#103 - Alex Shahidi: Top 10 Insights of 2025 (Part 2)

27:55It does require, I think, in our organizations as they get larger, that people aren't just focused on their own specific goals, because oftentimes the big things that you're trying to accomplish require reaching out to lots of people in other parts of the organization, or even outside the organization. So thinking about not only what you're trying to accomplish, but who are you working with to do that? And can you do that in a way that brings a lot of people together on that journey? Alan Waxman, co-founder of Sixth Street, reflects on lessons learned during his decade at Goldman Sachs, where he became one of the firm's youngest partners at age 31, and how those lessons continue to shape his approach to investing and leadership.

28:37In this clip, Alan explains why culture is essential to building a successful investment organization, especially for teams operating across multiple asset classes.

28:47Alex Shahidi:What I learned at Goldman is because we were investing across so many different asset classes, the importance of culture. I ended up being the chief investment officer and running the group. Just to give you a sense, it's about a$25 billion of Goldman's balance sheet. So it's a big business. It's the largest principal investing business. We're the largest investing and opportunistic investor at the time, probably in the world at the time. Now it's changed because all these big public guys. but back then. And really just the whole investment philosophy of constantly this whole idea that theme thematically, every theme has a shelf life and something that's really good has a shelf life of 12 months to 36 months and ultimately capital flows to it.

29:29Alex Shahidi:And it gets a little bit less good, a little bit less good. Then it gets not good. And then it gets really not good. And then it basically sort of reverses itself. And at some time gets good again. So So we were constantly migrating to where the best risk award is across themes and across asset classes. And then comparing this asset class to this asset class, this investment, effectively what we would call like unitizing risk units and return units. And that style of investing was dependent on culture, because if you had a bunch of teams and sector teams that weren't talking to each other, you really wouldn't be able to systematically compare relative risk award between all these different asset classes.

30:06Alex Shahidi:So that was the big aha, the sort of the connection between multi-strategy capital investing, which is what we're doing, and culture. So that was kind of on the investing side. Blake Johnson is a serial entrepreneur, investor, and philanthropist known for founding and scaling multiple companies without raising outside capital. He has successfully built and sold businesses with combined valuations exceeding a billion dollars. First, I asked Blake how much of being a strong leader comes down to IQ versus EQ. Here's what he said. Today, I think it is 80 % EQ and 20 % IQ. I've always kind of often observed that the first 22 years of a person's life, the schooling system really rewards you for IQ.

30:53Alex Shahidi:How well you can read a page, regurgitate a concept or an equation or a passage on a piece of paper, and then quickly forget about that. the rules of the game drastically change once you get out of school. The world shifts. Business and leadership and really building things of value much more heavily depend on EQ at the later stages of the game. It's been an interesting thing for me to observe over the years, but having that EQ embedded culturally and also combined with work ethic. Next, we talked about the importance of focusing on the destination. while recognizing that the path to get there will be challenging and rarely the first one you choose.

31:38Blake draws a vivid comparison to climbing a mountain in this clip.

31:43Alex Shahidi:If you're not failing, you're doing something absolutely wrong. And if you're not comfortable in failing, you don't have it. I always preach that there's one destination, let's say it's to get to the top of the mountain, but there's many paths up the mountain that one can take and one's not better than the next. you have to be open to the various paths and inherent in any path there's going to be obstacles that come in your way it is part of the game they're not fun they're frustrating is all hell sometimes and you have to be persistent and nimble to get around those and i'm always constantly preaching about i don't care what path i have to take to get up the mountain I'm open to all of them and let's find the best one.

32:29Alex Shahidi:So that gives you the foresight and the ability to kind of scan the environment and not get so pigeonholed on one that this is the one, this has to work. Because if you're so focused and myopically focused on one path, you might be missing the right path that's right beside you. That may give you a shortcut up the mountain or maybe promote an easier journey to get up to the top. Jason Illion, co-founder of Highmount Capital and former managing director of Koch Disruptive Technologies, shares three keys to leadership. You can either build a legacy or you can build an empire, but you can't build both.

33:08And so we talk about how do we get to invest with legacy builders. And what I mean by that is empires are typically built about a small set of people, a family, whatever it is. But it's about a few people and it's about a few people controlling a lot. empires always fall. It doesn't matter where it falls in this generation or next, but even the Roman Empire, as great as it was, imploded because it came from the inside, right? Legacies are different. It's about building something for the long term, and it goes beyond you. And so, too many times we think about things as the pie is this big. How big my chunk can I take of the pie versus saying, what if we grow the pie?

33:49My slice of the nephew is big because the pie itself grows, And that's legacy-minded thinking. And so one of the first views we always look through is, are we helping build a legacy and an empire? Because you don't get to do both. The second piece that we often say is, what are the core principles that have helped build our firm and will help build other firms? And I think there are some fundamental foundational things you can think about. And one is shared vision and values. If you're going to have partners in your investing firm or you're building a company and you You need key executives. They have to have the same shared vision and values, which basically means we got to be pointed the same way.

34:26If you're even one degree off from sailing from New York to London, you're going to end up somewhere in Africa. You can't be one degree off. You got to be going the same direction. So that same vision and values has to be the same. But with that comes very different complementary capabilities, meaning if I'm a quarterback, I can't have a team of full quarterbacks. I need wide receivers and I need running backs and I need alignment. I need complementary capabilities. And I think early in my career, I think it's easy for people to attract themselves to people like them and want to work with people like them versus surround yourself with people that are different than you.

35:04They're the same vision and values, different capabilities. And then the third piece of that is just align incentives, meaning how do we incentivize all of us to run the same direction at the same speed with different capabilities to be successful. But if we either succeed together or we fail together, what happens as you start building companies and investing in companies and doing things is the incentives become misaligned, meaning I succeed when you fail or it can happen. I think that's a bad model. And so I think you have to really continuously look at your incentive model because people do what they're incentivized to do.

35:42It's pretty simple, right? You tell a kid, you're going to pay him a hundred bucks to mow the lawn, probably go mow the lawn. It's going to make a hundred bucks. If you pay him five bucks, he may go do something else. And so you got to incentivize people to go and work on the same things together and understand that that pie gets bigger if we all succeed. Bruno Delama, a pioneering entrepreneur and co-founder of GlobalX, one of the largest ETF providers and Sangha brings a distinctive perspective on innovation and leadership. First, Bruno reframes leadership as the art of bringing out the best in people.

36:17He explains why human dynamics are the most complex challenge and why becoming a great leader is a lifelong journey of personal transformation. Of course, as you're leading human beings, what you're really doing is you're bringing the best out of them. And that ultimately, it's about humanity and what motivates us. And as you go deeper and deeper, you know, some of the fundamental questions of, okay, why is my head of marketing here? And why is my head of sales here? And why is my CFO here? And why am I here? What are we doing? What's the point of this whole thing? And so it was a beautiful journey and exploration that just opened, you know, an entire dimension of my life of essentially going on a journey of, okay, how do I become the fullest expression of being human that I can become?

37:03So human beings are the most complex machine, if you want to use that term, that exists. And there's a lot of different things happening that I have now. And it's still emerging, but much better understanding than I did back then. And if you want to be literally the best leader in the world, you almost need to transform yourself really completely. and through that process have a much better understanding of the forces of what's happening and how is it happening and how does that affect us. And yes, it's certainly a lifelong journey for me. It has been for the last decades and it probably will be until I die.

37:45Next, Bruno explores the concept of the hedonic treadmill, the endless chase for more, and why stepping off that loop is essential for fulfillment and deeper transformation as a leader. as the kind of the leadership lesson was when, you know, I told the story how we went from 11 million to 1.3 billion. The business plan that we had laid out for ourselves was to get to 2 billion in assets. And how happy would I be if we ever got there? And we did. And I was thrilled and it was really exciting. Eventually, not very long after that, I found myself thinking, well, you know, if we got to 3 billion, that would be nice.

38:24And we got to 3 billion pretty quickly after that. And I enjoyed that for five minutes. And then my mind was reeling again, you know, well, if we got to 5 billion and I caught myself as I was doing that. And this is a pretty fundamental thing that most humans miss. And the value of catching ourselves doing this is transformational. What is this thing anyway? What was I doing? Why was I doing it? What's the purpose of it? And there's a term that speaks to this called the hedonic treadmill. And 90 % of humanity, maybe more, lives in this hedonic treadmill of more and more. And if you think about, you know, you were asking about the complexity of being human.

39:12And this is a critical point that we need to get to as human beings to really start the process of deep transformation. Otherwise, we just keep ourselves in a loop of essentially guaranteed unhappiness. I may be wrong about this, but I haven't found one single human being that has this provenance. Well, if you keep moving the finish line, you never get there, right? I mean, by definition. So if you think about that model, there's two fundamental problems. One, the model of we're setting up our objectives and working really hard to get there with the understanding that when we get there, we'll be happy, which is not true.

39:53Experientially, that is not true. The problem with that to begin with is that, well, a lot of people will not even get to that initial finish line. So there's that. And then those that get to the finish line, then to your point, the finish line, well, you never get there because in that treadmill, you just keep on pushing it forward and forward. And so I was really struck by the ultimate example. Like if you take all of us, 7 billion human beings, and you go to what humanity would consider the front of the line, you meet Elon Musk. And he's like literally in front of the 7 billion humans in terms of how we think about success.

40:32And there was this podcast that he did with a German journalist. And the journalist asked him about death. And he said, what do you think about death? And Elon said, I think it will come as a relief. And even if that was a throwaway comment, which it could be, it just to me shows a state of mind of somebody in the midst of ultimate success. For him, it's even worse because, you know, if he had one human being with less wealth than him, he could say, well, once I become number one, then I'll be happier. And then he gets there and he's like, wow, I'm not happy. So that catching myself in that process of moving the finish line and realizing the futility and the mental mistake and the implications of that and the ability through, this is not an easy thing to do, but it's doable of reprogramming that.

41:25But obviously the first step of reprogramming that is just realizing that you're doing it. Because most of us, I was doing it unconsciously, like it was just a thing. And I just was very fortunate to catch myself in that process. And so that to me is probably most fundamental changes that humans need to go through, which is understanding if that's not the game, what is the game? David Rutherford, a former Navy SEAL, SEAL instructor, and CIA contractor turned motivational speaker and founder of the FrogLogic Institute, shares powerful leadership lessons from his time in the SEALs that translate directly to business and beyond.

42:03In this clip, David outlines four core principles of leadership development.

42:07Alex Shahidi:There's four ideas behind the leadership development. First and foremost, you've got to be willing to be cold, wet, and sandy with everybody with you. Now, in our training apparatus, that's legit. Our officers go through the same training as us. And then many times they get even a greater beat down than we do. They take more heat because the responsibilities are greater. The other is a grander sense of situational awareness. I always see what you always hear on big leaders is they try and parse out the critical aspects that they need to focus on. Well, the reality is that if your junior man doesn't feel worthy that you're interested in what they're doing, then that's going to really, really have an impact negatively on your organization.

42:56Alex Shahidi:But the biggest one is those junior managers. The junior managers are the key to the success of every small business, big business, whatever. And if the investment in those people is not dialed in, that's where you start having really significant trust. So be situationally aware of the different levels of input and influence in your organization. That's huge. And then within those lower levels, if there's no concept that there's a responsibility within them to lead, and that's the way you look at the representation of your organization, you are a leader. You lead in the community, you lead around, and then you're training those people to become a leader, even if that means they go out and start their own business and say, hey, thank you so much.

43:39Alex Shahidi:That's the ultimate thing because you've influenced them and given them enough of these ideas. And if you do it the right way, you pay them well, you give them the growth trajectory, show them the path, they will become as loyal as anybody else. And then finally, as you talked before, Alex, the ability to analyze in the appropriate time what the actual battlefield looks like and then to take risks. And that's the number one thing that I see more often than not is leaders unwilling to take risks because most of that has to do with the lack of work they've done in developing their team. They just don't trust their team.

44:17Alex Shahidi:They don't trust that if I'm going to take this huge risk, expand into another city or state or whatever, if I don't believe in my team, then I'm not going to take that risk. That's, I think, the biggest challenge is taking smart dialed-in risk as a result of the strength of your team beneath you. Finally, Alex Ehrlich, founder and CEO of Per Capita, has more than 40 years of experience in global finance, having helped launch Goldman Sachs' securities lending and prime brokerage business and led prime brokerage at UBS and Morgan Stanley. In this clip, Alex outlines his leadership pyramid and emphasizes the importance of building a team-centered culture.

44:57The leadership pyramid is just based on the fact that, you know, one of the few things I learned in college in my year and a half of, you know, getting educated was I encountered Maslow's hierarchy of needs. And that was actually something I always thought was really impressive on just a personal psychological basis. After I had left Goldman and I was at UBS and I was trying to build a business and, you know, I knew my job was to sort of figure out how to beat Goldman, which was a great firm, had had these observations about, you know, what we already talked about, your brain and your work ethic and your integrity.

45:23That's just kind of like the bottom of a pyramid, like a ticket for admission to play the game. and I started thinking about Maslow and how Maslow had like his pyramid and you know every level in the pyramid is sort of a higher level of complexity of meeting human needs and I started to think I wonder if there's a behavioral pyramid that describes career success, career progress behavioral traits, leadership traits similar to the way that Maslow did his pyramid and so I used to refer to this as the behavioral pyramid for success and Maslow had I think five levels but I had four so it's just a pyramid and there's four levels.

45:58The bottom one we've already talked about, the base of the pyramid is you gotta be smart, you gotta work hard, you gotta have ethics. If you don't, you're gonna fall off the pyramid, you're out. And now you get into the interesting stuff, sort of the seven boxes above. And in sort of stratifying those boxes, those levels, what I was trying to do was think of career ascent. So if the bottom of the pyramid is entry level, so let's call it on Wall Street language, that would be an analyst. So that gets you an analyst job. What gets you promoted to associate? Why do we keep you? Because we don't keep you just because you're good at spreadsheets and PowerPoints and, you know, organizing roadshows, because that's not a sign of leadership, but that's a low level degree of ability.

46:39So you start looking for those behavioral traits. And so on that second level, what I would put would be empathy, because as I already mentioned, it's really the cornerstone of leadership capability is that you are empathetic in your core. It's who you are, because if you're not, you're never going to be a good leader. And by the way, you know, I could talk about all of these things for, you know, sort of 10, 15 minutes, every box for 10 to 15. The second box on that level for me is self-awareness. And by self-awareness, what I mean is just recognizing that by our biology, we are always the star of our own show.

47:11We're center stage in everything we do. Everybody else has a part in our life, but we're the star. And self-awareness in the context of business means that you know the world does not revolve around you. You are revolving around other people's worlds, including, you know, many, many people above you, many people around you, many people below you. So self-awareness is you can astral project and see where you are in the chessboard consistently instead of thinking the whole thing revolves around you. Diversity. And I do not mean what you look like. I don't mean the type of diversity that is controversial right now.

47:43I'm talking about diversity of thinking. I'm talking about, you know, your ability to be comfortable with people who don't think like you, who aren't like you, who don't sound like you, who have different experiences with you. Because that is ultimately a leadership trait because you're comfortable with people, you will form interesting intellectual relationships and bonds, and you will also be a better manager and leader for people who are different from you. And then the final fourth thing on that level is just showing signs of creativity, that you're not limited to being great at executing what people tell you to do, but you somehow begin to go beyond that and you show signs of bringing value that nobody told you to bring to the table.

48:23It doesn't have to be art. It's not artistic creativity. In a business context, you might think of it more as a burning desire for continuous improvement, which drives you to be looking for things that could be better. So that's that like sort of associate level. And then you go up a level. I've only got three things left to sort of two things on this next level and then one at the peak. You go up a level and now you're into like an officer level. So let's say again, in Wall Street context, you know, you've gone from analyst or associate. Now maybe you're a vice president and you're probably at that point, 28 to 30 years old or so.

48:56And it's your first officer level job. And there were two more traits that I would put on there at that level. One is you act like an owner at all times. You take the accountability that owners take for everything going on around you. You lose that trait that almost every young person has of acting like labor instead of management. You know, labor, we talk about this labor, you know, you show up, you're like, where's my desk? What do I do? What time do you want me to come in and, you know, tell me my job? And ownership is, think about it, you own a store and it's on the street front and you're selling, you know, whatever it is you want to sell, whether it's, you know, books or records or clothing and people come in the store and you're the owner and you have some employees and they're doing their thing.

49:38You don't get to ask anybody what your job is. Your job is to do everything from as early in the morning to as late as nice as you can stand it to make sure the store is successful. And so people have to make that transition. And by the way, they also have to stop acting like putting their personal interest in front of the ownership interests of the partnership that they are being invited to be a part of. Second, and the only other thing on that level, which I find is a huge differentiating trait for people, is the ability to build your own network. Because in a job, your manager management is trying to make you successful by making sure you have the tools you need to be successful and you know the people you need to know to be successful.

50:20But as we said earlier, they're not telling you how the other 29 floors work. They're not introducing you to the people on the other 29 floors. You want to have a great career and have more and more sort of the lottery tickets in your career to be successful, you've got to build a network. And if you're working at a good firm, there are so many people you can meet who are going to add value to your life and your career, and nobody's going to tell you to meet them, and people aren't even going to necessarily introduce you. So this question of kind of how anybody gets to run Goldman Sachs, as I said earlier, or Morgan Stanley or anything else, it's interrelated to this question of how did they build their network when they didn't need to.

50:59And I could talk about that for a long time, but that's everything below the apex of the pyramid. The apex is one thing, and it's usually controversial, come have this to this class and, you know, there's always be somebody that wanted to argue about this, including sometimes very senior people who just really blatantly disagree with me. And I hinted at this earlier, that to me, one of the central traits of leadership and creatively important for very senior leaders is that those people have to be in pursuit of their own happiness. They have to be in pursuit of happiness because if they're only in pursuit of success, and many people will take this point of view, like I've had this said to me many, many times, it's like, dude, I did not come here to be happy, okay?

51:44I'm not being paid to be happy. I'm not here to be happy. I'm not here to make you happy. I am here to be successful. And in the context of like the investment banking world that I come from, it's basically I get paid for three things. I get paid to make money, serve my clients well, and beat Goldman Sachs. and I use Goldman Sachs as an example, not that they're always number one. You know, if you're Goldman, you're being paid to beat Morgan Stanley. The point is that if that's how you see the world, that's particularly in this era with sort of cultural changes as generations pass on and people are concerned about happiness, you're at a step with the way the world is changing and you are not going to inspire people to want to be like you.

52:25You might be really, really good at your job. you might inspire people to know what you know, people may very well want to learn from you. They may want to be on a team with you so they can sort of soak up your brilliance, but they're not patterning themselves on you because they actually want to be happy. Secondly, if you're not concerned on your own happiness, people don't think you're concerned about their happiness. And people want to know that the management above them cares at the very least about their progress and their career happiness, if not their personal happiness. These nine voices remind us that leadership isn't about titles or technical skills.

53:02It's about vision, empathy, adaptability, and the courage to take risks while empowering others. Whether it's building a legacy, fostering culture, or staying calm under pressure, the best leaders combine clarity of purpose with a relentless commitment to growth. Number three, the AI bubble. The AI boom is one of the most talked about themes in markets today. But how does it compare to past technology cycles and what might the future hold? No one knows for certain, which is why maintaining a balanced perspective on the full range of possible outcomes is essential. While optimism seems to dominate the headlines, here we focus on the potential downside risks.

53:43In this early December episode, Rajiv Jain, CIO and founder of GQG Partners and a former AI Bull, shares his views on why today's environment may be more vulnerable than the dot-com era, the challenges of scaling AI, and why the biggest winners could emerge in unexpected places. In this first clip, Rajiv explains why today's AI surge may be more vulnerable than the dot-com era. First of all, it's way more vulnerable. And the reason is the numbers are much larger. The dependence of the economy on this area is actually startlingly high. Let's start with market cap, et cetera, right? I mean, NVIDIA is almost 15 % of GDP.

54:23So it's approximately give and take Microsoft and Apple and so on and so forth. But their impact economy is actually far smaller historically in terms of number of jobs that they created and so on and so forth. But the market cap impact is quite significant. Technology itself as a sector is worth almost same as GDP, I have$30 trillion. The other aspect is the amount of dollars that are now going into data centers, et cetera, as a percent of GDP and as a percent of overall CapEx spend in the whole economy is disproportionate. The problem is this is a very rapidly expiring technology. I'll give you an interesting data point.

55:03If you look at the GPUs, H200, which were launched last summer, okay, if you go to the distributed network, which we have, that they're now selling between 40 to 50 % discount to what they sold 12 months ago. In fact, some of them are even suggesting even the Blackwell might be available for a discount. We haven't gone the numbers yet, but they are suggesting that you should be able to get that. And these are authorized distributors, by the way, of NVIDIA. The question is, something that I can depreciate that rapidly, why there's such a surge in investments when we do know that the Chinese open source models can be very effective?

55:39In fact, no other country is doing that. And there might be a good reason why other countries are not investing at this point because technology changes are so rapid. So unlike the dot-com era, those optical fiber, et cetera, lasted decades. We're still using them. These may be a lot of stranded assets. Number three, the amounts that are going in are happening on the private side and hence are more opaque. But some of the valuations are completely in Alice in Wonderland. For example, if you look at OpenAI at$500 billion, it's got a finger in the air, whatever they're valued at, for a company that last quarter, third quarter, apparently, based on Microsoft's numbers, had an$11.5 billion loss on approximately$4 billion revenue.

56:21And now they're saying they're going to spend$1.5 trillion. I mean, the math, what's fantastic, and nobody's questioning the math. And this one company, if you look at X.AI, being valued at$200 billion, but under$1 billion revenue. Pets.com was$2 billion. People don't pay so far. Oh, by the way, what's interesting is Pets.com was more than half owned by Amazon. And then it didn't work. But it was$2.5 billion. Inflation adjusted is not$200 billion. So the numbers are completely astonishing. The other part is the circularity. I mean, the whole venture financing issue, which was heavily criticized in 2001, there were a lot of articles if you go through Wall Street Journal, et cetera.

57:00Now that thing is on steroids. I mean, today there was another deal announced of Microsoft NVIDIA investing in Anthropic. And Anthropic then is going to go around by compute from Microsoft. So they're going to borrow more money and buy back compute from these guys. Almost 40 % plus of startup capital is coming from tech companies. So the circularity of these maybe a dozen companies which show, you know, they come as usual suspects in everything. And the size and scale of this is actually massive. because one thing which is very different, the other thing, by the way, is also different from what happened in dot-com.

57:38The underlying economic growth was actually stronger. People forget, U.S. had a fiscal surplus. In 2000, there was a New York Fed paper discussing what will happen if U.S. government has no debt. Think about it. This actually Fed research study, we had no deficit. In other words, there was a lot of fiscal flexibility in case there was a recession. And by the way, 2000, 2001, was one of the shallowest recessions. So when you add all these things up, S &P growing a lot faster at almost 17 % to 18 % compounded annual growth rate going into the peak, EPS growth. Now you're looking at high single digits, by the way.

58:18Right? And that's along with fiscal surplus because that has obviously massive stimulative effect. So the question you have to ask is, if there's a slowdown recession, is the deficit going to go to 10 %? If you assume 300 to 400 base point increase in deficit, what happens in that case? How would the bond market react? Because in 2003, Fed basically cut the rates to zero. So as you can see, there were a lot of fiscal flexibility. The Fed had a lot of flexibility. The corporates had a lot of flexibility. This time around, it's a lot more tougher environment and the valuations are higher. He then addresses the big question on many minds.

58:54Where will AI revenues come from? The funny part is when people compare to.com, so we actually went back and read some of the old annual reports from 99, 2000. And there was an interesting nugget from Cisco's annual report of 99. It said in the US, the internet economy, as they called it, in 1998 was$300 billion. This is Cisco's annual report of 99, okay, which came in early 2000. Today, revenue from AI is under$25 billion. And if you look at, let's look at OpenAI. More than half of the user base is from emerging markets. India, Indonesia, Brazil, Philippines, Turkey. Do they really have pricing power?

59:36Let's look at that. So if you look at the telecom operators, for example, in India, a company called Bharti, the average revenue per user per month is$3.50. cents. I'm not sure that OpenAI would be able to charge$20 for 5 % or 10 % of the users in India or Brazil or other places. It just won't happen. Not to mention, there's no stickiness because you can change from one to the other in a pretty quick fashion. And third thing is that they've already lost market share to Anthropic in coding, et cetera. So this is a very fluid space. One of the biggest problem, by the way, which I think is a real heel is heel for this industry is it doesn't scale well.

1:00:17What do we mean by that? So if you look at every incremental user that OpenAI gets, it may be equal or more expensive from a compute perspective than the prior one. There's no real economies of scale. In a software business, if you get a new software client, fixed costs already embedded. So the incremental margins are very, very high. In this case, incremental margins may be worse. If you get a power user, they may completely blow through your budget for that individual. So then they end up throttling them. So think about it this way. You're actually trying to control your best users. Finally, Rajiv explains why non-tech sectors may ultimately benefit most from AI, thanks to well-defined rules, large data sets, and high barriers to entry, while many tech winners could falter.

1:01:03Same thing happened with dot-com. Telecoms were considered winners of all of this. Turned out they were not. Markets are completely wrong. I mean, a lot of stocks like Disney, et cetera, went through what trading at, in fact, it was called TMT bubble, tech, media, telecom bubble. So media stocks went through the roof. Turned out a lot of media companies became casualties. So it's not the first time that companies that are considered winners ultimately turned out to be casualties of new technologies. For my insurance, like property and casualty insurance, see, when the ground rules are very, very narrowly defined, this thing actually works reasonably well.

1:01:37If the grounds are not defined, this thing can be a complete disaster. Try Copilot on your own, and you wouldn't be surprised if you see very obvious mistakes. But ground rules are very well defined in property cash insurance, like car insurance, for example, right? So then it should work very well. So our view is that insurance industry would be one of the biggest beneficiaries, that they have huge databases, so they can price policies far better. And the interesting thing is, that is one of the cheapest industries. It is not cyclical. It's worth selling a very attractive valuation. Barriers to entry are high, and probably would be a winner.

1:02:07So there'll be different winners than I think the perception seems to be. And by the way, you can see it, right? For example, if you look at software, I mean, most of these software companies were trading at 50, 60, 70, 100 times earnings three years ago. Now, all of a sudden, they considered losers all of this. If you look at last 30, 40 year history, how many software companies can we count as true long-term winners? Microsoft, Oracle, SAP, and then, right? We run our names quickly. That's the nature of the animal. The long-term barriers to entry tech tend to be very, very low. Buffett was not wrong when he said, look, doesn't invest in tech.

1:02:44You could see why, because it's very hard to predict who's going to be the winner five, 10 years out. And by the way, like NVIDIA, for example, everybody is developing their own chip, but they're also this customer. If nothing else, they could reduce the demand from those side. Rajiv's insights remind us that today's AI boom, while exciting, carries risks that may be underappreciated. Mass evaluations, rapid technology shifts, and unclear revenue models. Adoption could take longer than expected, and the biggest beneficiaries may not be the obvious tech giants, but industries with well-defined rules and deep data advantages.

1:03:19No one knows the future, but having a balanced perspective on the full range of possible outcomes can help investors avoid extremes, whether it's chasing hype or dismissing innovation and positioning themselves thoughtfully for what lies ahead. Number two, AI. Lessons from the past, insights for the future. AI has dominated 2025, but to really get a sense of where it may be going, I wanted to first look back to the early days of the internet. The patterns are familiar, bold ideas, rapid adoption, and plenty of surprises along the way. For this segment, I'm doing something a little different. Instead of focusing on one guest at a time, I'm weaving together the voices of three remarkable innovators, each from a different era and vantage point.

1:04:07First, Dr. Leonard Kleinrock. He helped build the very foundations of the internet and brings the wisdom of someone who's seen it all from the first packet sent to today's digital world. Number two, Jeff Huber. He was at the heart of Google during some of its most innovative years, helping launch products that changed how we live and work. Number three, Brock Sutton, who's leading the charge on AI implementation at Capital Group, bringing a fresh, hands-on perspective from the front lines of today's technology. You'll hear me jump back and forth between these three, sometimes connecting their ideas, so you can hear how different generations and backgrounds shape the way we think about AI's future.

1:04:48By mixing their insights, we'll explore what history may teach us about the opportunities and risks ahead. It all starts with ambition. Dr. Leonard Kleinrock, one of the original architects of the internet, reminded us that anything truly worthwhile is going to be difficult, and that's exactly what makes it meaningful. Back in the early 1960s, as a PhD student at MIT, he set out to tackle a problem that really mattered. That decision to focus on something big and challenging may have changed the course of history. I didn't want to work on a problem that was small, difficult, and of little consequence.

1:05:24And most of my classmates were doing exactly that. There was this wonderful new field called information theory. There were many hard, open problems, small problems that needed to be dealt with. And they were busy working on really hard problems and good ones. But I realized that's not what I wanted to do. They wouldn't have impact. Whereas at MIT Lincoln Lab, which provided this chip to me, at MIT itself, I was surrounded by computers. And I knew that one day, sooner or later, these computers would have to talk to each other. And there was no adequate network which would allow remote computers to interact and talk to each other.

1:06:03And I said, look, here's a problem that nobody's working on. It's an important problem. If I can solve it, it will have impact. And I had an approach to solving it. This is exactly what I was looking for. Similarly, Jeff Huber, former Google senior vice president who helped build Google Maps, ads, and Gmail, and now founder of Tritomic Capital, echoed the same principle inside Google's culture. When I was at Google, my boss at the time was Larry Page. And Larry had a very strong sense of anything you're going to do is hard. So if you're going to do it, you might as well make sure that when you achieve it, it matters.

1:06:46And that's really resonated for me as well. And in fact, many times it's easier to, when you have a big mission, a noble goal, something that's going to have impact, it's easier to get others rallied to the cause and supporting it because they identify and they buy into the mission. When you have the right mission, when you have the right goal, the universe conspires for you to help make it happen. What's really interesting is the vision for the internet has been there for over a century. Listen to Dr. Kleinrock here. When was the concept, the vision of what we now have as the internet first articulated?

1:07:22When did someone see this? And I can ask people listening to this to wonder, is there anyone they can think of or any person? Well, I'm going to quote somebody and I'm going to ask you to think about when and who this could have been. The quote said essentially, it will be possible for a businessman in New York to reach out across the ocean using a device no larger than a watch instantly at almost no cost to his colleague in London or elsewhere and send easily any picture, drawing, text, speech immediately. Now, first of all, whoever that was, they're talking about what we now call the internet.

1:08:10So who do you think that was? And when do you think it was said? It was Nikola Tesla. And he said that 1908, more than a century ago. And he was talking about the telegraph network. He didn't talk about video because there was no video, but he had the concept. But vision alone isn't enough. The internet began with open collaboration. shoot for the moon labs, and unguarded innovation fueled by government support and funding. But as commercialization arrived, ideals collided with incentives. Dr. Kleinrock saw it firsthand, a research network turning into a global marketplace. Listen to him describe his firsthand experience.

1:08:51In October of 1957, the Russians who were part of the study jumped the gun and they launched the first artificial earth orbiting satellite, something called Sputnik in October 1957. And that damn thing circled around the earth going beep, beep, beep, beep, annoying everybody and pointing out that Russia was now ahead of everybody else, not only in space, but in science and technology. That was October 57. Well, then President Eisenhower of the United States said, uh-oh, we've been caught with our pants down. We are no longer leader in science and technology, and that better not happen again. So four months later, in February 1958, he formed a research environment.

1:09:43He formed something called the Advanced Research Projects Agency, ARPA, within the Department of Defense. To do what? to fund research and education in science, technology, basically engineering, mathematics, for the sole purpose of bringing the capability of America back up to primacy in those fields. So we started funding research across the country, educational institutions, et cetera, industrial research labs. And it started out by funding science in the area of chemistry, aeronautics, physics, biology, space, et cetera. In 1962, they formed a special group to study computers. And it was called the Information Processing Techniques Office, computers.

1:10:34And the first head of that was a fellow named Licklider, Dr. Licklider, who was a psychologist. and he had the notion that if he put man and computers together, you get what's called a man-computer symbiosis. You get the best of both and who knows what wonderful things can happen. So he started funding computer scientists around the United States and the way he did it was remarkable. God bless him. He would go to some of the great scientists at various universities and research labs at the time. So he'd go to Marvin Minsky at MIT, who was great in artificial intelligence. Said, Marvin, you're a great scientist.

1:11:15You've done great things. Here's a pile of money. Go shoot for the moon. Really go for something big. Failure is okay, but go for it. We're going to give this money for a long time. We're not going to tell you how to do it. Do what you want, and we're not going to watch you. It's all on your own. That culture of openness defined the internet's birth. It was all about research. Then came the turning point, the World Wide Web and the first signs of commercialization. In the early 90s, what happens? The World Wide Web appears, a simple to use graphical user interface. And suddenly, all this combination comes in.

1:11:54And now it began to reach out to the consumer world, to the general world. And now, so suddenly consumers are on it, companies are on it. Around this time, on April 12th of 1994, another critical event occurred. The first broad-based spam message was launched. It reached most of the people on the network. It was launched by two lawyers on April 12th, 1994. And what it was, was a message going out. I've got a copy of that message, that email message. and it said, was reaching out and said, look, there's a green card lottery coming up. We will help you get in the lottery. Come to us, hire us, pay us.

1:12:40We'll let you get in. Those lawyers were advertising on our research network, on our engineering. That's not allowed. We were aghast. We said, ouch. And this time we said, uh-oh. So we sent email back to those lawyers. We said, you can't do this. How dare you? Shame on you. Cease and desist. We sent so much email back to their server that we took down their server. So an unintended consequence of the first broad-based spam message was the first denial of service attack. But it was too late. The commercial world saw that here was a way to reach the consumer public. They realized this is not a research engineering network.

1:13:24This is a shopping mall. This is a social network. This is an entertainment channel. What wonderful capability to reach out and make this into a commercial success. So in answer to your question, it was around that time that the focus and the energy going into the development of the now called the internet shifted from research and engineering to commercialization. The network took a significant shift to the left. And now the energy was how to seduce the consumer to spend their money. And we've seen that development continuously now. And of course, that drove the directions and the energy in the wrong direction.

1:14:06At the same time, since we enabled so many people to come on, we brought in the power of the internet. What is the power of the internet? The power is that anybody with a computer and aligned to the internet, no matter how poor or dirty or banana peels on the floor in a dirty environment can reach out at almost no cost instantly to millions of people and influence them, connect with them, et cetera. Now that's the power of the network. And it's also a perfect formula for the dark side of the network. And so it began to emerge. We began to see these terrible things come onto the internet, you know, fraud, denial of service, fake information, et cetera.

1:14:55And around that time, as it began to emerge, I said, oh my goodness, the internet is going to its juvenile teenage years and it'll mature. Didn't happen. It didn't happen. The internet is now in some sense in a worse situation because the social networks began to dominate and became influencing what was going on in the information, the misinformation, the motives, the directions. And it's risen in some very nasty ways. And here's another lesson shared by Dr. Kleinrock. Predicting infrastructure may be easy. Predicting applications is much harder. We've been able to predict very effectively the infrastructure of the internet.

1:15:39High-speed networks, basically capability in the walls, smart spaces, wireless networks, devices, and high-speed networks and connectivity, which works. What we've not been able to predict well are the applications and the services. We didn't predict email coming. It came on and suddenly within months dominated the traffic of the internet. We didn't see peer-to-peer networks. We didn't see user-generated content like YouTube. We didn't see a blockchain coming in. We didn't see search engines. We didn't see shopping malls and the social networks, all of these things that have come about. That shift may hold a warning for AI.

1:16:22We may be able to predict the architecture and hardware, but what's harder and potentially far more important is foreseeing how people will use it. Brock Sutton, who leads emerging client capabilities at Capital Group, puts AI into historical perspective, seeing it as a general purpose technology, much like the internet was in its early days. Here is Brock. The assumption is right. It's a general purpose technology, similar to the internet. So it will likely impact everything. But I think the interesting thing to think about is we talked about how it's kind of building on the past of compute. This is building on historical kind of compute.

1:16:59And so I think the interesting thing about that there is technology always has the same impact on industry after industry, function after function. So if you look back, it always takes some task, some job to be done, and it makes it cheaper. It drives that price, you know, maybe not down to zero, but close to zero. And the beneficiaries are those that sit in a complementary area to this technology. So like one way to think about AI is to say, okay, what is this technology going to be great at? And how do I position myself as a complement to this technology? So don't necessarily compete. So the example I'd love to use is the internet, because I think everyone can latch onto this.

1:17:38So you have, prior to the internet, you had companies that would create content. So you or I would come up with a newspaper article, maybe write a magazine article, create a screenplay for a movie. There was some value in us coming up with an idea and creating content. But if you think about the real winners, the real winners weren't distribution, right? So it was, hey, could you actually print a newspaper? Could you print a magazine? Could you get that to people's doorsteps, to new steps? Could you actually make a movie? Could you get that movie into theaters? So companies with distribution were the previous winners to the internet.

1:18:11Then comes along the internet and using this framework that we just talked about, it commoditized distribution. It made it free for you or I to send content. Anyone can listen to this, right? A thousand times over and it doesn't cost you anything. And so the beneficiaries then were the compliments to this. So what were the compliments? The first is people that were amazing at content. So think about like the big companies, the big companies got bigger. companies like Netflix, companies like the Wall Street Journal, New York Times, right? Those big kind of brand names. And then on the other end of the spectrum, you had this massive long tail of individual creators that could have never existed before, but can because distribution is now free.

1:18:53So that's what was commoditized. The compliment was this piece. If we use that same framework, then, and we think about AI, the question becomes, what will AI commoditize? What will drive the price down of. And if we've seen anything within the technology so far, it's really driven down the price of things like analysis and starting to, with some of the agentic workflows, things like actually execution. So you or I, right, we can have any kind of question we want, and we can use the tools today to come up with a well-researched 10 to 15-page research report on that given topic. It's making it essentially free for us to analyze anything.

1:19:33And then more and more with these agents where they're able to go out in the world and make decisions, it's actually driving down again, similar on the execution side. So if you pull that thread, then what starts to matter more is ideas. So where you point this technology, the questions you ask, the agency you have, those types of things, that's what becomes even more valuable in this type of environment. So it's hard to say, hey, what will exactly happen within that space? But I think that's one framework. I asked Brock how we should think about our roles in an AI-enabled world. Should we focus on the tasks where humans add unique value rather than trying to compete with computers at what they do best?

1:20:13Here's how he answered. One of the things to make sure that you do to stay in that space is to stay close to the technology, right? And use it so that you understand where is this good enough? Where is this becoming more expert in than I am? One way to think about it too is like this kind of floor, lower ceiling razor, where it makes us proficient, somewhat proficient in almost anything, right? We can be somewhat competent. But in the areas that we're truly expertise, you know, it 100 ,000 Xs, you know, our abilities and others' abilities. So I think that's like a good way where it makes everything somewhat approachable, but in the areas that you're truly are an expert, it also 10 ,000 Xs you.

1:20:53And this is really what innovation is, right? You've had other breakthrough technologies in the past, electricity, you talked about the internet. And what it does is it creates new opportunities. And at the same time, people have to evolve as technology evolves. And it's probably a mistake to ignore it. You're probably better off trying to be front-footed, try to understand it, figure out how it can help you. And I guess a simple way to think about it is humans plus computers is probably better than one or the other alone. Yeah, I completely agree. And I think one of the other things that's kind of fun to think about is think about if we have listeners 100 years ago that were listening to this podcast and we would have to describe to them, this is a job.

1:21:35We're doing a part of our job right now. They would probably say, that's not a job. That's not real. That's a fake job. And so I think one One of the interesting things to think about is how will we look at jobs in the future, maybe in that same dynamic where it's like, it's very different than what we're doing today. It's very serious to those of us doing that in the future, but it does look very different than kind of where we're at today. And so I think we're super early on this evolution. People are just getting started. It's going to take a long time, but I do think it's good to think about what are the end points that we may get to.

1:22:11Here, Brock discusses some of the biggest risks he sees with AI over time. My concern, one of them, is a little bit around do humans outsource thinking and reasoning and making decisions? And I think that's a potential risk. I think we need to make sure that humans are able to think, they're able to reason through different problems, they're able to make decisions on their own. Absolutely use AI as a helpful tool, but I think actually learning how to do that for yourself is incredibly important. And I think you're seeing some of this with the education system right now where because the younger individuals are going to be the first users and are the first users of this technology, they're wrestling with some of the tensions before everyone else.

1:22:51And you're seeing this in higher education and things like that. How do you give a test? What does a course look like in a post-AI world? So I think that's a really important thing to keep an eye on as a society is make sure that people are able to reason, think for themselves, and use this technology to help them and extend them, but not necessarily replace that function. I asked Jeff Huber what advice he'd give to people who might feel intimidated by the steep learning curve of new technology. He shared some practical guidance for thriving in the AI era. So I share this frequently with my kids that we now live in an incredible time.

1:23:27And I mentioned it earlier where it was a little bit harder when I made the jump into life sciences biotech after a career in tech. But we now live in a time where anything is learnable. The only limitation is the curiosity and willpower to do it. So just let curiosity drive you. And yes, now the internet exists. Everything is discoverable. Now we have incredible AI tools that can be your coach along the way to be able to learn and develop new skills. And I think a key one of those is AI itself. I think you're going to see differentiation between people who are on the outside and not engaged and people who are on the inside and using the tools and really pushing what's possible.

1:24:09And Jensen Huang recently had a quote that really resonated for me. It was asked, is AI going to take away people's jobs? And his take was, no, somebody using AI has the biggest potential to take away your job unless you're there and leaning in and continuing to learn. So my encouragement for everyone, for my children, my son just graduated college last year, and my encouragement to him was congratulations on graduation. You finished the first chapter. Now you've got the rest of the novel ahead, and you need to be continually learning as you go. Your education is a milestone step along the way.

1:24:45It's now lifetime learning that you're engaging in. Finally, I asked Dr. Kleinrock whether he envisions AI becoming as seamlessly embedded in daily life as electricity or the internet. Here's what he had to say about what the future of AI might look like. Yes, I do. And it's part of the internet being invisible. I like to imagine, as I did in that vision I had back in July of 1969, I should be able to walk into a room and the room should know I've walked into it. And I should be able to interact with the room the way you and I are talking now, namely with speech, with gestures, with facial expressions, with haptics, with the way you and I interact without having a keyboard or a technology or one of these damn things, tiny keyboards.

1:25:34And it should know what my privileges, my profiles, my preferences are. So it can enable, can provide them to me. If I walked up to a physical device, it should be enabled with those capabilities that I want. And it should anticipate what I want, be able to be an agent for me, make suggestions, and interact the way humans do, using all of the internet capability, but the AI tech capability as well. I want an agent with whom I can interact, which is very much like interacting with you. And maybe it is you with capability, enhancing you in your interaction with me. I foresee, I like to say, what we're moving to is a global intelligent interface surrounding us.

1:26:25It's in the ether. It's in the environment. It's in our tables, our cars, our walls, our fingertips, our bodies, and the environment in which we engage. If we step back, the story of AI may look a lot like the story of the internet. A breakthrough technology, a massive build-out of infrastructure, and a rush to build on top of it. As with any major shift, some groups are thrilled by the opportunities ahead, while others are anxious about the changes AI will bring. The key takeaway from these conversations? Don't sit on the sidelines. Learn the tools. Experiment boldly. But never give up your independent thinking.

1:27:03Number one, why the coming decade won't look like the last. The next decade may not resemble the last. Secular shifts in interest rates, global power, and economic policy may be reshaping the investment landscape. What should investors expect? And how can they prepare for a world that's changing faster than ever? Jeffrey Gunlack, founder, CEO, and CIO of Double Line Capital, explains why he believes the era of falling interest rates is over, and why investors should prepare for a very different environment ahead. Here's what he shared in our mid-March conversation.

1:27:37Alex Shahidi:That's my belief that we bottomed on interest rates and that we're in a longer-term cycle of rising interest rates, which is going to be very interesting because we had a treasury debt that was like 3 % on average, and now it's moving towards 4%. And depending upon where rates go, it could go higher. If you think about that, you get to some very uncomfortable arithmetic regarding interest expense. This is something that I talked about two, three years ago, when people were saying rates will never go up, rates will never rise. I used that famous photograph of then Cassius Clay, Muhammad Ali, with Sonny Liston, I think it was.

1:28:24Alex Shahidi:It looks like Liston's never getting up. It just looks like he's out cold. I used that graphic and I just said, you know, we've got to start thinking about where this interest expense problem may go. And of course, now that it's higher than the defense budget and not even the official defense budget, the true defense budget includes Ukraine and the Israel situation, all that stuff. The interest expense is already higher than that. So over a trillion, I think it's running at about a trillion three right now, up from 300 billion just a few years ago. And I think that is very strongly reason why interest rates are in a secular rising position, because the deficit is percentage of GDP keeps going up, and the interest rates that are rolling off, we still have some 25 basis point stuff that's rolling off.

1:29:11Alex Shahidi:There still will be for some years to come. We have a strong possibility that people won't want to lend us money at low interest rates, especially for a long-term period of time, especially if the dollar starts falling. So, typically in a recession or weaker economy, you get lower interest rates and you get a higher dollar. I think it's going to be the opposite. Because I think we're living in a mirror image of the 40 years that are informed by falling interest rates. And a lot of people have never experienced high interest rates, rising rates. And no junk bond investor has ever really experienced a rising rate default cycle.

1:29:46Alex Shahidi:because when defaults would show up, the treasury rates would fall and you would have some capability of refinancing. So instead of going bankrupt, you could refinance. That can't happen in rising interest rates. So I think the corporate CFOs have been very smart and they've definitely managed their debt burdens pretty well. They've pushed the maturities out. It isn't a problem in the next few years, but ultimately the maturities will come. And will they be able to refinance? will they have to default? I think defaults will be higher in a rising rate environment than they were in a falling rate environment.

1:30:21Alex Shahidi:Yet, the junk bond market has only existed from the early 80s. So it's been nothing but falling rates until recently. And there hasn't been enough economic stress with these rising rates for the past three years or so to cause significant increase. Defaults are going up, especially on bank loans, but it hasn't been a deluge that you typically see during a significant recession. He also discusses the potential for a major inflection point in markets and policy. I'm quite fond of Neil Howe's work. He's a demographer. He wrote the book called The Fourth Turning in 1996 or 1995 when he used demography to predict the global financial crisis.

1:31:05Alex Shahidi:And he said it would come somewhere around 2006. So it was pretty accurate. But his work is based upon this concept of turnings. We used to talk about the Kondratiev cycle years ago. No one talks about that anymore. It was basically a 75-year thing. And it turns out there's a logic behind why it's every 75 years or so. And it has to do with the fact that societies get a framework. And it starts out in a context of crisis, typically. But the framework is agreed upon. and it's designed to be in harmony with the production, to put it in the Marxian philosophic terms, the means of production. And the means of production get addressed through how you split up the rewards of the economy.

1:31:51Alex Shahidi:So there's the production of the economy and then there's the property relations, which is how you divvy it up. And it starts out where they're in sync, but there's a natural tension, which is unavoidable, where the property relations don't want to change. They get set in place, and the people that benefit from them work hard to not let them change, the powerful, the wealthy. They don't want that to change. But the means of production change in revolutionary form many times over a 75-year period. Think of television, think of the internet, think of AI, think of the steam engine, the telegraph, you name it.

1:32:27Alex Shahidi:And so they radically change the means of production and the populations get further and further out of sync with the means of production and this tremendous tension. And ultimately, it's kind of like having one foot on the dock and one foot on the canoe and it keeps drifting and eventually you're going to get wet. You're going to fall in. And so everything has to get ripped up and you have to start over again. And that's where we are. And I think people use different frameworks to talk about this, but they're all cousins of each other. And usually, not always, but usually it leads to some sort of significant conflict like the Civil War, World War II.

1:33:04Alex Shahidi:It happens about every 80 years or so. And Civil War was 1865, World War II was 1945. Add 80 to that. It's 2025. So you are here on the map. And it's just going to keep coming faster. Jeffrey goes on to explain why he believes the future could look very different, perhaps even the opposite of what we've experienced in recent years. I think the endless outperformance of the United States equity market will reverse with this regime shift. If you just look at the foreign investment position in the United States, it has gotten so big. It's$23.5 trillion. 15 years ago or so, it was three. It was the net investment position.

1:33:48Alex Shahidi:So the outperformance of the U.S. has attracted money into the U.S. and that's led to a virtuous circle of US outperformance because the money keeps piling in because it's a one-way trade, particularly versus EM. I mean, it's been going on for like decades and versus Europe, it went on pretty hard for over a decade, but that's suddenly reversing now, which I think is a tell on this one-way outperformance. It's driven in large extent by flows, and flows reverse or can reverse. When they do, particularly if we're getting bellicose with other economies and other governments, well, people used to talk about China not reinvesting their treasuries, but quietly they've been doing that for a long time.

1:34:36Alex Shahidi:I mean, they're already down by 600 billion from their peak. That's already happened, but what if that accelerates, and what if the non-cooperation, which obviously is the tariff rhetoric in just the past month has gotten people not getting along. I mean, we've got the Canadians booing the NHL, the Star Spangled Banner when they play it in Toronto or Montreal. So that's all part of things disassociating. My strongest belief on how this regime will play out is the mirror image concept. I think the dollar will go down as the economy weakens. I believe that's happening. I mean, the dollar is already down by 10 % from its highs and it's fallen quite a bit just in recent months.

1:35:18Alex Shahidi:And most people say, I know this. I've been doing this 40 years. I know exactly how this works. When the economy goes down, the dollar goes up. I think it's going to be the opposite. And I think during recessions, you know, the US outperforms, emerging markets don't do well. It's going to be the opposite. And so I really strongly suggest that investors that are U.S. dollar based, and I'm sure this is true, the predominance of U.S. citizens, they have almost all of their investments in the dollar, almost all. And I think it's been such a comfortable thing to do because it worked in a nonstop way.

1:35:55Alex Shahidi:But that's starting to change, too. The investment consequences of this is you want to be much more diversified. People talk about 60-40. I think 60-40 went out the window with zero interest rates. And then we had the bear markets and stocks and bonds when the interest rates were rising. I've been advocating more diversification, not just 60-40 stocks, bonds, but just take a look at what's happening with gold. Gold, actually, if you take a very highly convenient start date, which is January 1st, 2000, so it's been 25 years, stocks have done quite well, gold's done better. And if you just look at the S &P divided by gold, it hasn't rallied at all.

1:36:38Alex Shahidi:So we're starting to see interest away from traditional dollar-only, 60-40 types of investments. That's why I believe gold has been so strong when other commodities have been weak. It's not so much for economic purposes. It's people are, by degrees, monotonically gaining mistrust in the way all of this is being run. I asked Jeffrey to rank U.S. stocks, non-U.S. stocks, bonds, and gold for the next 10 years. His answer offers a telling glimpse into how he sees the coming decade. I think number one would probably be non-U.S. stocks. Number two would be gold. Number three, I guess it would be U.S.

1:37:25Alex Shahidi:stocks. That's a close call between that and bonds. Yeah. If you'd asked me that 18 months ago, I would have been much higher up on bonds. I mean, the yields were much higher. I posed the same question to Julian Brigden, head of Macro Intelligence 2 Partners, in mid-April. Here's his quick take. I would do precious metals, non-US core stocks, tips, US stocks, and US bonds. Julian also warns that the global order may be shifting, drawing on historical context to frame the risks and opportunities ahead. We've obviously been in a sort of post-war period. We've been post-Second World War period in a period where it's been Pax Americana.

1:38:08And I think the problem with these systems is not, we've had seven, right, throughout kind of history, and not one has survived the test of time, for numerous different sort of reasons. But, you know, typically, they tend to boil down to this sort of concept of imperial overreach that in the imposition of enforcing this system, often, And as I said, onerously, if you say the Roman Empire, you'd stretch yourself too far. You don't have enough troops. You can't fund the troops. The Visigoths and the Huns end up attacking you and then turn up on the outskirts of Rome and sack Rome, right? And the whole system sort of collapses.

1:38:47There often comes with financial strains. It often comes with technological changes which challenge your technological dominance. And so they just haven't survived the test of time. And there's also this military tone that exists with it, this element which exists to it, which, as I said, either is forcefully imposing the rules or benevolently imposing rules. But it's very important that role, particularly, let's say, in the current system, the US has provided a military shield security to its allies. And in return, they've been willing to work in a US dominated system, which is what the US set up after the Second World War.

1:39:31And all those benefits have derived from that. And in terms of financial flow, it's basically boiled down to the point that foreigners are prepared to fund our spending, our excessive spending, in return for us providing that protection. And in that sense, we've hit this tipping point, I think. I mean, I don't want to get overly complicated, but in economic terms, it's referred to as kind of Triffin's dilemma when you are the reserve currency. that essentially the costs to the reserve provider, in this case the US, of providing that currency and keeping it stable and keeping it strong begin to outweigh the perceived benefits.

1:40:14I will say perceived benefits because I'm not sure that we're going to be right, that the costs are higher than the potential benefits we can gain. And so this leads to a reassessment within the reserve provider. And that's certainly, I think, what the Trump administration is manifesting in terms of their policies. We are in danger. I think, firstly, we're definitively changing the rules. I think that is going to have very significant consequences. And I think also we are potentially changing the rules and changing our approach to such a degree that it potentially threatens, at an embryonic stage, Pax Americana.

1:40:56Look, I will say this, Alex. For most of any trending market, macro is marginally important, but it isn't the driver. Macro really comes into its importance at inflection points. And I think we are at possibly an 80-year inflection point, so like a post-Second World War inflection point, but at a bare minimum, a sort of 40-year inflection point, 30, 40-year inflection point. And so I don't think macro has been any more significant than it is now. I then asked Julian whether even seasoned investors, those who've been in the markets for decades, might be surprised by how much market relationships could change in the coming decade.

1:41:39Here's his response. I think if you've been investing for 40 years, you've seen these before, right? But I'm pretty old and I haven't been investing quite for 40 years. And there are days when I certainly wake up and feel like I've been investing for 100 years every single day. But I was certainly around and copus mensus enough to sort of understand. I mean, I already started in like 87. But in the 40-year thing, I'm talking the last time we saw a currency accord. And I do want to stress as a retail investor, getting the trend in the dollar right, as certainly as a US investor, will determine all your gains.

1:42:15If you get the dollar wrong, you will be invested in the wrong sectors, you will be invested in the wrong countries, and you will be invested in the wrong assets. Now, in terms of trends, I would say that certainly to assume that we continue the trends of the last, as I said, I think these trends really started in 2014, but arguably in 2011. So if you think that we continue along the path of the post, let's say, global financial world, where US assets continue to just inexorably outperform, where we continue to suck in ever greater percentage of global savings. I mean, at the moment, the US demands just to keep the relative performance where it is in the equity space.

1:43:05So US against the rest of the world, demands that it takes 70 cents of every$1 that goes into global equities. 70 cents. So what's that going to grow to? 80? 90? 100? So no one's going to buy any assets abroad. There's going to be nothing worth investing in anywhere else. I mean, those mathematics just doesn't work like that. So I think this relationship depends on an ongoing strong dollar, which the Trump administration doesn't want, ongoing US asset outperformance, which I think is questionable. I think we're breaking some relationships that have been in place over this decade, 15-year period, and a strong, robust economy, which cannot slow down, which cannot go into recession.

1:43:52I think all of those three are in question, Alex. I think the consequences in terms of your asset allocation mix are inordinate. Bob Prince, co-CIO at Bridgewater Associates, one of the world's largest hedge funds, explains why the U.S. is facing a precarious fiscal situation that could pose significant challenges for the economy and markets in the years ahead. Here's his perspective from February. The relative equilibrium that we've achieved in the United States has been achieved by about a 15-year period of the government stepping in and taking on a lot more debt and allowing a deleveraging in the private sector and a strengthening of household balance sheets in the private sector.

1:44:36And that has left the U.S. government with a big fiscal deficit, but also a big stock of outstanding debt. So U.S. debt to GDP has gone from about 70 % where it was for decades to about 120%. The fiscal debt, it's about seven. It's probably going to be that or higher going forward. What you're left with is that the US economy, you have to roll over the debt. And so you have both the new issuance and the rollovers of the existing debt. The rollovers of the existing debt is occurring at a higher interest rate, which is then increasing the deficit. And that can have compound effects over time. Ray's actually done a good study of this.

1:45:18He's writing a book on the math of that process. it's a precarious situation it hasn't come home to roost because the u.s economy has been stronger the fed's been tighter u.s rates have been higher u.s companies are the tech sectors are doing better and so there's been plenty of capital flow into the bonds but you're going to be issuing the u.s government's going to be issuing 25 to 30 percent of gdp every year as far as the eye could of bonds. And while you normally roll over the bonds, the holder of the bonds has to choose to do that. And if the holder of the bonds is a foreign government or someone who doesn't necessarily want to hold the bonds anymore, you're susceptible to that.

1:46:0743 % of the outstanding debt is held by either foreign entities or the US central bank. The Fed doesn't want to roll over the bonds anymore. So that's a situation. Debt rollovers is not something people pay a lot of attention to. But if you look across emerging economies, it's always the inability to rollover debt that is the currency crisis and the financial crisis. It's not the new issuance per se. It's the combination of the new issuance that also scares people out of the rollovers. The rollovers of U.S. treasury debt is going to be a big issue going forward, both because of the rise in the interest rate that's going to get paid and the potential that the people that hold the debt don't want to roll it over.

1:46:56That's also one of those cascading risks. If it happens, it doesn't happen in a small scale. It's like the avalanche tipping point risk. Bob then contrasts the wide uncertainty and risk of extreme outcomes with how most investors are actually allocated, emphasizing that despite the need for strong diversification, most portfolios remain poorly diversified. He also highlights the importance of global diversification, pointing out that better pricing opportunities and lower expected correlations across countries make it even more critical going forward. Here's his perspective. If you look at what the typical investor is holding, your point number one was diversify, poor diversification.

1:47:39If you look at investor portfolios today, including institutional portfolios, they have more equity risk than ever, which is a bias to favorable growth and easier money. They have more equity risk than ever. They have more U.S. equity risk than ever, 67 % of the total world market cap, which means almost 70 % of all the dollars that are going to equities need to go into U.S. equities to keep the price the same. more concentration than ever, the MAG-7, so-called MAG-7, and the top 10 is 30 % of the market, which is the most ever. And the valuations is near the highest ever. And particularly for a foreign investor investing unhedged into the US, the dollar is also near the highest level ever because of the favorable view of the US and favorable actual outperformance of the US economy.

1:48:37over the recent decade or so. And you've got all of those converging at highest ever, which then means if you translate that into what's being discounted, a very favorable set of circumstances is being discounted. And there's a really narrow path for that really working out to get a good risk premium on that particular portfolio. There's a reason we are where we are now. It didn't happen randomly. In the last decade and more, the U.S. has been the best performing economy. And U.S. companies have been the best performing companies. And the earnings growth that has actually supported that pricing up to now.

1:49:18So if you take the MAG-7, they've had a 20 % annualized earnings, but now it's discounted to be 13 % a year. And if you look at the rest of the market. The other 493, they've been sort of dragged along because they're now discounting roughly 8 % earnings growth in the future to have a normal risk premium. And it's never been that high. Theirs was 5 % looking back, it's discounted to be 8%. It's never been that high. So the US market has been dragged along. The total market has been dragged along by the outperformance. And this idea of US exceptionalism reflects that, yes, over the last decade, the US did have exceptional performance.

1:49:57And it was not discounted a decade ago. I don't know if people don't recognize that, but a decade ago, the tech sector was not really priced that much differently than the market. And the US was not priced that much different than the market. And then all of those things vastly outperformed, which led to relative to discounted great performance, but now it's discounted to continue into the future or more. You're betting on a lot to have that concentrated position. And I agree with you on the global diversification that I think this is a tremendous opportunity for global diversification. You go back to the 70s and 80s and global diversification was the thing to do.

1:50:35Then you hit the 80s and 90s. And with globalization and global capital flows and global trade, China comes along and China's got a currency that's pegged to the dollar. Their monetary policy is connected to the dollar. Asia was just manufacture and export to the West. It was a singular global economy and a singular global market. And the correlations between markets got very high, 80, 90 percent. And everybody's like, what's the point of global diversification? But now, if you look at this world of modern mercantilism, tariffs, the involvement of governments in business activities, as well as the differences in fiscal policies, the difference in monetary policies, the differences in inflation rates, and the differences in how countries dealt with COVID.

1:51:26And particularly Asia. Asia dealt with COVID through social measures, and therefore they've never had an inflation. The US and Europe, UK, the West dealt with it by printing money and fiscal stimulation, which then caused the overheating. And so we've been getting a negative correlation between the East and the West because of that complete difference in macro circumstances. And we're getting the echo of it now, even forward, the secondary effects of that, combined with the need to diversify because of the uncertainty that's created by what governments are doing in the market. So I think that the expected correlation of global markets is now low again.

1:52:08And actually, it's an opportunity and actually a necessity to diversify globally. If you don't diversify globally, you don't want to be sort of randomly hit by one of these circumstances. There's no reason to be concentrated because you can't be reasonably globally diversified. The super optimistic conditions that are discounted in the United States are not discounted in other countries. So the discounting is very different. Joe Davis is the global chief economist and head of the investment strategy group at Vanguard, the world's second largest asset manager overseeing$11.9 trillion as of October, 2025.

1:52:50Drawing on findings from his recent book, which explores how AI and other megatrends will shape investments, Joe explains why the next decade may look very different from the recent past. He describes a coming tug of war between demographics, debt, and technological innovation, and what that could mean for investors. Here's Joe. Full disclosure, if I fill out these surveys, what will growth be over the next several years or inflation? I mean, just imagine my role. I'll call them consensus surveys. And for the United States, for an example, I say, yeah, 2 % growth, 2 % inflation, the Fed's goal, generally speaking, or forecast.

1:53:28other IMF, you know, other central banks, it made a lot of sense to me. And that's what our general, our central tendency would be. What I was surprised to find is that when you look beyond certainly a year and you start looking out three years, four years, five years, as these factors are evolving, both on the positive side, the potential impact of AI, because we've incorporated technology in its three dimensions, its ability to automate, to make us more productive or to augment our work as well as unleash new industries. And that's where that data set's really valuable. As well as some of the negative forces, right?

1:54:06The aging of society, we've tied our deficits, our fiscal deficits, our debt spending to that sort of aging given Social Security, Medicare, Medicaid. And so it's that push and pull of those two factors, which means dependent upon their relative strength of AI or the lack of productivity and some of the lift that we'll need for higher growth, which is where you get the unlikelihood of this balance of 2 % growth and 2 % inflation. I was not looking for this diagnosis. If you would ask me three years ago, I'm on record saying, yeah, 2 % growth, 2 % inflation makes sense. What I was surprised to find is that that's what is most common in the industry, it's actually the least likely outcome because of this tug of war that is emerging in our analytics between on the upside for growth through the AI with some disruption, along with if it doesn't materialize, it's got to develop more AI and its capabilities and its lift on new industries.

1:55:06If it doesn't, you get more of a lower growth, yet still high interest rates because some of the deficit pressures and modest pressures on our currency. And because of those two competing forces, you can now see where you don't get this 2 % growth, 2 % inflation. Again, it's possible, but it's less than a 20 % probability of happening for a forecast that I think, I don't know, 80, 90 % of economists, and again, myself used to be in that camp, used to articulate. So it's a pretty bold economic assessment, but we're not trying to be sensational or grab headlines. It's coming out of our data-driven system.

1:55:46Finally, Akash Doshi, global head of gold strategy at State Street, discusses why gold's role as a safe haven may become even more important in a world of rising global debt and a higher likelihood of monetary intervention. There is this concern about global debasement. And I think that's been an accelerated phenomenon post-pandemic. And what do I mean by global debasement? I often ask from a bar trivia standpoint, how much global debt is outstanding worldwide? This is government as well as financial, private sector, corporate credit. And this is not just the US. I'm talking Eurozone, China, et cetera.

1:56:26And that number is 350 trillion. I often get answers of 100 trillion or 150 trillion. No, it's over 300 trillion, close to 350 trillion as of 2025, middle of the year. And that's important because you could say, Akash, global debt is always rising, just like population growth. What's the big deal over the last 25 years? The government's share of that debt has also risen to record levels in 2025. And there were two marked periods in the last 25 years that it really rose. One was during the GFC. The second is during the COVID shock. So not only is global debt at record levels, but the government share of that global debt is at a record level currently.

1:57:13And I think that is something that's really driving these debasement fears and this demand for alternatives such as gold. Well, that wraps up our top 10 insights of 2025 and brings this year's podcast season to a close. Our next weekly episode will be released on January 7. I encourage you to catch up on any of the previous 50 episodes from 2025 that you may have missed. I look forward to what 2026 has in store. Thanks for listening. We hope you enjoyed this episode. Please visit our website at insightfulinvestor.org to access past shows and learn more about our podcast. If you have questions, feel free to email us at info at insightfulinvestor.org.

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