Why Bitcoin WINS No Matter What Happens to Inflation

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Here's the one thing I will say about innovation. When you want to invest in innovation in a deflationary world, you're trying to find what Jeff Bezos said during the last 15 years, which is when Bitcoin was created. And what did Jeff Bezos say? Your margin is my opportunity. There's no more margin now in codebased stuff. It is in a freef fall. That is why software stocks are getting up. So where Bitcoin benefits is it doesn't get hurt by that.

What's going on guys? Today we got a great conversation with Jordi Visser. In this conversation, we talk about the decoupling between Bitcoin and software stocks. We talk about inflation versus deflation and what his expectation is. And then we get into the five different thematic baskets that he's been paying attention to, why they're up so much, and what exactly is happening in each one of them. And then, of course, we talk about the scarcity trade and why Jord is surfing through all of the different markets trying to find things that are full of shortages or scarcity and how he's thinking about investing his portfolio right now. Here's my latest conversation with Jordi Visser.

All right, Jordy. It looks like software stocks have taken a beaten into the end of the week and Bitcoin has stayed pretty strong here. So, help me understand are software and Bitcoin decoupling and is that a good sign for Bitcoin or is that more of a bad sign for software stocks?

Yeah, I think uh I think the reaction to well, first of all, IBM reported, Service Now reported and uh the market did not like either of the commentary in there. The earnings are still fine, but the overhang or the reality that I think uh probably started with just Silicon Valley recognizing that as the agentic world came, we have no terminal value on these companies has set back in. So, I've posted about this a few times over the course of the last month when we originally had the correlation break. It was a day where Oracle broke out. Software names were bouncing. But yesterday I or not yesterday, Wednesday I posted in X and I said that if you look at what's performed so far this month within the IGV, which is the software ETF, almost all of the top 10 names were related to crypto.

So let's separate Bitcoin for a second. Uh what is happening is the miners were kind of the ones that led way before Bitcoin and I mentioned them last week uh I think here but definitely on my weekly where I just said we've reached a point of compute shortage and if you can scramble and get anything related to AI that's where you want to go. We have bottlenecks throughout the world now. um it was only memory 4 months ago, but now it's spread to CPUs and because of Iran, it's spreading to chemicals and other places. You're going to have bottlenecks the rest of this year. So software still has the issue of AI progress, but then the Bitcoin miners in recently have started to benefit from the reality that we don't have enough compute.

So the question is where does Bitcoin sit? Well, first of all, with the miners getting a bid, well, that's obviously good for Bitcoin for another reason with the ecosystem. But I think an important dynamic is shifting and you and I have differed on inflation. There is really no doubt in my mind that inflation is going higher. Now I want to separate this again because I think we talked about this last week and so people hear this. I do not think the housing market's going to get better. I do not think wages are going to get better. I do not think the things that traditionally are correlated with inflation are going to get better. But there's no way to refute what came out in the PMI numbers this Thursday. Service and manufacturing PMIs are moving higher and most of them are at the highest levels since 2022. So you are getting back into a world where inflation has peaked on the survey side for all of these things which has a very high correlation as a leading indicator. And this is the thing I want to say to people. I don't care what the true flation number is today. I care about what it's going to be like in three months. and maybe their number will stay low. Headline CPI is the one that I have confidence in will be above 4% as we keep getting this data. And the reason is because the manufacturing bottlenecks are real and they are big.

And I heard this today and listening to a podcast with Craig Fuller and everyone should listen to this podcast because I like hearing people that talk about the economy and what's happening. This is a very unique economy. If I wanted to figure out where inflation was over the last 17 years, we were in a bare market in commodities for 17 years except for co. So the reason I kind of took a shot at people fitting things to historical data is today's world is not the same as it was from 2010 to 2015. We are in a commodity bull market. We have shortages across the globe. And what Craig Fuller talked about was freight is out of control all because of AI. All because of the one big beautiful bill. All because of lower energy costs here and higher energy costs around the globe. So natural gas is low. That'll keep help inflation a little bit down. Oil's higher. Gas is higher. Diesel's higher. That'll push it up. But the reality is memory prices, CPUs, semiconductors, that stuff. There's no there's no end in sight.

And the reason I bring this up for Bitcoin for people at some point Bitcoin is either in the abundant bucket or it's in the PI PMI sensitive bucket. It's a PMI sensitive. Its returns are there. The only thing missing which I still think will happen is year-over-year CPI will get above 4%. Three-month bills will stay below 4% and we'll have negative real yields. And I think that's what's happening is software is in a deflationary problem. So your world, Bitcoin is now moving into the inflationary world, my world, which is more related to commodities and scarcity.

One of the things that's interesting is you and I have talked in the past about Bitcoin being valuable both in an inflationary world and a deflationary world. And in the inflationary world, I think that's the one people are used to and saying, okay, uh if there is global liquidity increasing, this thing's very sensitive to that. And so it should be able to kind of sniff that out and go and and uh increase in uh price. Deflation, we've talked about this like abundance and scarcity and kind of the value proposition from that standpoint. Are those the same buyers of Bitcoin or is there like uh if you take a you know 100% of people who are uh in the investment community some of them are allocating capital in an inflationary environment but they'll actually go to cash if we move to a different regime or is it no doesn't matter you know kind of who you are you're going to end up at Bitcoin regardless of the regime right I always think about this idea of like an asset being different things to different people and so how do you think about Bitcoin's buyer in an inflationary versus deflationary

You know, this is a great question. Um, and I and I want to kind of use the Jeff Booth for this because I think he does the best job of saying that there is always deflationary pressures in a credit based fiat fiat system. Innovation is deflationary. We both agree on that.

Yes. Woo. If people are not getting jobs as easily, if they can't move up the corporate ladder, if there's affordability issues, well, that's the deflationary pressures that usually lead to more government stimulus. Well, we have government stimulus happening. So, when I say negative real rates, that may be some kind of economic wonk to people and they're not really thinking about it. That is these two forces at the exact same time. to have negative real rates, you have deflationary pressures which are keeping short-term rates low and you have inflationary pressures which are keeping CPI high.

Now, in the US, we don't have this, but in Brazil, they have what's called a basic basket. The basic basket that people need to survive on, well, I think the basic basket for young educated people in the US, where is my housing? Can I get an apartment in a city I want to live in? Nope. Not good. Um, where are food prices? Okay. Well, we have commodity inflation right now. Fertilizer prices are going up. Food inflation is not coming down. That's going to be an issue. Can you get a job anywhere you want? Yeah, you can get a job not anywhere you want. You might have to take a job not in the education based on the education you have because there disruption happening out of nowhere in the labor force. And so, you might not be able to do this job. You might have to go do a different job even though you have an education in this job. I think we've taken the basic things of let's say an advanced society and made it very challenging and that to me is the deflationary pressures on the one side that Bitcoin it usually brings the anger out of people. This is when people would want Bitcoin.

On the other side, when the government needs to have excess spending and regardless of what's happening on the fiscal side, we have a fiscal impulse right now. Tax refunds very high, tax receipts very low. Bonus depreciation for companies, which is another form of stimulus, is having a huge impact. Craig Fuller talks about this. I think all of these kind of half deflation, half inflationary pressures are creating an issue.

Here's the one thing I will say about innovation. When you want to invest in innovation in a deflationary world, you're trying to find what Jeff Bezos said during the last 15 years, which is when Bitcoin was created. And what did Jeff Bezos say? Your margin is my opportunity.

There's no more margin now in codebased stuff. It is in a freef fall. That is why software stocks are getting up. So where Bitcoin benefits is it doesn't get hurt by that. So it's got the one side now the inflationary side which it will benefit from and on the other side where it benefits from deflation is from the opportunity cost that an individual investor has. I need growth assets and this is the Rick Edelman argument. How do I invest for the next 40 years because I'm going to live longer. What growth assets can I have because those are the ones that I can be in. The growth assets are not working. hyperscalers and all of the things related to software. I think this is where bit Bitcoin separates itself in the second half of the year because of that dynamic playing out both inflation and deflation at the same time.

What is the thought process in terms of Bitcoin price action? Like when you say breaking out, uh that could be Bitcoin doesn't move and stocks fall, but it also could mean Bitcoin goes up a lot and stocks stay constant or go down. like how do you think of the relationship of these two and and how big maybe is it a separation?

No matter what my views have been this year, one thing has stayed constant. We will have earnings growth and we will have nominal GDP. End of story.

Uh we might not have real GDP to the level people are used to. But if nominal GDP 7 and inflation is five, then you get 2% real GDP and everyone goes, "Oh, it's not nominal GDP drives revenues. Nominal GDP drives earnings." Plain and simple. Um, if companies are able to control their expenses via AI through labor, then that's where profit margins are sitting up at high levels. So, I think what'll end up happening is you want to be long the stuff tied to the bottlenecks in the physical hardware world going forward. So, this is where I've talked about semiconductors and commodities and servers and anything physical. The software stuff I think will be in trouble and will remain in trouble. It has done such a big fall already that I'm not sure how much lower it can go overall, but I think it'll underperform.

But when you look at stocks relative to nominal GDP, that's where I've said if I had to guess, I think 10 years from now, public companies are not going to be the ones benefiting from AI. It's going to be private startup companies that actually never go public. There's going to be a change in the capital structure. The financial guardrails of the world are shifting and they're shifting towards crypto. That combination of AI disrupting public companies because public companies just can't adopt AI because having a lot of people is very difficult. And I think they're all learning that. And I got to be honest, one of the stories that will happen before the end of the year. I think a lot of these big companies are not going to see the benefit come through the way they think because it is just so hard. And I'm sure you've got your own experiences. How do we integrate this in a way the costs are going higher? The speed of it is going so fast and startup businesses don't have that friction of people inside the business, culture inside the business, legacy systems inside the business. It is a very difficult thing. And I just got to tell you, it's like it's like a telling a 60-year-old, you know, athlete, hey, why don't you go play football again? They might be in great shape, but they're not in great football shape. I don't think companies are in great AI shape.

you have these uh five thematic buckets or baskets that you've been writing about um to the 20 uh 22V platform and to the subscribers. I want to go through each one of them and if you can kind of just help us understand because they I think the common theme is they are potential solutions or they are potential names where there is massive scarcity and so you're really just taking the same idea and applying it to these different verticals it seems. Um, maybe we can go backwards and start with chemical because I don't think we've talked a lot about chemical companies, the chemical theme. Explain this one a little bit.

So, chemicals are very PMI sensitive, but they're also very semiconductor sensitive and also optical fiber. So, in there is optical fiber. So, one of the things all of these themes I've written about really from November of last year into the early part of this year and this was a transition point. These are all agentic names. So when you get back to pre-training and you think about getting AI up to this point, what was the major winner? It was Nvidia.

Um so people can hear these amazing stats. The S&P 500 now they've got different levels of you hear sectors, but then there's industry groups. Level two industry groups, the largest waiting in the S&P 500 is now semiconductors. It's now 17%. S&P is about $60 trillion which means you're talking about $10 trillion. Of the $10 trillion of semiconductors 7 and a half of the 10 are three companies Nvidia, Broadcom and Micron. Those were really the three major bene they benefited the most in the early part. Now Broadcom and Nvidia were the main beneficiaries from the data center buildout and the GPUs and everyone heard that. But beginning in November when Opus 4.5 came out, we started to shift towards AI agents. Micron really started to benefit because of memory. I was talking about memory all year last year is we're not going to have enough because agents are coming. Once that agent world kicked, everything shifted to inference. So Jensen Wong announced a partnership almost a takeover of Grock because his business is focused on the data center GPUs but he realizes well now there's going to be a lot of agents and this is the action world. This is not the thinking world. The action world takes a lot more east west traffic. So chemicals are necessary because of the Corning tubing. So Corning has fiber. Okay, they need tubing. Well chemical companies benefit from that bonding all the semiconductors together. So when it was just GPUs, not as important, but now you're packaging the GPUs with memory and with all of these other components. That's why when I talk about Marll, Marll is another one. You saw Texas Instruments last night. What happened to Intel? Those that's GPU one's power semi. All of the semiconductors are benefiting and that's because of the agentic side. So in that first chemical basket or not the first one but chemicals PMI sensitive does really really well with this and right now US chemical companies are benefiting because the chemicals here are made with natural gas and a lot of the ones overseas are with oil and natural gas is very low right now in the US. So US chemical companies so it's the beginning of a bull market in chemicals.

I wonder how much like a COO industries is benefiting from this, but it's private and you know they got a big chemical business and some of these players that you would never think are AIcentric companies but because they are the inputs uh obviously is probably pretty good for them.

Yeah. And the reason I want people to go listen to the Craig Fuller podcast, he specifically says in there that chemical shipments are through the roof.

So people have to understand that chemicals are used in almost everything. But this massive industrial buildout, and this is just the beginning, cuz chemicals are going to be used in the auto upgrade, and just so people hear this, cuz I've started to talk to more and more institutional investors, we may never sell more cars than we did this year. Meaning, we did 16 million. Okay, maybe next year we'll do 16. We've been around 16 million. We got close to 16 million in the 70s. So then people go, well, we're never going to sell more, so why would this be important? And it's like, okay, here's what's going to happen. And this is big for Qualcomm. Leading edge thing for people here. Qualcomm's not ready yet, but it's getting close. If we do 16 million next year, a good portion of that 16 million, let's assume 1 million this year were AI components, meaning you could speak to the car, the car could do things. Hey, move the wiper, do this. So, Alexa with inside the car.

That takes a lot more chips, takes a lot more chemicals for that. Well, next year maybe we do 4 million. So instead of 0% growth rate of autos, we're actually doing three 400% of AI auto

smart cars.

Exactly. And that's what's going to start happening every year. And so what people need to think about with semis is Jensen Yuang saying it's going to be an $85 trillion recycling eventually. What happens is if we have a 100 million cars owned in this in this country, which is less than there is, but if we have a 100 million, by the time we get 5 years out, maybe 80 of them are AI

because no one's going to want the older models. So that process is a lot more dollars that goes into semiconductor. This is endless, the upgrade cycle, and this is happening fast. So that's where chemicals fit in.

Let's talk about whole rack as a theme. So this really gets into a combination of the GPUs to the rack of things that go into a data center now. And this includes servers, it includes memory, it includes CPUs, it includes all of that stuff. So if Morgan Stanley wants to have some of their AI come from the cloud, so one of the providers, but then they go, "You know what, we need to also because of privacy issues, we need to house this stuff here." Well, they need to go back to the old world of servers. And so all of the Dell, the Ullet, Packard, all of those names have just broken out. Those are all part of the whole rack. So it's that it's it's literally not just semis. It's everything that people would need for the whole rack to actually be able to do AI inside their own device.

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You know what's funny to me is uh there's always these stories of like a huge inflection point in Silicon Valley was when you no longer had to like set up the server you just could like you know cloud get started whatever

the full circle of like now there's a bunch of businesses be like no no this cloud thing we're out on that. I don't want you have access to my data for training purposes or or whatever.

Do you remember how long it took to get companies to go to the cloud? Oh, you I mean you had a bunch of people who didn't trust it, didn't understand it, whatever. I will give you one interesting data point. Um I talked to one of the major model labs uh this past week and um we were talking to them and and I just on offhand uh mentioned the data labeling startups and how you know we've seen all these from the micro ones to the handshakes they just been exploding in revenue etc. And I started asking a little bit about the data labeling and it uh one of the interesting things they said is yeah we actually are much more focused on posttraining data now than pre-training data. And so you know I asked a couple more questions and and basically it sound although they didn't explicitly say this it sounded like they already have done so much training that now we are entering a place where it's all about the finetuning and and the evals and

it does to me at least it was like a reminder like we have come a far you know very long way even though it feels like it's still the starting line

5 years ago I mean almost none of this was being discussed. Well, we we kind of talked about this before and so people hear it for for use for us, this thing is already smart enough. What it's not smart enough, so the pre-training, the brain building, what it's not smart enough for is uh going through the physical world and making decisions in an automobile completely. So, it's not there yet. So, there needs to be a lot more training on interacting with the physical world. the memorization of all human knowledge it already has, but figuring out things to cure cancer, figure out things that we haven't done yet, it needs more work for that. So, I want people when they think about this to to really break it down to two separate things. There is now two tracks. There's still the pre-training that's necessary for all of the things that Elon Musk wants, that Demis want for the world's greatest problems, energy, all of that. At the same time, we're now entering the Agentic side. And when people hear Gentic, maybe their eyes gloss over and go, I don't know what that means. That's the action side. So you've got the thinking side and then you have the action side. For the action side, it's more east west traffic. And that's why with chemicals, with the whole rack, these are different components that are necessary. And for people listening, like the reason I put these indices together, I talk to the most sophisticated investors in the world. They are still behind this change. So, one of the reasons that we do the show together, one of the reasons I won't work for anyone again is because I need the time to listen to Dylan Patel was on a podcast that I listened to today while you were in your office and I was doing a a thing. I was listening he was on a podcast today.

You see him getting an edge on me. He literally he was camped out in the office next to me and he he knew I was on a call. I'm going to get an edge on him right now. I'm going listen to the thing that he hasn't had time to listen to and I'm going to go bring it up on the podcast.

You're in there having your meeting. I look at my watch and go, I got 25 minutes. This is a 45minute podcast.

2x. Exactly. Perfect. I already know. Look

how fast you did that math.

You know what's you know what's interesting though is um I saw a tweet. I I wish I remembered who who tweeted cuz I give him credit for it. But they said actually uh a great way to think about modern life is that we are in a bandwidth crisis. And they were talking not about hardware, software, they're talking about human bandwidth. And I think AI is a perfect example of it is nearly impossible to keep up with everything that is happening. And so when you get the overwhelming I don't have enough bandwidth, human brain goes into how do I prioritize? How do I 2x 3x you know all these different things that we try to work around.

Mhm.

But that's just an AI. Then if you're somebody who also happens to be a sports fan

or happens to be a pop culture fan or wants to read books or

how do you keep up with everything? It's impossible.

Uh this is the beauty of the decision I made and being able to sit there and listen to people and I want to use an analogy of of how important these podcasts and and this news is. So if you go to work and you want to go find out the the final score of the Nick game and you go to a box score and you look at the final score, you look at all the quarters when the game was, who scored the most points, and you go through all this, you actually know the result. Well, to be honest with you, that's what economists do. So, no offense to the economists listening, but I always wanted to build my own models that were based on leading indicators and lagging indicators because looking at the box score doesn't tell me anything about the next game. Did someone get hurt? Did someone leave limping, but they're still going to play? Is their jump shot off? Let let me go through and see if someone was seven for 10, but all, you know, the seven makes were dunks and the three misses were from three points. Okay. person didn't have a good shooting game just hadn't been go through it. You don't get the data by listening to Dylan Patel and Craig Fuller. Dylan Patel is on semiconductors like no one else. So, he knows all the box score, but he was at the game. Craig Fuller is at the game. I'd rather talk to those people and listen to those than read the box score. But for people that have jobs managing people doing this, the box score is all they can do because they don't have the time. So they depend on the economist in this day and age with podcast NX. It takes a lot to go get it, but that information is so real time. And I'll just give you a live example. I was doing a webinar this week for the subscribers and I had read a media report that was going viral through X around some issues. Not issues is probably the wrong word. Nvidia really focused on Korean heavy power companies and it even extending into ship building companies. They're trying to find ways to get more power.

So it fits my power shortage issue that's happening. But it also leads to power semiconductors and these stocks have started to go through the roof. Now this was before Texas Instruments. So when people asked me yesterday, what are some names? And I'm like on semi Texas Instruments and why now? And I just said, Jensen Yuang is now ready to release this. He's looking for new partners on this and power semis are going to be really important. That is all from an ex thing that was in the Korean media this week.

It's crazy.

It won't be news for for the Goldman Sachs and Morgan Stanley, honestly, until later. They can't do a report. They've got so many calls and meetings already set up. So, I don't like to have meetings. I don't want to be there. So, real time news and real time information from critical people.

Can I admit something that pains me, but I I got to be honest with you and with the audience. Do you know the number one activity that I find personal enjoyment in that has been sacrificed in my attempt to keep up with all this is reading physical books. I have found that over the last 6 months or so, I used to read about a book a week

and I would read everything from things that were workrelated to things I just enjoyed and everything in between. I've noticed that I have been reading a lot less, but I'm probably consuming more information.

So, it's like total consumption is going up, but most of the reading I used to do was things that were talking about the past. And so, I would barbell it. I want to be as current as possible and I want to be as rooted in history as possible. I find myself consuming less of the what happened in history or the, you know, biographies of people etc. because I'm so inundated with the like every single day there is something new and maybe it bounces that back out at some point but as I noticed that I started like I don't know if that's a good thing or not right but I I just naturally see myself going that way

so let me let me give you some um before you and I did a podcast I actually did a podcast it's called In Search of Green Marbles okay

I remember

you remember that on that podcast one of the episodes was why books are waste of time

oh god Now, this was pre-hat.

I find two things that we disagree on. Okay,

so here we go. No, no, no. Remember, I'm I'm a person of nuance and kind of, you know, I got a little George Carl in me. Like, read the words.

You already admitted it's a waste of time. You don't have the time for the books. So, that means it takes a lot of time, so it's a waste of time. Now, if you ever want to play a game, pick a book that you haven't read yet on history, okay? And look at what it is. take the the details of the book, put it into chat GPT and say, "Hey, give me a three paragraph write off of the what this book is about." Okay. Now, hit a new chat. Ask it the same prompt again. You know what you're going to get?

Two different versions of the same thing. There are there are so many problems with a book. It's one person's opinion. Mhm.

If you get stuck in a world of trying to figure out what something is, when I do my AI training videos, uh, that some of your guys help me with here, part of my process is to take one thing, which think of as like a book, and let five separate LLMs do a deep research report on them. It's like five different people giving you another book version, and then I take those five and I consolidate them. It does a bunch of things. It gets rid of hallucinations, but then it gives you kind of a more in-depth view that takes the key components. So, if you ask five eyewitnesses about a crime that happened outside and five of them will give very different accounts, the ven diagram of where they all agree is usually the most useful information. That's what the green marbles means. That's what I do with AI. So, that's why books were a waste of time.

So now you're really going to pull all of my uh admitting things. Uh in my understanding and uh uh exploration of why I was not reading more books, I actually did something similar where um when I was in high school, my best friend was Spark Notes. I don't know if you had this when you were in school. So Spark Notes was basically

I was in school a long time ago, my friend.

Yeah, Well, so when I was in school, you could read the book they told you to read. Or if you were like me and you spent more time trying to not read the book, you would go find the Spark Notes. We were candle lit.

Yeah. Oh jeez. Okay. Um and so uh I asked, "Hey, can you create the spark notes for this? I want to be able to read in 15 minutes or less, right?" And it would go and it' give me an thing. And um I realized though, one of the things I love about some of these books is the anecdotes. And so I've been trying to figure out, can I basically have the model not give me the summary,

but give me the anecdotes. Go and find five stories in this thing that, you know, would be surprising or or whatever. It's not perfect. And there's some things about like don't let it do web search. Instead, have it, you know, actually get the uh like the Google book text, etc. In 6 months, you're going to be able to do all this stuff in a pretty interesting way.

And maybe the part I'm most interested in is and then what happens when you tell it, okay, now create a video that's 15 minutes long that explains to me all the major concepts of this. And it's like having, you know, somebody who read the book and then tells you all the answers. And so to me, like as we head this way, like maybe I should go sell all my physical books. Like I'm uh I'm I'm intellectually short and shouldn't be.

All right. So let let me since all the writers hate me now, let me let me let me give um so I love I love the Steve Jobs book. Okay. I love the

Isaacson's book.

Yes. Is book and and Josh Weightkin wrote the art of learning which I love. Great book. So if I use those two, the common thread between two of them, which AI cannot do,

they're experiential.

Yes.

So the Jobs book is both the history of Jeepbot, but it's also his experience with Steve Jobs. I like personal experiences because I learn from those. So I don't want people to think that like I'm not a fiction reader because I I'm insatiable learner and there's just something that fiction doesn't connect with me. I think it's ADHD and I'm constantly looking to learn. It just is. I I don't rest that much. I don't need a lot of sleep. I get my sleep because I get my HRV and I want to stay young. But I do love the concept of sitting with certain books that the experiential side grabs me. And that's why when you read my Substack or you read my works, there's always something personal in there because my own experience of things in life becomes the trigger point or the dot connection to explore in a book. and and hear other.

So you're you're using experiential, I'm using anecdote. Same thing. Like that's a I I actually I'll give you a good example. Um I forget uh there's a podcast called Rain Makers. Uh my friend Rahm uh put together and in it he talks about Philip Ashawitz who uh AEG like they own a lot of like the sports arenas and stuff like this. um at a time there was a time where he was buying up all of the like Regal cinemas etc. and the movie business was the the first time the movie business was tanking and everyone said it was over and everyone's like what is this guy doing? Why is he buying up all of the movie theaters and in that um telling of it he realized that nobody gets to the movie theater late everyone shows up at least 10 minutes early. So he was the first guy who realized I have a captive audience of you know a couple hundred people. So he started playing ads before the movie started and he completely changed the economics of the movie theater and you know was able to revive this thing.

So I was like wow if you have a captive audience you can play ads and so literally if you come up to our conferences you will see everyone tomorrow we will play ads during the conference and I got it from that book. It's like that's the stuff that I love is the anecdote that you can pull out and say hey how do I apply this?

AI is not yet there to to be able to grab that. No. And I I I do not believe that AI it it's going to take a long time for it to understand the the nuances of the of what drives people's decisions, the psychology of people. I just don't think it's going to be there quickly.

Let's talk about uh mythos. Mythos, whichever way we want to mythos. Mythos.

I've made the decision. I'm I'm drawing a line. It's mythos.

Take that. Uh mythos. Um you think that this story should scare a lot of people. Why? I So the story is that apparently unauthorized users had access to it again.

What does that even mean?

Yeah, that probably means they think the Chinese have because there was a report today that whatever the case is because the Chinese have apparently been um going through the distillation process with all the M whatever the case is. I think it says two things. One is it is ridiculous for people to not think that people can hack into anything already. Mhm.

It's just it's going to happen. Um, number two, it does mean that people should expect that one of the biggest dangers from AI is AI itself. And I do think there's going to be a hacking situation this year. I do think cryp cryptography is going to become a place that is more respected, uh, which will help Bitcoin as well. But I do think

Bitcoin has been all over that one for half a decade and a half. I and again um you're going to have issues for sure with artificial intelligence when you get to this much power in it. Um it's just we're accelerating so fast that we're not ready for it. So the same thing I said about enterprises they don't know how to use it. Uh there was a great uh post by Aaron Levy from Box.

Mhm.

He's excellent on the AI stuff. He's great and he his ex posts are very thought out and again you're you're talking about someone who's at the game. Um if you strip out I mean software cares about software but his whole thing about if >> the ar how how do you set up an architecture of AI for your company if the architecture you're using that you decide on today is obsolete in 3 months from now.

So think about where open AI was 6 months ago. I think Gemini was ahead of everyone 6 months ago and 6 months before that it was OpenAI and now it's Anthropic. Well, if Anthropic doesn't have enough compute and all of a sudden OpenAI rolls out some of that excess spending they did in their black wells allow them to get to the agentic side is moving to anthropic the best idea. I think it's very difficult for people to figure this out and I think governments everyone is going to have a hard time with it. So with Mythos, the fact that this model is such a step change over the last one, how do you deal with this? What do you deal with it? And that's why they've been giving it to banks, not just in the US, but now they're giving it to banks in Europe for the same reason. I just think it's going to be an issue that people should be ready for. It won't be the end of the world because we'll figure out defenses for it, but I think to get to a solution to the problem, we're gonna have a lot of problems first.

When you look at these new models and how fast they're coming up, um there's two things I've been told over the last two weeks I think are interesting. The first is an investment banker who covers many of the large model companies explained to me that there is a very large divide. What we generalized and and thought we knew about OpenAI is going after consumer. Anthropic is going after enterprise. He hammered home for me like oh whatever you thought was the focus. It's like 10 times more of a focus like anthropic if you are not part of the enterprise they do not care. So this whole idea of like giving it to the banks, giving it to these people, they also in a weird way by giving them access to a model that is you know the greatest best model whatever it's kind of marketing for also you should be a customer of ours and so if we can build this thing that you're scared of then maybe you'll come to us for the solution and so I do find that you know somewhat interesting is like the marketing component. The second thing is um do you know who is buying lots of data right now which is pretty interesting is Meta from what I understand. So they are out trying to get tons of different data sets that they almost at least what I'm being told they feel like they're a little behind and so how do they accelerate well let's go get a bunch of this data start training it etc. Uh my understanding is somebody who is not buying a lot of data is XAI. They've been hiring kind of contractors to go and do data labeling etc. But now SpaceX and Kursler.

Yeah.

And so it feels like everyone had a different strategy.

Y

and now it's not just a land grab on power and infrastructure and all this. it is now how do we get the data sets we need and then also the creative deal making going on in Silicon Valley whether it's how do we you know buy scale AI but not buy it to this like cursor deal where you basically get you know hey we'll pay $10 billion in the worst case and the best case we buy your company for 60 billion I mean this is like the dream right

yeah and just so people understand this because what you're saying is true I think people need to simplify this into why these companies are doing this number one they need more compute

100%. Well, they also need capital for the compute and that's why the raises and SpaceX is going to the market because to build terraab and to do and I think they now

does he need some money?

Yeah. I I mean they all need money and they're using the capital market. So they're using bond issuance like they're going out there to raise a lot. Open AI just raised $122 billion

for a startup private company.

Yeah. I mean it's bigger than the bottom 300 companies in market cap of the S&P 500. That's how much money they raise for. So you're dealing with just an insane amount of money that's necessary and they need revenues. So they are in a what do we do? Where do we get the revenue? So anthropic is generating revenues. So the competition migrates to enterprise. We all need enterprise. So it's it is capital needed for the compute which is then necessary for this. Now Elon has a different story. Where's his revenue coming in from SpaceX? Well, it's not coming in from flying rocket ships into space. It's Starlink. So Starlink is enough of a profitability at this point for that company to be judged. It's going to have a very high multiple at where it's being done. But Tesla does too. And you go through this, it's like, okay, how is he going to raise the capital except from individuals and company? We're reaching that point where when you get that many companies that need this much capital to generate the revenue and they believe the revenue is going to come from the enterprise and I keep saying it's really weird how this goes but annualized revenue rate is not real money guys yet. Meaning you're annualizing it which means you're taking it on okay we had this much this times 12. Okay great.

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Well, have you seen the um controversy with CAR, contracted annual run rate?

No.

Okay. So, the point you're bringing is, um, companies, and this is not necessarily a nefarious thing, that they're clear about it, but they will say, "Okay, I did $100 of revenue in the month of March. If I times that by 12, that means I am doing $1,200 of annual run rate." Now, if you're in a subscription business and you can prove churn and stuff, that's kind of where it emanated from. But now people are just taking like the monthly revenue, and it could be really spiky or lumpy, and they just annualize it. Okay. So, I think that's like investors are smart. They understand some of the perils of that. But now there's this new contracted annual run rate. And my understanding of how these deals work is, let's say that I am a model company or I'm an AI company, and I come to you as the customer and I say, "You know what, you want this thing that I have. It's really important to me that we sign a multi-year deal. So, it's not a three-year deal. The contract in the third year is going to be $3 million, but let's make sure you like it. So, in the first year, I'll give it to you for $100K, and then in the second year, it'll be a million, and in the third year, it'll be 3 million."

Mhm.

You also can cancel after 12 months.

And so, you're contractually obligated to give me $100K in the first year.

Yep.

And you can leave after 12 months.

But my contracted annual run rate...

Y-

is $3 million because in the third year you're going to pay me $3 million, and I, we're signing a $3 million a year contract is the way it's positioned. And so I go and I say, "Well, I was doing $10 million. Now I'm doing $13 million in contracted annual run rate." Unsophisticated investors may not realize that really you only got $100K, or they could get out after a year. And so I think people have to be very cautious when they see some of these headline numbers. And it is pervasive now, not just in AI companies. I mean, this is becoming a, how do you market, you know, how good your company is doing? But there's a lot of this type of stuff going on, and I think that's where people are getting caught up of like, how did a company go from, you know, zero to some crazy number? It's like, well, is it like real revenue, or is it, you know, fugazi, you know, type math?

And the key thing out of what you're saying, and what people need to understand, and this is why the ROIC is going to remain a risk, no matter what. So, the reason I was taking a shot at the annualized run rate is just a fact, which is, if they run out of compute, guess what, guys? It's not going to go higher.

Um, you've run into a point where exponential change has an impact on value, on the way people think of things. I was just on a call and someone said, "So, at what level will you care about SaaS companies?" And I literally said, in fact, I'll use something here. Books are a waste of time. Spending time on software to try and figure out where valuation is is a waste of time. The stuff is moving so fast that when there's no terminal value, how do you value something? So, you're asking me where I see value in the future when I don't know if they're going to exist in the future. So, do the reverse with the contracted annualized revenue. You're doing the same thing. It's just a different version of it, which is, "Okay, I'm only going to pay you $100,000 now because I don't know if your technology is going to work, and I don't know if I'm going to be able to change my business to do it, and I don't know if this will be the best technology in a year." That's all because of exponential change. It's different than software.

How long have we been doing this podcast show, uh, every week?

A year now.

A little more than a year.

I don't have the smartest brain, which is why it took me this long to come to this conclusion. But I just realized what your entire worldview. You're a scarcity trader. Like, that's pretty much what you were looking for. You were looking for shortages and scarcity. Whether it is power, whether it is chemicals, whether it is, you know, optical, whatever, whether it's Bitcoin. Like, you essentially are searching through all of these markets looking for areas where there are shortages or scarcity, and then you're deploying capital into it. Is that fair?

You left one part out. So, as I mentioned, I told you I wasn't that smart.

I was trained by a handicapper. Everything to me, regardless of whether it's scarcity or abundance, has to do with one important thing: Where's the money being bet right now? Which has to do with sentiment. So, the odds on the top board are based on the way people are betting. So, one of the great things about talking to institutional clients, mutual funds, hedge funds, the sharpest people that are investing tens to hundreds of billions of dollars is, if they tell me why Marll, and I just wrote a piece on it, and I go, "Well, because of Silicon Photonics." And they're one of the, and they go, "Is that going to start kicking in now?" When I start hearing, I'm looking at the tote board going, "Oh, the odds on this are much higher than I thought." So, you're right that I think you're looking for places where, like, competition could be scarce.

So, you know, when you got monopolies, you don't have much competition. So, it's hard to break into their model. It's all about scarcity. Capitalism at the end of the day, in economics, is all based on something to do with scarcity. The reason I say abundance is a problem is because if you get to a world where everything is free, there is no capitalism.

Mmm.

So, in this theory of abundance, it gets in, but there's still an exchange of services, they're just free. And this is where, if you listen to Elon Musk, he eventually gets, I don't know what money means in the future. I'm kind of in that situation too, where if I look 20 years out, if I believe people are going to live a lot longer than the current lifespan, like much longer than the current lifespan, and I don't know what jobs are going to exist because humanoids will be here. And Elon's phrase that I like to run with, which is, "Oh, there'll be jobs. It's just a question of whether you want to work."

Yeah.

And if that's the world we live in, then what does fiat money mean? What does the S&P 500 mean? What does that? And if that's only 20 years ahead because of how fast we're going? So, you have to think, if every year is like 10 years of innovation. So, take Joseph Schumpeter's destruction. That means in 20 years, you're talking about two centuries worth of innovation. If I believe in 20 years that that world of abundance is here, then the only thing that I want to have as kind of a thought is, "Well, I think Bitcoin and the crypto world, the exchange of velocity of services through this value thing is the way people I should be." So, if I think that's a 30% chance of happening, and in my net worth, if I have 5% in Bitcoin or 1% in Bitcoin, that's the wrong number. The right number is 30%. It's 20%. And this is my pitch to wealth managers out there and our FA is going, "It's a probability on if this fiat system is going to be the way you think it is, and you should have a certain percentage in there."

So, we do a very good job of avoiding any of the political nonsense that goes on in the world. But what scares me about what you're saying is that Elon Musk and Manny, agree. Hassan, uh, was it Picker?

And Elon agree. Basically, it is this breaking down of a high-trust relationship between humans and capital in a world where you kind of get into undiscovered territory of like a free-for-all.

Mhm.

And people have very different views. I mean, I don't think Elon and Manny agree in terms of like, you know, explicit policies, etc. But it's actually everyone sitting around saying, "Hey, this future world we're headed towards, I got a different idea of what we can do to prepare for, solve for, help people, etc." But the more people that agree on that world being where we're headed, the more likely it is we head to that world.

And that, I think, is a little nerve-wracking, right?

Okay. So, two things. One, you've pretty much described the Fourth Turning, correct?

Agree. Um,

I read, I read the book. It wasn't a waste of time. So, but I, the reason, you know, I've talked about my grandmother both with you and when I've sat down with Natalie Brunell, arguably the most important, kind of, person in the way that I think about markets, other than my father. And the reason is because she was born in 1920 during the Great Depression. So, if everyone goes back and says, "Are my kids?" So, that's the fourth. You know, I've got my grandmother, my mother, myself, and my kids. Great. They're the four turnings. They're the four generations. The difference between my kids and my grandma. My grandmother was born in the Great Depression. To her, any debt was bad. She lived in a trailer home, a mobile home, I should say, not trailer. She lived in a mobile home in Florida when she died, or not when she died, but when she had to eventually move to assisted living.

Um, if I think the way she thought about money. She had enough food and money if she had a canned good and this good.

Well, my kids don't have that attitude. So, Manny has existed for 80 years. It's just that the voters decided now is the time for him to be elected.

If you saw what happened in Manhattan in the East Village...

What?

Uh, the stat is 70% of people in the East Village voted for him. Right. Because all, and for those that don't know New York City, it's basically a lot of young people in their 20s. That's kind of like Williamsburg light.

Yeah. Yeah. It's, uh, it's basically a lot of young people. They first moved to New York City. It's a little bit cheaper to live there. Um, a lot of fun, bars, you know, the whole thing. Um, but now they want to move, uh, I think it's one of the mental institutes to that neighborhood, and they're like, right, they're like suing him, and they're signing petitions, and like all this stuff. And of course, people on the internet are like, "Hey, like, you kind of get the policies that you vote for," type thing. Um, but I do think, I mean, this is the whole game, right? Is like, every generation's got to go through and kind of relearn these things. And, um, maybe it is good that they learn rather than from a book, from experience. It's just a little bumpy, you know, it's a bumpy landing when, uh, when they're doing it, you know.

You know, the best part of what you said. So, yeah, we don't get into politics here. There's a reason why I don't get into politics because I, I, I'm not only an independent, but I, I love great leaders. That's what I love. I, I'm, and I, I'm not saying that no president has been a great leader, but when people are trying to get votes and they're doing things based on what will get them elected, there's a conflict that I think in the modern day has just become kind of an issue, especially when you bring social media in because these are online things. When I listened to Jensen Huang speak with Dwane Cash, I bought the stock Nvidia the next day. Um, and the reason was because I actually loved the way that he handled himself. I loved that Dwane pushed him. Every interview he's ever on, he's just very nice and affable, and everything is a nice conversation. "We love you. You're the, you know, had the best company in the world." And Dwane kept pushing back, and it got into China versus the US and all this stuff. And I thought he did a great job. So, I think one of the reasons that you and I don't talk about politics, even off the air, it's just, it's not something of my makeup. I don't watch CNBC. I don't watch Fox News. I don't watch news. And the reason is because I want to just go through and figure out what I want to believe in based on what goes on. I am very, uh, I'm in the middle on everything. I make decisions, and I'm, I'm a gambler at heart in terms of my risk-reward, but I don't get into the thing. I just believe the Daily Stoic, and you and I have talked about it, but for people who have never bought the book, this is a shout-out to Ryan Holiday. Uh, I think Matt has the book, too. Yeah, he's showing it to me right now. Um, this is a plug for that book. All of the things that you're talking about, and all the emotions people have, the voting they do, reading a book where a passage in a given day is about something someone wrote about 2,000 years ago, and it was the same as what's going on in the East Village today. That's really cool to know that the human brain is doing the same anxiety, the same fears, the same, "I could have a better life if they did this." Marcus Aurelius was going through that with the Roman Empire a long time ago. So,

I don't want to say who said this because it'll taint the way people view this, but there's a person who is very well-known who gave an interview one time, and they asked him, you know, "How do you deal with stress?" And he basically was like, "It doesn't matter." And they're like, "What do you mean?" He was like, "You can be doing the single most important thing in your life and you know, focused on and stressed and this and that, whatever. And then all of a sudden, there's an earthquake in India and 400,000 people die, and it doesn't matter." And so, again, very like, kind of pessimistic view, almost to a degree. But what if Marcus Aurelius, right? You know what I mean? Like, it's, I mean, it's a very similar trend all throughout history. And I think people are going to ask a lot of these questions because the whole AI thing and like, what do we do with our time? You know, what is the role of a human? What is the meaning of life? All this like crazy stuff that I don't know. We're going to find out.

We, I, I don't know if I've mentioned this here, but, um, I think 9/11, the aftermath of 9/11 for me, because I was so impacted by it, because the best man in my wedding died in 9/11, and my best friend growing up. So, this was a major event for me where I questioned life. I left Morgan Stanley, made the decision to leave Morgan Stanley no more than a month after, um, because I didn't want to spend my life firing. I didn't want to be in a job that didn't bring me joy. I wanted to focus my attention on a very Buddhist philosophy. What does it bring me joy? Do they bring me joy? Whatever it is, it needs to bring me joy. I, I made a very conscious decision in my life that I didn't want to be in a stressful situation with people forcing me what to do. Now, at that point, I didn't think I'd ever work for anyone again. I set up my own business. I ended up in another business. I told them I didn't want to manage people, and eventually I was managing people again. So, it always tends to happen. Not this time, people. It's not going on. But the reason I bring it up is those events in life, they go on. That one had a huge impact on exactly what you were saying to me. When I ever get worried about anything, there's two things I think about. I did the eulogy for my friend, or one of the people that did a eulogy for him, and I did the eulogy for my grandmother. So, someone who died at 98, and someone who died in their 30s, who had a long life to live. And in both cases, the same message came out, which is, you don't know how long your life is going to be. You don't know if it's going to be 98. You don't know if it's going to be 33. You have no idea how long it's going to be. You get one chance. And if you ever start to stress about things, just be grateful because these people went through the Great Depression and died in the towers having to make a decision on what to do. It's just there.

I agree.

All right. Where, uh, where do you want us people to go?

YouTube. Search on YouTube, Jordy Visser. Go there, hit the subscribe button, and it's a digital thank you. It's like send him a gift card, you know, but just, it's not money. It costs you zero other than 30 seconds of your time. If you got Open Claw, you can have your bot go do it. If you got co-work, you can have your little bot go do it. Or you can be old school, you know, like an artisan. You can go and actually do it yourself. You know, maneuver on over, use your little keypad, go and hit the follow button or subscribe button.

See you guys next week.

See you.