Is the Real Rates Tsunami Incoming?

28:19When you are a business or an individual and you can fund yourself at negative 9 % real interest rates, you're going to borrow all you can and buy your inventories, make investments if you're a person, buy real estate, whatever, buy real estate and pay like 2.5 % mortgage with 9 % inflation. You're going to do it galore. Now, when you see a real interest rate switch to positive, and they only just did it, but the process actually started in 2022, some individuals opting to say, and companies opting to say, you know what, I have this revolving credit line, instead of making that next investment, I'm just going to pay down this revolving credit line.

28:57I have enough inventory, I don't need to take more inventory loans, let me see if I can pay down some of my loans, which are now, I'm paying 7%, 8%, 9 % instead of 4 % or 5%. That process has only started. That is the process which created the banking crisis in the spring of 2022. The spring of 2023, I already lost track, what was the banking crisis? So, more recently, right? The Silicon Valley banking crisis, right? RAOUL PAL, Yeah, it feels like it was this year. RAOUL PAL, Yeah, it feels like it was this year. RAOUL PAL, It feels like three years ago, right? RAOUL PAL, I'm not a good guy to ask on this.

29:31I can't remember any anniversary of my wife complaining about this. RAOUL PAL, It's just a few months ago, but it feels like it was three years ago. So much transpired. The shrinking of balance sheets by strong players and suddenly weak players, like the whole tide goes out thing, right? You know, the tide went out and people by good strong players, by pulling money out, exposed weak players. I think the same process will happen in employment world. We're not going to see employment collapse because of just because of bankruptcy. So economic shrinking or like it's not going to happen that economy will slow down and then employment will collapse.

30:08So consumers will stop consuming and employment will collapse. No, employment has to lead it because real wages are doing well. Employment, job market really robust. Consumers will keep spending. Corporations will keep doing well. So to me, honestly, every economic number I see, like retail sales, durable good order, manufacturing, I was like, blah, blah, blah, blah, blah. The only thing I'm looking right now is unemployment numbers. That's the only number that matters because that's the only number that needs to crack for things to turn down. And I believe, even with the recent reports, I'm still not convinced that it's cracking because there was a lot of false positives on that.

30:46But there's a lot of times that unemployment is weakening. Look at those jobless claims. Look at those jobs. So no, this goes back up. Like, we'd have to really give it a little more time. But I believe that the process will be not because weak companies are going bankrupt. It's because strong companies in the environment of 2.5 % real rates will have to increase productivity, which they had no incentive to do two years ago. It will be a slow process of reduced time. Wages are going up, and they will keep going up, and companies will eventually start getting by with fewer employees. There is a lot of redundant jobs, and these jobs are, I think there are some signs of this, and very, very weak signs of that possibly the process beginning.

31:25When it will begin, it will be the tsunami like we've never seen before. The deflationary tsunami of job loss on this country will be probably my guess on the power of 1930s. So I think I'm at the limit of my ability to un-nest statements, but I'll try and do. Your observation about the deleveraging of wealthier balance sheets is well made. And I think people who've followed the Japanese deflation experience would pat you on the back and nod because that's exactly what they experienced. It was a demand for credit that collapsed in Japan, not the supply of it. And this is how a deflationary balance sheet generally works.

32:16So there's guys who focus on this, and you can look them up on economist Richard Koo, I think, gave an interview for Real Vision. He's a guy who's most familiar with how this process works. So I totally take that point. Where I might disagree with you is partly on the political economy of it. So I just don't see a political consensus forming around smaller deficits in the US. The easiest political solution for any problem you have in the US is to spend more money. And there are some really good, really important projects that the federal government has outlined already, including some kind of new industrial policy that I think will be prioritized.

33:05So you hinted at something the economists call crowding out. And then you hinted at also the MMT, some of the problems of MMT. I hate talking about the problems of MMT, partly because the people who look at MMT are very detailed focused. If you ever talk to Warren Mosler, and you really should, very smart guy, he's very pedantic. He will - Well, I listened to his presentations. So I have not talked to him directly, but I have followed him. And I took a lot of, and trust me, I took a lot out of it. Yeah, I always get a lot when I look at Mosler's comments, Mr. Mosler's comments. So I had to, I have to, Mr.

33:44Meisler. But so one of the observations I'd make is that you're right. If we allow, if the federal deficit slows, the growth in the federal deficit slows, what you describe as a deflationary impulse on wealthier people deleveraging could easily overwhelm everything. If it doesn't, it doesn't really matter if rich people delever. A private sector can delever. if the public sector is relevering them, then we're going to be overwhelmed with money to buy assets. And there's nowhere else. Until you delever balance sheets, dollars don't die. If the federal government shoves that money into the system, the balance sheet gets relevered until we deliver it some more.

34:28So that push and pull, I don't know how it resolves. But I do know that we've got some really big government projects that we're going to undertake. And all of the dissaving that's taking place in the US today, it's government dissaving. It's a federal deficit which is expanding dramatically. And it's not even as if I disagree with why that expansion, the federal deficit is taking place now. I think they're right. These things are priorities, and they're not going to be deprioritized, even if the wealthy choose to de-risk their balance sheets. So that's kind of where I push back. ED HARRISON Okay, so first of all, I want to—it's not even like, to me, that's not a pushback, because I fundamentally agree with you, in the sense that if you ask me, what is the greatest risk to my view?

35:23For example, if my view is to be long duration in the United States, to bad and lower interest rates, what is the greatest risk to this view? I would say the risk is—political risk is the greatest, because the government can always inflation if they want to. If their goal is to create inflation, they want to. And it's a question of velocity of different processes. Now, it might come down to just a matter of opinion which process is going to overwhelm. Experience of past decades shows that cyclical forces usually overwhelm everything. So I'm betting on the fact that - RAOUL PAL 40 to 50 years experience.

36:03Yes, my experience. And I will actually, in a moment, I'll show you a chart, which makes me think that things have not changed. But I think the cyclical forces, it always pays to bet that cyclical forces will overwhelm everything. because yes, probably, as you say, government will keep expanding its programs. It'll probably happen whenever we have unified government, whether it's Republican or Democrat, they will push some kind of fiscal expansion. Whenever it's a gridlock government, maybe they'll slow down on a little bit. The thing is right now, what works in my favor, I think, is that right now there is so much fear around inflation and people have not yet started fearing deflation.

36:44And anything that they do now will be so lagged that we have to think of conditions right now are going to create what we're going to see in 2024 and 2025. And I think conditions are very contractionary right now. So I think in 2025, cyclically, we're likely to see deflation because of conditions put in place now. The kind of fiscal, I don't think fiscal expansion right now will catch up to balance sheet reduction, the way we see it right now. Now, if something radical will happen after the 2024 election, we might see different things. But I think right now, because of gridlock policies, the opposing parties has enough kind of ammo to say we cannot do this because it will be inflationary and so on and so forth.

37:27We need to watch the budget. As you say, eventually, yes. Eventually, minimal wages will go up. Various other inflationary political measures will be put in place. But that process, I think, will slow and it could be and it will be countermanded with various other very powerful secular processes. like which and some of this fiscal investment might actually lead to increased productivity that in the long run might prove to be deflationary but looking out 10 years ahead is not so productive for purpose of portfolio investments i think the best horizon is two years because it's just too hard to predict what's going to happen 10 years from now i mean i'm okay there are certain investments that i will make with longer horizon but two to five year horizon is usually the best.

38:11And I think on this horizon, the cyclical process will move faster than any fiscal process will. RAOUL PAL, Can I ask a question about that? Because, well, what are those certain investments that you will make with a longer term horizon in mind? And what determines when you say, yeah, you know what, right now, I want to focus on the five-year, not the two-year? RAOUL PAL, Some investments, well, one of the investments that's, There are many of them, but a simple one that I can explain in investments like hard assets. Like, for example, you can buy things like, and that could be both more industrial and more precious.

38:50It could be investments like silver, gold, platinum, palladium, or it could be investments like copper. And I mean, before, I don't know if people remember, but somewhere around 2003, palladium was traded at less than$200 an ounce. And I bought a whole bunch of it working for JP Morgan. And people asked me, how long are you going to hold it? And I was like, well, until it goes up. This is not sustainable. Platinum was like, I don't know, like seven times more expensive. Like, it was just a crazy ratio. I don't remember what the ratio was, but it was like insane ratio of platinum to palladium. Like, that's not going to last.

39:27Just as I believe, by the way, right, the inverted ratio of palladium to platinum probably not going to last. And that is decades-long processes. And you just say, like, well, look at silver dynamics. So silver is trading in low$20, right? It used to be the high of 44. What are the chances that it will be at 50 or 60 in the next decade? Pretty high, in my opinion. But it's very hard to predict what silver is going to do in the next year or two. RAOUL PAL, Ph.D.: Yeah. It's the scaling of that bet that makes it difficult, not the statement. The statement that silver will trade at 60 at some point seemed perfectly valid to me.

40:03The problem is, how do I scale it now that I haven't gotten rid of it in two years' time? Yes, yes. So even the scaling and portfolio management and how it correlates to other things in your portfolio, all of this has to be taken into account. But in this case, what is interesting is when I look at stuff like precious metals or cryptocurrency, or I don't even look at like what are the fundamentals? What is the fundamentally the price of silver or gold should be? I don't think there is any fundamental way to establish what the price. People use all sorts of arguments to establish what gold should be worth and what Bitcoin should be worth.

40:35And honestly, when it goes to like, and I don't want to be offensive to people, but people actually try to calculate what should be the price of Bitcoin. To me, that's a little hilarious. RAOUL PAL, It's not so I'm not sure it's significantly better modeled by the analysis or by Brownian motion. They all seem roughly the same to me. RAOUL PAL, Well, what you can do, you see, fortunately, with gold, you have several thousand years of history, and silver too. You can look and see how they can possibly trade in various scenarios. So to me, all I do is I look how they can possibly trade. When I look at cryptocurrencies, I also see, well, I recognize in the cryptocurrency trading pattern, the trading pattern of precious metals.

41:17That's what caused me to get an interest in cryptocurrencies several years ago and write an article in search of digital gold when I wrote about what are specific features and bugs which made gold gold, and which of those crypto assets possess. And sometimes, in my opinion, people confuse what is a feature and what is a bug. And we can go into this if you wish. But I started to look at that, and I started to see, well, if you invest modest amounts on certain assets and you see the potential patterns of trading, like, for example, we just talked about silver, can it go to zero? Yes. Can it go to 60?

41:53Yes. If I buy it at 20-something, the historical pattern of trading silver shows me that there's a good chance of having good return on capital on it over the next few years. It's all about getting good return on capital in expectation space. Obviously, everything. I just want to say this. I already made a few really strong statements in this speech. And people should know when a market trader says something, I am sure there will be a deflationary bust. I am sure rates are going to zero. What I really mean, you have to have a little translator there captioned. There is a 52 % chance of that happening.

42:27Yeah, yeah, absolutely. We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing. I want to just tell you a silly story. Then I want to probe a little bit on this cryptocurrency thing because I don't really know about crypto. But when I was getting married to my wife, I gave her a set budget, right? And this is going to show me in a terrible light. I'm a terrible person. Just in case anyone didn't know, I'm terrible. Now we can move on. So I gave her a set budget. And she wanted to buy herself a platinum ring, a platinum wedding band or engagement ring.

43:07And with the fixed budget, she didn't want to, she said, I know what I'll do. I'm going to get him a palladium ring because I know he doesn't care about jewelry. You'll notice I'm not wearing anything right now. He doesn't care about jewelry. He can have a Palladium ring, which is like one fifth the price of my platinum ring. Guess whose ring is worth more now? RAOUL PAL - Yes. RAOUL PAL - Well, I can assure you, I always bought Palladium jewelry whenever I had a chance to because I knew. RAOUL PAL - It's just the absurdity that makes me giggle. RAOUL PAL - No, that's the funny story. RAOUL PAL - So on the subject of crypto, I know so little about crypto that people wheel me out just to say, this guy doesn't know anything about crypto.

43:47I'm the standard of who doesn't know about crypto. Do you tell me about crypto? Should I put money in? I've implicitly got a position because I have some private equity investments in people like Gemini, which, by the way, I got to say, I look at that and I think to myself, what was I thinking? Oh, my God. But regardless, what do you think the future of crypto is? well so first of all i am also not at all an expert and uh crypt and even like things with blockchain after all these years i still get confused about them so like i don't have this deep understanding what is going on there all i look and look is honestly is that the chart like in this case i'm not generally technical analyst but all i know is bitcoin is a chart of bitcoin literally like that's the end of my knowledge and then some bits and pieces around it to me it's just important to me and when it comes to other coins i really don't want to talk because i really haven't well i talked about this a little bit because i for example i wrote about ethereum being as digital copper like with bitcoin is digital gold if ethereum is digital copper and i discussed why it is gold and not copper that is used as a store of value and i just like what i would say is like think about this do you want to invest in gold and what features gold has Why did gold win as a precious metal?

45:11Why is it not silver, not platinum, not copper? Why is gold one of the store values? There are actually fundamental reasons for that. Gold, there is a lot of gold, but not too much of it. Just the right amount above ground gold. Gold is sufficient. Gold has some industrial use to anchor it somewhat and some industrial use, but it's not huge. And that's actually a feature, not a bug, because for metals who are mostly used industrially, like copper, it's not going to be driven by its store of value, by monetary policy. It's going to be driven by technology and technological demands. That's not an interesting store of value.

45:50The interesting store of value, which is driven by liquidity. So gold has good, because gold has some value, so you know it's not going to go to zero, right? Because it has some very useful properties. It's the densest metal. It has some hygienic properties and so on. But it's also plentiful enough that some kind of industrial need will not going to drive it one way or another. We have a steady but small new supply of gold. So gold will not be too deflationary in the long run, which is, by the way, people think that shrinking supply of Bitcoin is necessarily a feature. That could actually prove to be a bug.

46:24No, I think it's a bug. What I think is the best is, I think you want to have like a steady low supply, which is there is some similarity. Gold is more and more expensive to mine. Bitcoin is more and more expensive to mine, right? So that type of setup. But I think having like a steady trickle in supply would probably be the best for long-term store of value. For example, being able to transact on it, but not too easily. That's a feature. Like you can carry gold bars on you, but it's not very convenient. You don't want your store of value being something which is too easy to transfer. In my opinion, Bitcoin is a little too easy to transfer.

46:58but because Bitcoin transactions are a little slowed down right now by blockchain, that's actually a good thing. You don't want to have something which is too easy to transfer because then it's easy to steal. It's like carrying words of cash in your wallet, right? You want something which is hard to steal or confiscate. People can have money and say like gold in their safe, but also you can carry it if you need to. So that's a really good balance of density of gold made it really useful for carrying value, but it's not super convenient. So you don't want store of value to be money that is exchanging hands in every small transaction.

47:36That's not store of value. That's cash. Also, you do want something really volatile relative to dollar. Because when people say, I find it hilarious when people complain about cryptocurrency that it's too volatile relative to, that it's too volatile. I was like, well, there is a great way to store money if you want something which is stable against dollars. It's called dollars. It's dollars, yeah. And if you want to really store it in crypto, then you can use stable coins. The whole point of store of value is to be volatile against cash. That is, when money expands and cash becomes less valuable, your store of value thing goes up on price.

48:16That's exactly what you want. Yeah, yeah. So all of those, so what I'm saying is like, my narrative probably doesn't sound particularly bullish or bearish. I'm just saying that there are upside potentials like similar to those which might be created on precious metal space. And the longevity depends upon street credentials of being a store of value. Will in the future Bitcoin survive as a store of value? Will it? And the argument that it's limited supply, and therefore it has to go up in prices, nonsense. This argument was made about Beanie Babies or whatever, because there are tons of things that are limited supply.

48:57My nail clippings are in limited supply. RAOUL PAL I don't know if your nail clippings are in such limited supply. RAOUL PAL Well, my nail clippings are. There is only a certain amount I can produce in my lifetime. RAOUL PAL It's true. If I launched a futures contract base of it, I'd have deliverability problems, I think. RAOUL PAL, So yeah, so limited supply in itself does not really prove that anything is going to go on price. But I feel there are potentials, potential to go up in price if it survives as a store of value. Then you have to look at how the store of values trade. And what I think is happening is it trades similar to precious metals, but a more compressed timeline.

49:35If you want to invest in precious metals, you might also be interested in investing in crypto, it might compare the risk returns and where they are on the charts and so on. RAOUL PAL So one of the reasons why I asked you this question is I got the impression you had written a book on a crypto issue. And I was trying to tease you out into discussing the book I thought you'd written. Now, maybe I did that in a half-hearted, ham-fisted way. But I'll be more explicit. Tell me about your book, Alex. ALEXANDER BOOTHERNANI So this is not just my book. There is a book that so anybody who is interested in crypto should have a look at this.

50:14There is a consensus network, which is a Bitcoin publishing network. And they're coming out this very shortly in a few weeks, and already it's available for pre-sales. Maybe you can show the cover if you have it on. Yeah, this is called 21 Futures Tales from the Time Chain, which is the first ever Bitcoin fiction stories anthology. So what it does, it has several stories which discuss in a science fiction way how the future might look with Bitcoin in it. And I'm just one of my, one of the stories there, which is called Are We Not, is my story. There are several other, there's 21 actually, 21 futures, there's 21 stories in this anthology.

51:00And I really think that probably anyone who is interested in crypto is going to end up reading this anthology, so you can just as well order it now. So, you know, I should discuss it, talk about this with people more. I don't really ever kind of talk about crypto because I don't really have anything useful to add. But when I do the thought experiment as to what the use case is, the only possible use case I can think of is to export capital from places which are trying to restrict the export of capital from them. like the People's Republic of China or the Islamic Republic of Iran. Because if I wanted to hide my purchases of drugs and prostitution services from the federal authorities, Bitcoin is a really poor tool.

51:45By the way, I don't really purchase much in the way of drugs or prostitution services. This is a hypothetical, just in case - For the record, for the record. Yeah, for the record and for any NSA officers who are watching. But if I wanted to do it, Bitcoin would not work. It keeps a record of all my transactions, which is the very last thing I want. And the United States government, I believe, probably can decrypt anything it needs to and find anything it needs to. So it only really works because we're hoping the People's Republic of China's government can't do that and doesn't have that capacity.

52:21And there it does work. if you're, say, a Chinese local government official and you stole$20 million, using Bitcoin, you can be pretty certain that you'll get$10 million of it to Vancouver so your mistress can use it. It seems to me that would be the certain use case. All the other use cases I'm unsure about. It seems to be private money, and I don't know if private money is work. I want to be very specific because that's what I talk about. I do not think that Bitcoin specifically is heading towards being a currency and active use cases. It's use cases, a store of value, not to facilitate transactions.

52:59And you mentioned that some of the store of values are good for large money transfers, so much in clandestine money transfers or semi-clandestine. It's not so much clandestine as protected money transfers. And this is really what I, so at the risk of spoiling my story just a tiny bit, I want to, what I wanted to explore, or the aspect that I wanted to explore, was a society with a complete loss of digital trust. For example, right now, how do you know that you're talking to Alex Gorevich, but not to some AI representation of me, which just read all my articles and just synthesizing how it would answer the question?

53:39It's almost possible already. It's like we're on the verge of somebody being able to impersonate me with AI. And if I'm so close to it, then surely in two years we will be able to. You see, in my case, I like to believe that my sense of humor is so terrible, would it be quite hard to simulate? But maybe I'm wrong to think. I think you're too. Yeah, you might be humbled by that. So how do you know when you receive an email from your coworker that it's an email from coworker? How do you know when you talk on the phone with somebody and you recognize the voice that it's actually the voice of your friend?

54:14How do you know when you are calling your banker that you actually call your banker? So how do you navigate society with a loss of digital trust? And I feel like, to some extent, the society is coming. It's unavoidable. The digital trust will be harder and harder to manifest. And I wanted to explore how people will cope with that. And if cryptocurrency comes into that, how you can deal with what is the role of cryptocurrency and blockchain more in general, in the world with a loss of digital trust. Yeah, we're going to need digital credentials that we can trust. And yeah, I can see that. What else would you like to talk about?

54:58What's topical right now? What's got a share of mind with you? Well, let me show you the chart that I showed, because a lot of people, of course, always want to think about what stock market is going to do, what economy is going to do. So to conclude this, let me show this chart. This is my favorite chart. This chart has kind of been my Bible over the last, since I discovered it about 10 years ago. Maybe I discovered this chart. And it's been really my investment Bible. So there is an orange line and a blue line. And you see, so the blue line tells you what is the yield of the, it's basically the difference between the yield on a 10-year note two years ago versus the yield on a 10-year note today.

55:43So as you see, it's super negative right now. You see the shaded portion of it? It's super negative because the 10-year yield went up in unprecedented fashion. So let's look back on interest rates. And then the orange line is the look forward on stock market. It's a subsequent two-year percentage change in the stock market. And as you see, we don't have it on the shaded line because we don't know it yet. We know how 10-year yields changed over the last two years. We don't know how stock market will change over the next two years. But as you see already, you see the blue line recently started to go down.

56:24It was really high up. What it means is that it's really high up. Look at the last spike on the blue line. That was in 2020 when the yields fell dramatically down between 2020 and 2018. and it created this huge enormous spike in the orange line. What does a spike in the orange line mean? It means that stock market compared to the lows of 2020, it went really, really high up. And as you see right now, stock market, as the blue line came down to flat, stock market came down to flat. What does it mean? It means that if we go back two years to the end of 2021, the interest rates were roughly flat back then relative to the end of 2019, And the stock market performance subsequently from 2021 to 2023 was roughly flat.

57:13And what I'm basically saying is that two-year lag of interest rates can be very well seen in stock market. It's not necessarily, stock market is not economy, but it's just a good proof of how interest rates work their way through various factors. And you see it paints a pretty grim picture for stock market if this fit will continue. Now, there is a caveat. It's a cherry-picked chart. It starts in the end of 90s. That feat was not as good since before that at all, before the end of 90s. The whole concept, this chart is really the chart of risk parity, if you wish. It was in the end of 90s, people invented risk parity.

57:52I invented risk. I came to risk parity independently in 2002. I didn't know other people were already doing it, but I started to do it internally in JP Morgan. I still have my presentation that I made for management on risk parity at that time. And I had exactly the same definitions that other people did, because it was just the greatest trade of our generation, right? There is parity. One of the greatest trades in the history of financial markets, I would say. So some people say, well, maybe we're in a different environment now. Well, I'm looking at this chart over the last two years and saying, prove it, because so far it looks awfully the same.

58:29RAOUL PAL You know, if I were to argue, I would say the risk parity works when you don't use fiscal policy, when fiscal policy is subordinated to monetary policy, because then every time you get a problem, the central bank is going to run a counter-cyclical policy and there's only monetary policy to worry about. So it will work just fine. When fiscal policy breaks out and they start to aggressively use it to achieve policy objectives, it might not work going forward. Might. It might. You know what? I'm not brave enough to say that. As of today, as of today, the feed is pretty good. It's not perfect, but it's pretty good.

59:08And you see, orange line can stay above blue line quite a bit. It does not mean that stock market necessarily has to go down 50 % from its highs. But down 20 % or down 30 % two years from now from where it is today seems to be the likely outcome given this chart unless things change. So I think there is a headway in the head for stocks. And generally, I never bet against stocks because to me, that's more like a reason to stay flat than to be short. Because in the long run, stocks will always win. In the long run, no matter what squiggly lines you draw, the stock market tends to go up somehow. And maybe, again, fiscal policy might break this chart in some weird ways, like we could have higher rates and higher stock market forever.

59:54But as I said, so far so good. The chart keeps going. And the interesting thing is, so I discovered it. So it's not like the chart that I'm drawing right now to prove my future view. I wrote about this chart in my book, that I wrote in 2014, my first book, The Next Perfect Trade. And that chart persisted since then. And it's persisting very well as of today. So I'm yet to be convinced otherwise. No, I wouldn't really want to bet money against it at this point. And I tend to share your view that stocks, I don't really understand why are so strong. And neither do I really understand why real yields are so high.

1:00:35So if I'm leaning in any direction, those are the directions I'm leaning in. But I know that we were meant to talk for a certain length of time. We've talked for a little bit over that certain length of time. Probably a good time for me to just say to you, thank you so much. I found that really stimulating, really thought provoking. I hope anyone viewing it does as well. And it's always great talking to you, Alex. You're a sharp man. You think about markets, which is not so common, sadly. Well, thank you very much. Thank you for having me over and for having a great conversation. I'm glad you said it was great.

1:01:11I don't get that as often as I'd like. Let's see what the viewers say. Exactly. Thanks so much, Alex. It's been a pleasure.

1:01:26People are going to lose their minds. This is a moment in history unlike anything humanity's gone through. It's a very different world for humans to come. Take a step back and see the broad picture, which is the way all these technologies are interlinked. Because this is all about exponentiality, and humans can't think in exponential terms. How consequential do you want to say machine intelligence is? It's almost certainly as consequential as writing. How long did writing take to disseminate through the human population? You know, hundreds, thousands of years. And we're dealing with it now on a scale of months.

1:02:00But in this kind of world, you're compounding 100 % growth every year. And the numbers become astronomical. AI is going to spot patterns in the world that were just completely invisible to us. Even if you think that the AI and the robots are your demise, you might as well bloody invest in them and make some money out of it. If not, you're just going to be angry man shaking your fists at the clouds.

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