Could AI be as big as the Industrial Revolution? May 31, 2024

28:01Or it might just not be reliable enough and it's kind of remains sort of an edge case that's sort of used in certain areas. Don't forget, it was people like Matt Common a few years ago saying how blockchain technology was going to revolutionize the world, right? And look, that just fell flat on its face. Honestly, I'm not segueing to Bitcoin, I'm not. But he said that. And they've completely pulled back from it. So interesting comment, Matt. You've got my attention. I'm curious. But it's way too early to call this race done and, yeah, we will see. There is, I mean, I think it is, you kind of touched on some of the potential issues and opportunities, right?

28:45I think there is a really significant, I mean, I'm going to put all the chips on hyperbole. in the sense that anytime you say could do something, and by the way, I'll finish the process, I'll come back to it. When you say could do something, it's like, well, so what you're saying is it's not impossible. Yeah, that's all you're saying, yeah. So there's a 0.01 % chance, yes. So it could be, yes. It's like that scene in Dumb and Dumber when she says, I wouldn't be with you in a million years. So you're saying there's a chance. Yeah, exactly. And that's exactly it, right? So he's not wrong, he's not wrong.

29:17um look and i think so let me go to the investing implications mate because let's let's say it's not as big as the industrial revolution it's still pretty big um and you know at a best or worst case scenario i don't know who you are um unemployment goes to 25 and stays there because you can't do a thing with people any more cheaply than you with a computer i mean that's that speaking about the industrial revolution that productivity gain was what happened now the productivity gain came we all moved out of farms on two production lines then we all moved off production lines into service jobs that we we found jobs we've created work we've pushed prices up and houses um we know we've we've found jobs we've found tasks we've found frankly ourselves more entertainment more things to spend money on the the i'm i'm pretty i think i'm i think i'm bearish on the idea that ai leads to permanently higher unemployment in the sense that we're always going to want a new thing right there's always something else to spend money on we haven't got lamborghinis at the moment maybe we could have all lamborghinis or something else or more massages or more what it will be a netflix subscription whatever those things are we haven't gone from you know if you'd sat here and said hey this steam engine is going to be bigger than anything we've ever seen it's going to disrupt the world massively and it's going to cause the end of x y and z you're right with the first bit and wrong with the second bit and sometimes the we've talked so much about you know i use the airlines all the time of the trend is real, the outcome is not necessarily foreseeable.

30:40I don't know that I'm prepared to say this is the end of employment for a whole lot of people. The jobs, absolutely, the jobs will go. 95 % of us were employed on farms at the turn of the 19th century, I think I'm right in saying. And now it's single-digit percentages, right? And yet, when I haven't got 15%, 20%, 40 % unemployment, we've got 4 % unemployment because we found other things for people to do. So I'm not going to say this is it. but there is a question about what people are doing and how quickly that happens and what disruption happens in the meantime. So there's that. On a company level, I suspect AI is more likely to be an efficiency driver rather than a meaningful differentiator for companies.

31:23Yes, if you've got a really, really, really large proprietary data set, you might be able to find solutions that other people can't find because they don't have access to the same data. but for the 99 point something percent of of companies it's not going to be that right the the motley fool or straw man aren't going to have proprietary ai models on their own data that lets us do something different that someone else can't do in any meaningful way if you're google and you have the world search that's why google actually worked in the first place the network effect of i know what people search for i know what they click on i know what they find that that enabled google to win because they did get more feedback and so that's not ai but the idea of more data points more proprietary data points let them get further and further ahead i don't know in this new world that ai is going to be a game changer for individual companies as much as for industry writ large so i'm and even frankly we've talked about nvidia before its market cap now is bigger than the entire german stock market believe it not one company yeah maybe it stays there maybe it falls back there's a lot of success there's also a lot of hype and hope and intel was the big thing and chips until it wasn't.

32:31Who's saying media stays at the top of the pile? It may well. I don't have a view. So there are individual companies that can win from this, but I don't think it's obvious that they will continue to win or who the winners might be. Are there any areas, any investing takeaways, any perspectives? Are you thinking any differently about investing as a result? That's an excellent question. Let me come back to that one because I just touched on a couple of points you made there. I think in prior technological revolutions, there has always been somewhere for humans to retreat to. So we got off the farm, we got on the production line, we got off the production line, we went to services.

33:07Right, yep. You know, and if you now can get machines to think, or at least do a large part of the thinking. Yeah, right. It was like, well, where to? Actually, some of the earlier literature was all about, well, we all become artists, right? We like sit around composing music and drawing pictures and I don't know, living in this massive hippie commune. But it's like, huh, turns out that they're even better at us than drawing pictures and making music, at least for most of us, right? So it's got where, not that I have a firm view on it, but I just, I hear that point of view, but I just don't know where do we retreat to this time?

33:45Like what's left? But I don't think we know, do we? I mean, we didn't know that the service economy was able to be retreated to. We didn't know that the industrialisation would create jobs. I mean, the sowing strikes when the spinning jenny was first introduced was, well, what else could we possibly do? There aren't any other jobs out there. All we can do is work on farms or agriculture or work on farms or sow. There is no alternative. I think we know in hindsight what the next thing was. It's possible at any one of those points there wasn't a next thing. We know about the service industry because it's a thing.

34:13There was no service industry 200 years ago. It just didn't, I mean, maybe doctors, I guess, or butchers more directly. Other than that, there was a lot of personal service workers around. Again, I'm not saying you're wrong. I just, I guess, what did John Temple say? The four most dangerous words of this time, it's different. I don't know. I don't know. I don't know either. I don't know. By the way, I don't know either, but I just, I put it out there because like that is a, there is a, this is not an infinite recursion of turtles all the way down. Like you get to a base turtle where it's like, Like there is literally nothing for you to do.

34:49I love the ever-based turban. Right? Like what are you doing here other than being some – we need a consumer for this, right? Yeah, exactly. So NVIDIA is interesting as well. So NVIDIA makes$60-odd billion a year in revenue. Billion. There's 30 ,000 employees. So what's interesting about the Magnificent Seven and that is that they are economic powerhouses that rival many countries, most countries, in fact. But you go back in time and you look at the Rockefellers and the industrial powerhouses of an earlier age, they didn't have that human capital leverage, if you want, where they could – there still needed to be a lot of people to be employed.

35:43Less than what they did, I mean, those engines really meant that we... I mean, think about the logging industry. You literally had guys with bullocks and carts and saws, right? And then someone, boom, the chainsaw. Now, did the logging industry go away? No, but now I only need one-tenth, right? And now you've got a corporation like NVIDIA, bigger than the German stock market, generating more money than most countries, and they do it with 30 ,000 employees. Now let's look at an NVIDIA in 10 years' time where it's 15 ,000 employees doing$60 billion. So it's not a, again, it's not a black and white thing.

36:26No one's got a job anymore. Yes. But my, what's the word for it? I guess thinking out loud, wondering out loud is, do we just get to a point where it's like, yeah, there's still jobs. I mean, humans aren't irrelevant. It's just, we just don't need as many of them anymore. I guarantee you, I guarantee you the second that we have a reliable, and we're not, don't feel like we're that far away. We have a reliable call center agent, AI. I mean, it's a whole bunch of people out of work now. It's like, okay, um, what are you going to do now? Not everyone's Taylor Swift, right? Not, not everyone's a star soccer player or whatever it happens to be.

37:10It's, it's just, yeah, there's still humans, but a lot less of them. So I don't know. So I asked that I, I, I, I genuinely think that that is, is going to be a, a, an adjustment and a challenge. Um, from the investing takeaway, I may have mentioned this before. Um, but I, I, I, I would really say to people, we will have another bubble. Oh yeah. We might well be in the start of a bubble now with AI. And cause I've lived through many bubbles. I lived through the tech bubble. I lived through the SAS bubble, lived through the lithium bubble. What was the other one? Graphene. There was a quantum bubble there for a bit.

37:49Like, I mean, these are all technologies that hold incredible promise and every company, like people get a whiff of this stuff and they recognize, and I can tell you as part of what we do at Strongman, we speak to a lot of CEOs, not a single one has not mentioned AI, right? And it's just sort of like, are they wrong to mention AI? No, but is there anything special about them? Well, no, we're all using it, dude. It's not special. It's like I mentioned to you the other week. It's like, well, we're all using an email. No one puts on their corporate presentation. I think you'll be quite impressed because we've got a website and you can email us.

38:26Oh, by the way, we've got a Twitter account. It doesn't make any difference, right? So I will be hyper bullish in this space once it becomes clear because we haven't figured out the business models yet. We haven't figured out the use cases. Once that becomes clear, it'll never become crystal clear. By the time it's crystal clear, it's too late. I saw a really great presentation the other day and the talker made the point that if everyone agrees that your investment idea is a good one, it's too late. That's a good point. And it's such a great point. It's such an obvious point, right? If you say I love this company and you don't get a few people saying you're an idiot, I mean you kind of want that, right?

39:20Because otherwise it's priced in because we all know it's a great idea. idea. Um, uh, yeah. So I, I think you, you kind of want to be in that space where it's like, you've got enough. It was, we start, go back to our first point here. We want to have a bit of evidence here. I want to see, okay, beyond some CEO and a presentation telling me how great this is going to be, I can actually see some numbers being generated here. I can see that you've got an edge on others. I can see that you've somehow incorporated this into your business model. That's, that's, that's done in a way that is not available to other, to other, uh, competitors.

39:54and that you're exploiting that and there's a long way to run, I'm all in at that point. I'm back up the truck. That's Guerrilla Game. We talked about it last week. We did, yeah. Guerrilla Game 101, that is perfect, exactly what you want. But we're not at that stage yet. I would argue we are at a dangerous phase. We're at the pet stock comm stage of the AI where it's sort of like, we know it's going to be big. We've got a reasonable assumption it's going to be big, but we don't know how. And for that matter, I would just be very wary investing on the basis of its AI. Motley Fool Money. For more, subscribe to the free newsletter at fool.com.au forward slash listener.

40:37Let me ask you the reverse question and I'll give you my thoughts in a sec. But just because you kind of occurred to me as you were talking, are there industries or companies you would avoid because of the potential for AI? I mean, you're right that maybe the answer is no by definition because we can't know one, we can't know the other. So I think if you can beat the market perfectly by going long, you should be able to short and vice versa. We know it doesn't work that way. So where's the – is there anything you're looking at going, oh, man, this thing is toast? Even when AI turns up, man, you know, like – not turns up a tier, but you know what I mean.

41:07Are you any more bearish or less bullish on companies because of AI?

41:15There are, and I was just thinking the other day, and now I've drawn a blank. Well, there's two parts to that question because there will be industries that will be upended but the corporate at the top of it might do much better. So go back to the CBA example, right? So CBA may well be a far more leaner operation or an Amazon warehouse or something like that, you know, when the robots start getting involved. It's sort of they may be much better, but will they be better relative to what others can do? And will it not be – I mean, things can be both really bad and really good at the same time depending on what your context and viewpoint is.

42:00I suspect for corporations on the main it will be a positive. and when I say, I hesitate and I'm mumbling about here because there'll be all kinds of sectors that I wouldn't want to work in. You know, with my kids growing up, I kind of think, I mean, anything in the driving game, I think is going to be, transport is going to be toast, right? We've already got self-driving. It's just a legal impediment at this point. So that's kind of, that's gone. Call centre work, that's gone. Legal discovery and sort of the more grunt end of that, gone. I think a lot of basic bookkeeping and accounting, gone.

42:40Gosh, you name it, you know. There is so much that has been the potential to be disrupted. So I'd be very bearish on – just like as I wouldn't advise my 14-year-old to get into blacksmithing, you know. It's too late. It's not a growth industry anymore. I think there's going to be a lot of – but then again, you know, there is – I don't know. Help me out here. I'm all over the place. No, I think you're wrong. I think it's – and I ask you questions because I get to ask the questions when I don't know the answers, which is crap being in my position. So, look, let me go back to where we started. I think AI is going to be huge.

43:20I think it becomes an enabling technology, as I said, and I think you've kind of made that point about email. I do like the fact on Berkshire Hathaway's website, by the way, in which I own shares, they say something like, you know, if you want to send us a letter, here's the address, but we won't get back to you, which I think is brilliant. Right. Yeah, we don't do emails. Don't do that. So I think the idea of AI is brilliant. I think the opportunities are massive. I think the world will be remarkably different in 15, 20 years' time than it is today for reasons that we can't yet imagine. Remembering, of course, the iPhone is still less than 20 years old.

43:52Like that's just stupid. So think about that change. And again, I've said before, we take it for granted. I think the problem with – not even a problem necessarily, just something to keep in mind as humans, we don't see it coming. And when it comes, we kind of forget how quickly it came. You know, in the lifetime of almost everybody listening, and if you're under 17, then thanks for listening, we went from Nokia, you know, sending text by pressing the number one three times to get the letter C to the world's information in our pocket in a massive screen thing with Wi-Fi and 5G and all this. In less than 20 years, stupid fast, right?

44:26And yet we take it for granted so much, we don't ever think about what the world was like before it. We kind of, if we stop and think occasionally, we'll recognise it. But it's a really, really big gap. And I think that's kind of important. So 20 years time, the world's very different. How, what does it mean for investors? I suspect that it's those who adapt to using new technologies best that win. And so I would suspect that you want businesses on the front foot without being on the bleeding edge. You don't want people wasting money and time. I mean, as you say, everyone's talking about AI and their bloody press releases and whatever, and that's just stupid.

45:05Remember, of course, we said this, I think we said this last week, the ASX tried to do blockchain to replace chess, right? Which was just stupid and always stupid and dumb and all that kind of good stuff. The benefit of that idea is that there is the technology we can use to improve things, but jumping down that for the sake of it is not worth doing. So you don't want somebody saying, we're going to revolutionise the business, make it all AI. today. Any more than Pets.com should have said we're going all internet in 1994. You've got to, the technology has to keep up and you have to advance with the technology.

45:40I think Woolies and Coles have a spectacular job by the way of growing their online sales. They didn't shut down supermarkets. They tried to jump in. I used to, I think I've said before, I used to be an account manager, a sales job years and years and years ago. And it was ShopFast was the very first online supermarket in Australia. And they went broke. They got bought out by Metcash and effectively shut down. I don't think there's still a website. There might be somewhere. I was the account manager for a while. And, you know, that was bleeding edge stuff. And they weren't wrong. They were just early, a bit like you said before.

46:08Like quick flicks. Right. Yes, exactly. Exactly. So those things are – so just be careful jumping into the AI game just yet. And as you said, mate, the chance there's too much hype in share price is also very real. So pets.com was early and it was too expensive. And yet the result is still – you know, it was the right idea, just too early. So be careful on that one. In terms of what I'm avoiding, I guess I'm – I like – it comes out of quality of management for me rather than businesses themselves. And you've got to say that – I'll give you a simple example. Appen is a great company, which is a great example of one to avoid.

46:47They trained search engines and computer systems until they weren't needed. They literally put themselves out of work. And it was needed to be done. They took profit and revenue while it was there. Of course they should have. There's money there for it. But the investors who went, well, this thing's doing really well and so I can't imagine it ever changing, guess what? Computers caught up. That's a great example of you were saying of that stuff just being rolled over the top of. So, yeah, those kind of roles are challenging. But, again, the companies that employs those people, think about an accounting, think about Kelly Partners, right?

47:20Accounting business, accounting aggregator, mostly in Australia, trying to go to the US. Are accountants in trouble with AI? Maybe. I don't know. Will Kelly Partners, if it is the biggest brand in the country in 20 years' time or five years' time, find a way to use AI to make itself even more successful and profitable? Maybe. Will it be just as profitable because everyone else does it as well? Maybe. So just because accountants, for example, may come under, maybe they won't, come under pressure from AI doesn't mean that it will necessarily be true that you end up with the businesses themselves not making money, even if they are in that really labor-intensive business.

47:52It's their ability to change and adapt. And so it's a long way of saying I would – I'm focusing on management. I want a management team who are saying, yes, we're aware of it. Yes, we're doing some early work on it. We're not overcommitting to it because it could evolve in a million different ways. But also we're not saying this will never be a thing. I own shares in Harvey Norman, but God love Jerry. For the first 10 years of the internet, he was telling us how people would never buy TVs and couches on the internet, right? Now, would Harvey Norman be – and look, Harvey Norman's done okay. He could have been 10 times bigger if he wasn't so intransigent, yeah.

48:22Think about JB Hi-Fi, think about Kogan, whose shares I also own. If Harvey was there early, he would have grown much more quickly and be much larger because it would have been the place to go to get stuff online in Australia. And he could bring to bear all the scale advantages, all the infrastructure, all of them. Like just no start-up is going to be able to compete with him because the sunk cost of all of that capital investment is phenomenal. So as soon as you've sat the business down because the internet was going to be a thing, no. should he have been more proactive in making sure that at least he was keeping up with the thing and investing proportionally to the opportunity?

48:55Yes. And he missed that. So, and again, by the way, that didn't make Harvey a bad result over the last 15 years. It wasn't great. It could have been much better. So I'm not saying sell everyone who doesn't. But that's, to me, the sweet spot, mate, is don't look at AI in the press release. Everyone's mentioning that. It's like understanding which businesses are moving forward with that. Again, I think Willis and Coles are a great example of groceries done really, really well, right? They could have done the whole, we're predicting our physical business. They could have done the whole, it's all about online.

49:19they're trying a really, really sensible, careful path of let's start it up, let's have something there. If and when consumers are starting to use it, we can increase our investment in it. It won't go too fast. We'll go fast as we need to. We'll take advantage of what growth comes, and they've done a really, really good job of it. So that to me is how I think about it. You've got to think about it as in this adoption is not a choice. Yes. I'll borrow someone else's line here and those that know, no, I won't give it away. Oh, come on. But it's a Bitcoin thing. Of course it is. I can tell. But as soon as I say it, I just taint it and I undermine the point.

50:01So forget I said that. Forget I said that. Okay. But it's a good point, right, in the sense that there were countries that could have not adopted gunpowder. It wasn't a choice. Right, right, right. The Japanese didn't adopt gunpowder famously. Samurai swords aren't going to get you very far if you can be shot for more than a sword length away. You walk in there with an army of muskets and you just decimate the most skilled warriors the history has ever known. It's not a choice. The person who didn't adopt steam power, you can do it if you don't. You don't have to adopt it if you want. It's different to saying, I'm going to adopt the iPhone.

50:39Okay, that's one thing. You know, maybe we want to do it. to, you don't, gunpowder didn't need a marketing department. Electricity didn't need a marketing department, right? Well, maybe it did though. Maybe the Japanese would have picked it up if there was a clever billboard, a series of billboards put up around Tokyo. People use it because it is objectively better and not a little bit, like 10 times better. Better in two ways too, mate. Better in terms of what you're able to do and better and recognise your competitors are doing it and so you need to keep up. There's both an efficiency and a competition angle.

51:13Both those together are an incredibly powerful force. 100%. So there's Jerry saying, I'm not going to adopt the internet. It's like, mate, you will adopt it whether you like it or not. Now, you can do it early and benefit from it, or you can go la, la, la, put your fingers in the ear. And guess what? Harvey Norman has a website. You can buy stuff online. At a point where it's just like there's no differentiation at this point, and most people don't, right, because it's just better to go in store because that's what you're good at. You're just not good at the other stuff. So we've got to be - And a little bit of, I think it was a little bit of Ludditeness in it.

51:46I've got to say, I'm not as rabid as you are on tech, but I'm not Jerry Harvey. There is something in between where Jerry just didn't want to believe it. That's the other part. It wasn't like a, it was partly circling the wagons, which is what companies do all the time really badly. And it's the innovators dilemma. We know that. It's Kodak. Right, exactly. Jerry had a wonderful model, didn't want to do it. Kodak invented the digital camera then said, well, we better not do it just in case. But there was also, I think in Jerry's case in a sense he didn't think it would be true because he couldn't see it through his own eyes.

52:13And I think that's, you know, if he wouldn't buy TV without looking at a couch without sitting on it you couldn't imagine anyone else doing it either. And there is that element of just remembering, we've said this before about investing generally. Remember you are not the target market. Maybe you are sometimes. But if you want to invest in Hermes, right, because they're in the news at the moment with their$1 ,000 Birkin bags. $100 ,000 Birkin bags, right? I'm not that market. Just because I would never buy one doesn't make the company a bad investment. you know and that's Jerry's gone well of course people wouldn't do this who would do that the answer is an increasingly large number of people Jerry and they did and then Jerry had to catch up and they've got up reasonably well to be fair I actually own my shares I sold them when Jerry actually did that I'm not playing this game thing because I was like I don't want to I don't think he's right so I sold the shares and then they moved back into it I've ordered a couple things from Harvey online it worked reasonably well I was like okay now they're back I think it's no longer a disadvantage from where they could have been it is But that's why I re-bought in because I thought, okay, well, they've now got it either way.

53:09I feel more comfortable buying it. And it was a cheap price of all which helped. But that's kind of the – that's the other story. Just being mindful of – you made the point about the hype before, mate, and the fact that it might be the beginning of a bubble. I think that's the really important one to watch out for. Yeah. The this time it's different. The everyone else is doing it. The, oh, my God, AI is going to be massive. You've got to be really, really careful of some of those things. Yeah, two things can be true at once. AI can be massive and it can make bugger all difference to your competitive advantages.

53:34Exactly. Both of those things can be true. Yes, that's true. I'll tell you where I thought of something and I may have mentioned it before, but where I would be favoring an investment on an AI angle would be those that have proprietary data. I can get a model off the shelf. I can subscribe to GPT-4-0 or CORD or Perplexity or whatever. These models coming out every day. Yes, yes. We've all got them, right? Only ProMedicus has terabytes and terabytes of medical image data. Yeah. So, you know, it's no wonder that they're getting the universities partnering with them because you can have the best AI in the world.

54:11You've got nothing for the bots to look at. That's interesting. That's an interesting area. There's other companies that are just like, oh, we collate and collect all of the data on X. Well, hell, you are a prime candidate. I'll give you another one. And a favorite love-hate relationship with me, Catapult Sports, right? Yes. They're by far the biggest sport analytics company in the world. So they've got all the data. So are they going to use AI? Of course they are. Are they using it? Yeah, they already are, right? Well, I could do it as well with my sport analytic tracker, but I've got like four people using it.

54:48They've got 30 ,000 people across all different leagues and sports. They're going to get better data. Therefore, the AI is going to get better insight. Therefore, they're going to make better enhancements which is going to feed on itself. You want the company that have the positive feedback loops. That's where things run away. I mean, why is Google so dominant in tech? It's because they won early in search, which gave them incredibly cheap capital, which they then reinvested into other areas, which then gave them a lead to invest in. And they just kept on reinvesting this positive feedback loop, which is almost unstoppable.

55:33And if some kids got lucky enough to invent some genius tech in their garage, Google, just buy them out, right? The YouTube guys, gosh, they made a – well, they probably look at it now and go, hmm, that was a mistake. Well, actually they don't because they're ridiculously, insanely rich. But that is a competitive advantage that is interesting. So I would be more interested in what is it that you can do with your model or with a model that others can't do? Correct, correct. That is interesting. Exactly. And that is where, as I mentioned the Google example before, there are going to be some examples of that.

56:13I don't know that we know what they are just yet. The large language models almost by definition are using public data and is publicly available. There may be a winner in that eventually, but it doesn't really lend itself. Maybe if they sign up some contracts, we know JATGPT, for example, signing deals with News Corp and others to use that data, maybe exclusively eventually, maybe not, maybe it just becomes more expensive. It's a scale game. So maybe there is an AI winner for that public AI chatbot stuff. Generally speaking, most companies are not going to have the data. I think I might have used an example before, but it's a great, fascinating credit scoring company in the US.

56:47And the name just literally popped out of my head. But why this is fascinating is because they actually aggregate data across all the banks and make the banks better off as a group than any of them could be individually because of the sheer size of that. It gives that kind of combined nature. Take CBA, right? CBA is better than NAB because it could be because it's got more customer data, right? So just the more data you have, the more you are likely to be able to use that data to find, I don't know how much better, but let's just say, if though a provider was to say, actually, I'm going to aggregate NAB and A &Z and Westpac together and provide them credit scoring data, all of a sudden that's bigger than CBA.

57:22And the CBA needs to be inside the tent rather than outside the tent. That's all of a sudden you've got. Now, Upstart is the name of the business. That's now got an opportunity to provide more value for the banking sector. The value is going to accrue in part to the banks because they can make more loans and better loans and cheaper loans and all that kind of stuff, have a higher collection rate, but also benefits Upstart. And again, you think, well, hang on, who's got the most data? It was one of the banks. But the value is actually in having all of the data and using that. And so, again, even in that circumstance, you've just got to be careful, not you personally, but our listeners, in terms of thinking about who's biggest, if you can coordinate or collate all of the smaller and get a bigger number overall, you can still end up with a very different market dynamic.

58:04So just be, not even with collusion or cartel behaviour, just literally say, hey, you can have all the data and do this. It's a very, very different model. And so thinking about how that might work and frankly, those AI opportunities, I'm with you, mate. I think it's too early to be going boots in anywhere because the range of outcomes is just massive. I do think, though, the winners will have to be using AI in five or ten years. So if companies are refusing to do it or choosing not to do it or being overly sceptical, yeah, cautious is fine because you don't want to overinvest in it, which, as I said, is a massive issue.

58:34But you want to find someone who's saying, I'm going to move with the – I'm not going to swim against the tide. I'm not going to try and beat the tide. I'm just going to let the tide carry me and take advantage of it when I get to where I'm going. That's exactly – I mean, Matt Common's out there saying AI is the next industrial revolution. and there's a bunch of Luddites out there saying it's all nonsense. Yeah, that's right. The truth is somewhere in between. And I want a management team that's sort of like, hey, this is really interesting. We'll look at this. If it can help us in any way, shape or form, of course we'll use it.

59:05But we're not going to use it because. I'll give you my favourite example, which is the ASX deciding to use blockchain technology. Why did they do it? Because it was a buzzword. It sounded good. They didn't understand what the hell it meant. and they blew$100 million on that. Now, that is idiotic. I mean, how people aren't, heads weren't seriously rolling from that. I have no idea, right? But that is a classic example of doing it because it was sexy and for no other reason. Whereas if you've got someone who's looking objectively at technology and going, this is really applicable to our business.

59:38This can really help us improve efficiencies, deliver better outcomes to our customers. There's like, then that is a very different question. So do it because, right? Look at solar adoption, right? Like we've seen Australia is really leading the charge here. And there was initially a lot of grants and stuff to sort of kickstart and prime the pump and everything there. But people are doing it now with pretty terrible feed-in tariffs and without a lot of subsidy and the rest of it. Is it because everyone's an eco-warrior or is it because people like cheap energy? And frankly, it's some combination of both, which is almost the point, right?

1:00:15Yeah, but I guarantee you can have the biggest anti-greeny dude in the world. Right, right, right, right. And you say, mate, I'm going to cut your power bills in half. Are you in or out? I mean, it's only the most hardcore ideologue that's going to say no to that. Can I tell you, mate, I've actually had those people on Twitter. I've had a couple of those people who say, I refuse to get solar because it's just this and that and the other. It's like, do you want to save the money? No, I don't care. I'm not going to do it because it's – There is some very serious self-defeating going on just there.

1:00:44It's madness, right? It's just like - But you're right. Most people are doing it for the - Yeah. As you say, the very success of it is its own advantage. Absolutely. So, I mean, again, back to AI, I've mentioned before, I've been using it, incorporating it into my workflow increasingly. I did it originally because it was new and it was interesting and I wanted to play with it. And then I kind of lost interest and then I came back to it. And then I found a use case for it. Now I'm not using it today and paying my$30 a month subscription to Claude because I just, you know, it's a feel good thing that I know I get value dollar a day and I get to have a personal assistant.

1:01:23Yes, please. I'll do that. You know, and, and that's that, I think there'll be a lot of situations like that. And I will have any management team that is going to use it judiciously and objectively and sensibly like you'll have my full support. If you're doing it just because that's what the Joneses are doing and you feel like you're doing it. That's what you put in the press release, yeah. Yeah, you do not deserve to sit in the big chair, you know. That's very true, very true. Mate, last one, just a quick one to finish us off. Superannuation. Fascinating story in the papers this week. Basically, so a couple of things happening at the same time.

1:01:58The biggest headline, the one that grabbed me, was the super outflows from particularly retail superannuation funds. And I mention that specifically because there's two things going on here. The first is obviously, maybe not obviously, but just for the record, people are moving into industry funds and SMSFs in bigger ways. So there is simply more money being put into different types of funds. And that matters because where the money, well, it doesn't really matter in terms of the system, but that's kind of what's going on. There's money coming out of those parts of the system and going to other places.

1:02:32So industry super funds picking up, Australian super has grown. Here's this. 2022-2023 grew at 15.8 % funds under management. 9.9 % Australian Retirement Trust. Insignia up six and a half. Aware Super up 10.3%. These are in size order. Uni Super up 12.6%. A remarkable growth in funds under management for these mobs. At the same time, we're seeing there's significant losses out of retail funds. Now, I will say, and apologies for everyone running a Retail Super on Uni Super Retail Super Fund. This is wonderful. This is spectacularly good news because we know that industry funds tend to outperform retail funds.

1:03:09We know that if you can't control anything, at least control your fees. It's a great strategy. And so there is a really, really positive outcome, I think, from some of this change. The other thing, though, is we're seeing money being – this is the other part of it – money being pulled out. And frankly, again, it's probably likely that older people probably have retail funds because that has tended to be the dominant place. And people don't change their super funds as often as they should. they have reduced massively so mercer colonial first state amp bt and insignia had net outflows of 10.6 billion dollars in 2022 23 the same same time period now that's a 3.6 trillion dollar sector 10 billion is a lot of money but it's not that much compared to a you know three and a half trillion dollar investment pool it's just interesting for those two reasons mate there is a move between retail and industry but also as the as the article says in the afr today there's a whole lot of boomers actually pulling their money out and it make it stands to reason if you've got two members one 65 year old boomer and one 18 year old what's it what's that generation now is it the zoomers or the somethings anyway who puts in 15 dollars in their first superannuation contribution for their part-time job what one person doing one thing one person doing something else the dollar values are very very different right a 65 year old with a you know 30 year superannuation compounding is taking out more than the new person's putting in so there is there is a bit going on in the super space?

1:04:30Yeah. I mean, I think it's a good thing. There is too many snouts in the trough in that industry. I mean, the industry is massive. It's one of our major industries. I mean, the finance sector is important for, I mean, you want people to direct the flows of capital in productive ways. You know, it does, people inside the tent say this, I guess, but so I'm aware of that, but I would say it actually does function to serve a useful role for society. Can do. Yeah. Could possibly if it was done well, yeah. But the size of it is gargantuan relative to what it needs to be. And the fees charged are insanely, there's no way to justify it.

1:05:18They get away with it because 1%, 2 % doesn't sound like a lot, you know, and as you've mentioned many times before, whether it's financial planning or funds under management with managed funds, if it was actually a dollar figure and you had to pay for it, it didn't come out of your funds, but you paid for it out of your pocket each year, people would notice it right away. It's like how much? The industry would be 1 % of its current size, guaranteed. It would be. And we would be, the people whose money is actually being invested would still be better served. Getting better returns, correct. So it's belated.

1:05:48Well, not only because they would choose the lower fee option, but fees across the board would fall for exactly that reason because people had to pay them all of a sudden. It'd be a double win. It'd be fantastic. Don't you find it – I find it fascinating that whatever capital city I fly into and you look at the CBD and you look up, do it next time you're in the city. Yep. They're all financial. It's AMP, BT, CBA. It's just like does anyone do anything here other than just like you just middleman the hell out of the finance sector and just like clip the ticket on the way through for awful, woeful service.

1:06:23I mean, don't get me. I would rant it to you for like 20 minutes before we started with my experience with the bank. Double standing grifters. I can't stand them, you know. And it just, I think it's a good thing. I think, and this is why I think where the role of government regulators need to come into here is not to start doing it themselves. It's not your role. but you need to make, you need to reduce the frictions as much as possible. And then the free market will do its thing. People will just go because that lot over there are getting better returns and charging me less for it. Now I can tell you as someone who's just had to transfer their super, it was like pulling teeth, I mean, the forms and phone calls and wait time.

1:07:05It's just like, can I just have my money? No, I'm not just saying I just, you know, fog a mirror and send my money my way. It's, there are requirements that need to be there, but, but the frictions are so burdensome and so ridiculous. You know, it's just sort of like, why don't people ever change insurance companies? Why don't people ever change banks? Why don't you, I mean, you're always banging on about get a better rate. Why don't people do it? Cause it's a pain in the backside. That's why you don't do it. Right. We all know we should do it, make a phone call, but it's, So I would say very, very simply what you need to do here is just make it super simple.

1:07:44You give people the choice and make it as painless as possible and the market will figure it out. And the AMPs of this world and the BTs of this world, my mother-in-law's super has been with them and I can tell you they have absolutely robbed that poor woman blind. And, you know, I'll start. I'll happily testify in front of a judge. We might pre-record next week's podcast just in case, mate. You might be unavailable. 90 % of people listening are nodding along. I guarantee you right now, if you're with one of these, look at your super fund, look at what it's returned, look at what you've paid and ask, have they beaten a low-cost passive fund?

1:08:26I know statistically the vast majority of you will say no, in which case, what the hell? and then know, oh, you know, funds are outflowing and people are going here and, you know, you can only trace all the usual BS that comes with it, you know, it's like - Don't forget the passive investing is killing the share market. Oh my goodness, you know, it's just sort of like - Yep. The fact that you can afford these glass fortresses in the middle, you know, and just - That's right. Plus your funds aren't the problem here. I'm so angry with it all and it's just like - But at the same time, I get it because having gone through this experience, I'm not going to – it's just – and most of us are trying to just raise the kids and get on with our life and deal with trying to put out 10 fires at work and the gutter needs fixing and this.

1:09:17Who's got all the time in the world to then go jump onto a call centre and call a company eight times and wait in line for four hours and then have someone say computer says no and I'm going to have to transfer you around? And it's just like, it is like the inner ring of hell is a call center queue. Like there is nothing more painful on the planet. And it's not an accident. It's not an accident, right? Because if it was any easier than half of these businesses, they survive by virtue of, because we allow them to, and our regulators allow them to operate in a way that was just, frankly cartel-like behaviour.

1:09:59Calm down and go. I think cartel-like might be a bit. I said cartel-like, cartel-like. And I'll stand behind that as well. And I didn't invent the term, right? Like a lot of people, I did. Again. Cartel-like behaviour implies collusion though. Yeah. That's my only concern. Yeah, but it's a game theory kind of collusion. No one's ringing up, but they're all doing it because they know what they can get away with, right? It's the beauty of competition, right? Having the industry funds in particular there. The cartel isn't working, which is the beauty of it, right? They're bleeding. We're just talking about the funds they're losing.

1:10:36Oh, but they should have bled out years ago. I mean, the fact that they're still going is just like, wow, really? Remember when they tried to introduce portable bank accounts? Can't do that. Not really in detail. Go on. People were putting it forward. It's just like that way you just pick up the phone and go. Because when I change bank accounts, I have to, like every single direct debit and every, it's just, again, it's this onerous, it's not that it's impossible. I can ring up and go to a different lender and get a better rate for my mortgage. It's not hard in a way, but it is at the same time.

1:11:10Oh, yeah. The inertia is enough for people to do it. Correct. Exactly. Yep. Yep. And then the other day, because with the opening up the new super fund, I had to go get some life insurance. How, I mean, oh my goodness. Like it's so complex. Like when we moved recently, we thought, oh, maybe I'll change energy providers. And it's like comparing mobile phone planes. It's like, I don't, like I'm not Einstein level genius, but I'd like to think that, you know, I'm okay. I've got a average, I'm in the sort of middle of the bell curve where I should be able to do basic cognition here. And you can stare at this thing for four hours and just be completely befuddled and confused.

1:11:46I can tell you every single award program that I'm going to get, but not how much it's going to cost and how much it's going to compare to this, right? It's just – it's – Can I tell you quickly, really quick interruption, only to say there are some great government websites that lets you compare your bills super, super easily. Yes. So I – because we've got a smart meter here, I had the meter number and I literally put the number in. I had to prove I was who I was and it literally spat out the best prices, the best plans. Really, really, really. I went to that – again, I'm going through the process.

1:12:17I looked up my energy bill and buried down the bottom it says, if you'd like to compare rates with our providers, visit this website, go to the government website. And then it said underneath it, the government makes us put it here. Yes, exactly. Which to me was like, why are you saying that, Paul? I mean, I know you've got to do it, but do it. I may be obliged to say that too, I'm not entirely sure. Maybe they are, but it's kind of like we're going to tell you this, but I'm going to also tell you that I'm only doing it because I have to do it. I've been made to do it, exactly. At least pretend you're virtuous, right?

1:12:54At least pretend that you're doing it because you can stand behind your product. It struck me as like someone needs to get fired for that decision there. If they're not being made to do it, you don't need to tell us that you're only doing it because you're forced to do it. I would really rather screw you over, but I'm not allowed to. I'm really sorry. Scumbags, absolute scumbags. I want to go back very quickly as we finish up, mate, just to the point you made, because I feel compelled to just make sure we're not sending the wrong message. There are, again, I'm on Twitter regular, as everybody knows, and every time I tweet about superannuation or fees or something else, and the same sort of stuff we've just talked about now, I get a small subset of people who say, see, that's why super, they're scumbags, they're bleeding us, that's why we shouldn't have super, that's why I should take my money out and do something else with it, because I don't want to let them take the fees.

1:13:43and I think that's the wrong approach. In fact, I'm dead sure that's the wrong approach. It's not what you intended either, mate, but I just want to make this point for everybody listening. There are scumbags in the finance industry. There are a lot of scumbags in the finance industry, but the entire finance industry isn't scumbags and even if it was, super is still really, really worthwhile. It's possible to say we should reform the system massively. I've said before, mate, I think the default should be a future fund run default super program for everybody with a 0.01 % fee. It'd be really, really easy to do.

1:14:12The government could do it tomorrow if they actually cared enough. So, you know, is the industry broken? Kinda. But super as a concept is still incredibly powerful, incredibly worthwhile, and you should absolutely embrace it and use it to your full advantage. The tax benefits, the compound benefits, the fact that someone is literally keeping you from spending your own money feels dictatorial until you retire with a six or seven figure number and go, oh, wow. Jeez, I probably would have spent that if I'd been allowed to. You know, it is incredibly, incredibly, incredibly worthwhile. in my view.

1:14:42I don't think you disagree, Matt, but I'll leave the mic open just in case you want to. But I just want to say that to people because I think what I don't want people to hear is what they often hear, which is the system sucks. We're getting screwed. Therefore, super sucks. Therefore, I shouldn't have super. Therefore, super is bad. I want to cut the difference between those two things. It is being mismanaged. You're being charged too much. Those things are all true. And yet, even if the fees stayed that high, it would still be extraordinarily worthwhile and you should do it. We should absolutely bring the fees down.

1:15:08I don't want to throw the baby out with the bathwater here. The baby is wonderful. let's get rid of the bathwater, let's get the baby because you don't want to miss that part of the story. If you heard Ramon say, well, yeah, that's right, super sucks, it doesn't. We get screwed, but it doesn't suck. It's remarkably beneficial. Yeah, it's a great point. Make a good decision first off if you can because you won't change. It'll be very hard, much harder than it needs to be to change. So just think carefully when you first elect elect with what provider you go with because, you know. Tell the kids too, by the way, if you've got kids in your household or there are people going for their first jobs, this is a really great time, particularly with Super now following you.

1:15:49If the kids start at 14, 15 with their first job, you get a job at Macca's, which Super Fund do you want? Choose well then because they're probably going to keep that fund, as you say, Ram, I don't know what the numbers is, but probably well over half will keep that fund for 40 years. So if you've got kids around, if you know kids, if you're, you know, young person listening, really, really, I had never heard that advice before. That's excellent advice. I think it's a really, really good point you make. Yeah, I mean, remember Commonwealth Bank got rid of the Dolomites. Or not maybe the Dolomites, they got rid of the, what was the, they used to go around to schools.

1:16:18They gave you a free money box. It was a Dolomite program anyway. It wasn't the actual, yeah. Yeah, eventually they stopped. Remember they had a Dolomite go further than a Dolomite account? Do you remember that? Yeah, that's right. That was the ad they used to run. I've got a money box somewhere from like 1985, right? Yeah, no, it's right. Wildly successful. Yeah. Wildly successful. So they had to stop doing it because it was just sort of like, you know, it's like you're getting kids. I opened up a bank account for my 14-year-old the other day. He's got a job at Macca's. Yeah, so we're doing all that kind of stuff now.

1:16:49And it's just like that'll be the bank that he's with forever. Yes. Almost certainly. And they knew that as well. And it's really a great onboarding experience. Everything after the fact is terrible. But the onboarding, brilliant. Yeah, and there's a lot of signal in that, I think. Yeah, that's a good point. That's a good point. Mate, I think we've gone long enough. Will you come back on Sunday? Yeah, and just a quick peek behind the curtain. We're chatting beforehand going, God, there's nothing to talk about today. Yeah, that's right. Here we are one hour and 17 minutes later. We did have a fourth topic we could have gone into too, but we won't.

1:17:23We won't. Next time, next time. Or not. He was going to rant about Ethereum, people. There you go. There's a special bonus behind the curtain for the end of the podcast. Speaking of buyer beware. We will see you on Sunday. Until then, enjoy the rest of your weekend and Fool on. Cheers. The Motley Fool and people appearing in this program may have positions in the companies mentioned. General advice only. Please speak to your financial professional to understand how it may pertain to your situation. Subscribe to the free newsletter at fool.com.au forward slash listener. The Motley Fool operates under Financial Services Licence 400691.