> 0:20:41.679 the public markets, and they were turning into actual spending with. 0:20:41.880 --> 0:20:44.320 So i iwer an investor in an IPO that was 0:20:44.440 --> 0:20:45.880 turned into revenue for Yahoo. 0:20:46.119 --> 0:20:50.560 That's flattered Yahoo's revenue exactly. And then mean, in meantime, 0:20:51.000 --> 0:20:53.600 you had this narrative that had been going on for years, 0:20:53.960 --> 0:20:57.399 not a week, but years, where all of the old 0:20:57.400 --> 0:21:01.840 economy companies and their management teams, we're getting totally shamed 0:21:02.440 --> 0:21:07.240 by resisting the Internet. Meanwhile Amazon puts up these extraordinary 0:21:07.320 --> 0:21:09.640 numbers every quarter. You know, it's not Barnes and Noble 0:21:09.720 --> 0:21:11.159 is not going to kill them. In fact, they're going 0:21:11.200 --> 0:21:13.119 to kill Barnes and Noble. That started to become clear. 0:21:13.280 --> 0:21:16.719