The Compound and Friends - You’re About to See the Real AI Winners Stand Up

Episode Date: July 17, 2026

On episode 251 of The Compound and Friends, ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Michael Batnick⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Downtown Josh Brown⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ are joined by Jonathan Thomas, CEO of American Century Investments, to discuss: the remarkable rise of Avantis Investors, why active ETFs are gaining ground, what it takes to build investment products that can outperform without taking excessive risk, whether AI is creating an earnings bubble, why the market is broadening beyond the Magnificent Seven, and where the biggest long-term opportunities in AI may emerge. Plus, Jonathan shares the story behind American Century’s ownership structure, which has directed billions of dollars toward cancer and genetic-disease research at the Stowers Institute for Medical Research—and takes us inside one of the most exclusive celebrity weddings imaginable. This episode is sponsored by Public and Vanguard. Visit https://public.com/compound to learn more. To learn more about Vanguard bonds, visit https://vanguard.com/audio Sign up for The Compound Newsletter and never miss out: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠thecompoundnews.com/subscribe⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Instagram: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠instagram.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Twitter: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠twitter.com/thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ LinkedIn: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠linkedin.com/company/the-compound-media/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ TikTok: ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠tiktok.com/@thecompoundnews⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ 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 Josh Brown 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/⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ Public Disclosure: Paid for by Public Investing. Brokerage services by Open to the Public Investing Inc, member FINRA & SIPC. Advisory services by Public Advisors LLC, SEC-registered adviser. Complete disclosures available at https://public.com/disclosures Learn more about your ad choices. Visit megaphone.fm/adchoices

This can't be good breathing this in, right? Oh, it's got to be awful. So it's like carcinogens in the air? Yeah, I mean, it's Canadian wildfires, right? Up shone. It's just going to be a regular thing. Now, do you think? No, I mean, we have this couple years ago.

I was going to say, we've had it for a few years now, I think. I read something that the air quality today is this same air quality happened 60 times a year in the 80s. Really? In New York. Does that sound right? I don't remember this other than recently. I don't remember this is... What do I know?

They could keep their... That was just from people smoking. Well, I think it was from the... I think it was from all the factories and whatnot. Yeah, you guys are young. You didn't get on airplanes where people have lit cigarettes in the cabin. I kind of wish I was a part of that. No, you don't.

And then you're in the non-smoking section. It was one foot away with no circulation. You get no smoking at this seat. At this seat, you can't. We were very scientific. I have science questions for you today. Are you ready for those? Depending how deep they are, sure.

Well, yeah, I mean, I'm not going to ask you to run an experiment. But I was reading up on stowers. Stowers, yep. I mean, I'm fascinated by this. It's really a unique story. Yeah, I think it's one of the coolest things. And I can't wait to ask you all my questions. Do you come to New York a lot?

Yeah, I could probably get here half dozen times a year, every other month or so. Tell me about the golf tournament. The golf tournament. So, yeah, we just had that last week. The funny thing is that when people see me wearing an American Century shirt, I always want them to say, oh, you know. Oh, like that golf tournament?

No, I want them to say, I got all my money with you, everything. But the first thing they say is, I love your golf tournament. So when did it start? How long has that been running? So it was originally started by Suzu 37 years ago. It was kind of a hot dog and potato chip event. We took it over 27 years ago. And when I first joined the company, I thought, oh, my gosh, you know, a celebrity golf tournament made for TV.

You know, I went to it. We didn't have a lot of people there. We had, we actually hired people to stand in South Lake Tahoe and give out tickets to try to get people to show up. Because nobody knew what it was. Right. Right. Yeah, you fast forward now till this year, last several years,

we've actually sold out on Thursday, Friday, Saturday. We have people tunneling in. They bring shovels and have, and they, no way. There's a fence around the place. And because they're sold out, they would tunnel in. So now we have to put security around the perimeter at night. So they don't do that.

And we've had, you know, 85,000 people show up, you know, 5 million viewers, 4 billion social media impressions, 17 billion press hits. It's turned into a gigantic issue. Why do people want to be there so bad? But you guys, you get great golfers. We get about 12 great golfers. And then we have 78 really fun people. Celebrities.

Yeah, celebrity. Well, the celebrities are also the golfers. There's about a dozen that can win it. But there's another 78 folks that are legends. And whatever they did, they're best in their field. and the environment there is very intimate. Like, you know, you can go up and talk to anybody in a way that you can't do in a bigger place.

The city is very space constrained, and so it just works out perfectly. And then the weather's, I don't know if there's a better place in July for weather. It's beautiful. Where is it? Where do you hold it? Lake Tahoe.

Okay. Yeah. All right. And it's always been there. It's been there forever. Okay. Yeah. So give us an example of some of the celebrities

that played this year? Oh my gosh. Well, probably the guys that stole the show this year were the hockey guys from the USA Olympic hockey team. So we had the Kachuk brothers, who by the way, just got joined on the same team in the Panthers. Matt Boldy, he's the guy who scored the first goal, who flipped the puck up on his stick, over the defender, caught it with his stick, and then scored the goal. So the hockey guys are a big deal. Steph Curry was there. I mean, it Tony Romo, I think always goes. Tony was there again this year. He's a real player as well.

He's always in the hunting on the leaderboard. So it's literally mega stars from every walk-al life. Is that your favorite annual event for American Century that you get to be part of? It's really our only major branding event that we do. We pour almost all of our discretionary marketing budget into it. But when you look at kind of our size and then our brand awareness, and there's another thing called luxury awareness. We punch way above our weight.

And while everyone may not know exactly what we do, but they all know the name American Century because of the tournament. So it's been a great brand. Mission accomplished. Yeah, that's how I feel about it. That's really cool. I was checking my spam folder. I didn't see my invite to this one.

Oh. Maybe it went to a different address. You know what, Josh, why don't we just throw our own thing? Like, when is Rittholt's going to have our own tournament that we can sponsor? I don't know if we have the budget for that. What network carries it on TV? It's a three-day no-cut tournament. On Friday, it's Peacock, and Saturday, Sunday, it's mainstream NBC.

That is unbelievable. Yeah, it's crazy, really. I mean, I was going to say, you could not buy that level of attention. You have to have earned it, and you guys have obviously had a fun event for so long that it's become an institution. Actually, you would probably, you know, all kidding aside, outside of your spam folder, you would enjoy it because what happens is, obviously we have all these celebrities there,

and I'd like to think people come for American Century or the celebrities, but I would say the number one reason people come, it's an industry event. All sorts of people that you know, and that more importantly know you, are there, and I think you would find it very, very helpful from a networking perspective. All right, let's figure it out. You can send me.

I'm on a new else in short. Let's figure. I would love to do it. And I haven't been to Lake Tahoe in a million years. So there's a lot of reasons why I would love to be there. Mark your, I think it's July 6th or 7th next year. Mark your calendar. Okay.

All right. You got to deal. I got to check with the boss at home. Yeah. We all do. If I get to green light. All right, that sounds great. How are looking, everybody?

Good? Nicole, you're going to click us up? This is going to be a great show. 251. I could feel it. This is a good one. Whoa, whoa, whoa. Stop the clock. Here's a word from our sponsor.

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Oikos Pro Feed your strength. Visit oikos.ca for more details. Welcome to The Compound and Friends. All opinions expressed by Josh Brown, Michael Batnik, and their castmates are solely their own opinions and do not reflect the opinion of Riddholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Ritholds wealth management may maintain positions in the securities discussed in this podcast. Ladies and gentlemen, we're now rocking with the best investing podcast in America. Or so I'm told, I'm really excited for this one.

I've been thinking about this all summer. We have a very special guest, first-time guest. His name is Jonathan Thomas. Jonathan has served as CEO and president of American Century Investments since 2007. That's a long tenure in that seat. We'll talk about it. Jonathan has chaired its board since 2025. American Century is a Kansas City-based asset manager with over $300 billion in assets

whose ownership structure directs much of, its profits to the Stowers Institute for Medical Research. He was previously the global C.O. of Morgan Stanley's Investment Management Division, where he also served as president of Morgan Stanley Trust Company and chief risk officer for investment management. Jonathan, welcome to the show. Thank you.

Glad to be here. So when I hear Jonathan Thomas, I think Jonathan Taylor Thomas of home improvement, but you're a different person. That's not also you? I wouldn't mind if that was me, but no. I'm sorry. Hopefully I didn't surprise you.

All right. Well, I also want to introduce making his first appearance on the compounded friends, but viewers, viewers know him, viewers love him. Sean Rousseau is an investment analyst at Riddholtz supporting the investment committee, advisors, and the compound channel. Sean co-authors, the best stocks in the market column with me focused on stocks that have the best uptrens in the market. Sean, how long have you been with us?

Four and a half years. half years. Welcome. Sean is in Michael, Batnik's seat. Michael is on assignment elsewhere. We cannot disclose. We cannot disclose. Where is he, by the way? I don't even know.

Gallivanting. All right. Michael's our vacation in this family. All right, guys, this is going to be a lot of fun. Let's start here. Tell the audience who have only seen the golf tournament. What is American Century investments? Okay.

Yes, the Golf Tourant, we can talk about that too. Yeah, yeah. So American Century, we're just under $350 billion asset manager. we're privately held. We are purpose-driven, and we're a peer-play organization. So those three factors are really important to an informed client of ours, because you think about privately held, we're not subject to the... Not a public company.

Correct. Right. We're not, we don't have that quarterly earnings pressure, which allows us to invest and reinvest for the long term. Pure play means we don't have kind of the conflicts and constraints that you might see from an organization that's part of a larger bank or insurance corporation. And then purpose-driven, as you mentioned earlier, we have a very unique capital structure which ends up directing over 40% of our dividends each and every year to the Stowers Institute

for Medical Research, which supports over 500 scientists that look for cures for cancer and other gene-based diseases. It provides a level of inspiration to our employees that's almost hard to our articulate. They, you know, obviously we have a tremendous sense of fiduciary duty to begin with, but then knowing that by winning business, retaining business, delighting our clients, we're going to have a positive impact on mankind. The last thing I'd say is we do, we have three brands that we're affiliated with. We have American Century Investments. We have Avantus investors, and then we have income America, and all of those are tied to the company. Okay. So we're going to

do the stour stuff later in the show because I have so many questions and I'm excited to talk about it. Let's talk about you. You go Fidelity, Bank of America, Morgan Stanley, and then landed in American Century in 2005. You become the CEO two years later. Let's start right there. Did you know that you were walking into a situation where you could potentially be the CEO of the whole thing? Yeah, that was, I've never really chased the CEO title to tell you the truth. You know, I've always been throughout my whole working life.

Somewhere in my 30s, I figured out that what we do, all of us in this room, is we help people. And I started thinking about what I do not as work, but as helping others. And that has really inspired me and motivated me throughout my career. I was out here in New York, as you mentioned earlier, with Morgan Stanley. I'm from the Midwest originally. My wife is from the Midwest originally. and when American Century Investments originally called us, I thought it might be great to get back to the Midwest routes.

It was absolutely a strong possibility that I could become CEO, but I did start off there as CFO. Okay. Sean's from the Midwest as well. Where in the Midwest are you from? Kansas City. Okay. And yourself?

I'm from Denver. So you must be a cheese fan. Yeah, I am. Yeah, I'm sorry about that. Yeah. End of the show, right? What did you learn working on operations and risk that gave you a unique perspective stepping into that CEO seat at a large asset manager?

Because it strikes me that probably a lot of CEOs maybe start off more management or money raising, like sort of like they're in a rainmaker position first. They build the name for themselves. So you kind of came from this more operations and risk side, at least to start with. No, that's right. how did that set you apart from other people sitting in the seat? And why was that important for your ability to lead the organization? Yeah, great question.

So investment management, investment performance is the core of every asset manager. We need to provide superior, long-term risk-adjusted returns. And the portfolio managers who do that, they spend all of their time focusing on optimizing a portfolio, optimizing risk-adjusted returns. The path I took was absolutely different. You're right about that, Josh. But it was different in a way that was very accretive. I was always more or less in a chief operating officer role.

And when you think about that, when you're in that role, you are making all sorts of tradeoffs between talent, technology, regulation, capital allocations, et cetera, across a wide group of functional areas. and that capital allocation in those tradeoffs is actually exactly what a CEO does. You're constantly focused on, you know, where can I invest, where can I underinvest, what matters to the client. And so I think that broad range of functions that I've overseen for the bulk of my career really helped me with that balancing act.

Yeah, because it's all tradeoffs. It is. If you want to do more of something, everybody has the same amount of hours in the day, going to do less of something else. That's entirely right. And the timing of these things is also critical. Yes. Okay.

All right. I wanted to ask you, just in general, because you've now seen almost three decades in that role, has the job of running an asset manager changed materially in all of that time, either because of market forces or what investors want or the availability of technology? Like, what are the big changes that? you've seen in your time. Yeah, it's a huge question. I'll answer multiple dimensions of it.

You have 30 seconds. Okay. So I've been doing this for 40 years, over 40 years, actually. And, you know, back in the 80s and 90s... I was going to say you were on Wall Street in the 80s when Wall Street was Wall Street. Those are your formative years. Yes, when they made movies about it. Or when they later made movies about it.

Yes. Okay. So in the 80s and 90s, the asset managers only... the client relationship. Almost everybody had a direct to an asset manager relationship. So the consumer was like, my money's with Fidelity. And they felt like they knew Peter Lynch. Right. And that was like there could be somebody in between, but there didn't have to be. That's correct. Okay. Yeah. And often, though, what they actually did, they had money with the big three back them were actually the Fidelity Magellan Fund, American Centries, Ultra, and the Janus 20 Fund.

Yep. And so what they actually had was three relationships. They got three statements, and you had this market rally that went from 87, basically, to 2000. Everybody thought they were geniuses. They went to cocktail parties. One guy said he had an 80% to return. The next guy said he had 104, and so they'd switch. Your horse in that race was Ken Heedner in that era, or was that later?

That was later. Okay. All right, got it. So then come along to 2000s, and the tech bubble burst, and all of a sudden, all those individual director investors realized they needed professional help. And so there was a massive pivot away from the direct-to-consumer relationship to advisors. And we as an asset manager had to shift our focus, too, to support advisors in the industry and help you help your clients.

And so that was a massive pivot for us. And then, you know, if you kind of look at right where we are now, I think there might be very, very early signs of yet another pivot taking place, and that is pivot to platforms. So first the asset manager on the relationship, then the advisor owned the relationship, and we had to pivot to support the advisor. And now increasingly you see platforms owning those relationships, whether retirement platforms or AI-assisted financial assistance. And so it's just shifting.

and I don't know how far that will go. I think it probably ends poorly because that trust that's so important in our business and the relationships that you build with your clients. And at the end of the day, the advice is important, but it's the behavioral side that's so critical with retail clients that they need somebody to come to when the markets go down and explain this is not a time to abandon your investment, but rather a time to probably really look at things as being on sale.

The second part of your questions was about technology and markets. You know, markets change and markets determine winners on a year-to-year basis and obvious, but the whole industry, there's idiosyncratic risk, but for the most part, the industry moves in unison when markets go up and down. The thing that differentiates asset managers over a longer period of time is to technology. And whether it's the proper or improper use of technology determines the winders over longer periods of time as opposed to the markets, which has a shorter term orientation. So one of the big things about this platform moment that you're describing, and I totally agree

with you, you now see situations where the whole game becomes about distribution and taking existing investment strategies and fitting them into technological methods of delivering them that obviously go beyond the open and mutual fund. So like one very obvious example is a lot of firms are converting active strategies into ETFs and then taking it a step further. Now that we have a lot of advisors using custom indexing, you see a lot of asset management firms saying, well, how can we take our secret sauce and turn it over to a technology platform that will enable advisors to not allocate to a fund, but allocate to the holdings of a fund

individually and then layer on tax loss harvesting and do things where we're helping convert concentrated positions into more diversity. You know, this says a lot of, a lot of this is about how does our brand translate to this next set of platforms that are gaining popularity? Yeah. So we're in the early state. of that. You're right. I mean, there's been a huge amount of press and hype around this ETF share class. There are firms that have successfully converted existing funds into active ETFs who've had some momentum. A lot of that, though, ultimately results in some fair level of cannibalism. And, you know, what we've done with Avantus is, and by the way, you

start off with distribution. I'll come back to Avantus in a second. The other thing that's changed over the long period of time they've been in this industry, 20, 30 years ago, 80%, 75% of the asset managers had positive net investment. Today, it's totally flipped. It's about 75%, 80% are negative. Does that mean flows? Does that mean flows? Flows, yeah. So purchases, less redemption, whether you're positive or not. That's right. And that's completely flipped. So distribution has become, very, very important, and the space has gotten very crowded. With Avantus... Before we go to Avantus, I think you made a really important point.

I remember reading magazine articles about the mutual fund business in the late 90s, and it really was a feast. Everybody saw flows. Everyone was making money. And if you wanted to see more flows, just buy more commercial time on NBC, CBS. Like during the final four tournament or whatever. And it was like magic. It would just work.

So many things have happened that we don't have time to get into. But like one of the big ones is the attention span of the American public has been so fractured. It's not even clear how you get attention for a brand. You used to be able to write one or two checks. And now you might have to engage in 700,000 different media platforms to get that same bank for your buck. The other thing, and maybe this is a little bit more of a profound shift, is that one of the things technology does by its nature is it consolidates the winners and loser. Like the winners become consensual.

And I bring this up because yesterday, Black Rock reported earnings. This is the largest asset manager on Earth. Yes. They reported a 20% gain in AUM year over year for this quarter. And it's almost like, how is that even possible? I do think it's this sort of Pareto principle on steroids. And I don't know what the answer is, but there are brands like Avantis that come along that aren't BlackRock, but they catch fire anyway. So you can still win.

And I think what the audience would love to hear from you is, what is that playbook to start a brand and have it become one of the hottest brands in terms of new money coming in? almost overnight. How did you guys do it? And maybe tell us what Avant this is in the process. Sure. Another long question with a, I'm very good at those. Yeah, I'm trying to keep it all straight in my head. So, yeah, so Black Rock is massive, Vanguard's Maca, massive State Street. But one of the things that, and the 20% year-over-year improvement is massive. But you got to remember, if you look over the last five years, including 20, was it, 22 when the market was down 18%. On average, the markets are up 16%.

So you got a 16% market capital. Big tailwind. Yeah, huge tailwind. And then there's flows on top of that. You know, I think the black rocks and the vanguards of the world have developed kind of a reputation for being safe. I think there was actually a misunderstanding for a long time that indexing was safe. because everyone said they don't take any risk.

And what many people didn't understand is that's risk in the form of deviation from a benchmark as opposed to. Say for advisors, if I recommend Vanguard or Aishares to a client, I'm not going to have enough deviation where the client says, what the hell are you doing in a bull market? Because I'll be neck and neck with that bull market. That's the safety is for the intermediary. Correct. Not for the end user. The end user is going to have the volatility of the market. So you're 100% right.

This became more about career safety for the people recommending the funds. Yeah, and what's happened with Avantus, I think there's two things that have really driven at one, going back to your business. If you have a client and they look in their portfolio and it's all Vanguard and BlackRock, I think it somewhat begs the question. What do I need you for? Yeah, how hard are you working for me? You know, Avantas kind of splits the difference between active and passive investing.

they are low-cost, highly diversified building blocks that allow people give them the opportunity to outperform the benchmark. And to put that into real numbers, the whole thing launched in 2019, so we don't have any 10-year records. But of the products that we have that have five-year records, there were five of- All-ETFs, by the way. Well, when we originally launched, we had ETFs and mutual funds, side-by-side. priced exactly the same.

Though the flows have been 90% into the ETFs. That's what the advisors want to use. Yeah, well, they're cheap, they're liquid. Tax efficient. Yeah, and I don't know who you clear through, but Schwab was the first, the other thing that people don't talk about on ETFs on the adoption, they talk about intraday liquidity,

they talk about low price, and they talk about tax efficiency. The other thing that changed it in this country, as much as anything else that doesn't get the press, Schwab, if you remember, which is interesting because they're publicly traded, was the first one to offer free ETF trading, no commission ETF trading. Yes. And that was a gigantic tail in for the business.

We had it at TD. Oh, you did have it at TD. Yes. Okay. And, but you're right. That's a huge adoption vehicle to tell people, we're not going to charge your clients or you, anything for you to allocate to ETS. And here's the menu.

Here are the ETSs that are available for no commission. It was huge. Yeah, and Fidelity followed almost immediately. It was probably a week or two behind. So for all the advisors who clear through them, it just changed the game immediately. 100%. So anyway, is it going back to Avantas.

So of the five that have been in the market since 2019, the average fee on those is 26 pips. That's pretty good. Looks more like passive than active. Correct. In fact, if you look at their passive, equivalent indexes, because in the Morningstar category, the average of that fee is 19. So you're paying seven more BIPs for the opportunity to outperform.

And for the products that we launch, those first five, on average, we've outperformed the bench by 280 BIPs. So you're spending seven BIPs. That's remarkable. That's annually to get an extra 280. And then on top of that, those first five, every one of them now is over $10 billion. of assets, and we actually have 10 over a billion. And one of the reasons that's growing so fast,

and this is something that's fairly unique to what we're doing, whether it's large-cap growth, small-cap value, emerging markets, we use the same exact investing philosophy across every single asset class. So if you like a particular product, call it U.S. large-cap growth, and you like the philosophy and you like the philosophy, and you like the approach, you're going to like the other ones as well. The whole suite makes sense.

Correct. And for the advisor, I think it becomes super easy to explain to their client. They don't, if you have seven positions, you don't have to learn seven different investment philosophies. You only have to use one. And so when you throw in, you know, all the benefits of ETS plus free trading,

low cost, the outperformance, the look in the portfolio, where it's not just Vanguard and BlackRock, And then you look at the opportunity, not just the opportunity, the realization of the outperformance. It's a really compelling case. And then the story being consistent across every asset class. Because that's another thing that's very, very hard for asset managers. Going back many years, everybody bought the hot ones.

And that resulted in a portfolio from an asset manager's perspective where you got, your client has one product. And under Avantus, one of the things that's accelerated the growth. so much, is that when people buy us, they tend to buy three or four positions once they buy in the philosophy. Right. So the advisor, right, the advisor learns the Avantus philosophy and says, okay, actually, this makes sense to me. Yep. And I can make it make sense to my client. So then, it's like, well, if we're doing large cap value, the Avantus way, we don't think the market is materially different at the small cap level. Right. Like, if we think this philosophy makes sense here, why wouldn't we also do the same thing here? And that's how you really win with advisors.

You become a go-to for multiple tools in the toolbox. Right. And multiple positions, it makes their life easier. It shows that they've done some spade work to get there. And then on top of that, I have to say, there's a massive tailwind in the industry. So active ETFs this year, this is probably a month or so old data, but it's roughly correct, 40% of the year-to-date ETFs, have gone into active ETFs. Yeah. The category has grown over 50% over the last five years. And the whole space, so it's not just the Vantas, it's the category.

When we entered the space in 2018 with American Century ETFs, there was $50 billion in it. It had one or two percent of the ETF space. Today, it's approaching $11 billion, pardon me, $2 trillion, and 11% market share. So the adoption, not just of Avantus, but active ETFs has been huge. And what's fascinating about that is for years, you know this, both of you guys know this. Everyone said active is dead. Nobody's buying active anymore. And what it really turned out to be is it was the other attributes, the fees, the building blocks, transparency.

So I've given Kathy Wood credit for kicking the door down and having the first mainstream, popular active ETF, not as an endorsement of how she invests. But she built, I mean, this is pandemic era. We sort of had a bubble in, you know, low quality, high growth, exponential tech stories. She built her brand in that era. But she was the first one to have a $50 billion dollar AUM actively managed ETF. ETF shop. I mean, it hasn't gone well in the last couple of years, but she really sort of was a pioneer for that type of product. And then I think a lot of other asset managers looked at that and

said, okay, we now think there actually is an audience for people that want ETFs, but want stock picking in those ETFs and want something different than just another benchmark product. Yeah, she was a pioneer, and that the assets she gathered there on that momentum and tech-oriented style of investing was super, super impressive. The other tailwind we didn't talk about, there was a rule. I might not get this right. I think it was called 6C-11 or something like that. It came out in 2019.

It's more commonly known as the ETF rule. And up until that rule came out, in order to do an active ETF, you had to get SEC exemptive. Exemptive relief. One by one. Yeah. So the ability to get that relief, the uncertainty, the time to market was huge. And when they came out with that rule change, that also was a massive tailwind to the space. There was a philosophy out there that the portfolio managers who are managing active funds really, really cared about the secrecy and the ability to wait 45 days before filing whatever their trades were for the quarter.

That ended up not being true. or maybe some of them care. But now all these active ETFs for the most part are not hiding what they traded. In fact, they're proud of it. It's fully transparent. It's on everyone's website. You can download it that night.

What funds traded what? And the world didn't come to an end. Yeah. Like it's sort of like everyone now is just like, okay, cool. They bought this. They sold that. How could you be an advisor

and have one of those hidden ETFs and not even like be able to attribute? And that's why they weren't. That makes it so hard. Right. That's, that's, that's why. That's why they weren't popular. Yeah.

Yeah, it's, to be real honest with you guys, our first attempt in the ETF space was actually the semi-transparent active space. And we use the word semi-in-this industry a lot when it really means not at all. Like semi-liquid funds. Well, that's what I was talking about. Yeah, yeah.

Semi-transparency just sounds like it's not going to be transparent. Right. And it wasn't. But we started with that. And one of my management philosophies is, got to take risk, right? If you don't take risk, you don't really gain a competitive advantage. But if it doesn't work, you have to fail fast. You can't become emotionally wed to the idea. So the first ones we rolled out, largely because of our portfolio managers, concerned that there'd be

free riding and front run. Which is understandable, too. It is a fair concern. We rolled those out, and there was just no uptake. And so we recognized the market didn't want it that wasn't hedgible, and we pivoted very quickly to the fully transparent, and that's how we got off and running. So, congratulations. Avantus hit $150 billion in AUM. It took you guys six and a half years, and might be a record. I don't know of another asset management fund that's a company that sprung up in the last

couple of years that's been able to do that. Why are your, not making a forward-looking statement. Why do you think your funds have been outperforming? What is it that you guys are doing that other fund families in the peer group are not doing? And how sustainable are these edges going forward? Yeah. So you're absolutely right. Far more asset managers are going away than are coming.

There's not a lot of new launches lately. No, it's miraculous, but you guys did it. And, you know, if I had to kind of pull it apart, I go, you know, part of it is the team. You know, we started this de novo. It wasn't an acquisition. I had breakfast with Eduardo, Eduardo probably a million years ago, approximately. Okay.

We went to Maillino before it was closed and then reopened. I think I had the frittata. Okay. I don't remember that much of what was said, but I remember talking factor investing with Eduardo before the launch of Avantis. So I've been doing, as I said earlier, I've been doing this for over 40 years. Eduardo is one of the most virtuous,

smartest, client-centric person I've ever worked with. He's just unbelievable. And that, those attributes, even though they sound very fluffy, are real tangible differentiators in how that business is run. His focus on delighting clients and really exceeding expectations is strong. But so the big thing is that, you know, it's a, what do people like it? It's low fee, as we talked about. it's ETF, so it has all of those advantages. It's highly diversified, and so you don't have the volatility that comes along with, you know, active management, the other thing that's changed. You asked a question earlier, Josh, about what's changed over the years.

At one point, there was, you know, large portfolios, and everybody wanted small portfolios, what I mean by that small number of names, but that created kind of a worse to first path. And now people want to just kind of beat the bench. And I think what people don't understand is even if you're in an index fund, each index fund is run differently as well. You can get very, very different returns based on things as simple as equal or market cap weighted. But what- More variety on the value side, too. Correct.

Like what constitutes a value index you could have radically different results. Yeah, some of the things that are in value and I would blow people's mind. But I think what really happened was this. Eduardo kind of pulled this and his whole leadership team, pulled this apart and said, what's going to create greater expected returns in the future? So it's less about predicting and more about relying on what we call financial science and academically driven research that drives the portfolios. And it's a huge differentiator.

There are not many of us in the entire industry doing this. There's a lot of copycats trying to come in right now because of the momentum we have. but it's going to be tough to beat the performance and then the scale that we have right now. There's so many funds, DFA, Schwab, Fidelity. Like, how do you differentiate yourselves? Because everyone has their own small-cut value and factor. Like, how do you differentiate yourselves

from the competitors like DFA? So DFA is a good one. So, you know, they are a shop that at first, you know, it was a cult-like following. You know, you guys are probably aware. In order to sell DFA, you actually had to be approved, to sell. We got into the cult.

Oh, you did. Okay. Yeah. But no, but you're right. They did not, to their credit, and I always admired this about them. And we're the same way with our clients. You could not just walk in the door and say, give me a dimensional fund. You had to prove to them that you were a serious advisor that was not going to have clients

who are mass selling in a market downturn, for example. And I always admire. And our welcome indoor is not that wide either. Like, you have to have a financial plan to invest with us. We don't just take checks from people because they like me on TV. So I like that aspect of what they did. Yeah. And, you know, they're a very worthy competitor.

And probably of everybody in the industry, they're the most like us. Yeah. You know, we really focused when we compete with them head on, we really focus on fees, obviously performance. And, you know, the other thing we have is, you know, they're what nearly a trillion dollars probably now eight eight nine hundred billion we're 150 billion so our agility and nimbleness and client centricity is just much easier to execute and you know can really rally around that that cult that they build you know was disrupted because when you sell just

mutual funds which was they used to do uh you can really control who buys it soon as they launched ETFs. Right. It's up to the market. Correct. Yeah. You got it. Right.

And you know what? The cannibalization argument also is real where you say, all right, we've got this 40-act mutual fund. It's been around for 30 years. Everybody who's in it likes it. Everyone's happy. But the future buyer, the future allocator is a financial advisor who may be building an all-ETF model portfolio.

and that firm, hypothetical firm, may ramp from $100 million under management to $5 billion. We're not going to compete for any of that. We're not going to be there at all. So at a certain point, you have to just say, all right, we've got to figure out this ETF share class. We have to be okay with assets migrating from the 40 Act fund into that wrapper. Yes. We may make less on it because ETFs on average were cheaper than. And this is just like we have to decide.

we're either going to do it or not. A lot of firms at this point have now done it. Many of them probably wish that they bit the bullet 10 years earlier than they did. Yeah, I talked earlier about the stats on how the market's grown, right? It was 1 or 2% when we got into it. It's 11% now. Yeah. And, you know, the other thing that's done, Josh, is it's completely disrupted.

This is so cool and energizing to me. For a long time, I'll call it the hierarchy in the mutual. a fun space was pretty established. Now, the reality of it is the order really didn't change much over the last 20 years. The distance changed a lot from Black Rock and Vanguard and Fidelity. They became much larger, but the order more or less stayed the same. Moving to ETFs, all of a sudden, it was a jump ball. And, you know, here we sit, you know, we're somewhere around the 20th largest asset manager.

But if you look in the ETF space, because we were. early, because we focused, we started it from scratch so we could really dial it into exactly what clients and advisors wanted. You know, we're now the fourth largest active ETF issue in the country. And if you look at all ETFs, including all the passive ones that are out there, we either 12th or 13th. So in a business that we've been in since 1958, on the fund side, were somewhere around 20 for the ETF side where, you know, top 10, almost top 10 overall and top five in terms of active ETF issues.

So it's been exhilarating to have this pivot take place and the opportunity to have a jail break, candidly, for all of us who've been in that hierarchy for so long. Yeah, 20 could go to 10. Yes. It could absolutely happen. You're also in a very specific lane. You're not competing in the thematic ETFs,

the single-stock ETFs, the leveraged ETFs, you guys are doing something that's very specific. And it's not like you're, it's not like you're firing up the spaghetti cannon to see what, you know, it seems like a much more disciplined growth strategy. No, 3X levered ETFs. No, we don't.

And we look at it. You know, when we see all of our competitors launching, you know, single-stock levered and, you know, trip all that. Not that there's anything wrong with those products, but what you guys are doing is very much specific to an investment philosophy versus what do I think we can get somebody to buy next month? Yeah. For us, it's core portfolio holdings that are truly in the client's best interest.

And all of everything we've built on the ETF side, one of the other big differences between funds and ETFs is when funds get too big in order to continue to generate alpha, we have to get closed. And that's extremely disruptive as well to the advisor who now has to, if they have it in a model, they have to reallocate or find something else. The ETFs, we've built them so that they can scale perpetually. So even like a small cap stock, because of the number of names we have in there, we can continue to scale.

So that's been another huge advantage to ETFs in general, but specifically the way we've built the Avantas. Before we move off Avantis itself, I do have to tell you, you have a Hall of Fame wholesaler at your firm, Carolyn Gainer. Oh, she's awesome. One of my favorite humans that I've ever met and just an absolute rock star. I hope she's the CEO after you. I want to ask you, how do the other children feel in the family when Avantis is getting this much attention, this much positive momentum, all the money is flowing in? Like, how do the other verticals within American Century kind of cope with that level of attention?

Yeah, well, we've talked about Avantus because we have 40-some-odd products there and the assets have grown very big. But we actually also have our first ETFs were actually, if you remember this term, this is from 2018, Smart Beta. Yeah. Before my time. We don't use that term anymore. No, no, that's a, that was an eight-year-old term. Those were our first ones. They were on the American Century Side.

And then I told you we did the non-transparent or semi-transparent actives. That didn't work. But eventually we've launched a bunch of American. century ETFs as well. And those are also gathering assets and earn positive net investment. The problem that every asset... You love all your children equally? Yes.

But mutual funds for us and our competitors remain in huge negative outflow. And so that's hard for us. But the ETFs, no matter what brand they are, are all growing for us. Okay. That's awesome. I want to do some market stuff with you. Let's talk stocks. Let's talk stocks.

Let's talk... let's talk, we'll start with earnings growth. Analysts are now expecting 23.2% year-over-year earnings growth for the S&P in the quarter that we are just now getting the earliest reports. The financials reported, knocked it out of the park, and we're pointing out here excluding the MAG7, earnings are still expected to grow 20.9%. So it's not just hyper-scaler stuff. 10 of 11 sectors will grow earnings this quarter. And yes, the biggest contribution will come from tech. Daniel, can you chose short one?

Which is 65%. I mean, that's just nuts. 65% growth year every year. For technology. Yeah, it's crazy. So I guess my first question would be from a top-down standpoint, you'd have to agree this is one of the great bull markets that you've ever seen, I've ever seen.

Yeah, so if you go back to 0809, we had a little blip in the first quarter of 16. That was rough. 2022 was bad. But other than that, it's been 17 great years. Yeah. Absolutely. Would you like to predict the end of it?

Have we all given up on even thinking about when this ends? Or what do you think? I mean, if you kind of look at the three things that I really think about, you got the economy, right? We have done everything possible in the last year or two to disrupt the economy, right? We created a war. We implemented tariffs. We got a new Fed chairman who nobody can quite pin down where he's actually going to go. Iffy labor market.

Very ify labor market. And a lot of uncertainty around what AI is going to do, ultimately to that labor market. If you read the Centrini report, you think it's doom and glorious, which is just fascinating, that whole thing. But at the end of the day, the economy is proving to be very resilient. Accelerating. It is. Yeah, there's no signs whatsoever of any sort of imminent correction. Inflation, while elevated, is kind of in line with expectations.

And then the most recent read we'd had was, what, 3.5% versus a call, a whisper number of 3.8 and 4-2 the previous month. It was the biggest single month drop in six years. and, you know, obviously very attributable to the oil shock and the temp, what's turned out to be the temporary ceasefire. And then finally, the consumer, you know, the consumer, especially on the high end, continues to earn and continues to spend. So, you know, as we look to the back half of the year and even beyond that, you know, we kind of see as steady as she goes environment. And, you know, there's a lot of questions that I'm sure you'll talk about asking, about AI and have some real interesting views on that. But, you know, that's going to be a very big determinant where all this ends up. Our colleague Ben Carlson tweeted this. I thought it was funny.

He said, is this the most normal year possible for markets? The U.S. stock markets up 11 percent. GDP is in the two to three percent, two to three percent range. Inflation says at three and a half percent and the 10 year treasure yield is yielding four and a half percent. Yeah, so funny. All those headlines and like everything about all of the most important stats is like fairly within the normal range. Part of that, though, is this broadening out of the winners and losers. You guys talked about Meg 7 a second ago. You know, what's happening now is, and we're at the very early stage of this,

for a while, all called the creators. The creators and the enablers of AI were just soaring. And now what's starting to happen is the adopters are starting to... couldn't agree more. To receive the benefit from it. So that concentration of the creators at the beginning drove the market like crazy. Now the adopters are getting the benefit. And I think ultimately the winners and losers will be determined by who adopt it and who's deploying it correctly.

But it is a I think it has a lot of legs. And, you know, I'm sure you're, in fact, I was sitting out in your lobby. By the way, your office has a great vibe. It's full, right? It feels like a family in here. You can feel the trust in the... Everybody's under 30. Yeah, I noticed that too.

I'm the old man here. Well, until I showed up. Gladly, gladly. Thank you for saying that. I appreciate that. But at any rate, the... I forgot what I was on. But, yeah, I think the adopters, and if you look at the S&P,

I just looked at this last week. I was doing something in the press. 24 year-to-date market highs this year, 57 the year before, or 57 the year before that, zero in 22 and 23 and 21 had 70 market highs. And everybody gets nervous around market highs thinking, oh, you know, I'm going to come in at the top tick. But if you look back over those last five years, it's more indicative of an ongoing bull market than it is sort of any sort of an imminent recession or pullback.

I'm so glad you said that. The new meme going around now is that actually it's an earnings bubble. It's not a, they can't say it's a. stock bubble because the biggest most visible growth stocks in the market have shrinking multiples this year. Yes. In a bubble, it goes the other way. Yes.

We're paying more for earnings in a bubble. So what the bears have pivoted to is, oh, no, no, we're not saying the stocks are in a bubble. Now we're actually saying profitability. And maybe they'll be right. I don't want to mock. Daniel, can you show chart too? Yeah, I don't want to mock people just for having that opinion because it sort of does look unsustainable. When you look at earnings grow through this prism, Sean, what's, what are we looking

at here? This is from Chart Kids. So Hickshu did something really interesting. You're looking in, in the dark blue, you're looking at actual EPS. And in the, in the light blue, it's the previous year's estimate of what that earnings would be. And so generally, outside of recessions, analysts nail it. They nail earnings unless it's 2001, 2002, 2009, and then 2020. So for the most part, analysts are actually right. The verticality is the thing that bothers me of the next year's estimates. Yeah, and it is funny, though, right? I mean, if you look back at the previous bubbles using that word,

you have a marked on your chart here, which makes it super handy. Yeah. You know, the 2001 one, you know, what's really funny about that, nobody, I haven't really seen this in the press, but that was driven by the internet, right? Everybody thought the internet's going to change everything, and it's all going to be different. A huge KAPX bubble.

A huge KAPX bubble. And if you remember, the poster child back then for a bubble company was actually Pets.com. That was the poster child for a bad idea driven by the Internet. And really, the Internet took a long time to really crystallize its full effect. I'd go as far as to say it wasn't until the pandemic in 2020, where the effect of the Internet that was imagined in 2000 really was fully realized when everybody had to grow remote and nobody went to the stores, et cetera. 0809, there was a lot of contributing factors, but we know the lending and the mortgage

was a big part of it. 2020 was really a one-quarter thing. But I think when you look at this, we've never had, and actually what's funny about going back to Pets.com thinking about that, what's the big animal thing right now? Chewy. It's the same. It worked. The idea was good. We weren't ready for it. That's correct.

Yeah. So Chewy is doing very well. It's new. And it's the same exact concept of Pets.com. Its timing was just better. And the full realization of the internet came. So when I look at this chart, I think the concept of an earnings bubble, I've heard that as well. I love the things that Wall Street comes up with. I like the word chip wreck that was flashed around a couple weeks.

But the earnings bubble, earnings, as you say, the multiples are coming down while The earnings are going up for some of the big ones, at least. Can you chart seven, Daniel? And I think a big part of that is going back to the adopters of AI as opposed to just the creators. So here's a really great example right in all of our faces. This is the biggest stock in the world. This is Invidia. And the growth rate obviously has been extraordinary.

But the stock price is no longer reacting to earnings upside surprises, to higher guidance, to analyst upgrades. It's getting cheaper and cheaper and cheaper. Even as there's really no deceleration, there's no, there are no negatives in any earning. So what the market is basically saying is we're bored with Nvidia. We get it. We get it. They own AI. They own the GPU.

I also think there's a story in here about competition coming in the form of, you know, application-specific integrated circuits and the chips of the hyperscalers. and whatever else, models, large language models that use less GPU, whatever it is, this is not a bubble. This would be a bubble if Nvidia's multiple had gone from 30 to 90 times earnings. This is a discount. This is a discount to the market.

It's a huge discount. And I agree, I think competition's a big part of it. I mean, they were the first ones out of the gate to really own, I'll call it. 90% market share, and now they're not going to. Yeah, right. But I don't, you know, at the end of the day, day, you know, there's always a horse race and the leader switch quite a bit. You know,

the government's investment in Intel fascinates me too. But, you know, I think Navidia is going to be a player for a very, very long time. And when I see this and other charts like it, I think there's just a concern, a not yet to be realized concern that the spending that's going on there might end a little bit sooner than people had originally predicted. But if the That's where the earnings bubble comes from. The companies are over-earning relative to what happens when this Cappex normalizes. That's exactly right.

Yeah. Yeah. Which is a very reasonable thing to be worried about. Can I ask something? I keep hearing about the circular investing and the lack of free cash flow and everything. Let's just say Amazon and Google and Microsoft and all the big spenders stop spending. Doesn't that just shoot free cash flow right back up? For them, but that's not the worry.

The worry is I start a neocloud. I say, I am building a data center. I have money from Saudi Arabia and maybe the Norwegians and everybody, private equity, Apollo's in. So I'm going to build this data center and I'm going to start my own neocloud. Jensen Wang calls and says, I heard the news. I think it's great. We would like to sell you GPUs. And by the way, we will financially backstop those purchases.

You don't have the capital yet. We know you're good for it because we see that. You have all this backing, and therefore, Nvidia is going to book that chip sale to me, and I'm either using money that indirectly comes from them, or I'm backstopping that to raise money from someone else. Take that example times a thousand, and everybody's lending and or equity investing in everyone else's projects,

and the concern is when the music stops, all these people go for the chairs, and a lot of people are going to be left without a chair because some of those funding commitments are going to vanish as though they were a vapor. Am I explaining that right? No, I think that's exactly right. I'm not saying that will happen. I'm saying this is the thing that will make this actually an earnings bubble because these

earnings will go away. Right. And people confuse the economy and the market a lot, right? So the economy can be doing one thing. The market can be doing another. Economy, as we were just talking about, it's doing very, very well. But, you know, a stock price and the valuation is the deal. discounted value of its future earnings.

So if you kind of look at this chart, there was an expectation that AI was really going to go. It got some traction. Multiple's got super high. And now I think there's a view that as more competitors come in and more capabilities are built out. I mean, 18, right? 18 is below the S&P multiple right now. 18 times for Nvidia. Yeah.

Yeah. People are acting as though it's been disrupted already. Right. Yeah, but it's just the going forward expectation. But I keep coming back to what I said earlier. If the adopters realize the expected benefit, productivity, because productivity is what drives margin, profits, GDP, the economy, everything. If they realize those productivity benefits that I think are out there,

this will tick back up because people realize it's a society. So I love that you said that. And I said something very similar earlier this year in response to, what happens when CAP-X plans start to moderate and all this earnings growth? Is there a hand-off

where we don't have to automatically just have a bare market? Like, we don't just automatically have to have a 2022 another year of efficiency. And I think that's the, I don't know if it's going to work. That is the handoff

where the S&P 493 start to out-earn chart five, Daniel? Because of all these investments they're making an AI start to result. in higher earnings and more productivity. Like that is the way the market gets out of this hyper concentration amongst seven giant stocks.

What are we looking at, Sean? So this is as of yesterday. We're looking at the S&P 500 in points on the far left. And then the contribution to the points change year to date. The mag seven's in gray. And the other 493 is in, I guess, a black or dark blue. So the 493 is absolutely trouncing the mag seven so far this year. Yeah.

Yeah. Well, this comes back to the broadening out. For the first time in, I don't know how long, 50 some odd percent of the S&P is up over 10 percent, right? It used to be a huge disparity, right? The S&P was doing great because of very concentrated, 40 percent of it was weighted in technology, and that broadening out is now happening. And you see it across small cap. You see it across emerging market.

It's really, it's live and it's real. Do you worry about bubbles? in pockets of the market like semiconductors, memory stocks, are there areas where you guys maybe think, maybe look at portfolios top down, maybe we ought to do something about concentration here, or is that not really an issue for you based on the way that you manage money and how the strategies work?

So you brought up Jensen Wang earlier, and have you guys heard his thing about the AI cake? Maybe. Okay. He talks about the AI is a cake, and he says it has five layers to. What a salesman. Oh, he's fantastic. Because I'll buy cake.

Yeah, me too. Talk to me about cake, and I'm all in. He talks about the cake, because we use the word AI, but there are really five distinctive levels to it. There's the base level, which is really the ground, the cooling, the electricity. You've got the chip level, right? the Navidias of the world. You got the infrastructure level, which are the data centers themselves. You have the model level, which are the LLMs.

And then sitting on top of all of that is the app level where the actual values created. From an investing point of view, you know, down on the bottom of the cake, those first two levels, the base level and the infrastructure level, or base and change. require massive investment, tons of capital. As you go up that cake, it requires less and less capital. But when we talk about AI investing, you've got to figure out which level the cake you're in, okay? Because it's not just, the word is used so broadly and there's so much underneath it. What level of the cake are you in?

And is that position that they currently hold sustainable, expandable, and defensible. And I think... On a stock-by-stock basis. Stock-by-stock basis. Very hard to do. It is, but we use the words AI so broadly, and there's just so much more to it than that. It's nuts to me how many sectors it affects, industrials, utilities, energy, like almost every single sector, maybe except for financials and health care.

I mean, we wrote about Caterpillar, and that's like, that's been such an AI story. I mean, who would ever think that? So I like this idea that where the puck is going is that health care and financials, arguably, have companies that could be among the biggest beneficiaries of AI as users, as adopters. Think about insurance underwriting. Think about drug discovery. Like, if AI lives up to the promise, I was going to say hype, but I don't view it as hype, lives up to the promise, you could have 500 companies in the financial sector and the healthcare sector.

say something on an earnings call like we credit the beat to these investments we made a year ago in updating our workflows and processes to the AI era. And I think that's a really great way for the story to go. Yeah, going to that last level of the cake, the apps and stuff, that is where the drug discovery comes from, the financial and services. So are we there yet? Oh, my gosh. So, you know, over at the Stowers Institute,

they're using a tremendous amount of AI and really advanced... Well, you're paying for it. Yeah, that's true. That's correct. Really advancing medical research. And, you know, you see it in financial services. Our portfolio managers are using it to do research. I don't think it's going to come anytime soon where you're going to remove completely human judgment from the process.

I still think human judgment prevails at the end of the day. But all the things that feed into that ultimate decision are going to be fed by AI. And I agree with you. I don't think it's hype. I think it's promise. The other thing that's not, you know, that Centrini report I mentioned earlier, if you read that, it's fascinating.

It came out right before the Iran War started and it got like 11 million views over a weekend. And the market started going down because everybody freaked out over it. The thing that wasn't in there that's really interesting is you say, okay, what's going to happen to the labor market? and in a completely unplanned but realistic way, we may be at peak population right now. Anyway, regardless. Right, and if we're at peak population, everybody's around the world, for the most part,

is having fewer children. So it almost feel, of course, it's not a master plan, feels like a master plan, but if population, if we're at peak population, and it continues to go down and productivity goes up, You're threading a needle, but it could create the perfect outcome. It may have arrived right on time. When you look at the demography, the Koreans are not having children.

They have negative population growth. The Chinese are not far behind. Japan, the same. Europe is after that. And of course, we will not be impervious to it. We've got immigrant populations that have come in over the last 50 years that have kept our population growth above the average of the developed the world. but that's not forever. We're going to run out of people that are going to come in.

So I agree with you. And then I think about you got 68 million boomers still alive. Somebody's got to take care of, somebody's got to take care of them physically, nurses. Like, we're going to need all of the robotics and the AI we can get. So I'm not negative on it. We might have a little air pocket in the next five years for white collar employment, but that's a whole other subject. Josh, I don't like that you said there's 68 million.

of us because I'm one of them still alive. You are? You make it sound like I'm beating the odds. I'm an ex-ennial. So I will definitely have a robot nurse. Take care of me. All right. I want to talk about Stowers.

So I think this is one of the coolest stories in our industry. Jim Stowers Jr. Founded American Century Investments, as you mentioned, in 1958 in Kansas City. So a very non-traditional way to start an asset management firm in a place. Okay. He had $100,000 in capital, 24 investors, and two mutual funds. All right.

He was a mutual fund salesperson himself for Waddell and Reid. Wow, you've done your research. I have. It's Claude. He'll get too excited. Okay, all right. No, but I wanted to better understand the story. And then in the 90s, the Stour family has some cancer stuff happening.

and it's sort of like, it's sort of like becomes the, you said, purpose driven. Yes. Sort of becomes this animating thing of like, well, what can we really do about this? So bring us up to speed on the story and then we'll talk about the Institute itself. Okay. So everything you said is exactly right. So I'll just pick up. So he and his wife both ended up with cancer in the late 90s.

They went to treatment. They could not believe how barbaric it still was and how it had not yet evolved. since the 50s or 60s. Hardcore chemo and... Yeah, right. Yeah, it's tough, radiation and everything else. And they decided they wanted to do something to help people that was bigger than money. And, you know, most people just donate their money.

So they did a couple of things that were fascinating. One, they gave away almost all of their net worth while they were alive. That's a bold thing to do. And not only did they give it away, they did it to create the Stowers Institute for Medical Research. and I agree, Kansas City is an odd place for an asset manager. Well, not these days, but back then. Well, yeah, I mean, the wealth and RAA, right, we now have created. The biggest RIAs in the country are all in Kansas, and I'm still trying to get,

we're going to get to the bottom of that. Okay, creative and Mariner and all. They're all there. Yeah, it's crazy. What's how that's turned into. But anyway, he decided to give it all away, and he took an old hospital in Kansas City that largely been abandoned, rebuilt it to be the Institute, gave his donation, to it. And then I call it the gift that keeps on giving. And then as a result, we just keep

directing our dividends there over 40% of them each year. It's about 2.2 or 2.3 billion over the last 20. That is it incredible. It's crazy. And it's, um, and you sit on the, you personally sit on the board of both entities. I'm the chair of both companies. Correct. Okay. Yeah. Got it. Do you ever as an, as an executive in the asset management industry, say, man, we could really reinvest those dividends into this business if we could? Or do you not think about it that way? I don't. I actually believe, you know, we're in, as you pointed out, we're in Kansas City. It is a differentiating objective for us. When I don't go to a whole bunch of finals, I go to the big ones, but when I'm in a big final and let's say you guys are firemen or cops or doctors or lawyers, whoever the investment

committee is, and they've had a presentation. What's a final? Oh, like an institutional Final pitch. Yeah, right. Yeah, institutional pitch. And we're up against two other big competitors. Are you the closer? They fly you in for those? So the big ones.

Okay. The last thing I always say is, by the way, if you choose us, know that 40% of the dividends that we generate will go to fund medical research to create a better world for you, your kids. And, you know, American Centries kind of sits at the intersection of health and wealth, the place where everybody needs help. How do they say, who says no? You nailed that.

I know. How do they say you nailed that? It's really compelling. So I don't think people do it. Very few people invests with us just because of that. But when you're talking to somebody and they can't decide, you know, if we've gotten to the finals or if we're in your company and we're one of the last three picks and they're choosing between

and they know the American Century story, it's a tiebreaker quite often. That's cool. Yeah. I love that that's the case. I want to ask you a little bit about the science. Yeah. So you guys are funding. $2 billion-ish, which is a lot of money.

And what I love about, what I love about the Stowers idea of research, similar to the way that you talked about, not being a public company, not having a gun to your head about earnings, you know, do we beat the street by a penny or not each quarter, they're not chasing a drug that they could commercialize, you know, in 15 months. they're doing these sorts of long-term research that the pharma guys probably aren't doing because it's such a long tail before anything comes out of it. It's still necessary. And a lot of the stuff I read about what you guys are doing is regenerative ideas.

So tell us a little bit about some of your wacky science experiments and what the idea is behind them. Yeah. So one of the things, I think we're good way to start this. When people think about scientists, they typically, think about chemicals and compounds and labs labs yeah uh we're taking a very very different approach to it um for the most part we focus on organisms that have evolved animals animals that have evolved over millions of years that should have some sort of ailment cancer diabetes neurodegenerative diseases baldness?

Oh, yeah, we have 20 different labs focused on 20 different things. And we focus on the animals that have avoided them. So two things. One, we're not... He's going to combine the animals with people. Yeah. That's kind of where we're getting to, yeah. So, one, it's not a bunch of chemicals.

We're studying nature and how evolution has gotten rid of these diseases that they should have. And then the other thing that happens in science, almost everybody studies what went wrong. We study what went right. In evolution. Correct. Why does this animal not have diabetes? It should absolutely have diabetes.

This animal should absolutely have osteoporosis, but it doesn't. And so what we're doing is we're looking at a very molecular level of what proteins or DNA structure do they have that differentiates and is that applicable to humans. and when you mentioned earlier, pharma doesn't pursue it. We do what's called foundational research. In a way, it's a little like Avantus. I look at Avantus as building blocks for people's portfolios, and then they can have their satellite holdings, but the core of the portfolios should be Avantus.

Same thing here. We're doing foundational research that we make available to the world for free so that everybody else can build upon it. And then the other thing that we do, that's very unique, everybody who does makes a discovery loves to tell the world about and publish a paper but we also talk about our failures. If we have a hypothesis that doesn't pan out, we actually publish that as well. Why do we do that?

Even though we're competing with all these other organizations for new scientific knowledge, we don't want people, we don't want the world to waste resources replicating a hypothesis that we've tested and learned that it did not work. So we publish both our successes for people to build upon and our failures. Right, don't do this. We did it already. It doesn't work. Here's our method.

Here's how we know it doesn't work. Yeah. That's really cool. So it's altruism within altruism. It's like altruism squared. Yeah. Here are some of the things that have come out of your, your organization's research and labs. Plannarian flatworms.

you guys precisely identified a subset of stem cells that can regenerate an entire organism from a single cell. I don't know how that's applicable to me. Do I eat the flatworm or tell us with the importance of that research. It sounds like a big deal was made out of it when you did it. Yeah. So there's all sorts of organisms in the world that if you cut them in half, cut off their arm, cut off their head, arms, legs, they completely regenerate.

Yeah. They grow a new one. Organs as well. Humans can't do that. But understanding how these organisms can lose an organ, lose a limb, you can reduce something down to just the- Like you cut a lizard's tail off and it grows a new tail. Yeah. And there's all sorts of them that do that.

So we're looking at it for the sake of organ regeneration, for the sake of helping people regenerate with all these organisms, animals, throughout the world. can do it, why can't humans? And we have made tons of discovery. There's a guy that we have called Alejandro Alvarado Sanchez, or Sanchez-Avarado, who is the lead scientist there, and he is internationally recognized as the lead thought leader in the space of regeneration. He's over at the Institute. I would imagine there are commercial companies coming to you guys and saying, we want to try to do something like, we want to try to do something with some of your research. Is it for sale?

Is it for collaboration? How do you think about that? Again, it's a 501c3. And so what we really trying to do is really just trying to make the world better place, creates scientific knowledge that others can build upon. But we have also sold some stuff. A recent example is one of our guys figured out how, at the time, osteoporosis, the decaying of bones, there was no way to stop it.

And the best drugs out there only slowed it. I believe we learned this from fish. We found this fish, I think it was an African killafish or something, that learned how to regenerate. Is it a filter fish? No. No, no, kill a fish. Oh, okay. All right.

Yeah, no, different. Because I eat those once a year. No, no, no, no. Go on. Go on. And we discovered how to do that. And we ended up selling it to Amgen. And Amgen now uses it.

And so they have a drug. that not only slows, but can reverse osteoporosis. Oh, that is so cool. Yes. The last one I'll mention, I read about this, you had a study in conjunction with the University of Georgia where you guys uncovered more than 300 potential drug development targets for a lethal fungus.

What was that about? Do you remember offhand? I don't remember that one, so I don't know where you found that one. But we do have, from a collaboration point of view, we have hundreds of collaborations going on with all the biggest organizations, MSK, Memorial Slam Ketting, M.D. Anderson, all the major hospitals. I think that's one of the coolest things I've ever heard. I love it.

I love the whole mechanism of funding it with the asset management firm. And then the fact that you're sitting astride both organizations is really cool. It shows a real commitment. It's reminiscent to me of like the Hershey family and how they took care of their community. I think it's great. Last thing, we're going to ask you before we let you escape, and I can't let you escape before I get the answer to this. You were at the Taylor Swift-Travice-Kelsea wedding.

That's true. Did you officiate the wedding? What are you doing there? Well, I wondered that as well when we got the... Actually, it's a funny story. If you have a few minutes... I got all the time in the world for this. So, I don't know, it was February or March.

I got this text that said, this is from Taylor and Travis. I promise it's not spam. No way. And I deleted it. Well, that's what I would have done. Yeah, 100%. Yeah.

Now, I know Travis fairly well. And, you know, a couple days later, it comes in again, you know, from Taylor and Travis, I promise this isn't spam. And it just kept coming in. And eventually, I blocked the number. How many other people did that? Well, that's where the next part of the story, about a few weeks, maybe a month at most before the wedding. So if the words won't come out in February, this was in June, my phone rings.

It's Travis. And he goes, hey, J.T. You're like one of the only people that hasn't responded to the wedding invitation. What's going on? Which was a text message. Yeah, right. Yeah, which I would have never imagined. And I said, well, Travis, I didn't get an invitation.

He goes, Jonathan, we send you text messages like every two or three days and you're not responding. And I said, oh, my God. I deleted it. And now I died deleted, I blocked it. And he said, well, you know, go ahead and fix it. You're invited. And I said, well, Travis, why would you send a text message for a wedding and not an invitation? He said, look, everybody in this party is like you. They're never in one place. They're in a bunch of different places. And the work it would take to figure out when you're going to be where, when you're going to be where, is way too much. We had everybody's cell phone numbers. We have very few people. Also, the invitation with the address and the time that goes right on the internet if you print it out. Well, I'll get to that in a second too. So anyways, he calls me up. He tells me why even I responded. Wait, I just want to point out, my Gen Z walked in for this story. Okay. You just made it just, I don't know how you did it miraculously. You got a slack. All right.

Continue. So, so then I said, okay. And then I said, what? numbers is it from and he tells me the area code he couldn't remember the rest of it so i'd never looked at my blocked numbers before in my life so it took me half an hour to figure out to do it i had you know like you guys i've blocked thousand probably tens of thousands of numbers and i had hundreds from that code so i call them back i said Travis i i have no idea which one it's from and he said give me your wife's number so uh i told i gave him my wife's number Cindy and then she's been getting all the updates. And when you first get the wedding invitation, which was a text, the first thing you do is there is multi-factor authentication. Right. So you go through that process

a couple times. Then you got a non-disclosure agreement. Oh, wow. Sent to you kind of via docu sign. We both had to sign that. After that, you then actually got the invitation itself, digital invitation, watermarked. So it says, So you can't forward it to somebody. It says Jonathan and Cindy Thomas in the background. So if you took a shot, screenshot it, shared, everybody would know who it was. I won't get into the details of the NDA, but it was, it had teeth. Let's just put it that way.

And then throughout the process. So the first one just came out, you invited to the wedding. Then it came out July 3rd in New York. Then it came out July 3rd, Manhattan. And it wasn't until four in the morning. on the day of the wedding where we got the exact location. That it's it's Madison Square Guard. Yes.

Yeah. Okay. So I don't want you to break your NDA. Can you just tell me, did you have fun? It was amazing. Did Cindy have fun? Everybody had fun. I will tell you this.

Careful. Yeah, I am being careful. Taylor and Travis, first of all, Adam Sandler officiated it. He came down. Everybody laughed and thought it was a joke at first. But he actually did. He probably spoke for 20 or 30 minutes. Um, vacillated between funny, very sincere, um, sang a few things. Um, but, you know,

Adam Sandler saying? Yes. Oh, wow. He sang during his officiating process. As one does. Right. Yeah. Yeah.

But, uh, you know, if there was a key theme to his thing, uh, there are two things I remember real distinctly. One is, you know, in your typical vows, the officiator says for rich or for poor, Adam said, you know, you're not going to have to worry about that. Yeah, yeah. And then the second thing is his key message was kiss each other. Every day in the morning, at night, after dinner, just kiss often. And then Travis went first with his vows.

He probably spoke for 30 minutes. And I don't want to violate his privacy, but I was crying, which I was trying to hold back. But you know him in real life. Yeah. Oh, he made himself unbelievably vulnerable. I was sitting there crying, and I was trying to hold it back until I look around and there's all these 300-pound men from the football business, crying as well.

And so I felt really comfortable to kind of let go on it. I mean, it was very, very powerful. And then Taylor went, and she also wrote her own vows. She probably spoke for 30 minutes. That's the least surprising part of this. Yeah, and it was poetic. She's a writer. Yeah, I mean, it was really well done.

And then the last thing I'll tell you about the wedding are two things that were really incredible. One was, you know, the vows and the ceremony were very solemn, very sincere, very emotional. Then they opened up, you kind of walked through this massive castle that they built. And by the way, you would never guess you're in Madison Square Garden the way they did. It was incredible. But you walk through this castle that they built. And behind it, they had all sorts of games, amazing giveaways to people. And then the stage, initially, Taylor and Paul McCartney sang,

and then Taylor and Stevie Nix sang. Since this is insane. And then for the rest of the night, everybody, the whole entertainment industry is. I kept saying if something happens since building, the entertainment industry in the U.S. is gone. They just popped up on stage and sang songs. So at one point, I was dancing with my wife, and without any exaggeration, I had Paul McCartney to my left,

Brad Pitt in front of me, Cindy Crawford on this side, and I can't remember who is behind me, Brad Pitt, Tom. I mean, we're just surrounded by legends. How do you ever go to a normal wedding after that? It's going to be a letdown, that's for sure. Why isn't Paul McCartney here? Yeah, but it was, they really calibrated the second part of it to their guests. I've never seen a wedding that was so designed to delight the guest and make sure they have a lot of fun.

Usually there's always this ongoing theme about the bride and groom. For them, the ceremony was very much about them. Once you went through that castle, it was all about the guests. And they went over the top to make sure everybody had a great time. That's really cool. A story. That's really cool. Well, listen, I got to tell you, I absolutely love the story of American Century.

I had so much fun learning from you today. Thank you so much for joining us. Sean, great job. Thank you for sitting in. Thank you. Thank you. Thank you. For Michael. And I want to tell people where they could learn more about Vantis and American Century.

Where would you tell people to go? Well, just AmericanCentry.com. From there, you can get to information about income America, which is a retirement product we have. You can get to Avantus investors and you can get to American Century product. I also post quite a bit on LinkedIn about some of our major achievements and developments. You can see it there. And then the Stowers Institute.org. also has a lot of information about the research that's been going on there.

Jonathan Thomas, thank you so much for joining us. We appreciate it. Guys, thank you for watching. Thank you for listening. Check out American Century, of course. We'll see you soon.