WEBVTT - Bloomberg Surveillance TV: November 21, 2024 0:00:00.160 --> 0:00:06.840 Boo, Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferroh, along 0:00:15.520 --> 0:00:18.759 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.760 --> 0:00:22.320 for insight from the best in markets, economics, and geopolitics 0:00:22.480 --> 0:00:24.960 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.720 live on Bloomberg Television weekday mornings from six to nine 0:00:27.760 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify, or 0:00:31.360 --> 0:00:34.000 anywhere else you listen, and as always on the Bloomberg 0:00:34.080 --> 0:00:37.120 Terminal and the Bloomberg Business app. We begin this out 0:00:37.200 --> 0:00:40.160 with stocks falling after Nvidio delivered a disappointing fourth quarter 0:00:40.240 --> 0:00:43.320 revenue forecast. Cameron Dawson of New Wedge Wealth looking ahead 0:00:43.360 --> 0:00:46.320 to twenty twenty five, saying tech earnings estimates are too high. 0:00:46.479 --> 0:00:50.000 Bloomberg Intelligence shows consensus forecast for tech going from plus 0:00:50.080 --> 0:00:52.840 fourteen this year to plus twenty seven next year, even 0:00:52.880 --> 0:00:56.040 within video going from one forty this year to fifteen 0:00:56.080 --> 0:00:58.400 next year. We don't see the everything else in tech 0:00:58.520 --> 0:01:01.760 able to deliver that kind of growth. Camra joins us 0:01:01.760 --> 0:01:03.520 now for more camera good Mornic Coome running is the 0:01:03.560 --> 0:01:04.920 bout too high for twenty five. 0:01:05.280 --> 0:01:07.839 I think the bar is too high for that reacceleration 0:01:07.920 --> 0:01:09.960 in tech because we don't get it from the other 0:01:10.080 --> 0:01:12.959 big tech weights. You don't get an acceleration from Apple, 0:01:13.040 --> 0:01:15.560 you don't necessarily get a big one from Microsoft. You 0:01:15.560 --> 0:01:18.959 get a deceleration from Nvidia. So it means that the 0:01:19.000 --> 0:01:22.319 market is pricing and effectively the everything else in tech 0:01:22.520 --> 0:01:26.280 truly reaccelerating. We're not quite sure if you can get that. 0:01:26.400 --> 0:01:28.640 So if you look at the two seventy two numbers 0:01:28.640 --> 0:01:31.360 for twenty twenty five earnings, you look at tech, you 0:01:31.400 --> 0:01:33.680 also have to look at healthcare, which is the other 0:01:33.720 --> 0:01:36.840 area where there's a big acceleration that's priced in. It's 0:01:36.880 --> 0:01:40.160 set to go from three percent to twenty percent next year. 0:01:40.360 --> 0:01:43.600 But remember expectations were for twenty percent this year and 0:01:43.640 --> 0:01:44.479 all we got was three. 0:01:44.680 --> 0:01:47.600 Let's stay on tech. AI and Vidia doing really well 0:01:47.680 --> 0:01:50.520 this year. The rest of the semi space nus a 0:01:50.600 --> 0:01:52.400 good how'd you explain the difference between the two. 0:01:52.920 --> 0:01:55.680 It truly is AI and everything else. If you look 0:01:55.720 --> 0:01:59.000 at the equal weight Semiconductor Index, it's actually down three 0:01:59.080 --> 0:02:01.800 percent this year, which tells you that there is still 0:02:01.880 --> 0:02:07.400 a malaise in the old industrial Auto China, old manufacturing 0:02:07.440 --> 0:02:12.440 part of semiconductors. That does reflect this weak manufacturing environment 0:02:12.440 --> 0:02:14.800 where we've been in where we've had this historically long 0:02:14.840 --> 0:02:18.040 stretch of a PMI sub fifty. So the question is 0:02:18.240 --> 0:02:21.320 we do think that pmis will start to recover only 0:02:21.400 --> 0:02:23.919 because of better sentiment we saw that post the election 0:02:24.000 --> 0:02:28.200 in twenty sixteen. Does that translate to better manufacturing activity 0:02:28.240 --> 0:02:31.000 on a global basis or do you get this offset 0:02:31.040 --> 0:02:33.720 from tariffs where you still see this malayse take hold 0:02:34.040 --> 0:02:36.680 and it truly stays this world where you only have 0:02:36.800 --> 0:02:38.840 AI demand and everything else this week. 0:02:38.960 --> 0:02:42.000 So basically what you're talking about is the AI side 0:02:42.000 --> 0:02:44.320 of the story that's really powered this market. A lot 0:02:44.360 --> 0:02:46.480 of people have come on the show and said they 0:02:46.520 --> 0:02:50.080 agree with you that probably expectations are too high for 0:02:50.120 --> 0:02:52.839 AI to keep leading, but that just gives everything else 0:02:52.840 --> 0:02:54.720 a chance to catch up. Those semis are going to 0:02:54.720 --> 0:02:57.160 actually have their turnaround day. You hear those sizes of 0:02:57.200 --> 0:03:01.120 words from the likes of Micron, and tell why do 0:03:01.160 --> 0:03:03.200 you think that's not the case that the rest of 0:03:03.240 --> 0:03:05.680 the market will just play catch up, even as AI 0:03:06.160 --> 0:03:08.720 maybe doesn't grow quite as much as some people hope 0:03:08.840 --> 0:03:10.280 hope does spring eternal. 0:03:10.560 --> 0:03:12.919 And we do know that if you look at these 0:03:13.120 --> 0:03:16.359 at these very cyclical semiconductor industries, we know that it's 0:03:16.440 --> 0:03:19.359 most cyclical industry in the world. That you have been 0:03:19.400 --> 0:03:21.680 in this weaker environment for a couple of years, So 0:03:21.720 --> 0:03:25.399 the bar is lower for a recovery. But the big 0:03:25.480 --> 0:03:28.799 question still comes back to tariffs. Will you see companies 0:03:28.840 --> 0:03:32.079 still want to invest in big manufacturing plants that would 0:03:32.160 --> 0:03:35.640 support the demand for these semiconductors. If there's a questional 0:03:35.640 --> 0:03:38.200 mark about where the terriffs will come from, where should 0:03:38.200 --> 0:03:41.480 they be and so that's that offsetting factory. Yes, the 0:03:41.520 --> 0:03:44.160 demand has been weak, but does it remain weak because 0:03:44.160 --> 0:03:45.240 of tariff uncertainty? 0:03:45.360 --> 0:03:47.280 So everyone has come on the show since the election 0:03:47.440 --> 0:03:49.960 is basically said, are you bullish on the US or 0:03:49.960 --> 0:03:52.000 are you really bullish on the US? And then I 0:03:52.040 --> 0:03:55.400 saw your outlook for this upcoming year and basically your 0:03:55.440 --> 0:03:57.120 cast to go a whole bunch of cold water on 0:03:57.160 --> 0:03:59.320 this and you're saying that it's going to be choppy, 0:03:59.360 --> 0:04:02.040 stap being so exciting. Either you get chopp that could 0:04:02.040 --> 0:04:04.720 create some drawdowns, or you get a bubble which will 0:04:04.800 --> 0:04:05.320 end badly. 0:04:05.680 --> 0:04:06.920 Why aren't you more excited. 0:04:07.400 --> 0:04:10.480 Well, look, we're excited, we're still bullish on the US 0:04:10.600 --> 0:04:13.840 and we're still fully invested. The point is, though, is 0:04:13.840 --> 0:04:16.640 that if you think about sixty four hundred sixty seven hundred, 0:04:16.920 --> 0:04:19.200 all of that glosses over the path you take to 0:04:19.240 --> 0:04:21.840 get there, and the path is going to be really important. 0:04:21.839 --> 0:04:23.719 We think it's going to be different than twenty three 0:04:23.760 --> 0:04:26.279 and twenty four. Twenty three and twenty four was broadly 0:04:26.400 --> 0:04:28.320 up into the right. But what we see is that 0:04:28.400 --> 0:04:32.120 because you're going in with high valuations, high sentiment, high positioning, 0:04:32.400 --> 0:04:35.840 as well as stretched expectations for earnings growth, you have 0:04:36.000 --> 0:04:39.200 this big high bar to jump over, which just suggests 0:04:39.279 --> 0:04:42.279 to get used to more volatility. So what we're talking 0:04:42.279 --> 0:04:45.600 to clients about is to say that if that volatility comes. 0:04:45.360 --> 0:04:47.560 What will you do with it? The classic Walter. 0:04:47.400 --> 0:04:49.719 Demer line of when it comes time to buy, you 0:04:49.839 --> 0:04:52.440 won't want to. So we're trying to get our minds 0:04:52.480 --> 0:04:55.680 in process of accepting this volatility, wanting to step into 0:04:55.800 --> 0:04:58.520 it versus running away from it. But certainly we think 0:04:58.520 --> 0:05:02.040 it's that wide choppy rain, not necessarily low fall up 0:05:02.040 --> 0:05:02.560 into the right. 0:05:02.640 --> 0:05:06.400 Is it choppy because of underlying economics or because of policy. 0:05:06.440 --> 0:05:09.920 Probably policy and policy of course could drive and influence 0:05:09.960 --> 0:05:14.080 the underlying economics. We think that big sweeping tariff policy 0:05:14.160 --> 0:05:16.679 is certainly a dampener of growth. It raises the question 0:05:16.800 --> 0:05:21.560 around at supply chain disruptions, which could be inflationary. But 0:05:21.680 --> 0:05:25.239 those policy wild cards of do we get tax reform, 0:05:25.400 --> 0:05:28.760 tax cuts or not, do we get higher tariffs. All 0:05:28.800 --> 0:05:32.440 of these things are potential sources of volatility, and because 0:05:32.480 --> 0:05:35.600 you're training at such high valuations today, there's not a 0:05:35.600 --> 0:05:39.800 lot of wiggle room to absorb that higher uncertainty. 0:05:40.000 --> 0:05:42.360 So terrorifts for you definitely are a tail risk. A 0:05:42.360 --> 0:05:44.000 lot of individuals have come on and said that, but 0:05:44.640 --> 0:05:46.920 a tax cut and a big tax plan that would 0:05:46.920 --> 0:05:49.360 be a boost. How do you think about the sequencing 0:05:49.400 --> 0:05:50.920 of all this, Well. 0:05:50.800 --> 0:05:52.839 That's the thing that we think it could be inverse 0:05:52.880 --> 0:05:56.640 from the twenty sixteen sequencing, where we got tax cuts 0:05:56.640 --> 0:05:59.000 first and then we got tariffs, and that's one of 0:05:59.000 --> 0:06:01.040 the reasons for the weak market that we had in 0:06:01.080 --> 0:06:04.600 twenty eighteen. This time around, tariffs could happen first, and 0:06:04.640 --> 0:06:06.760 we still have a big question mark as to whether 0:06:06.839 --> 0:06:10.040 or not you even get that corporate tax cut simply 0:06:10.080 --> 0:06:13.240 because you are negotiating four point seven trillion dollars of 0:06:13.360 --> 0:06:17.120 existing taxes with a very slim majority in the House. 0:06:17.480 --> 0:06:20.200 A big question mark if you can get us down 0:06:20.320 --> 0:06:23.760 to eighteen percent on the corporate tax rate given everything 0:06:23.760 --> 0:06:25.479 else you're negotiating. 0:06:25.080 --> 0:06:27.640 Let's finish on bitcoin just to count ninety eight k 0:06:28.279 --> 0:06:31.800 all time high multiple choice, A risk anset on steroids, 0:06:32.360 --> 0:06:36.039 an important diversify for portfolios, or a proxy to play 0:06:36.040 --> 0:06:39.320 some huge momentum societal shift over the next few years. 0:06:39.360 --> 0:06:40.200 Which one is it. 0:06:40.480 --> 0:06:44.120 DA and B meaning that you think it's It is 0:06:44.240 --> 0:06:47.280 definitely a liquidity proxy. This is a proxy for how 0:06:47.360 --> 0:06:50.279 much liquidity is slashing around in the market. We certainly 0:06:50.320 --> 0:06:52.560 have seen that play out in other cycles that when 0:06:52.600 --> 0:06:56.280 the FED is removing liquidity, Bitcoin is typically done poorly. 0:06:56.600 --> 0:06:58.839 This is a world that given the FED is cutting 0:06:58.880 --> 0:07:01.919 rates with financial can so easy. That is supportive of 0:07:01.960 --> 0:07:04.320 this kind of asset. We think it is also a 0:07:04.360 --> 0:07:09.160 psychological commodity that captures fears about dollar debasement, the fact 0:07:09.160 --> 0:07:11.240 that you have high fiscal spinning, the fact that you're 0:07:11.280 --> 0:07:15.160 talking about even more monetary spin or stimulus, which just 0:07:15.200 --> 0:07:18.000 supports this notion that there are people who are afraid 0:07:18.160 --> 0:07:21.160 of dollar debasement, and thus this is their way of 0:07:21.200 --> 0:07:23.080 being able to get access to that risk. 0:07:23.120 --> 0:07:24.960 So Lisa would like to know some form of inverse 0:07:25.000 --> 0:07:28.320 correlation between the performance of a twenty year oaction and bigcoin. 0:07:28.520 --> 0:07:29.000 Is that right? 0:07:29.200 --> 0:07:32.160 All I can say is a psychological commodity tulips, where 0:07:32.160 --> 0:07:35.320 a psychological commodity you can say pretty much anything. 0:07:35.040 --> 0:07:37.400 Or haven't got to guess so much. Left Malpert, I'm not. 0:07:37.440 --> 0:07:39.840 Just saying that the crypto is tulips, but I will 0:07:39.880 --> 0:07:44.320 just say that a crypto platform founder of tron, Justin Sun, 0:07:44.560 --> 0:07:46.800 bought a banana that was duct taped to a wall 0:07:46.840 --> 0:07:49.720 for six million dollars. Yes, okay, So I'm just looking 0:07:49.760 --> 0:07:52.880 at this and I'm like, is that psychological kind of 0:07:52.920 --> 0:07:55.160 commodity is sort of to ease your fears? 0:07:55.480 --> 0:07:58.880 I think that that is the bubble scenario into twenty five, 0:07:59.000 --> 0:08:02.200 is that we get a bark of speculative fervor, and 0:08:02.240 --> 0:08:05.360 that is the scenario where you could see runaway markets 0:08:05.400 --> 0:08:09.840 because people start yoloing on bananas taped two walls, and 0:08:09.880 --> 0:08:11.920 that could be something that would make its way into 0:08:11.920 --> 0:08:15.320 broader equity markets where you see valuations push up into 0:08:15.440 --> 0:08:16.760 even more rarefied air. 0:08:17.080 --> 0:08:19.880 You don't sound like a crypto purist at all. A 0:08:19.960 --> 0:08:22.239 lot of these conversations years ago when we were trading 0:08:22.280 --> 0:08:24.680 down there, ten k, same conversations, and here we are 0:08:24.760 --> 0:08:26.240 up by one hundred totally. 0:08:26.280 --> 0:08:28.600 I think that anyone who's been barishing crypto has been 0:08:28.680 --> 0:08:31.720 humbled massively. And there's a lot of questions around exactly 0:08:32.040 --> 0:08:34.640 the idea of blockchain and how it could be used 0:08:34.640 --> 0:08:36.480 in supply chains that have cost a whole host of 0:08:36.480 --> 0:08:37.440 different asset classes. 0:08:37.520 --> 0:08:38.959 So there is a lot of value here. 0:08:39.000 --> 0:08:40.920 That's a good clean up effort. That one right there, 0:08:41.080 --> 0:08:43.880 bigcoin right now ninety AK all time highs up this 0:08:43.920 --> 0:08:46.360 morning by a round about four percent. Cameron, thank you, 0:08:46.440 --> 0:08:48.199 Thanks going to see it. Thank you, Cameron Dawson of 0:08:48.280 --> 0:09:01.160 New h Weel. The former Google CEO Eric Smith joins 0:09:01.240 --> 0:09:04.800 us on his latest book, Genesis, Artificial Intelligence, Hope and 0:09:04.880 --> 0:09:07.360 the Human Spirit. Eric joins us now for more. Eric, 0:09:07.400 --> 0:09:09.120 Welcome to the program sir. I want to pick up 0:09:09.120 --> 0:09:11.600 on that one word hope and ask you how much 0:09:11.600 --> 0:09:13.679 hope I should have that this goes right, and start 0:09:13.679 --> 0:09:17.320 with this quote from Foreign Affairs magazine. It read as follows. 0:09:17.960 --> 0:09:20.760 In cases where some humans might face off militarily or 0:09:20.760 --> 0:09:25.280 diplomatically against the highly AI enabled state, or against AI itself. 0:09:25.600 --> 0:09:29.360 Humans could struggle to survive, much less compete. Such an 0:09:29.400 --> 0:09:34.400 intermediate order could witness an internal implosion of societies and 0:09:34.440 --> 0:09:38.400 an uncontrollable explosion of external conflicts. So you've got to 0:09:38.400 --> 0:09:40.600 calm meet down, Eric. Should I have hope that this 0:09:40.679 --> 0:09:41.160 plays out? 0:09:41.160 --> 0:09:43.439 Well, Well, let's. 0:09:43.240 --> 0:09:46.479 Start with a hope that either of your show is incredible. 0:09:48.080 --> 0:09:51.680 Previous guests talked about two percent productivity. Imagine that productivity 0:09:51.720 --> 0:09:54.600 goes to five percent a year because of this technology. 0:09:54.720 --> 0:09:56.040 So there's every reason to think that. 0:09:56.000 --> 0:10:00.920 There's enormous land businesses, inventions, science, health, and so forth 0:10:00.920 --> 0:10:03.400 to get invented. But the same is also true for 0:10:03.440 --> 0:10:06.040 the invention of conflict and war. And if you think 0:10:06.080 --> 0:10:08.400 about it, it makes absolutely no sense to put somebody in 0:10:08.480 --> 0:10:10.480 a fighter jet up in the air and have them 0:10:10.480 --> 0:10:13.160 be shot at by another missile. It makes much more 0:10:13.200 --> 0:10:14.960 sense for that fighter pilot to be sitting on the 0:10:14.960 --> 0:10:18.200 ground and having a swarm of the equivalent. 0:10:17.760 --> 0:10:18.319 Of those jets. 0:10:18.400 --> 0:10:21.920 Let's just call them powerful robots, powerful drones that act 0:10:21.960 --> 0:10:26.320 in synchrony to achieve the objective of this attacker or 0:10:26.360 --> 0:10:30.080 to defend yourself, and the future of war is autonomous 0:10:30.160 --> 0:10:31.680 and networked and AI driven. 0:10:32.600 --> 0:10:34.840 This is something that a lot of people have focused on, 0:10:35.080 --> 0:10:38.040 in particular how the US is going to evolve in 0:10:38.080 --> 0:10:39.880 this manner, as well as how China is going to 0:10:39.880 --> 0:10:42.000 evolve in this manner, how they're going to use some 0:10:42.040 --> 0:10:46.240 of the space satellites to help coordinate that effort. Eric, 0:10:46.280 --> 0:10:50.000 do you feel like right now one superpower is winning 0:10:50.080 --> 0:10:52.880 versus the other? What is the best way to gain 0:10:52.920 --> 0:10:55.520 preeminence in a military AI sphere. 0:10:56.440 --> 0:10:59.120 Well, when doctor Kissinger and I went on his last 0:10:59.120 --> 0:11:02.480 trip to China, I was convinced from that meeting that 0:11:02.559 --> 0:11:04.800 China was two to two and a half years behind us, 0:11:05.320 --> 0:11:08.600 But I am now wrong. It turns out that in 0:11:08.640 --> 0:11:11.480 the last couple of weeks China has brought out software 0:11:11.520 --> 0:11:15.400 models what are called language large language models that are 0:11:15.480 --> 0:11:18.040 rivals of the best American ones, which I never thought 0:11:18.040 --> 0:11:20.360 would be possible. One is called quinn An other words 0:11:20.400 --> 0:11:24.079 called hong Yung. And it looks like they've caught up 0:11:24.640 --> 0:11:28.320 or they're very close behind. And it looks like China 0:11:28.400 --> 0:11:31.120 has decided that it's another part of its industrial policy, 0:11:31.160 --> 0:11:34.800 along with its focus on cellular dominating the battery industry, 0:11:34.840 --> 0:11:37.000 dominated in the car industry, et cetera. So they're willing 0:11:37.040 --> 0:11:39.800 to spend the money. What's interesting is that it does 0:11:39.960 --> 0:11:42.680 frame the narrative of China versus the US as the 0:11:42.720 --> 0:11:45.760 defining narrative. And one of the more interesting questions, which 0:11:45.800 --> 0:11:47.880 we discussed at some length in the book, is what 0:11:47.960 --> 0:11:49.840 happens to the deterrence and what happens to all the 0:11:49.880 --> 0:11:52.120 other one hundred and ninety five countries that are not 0:11:52.200 --> 0:11:55.680 China and not the US. These questions are really important 0:11:55.720 --> 0:11:59.520 because the power of this technology upends society in so 0:11:59.600 --> 0:12:02.920 many ways, economically, the way we govern, the way we 0:12:03.000 --> 0:12:04.760 reach language, and so forth and so on. 0:12:05.320 --> 0:12:06.960 So there are a lot of questions within this, and 0:12:07.080 --> 0:12:09.560 this could be a half an hour discussion, but one 0:12:09.600 --> 0:12:11.600 of them is who should be financing and who should 0:12:11.600 --> 0:12:15.960 be leading the national efforts to gain pre eminence in 0:12:16.000 --> 0:12:18.360 this sphere. And you have to wonder, you talk about 0:12:18.440 --> 0:12:22.360 China as a state organized, state funded type of effort 0:12:22.440 --> 0:12:25.280 that is coordinated in that manner, how should it be 0:12:25.360 --> 0:12:28.520 directed in a place that does consider itself capitalist, like 0:12:28.559 --> 0:12:29.360 the United States. 0:12:30.600 --> 0:12:33.640 Well, the Chinese model is what is called civil military fusion, 0:12:33.840 --> 0:12:37.480 where they subsidize their biggest companies. No one in America, 0:12:37.640 --> 0:12:39.720 not even in the companies, thinks that the thinks that 0:12:39.800 --> 0:12:43.360 the largest American companies need to be subsidized. But let 0:12:43.360 --> 0:12:47.080 me make an argument that if general intelligence, that is 0:12:47.200 --> 0:12:51.160 human intelligence, is to be invented, it should be invented 0:12:51.320 --> 0:12:53.640 in the United States and under control. 0:12:53.280 --> 0:12:54.959 Of Americans and the American government. 0:12:55.440 --> 0:12:58.120 And I don't mean managed, but I mean under the 0:12:58.200 --> 0:13:01.559 legal control of our country, our citizens, at our democracy, 0:13:02.320 --> 0:13:04.200 and getting there first is a big deal. 0:13:04.240 --> 0:13:06.199 A number of us have talked for some time. 0:13:06.480 --> 0:13:10.040 That there should be ANAI for America initiative where the 0:13:10.040 --> 0:13:13.719 government works closely with the private companies and figures out 0:13:13.720 --> 0:13:15.839 a way to make sure that we are ahead of 0:13:15.840 --> 0:13:19.760 ahead of time. In truth, however, the financial industry that 0:13:19.840 --> 0:13:23.160 you all invented, for which we are incredibly grateful, has 0:13:23.200 --> 0:13:24.600 been incredibly. 0:13:24.040 --> 0:13:26.559 Generous in terms of the ability to fundraise the billions 0:13:26.559 --> 0:13:27.760 of dollars that are required. 0:13:28.200 --> 0:13:30.640 And I should state, by the way that you guys 0:13:30.640 --> 0:13:32.320 have done such a good job in raising money, and 0:13:32.320 --> 0:13:34.920 we've done such a good job in actually getting the 0:13:34.920 --> 0:13:37.040 computer scientists around the world and the data and so 0:13:37.080 --> 0:13:39.240 on and so on. What we now need is energy. 0:13:40.080 --> 0:13:42.840 We are prolific consumers or energy, and we're going to 0:13:42.920 --> 0:13:45.120 run out. One estimate is that US will run out 0:13:45.160 --> 0:13:47.800 of all sources of energy by twenty twenty eight at 0:13:47.800 --> 0:13:48.760 our current growth rate. 0:13:49.280 --> 0:13:51.440 There's another topic you discussed in this book, which is 0:13:51.520 --> 0:13:52.880 AI to check AI. 0:13:53.480 --> 0:13:54.440 How can that work? 0:13:56.800 --> 0:13:58.680 When do you think about it? 0:13:58.760 --> 0:14:01.480 One of the things that happens in AI systems is 0:14:01.520 --> 0:14:04.840 you have compositional generations. What happens is you take one 0:14:04.880 --> 0:14:07.560 piece and another piece and you interlick them and they've 0:14:07.559 --> 0:14:10.800 never been linked together before, and it looks like when 0:14:10.880 --> 0:14:15.280 you combine those two you get emergent properties. So that's 0:14:15.320 --> 0:14:17.800 in and of itself interesting. So the question is what 0:14:17.920 --> 0:14:20.560 is the limit of that? How far can that system 0:14:20.600 --> 0:14:22.680 go up? I think it will get there, and I 0:14:22.680 --> 0:14:26.120 think that it's probable that we can build systems that 0:14:26.160 --> 0:14:30.040 are the technical term is super intelligent, where you have 0:14:30.080 --> 0:14:33.480 a simple system, sorry, a single system that is at 0:14:33.480 --> 0:14:37.360 the nineteth percentile of physics. 0:14:36.320 --> 0:14:40.120 Math, chemistry, and arts and so forth. No human can 0:14:40.160 --> 0:14:40.480 do that. 0:14:40.920 --> 0:14:43.760 It looks like these systems will be not only available 0:14:43.760 --> 0:14:46.520 in the next five years, because we already have examples 0:14:46.560 --> 0:14:49.280 of passing these tests already, but also that they'll be 0:14:49.320 --> 0:14:51.280 broadly available for all of society. 0:14:51.680 --> 0:14:53.400 That has huge implications. 0:14:53.400 --> 0:14:56.320 We've never had an experiment where each and every one 0:14:56.360 --> 0:14:59.240 of us has a polymath, you know, the Einstein type 0:14:59.280 --> 0:15:01.760 scientists at our back and call. 0:15:02.120 --> 0:15:06.280 And furthermore, that scientist, whatever you want to call him 0:15:06.360 --> 0:15:06.840 or her or. 0:15:06.880 --> 0:15:10.480 Is, is capable of writing code, doing agents, and making 0:15:10.520 --> 0:15:11.080 things happen. 0:15:11.440 --> 0:15:13.720 How do you think the United States competes with China 0:15:13.920 --> 0:15:16.560 when we have an incoming administration that wants to put 0:15:16.640 --> 0:15:19.280 up tariff walls, and even this administration who's been putting 0:15:19.280 --> 0:15:22.440 export controls on some of our high tech semiconductors. 0:15:23.720 --> 0:15:25.880 I am not in favor of broad tariffs. I never 0:15:25.920 --> 0:15:26.280 have been. 0:15:26.360 --> 0:15:28.920 I'm the son of an economist and a grandson of 0:15:28.920 --> 0:15:32.560 an economist, and tariffs are essentially taxes. What I am 0:15:32.600 --> 0:15:36.240 in favor of is restrictions or limitations for strategic reasons. 0:15:36.640 --> 0:15:40.000 It's really important that we win in this race against China. 0:15:40.520 --> 0:15:44.640 And so the things that the Trump administration Biden administration 0:15:44.720 --> 0:15:47.640 to limit, for example, hardware access, were really smart. And 0:15:47.680 --> 0:15:49.720 I know because I was part of a commission that 0:15:49.880 --> 0:15:53.320 recommended it way back when in fact was adopted. 0:15:53.400 --> 0:15:56.960 Great job. So the question here is ignoring the tariff. 0:15:56.640 --> 0:15:58.160 Question, which I just don't like and I think is 0:15:58.240 --> 0:16:01.360 just another tax. How do you control how do you 0:16:01.400 --> 0:16:03.560 control and limit what China does? And how do you 0:16:03.920 --> 0:16:05.720 how do you amplify. 0:16:05.240 --> 0:16:06.040 What America does? 0:16:06.880 --> 0:16:08.640 And you sit there and you go, well, you're doing 0:16:08.680 --> 0:16:10.600 pretty well, right, everybody's making a lot of money. 0:16:10.600 --> 0:16:12.680 There's all this growth, and Dy's doing well. All the 0:16:12.720 --> 0:16:15.560 tech companies are doing well. But let me explain what happens. 0:16:15.880 --> 0:16:18.120 You have a slope that's like this, and it keeps 0:16:18.160 --> 0:16:20.320 going up and up and up with humans. 0:16:20.760 --> 0:16:22.920 At some point the industry. 0:16:22.480 --> 0:16:25.600 Believes that there will be AI scientists, that is, non 0:16:25.680 --> 0:16:28.880 human scientists, and he or she who gets there first 0:16:29.120 --> 0:16:31.320 gets a slope like this and all of a sudden boom. 0:16:31.560 --> 0:16:34.160 Yeah right, we're really really growing fast. 0:16:34.600 --> 0:16:37.200 These network effect businesses are what we do in our 0:16:37.240 --> 0:16:40.800 in our competitive environment against each other under US regulation. 0:16:41.000 --> 0:16:43.040 I want that to be true globally for the US. 0:16:43.240 --> 0:16:45.040 Eric, I can sell to you world and thin of 0:16:45.120 --> 0:16:47.800 having your back students to continue the conversation. Congratulations on 0:16:47.800 --> 0:16:49.600 the new books. So we pretty shake a time. The 0:16:49.640 --> 0:17:02.320 full mcgogle CEO Eric Smith begin this out with Trump's 0:17:02.320 --> 0:17:04.560 treasury pick still very much up in the air following 0:17:04.560 --> 0:17:07.680 meetings with Apollos, Mark Rowan, and former FED Governor Kevin Walsh. 0:17:07.760 --> 0:17:10.600 Investors still waiting for President elect Donald Trump to make 0:17:10.600 --> 0:17:13.200 a final decision on the individual who will go into 0:17:13.240 --> 0:17:16.120 twenty twenty five facing down a huge to do list. 0:17:16.320 --> 0:17:18.919 Joining us around the table the IBM Vice chair the 0:17:19.000 --> 0:17:22.560 former National Economic Council Director Gary Cone, Gary, good morning, 0:17:22.720 --> 0:17:24.400 Good morning, Thank you, Seeyah, thanks. 0:17:24.200 --> 0:17:24.720 For being here. 0:17:24.760 --> 0:17:26.520 I think we need to take a big step back 0:17:26.720 --> 0:17:30.320 in FANCO several years back to twenty sixteen, twenty seventeen. 0:17:30.720 --> 0:17:32.680 Just frame for us what you had to face down 0:17:33.000 --> 0:17:35.399 in sixteen going into seventeen and how long the to 0:17:35.400 --> 0:17:36.520 do list was back then. 0:17:37.160 --> 0:17:39.080 So I think we should take even a bigger step 0:17:39.080 --> 0:17:43.080 back and remember what the environment was. If you go 0:17:43.280 --> 0:17:46.480 back to the economic environment as we were going through 0:17:46.520 --> 0:17:51.960 this exact period, we had a environment where we had 0:17:52.080 --> 0:17:55.159 just started just barely started to come out of the 0:17:55.400 --> 0:18:01.400 Fed's zero interest rate policy, quantitative easing and a decade 0:18:01.600 --> 0:18:06.560 of Fed articles would ever be inflation again. We were 0:18:06.600 --> 0:18:09.600 just starting to turn that corner. We had come through 0:18:10.000 --> 0:18:15.399 obamaed four years or eight years of basically saying, you know, 0:18:15.400 --> 0:18:21.240 there's been a very tough business environment, highly regulated. You know, 0:18:21.280 --> 0:18:23.800 how do we get business re engaged in Trump won 0:18:23.840 --> 0:18:25.800 this victory, it looks very similar where we are today, 0:18:25.840 --> 0:18:29.440 except you know, FED funds were seventy six basis points 0:18:29.480 --> 0:18:33.679 back then. They're four and a half percent today. National 0:18:33.720 --> 0:18:37.959 debt was about twenty trillion. We're thirty five trillion dollars 0:18:38.040 --> 0:18:41.760 right now. So we're in a pretty fundamentally different place. 0:18:41.840 --> 0:18:43.800 And then as you look where we are today, not 0:18:43.840 --> 0:18:48.080 only have we a pretty decisively different position in rates 0:18:48.119 --> 0:18:51.639 and debt, I think the President elect is walking into 0:18:51.680 --> 0:18:55.360 a environment, with that high interest rate environment where housing 0:18:55.400 --> 0:18:59.240 prices have gotten really out of touch for most Americans 0:18:59.480 --> 0:19:02.320 and there's a real push to try and make housing 0:19:02.359 --> 0:19:05.960 more affordable. You look at the way Treasury has decided 0:19:06.000 --> 0:19:09.160 to fund that additional debt. They've been very short dated 0:19:09.160 --> 0:19:11.800 on the curve, which I think provides an enormous amount 0:19:11.840 --> 0:19:15.360 of risk in refunding. And we all worry about refunding 0:19:15.359 --> 0:19:18.320 of Treasury. So I think we've got to have a real, 0:19:19.680 --> 0:19:24.639 a real refunding situation where we roll out maturities. I 0:19:24.680 --> 0:19:26.720 remember talking to the President like eight years ago by 0:19:26.760 --> 0:19:28.320 doing a fifty year and a one hundred year. I 0:19:28.320 --> 0:19:29.720 still think we should have done a fifty year one 0:19:29.760 --> 0:19:30.440 hundred year when. 0:19:30.400 --> 0:19:30.920 Rates were low. 0:19:31.760 --> 0:19:33.800 And then you think about the situation with state and 0:19:33.840 --> 0:19:35.920