Why Henry Blodget is Building Another Media Company

18:44Peter Kafka:no we certainly don't the stuff that you make is valuable but not more valuable than a photo of

18:49Henry Blodget:someone's dog that's right that's right and then google the same thing started to do a lot of it itself and now is doing a lot of it very, very successfully itself. And so distribution keeps changing. But I think one of the things that Jeff Bezos used to say that I found very helpful is instead of focusing on what changes, focus on what is not going to change. And in my view, as long as there are human beings, we are going to want to know what's happening and what it means. And so we want to be informed, entertained, and go from there. So technology can do a lot of that, and we haven't even gotten to AI yet.

19:30Henry Blodget:It can do a lot of what we used to do, certainly in an earlier phase. But this gathering of primary information and expressing it in a compelling way, which is a lot of the issue, is you have to know what a story is and you have to convey it in a compelling way. that I still think is a human activity. And I think that it's going to be a while, I think, before the one-to-one podcast that we're going to have a digital Joe Rogan, for example. I think there is something about Joe Rogan that really appeals to people and they develop a relationship with him. And so they want to tune in. And I don't, I think it's going to be a while.

20:09Peter Kafka:Well, we'll come back to this idea. You're moving into the solutions issue, but solutions part of this, but I want to stick with the problem for a second. What if part of the problem is simply that, and we already saw this with newspapers, right? You know, people who grew up aspiring to be a journalist like myself, like we had this notion that, oh, newspapers are important and people read them because of the news and they want to, and yes, they have cooking and sports and classifieds, but the newspaper is a news delivery service. And as soon as the internet disaggregated that, we learned that most people don't care about news.

20:40Peter Kafka:They don't actually want to read news. And if they really cared about classified ads, they could get that from Craigslist or Yahoo or wherever. And everything got broken up. And so once you remove news from the bundle, the value went way down. And I'm wondering if that's just happening across the board, that lots of stuff that we thought was valuable turns out is much less valuable than we thought. And when the audience has a chance to choose or even not choose, just be presented with other stuff that is cheaper and or as entertaining, they go for that.

21:09Henry Blodget:I think people really do still value news a lot. I think part of what's changed, though, is it's hard to get a monopoly on news reporting. And you look at political news, for example, hundreds of reporters going after the same story and publications and every one of them only a click away from the consumer. So the consumer actually doesn't care who reports it. And it is very difficult for a single publication.

21:37Peter Kafka:He's launching his commentary and discussion about the one thing.

21:40Henry Blodget:Yes, because the moment you learn the news, then we move to what does it mean? And that's where a different engine and type of personality and commentary takes hold. So it's very hard to get a monopoly on that. And going back to what we're talking about earlier, like regional, for example, it used to be in the 1990s and before that the L.A. Times and the Chicago Tribune and Dallas Morning news, could all have Washington White House correspondents because there was no news source in their area that was actually bringing that news to people. So it was useful. They also made enough money to be able to afford that person.

22:17Henry Blodget:Yes. But also there was a demand for the news because the New York Times wasn't there. You're not going to get the New York Times in Texas or what have you. So but the Internet blew all that up in an afternoon. And now anybody anywhere can read the source. And so this truth and it's tough for people to really admit to or really grasp. It's like, we just don't need that much capacity anymore. And this happens in every industry, which is when there is too much capacity, prices go down and demand per unit drops until the capacity is cleaned away and then eventually you have pricing power. And one of the other interesting things about newspapers that I think is analogous to what's happening in digital media now is, and Catherine Graham's book about the Washington Post, goes through this in great detail is when Catherine Graham's family bought the Washington Post, there were five daily newspapers in Washington, D.C.

23:12Henry Blodget:None of them were making any money because they were just kicking the shit out of each other. And 20 years later, things had gone pretty well. There were just two of them left. And finally, the Washington Post bought the other one. And And that's where the economics kicked in because they had reduced the consumption and they had created a single product that everybody wanted to get and had to have. And then, as you say, all the other revenue streams came in. So so I think that, yes, the Internet has not only made it so that anybody in the world can get to a single publication anywhere. So we don't need as many White House correspondents as we used to have.

23:49And to we the bundle disaggregated.

23:53Henry Blodget:So a lot of what was delivered to your doorstep in that inch of newsprint is now provided better by a lot of other sources. So that really blows up newspaper economics. But all that said, the New York Times is a better business today than it was in 1990. It is. And it is going to go on and continue to grow. And people are oohing and aahing at their 12 million subscribers now. They're going to be at 25 million, 50 million. This is the Netflix of what used to be called newspapers. And they have a long growth path. And there are others, too, because their perspective is one that is actually going to alienate a lot of audience that want other things.

24:33Henry Blodget:But they have a great business now. It's clicking along. So the news industry is OK and we are being served. It's just a question of all of us employees and entrepreneurs trying to figure out how do we fit into that? How do we stay employed? It's tough.

24:47Peter Kafka:I don't fully agree. I mean, The New York Times is the example that everyone loves. doing great and will continue to do great. They sort of got there, not on a linear path. They weren't quite sure how to do it. Remember the period where they put up their first paywall for opinion pieces and then realized that everyone has an opinion on the internet? Although now we're back to, I mean, what they were doing was making a paywall for Paul Krugman, and now Paul Krugman has his own business behind a paywall, so it does work. But I do worry that some of this stuff does not get solved by the market. And some, a lot of, especially local, is just a public good and there is no market solution for it right now.

25:24Henry Blodget:I will respectfully disagree with the last also, but let's talk about local in a second. So I would say, yes, the New York Times is a very good example of when something new comes along, you got to experiment. And they did have some false steps and then they stuck back and they did that report where I will still remember talking to the very, very brilliant and charming Arthur Salzberger Jr. saying, Henry, you're such a digital genius. Tell me what you know. And I said, this smart person wants to hear what I know. So I told him everything. And then, of course, 20 minutes later, he's using it against us.

25:58Henry Blodget:So should have been more judicious there. But they were very smart about it. And they had a very, very near-death experience. I mean, they almost were taken out in the financial crisis. Very reasonable for smart people to say that they were going to go bankrupt. That is right. And that's why the stock went to$3 a share and so forth. But they got it together and they figured it out. And now they're really good. And there is a long way to go as far as I'm concerned. So let us turn to local. I am a big local optimist and I'm on the board of a small newspaper company that has two newspapers in Northwest Connecticut, the Lakeville Journal and the Millerson News.

26:35Henry Blodget:And when I arrived, the team there had already done this remarkable savior and reconstruction of the business. And in that case, which is one model that works, they took a longtime for-profit operation, I think 125 years old, they converted it to nonprofit. They're in a market where a lot of people care about local news, have an incredible development team and board and actual news and publishing team. They rebuilt it. Now it is a nonprofit, very well-funded, credible journalism run by a former editor from the Wall Street Journal and now a new editor. So if anybody out there wants to go into local news, it's a great opportunity.

27:19Peter Kafka:Some contribution. There's probably some advertising, some contribution from readers via subscriptions or donations, and then corporate philanthropy, I assume is the three legs.

27:28Henry Blodget:Exactly right, except it's not corporate. It's people in the community who care about it. So that's one model. There are other models that are doing very well. I was very close to launching something actually in Nantucket, Massachusetts about five years ago because that's where I started my media career. I was a local reporter covering football and art and sailing regattas and everything else. of great for a couple of months. And I was about to launch something and I was making one of my last due diligence calls to a reporter who was on the 182 year old newspaper there who I'd followed for a long time because he was writing about this thing that I really cared about.

28:04Henry Blodget:And I said, Jason, I'm thinking of this thing. What do you think? You're in the market. And he said, Henry, I like that idea, but I'm going to tell you right now that I'm actually about to go do that with somebody else. And so fortunately, they were so good at it that I didn't launch something that would have been killed by them immediately. But I watched. So very small team of people taking on a weekly 182 year old newspaper. They come out several times a week in digital. It's a great reporter, really connected, very small team. It is now a very good, consistent news source in a market that, again, it's a wealthy market, lots of people, lots of news happening and so forth.

28:47Henry Blodget:So it supports it. But that's a for-profit business called the Nantucket Current. It's excellent. I encourage anybody to check it out. So I actually would believe that what's going to happen is the old local architecture is going to break down and some of them will survive in some markets as they are. Lots of new ones will sprout up and we will be fine. And going back to what I said before about you look at what doesn't change. What doesn't change is that people want to know what's going on in their community and with people they know and have heard of. They want to know what happened at the Little League game and at the high school.

29:25Henry Blodget:They want to see pictures of their kids throwing touchdown passes. They want to hear names of people that they know.

29:32Peter Kafka:This is the Chuck Todd media business he's trying to start is starting with sports, essentially.

29:36Henry Blodget:Good for him. That sounds great. Sports is in, there's incredible passion around that and people want to know it. And so, and where I didn't notice this firsthand was I was in Nantucket for my whatever, 45th summer there or period of summer. And there was a beach erosion right near where I was staying. The paper would come out every week. I wanted to know this story. The great journalist who I mentioned before was covering it. I knew he would write about it. I knew it was the only way I could find it. No, there was no blogger covering erosion. So in the rain, I got on my bike long after I had forsworn paper.

30:11Henry Blodget:A paper like why would you ever read paper? Bike down to the market, get the inquirer and mirror, take it home, read the story because I really care about that and nobody else was doing that. And so I think this is going to come up in every local market. And if you will allow me, I will even use your podcast as a job ad. I have a very good plan for starting a new local publication in the Northeast. And what I am looking for is a very enterprising journalist who is excited either in the market already or excited to go build this with me because I'm not going to do it. Those years are too old for me, but I will edit it from afar.

30:55Peter Kafka:You are starting a second business as we speak.

30:57Henry Blodget:No, I'm going to partner with somebody. Anyway, I'm very excited about that. So if I find the the right person. Hit me up. Hit Henry up.

31:04Peter Kafka:I won't even take a fee. We'll be right back with Henry Blodgett, but first a word from a sponsor. When you're 7-Eleven's hottest fire chicken sandwich, people

31:13Henry Blodget:think you're intense. Well, yeah. I'm hot! So, yeah, intense. Want to see if you can handle the heat? Then try me. With pickles or spicy mayo and jalapenos. Oh, and it's all just$4.99. That's a deal almost as hot as I am. Almost? Sweet? No. Want spicy? See for yourself. $4.99 and only at 7-11. Follow up through 825-26. Participating stores only while supplies last. Visit store for full terms.

31:44Peter Kafka:And we're back. I kept trying to segment the solutions part of this, but it seems like your solution is make stuff people want and then it will all work out. You'll figure out how to price it. You'll figure out how to. That seems too simple.

31:55Henry Blodget:Yes. I don't think it will definitely all work out. And I think we've seen over the last 25 years, lots of digital startups were started with great teams and great journalists who were operating on exactly that idea that if we write great stuff, we're going to be this is what people want. And off we go. And that is not enough. And in fact, you alluded earlier to the the bundle of a newspaper and all the different streams and components of that that actually paid for everything. And it turns out that as much as we journalists love the big investigative story about what's going on in the town hall, what actually pays for everything is the local food coverage and event coverage and the classifieds and so forth.

32:45Henry Blodget:So the same thing is true in digital. So you have to get the mix right. This is not a people are going to pay whatever it takes to get that maybe once a year story about something that's going on in City Hall. It is a package. You've got to provide value, probably a combination of subscription and advertising. Or in many markets, it's going to be nonprofit. There's not a one size fits all here. But yes, you have to come up with a sustainable model. Otherwise, what you do is work incredibly hard for a few years and produce some good work and then die.

33:17Peter Kafka:Well, that's not really a solution. I guess it's a solution. I'll take the solution. I want to ask about the AI part of it. In a world where AI can now, AI can't go get the original news, but once someone else has gotten the news, AI can write up a perfectly adequate news report in a second. It can't do Joe Rogan yet. but I asked it to do a Henry Blodgett take on the Intel deal. And what do you think? I sent it to you. Thank you for sending it to me.

33:47Henry Blodget:It was a little bit scary to open that email. And I had this exactly reaction you just described and the reaction that I've had myself, which is, hey, well done, especially because it took literally two seconds. And I could go in there and make it sound more like me and add other points, but it did make a point that I thought, hey, I hadn't thought of that yet. That's a good point. I would make that point. So the content is good. The writing is grammatically correct. The words are spelled accurately. I understood it. It was organized well. That's a lot. And I have to say that that is a lot of in the blogging to publication age of 20, 2010 to 2015.

34:31Henry Blodget:This thing is the New York Times.

34:33Peter Kafka:I have a thought about it. I'm going to write about it now.

34:35Henry Blodget:Exactly. It's kind of what I do now in my job. That's right. And by the way, that's what a lot of Substack is. It's smart people weighing in on what just happened. So helping us all figure out on what we think, what it means. So it's the what's happening and what it means. So anyway, I think that's very useful. I had a very interesting experience yesterday because you mentioned that we might talk about the AI bubble. And I said, great, let me bring my knowledge up to date, meaning I've seen some stuff over the last week that I actually want to go in and look at before I come on your show. So I Googled because I don't think that the models that I use all the time necessarily have today's news or yesterday's news or what have you.

35:16Henry Blodget:And what I saw, interestingly, over many searches was there is a publication that we all know that was coming up at the top every time. And I said, that's interesting. Back three or four years ago when I was really looking at search results for business and tech closely, I don't remember this publication coming up all that much. I didn't really even know they had a news team. They must have really expanded their news team. And so I started reading them. And they were remarkably similar to what I would describe as the source article. But they were ranking much higher than the source article. Very well written, credible.

35:52Henry Blodget:And I said, wow, you know, these guys, there's a lot of smart aggregation going on here. It's well done. And then, of course, I got to the bottom. Little disclosure. This article was written by AI with editorial oversight. So good for them. Well done. And you know what? It is ranking right at the top of Google on a lot of searches that I was interested in. So they got a lot of readership. And I assume it took a fraction of the time that it would have taken us to do this 10 years ago. Very well written. Fine. It got me. I read the article. The original article was behind a paywall. I couldn't get to it.

36:26Henry Blodget:One of the ones that I don't subscribe to. So I got it. It's good. very helpful. I don't know that that's sustainable.

36:32Peter Kafka:Why is it? Because it costs the creator essentially nothing, whatever they're paying to use the LLM, which might be literally nothing. Distribution is free. Why is it is good enough, which for most people is adequate. Why is that not sustainable?

36:52Henry Blodget:Right. And let's before because the initial instinct that everybody's going to have to that. Oh, that's terrible. Aggregation. This is how Time Magazine started. It's what they did.

37:01Peter Kafka:It's also what most of your news consumption is just someone reading someone

37:06Henry Blodget:else's news. My first job when I worked at CNN, part of the job was rip the Reuters wires. Yep. Which were actually being spat out of a printer. Go get them. Take them to the producer who would read all the news and say, here's the story that we're going to do. Turn this into a script that Stuart Varney can read. So this has been, exactly. So this has been done forever. Not knocking. Why is it not sustainable? Because I think that everyone, if it really works and it starts to drive economics, everyone will build the capability. Most smart journalism organizations are looking at how can we use AI.

37:37Henry Blodget:This one might be just a little bit faster than others or not have the worries that others do. Don't worry about labor. Don't worry about the brand. But eventually, the Google feed will be full of this.

37:48Peter Kafka:Or you won't go to Google.

37:49Henry Blodget:You just go to ChatGPT and they'll produce that. that for you is i i don't i find myself more and more with google using their summaries yeah which

37:58Peter Kafka:are usually very helpful so but so in a world where those summaries are good and getting better and again i think the chat gpt ones are i think i use chat gpt as just a better google it's just basically doing the same it's kind of using google to crawl itself but it's assembling it better better and better. That seems like that wipes out just this entire class of aggregators and explainers and any of these new formats that were newish formats that we're interested in and think are the future. And you can say, yes, no one's going to get your tone right and your insight right, but they'll come close and they'll come close enough for most people.

38:38Peter Kafka:That, to me, seems like a real existential problem.

38:42Henry Blodget:It takes a commodity part of the business that all you need to do to create it is hire some good, fast, smart writers, which that's not all. In fact, it's actually difficult for humans to do it. But it's something that any publication can do. You're not actually having to hire the reporter who can break stories, Maggie Haverman or whoever it happens to be. You can assemble some good, fast writers and you can do it. Now that's being automated. This is the story of tech automation since the first machine was invented. The Industrial Revolution saw tons of this. It is extremely painful for the people who are affected by it.

39:26Henry Blodget:I don't want to minimize that at all. But this is the process of our adopting technology as a species and society. So that middle layer, the Internet is the publication. We do not need 400 versions of the same story that are competing to be higher in a Google search, which, by the way, as you point out, is getting minimized and Google will do itself. We don't need that. And there is no right for a publication to be supported by creating something that we don't need anymore. So what do we need or what do we at least want? The primary information we want. And I think there is a part of that that ultimately LLMs or other automated services will be able to do.

40:14Henry Blodget:Here's your morning news documents, documents, right. Summarizing, putting together. I think we all saw the story about the the company of one human that publishes 400 local daily emails. That's pretty impressive. And yes, but that service and that person and the technology he's using are drawing on other local sources just in a clever way and creating something that is in some of the markets useful. So so that middle layer gets left out. But the actual gathering of information, primary information, usually human to human involving telephones or face to face communication is not going away anytime soon.

40:55Henry Blodget:And I think the analytical and storytelling will be preserved for a while. We as humans form relationships with other humans. The reason Business Desire is so excited to hire you, Peter, is that people love Peter Kafka. You have your audience. they want to hear what you have to say so they do you you can take them with you they care about you you're incredibly smart on this industry look if chat gpt gets to the point where day to day when something happens it is much smarter and more helpful than you or me yeah

41:31Peter Kafka:we're screwed yeah i we gotta do i do the make a something in a peter kofka voice thing every couple weeks just to see, and it does not give me comfort because it gets closer. It is, I'm getting to the point where I keep thinking, as an experiment, I should just submit one of these to my editors, publish it, and then say, aha, I fooled us all. I mean, I probably wouldn't be employed after that, but maybe as a stunt it works. But to show that, hey, in a pinch, this would definitely work today. It will definitely get better. Before I let you go, I do want to -

42:03Henry Blodget:Let me comment on. I am very confident that the management at Business Insider is smart enough to know that if you submit a ChatGPT written Peter Kafka article that is checked by Peter Kafka and it passes your standards, that they will be thrilled, that that's innovative. This idea that we must do it the old way because that is the way. I'm sorry, but organizations that think that way are going to be a step behind here. It's like clinging to newspapers. You and Matthias Doffner, who owns Axel Springer, see eye to eye. But I'm also going to say, I think it's going to be hard for ChatGPT. I really do.

42:40Henry Blodget:And in fact, what you sent me, the Henry Blodgett article, I just like, oh, you know, I hope that I can say it in a way that's a little more compelling than that. We'll be right back. But first, a word from a sponsor. When you're 7-Eleven's hottest fire chicken sandwich, people think you're intense. Well, yeah. I'm hot. Oh, yeah, intense. Want to see if you can handle the heat? Then try me. With pickles or spicy mayo and jalapenos. Oh, and it's all just$4.99. That's a deal almost as hot as I am. Almost? Sweet? No. Spicy? See for yourself. $4.99 and only at 7-Eleven. Ballad through 825-26. Participating stores only while supplies last.

43:22Henry Blodget:Visit the store for full terms.

43:29Peter Kafka:And we're back. I do want to talk about the AI bubble because I always love talking to you about bubbles because you were a really prominent Wall Street analyst in the first Internet bubble. And that was a bubble about the Internet, but it was also obviously a financial bubble. And a lot of the tech, obviously, from that era continued. Even a lot of those companies collapsed. Again, a handful of really big winners. Amazon, most prominently, are still with us today. And how do you use that experience when you think about AI today, either as an observer or an investor? It's kind of hard to play the market, right?

44:10Peter Kafka:If you're interested in buying AI right now, you buy NVIDIA. That's kind of it right now. But there's still a ton of money sloshing around and a lot of enthusiasm and a lot of this is going to change everything. It seems like the tech is real and going to stay real. But how do you reconcile that with sort of the funny money era that we seem to be in right now, where Mark Zuckerberg is offering a single engineer$100 million to come work at Meta, and when that engineer turns him down, he pays him$250, and the guy comes across. So how do you compare this bubble to that? First of all, are we in a bubble?

44:48Henry Blodget:It is extraordinary. That anecdote you just described, it is extraordinary how much money is being directed at this, both on the investor side and in the very concrete compensation and everything else. So stepping back, because I did actually go through this and then wrote a book about it and so forth. So this bubble phenomenon is the way the markets and technology innovate. And really, it's always or often portrayed as a morality play. Like, oh, it's going to end. It's so stupid, all this money is going to be burned, and people are losing their minds and so forth. Stepping back from that, what's really going on is it's a huge R &D lab, and hundreds of billions of dollars, probably trillions at this point, are being thrown at something that, yes, most of us recognize as a huge future opportunity, the same way a lot of people recognize the internet as a huge future opportunity in the mid-1990s to late-1990s.

45:48Henry Blodget:And with any R &D, most of the experiments are going to fail. So all this money is being thrown at thousands of companies. We know what is going to happen. And it is very much a consensus that you cannot go online without seeing it. What is going to happen is that some point, this amazing fundamental growth wave, which is amazing, people are buying and using these products and there is a lot of revenue being generated and so forth. At some point, we are going to get out ahead of ourselves we're going to have a setback and there's going to be a huge reordering of everything and a whole bunch of companies are going to fail.

46:30Henry Blodget:And then likely the next generation of companies or the survivors from this first crash will go on and inherit the earth and AI will be bigger than everybody thinks it will be, although different and so forth. That is the consensus. I think it's probably right. Then the only question is, where are we? Are we in 1996 or 1997? or are we in the fall of 1999, right on the precipice of the crash? And what I will respectfully submit is that there is no way to be super confident about that.

47:08Peter Kafka:So the premise here is that this is real. It's not going away. This is the bubble is R &D is a great metaphor, but some bubbles are just bubbles, right? People are just buying tulips because they're buying tulips and they go up in value. Or a couple of years ago, very serious people, and I talked to you about at the time, were very interested in all kinds of Web3 phenomenon related to crypto and real serious thinkers were really putting a lot of money and effort into this. It appears to have gone nowhere. Maybe it reconstitutes as something genuinely valuable down the road. But if you'd gone all in on Web3 in 2022, you didn't get anything out of that.

47:48Peter Kafka:There was no R &D. It was just it was just folly. Are you confident that this AI is real and things of permanence and importance are coming out of it?

47:59Henry Blodget:I think so. I don't I look at the adoption of ChatGPT and Claude and some of the other models. There is a lot of fundamental adoption there. People are using them. As many people have pointed out, there is not enough adoption or revenue to even begin to fund the extraordinary capital expenditures that are being made to provide these services, data centers. Yes. And one of the things that is worrisome, and we've seen some news about it this week, is that the models seem to be progressing more slowly than people thought. And their usefulness is not increasing as fast as people thought. And most companies are actually really struggling with how to use that.

48:47Henry Blodget:What do we do with this thing? Exactly. What do we do with it?

48:49Peter Kafka:But a lot of people use it. Like companies that started a website in 1999 and then realized it didn't transform their business. They just had a website. Right.

48:56Henry Blodget:And it costs a ton and they've got to maintain it and wait. Now, the toy company is going out of business. So why are we doing that? People want stores. So you're going to sort of have to relook at everything. But it feels like this is real to me. Going back to Web3 and crypto, which, by the way, crypto is still this massive area of speculation. I... have never understood what most of crypto is about other than speculating and building tools that facilitate the speculation and building this mirroring system of non-dollar-based things with banks and trading and so forth. But there do seem to be a lot of real companies that have been built to facilitate that.

49:44Henry Blodget:Coinbase is a great example. People want to speculate. They We need a tool to do that. So Web3 is another example. I remember thinking about that. And a lot of you are like, really, really, is that what we want? We want to disaggregate Google completely. And people don't want Twitter. They want something that is separated where they control their own servers and their own data. Yeah, hypothetically, maybe people want that hazard. But to your point, never really took off. I think it's different. I think if you look at what open AI is already doing, like, again, the fundamental product and sale is going gangbusters.

50:18Henry Blodget:But so were the companies in the 1990s, Yahoo, Amazon, AOL. Each one of them died for a different reason, with one exception, and that's Amazon. And I look back at my analytical days and stepping back again, there's been a lot of study of bubbles. One of the best historians is John Kenneth Galbraith. He wrote the 1929 book. He also wrote a little 90-page book called A Short History of Financial Euphoria. he talks goes through lots and lots of them he said here are all the phases he was right and one of the things he said is in any bubble it's sustained by the enthusiasm of the participants who are getting rich super fast and and want to be on board and there are two kinds of them one the kind who think the world has changed forever and nothing that mattered in all history is ever going to matter again.

51:11Henry Blodget:Like it is different this time. And then two, the people who think, no, it's not different this time, but it's different right now. And I am going to make a ton of hay while the sun shines. And then I'm going to get out right at the top. And what he says, both, both of them get killed. I was the second variety. I was like, the internet's real. It's profound. It's going to create some great value and awesome companies, but it is also a bubble. So be careful. like only invest in the ones that have the best chance of going through and only hold them for the long term and most of the companies will die i can report like most of the companies will die the even more companies died than i expected like that that group of yahoo and aol like i thought those guys are going to weather the storm ebay did for a while still still around they're still

52:05Peter Kafka:around. Still around. And the folks who own AOL and Yahoo will tell you it's a good business and you can buy it on the public market, supposedly, in the next year or so.

52:14Henry Blodget:But yes, it's much more. They lost the growth engine. And the problem with the valuations of all these stocks is that they are priced for the same kind of growth continuing for decades. So if you run into a problem like AOL ran into, which is they couldn't make the transition from dial up to broadband, band, their valuation is going to get destroyed, even if the billion, even if the company itself lasts forever.

52:37Peter Kafka:You can't really stock pick right now for the AI boom. If you're a normal person and you're interested in this and you think this is real, but also a bubble, what you just described, what do you do?

52:50Henry Blodget:I think for most of us, the truth is you have a balanced portfolio of index funds with a good, healthy slug of cash and bonds in there. You don't bet on anything. I mean, one of the things that makes this look very much like the 1990s bubble is how AI investing is now juicing the rest of the economy. A lot of the economic growth we're seeing right now is coming from these investments in data centers. And you've got Microsoft, Meta, and a few others investing literally hundreds of billions of dollars in investing in these data centers. Paul Kodrosky wrote a great piece last week about how everyone's saying it's just like the railroads and, you know, you've got to make the big investment up front and then you get the benefits for a long time, just like the pipes we laid in the ground to carry all the cable.

53:44Henry Blodget:Yes. But Paul points out, and I think it's an incredibly important point, is that this is not like laying a fiber line that is going to be great for the next 25 years or set a railroad tracks, you can drive trains over for the next 100 years. These things have a three to four year life because NVIDIA will come out with new chips. The current chips will be outmoded. So a lot of this massive investment in data centers, it's going to be obsolete in three to four years. So there isn't a huge payback time. So we are really setting up for a situation in which a lot of the fundamental performance is being juiced by every company in the world panicking and saying, I got to invest in AI and all venture capital money is going there and so forth.

54:29Henry Blodget:At some point, that party is likely to stop. And when it does, there's going to be this big reordering. Lots of companies will go. And I think sort of looking at the analogy of the Internet, what I wonder is because there's a group of people looking at all the private companies and saying like, you know, back in the day, only Yahoo made it. InfoSeek died. Excite died. Lycos died. Nobody's ever heard of them. You got to invest in only the best. True, but even the best didn't make it. So it's not going to shock me if in seven years, OpenAI turned out they took a wrong turn two years ago and went down some path that somebody else comes up with something new that is the Google of the era, which, by the way, Google didn't appear until 2000.

55:17Henry Blodget:It was the whole they missed all 1990s, and yet they were the one that you wanted because they got it right. So, yes, investing is very difficult. I actually very much believe that all the IPOs in the 1990s were a good thing. Lots of people have an opportunity to bet if they want on these companies early. You know, I'm for pro-freedom and responsibility and so forth. And I do think it's a bummer that individuals can't access any of these companies anymore because it's all private capital. And now their fees being heaped on top of everything is you got it. You got to pay all of your agents to invest in private capital.

55:53Henry Blodget:But a lot of other people would say, yes, but people won't get hurt in the same way. And I obviously respect that, too. I don't want anyone to get hurt.

56:02Peter Kafka:You are good at thinking and talking. I think you have a future in media. I would suggest podcasting, maybe video. Good luck. Regenerator is the substack. Solutions with Henry Blodgett on TikTok and YouTube and audio-only formats as well. Thanks for coming. Thank you for having me, Peter. Great to be with you. Thanks again to Henry Blodgett. Great to see him in person again. Thanks to Charlotte Silver, who produces and edits this show. Thanks to our advertisers who bring the show to you for free. Thanks to you guys for listening. See you next week.