WEBVTT - Google In `Terrible Bind' From Pulling AI Feature Under Pressure 0:00:02.920 --> 0:00:11.160 Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Business 0:00:11.160 --> 0:00:14.400 Wait inside from the reporters and editors who bring you 0:00:14.440 --> 0:00:18.800 America's most trusted business magazine, plus global business, finance and 0:00:18.840 --> 0:00:23.320 tech news. The Bloomberg Business Week podcast with Carol Messer 0:00:23.480 --> 0:00:26.640 and Tim Stenebeck from Bloomberg Radio. 0:00:28.120 --> 0:00:30.560 One other name that is on our radar and stock 0:00:31.040 --> 0:00:33.519 shares of Alphabet down about two point three percent. It's 0:00:33.520 --> 0:00:35.280 been on our mind all this week. You remember on 0:00:35.400 --> 0:00:37.960 Monday the stock dropped about four and a half percent 0:00:38.000 --> 0:00:41.480 amid renewed fears about Google's AI offerings, and that after 0:00:41.520 --> 0:00:45.400 a research note from Milius research analyst Ben Wrightss, who 0:00:45.440 --> 0:00:48.159 noted that problems with AI tools may fuel the perception 0:00:48.240 --> 0:00:51.400 that Google is an unreliable source for AI his words, 0:00:51.640 --> 0:00:54.960 and create an opening for competitors. Ben Writs is also 0:00:54.960 --> 0:00:58.440 specifically highlighting the possibility of users growing concerned. 0:00:58.000 --> 0:00:59.080 About Google's bias. 0:00:59.240 --> 0:01:01.600 Our Ed Ludlows Booth with Ben Rightsis earlier this week 0:01:01.640 --> 0:01:04.600 about his note and concerns on Google's AI strategy. 0:01:04.720 --> 0:01:05.200 Check it out. 0:01:06.120 --> 0:01:07.760 You want to make sure they don't have a bud 0:01:07.840 --> 0:01:12.360 light moment, and we're not sure yet. I don't want 0:01:12.360 --> 0:01:15.800 to weigh in on the merits of what they did 0:01:15.880 --> 0:01:19.320 or the debate. It's just real simple. When you alienate 0:01:19.360 --> 0:01:21.720 a part of the population and they believe that you 0:01:21.800 --> 0:01:24.640 may not be a source of truth, that's not good 0:01:24.640 --> 0:01:27.040 for business in their business. 0:01:27.720 --> 0:01:30.200 That was Ben rightsis speaking to our own ed Ludlow 0:01:30.280 --> 0:01:33.920 earlier this week, Alphabet CEO Sunder Pachai responding to the 0:01:33.959 --> 0:01:37.080 concerns as stock is now done nearly six percent so 0:01:37.160 --> 0:01:39.039 far this week. Thunder Pachai is saying in an email 0:01:39.080 --> 0:01:42.600 to employees, quote, we have been arguing that search behavior 0:01:42.680 --> 0:01:46.840 is about to change with new AI infused futures. This, 0:01:46.880 --> 0:01:51.000 once intigestion is changed by itself, creates opportunities for competitors, 0:01:51.040 --> 0:01:53.600 but even have a meaningful portion of user growth. Continued 0:01:53.600 --> 0:01:56.320 about Google's hallucinations and bias. Excuse me? That was from 0:01:56.400 --> 0:02:01.160 rightsis I should say under Pachaise say, no AI is perfect, 0:02:01.360 --> 0:02:03.800 especially as this submerging stage of the industry's development, But 0:02:03.840 --> 0:02:05.360 we know the bar is high for us and we'll 0:02:05.400 --> 0:02:06.840 keep at it for however long it takes. 0:02:06.960 --> 0:02:08.440 This has been and we're just trying to keep track 0:02:08.480 --> 0:02:10.119 of it because there's been a back and forth going 0:02:10.120 --> 0:02:12.600 on all week here, So let's get to it. We 0:02:12.680 --> 0:02:14.040 knew we had to get to the bottom of the 0:02:14.080 --> 0:02:16.400 concerns and what is going on in Alphabet and its 0:02:16.440 --> 0:02:18.760 key Google unit. So with us is the co host 0:02:18.800 --> 0:02:22.000 of Bloomberg Technology and BTV Ed Ludlow. He's in our 0:02:22.000 --> 0:02:24.680 San Francisco bureau, and also with us as Bloomberg News 0:02:24.720 --> 0:02:27.520 Technology reporter, Davey Alba in New York City. 0:02:27.560 --> 0:02:28.880 And I want to start with you. 0:02:30.000 --> 0:02:33.520 At the heart of this is Gemini, formerly barred Google's 0:02:33.560 --> 0:02:37.440 flagship AI products. Step back for us, the criticism from 0:02:37.520 --> 0:02:40.160 the analyst, the chief concerns. You talked with him, and 0:02:40.160 --> 0:02:42.520 then let's get into Sondar Pachai's response. 0:02:42.600 --> 0:02:45.120 Sure, and by the way, not just Tim, you know, 0:02:45.280 --> 0:02:47.040 I speaking to a lot of people that the investor 0:02:47.120 --> 0:02:51.359 concern is right that Gemini is the poster for Google 0:02:52.200 --> 0:02:55.760 and it's public facing AI tools and competence. But the 0:02:55.840 --> 0:02:59.440 deeper concern is that that AI technology is going to 0:02:59.600 --> 0:03:03.040 spread and underpin all of the things we know Google 0:03:03.120 --> 0:03:07.120 for search, YouTube in the long run, and those are 0:03:07.240 --> 0:03:10.320 the bread and butter businesses. And that's a concern, right, 0:03:10.360 --> 0:03:13.040 It's an issue of trust and what I find extraordinary 0:03:13.080 --> 0:03:15.640 about this story. I applaud you and commend you guys 0:03:15.639 --> 0:03:19.200 for being so thorough on explaining what happened. But investors 0:03:19.200 --> 0:03:21.520 do have short memories. If you go back to exactly 0:03:21.560 --> 0:03:25.760 one year ago, what happened. Google released Barred and in 0:03:25.800 --> 0:03:29.799 that demonstration video, it was asked about the Hubble telescope. 0:03:30.040 --> 0:03:31.840 You may remember, I believe I came on the show 0:03:31.840 --> 0:03:34.399 with you and talked about it, and it gave an 0:03:34.480 --> 0:03:37.880 incorrect answer, and what played out was downward pressure on 0:03:37.920 --> 0:03:41.120 the stock significant We're seeing the same thing play out 0:03:41.120 --> 0:03:44.360 this week. Trust has been damaged and that's hurting the shehes. 0:03:44.600 --> 0:03:46.480 And ed what do you make of Sunder Pitcha's response 0:03:46.520 --> 0:03:49.080 the way he tried to handle this yesterday at the company. 0:03:49.680 --> 0:03:53.160 Yeah, I mean it's a pretty direct and frank admission. 0:03:53.320 --> 0:03:59.600 You know that. Verbatim, he said that the answers given 0:03:59.640 --> 0:04:03.320 by the text and image generation side of Gemini insulted 0:04:03.320 --> 0:04:06.080 and offended people, and it was unacceptable. What I'm interested 0:04:06.120 --> 0:04:08.240 to hear from Davey is that he said they've got 0:04:08.240 --> 0:04:11.520 teams out working around this on this around the clock, right, Well, 0:04:11.520 --> 0:04:12.440 how do you fix it? 0:04:13.600 --> 0:04:13.800 Well? 0:04:13.800 --> 0:04:14.240 And let's so. 0:04:14.280 --> 0:04:16.960 Davey come on in your story with with your Bloomberg colleagues, 0:04:17.000 --> 0:04:20.599 digs into internally what's been going on at Google, specifically 0:04:20.680 --> 0:04:24.240 around its ambitious AI strategy. I mean, February was supposed 0:04:24.240 --> 0:04:25.479 to be a pretty good month from them, but it 0:04:25.520 --> 0:04:27.800 hasn't played out. Tell us what's been going on behind 0:04:27.839 --> 0:04:28.320 the scenes. 0:04:29.440 --> 0:04:32.839 Yeah, you know, you're right. February was supposed to be 0:04:32.839 --> 0:04:36.760 a banner month for Google and it's AI products. It 0:04:36.960 --> 0:04:41.600 released a bunch of updates, including some impressive new upgrades 0:04:41.600 --> 0:04:47.320 to Gemini, an open source model called Gemma, and you know, 0:04:47.600 --> 0:04:50.719 more context windows so you can kind of querry the 0:04:50.760 --> 0:04:54.839 AI for longer text and video. But you know, this 0:04:54.960 --> 0:04:58.200 controversy has been playing out all week, and our reporting 0:04:58.320 --> 0:05:03.400 found that the way Google rolled out this technology included 0:05:03.520 --> 0:05:09.560 a technical fix that would transform the crop that you 0:05:09.600 --> 0:05:15.120 would actually send to Google and kind of force some 0:05:15.400 --> 0:05:20.640 outputs that would try to mitigate the inherent biases of AI, 0:05:21.120 --> 0:05:23.880 given that it's trained on such a corpus of data 0:05:23.960 --> 0:05:33.200 that does preference you know, sort of Western images and stereotypes, 0:05:34.320 --> 0:05:38.680 and and so Google basically over corrected in releasing Gemini. 0:05:38.920 --> 0:05:42.279 And now you know the company is trying to work 0:05:42.320 --> 0:05:45.719 hard to fix it. But I in my opinion, this 0:05:45.839 --> 0:05:49.880 is going to be a long journey for them. They 0:05:50.240 --> 0:05:53.000 will have to really take a look at how they 0:05:53.080 --> 0:05:56.560 built this product from the ground up and try to 0:05:56.600 --> 0:06:00.000 see what fixes they can make to the fundamental product 0:06:00.400 --> 0:06:03.160 rather than kind of a band aid fix that they 0:06:03.240 --> 0:06:03.719 rolled out. 0:06:04.200 --> 0:06:06.680 Well, I want to throw it back to ed just 0:06:06.720 --> 0:06:09.839 for a second here to help contextualize where Gemini is 0:06:09.920 --> 0:06:13.440 slash was when it comes to lms that are out there, 0:06:13.480 --> 0:06:16.240 like where does it compare to open ais and other 0:06:16.279 --> 0:06:19.200 ones that meta platforms perhaps are working on, and either 0:06:19.240 --> 0:06:20.880 ones from other companies as well. 0:06:21.520 --> 0:06:23.960 Well, Look, I would I think Davey would agree that 0:06:24.240 --> 0:06:27.520 the way Alphabet and Google Alphabet, the parirent of Google, 0:06:27.560 --> 0:06:30.840 have rolled out first Barred and now Gemini the kind 0:06:30.839 --> 0:06:35.599 of all encompassing generative AI tool, has been more careful 0:06:35.800 --> 0:06:40.760 and in different stages than others have rolled out their chatbots. 0:06:41.120 --> 0:06:44.960 You know, they did it with limited beta access at first, 0:06:45.440 --> 0:06:47.720 opening it up to a wider audience. I do think 0:06:47.720 --> 0:06:51.919 it's important tim to remember kind of what happened to 0:06:52.000 --> 0:06:56.320 set this all off, which is basically Gemini was asked 0:06:56.880 --> 0:07:03.359 what was worse, Hitler or Elon Musk and that's a 0:07:03.560 --> 0:07:07.320 very layman's and short answer. But the response that the 0:07:07.360 --> 0:07:11.800 Gemini bot gave was it's hard to say, and so 0:07:11.960 --> 0:07:15.640 that is what spurred the debate online. The problem being 0:07:15.960 --> 0:07:18.080 the root of your question is we are twelve months 0:07:18.120 --> 0:07:21.720 on from the general release and so that's worrying, right, 0:07:21.760 --> 0:07:24.440 because if you go back in history, Google is at 0:07:24.440 --> 0:07:26.679 the advent of the R and D that went into 0:07:26.720 --> 0:07:30.520 early AI. Fast forward to the first twelve months of commercialization, 0:07:30.640 --> 0:07:34.760 and that response on that specific question has got a 0:07:34.800 --> 0:07:37.160 lot of people saying, well, how on earth could Google, 0:07:37.200 --> 0:07:40.679 of all companies, allowed it to get to this stage, right. 0:07:40.600 --> 0:07:43.960 And you know, Davey considering that Google you right, you 0:07:44.000 --> 0:07:46.280 guys write in your story that's on the bloomberd today 0:07:46.320 --> 0:07:49.240 that Google pioneered some of the techniques that. 0:07:49.200 --> 0:07:51.800 Are today at the heart of the AI boom. 0:07:51.840 --> 0:07:53.720 So it's kind of ironic, But come on in on 0:07:54.040 --> 0:07:55.960 some of what we just heard from ed in terms 0:07:56.000 --> 0:07:59.360 of what's been going on and what they're finding out 0:07:59.400 --> 0:08:00.280 some of the issues. 0:08:00.560 --> 0:08:04.000 Yeah, you know, this is a problem for all large 0:08:04.000 --> 0:08:07.240 scale AI systems, not just Google. This is something that 0:08:07.400 --> 0:08:12.880 open AI faces and you know metas LM faces. The 0:08:13.000 --> 0:08:18.120 fact is that these AI systems are trained on all 0:08:18.160 --> 0:08:21.720 of the Internet's data basically, and if you think about 0:08:21.760 --> 0:08:24.600 what's on the Internet, a lot of it is kind 0:08:24.600 --> 0:08:31.280 of garbage. And so the way that the AI mirrors 0:08:31.560 --> 0:08:34.760 what it's trained on is a huge problem and one 0:08:34.800 --> 0:08:38.280 that these companies don't have a an elegant fix for. 0:08:39.080 --> 0:08:42.640 So it ads right. Google has been absolutely way more 0:08:42.679 --> 0:08:45.679 careful than some of its other peers in rolling out 0:08:45.720 --> 0:08:49.880 its products. It usually does so in experimental stages first, 0:08:50.559 --> 0:08:54.200 But the problem is that there is no other way 0:08:54.240 --> 0:08:58.920 to train these AI systems, and so so when you 0:08:59.080 --> 0:09:04.080 have this fundamental issue of the AI kind of being problematic, 0:09:04.760 --> 0:09:08.040 what they can do is apply sort of hard coded 0:09:08.080 --> 0:09:11.440 fixes on it, technical fixes, and in this case, our 0:09:11.480 --> 0:09:13.959 reporting found, you know, they may have gone a little 0:09:13.960 --> 0:09:17.600 too far, which is how you get these absurd answers 0:09:17.760 --> 0:09:21.040 of like who is worse Elon Musker or Hitler, And 0:09:21.080 --> 0:09:23.800 it's like, oh, waffling, like we can't say one way 0:09:23.920 --> 0:09:24.320 or the other. 0:09:24.720 --> 0:09:26.520 So guys, we got about a minute left and let 0:09:26.520 --> 0:09:29.400 me go to you first, So how should we And 0:09:29.440 --> 0:09:32.840 I'm thinking about the Bloomberg audience of investors trying to say, well, 0:09:32.840 --> 0:09:33.400 wait a minute, is. 0:09:33.400 --> 0:09:34.439 This a really big issue. 0:09:34.440 --> 0:09:36.520 This is just part of a bigger, broader story as 0:09:36.600 --> 0:09:39.720 we wait our way through this new world of AI, Like, 0:09:40.040 --> 0:09:40.679 what is it? 0:09:41.400 --> 0:09:43.000 Yeah, it's hard for me to answer. 0:09:43.080 --> 0:09:45.320 I'll go with investors vote with their feet, right, And 0:09:45.400 --> 0:09:48.960 the negative share reaction this week was not as severe 0:09:49.000 --> 0:09:52.040 as the negative reaction one year ago in that example 0:09:52.080 --> 0:09:56.480 of Bard making a mistake. You just have to continue 0:09:56.520 --> 0:10:01.079 to see how investors interpret the get picture. How does 0:10:01.240 --> 0:10:05.040 Gemini Gemini relate to its core businesses and either improve 0:10:05.120 --> 0:10:06.400 them or cause more concern? 0:10:06.679 --> 0:10:09.280 Davie saving twenty five seconds for you your thoughts forward, 0:10:09.400 --> 0:10:10.920 you know, as you continue to report this out. 0:10:11.920 --> 0:10:15.040 Yeah, I'm curious to see what fixes Google will have 0:10:15.600 --> 0:10:20.800 going forward. The CEO of DeepMind, Demissabis, had just said 0:10:20.840 --> 0:10:23.520 this week that he intends for this feature to go 0:10:23.640 --> 0:10:26.280 back online within the next couple of weeks. And I 0:10:26.320 --> 0:10:29.760 think if they don't have anything more than kind of 0:10:29.800 --> 0:10:33.200 the band aid fix that we saw, then you know what, 0:10:33.280 --> 0:10:39.199 investors will probably take note and vote accordingly. 0:10:40.440 --> 0:10:43.320 Investors not shy when there's any kind of AI angle 0:10:43.400 --> 0:10:44.800 that that disappoints guys. 0:10:44.880 --> 0:10:46.360 This is exactly what we wanted to do. 0:10:46.400 --> 0:10:48.640 A deep dive on this which has been over the 0:10:48.679 --> 0:10:51.880 news throughout the week, co host to Bloomberg Technology Ed Ludlow, 0:10:52.080 --> 0:10:54.040 and of course our thanks to Bloomberg News tech reporter 0:10:54.120 --> 0:10:56.120 Davy Alba. 0:10:56.400 --> 0:10:59.800 You're listening to the Bloomberg Business Week podcast Can't Just 0:10:59.800 --> 0:11:02.800 Look five weekday afternoons from two to five pm Eastern 0:11:02.920 --> 0:11:05.360 Listen on Apple car Play and then Brout Auto with 0:11:05.360 --> 0:11:09.599 a Bloomberg Business app or want us Live on YouTube. 0:11:10.640 --> 0:11:14.600 Well shares of the power generation company energ Energy hitting 0:11:14.600 --> 0:11:17.840 a record high today inter day before dropping back this 0:11:17.880 --> 0:11:20.880 following its latest quarterly update, the company reaffirming its twenty 0:11:20.920 --> 0:11:23.559 twenty four guidance and an upbeat forecast for twenty twenty 0:11:23.559 --> 0:11:26.920 four adjusted EBITA. So we continue to get some news 0:11:27.040 --> 0:11:30.240 and earnings reports, including on some of the energy names. 0:11:30.480 --> 0:11:32.520 Yeah, and it's important to follow, of course, because Bloomberg 0:11:32.520 --> 0:11:34.960 News recently reported how the US power grid is struggling 0:11:35.000 --> 0:11:37.800 to maintain an even flow of electricity and putting homes 0:11:37.800 --> 0:11:39.199 at risk. It was a big take a couple of 0:11:39.240 --> 0:11:41.480 weeks ago. We covered it here on the program. So 0:11:41.520 --> 0:11:44.160 with more on some of the trend shaping the electricity 0:11:44.200 --> 0:11:47.080 sector as an investment play, We're joined by Timothy Kramer, 0:11:47.120 --> 0:11:50.520 the CEO at CNIC Funds. It's home to the cnic 0:11:50.720 --> 0:11:54.520 ice US Carbon Neutral Power Futures Index ETF, which has 0:11:54.520 --> 0:11:56.640 about four million dollars in assets in the fund. That's, 0:11:56.640 --> 0:12:00.000 according to Bloomberg, down about twelve percent since the beginning 0:12:00.120 --> 0:12:02.680 training in May of last year, down about four percent 0:12:02.760 --> 0:12:04.960 year to date. Tim joins us from Houston. Tim, good 0:12:04.960 --> 0:12:07.680 to have you on the program today. Talk a little 0:12:07.679 --> 0:12:09.839 bit about who this is for. Carol and I did 0:12:09.840 --> 0:12:12.400 some digging in the Bloomberg terminal and it was it 0:12:12.440 --> 0:12:14.200 was a bit tough to make sense of what exactly 0:12:14.280 --> 0:12:16.760 is in the ETF and what it tracks, So give 0:12:16.840 --> 0:12:18.800 us the details here, sure. 0:12:18.840 --> 0:12:22.040 So what's in the ETF is electricity future So ICE 0:12:22.080 --> 0:12:25.440 the Intercontinental Exchange has the futures listed. So just like 0:12:25.440 --> 0:12:28.040 you've got crude oil futures, goal futures, et cetera, you've 0:12:28.040 --> 0:12:31.559 got these futures on electricity. And so what the index 0:12:31.720 --> 0:12:34.280 then the ETF has in it is it takes an 0:12:34.360 --> 0:12:36.959 average of six of the major power trading hubs in 0:12:37.000 --> 0:12:39.160 the US and it takes those futures and then it 0:12:39.200 --> 0:12:42.000 weights them according to what the electricity consumption is in 0:12:42.040 --> 0:12:42.600 the US. 0:12:43.520 --> 0:12:45.839 So who is this for? I'm curious about you. 0:12:45.840 --> 0:12:47.559 Guys have about a little bit more than four million 0:12:47.600 --> 0:12:49.240 dollars in assets under management. 0:12:49.520 --> 0:12:51.040 Who do you target with this? 0:12:51.160 --> 0:12:51.400 Who? 0:12:51.520 --> 0:12:54.000 What kind of exposure is an investor looking for by 0:12:54.000 --> 0:12:55.160 tapping into this ETF? 0:12:55.920 --> 0:12:58.920 Sure, So electricity is the most consumed commodity in the 0:12:59.000 --> 0:13:01.760 US on a retail notional basis, but up until now 0:13:01.760 --> 0:13:05.199 it hasn't been in any ETF, any index, any mutual fund, nothing. 0:13:05.600 --> 0:13:08.559 So right now, if you take a look, modern portfolio 0:13:08.640 --> 0:13:11.160 theory says that you should have somewhere between five and 0:13:11.280 --> 0:13:15.000 fifteen percent of your aun allocated to commodities, and that's 0:13:15.000 --> 0:13:19.079 for portfolio diversification and for inflation protection. So if you 0:13:19.120 --> 0:13:22.080 take a look, pensions and endowments typically have about three 0:13:22.120 --> 0:13:25.440 percent right now allocation, and there's like over eight hundred 0:13:25.440 --> 0:13:27.920 billion dollars tied with the Bloomberg Commodity Index and other 0:13:28.000 --> 0:13:31.040 other commodity indexes. So this is geared towards a few 0:13:31.040 --> 0:13:33.960 different types of audiences. The first would be we'll say 0:13:34.000 --> 0:13:36.319 model portfolio. So if you take a look, a lot 0:13:36.360 --> 0:13:39.679 of the major platforms have been pushing a sixty forty portfolio, 0:13:39.800 --> 0:13:43.080 so sixty percent equity forty percent debt, and now they're 0:13:43.080 --> 0:13:44.760 trying to find tune that a bit, and so they're 0:13:44.800 --> 0:13:47.000 pushing like a sixty thirty five to five with the 0:13:47.080 --> 0:13:49.600 five being commodities. And so if you look back over 0:13:49.640 --> 0:13:52.240 the past three, five and seven years, on an absolute 0:13:52.280 --> 0:13:54.959 basis and on a risk adjusted basis, the sixty thirty 0:13:54.960 --> 0:13:57.160 five to five has been beating the sixty forty. But 0:13:57.240 --> 0:13:59.600 if you do a sixty thirty five three to two, 0:13:59.720 --> 0:14:03.560 three in commods and two in electricity, it beats everything 0:14:03.600 --> 0:14:06.080 on an absolute and a risk adjusted basis. So we 0:14:06.120 --> 0:14:09.400 think a model portfolio for investors would make sense. And 0:14:09.440 --> 0:14:11.880 then for the pensions and endowments, this gives you inflation 0:14:11.960 --> 0:14:16.440 protection because CPI is two point five percent electricity month 0:14:16.440 --> 0:14:18.680 in and month out right, and this person the index 0:14:18.760 --> 0:14:20.520 is eighty percent related to inflation. 0:14:20.640 --> 0:14:22.960 I saw Carol furiously writing down every number you just 0:14:23.040 --> 0:14:26.280 mentioned that, Timothy, Hey, So I do have to ask though, 0:14:26.320 --> 0:14:28.120 in terms of exposure to commodities. There are lot of 0:14:28.120 --> 0:14:30.960 different ways to get exposure to commodities. So somebody watching 0:14:31.000 --> 0:14:33.200 could be saying, okay, well, you know, I could buy 0:14:33.200 --> 0:14:36.400 this etf or I could buy I could buy crude 0:14:36.440 --> 0:14:39.840 I could buy natural gas, I could buy coal. These 0:14:39.880 --> 0:14:42.080 are all things that are used in the US to 0:14:42.520 --> 0:14:45.360 generate power. Why not just go directly to the source 0:14:45.560 --> 0:14:47.280 in terms of how that power is generator? I mean 0:14:47.320 --> 0:14:50.600 they could buy equity, you know, equity in companies that 0:14:50.920 --> 0:14:51.840 are solar companies. 0:14:52.800 --> 0:14:54.880 So in terms of going to the actual source, we'll 0:14:54.920 --> 0:14:57.680 go with what the occrude natural gas that you mentioned first. 0:14:57.880 --> 0:15:00.400 The US has a stated goal of being eighty five 0:15:00.520 --> 0:15:03.400 percent renewable generation by twenty thirty and one hundred percent 0:15:03.400 --> 0:15:06.440 carbon free by twenty thirty five, and so you're seeing 0:15:06.520 --> 0:15:09.320 less and less reliance on fossil fuels and more on 0:15:09.440 --> 0:15:12.640 other types of generation, and that creates a number of problems. 0:15:12.840 --> 0:15:15.640 And so you get direct exposure to the electricity as 0:15:15.680 --> 0:15:18.160 a commodity with this particular product. That's the first thing. 0:15:18.440 --> 0:15:20.360 And then if you do the equities, well, you know, 0:15:20.560 --> 0:15:22.520 you don't know if they'd hedge their exposure or not, 0:15:22.600 --> 0:15:24.680 and they can have accounting irregularities and they got to 0:15:24.680 --> 0:15:27.200 cover management and overhead. So you're not really getting the 0:15:27.240 --> 0:15:30.080 clean direct exposure to the commodity itself as if you 0:15:30.360 --> 0:15:33.640 as if you played the index or the ETI talk to. 0:15:33.680 --> 0:15:37.600 Us about flows over four million in assets under management. 0:15:37.640 --> 0:15:39.480 What kind of flows have you seen in and out 0:15:39.600 --> 0:15:40.120 as of late? 0:15:41.280 --> 0:15:44.320 So right now, we've got interest from some of the 0:15:44.840 --> 0:15:49.120 platforms and from family offices, and we have seen some 0:15:49.240 --> 0:15:51.680 people that have been treading this in terms of their 0:15:51.760 --> 0:15:55.800 view on natural gas and or absolute price levels on commodities. 0:15:56.120 --> 0:15:58.680 And I will point out that what happens is we 0:15:58.760 --> 0:16:02.680 had probably the warmest winter January February of twenty four 0:16:03.040 --> 0:16:05.480 that you know, we've ever had, and so that's kind 0:16:05.480 --> 0:16:08.080 of depressed the price of this a little bit. And 0:16:08.120 --> 0:16:10.240 so that was due to winel Nino phenomena. But we 0:16:10.280 --> 0:16:13.040 are looking now for this summer for law Nina to 0:16:13.120 --> 0:16:15.960 be a very hot and very dry summer. So we're 0:16:15.960 --> 0:16:18.200 seeing interest in this pickback up for people that are 0:16:18.200 --> 0:16:20.360 looking to try to profit or participate on that. 0:16:20.520 --> 0:16:23.040 So Tim, is that it like you in terms of participation, 0:16:23.120 --> 0:16:25.680 you're kind of relying on the weather in terms of 0:16:25.760 --> 0:16:27.880 interest into the ETF. I'm just curious about what's the 0:16:27.880 --> 0:16:31.080 strategy for getting AUM a little bit higher here? 0:16:31.680 --> 0:16:34.160 Sure, So to get the AUM hire, we're having conversations 0:16:34.160 --> 0:16:36.760 with the exact same pensions and endowments that we talked 0:16:36.760 --> 0:16:40.640 about and we're also having the conversations with some of 0:16:40.680 --> 0:16:44.640 the platforms about getting onto the model portfolios and getting 0:16:44.640 --> 0:16:46.960 this more available to some of the retail investors. 0:16:47.440 --> 0:16:50.600 Interested in your thoughts just on infrastructure and on the grid, 0:16:50.680 --> 0:16:53.200 since you're so involved in this space, Tim, I mean, 0:16:53.240 --> 0:16:55.040 there's been so much reporting, especially in your home state 0:16:55.080 --> 0:16:56.960 in Texas after that grid failure a couple of years 0:16:56.960 --> 0:17:02.040 ago during that really huge cold snap in the are 0:17:02.160 --> 0:17:05.760 US grids up to snuff to handle increasing power consumption 0:17:05.840 --> 0:17:09.800 as we do shift and start using more and more electricity. 0:17:10.160 --> 0:17:13.360 The short answer is no. The easy way to describe 0:17:13.400 --> 0:17:15.240 that is there's an article that came out the other 0:17:15.320 --> 0:17:18.720 day that talks about completion rate, and so approximately eight 0:17:18.760 --> 0:17:22.200 point seven percent of everything that goes into the development 0:17:22.280 --> 0:17:24.159 queue gets built. So there's a lot of things that 0:17:24.200 --> 0:17:25.920 are trying to get built as we're going towards that 0:17:25.920 --> 0:17:28.800 one hundred percent renewable, but it's very difficult to get 0:17:28.800 --> 0:17:31.320 them permitted and it takes a longer period of time 0:17:31.359 --> 0:17:33.960 to do it. It's up from between two to three 0:17:34.000 --> 0:17:36.800 years and now it ranges between four and seven years. 0:17:37.000 --> 0:17:39.000 So the fact that it's difficult to get the stuff 0:17:39.040 --> 0:17:41.440 permitted and it is taking longer to build. You need 0:17:41.480 --> 0:17:45.960 to combine that with the fact that's you've got higher 0:17:45.960 --> 0:17:48.960 expenses and so you know, higher interest rates, higher labor costs, 0:17:49.160 --> 0:17:52.000 and things like that just make it more prohibitively expensive 0:17:52.040 --> 0:17:53.639 to get the grid to where it needs to be 0:17:53.680 --> 0:17:55.480 for the stability factor that you're referencing. 0:17:55.720 --> 0:17:57.840 I am curious when you look at the electricity market. 0:17:57.880 --> 0:17:59.840 I mean, we talk a lot about AI right and 0:18:00.000 --> 0:18:02.080 machine learning and the amount of power that's going to 0:18:02.080 --> 0:18:06.080 be needed. We talked about the autonomous vehicles, the amount 0:18:06.119 --> 0:18:08.560 of power needed just inside the vehicle to make it 0:18:08.600 --> 0:18:12.920 all happen if it's autonomous. In terms of the fundamentals, 0:18:12.960 --> 0:18:15.480 the factors, the macro factors, what do you see tim 0:18:15.520 --> 0:18:19.600 as the biggest factors impacting demand raising it over the 0:18:19.640 --> 0:18:20.720 next couple of years. 0:18:21.320 --> 0:18:23.720 You nailed it right. So a couple of sound bites 0:18:23.760 --> 0:18:26.439 will be a Google search takes one wat of power, 0:18:26.720 --> 0:18:29.240 an AI search takes one hundred wants and it takes 0:18:29.240 --> 0:18:31.480 one thousand watts to train that. So the AI right 0:18:31.480 --> 0:18:34.000 there tells you kind of what the demand is. You 0:18:34.040 --> 0:18:37.560 guys talk about bitcoin. You've got it scrolling across your 0:18:37.560 --> 0:18:40.680 screens and so when you look at bitcoin, forty percent 0:18:40.680 --> 0:18:43.240 of all bitcoin in the world is mined in the 0:18:43.320 --> 0:18:48.320 US and seventy percent of bitcoin's expense is electricity. And 0:18:48.320 --> 0:18:51.520 then just the proliferation of data centers, the electricity demand 0:18:51.600 --> 0:18:54.119 due to data centers alone for data centers should be 0:18:54.119 --> 0:18:56.520 growing at about ten percent a year through like twenty thirty. 0:18:56.880 --> 0:18:59.679 So just for what you talked about technology reasons, just 0:18:59.680 --> 0:19:02.520 a massive name that we think is understated. 0:19:02.560 --> 0:19:05.800 Biggest risk though to this strategy for you and just 0:19:05.840 --> 0:19:08.520 got about twenty seconds here, sure. 0:19:08.359 --> 0:19:09.960 I mean the biggest risk is we think from a 0:19:10.040 --> 0:19:13.399 long term fundamental play that this looks good. The biggest 0:19:13.480 --> 0:19:16.840 risk is just short term if we don't get you know, 0:19:17.160 --> 0:19:19.720 demand due to weather. Yeah, I can depress prices a 0:19:19.720 --> 0:19:22.280 little bit, but other than that, from a long term perspective, 0:19:22.320 --> 0:19:23.560 we did all. 0:19:23.520 --> 0:19:23.920 Right, got it? 0:19:24.000 --> 0:19:26.040 Run tim great to get some time. Timothy Kramer our 0:19:26.040 --> 0:19:27.919 CEFCN I S Funds. 0:19:29.600 --> 0:19:33.440 You're listening to the Bloomberg Business Week podcast. Listen live 0:19:33.560 --> 0:19:36.359 each weekdays starting at two pm Eastern on Apple car 0:19:36.480 --> 0:19:39.439 Play and ANDROYD Auto with the Bloomberg Business ad. You 0:19:39.480 --> 0:19:42.760 can also listen live on Amazon Alexa from our flagship 0:19:42.800 --> 0:19:46.600 New York station. Just say Alexa play Bloomberg eleven thirty. 0:19:47.880 --> 0:19:50.639 Yes, indeed, folks, he is in from the West Coast, 0:19:50.720 --> 0:19:52.800 in from the state of California. He's also in charge 0:19:52.840 --> 0:19:56.280 of investing for the largest teachers retirement systems, second largest 0:19:56.280 --> 0:19:59.360 public pension here in the United States, which provides benefits 0:19:59.359 --> 0:20:02.520 to California nearly did we say, one million public school 0:20:02.680 --> 0:20:05.520 educators in their families. We're talking about the California State 0:20:05.560 --> 0:20:09.280 Teachers Retirement System also known as COLSTERS, which by the way, 0:20:09.480 --> 0:20:12.520 is also the largest educator only pension fund in the world, 0:20:12.720 --> 0:20:14.520 and as of the end of last month, the investment 0:20:14.560 --> 0:20:17.080 portfolio had more than three hundred and twenty five billion 0:20:17.080 --> 0:20:18.280 in assets under management. 0:20:18.600 --> 0:20:21.200