Animal Spirits Podcast - Is AI a Mistake? (EP. 452)

Episode Date: February 18, 2026

On episode 452 of Animal Spirits, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠���⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ben Carlson⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ discuss the software apocalypse, stock market blow-ups, AI fear-mongering, how AI will impact your job, in defense of SaaS, the ex-US trade is working, a bull market in Japan, Gen Z loves the stock market, prediction markets, a takedown of The Millionaire Next Door, middle-aged dad milestones and more. This episode is sponsored by Teucrium and YCharts Find out more at https://teucrium.com/agricultural-commodity-etfs Explore Hamilton Lane benchmarks on YCharts, and get 20% off your initial YCharts Professional subscription (new customers only). Sign up for The Compound newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Find complete show notes on our blogs: Ben Carlson’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠A Wealth of Common Sense⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Michael Batnick’s ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠The Irrelevant Investor⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Feel free to shoot us an email at ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠[e-mail]⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ with any feedback, questions, recommendations, or ideas for future topics of conversation.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Ritholtz Wealth Management⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/advertising-disclaimers⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠https://ritholtzwealth.com/podcast-youtube-disclosures/⁠⁠⁠⁠⁠⁠⁠ Learn more about your ad choices. Visit megaphone.fm/adchoices

Today's show is brought to you by Tukrium. Looking to diversify your portfolio beyond stocks and bonds. Commodities are getting more and more attention as we enter 2026. Tukrium's agricultural ETFs offer a way to access the futures prices of essential crops. These funds may help manage inflation risk and add diversification to your portfolio. Ask your financial advisor or explore Tukram ETFs on your own. Visit Tukrium.com. Click the link in the show notes for more.

Today's Animal Spirits is brought to you by YChart. One of the harder parts of portfolio analysis right now is alternatives. Private equity, private credit, and real assets are showing up more often in portfolios, but they don't behave like public markets. And yet, a lot of advisors still end up relying on public market proxies, static PDFs, or offline spreadsheets just to explain what's going on. The good news is Y charts has you covered here. Y charts now supports private markets with new Hamilton Lane benchmarks

so advisors can analyze alternatives right alongside equities, ETFs, mutual funds, and fixed income, using benchmarks built specifically for private investments. That makes it easier to put private markets in proper context, run more consistent analysis, and have clearer conversations with clients. If you want to take a closer look, you can learn more at y-charts.com and get 20% off your initial Y-charts professional subscription, new customers only. Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Ridholt's wealth management. This podcast is for informational purposes only and should not be relied upon

for any investment decisions. Clients of Ridholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits of Michael and Ben. I am recording this in a hotel room without a chair. So sitting on my bed leaning forward, not great from already bad back. I will be probably having to take a standing breaker too. Maybe not a break. A desk in your hotel room? There's a desk, but there's no chair. Okay, that's a choice. Yeah.

They want you all enjoying the fun and sun. You know what else is a choice? Listen, I'm not the greatest looking person without a shirt on. I think most people fall into that category. You're one of the exceptions, Ben, not to brag for you. Here's a choice. If you're going to a place where you're going to take your shirt off and you're a man and you've got a mane of pubs on your lower back,

on your lower back. I mean, that's a choice. And specifically, I saw a few dudes that, like, aren't the hairiest guys, but just were cursed with a bush on their lower back. They just need a little manscaping. Oh, my God. Those poor guys.

So that's when the spouse needs to step in and say, hey, listen, I'm just going to tidy you up a little bit. Yeah. Okay. Okay. So that's what we got for us from vacation? I didn't think I was going to bring that up, but you gave me an opening and I took it. All right.

Anyhow. Last week, this week, this has been a week, huh? You said, hey, are things going to slow down? Obviously, they didn't. This felt like another week of, I don't know, just light bulbs going off and people getting more worried. And so you said we got three topics today. software stock blowups, AI killing everything in prediction markets. Yeah.

And obviously the AI stuff is just not, this is, it's getting more interesting and it's kind of scarier by the week, I would say. Equal parts for me. Let's start with this. I think this is a good leave from Derek. Derek Thompson wrote, I cover a lot of topics in this newsletter in my podcast, inflation, GLP1, politics and loneliness. But the biggest divide in my audience and the biggest divide among the people I read and listen to and trust is on the the subject of artificial intelligence, the news in the discourse spaces, I see it often seems divided between outrageous extremes.

This technology is billionaire, billionaire hyped vaporware versus this technology is 12 months away from automating all white collar tasks or destroying the world. I think the first argument is a bit more ridiculous if you spend any time with the technology. I think a lot of people want that to be true. They want it to be nothing. But it's not. Of course it's not. That part is disprovable.

The technology is incredible, and it keeps getting more and more incredible. I think there's some head in the sand people that just, I know what this could potentially be, and I want it to be fake. Like, hey, the metaverse was fake. Hey, crypto didn't do what people said it was going to do. This is the next line of it. I think that's where that line of thinking comes from. Yeah, but I think it's misguided. I do too.

So how many people would you say? So those are the extremes. I would consider myself more in the middle ground. Shocker. Well, but how many people do you think are in the middle ground? What is the middle ground? I don't know. I think a middle ground is calm down.

A lot of the, a lot of the, yes, there will be disruption, obviously. But it's, but this idea that a vibe coded app is going to replace some of the software titans, I think it's probably a bit nuts. Well, obviously, replacing 50% of all entry-level weight-collar jobs, that just, that number seems high. But, I mean, here's the thing. Let's say we took the unemployment rate because of AI from, call it 4% to 8%. That would be, what, 7 or 8 million people out of a job? And I think... Are you minimizing that, or...

No, I'm not. I'm saying, like, what if... That's not like, that might not even be... extreme. That might be just like what happens. So I guess where I'm, I'm kind of landing on this is what if AI is a mistake? What if everything these tech people are saying is true? And AI and a majority of people in the future think, why did we do this? I'm a huge fan of innovation in progress. I'm not a lot of Luddite at all. I think, I think a lot of people, because I think AI is probably going to help a lot of knowledge workers that know how to use it. But I think because a lot of people are going to be left behind. Inequality is going to get way worse.

And I think if you just put the public, I think more people are going to hate AI than like it going forward. What do you think about that? Well, it depends on what time from you're talking about. So is it possible that by 2033 people think that AI was a mistake? Perhaps. I don't think I agree with that. But by 2080 or like 100 years from now,

like I think that take would age poorly like every other take does. Okay, yeah, and obviously some people say, no, you don't realize we're creating, like, God here that can cure cancer. So I think one of the big things that really set off, this Matt Schumer guy posted on Twitter, something big is happening. And it was this really long piece. And I tell you what, if you have a 20,000 word piece on AI or software right now, you should shoot your shot. Because it's all these people that no one's ever heard of who work tangentially in software or AI and putting it out. And this thing got like 80 million views or something. I read four of these this week, I think.

Right? I know. They're very long. I think most of them are probably written by AI. I've never heard of a lot of these people. They're really well written. So again, I think a lot of it has to be written by AI. But the main point of this one I thought was just like, you're not scared enough what this is going to do. The stuff that used to take me weeks or months and now it takes me hours. And what happens when this kind of stuff hits other things? And he goes through a list of things that could be impacted, financial analysis, legal work, writing and content, software engineering. medical analysis, customer service, a lot of this stuff. He's saying, like, some of these things aren't going to be safe. And AI is rapidly improving to the point where a lot of these jobs are in peril. I just, I think my opinion, I'm trying to keep an open mind and not have strong opinions here because things are happening so fast. Yeah, it's probably not satisfying for the audience. Strong opinions loosely held, essentially, yeah, I agree.

But a lot of these people, that are writing these articles are tech workers that assume that people are like them. And so much of the population is so oblivious to what's happening. And I'm not saying that's good or bad. But I think there is a lot of extrapolating being done. Matter of fact, I think in the stock market itself, I don't know that I can remember a bigger case of recency bias than what's happened the last week or two. And maybe that's recently biased talking.

But it really does seem like everybody is thinking that, well, even if Salesforce and service now, which by the way, I did hold my nose, I bought the stocks and I'm planning on holding them until I make money or get scared and sell them in a panic. But there it takes like, well, even, and I feel like this got consensus so fast, even if even if this was a warranted re-rating lower and even if these companies aren't. aren't going the way of the dodo. Like, they could just flop around to be dead money for years. Yeah. I feel like that's consensus already. It does kind of seem like that. I think that it's a shot across the bow to the moats.

And I kind of, I don't say like dead money, but I kind of agree that like the, you have to be worried about the re-rating. Oh, 100%. Well, but that just happened. Yeah. But that just happened. I agree. You're right. You're right.

This is a shot about it against the mode. It's like, listen, these are 60, 70 percent. gross margin businesses, they're growing fast, and they were trading for rich multiples that used to be deserved. Now they're no longer deserved. What's the right multiple for a company that is 15 times earnings the right multiple for a company where who knows what the earnings are going to be in 15 years? What if it's like seven times?

And I know that sounds even more extreme, but who knows? Who knows where how low it goes? I think your other point is really good, too, that tech people are extrapolating. And I'm not the only one to make this point, but maybe coding and programming is the perfect thing for AI to automate away. And most other jobs have way more functions than just automated tasks. There are a lot of jobs that do just have tasks that are required. But I think that software is probably the biggest and easiest one for AI to take over for people. That's obviously what we learned here. So the people that are historical should be because their jobs are

being replaced. And I'm not naive to think that like other professions, especially white collar ones, won't come under pressure, I'm sure they will. But I also think that AI is, it's not just a tool like anything else, right? It's not like just the internet. That's kind of ridiculous because it's so much more than that. But I hope that this is a tool that's used for good and not just to wipe us out. So did you listen to the Anthropic CEO on the Dwar Cash podcast? I listened to the entire thing on the flight.

And I don't know, man. I just don't understand anything these guys are saying. There is a lot of stuff that I don't get either, obviously. But there was maybe like, here's what I understand. When there are people that like pull clips and post the video in isolation on Twitter, I understand that better than me watching the two-hour podcast and probably dozing off at some points. But these guys are not speaking my language. I honestly, I have almost no idea what they're saying.

No, there's a lot of it that I didn't get. But there's stuff that I did pull out. And I think we're probably guilty of this too. If you and I go off into some other niche that we don't understand very well, we hear from people being like, you idiots, how do you not understand? understand this because it's not our area of expertise. So I think the one area I picked out when he talked about the economy and he's talking about the fact that we could see 10 to 20% GDP growth. And that's one of those things where I go, this is probably one of the smartest people alive.

His IQ is through the roof, but he doesn't understand because 70% of the economy is consumer spending. If we're going to put all these people at a job for AI, where do you get 10 or 20% growth? Productivity can't fill that gap. People have to spend money still. So, one person's lost job is another company's lost spending. So I think that's where the total disconnect is. And that number kind of, the one thing that I thought that I really pull out of that interview is he just kept saying over and over again, people aren't ready. People aren't ready for it's coming. People aren't talking enough about this. Because obviously he's seeing what we're not seeing yet. And he's saying like, people don't understand what's coming. And that was the part that was like,

okay. But I think my middle ground is, I think you can still have that thought and not think that the world is going to be different in like 18 to 20 because people are saying this already 18 to 24 months. Weight color work is just like going up in flames. And I don't think that a lot of these people realize that, yeah, there's so much more that goes into people's jobs than just performing these tasks that can potentially be automated. There's way more to it than that. As I'm like thinking through this, I think I'm starting to more and more reject this idea that it's just going to replace every job. people want to work with people, and maybe their teams will be better optimized and leaner,

and yeah, sure, like, of course. And as we have these conversations, and we'll continue probably for the rest of the, for the rest of eternity, right? Because artificial intelligence is not going to slow down or get worse or go away. We're going to spend just very little time, unfortunately, thinking about all the positives that might come from this.

Because it's, right, like we, who cares about the upside? That'll take care of itself. we as human beings are much, you know, we're programmed to worry about how this goes wrong. But think about how many amazing things are going to come as a result of this, some of the advances in medicine. Oh, yeah, no, of course. And I think the thing that gets people worried is when they asked him, the thing that I pulled out of that interview that worried me, he's talking about, like, biological weapons and stuff that could happen because of AI. And they asked, he asked, Dorcasch asked him, like, well, what are you going to do about it?

And he's like, well, that's up to the government. He didn't say he didn't he's not putting any like The AI people aren't worried about this like someone else needs to worry about that Like they're not worried about the unintended consequences of this He asked about what about inequality? He said well we got to figure it out And so I that's the one thing that scares me about tech people is that I don't think they have a lot of common sense They're the some of the smartest people alive I don't think they think about unintended consequences

That's the thing that really worries me about all this is that they don't they don't seem to care They're kind of like someone else will figure it out that's not on us We're building this thing Here's an email that we got from a listener. This guy's 31. He's data scientist, does a lot of machine learning, engineering work. Previously worked at a hyperscale. He's at a large payment company now.

All right, you're missing why companies are investing in AI. They're investing in the trajectory of task completion time horizon, and it's terrifying. So I guess last week we were like $200 billion from Amazon and Kappex spending on all this stuff. Like, what, how? What are they even doing? All right, so this person breaks it down a little bit. All right, three years ago, AI could write a line of code for me saving 60 seconds. Last year, I could give it a block of code saving 600 seconds.

As of February, I can give it a four-hour piece of work, and it mostly does this. This is task completion time horizon, and it's doubling every seven months. Big Tech largely operates on sizing. Someone proposes, we build a future. people like me estimate the future ARR, engineers estimate headcount required and time to market, and leaders do their calculations about anticipated ROIC and sign off or don't. Engineering is extremely expensive. At hyperscaler that he was at, I heard one headcount for one year pencils at $1 million between comp management facilities, hiring, firing, onboarding, etc. per feature,

AI is decimating headcount and time to market. Features are starting to cost a fraction of the price. You understand compounding and financial math. This is. is why 12-figure investments aren't crazy. His total comp is pretty good. He can now accomplish what previously took a team of four. I'm very well respected and people love working with me and I'm terrified. I don't know what's going to happen over the next 12 to 24 months. I don't know if I'll have a job.

Leadership would never say anything like that. They just love AI. I wonder if my career ends abruptly, whether my assets will appreciate correspondingly to allow me to retire. This is the math I run through my head. So, yeah, this person is, this person is terrified and rightfully so. And everybody that is feeling these sort of thoughts that we're hearing on the internet, they're seeing it before we do.

But also, I think, and it's not to sound so naive that, oh, their jobs are at risk, you know, hours or hours are safe. But and also those engineering teams at these hyperscalellors are to spend all these, all this money, yeah, those jobs probably are going to be on the chopping block. It does seem like a lot of people assume, like, man, AI is going to disrupt a lot of jobs, but I'm going to be fine. You're right. The tech people are the first line of defense, right, to see this, and they're going, oh, no, this tool is magical. I can see, I'm thinking three steps ahead. What does this mean for me eventually? And I totally get that.

Anthropic. All right, so when you agreed that the last two weeks, Anthropic really took the baton is really sucking a lot of oxygen out of the room from Open AI. So there is money. I can't remember. It was it 30 on 380, whatever. It was a lot of money. And in January, 2023, they had zero revenue. And a year later, they had $100 million in revenue.

And a year after that, they had a billion dollars in revenue. And today, they're on a $14 billion run rate. I thought the interesting thing Dario will kept saying in the podcast was, because Dwar Cash is like, why don't you just, if these tools are, you're creating a world of geniuses. Like, why wouldn't you spend infinity money to make this happen? Keep spending more. And he's like, listen, we can't. We really don't know if we spend too much.

Because the whole thing is it costs a lot. And I think that's like the transistor here is that the costs are so astronomically high to run this stuff and to build these data centers. That seems to be like the thing pushing back a little bit. Is he's like, we want to. We would if we could. But it's so expensive to do this that we have to be kind of careful. We can't push the RPMs all the way to the red line or whatever.

I thought that was interesting. But here's a question I have, and neither of us are smart enough to answer this. What is the moat of these AI companies? How hard is it for the other AI? Any of them. If they create a tool, why can't, because it seems like that's what Deepseek did.

They just stole it all. Why can't all the, what is the moat that protects these AI companies? I mean, obviously, a lot of it is just their researchers and stuff they, but once you put a thing out into the world, why can't the other AI companies just steal it? Okay. I don't know. This is obviously not our lane, but isn't it just, there's only so many AI companies. There can't be 400.

I know. There's three or four, right? Aren't the costs associated with running these companies are massive, massive, massive, massive. Yeah, right. You're right. Yeah, there's going to be, I don't know, I would say the ones we have now, Gemini Anthropic and Open AI, like, that's kind of, they're it, right? So the chief economist at Ramp, who we had on the show a couple of months ago, are tweeted one in five businesses on Ramp, now pay for Anthropic. A year ago, it was one in 25. That's nuts. Latest Ramp AI index shows Anthropics surge from 16.7 to 19.5% of business while OpenA.

I slipped to 35.9%. So the natural question is, is Anthropic winning at Open AI's expense. And he says, um, the old. Overlap in Anthropics customer base with OpenAI is 79%. So... Interesting. I mean, for me, I'm going between Gemini, Claude, and Open AI. I use all three of them now.

And I feel like there's certain tasks that I want to use for one and not for the other. I'm using them all. So I haven't used Google. Is that more for imaging? Is that what you're using it for? Maybe this is just in my head. I feel like Gemini is smarter than chat GPT. And I have no basis in reality to make that claim.

It just feels cleaner to me. I asked chat GBT. So I finished the Edswick book that I was talking about last week, which was great, by the way. We were talking about this. Matthew Broderick and Glory bring his mother in to read the script. Yes. And then Michael Lovitz at the center of this story as he's with all the other Hollywood stories. That was a fun read.

But anyway, so Ed's Wick used to put his father-in-law into a lot of his movies. And I asked Chad GPT who it was because I just want to see a picture, see if I recognized him. And it gave me the wrong answer three times of who somebody's public figure's father-in-law was. And when I went to Wikipedia, I mean, it was right there. So you say like, chat GPT is dumber. Well, this is the Rain Man stuff we were talking about. Anyway. Wait, my wife and I started watching the new Game of Thrones show again.

And that, it can never be on, Game of Thrones can never be on the pantheon for me because I never understand what's going on half the time. But I like the new one because it's a little dumb down and it's kind of, it's got a little more humor. I really like the tone of the show. But I'm like, where is this in the Game of Thrones universe? So my wife just typed into Chad GATT to be team. It's like, this one is 90 years before this one and this one's 100 years past this one. And these people are related to these people. And I'm like, wait, who's that guy again?

And so it gave me a good family tree of Game of Thrones, at least. Yeah. Anyway, just complaining about that, that chat for TV got this father-in-law wrong. Who cares? I mean, it'll fix it. It's not a big deal. And it's really not important. But, all right, whatever.

Okay. So I'm trying to be careful to not, like, over extrapolate myself. Because I really don't know anything about the software stuff, obviously. But last week, when Schwab was down 10% in a day. and Raymond James and LPL and a lot of the publicly traded companies in our space, I was looking for a head on. I'm like, what the hell is going on? Like out of nowhere, Schwab's down 10%.

Schwab is not a company that moves 10%, even after earnings reports, right? Like the last time Schwab swung like this, I guess, was like March 2022 when there was like, you know, the banking type stuff. So what moved the stock was altruist. our friends at Altris have this really neat new AI tool called Hazel that is starting with tax stuff and I'm sure it could do all sorts of other things. The idea that it would take 10% of a Schwab and all these other companies is a joke. And it tells me the market, if the market doesn't understand what's going on in our space

so fundamentally gets it wrong, then maybe it's getting it wrong on a lot of other spaces. Not maybe, I'm sure it is. I don't know which areas it is getting wrong. but the market is totally nuts right now. That was the massive recency bias overreaction. And I just can't wrap my head around how much of this is just algos. Algo is trading in Algo.

Yeah, that's not human. Nobody's selling that. But anyway, Chris, so just getting back to the technology and like, yeah, it's real. My partner, Chris took a look at it on Thursday. I haven't spoken to me yet about it, but he was blown away.

Like, the technology is real. And not just at Altrust with Hazel, but like, yeah, it's real, obviously. It's very real. Right. And this is the hard part people have wrapping their heads around is that, like, this technology is going to make us so much more efficient. Our financial advisors are going to be so much more – their lives are going to be easier. So it'll make them more efficient, have them – here's the thing that I think why we really need AI.

Because people have been talking for the last few years, I know you're not a demographics guy, right? I'm going to talk demographics, that's okay. Like people keep talking about the birth rate falling, right? and how this is a huge problem for the world. And the fertility rates are collapsing even faster than they thought. We need AI robots, productivity to fill that gap in the future. Otherwise, economic growth is going to fall off a cliff. So I think it's actually coming at a perfect time for humanity in a lot of ways,

where we're going to need this stuff. It's going to have to pick up the slack, and productivity is going to have to be better if we want to stay in the same trajectory. Otherwise, just because that's economic growth. It's population and productivity, essentially. Right? If population stopped growing, we need productivity to fill the gap. So, yes. The article for that altruist story said an artificial intelligence tool, this from Bloomberg, in debt creating tax strategies sparked a sell off and wealth management stocks Tuesday,

as investors feared the business could be at risk from automated advice. And it's like, wait a minute, what in the world? That literally doesn't make any sense. And I imagine this is how software people feel about reading, you know, whatever company it is. It's like that is completely a misdiagnosis. So, for example, S&P Global, which is a stock that I want to buy. I'm going to buy, actually. I'm going to buy it today when we're done recording because this is not at risk of disruption.

I understand the thesis of why it would be. So on the call, Martina Chung, president's CEO, who was asked about AI, I mean a million times. And she said, we maintain control of the commercial relationships directly with those customers. And we don't allow the LLM providers to train on S&P. global data. So this is where you and I are different on this. I want nothing to do with these companies that are in the crosshairs of being disrupted. I know there's a lot of babies being thrown out with bathwater here.

I want nothing to do this because I think that back and forth on this is going to go on for years. Yeah, could be. So let's talk about some of the in defense of SaaS names. So this one was by Finbar Taylor. Ripping out your system is not like switching from one note taking app to another. Service now implementations can take 12 to 18 months. workday migrations are multi-year projects.

The switching costs isn't the software license. It's the organizational upheaval. Ding, ding, ding. Here's the thing. If the only thing standing between you and your competitors was that your features were slightly better, you were already in a commodity race. AI coding tools don't change the fundamental dynamic. They just accelerate the clock speed.

By the way, S&P Global is not in the crosshairs. Like, the market is wrong, I think. We'll get back to that in a second. But here's what people miss. that race is now one that everyone runs at exactly the same speed. If your competitor can vibe code a clone of your feature in a weekend, you can vibe code a clone of their next feature in a weekend too. AI is a symmetric weapon.

It doesn't selectively advantage attackers over incumbents. In fact, it arguably advantages incumbents more. They have the existing user base, the distribution, the data, and the brand. They can ship AI-powered features to millions of users overnight. A startup with a weekend project still needs to require every single, customer from scratch. And this to me was a kudigra. There's a fundamental truth about enterprise software purchasing that the SaaSpocalypse thesis completely ignores. And this is the human element, Ben, that like we say that these people, these tech dors just might not appreciate. When you buy software

for your company, you're not just buying features. You're buying someone to blame when things go wrong. You don't always pick the cheapest option. You don't always pick the most innovative option. You pick the option that if it fails, you can defend to your boss. We went with Salesforce is a defensible sentence in any boardroom in America. We went with an app I vibe coded over the weekend as a resignation letter. This is the same dynamic that kept IBM dominant for decades, and that keeps McKinsey and Deloitte in business despite armies of cheaper, often smarter competitors.

Enterprise buyers optimized for career risk, not unit cost. I was just what to say career risk. That's like he nailed it. They want a vendor that will still exist in three years that has a support team that they can call it 2 a.m. that is a track record of not losing their data. So I guess what I think with these, with these names is, yeah, there's more than a kernel of truth. The re-rating is appropriate. I just think that the market will overreact, and in my opinion, it has overreacted. It is interesting to think about how the fact that these, you're right, if this stuff

becomes a commodity, what's the differentiation? So Josh had a good piece that talked about the difference between intel and intelligence. And it's like qualitative versus quantitative. And if everyone has access to these tools, then everyone's on the same level here. Right? Like, what's the differentiation? And so why would a weekend company come and beat the incumbents? It just ignores, like, what we know about human beings. Who is, who is the author of the article you shared this morning?

I don't know. I'm starting to worry that some of the, one of these articles is going to be created by a fake bot and an AI and it's going to get us all because we never heard of this person. So, there's another SaaS one. All right. So this was from Nicholas Bust. Stamante at Nick B.S. TMA. And he said, here's the thing the market already understands.

And this is very good because this is the stock perspective mixed in with all this. So bottom line shit. You don't need revenue to decline for the stocks to crash. You need the multiple to compress. A financial data company that traded at a 15 times revenue when it at a pricing power and 95 retention might trade at six times revenue when the market. believes both are eroding. Revenue stays flat. The stock drops 60%. That's exactly what's happening to some companies right now. The market isn't pricing in a revenue collapse.

It's pricing in the end of the premium multiple because the modes that justified the multiple are dissolving. So he breaks down these companies, his vertical software companies, into does it have proprietary data? Does it have regulatory lock-in? Does it have embedded transactions? And then what's the risk level? So if you don't have those things, you are in deep shit. So FACSET, for example, has nothing. of those things. But S&P Global, like a ratings agency, this is like regulatory stuff. An LLM can't slap a rating on any of these companies.

Well, you don't think you can do credit analysis on AI? That's not the point. These companies need to be rated. It's career risk and they want to blitz. No, it's not career risk. It's not career risk. They need to be rated by a legitimate ratings agency. You can't spin up a ratings agency.

It's not about the technology. Right. Okay. That makes sense. But I agree here. The whole, because one of the things people don't recognize is the fact that valuations are just emotions. Like, how do you feel about something? How do you know if the valuation should be 20 times or 10 times or 15 times?

It depends what people feel. Yeah, you can't. Right. So that's a very good point. Okay. Let's move on to talk about the stock market because we're going to keep having this AI conversation for a long time. And again, I'm not trying to poo-poo AI. I'm just thinking, I'm trying to do it.

the beauty contest thing where I try to think about what other people are going to think. And I think, I don't know, call it 60% of the population within 10 years is going to say, let's go back. I don't want this. I think that's a real possibility. Inequality is going to get worse. Weight-collar jobs are going to be disrupted and people are going to go, you changed way too much.

I don't like this. I think that's a real possibility. Do you think in 20 years there will be people that are married to robots? Of course. I'm not kidding. I know, yes. Like robots that look and feel human. Yes, and they'll be able to say, like, you treat me this way and this is your personality.

That wouldn't shock me. No. Not at all. It's going to be a weird, weird. And I'm worried about what AI is going to do to just videos and social media and, like, that kind of, that part of the thing scares me. I don't think that the tech overlords are going to put any garbils on that at all. I think they're just going to let it be wide open. Netflix will have a reality show with people and their robot special. houses. Oh, or can you tell the difference between, is it a real person or is it AI, right? Who do you want to date?

All right. So you had a chart that went viral last week. This went mega viral, which is kind of funny because this is like a detailed stock market. So you talk about the fact that 115 stocks in the S&P have declined 7% or more in a single day in eight sessions, not quite 20% in a day, like I talked about with Nvidia. And the average drought on when that happens is usually 34% right now. We're basically at all-time highs. And just your whole point was like, seeing this amount of volatility in single names, this is the kind of thing that happens in nasty corrections, in fair markets. And it's happening while we're basically at all-time highs. What the hell is going on? I'm still bullish for the record. I know there is some late cycle market stuff happening,

like the rush into Staples. And I don't think that the rest of the market needs to catch down. The fact that the rest of the market is holding up so great in the face of all this disruption that's being priced in, I think that's got, you're right, that's a bullish signal to me. I think the macro backdrop is still healthy. And listen, I'm not talking about a 5% correction, right? Those are always 5 and 10 and even 15 are really always on the table at all times, even in both markets. But one of the interesting dynamics of this current market is that the bubble we were promised is not so bubbly.

So bespoke as a chart. Here's a look at the NASDAQ 100s action in the year leading up to and the year after its March 2000 peak versus its action in the year leading up to its 1029, 25 peak. So if that was the peak, by the way, that was the Nvidia day, I think, right? Was that the day that Invideo opened up 4% and closed down like 5%. And it was like that really nasty outside day. Anyway, this is a, this is a weak-ass market compared to the dot-com bubble, obviously. So I guess just juxtaposed that with people thought that I was like comparing this market to the dot-com bubble

because that's the last time that this dynamic happened. I wasn't trying to do that. Well, and the fact that the rest of the world is going off right now. So Mike Zucardi says U.S. versus World XUS is off to its worst start to a year in decades. So they look at all these different years, and this is the spread between the two. I mean, we're whatever, a month and a half into the year. But the rest of the world is absolutely taking off. And this is like the catch-up trade.

And I know there are a lot of people who poo-poo this and say, Zoom out. Look at the last five years, seven years, 10 years, the U.S. has crushed international stocks. And that is a great stance to take over a 12-month period. I get that. But if this goes on longer than that, you can't keep falling back on that event. If this trend really takes hold and equal weight works and small cap works and you can't keep saying, well, what about large cap outperform before? Eventually, that point loses its luster. Yeah, that's true. I thought this is a really good observation by Vivek Ari at Bank of America. Okay, investors are simultaneously pricing in two mutually exclusive scenarios.

Either AI CAPX is deteriorating to the point that it won't deliver ROI, so it's bad for the AI thesis, or AI is so powerful that it will destroy all software companies. Both can't be true at the same time. If AI is powerful enough to destroy SaaS, then the companies building AI infrastructure are going to see massive returns. And if AI infrastructure spending won't pay off, then AI isn't actually powerful enough to destroy SaaS. See, this is another middle grounder. He's saying, take the extremes out. I'm a middle grounder.

There's dozens of us. The market is in a fog of fear, and fear doesn't do nuance. Well said. That's really well said. That last line feels like AI might have written it, though. See, that's... You know, though, I tried, I did... I uploaded my, every chapter of my book when I got finished it,

I would upload it to Chad GPT or Claude, and I would ask for feedback. And sometimes it would say, can I rewrite this for you? And I'd say, yeah, let's see it. And I can still tell the difference between AI writing. Like, I saw some guy on Twitter the other day, say, hey, I just wrote 90,000 words today

for a book I'm writing with OpenAI. And I just don't think people are going to want to read that. I don't think people are going to want to read AI stuff. Maybe I'm wildly off base here. I feel like you can still tell what is written by AI. Maybe that'll get better. I just... It definitely will get better.

Don't you think? But if there's so much of that... You're going to be able to say to it, make this look less generic. Throw in a typo. Throw in... Make it look like I wrote it. I mean, I'm pretty sure it's going to be able to do that. I still think the human touch, like, I don't...

I know people will watch slop videos. We're already seeing that. But I don't think you're going to... have this paint by numbers where you're going to be able to create your own TV shows and movies and it's going to be high quality. I just don't believe that. All of the best stuff comes from personal experience. All the best movies, all the best TV shows comes from personal experiences. Like, you can't create a good comedy using AI. I'm sorry, it's not going to happen. It's not going to be funny because the funniest stuff comes from personal experiences that people have had.

Right. Superbad was Seth Rogan and his writing partner, Evan Goldberg. It was some of the actual stuff that happened to them in high school, and they wrote a movie about it. Like, you can't, AI can't recreate that. It's never going to be able to. That I will die on that hill. Okay. Gungeon from the Wall Street Journal, the average stock reporting so far this earnings season has moved 5.2% up or down.

The biggest post-earnings moved since at least 2012. And a bunch of stocks are moving more than 15% after the earnings. So, yeah, I mean, the individual stock market is getting... Damn volatile. AI is opening up the VIX, I guess. This is interesting. This is from Maui Boy Macro. I don't know where this came from.

Maybe this was one of the chart of the day things. It compares operating cash flows as a percentage spent on CAPEX versus buybacks for S&P 500 companies. And buybacks peaked in 2022. Funny and interestingly enough, when Chad GIFT came out. And then since then, CAPX has taken off. So, CapEx went from, sorry, buybacks went for 46% to 15% of Capax operating cash flow. So way more money is being spent on CapEx now than buybacks. It totally reversed.

And it's funny because for years, people kept saying, buybacks are pointless. What are they doing? How much good in the economy can these be doing? And now companies are finally investing, and there's certain people who hate that. This is like, I think this is companies finally saying like, okay, fine, we're doing something. Warren just wrote about this too and

I can't remember exactly what about the max seven we're doing like obviously an overwhelming amount of the buybacks which was definitely helping put a floor into these stocks or tail end or whatever and if that's going

if that's going now the other direction yeah could make for some more volatility all right this is news to me amongst all the crashing stocks we are

in the middle of the highest quarter of revenue growth for the S&P 500 since 2022. Huh. 9% or 8.3% or 9% is expected for next quarter. Is that wild or what? Like, lost in all of this because we're just looking at the stock prices. And this is as inflation is stabilized. You can't say it's just higher prices because it's continued to go up, even as inflation has been fun. interesting. Okay, so remember a few weeks ago we talked about our Japanese bond yields rising good or bad, and you said, no, maybe it's neither. And then I went and listened to that podcast

about the Pimco CEO and AdLOTS that you told me about. And he was saying, no, I think this is a great thing. This is good. The Japanese economy is opening up. No more like financial repression. And so I pulled some of these things where people compress the charts and show like, oh, no, this line is going up. It's really scary. And it was like, this one tweet was like, at what point does something break because Japanese bond yields are going up? They surged to a new record of 3.5 And this other guy says, oops, the slump in Japanese bond yields deepen sending yields soaring to records and saying like, this is bad. And then look at Japanese stocks.

They are going nuts. This is absolutely a good thing. There's no more financial oppression. Japan is allowing rates to rise. They're allowing inflation to rise. And Japanese stocks are going crazy after going nowhere for 30 years. So people that worry about, oh, no, line going up bonds, that must be bad. This is actually a good thing.

Because in the Japanese economy, they're pricing in higher inflation and high. higher growth. Fair? Looks it so far. How about this for a mind-blower? This is just over the past 12 months. In Japanese, this is MSCI Japan is up over 40 percent. The S&P is up 16 or something, so it's killing it. The MSCI Japan ETF is outperforming the S&P 500 over the past five years now. How about that for a stat? Wow. Five years is a real time horizon. We were talking about this the other day. International small-cap value stocks are beating the NASDAQ 100 over five years. Just crushing. They're going to. It sounds like, it sounds like.

It's like, that sounds made up. International small cap value stocks. Things that work absolutely left for dead. All right. This is a story from the Wall Street Journal that you and I have been all over. Gen Z, locked out of home buying, puts its money into the market.

Actually, I would say you were all over this because I, I think I found this hard to believe. I think I poo-pooed this. Like, come on, they're not actually doing this. But, no, they really are. All right. The share of people 25 to 39,

making annual transfers to investment accounts more than triple between 2013 and 2023 to 14.4%. Outpacing increases from those 40 and over, according to JPMorgan. You have a 26-year-old who transferred funds into investment accounts since turning 22 shot up from 8% in 2015 to 40% as of May 2025. These numbers do not include 401ks. So this is just brokerage account stuff.

And they interview these people and two people, because we paint a lot of this stuff about not being about a house is a really bad thing. and this person says, what you get for your money right now and how much of it is going to interest feels hard. This is a 33-year-old. I can just keep renting and have more flexibility with my money. And she now thinks she could be content never buying a home.

And I thought the numbers would actually be worse. They have this number for home buyers. So the share of young people in the housing market has plummeted since the turn of this century. That's not a surprise to anyone, right? But it says Americans age 18 to 39 made up 51% of home buyers in 99, but only 40% in 2025, according to Redfin.

That doesn't seem plummeting to me. Don't you think that's higher than you would have thought? The share of those 18 to 39 is relatively high still. That is way higher than I would have thought. Sorry, I just got distracted. We've had this conversation like when your kids start texting you. Yes, it's very weird. So meet us at Echo.

Echo is the restaurant we've been going to for breakfast. Apparently, Kobe discovered that he likes pancakes. Mm-hmm. Meet us at Echo with tip. Love Kobe. Because yesterday I was like saying to Robin, oh no, I feel bad. I don't have any money. Let me go back to the room and get money to tip these people.

And Kobe's asked me what a tip is. And I told them these people work off tips. I was a waiter. I used to work off tips. So anyway, so I said, was this really from Kobe? He said, yes, love Kobe. So I sign off. All right.

Let's look at this. So the, if you look at the labor market, it's funny. We're talking about AI disrupting all these jobs. And I think what's happening now, though, is companies just aren't hiring as much anymore. They're not really laying people off. Because look at this. This is the labor force participation rate from 25 to 54. That's called Prime Age.

It's basically at the all-time high now, which was reached in the late 1990s, back to 84%. And this is not people dropping out of labor force. There's more people than ever in the labor force in this prime. because you want to look at prime age because so many baby boomers are retiring. So 25 to 54, this is back in an all-time high for labor force participation rate, which was falling after pretty much since the turn of the century until the pandemic. So how do you square this with the fact that AI is changing everything? Because obviously it's not happening yet.

Let me post you two possible outcomes. Surely neither of these will be right. But option one, everyone's head is in the sand. They're not head in the sand. People are just naive and oblivious to what's happening. And we wake up and overnight wipe out. Like unemployment goes quickly from 4% to 8%. Option two.

Same course. People are naive. Don't understand what's going on because they're living their life. They're not listening to our podcast and every other podcast. They're not reading a million sub-sac. They're just living a normal life off of the internet. And in 12 months, all of these fears have dissipated because all of these companies are the ones benefiting from AI and they're incorporating into their workflows and life goes on.

And yes, in option two scenario, people will be displaced. The email earlier, jobs like that. I think that's a very plausible outcome. So I guess you could say, what if AI takes the unemployment rate from 4% to 6%? And 6% was about what it was for most of like the 80s and 90s. and there are that's i don't know three million jobs disrupted and it's painful like is that i don't know doesn't i know i know i know i know i know i is different because it's the culmination it's the it's the it's the whatever the ultimate technological disruptor it's the end it's the it's the it's the it's the mike tyson it's bowser it's the final boss as they say but doesn't doesn't doesn't history just show that with every technological advancement things get better?

This is maybe, and maybe this is the one that proves everything else wrong. I think you could say social media is the first one where we go. I think if we could snap our fingers and get rid of social media, society would be better. I agree. I mean, that's not controversial. No. I think that's one, but you're right. And I think this is a different, this is way different than social media, obviously.

All right. I guess just specifically, I'm talking about just this, this dystopic fear that we're living with of massive, massive job destruction, end of times type stuff. Just, that's not, that's not the course of human history. No, the course of human history is there are people to be disrupted. We figure it out, we're resilient. We survive. We're dynamic, and we will make up new jobs.

That's kind of probably where I land on this whole thing. Yeah. And people will focus more on the downside because, yes, no, Nobody's minimizing, like, job casualties and real people's lives and, like, you know, that's, but that's the way the world works. All right. I think the way the world works now is that economic data is so granular. And again, I hate that word, but it's really useful here, that I think economic

data is so detailed now that it exists to only make certain groups mad all the time. Like, you can't have economic data and not make someone mad. So Axios has this piece on the share of U.S. consumer spending by age group. And it's 54 and younger and 55 and older. And 55 and older is slow. It was below 30% back in the turn of the century. And it was over 70 for 54 and younger. Now it's almost converging.

And I'm guessing in the next 10 to 15 years, this thing might even flip. And so now it's like 55 and 45, where 45 is 55 and older. And it seems like you look at this and you go, oh, those damn baby boomers, they get to spend everything. They have all the money. They have all the wealth. Is this health care spending? Or is this like they're just enjoying their life more because they're healthier? Well, look at the next chart.

I had Gem and I make this for me. The percentage of U.S. population 55 and older. It used to be way lower. Now it's higher. Oh, okay. Well, there you go. So there's more older people. That's part of it.

You crack the code. I mean, part of it is, yeah, boomers are, but it's just, it's a bigger percentage of the population. All right. Credit to you. Okay. Good news of the week. I feel like we've been kind of dire today. But the thing is, here's the thing.

The tech people, they're the ones fear-mongering. They're doing this to us. I feel dire. I feel like... No, I don't, I don't either. I'm of the mind that with you, the U.S. economy is dynamic. We're going to figure this out, even if it's painful to get there. But you have to call it like it is.

Like, the fears are not unfounded. It's not crazy. No. But I think we need to push back a little bit and not give in. All right. This is from Gail Pooley and a subject. Someone shared this on Twitter. Discretionary time.

So it's the amount of hours you spend in a life. How many are work hours? How many are leisure hours? And in 1880, something like 20% of all your time was spent in leisure. 80% of your time was spent working. And it was really hard and it was bad conditions. By 1995, it was more like 60% of leisure, 40% work. And by 2040, it's people think it's going to be, it's estimated it's going to be like 76% leisure and 24% working.

So this is kind of the Keynes thing about in the future. We can automate a lot of stuff and people will do, like, I think this is one of the reasons that people are so miserable, though, because we have way more time to spend in our head and think about stuff and complain. In the past, people's lives were so much harder. They didn't have time to complain and think. It was like, I'm working because I have to work, and I'm going to work till I die. And now, like, having so much time on your hands and being so much...

I don't know about that. You don't think having time to, like, just sit and be alone with your thoughts is bad for a lot of people? No, but I just, I don't... I think I might reject that premise that people used to work and not have time to think. And now we, I just, people are people. Everyone, we all, like, awesome people 50 years ago, I had the same fears and the same this and the same that. Yeah, we have more, I mean, there's obviously differences in the way that we live. But I think just psychologically, it's the exact same.

I just, my whole contention is that I know people think like, oh, nostalgia for the youth, like things really were different in the 90s because you didn't have all this stuff shoved down and through all the time. I think that's a big part of it. Yeah. A lot of it is better, but... But a lot of that leisure time is spent scrolling through your phone and looking at it and going, oh my gosh, look at how bad this is. I don't know, man.

We said this before. A lot of my leisure time was me staring at a window. Like, I vividly remember staring at a window, my front window, and just being bored. And, like, you know, my friends are away or whatever. Just nobody was around. Boy, did I watch a lot of movies on USA and TBS when I was growing up? He was like, fine. That's how I know the whole 80s catalog.

I'll watch McGiver, I guess. Right. Speaking of, thanks from our youth. By the way, rest in peace, Bobby Duval. 95 years old. What a life. Underrated performance is I watched again over the holidays,

it was four Christmases as the dad. He's great. I know everyone, like, he's gotten all the classics fine, but four Christmases. Was that Vince Vaughn? Yep, and Reese will have been. Um.

they're making a sequel of Demolition Man With Slice Stallone And Wesley Snipes I don't know why I call them Wes Wesley Snipes What else Sandra Bullock?

She's definitely too big for that True She's not playing that role again Although maybe her and Stallone got married Right? They were a love interest I saw them in a theater I don't think I ever watched it again

Because it was e you're a demolition man guy I mean do you really have to ask all right love demolition man all right anyway they're making a sequel to face off

are you kidding me you need to take his face off how would that work yeah AI can't do that A I can't come up with something so utterly stupid

by the way um the DVD. Remember the movie Over the Top? I don't know if we ever spoke about it on the podcast. Yes. What about it? All right. So here's the premise. It turned 30 this week. The premise of Over the Top was Slice Stallone is a truck driver

who has to win a arm wrestling, a national arm wrestling contest to save his son in a divorce. And the guy he fights in the last one, the bald guy, is from Miss. Michigan, my dad's hometown. No kidding. That's the claim to fame, yep.

Okay. The 80s were a crazy time. All right, we did this last week. Duncan did a survey. You won in a contest. You get a $3 million house, $3 million portfolio. It was 91% said they took the portfolio. Which is what we said, 90%.

Someone said, Ben, a few people said, I agree with your position in the house. My question is, which would you say as better prospects for returns? Housing or stocks? I would say probably sell stocks. especially if you got a house and you didn't have leverage on it, you had it free and clear. You don't have the leverage component?

I would say stocks all day. Although I do think there's something to real estate being an AI hedge. Like in a technological world, I think real estate is going to be even more important than ever. Land, I think that's a good AI hedge. It's 10 o'clock and silver is crashing again. This is weird. What is happening? Why silver's down 6%.

just because strange strange times by the way you know that AMC getting back to if silver is like the

Reddit thing now which it never got to the point of like GameStop or any of that stuff I don't think or AMC people were like

painting AMC on their garages and their cars and that stock is down 97% yeah remember how many people that was like

that was like this is how we're going to stick it to the man we're going to buy AMC yeah yeah we don't 90% 99%

Sorry, it's on 99%. All right. So the prediction markets are doing to gambling stocks what AI is doing to software stocks.

So Draft Kings reported last week and they show the wallet share of leading sportsbooks and leading predictions operators. And they show

as a percentage that the prediction markets are at 1%, but it doesn't matter. Right? It's the same thing with soft...

It's like, yeah, it's 1%. Draft Kings is in a 60% drawdown right now. So if you're a sports podcast, you're getting a little nervous, right? All right, draft kings, revenue increased 43% year for year. Holy moly. Market doesn't care.

The stock still got smoked. Wow. Market doesn't care. All right. So I feel like there's been these, these, the prediction markets have been becoming a bigger and bigger part of the conversation. Janice took a stake in Kalshi. There's going to be more scandals.

Vlad keeps talking about it, like on every earnest call. It's a bigger and bigger story. So Vanity Fair wrote a long piece over the week, last week, and sort of the New York Times. So Vanity Fair said that these prediction markets seem destined to last for two reasons. First is that these markets have found unusually warm support in Washington. Okay, and the second reason. And this is sort of the part that like, eh, don't love this, but it's true. Prediction markets are gaining momentum in an era when experts have been burned,

have burned through their authority, institutional knowledge is almost universally scorned, and shared reality is splintering into an algorithmic hall of mirror. The pollsters missed the polls, the networks can't agree on the facts, and the Trump's government is back-piling a two-cent. All right. that part of it is kind of shitty, but it's a big part of it. So I guess it makes sense that a lot of people in the future are just going to say, I trust whatever AI tells me, and I trust whatever the prediction markets tell me.

It's going to be interesting to see because eventually the prediction, because these are percentages or probabilities. Eventually the prediction markets are going to say 60% this presidential candidate is going and then they lose and people are going to go, see, prediction markets were wrong. That's going to happen. Yeah. Yes, it will happen. Like, there's going to be a close one and it's going to say prediction markets were wrong. And it's not necessarily wrong.

It's just those are the odds. But it doesn't matter because the experts are always wrong. Like, that's the point. So hold on, put a pin in this. In terms of people looking to these markets for a source of truth, they found a 22-year-old who studies philosophy at Berkeley and said that when he wants to know what's going on in the world, he is more likely to check the odds of Cal Sheen than to watch CNN.

Interesting. Okay. Yeah. I mean, who cares about news when it's all about opinions. It's like, just show me the numbers. All right, here's the New York Times. over the five years of Cali has existed, its thousands of gamblers have proved as accurate on average

at predicting certain economic indicators as the highly trained forecasters, a working paper published last month by the National Bureau of Economic Research Found, okay? So not exactly a company that's like in the pocket of big prediction markets. The crowd is also pretty good at predicting interest rate decisions from the Fed.

Betters have, he realized, have one advantage. They don't, and this is the thing, why I think that this is going to be a thing and not going away. Betters don't have to make a prediction if they're not highly confident that they're right. Professional forecasters don't have a choice, right? Even if the data are confusing

and they don't have much conviction in the number, they guess because they have to. It's their job. Another paper by the London Business School and Yale found that polymarket betters as a whole forecast corporate earnings more accurately than the analysts who are paid to advise investors

on whether to buy or sell. This is just wisdom of the crowds. Wisdom of the crowd, yeah. I was going to say that. Yeah. So some of the stuff that, like, I, I saw that there, now you can bet on like five-minute increments on the price of Bitcoin. Like, nonsense.

Nobody should be betting on the price of Bitcoin on five-minute increments. But actually, let me give the final work, Thomas Petterfey on this. All right. So, Vlad Tenive. Vlad said, I think we're just at the beginning of a prediction market super cycle that could drive trillions in annual volume over time. Vlad has been very, very, very bullish on this and driving results. So I forget what their prediction markets have been.

Is it a, I don't want to make up the run rate, but like it's, it's getting massive, massive traction. Do you think that this just can't, if that's true, that it just cannibalizes the rest of their business? Like, you can't have both high stock trading and high crypto trading and high prediction market training. Like, can't we, it can't all happen. I totally agree.

I totally agree. So it's also very similar to, um, Josh was saying Netflix, which I finally pull the trigger and I don't care what happens. if I'm buying Netflix in a 40% drawdown. Don't care. There's just too much competition. Netflix, YouTube, Spotify, Prime, whatever it is, Prime video, whatever it is. And so maybe it's like a similar argument. It's like it's crypto.

It's stock trading. It's predict on this, predict on that. So Thomas Petterfee has been around the markets for a long time. Okay. Thomas Petterfee is a legend on Wall Street. He's the founder of interactive brokers. Listen to what he said on this. This was at a conference recently.

I am extremely bullish on the prediction markets. I think this is going to be the biggest thing that happened in our business in the last hundred years. I take this guy's word seriously. So I look at prediction markets as the ultimate synthesis of human imagination and economic incentive. Our participants are rewarded for accuracy and penalized for error. This transformed guessing about the future into rigorous analysis that

forces a continuous real-time collaboration, I'm sorry, calibration of expectations based on the new data. If you aggregate a diverse pool of incentivized rational actors, the resulting consensus is mathematically likely to be the most accurate proxy for reality available. By assembling these forecasted facts, we are mapping the future with high resolution. Let me read that again. By assembling these forecasted facts, we are mapping the future with high resolution. We create a model of which we can plan our investments, our businesses, in our lives with better results. This is the most significant utility

of instantaneous global communication, decentralized volunteer collective that replaces a government fiat with free individual initiative. Eventually, all traditional markets will operate within the framework established by the prediction markets. I'm not really sure what that means.

But he said, he goes on to say, I think sports betting is a distraction from all this. I totally agree. I think right now we're focusing on a lot of the nonsense because the reality is most of these markets right now when you look at the stuff that's available on chain, it is sports betting. That is where most of it is taking place

and I am much less interested in that than I am the economic ramifications of people able to not rely on the think tanks for opinions about whatever. Just make a market. So I've been thinking about this. So you're talking, hey, prediction markets will help me forecast earnings better.

for Netflix and Tesla. Prediction markets will help me predict the direction of interest rates in the future. That's going to be more helpful. Everything. Everything. Everything. But there's been a lot of shitty things about the prediction markets that need to be cleaned up. The CEO of Cal she was asked recently about some of the halftime stuff. And he couldn't give a straight answer. He was squirming. He should have just said, yeah, we need to work on this. And obviously, they've thought a lot more about it than I have. Here's some of my solutions for getting rid of of just breaking down public trust, right? Because I think, like, sports is, like, a sacred type of thing.

If people can't watch sports without thinking that there's all sorts of illegal shit going on, here's how you fix one of them. Make prop bets illegal. Sorry. Right. How many points you're going to get? How many rebounds are going to get, that sort of thing? You cannot bet an individual athlete performance.

Just remove it. I agree. That's fair. Okay. No bets where there can be a leak at all. So, for example, the prediction market should exist where nobody knows the outcome. So who's going to win the Oscars? Sorry, people know that.

Right? Like, yes, it's a small group of people, but it could get leaked and you can't trace it. Leaks. The thing where you bet on will this person say this word, right? Take that out. So anything that can be known in advance by one person, by a group of people. Can't have game systems. Eliminate it.

You can't bet on that stuff. So what can you bet on? the weather, the price of a H-100 chip in the future, right? Like, that sort of stuff, I think it's fair game. Or fine, let's say that you could bet on something where maybe there can be a leak for the Oscars. All right, so cut it off. So a week before, make it so that you can't bet in the seven days leading up to the Oscars. Or make a max wager, right?

You can only bet a hundred bucks on this. I like having some guardrails. You're right. There needs to be some sort of rules here. Good points. Barry sent me this podcast called If Books Could Kill. I'd never heard of it before. And someone else asked me to. It's about the millionaire next door. Apparently the whole thesis of this podcast is like this collective wisdom from this book, it's wrong. We're going to do a take down. Okay? So it's a little, it's kind of cynical in a way, but I think it's a good pushback. And someone asked me for my thoughts on this.

And the Miller & No Next Door, they're basically saying, like, listen, this whole idea that people are rich because they're disciplined and they save and they're frugal and people aren't rich because they're not, they're undisciplined and they don't save and like that makes them poor. That's the wrong way to think about this. And I thought like that, that's a little bit of a stretch. Like I think a certain percent of the population, yes, they do spend too much and they could be rich if they didn't otherwise. And a certain percent of the population does get ahead by being frugal. But it's not a, it's not a big percentage. Like most people get ahead because they have high income. That's it. Right? Like, if you have a higher income, it's 10 times easier to save. And it's not like if you

double your income from 100 grand to 200 grand, your savings doesn't necessarily double. It could be like quadruple because it's more disposable income, right? And obviously there are certain people who spend too much and so people don't. But I thought their biggest point of take down on Miller & Nextdoor, and they're kind of saying, like, listen, the whole idea is just it's a little too simple and neat and easy. And listen, I read this book when I was like 23 years old, and it was my Bible for probably the first 10 years of my career. And I was overly frugal and I saved a lot and it probably helped me a lot.

But then I realized, like, what am I doing? I just need to make more money. That's the thing. That's ten times easier than being frugal. But their takedown was actually a survey thing. Like, listen, this is a survey of like 3,000 people. And they think the survey went out to people who are ultra-fugal, and they didn't go into people in nice neighborhoods.

They went into people who they thought they could find or millionaire next doors. And so it was kind of targeted and direct, saying, like, this isn't everyone. This is just a select group of people. So that you can have, I don't know. Anyways, it was kind of interesting takedown of a book that I know a lot of people use and love.

I like that take down. I don't love the frugal mindset. And you know what? This is just like people's personality. So if that works for you, I don't want to judge people, right? Some people just, they get pleasure out of saving money and fine.

That's not my mentality. But that's not even like, I kind of wonder how much of that is something that you learn in a book versus like, oh, like, oh yeah, this is how millionaires do it. It's like, I just think that's your personality. And yes, if you read in a book and it's already, and you already jive with that,

it'll maybe resonate stronger. But I do, I'm not a fan of the frugal mindset. I think life is too short for that, but that's, you know, you're not going to be generally... I think at a certain point of life, it's okay, but you should probably graduate from that adventure. That's what I did.

I had that for a certain point in life when I needed it, when I didn't make a lot of money out of college, and I needed to be frugal. But then you realize you can graduate from that mindset. I think that's the thing a lot of people never graduate. And I don't like, I don't like the celebrating,

hey, this rich person drives a 1998 Honda Accord. I don't think we celebrate that. Me either. Anyway, okay, story time. All right, I've reached some middle-aged dad milestones I want to talk about. We have some teens on our block, you know, that drive and they have their friends come on.

And we just, you know, you've seen where I live. It's a little cul-de-sac. The post-it speed limit's like 17 miles an hour. Like, go slow. There's a lot of kids around, a lot of young kids, and these teens drive through the neighborhood so fast. And when there's, like, snow piles and stuff around the corner, you can't really see.

And these kids drive so fast. And I want to, like, shake my hand at them. Like, slow down, you can. kids, and there have even been emails going around, like, hey, tell your high school kids just to take it easy in the neighborhood. You're going way too fast. So I'm an old guy who now wants to yell at teens because they're driving too fast. I get it.

Fair or unfair? F them kids. Yes, thank you. And finally... No, who's going to side with the kids? Yeah, let teenagers drive dangerously. I mean, I know they always have. We were teenagers once, but...

So one of the things that being a middle-aged dad now, I'm realizing... I'm always very sarcastic with my kids. And one of the things I'm most proud of, I think, is the fact that my kids all have a pretty decent sense of human. like they kind of get when I'm messing with them. But one of the things that they've been doing lately is like, and I don't know how they got into this at school, they like to roast each other, right?

Like, hey, we were roasting each other today. And we're like, just careful. Don't want to say anything too mean. So anyway, we went on to lunch yesterday because there was President's Day or whatever and the kids at school off and I met him for lunch by my office. And my oldest daughter, Libby had a friend with her. And like, in front of the friend, they have to now show off.

And so guess what? For the whole lunch, I was getting roasted. Just everything was dad doing wrong. In front of the friend to show off, all my kids are roasting me. You know, and before it was I can... What are they saying? I don't even really... They just constantly were attacking me.

And some of the stuff was kind of funny, and I'm like, oh, man, that's totally a dad thing. I'm at that dad stage where I get roasted out by my kids, you know, for doing stuff. And that's just another milestone that I've reached. I can't believe it. And by the way, one of the best roast, I finally let my kids watch Christmas vacation this year. It's my all-time favorite Christmas movie. I think it's the best one ever made. I watch it every year.

And there's the part where the neighbor, the yuppie neighbors say, hey, Griswold, we're going to put a tree that size. And he says, bend over and I'll show you. And so now every time I ask my kids for something, like, hey, George, where's your shoes? And he'll go bend over and I'll show you. And it gets me every time. And I just, it's just such a great line.

All right, recommendations. You probably have some movies from the plane ride down. Nothing? Okay, I will give you, I'm going to give you a plain movie. I've flown on Delta, much lately. I am out of Delta. They need to like recycle. I don't, what the hell did I watch? Did I not watch anything? I might have just listened to the, I might have just listened to the Dwarcatch podcast. Okay. I started downloading movies on my iPad because I, yeah, there's, um,

here's a great. I'm sorry. I was so dry. I remember what I watched. I was so, I'm so dry with Delta's movies. I watched curb. Okay, a TV show. Yeah, I'm a movie only guy in planes. I don't watch TV shows. Robin told me to stop laughing. She said, watch something else. You're on an airplane. I've got an airplane movie for the way home. It's on Apple now. It's called Eternity. It's got Miles Teller, and it's got Elizabeth Olson,

the younger Olson sister, and Callum Thomas, some newer actorish guy. And it's a rom-com, and it's about this old couple dies, but the wife had a previous husband who died in war, and they get to heaven,

and they have to figure out who they want to spend eternity with. And it's kind of a fun little, it's kind of got some funny parts about like how to spend your eternity and how to think through heaven. And it's a great airplane movie. I really enjoyed it. Some funny parts that made us laugh out loud.

I watched my wife. Really good. I think the pit is the best show on TV. It just keeps getting better and better. And I think season two is better than season one. And Robbie is the most likable TV character on right now. It's so good. Fair?

Yeah. One with the Louis guy who was the alcoholic and he died and what happened with his family. and it was really, really good. I took my boys to the movie on Thursday, Kobe has been dying to see goat. Like dying to see it. Like, Gids went and saw it yesterday. And what do they think?

They loved it. Yeah, it was very good. Was it? You liked it? Okay. Yeah, they enjoyed it. All right, before we signed off here, let's take the market's temperature, shall we? You're looking for some more knives to catch? Software is down another three.

percent. Yeah, okay. Not all heroes have hair, Ben. Software and silver, huh? Software and silver. Listen, if I'm, if I lose money on these stocks, it won't be the first time. I'll tell you that much. Are you losing money in the casino?

So, I was ready to bring this up on the pod because I lost the first three at the first three tables. And I'm like, why do I keep losing? I mean, I hit what I'm supposed to hit it. I stay what I'm supposed to say. And I don't play games. You've seen me gamble a million times. Right?

I hit on 16s when there's a 10. Sometimes you just have to eat it. You have to eat your losses just like the stock market. Yeah. No, I'm a professional loser. I don't get mad. So I was down to my last like 300 bucks. And I said, all right, I feel like this is like enough losses.

I think on my fourth table. And I ran it all the way back to even. And now I'm down a little bit. But who cares? Not exactly. That's a great feeling. That's a great feeling. So honestly, I feel like if I lose it.

at all again, I still won. That's right. There we go, Ben. That's what I'm trying to say. All right. Thank you, everybody. Sorry for a bit of a rambling, maybe some, maybe some fence sitting, but what do we know? I feel like having strong opinions is probably not going to serve. That was the perfect time for Grand Rapids' head. This is a Grand Rapids' head situation.

I don't think you should be pounding the table either way on AI. The only thing I'd say, if you're pounding the table that AI is not going to do anything and it's going to be useless, you're wrong. That's the only thing I can say definitively right now. Fair? That's a good way to end it. All right, Animal Spurs at the Compoundews.com. Thank you for listening.

We'll see you next time.