WEBVTT - Mary Erdoes Talks Credit Market and AI

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News. Really happy to say

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<v Speaker 1>that joining me right now is JP Morgan, CEO of

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<v Speaker 1>Asset Management and Wealth Management, Mary Rudos. Good to have

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<v Speaker 1>you here with us. It's been a really busy a

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<v Speaker 1>couple of days, and actually we're only day one of FII,

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<v Speaker 1>but JP Morgan was here on Sunday. You were celebrating

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<v Speaker 1>your ninety year anniversary in Saudi Arabia, and I've got

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<v Speaker 1>to say, for those who are unfamiliar with Saudi Arabian

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<v Speaker 1>history even before oil was discovered.

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<v Speaker 2>Absolutely, I'm so happy to be here with you. And

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<v Speaker 2>if you all could only see the crowds of people

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<v Speaker 2>that are here, nine thousand delegates here in Riod for

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<v Speaker 2>the FII. It's a really exciting time period, but it's

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<v Speaker 2>even more exciting for JP morgan ninetyeth year anniversary celebration

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<v Speaker 2>with all of the ministers and important heads, minister of

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<v Speaker 2>different sectors and the like. But it is incredible to

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<v Speaker 2>think that ninety years ago we were facilitating gold payments

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<v Speaker 2>and moving it here into the region before oil was

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<v Speaker 2>even discovered, and the journey that we've been on with

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<v Speaker 2>all of our partners here. It was great to see

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<v Speaker 2>at the JP Morgan event that we had on Sunday

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<v Speaker 2>night to celebrate so many of the ministers said I

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<v Speaker 2>was trained by the JP Morgan credit training program back

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<v Speaker 2>in the day, and so we're very proud of that

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<v Speaker 2>and our partnership that we've had for so many years.

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<v Speaker 1>Quite the evolution for both JP Morgan and of course

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<v Speaker 1>for the country as well. Now we talk about diversification

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<v Speaker 1>away from oil, but you sent an opportunity ninety years ago.

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<v Speaker 1>Now there are so many banks coming to the region.

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<v Speaker 1>It's becoming a lot more competitive. How do you hold

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<v Speaker 1>on to your market share and competes versus all of

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<v Speaker 1>the other international banks this market shap It's.

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<v Speaker 2>Competitive everywhere in the world, and it's increasingly competitive here.

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<v Speaker 2>We're very proud we have four hundred and thirty people

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<v Speaker 2>in the region. We just this week named riad as

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<v Speaker 2>our global headquarters for the region here, so we're very

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<v Speaker 2>excited about what that means for the opportunity. But you know,

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<v Speaker 2>we've soitate inbound and outbound payments, investments, all of the

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<v Speaker 2>things that make the world go round, and we work

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<v Speaker 2>very hard and it takes very long term time to

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<v Speaker 2>make these partnerships and develop the trust and so to

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<v Speaker 2>think about not just one industry, but many industries, to

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<v Speaker 2>go through hiccups, to ride through good times and bad times,

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<v Speaker 2>and you know that's what makes these relationships.

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<v Speaker 1>And as these countries have matured and grown very quickly,

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<v Speaker 1>what you have seen as an accumulation of wealth. So

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<v Speaker 1>wealth management is also a big focus for many banks.

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<v Speaker 1>Are you have a huge influx as well of ultra

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<v Speaker 1>HIH net worth individuals that again are adding to this cycle.

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<v Speaker 1>Would you say that wealth management investment priorities in this

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<v Speaker 1>part of the world are different from other gyal difference.

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<v Speaker 2>No different. You know, everybody has a home country bias.

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<v Speaker 2>We can't get away from it depending on where we live.

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<v Speaker 2>But everybody sees the opportunities. And if you just show

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<v Speaker 2>up at FII for a couple of days, all the

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<v Speaker 2>opportunities are here. Every major asset managers here, everyone's talking

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<v Speaker 2>about that opportunities. Many discussions on AI as you know,

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<v Speaker 2>but everything from energy to on shoring, reshoring, manufacturing and

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<v Speaker 2>all the different opportunities that exist.

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<v Speaker 1>Yeah, let me ask you about some signals that are

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<v Speaker 1>coming through from the US economy. Obviously we have the

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<v Speaker 1>FED meeting coming up to more of their widely anticipated

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<v Speaker 1>to cut interest rates, but CEO Dab Diamond a couple

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<v Speaker 1>of weeks ago was talking about there being potentially other

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<v Speaker 1>call approaches in the credit market, something to be alert to.

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<v Speaker 1>How do you see the signals coming through right now?

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<v Speaker 2>Yes, well, I mean we stress test the portfolio of

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<v Speaker 2>investments that we make with our own balance sheet as

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<v Speaker 2>well as our clients balance sheets each and every day,

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<v Speaker 2>and you have to do that, especially when you get

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<v Speaker 2>to top B levels in all of these markets of

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<v Speaker 2>which we've had. We haven't had a correction in a

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<v Speaker 2>long time. We haven't had a recession in a long time,

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<v Speaker 2>and so the closer you get to that time period,

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<v Speaker 2>nobody knows when it is. You have to make sure

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<v Speaker 2>that the clients and the balance sheet of whether it's

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<v Speaker 2>an individual well an institution of sovereign wealth fund or

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<v Speaker 2>our own bank is able to sustain that. And so

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<v Speaker 2>when we stress tests that we look for, you know,

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<v Speaker 2>what are the little even micro signs of what might

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<v Speaker 2>be going wrong. And that's that's our job that you know.

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<v Speaker 2>JP Morgan prides itself on fortress balance sheet. We want

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<v Speaker 2>to be there in good times and bad for our clients,

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<v Speaker 2>and so we need to make sure that we're able

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<v Speaker 2>to have the cash ability to help clients as they

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<v Speaker 2>as they ride through those times. And there aren't major signs,

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<v Speaker 2>but you're seeing, you know, little pockets of it. You

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<v Speaker 2>see a little amending extend on credit terms and the like,

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<v Speaker 2>and so we're watching it, and we're watching it very closely.

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<v Speaker 1>Yeah. How are you feeling about twenty twenty six? Again?

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<v Speaker 1>I started this off saying the federabout to cut interest

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<v Speaker 1>rates again? Yes, how do you see the momentum going

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<v Speaker 1>in to twenty twenty six? Because most recent results obviously

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<v Speaker 1>quite positive. Can the momentum continue?

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<v Speaker 2>Yes? I mean we should be seeing more inflation than

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<v Speaker 2>we are. There's a lot of things. Remilitarization should be inflationary,

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<v Speaker 2>Tariffs should be inflationary. It hasn't cut through the system

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<v Speaker 2>as much as you would have thought, and so you're

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<v Speaker 2>getting interest rate cuts that's very bullish for the economy.

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<v Speaker 2>You're getting a lot of reinvestment that's very bullish for

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<v Speaker 2>the economy. And so I think twenty twenty six is

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<v Speaker 2>setting itself up to be another great year. Just you

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<v Speaker 2>have to pick your pockets, you have to risk manage,

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<v Speaker 2>you have to make sure that the things that have

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<v Speaker 2>ridden up so well, have you right sized them? Have

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<v Speaker 2>you trimmed them to be in the in the in

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<v Speaker 2>the pocket of the portfolio that they should be.

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<v Speaker 1>So you mentioned artificial intelligence earlier, I do want to

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<v Speaker 1>ask you whether you are actually seeing a reternal investment

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<v Speaker 1>by introducing AI into your operations. And then also you

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<v Speaker 1>know whether actually their schooled for AI to replace people's jobs,

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<v Speaker 1>especially junior and analyst level.

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<v Speaker 2>Yeah, you know, I mean AI is a lot of

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<v Speaker 2>people have said, is there an AI bubble? I said,

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<v Speaker 2>that's like asking if there's a computer bubble. It's not

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<v Speaker 2>really a thing. AI is a new way of working

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<v Speaker 2>and it's a really important factor in all investments that

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<v Speaker 2>people make in all companies, especially JP Morgan. You know,

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<v Speaker 2>we spend a lot of time on it. As you know,

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<v Speaker 2>we spend eighteen billion dollars on technology a year and

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<v Speaker 2>we're on the forefront of many things, whether it's AI,

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<v Speaker 2>quantum computing and the like. But for us, it's about

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<v Speaker 2>deploying it in a way that you rethink how you

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<v Speaker 2>do things in the organization. Can you do it faster, better,

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<v Speaker 2>cheap or quicker smarter? Can you catch the errors? Can

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<v Speaker 2>you protect the clients, can you make sure that the

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<v Speaker 2>cyber defenses are even stronger than they would be. But

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<v Speaker 2>if you look at SMP five hundred companies, only about

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<v Speaker 2>ten percent of them say that they actually have AI

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<v Speaker 2>in their products and services out there. And if you

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<v Speaker 2>look at the mentions of AI when you talk about

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<v Speaker 2>quarterly earnings or even just our own investment managers going

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<v Speaker 2>and meeting for the different management teams out there around

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<v Speaker 2>the world and all the companies, it's only about forty

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<v Speaker 2>to fifty percent of international companies. The good news is

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<v Speaker 2>it's even higher in the US about seventy percent, and

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<v Speaker 2>that will trickle through. And it's just like how we

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<v Speaker 2>see it in our own company. You start with fixing

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<v Speaker 2>the no joy, you know, get rid of all the

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<v Speaker 2>nojoy work, try to get AI to optimize those kind

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<v Speaker 2>of things, and then over time you realize you have

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<v Speaker 2>to stop the way you're doing all things and rethink

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<v Speaker 2>entire processes and procedures. Why am I optimizing ten steps

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<v Speaker 2>when I maybe should have just gone from step one two,

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<v Speaker 2>step ten and removed everything in between.

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<v Speaker 1>Ultimately, do you see AI as a massive cost of flator?

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<v Speaker 1>Is that how you're thinking about it? From a business perspective.

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<v Speaker 2>It could be a cost of flator, but it should

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<v Speaker 2>be just a great efficiency gain and the better you

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<v Speaker 2>can do things and the better products and services, and

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<v Speaker 2>they're tailored just to you. I know exactly what you

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<v Speaker 2>want on which day, what you've been waiting for, what

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<v Speaker 2>you're nervous about, and how do I customize that, and

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<v Speaker 2>how do I do that at scale? And when I

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<v Speaker 2>can do that with AI? And if I have curious talent,

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<v Speaker 2>that's all you need is curiosity and a little AI,

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<v Speaker 2>and you can go very far in making the right

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<v Speaker 2>products and services for the clients of the future.

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<v Speaker 1>Yeah. Ultimately, though, do you see some of these jobs,

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<v Speaker 1>as I mentioned, at those entry level jobs being replaced

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<v Speaker 1>by AI?

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<v Speaker 2>Not at all. Somebody earlier today said, yes, a lot

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<v Speaker 2>of jobs will revis I totally disagree with that. I

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<v Speaker 2>think the jobs that will be replaced are those for

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<v Speaker 2>the people that are not curious, for the people that

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<v Speaker 2>are not using AI, for the people that don't say,

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<v Speaker 2>how do I rethink this? How do I dig in deeper?

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<v Speaker 2>And so every time you get to think about using

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<v Speaker 2>the technology that's at your fingertips and figuring out you

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<v Speaker 2>know how many times did you mention something last week

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<v Speaker 2>when I was watching you on late night Bloomberg TV,

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<v Speaker 2>which I do every night of my life, and it's

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<v Speaker 2>a great and it's a great joy to hear all

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<v Speaker 2>the things that you're covering, and you say to yourself, well,

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<v Speaker 2>if I could just plug that in and if I

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<v Speaker 2>could have it summarize what you're saying every night for me,

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<v Speaker 2>and I could think about how I'm going to apply that,

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<v Speaker 2>and then I take those vast streams of information. That's

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<v Speaker 2>all you need. You need curiosity, and you need great

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<v Speaker 2>people to do it. So I don't think it's a

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<v Speaker 2>job destroyer for those kind of people. I think it's

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<v Speaker 2>a job destroyer for the people that are waiting and

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<v Speaker 2>fearful that it is going to take over their job.

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<v Speaker 1>Mary, thank you so much,