TDI Podcast: Gerber on Ai, Tech and War (#963)

24:15Ross Gerber:Let's be honest. The market's not thrilled. I don't care what the market likes. I'm just saying. I know what. Just saying from a stock standpoint. I know how it works. You know, right. But like renewable energy needs battery systems to really get the most efficiency out of it. And battery systems with renewable energy have proven to be the lowest cost, best source of energy. So if we really want to do stuff, we've got to just go all in and start, you know, really deploying things like solar rapidly. And we can. We have the ability to do this. So I think it's just about investment. The second side of it, which I think is harder, is the actual transmission lines and the actual infrastructure.

24:53This is a whole nother level of difficulty than just putting up solar powers, capturing energy and putting it in a battery or whatever. Now I've got to build transmission lines that take this to the place. So if I build my own power around my data center, you know, and then it's a pretty simple process, but that has to be put into the economics of building the data center, which is now I have to build a whole new energy source and transmission for each data center. How much more does it cost to do this? So that's why I say it's going to take more time to deploy the infrastructure than people will want to accept because there's a lot of like things that have to be done.

25:35And then when you go to the city or the county and you say, I want to add my own energy infrastructure here, it's, you know, you got to deal with politicians, which means nothing happens fast.

25:46Ross Gerber:And the problem you also have, Ross, tell me if I'm wrong about this, is the energy consumption that we have right now with, we'll call it AI 1, you know, 1.0 conceptually, right? Then moving into inference and then moving into agentic is a whole, it's not just a 1, 2, 3. It's a whole different level of consumption. it's already like maxed, you know, like we're using quad a lot here at, you know, at work and, and like, it'll be like, okay, you've, you've maxed out your usage today. And it was like, how much more can we pay? You know? And then it was down the other day because there's so, there's just so much demand and, and they have to like kind of limit it.

26:22How much, how many tokens you're using and, you know, a token is kind of like a word. And so like the more questions you ask AI and the more it spits out more data, it costs money. And so they're undercharging for this product right now to get everybody to sign up, charging 20 bucks a month. You know, Netflix costs more money and does a lot less for me than AI. You know, you've talked about this.

26:43Ross Gerber:You've talked about like, you know, Grock and Claude and Grock and it doesn't matter the other ones we talk about. They're not going to stay cheap forever. Right. So right now I'm paying 30 bucks a month for Co-Pilot. Now I know Co-Pilot is a. is the least good of all. It's the least, but it does a good job for things like, you know, grammar check this, you know, rewrite this sentence, make sure this email looks good. You don't have to like cut and paste. Right, right. Or look up, you know, look up, find information on this client's information in my work side, you know, that's all in there. But do we think that the differential between pricing, where you have AI models and the AI companies that are the open, quote unquote, open source, right?

27:29Ross Gerber:And for the good of mankind versus the business-based ones, you know, those two competing forces these days, which everybody's starting to move much more towards the other side, forget about the good of mankind. Right. Is this going to start costing us a lot more? I don't think it's going to be right away, but yeah, for sure. And people will pay a lot more, but you have to look at it like as a cost benefit, you know, like how much am I willing to spend to get huge efficiencies in my business and not have to hire employees that we were gonna hire. So if you just don't hire one employee because of AI, let's say that's saving you 100 grand a year right there.

28:05So like, wouldn't you pay$2 ,000 a month for Claude? And people will, and that's what's gonna be. And so companies will pay a lot more than individuals. I think there'll be free versions of these things, obviously to get, that'll be like ad supported, you know, and then there'll be like the$30 or $50 or however many like tokens you're really using, you know? So it'll be based off usage because it's kind of like when the internet started and AOL used to charge, you know, $29.99 a month, you know? And so that they needed to do that. And when AOL said, okay, we're not going to charge anymore, it was down, you know, like the demand.

28:45I never understood that.

28:46Ross Gerber:I never understood that whole thing. Well, the idea was to get everybody on the internet. Like it was just get everybody on the internet. So if we do, like as soon as we could afford to like just not charge, it was better to get scale. And AOL was the biggest, remember, Time Warner of all people. Of course. Of course. And so I was there, 99, top of the market, AOL, Time Warner. You know, that's why I was like, don't buy Time Warner, Netflix. Please don't. It's like a purse, you know. So when it comes to this AI jobs cannibalism, if you will, to a point, there's been a lot of discussion I've heard.

29:22Ross Gerber:It's almost I've been saying that it's it's he who protests too much. This whole idea on every out of everybody's mouth that no, no, no, no, no. We're not building this to replace employees. But meanwhile, meanwhile, it seems like the it's happening. You know, look what happened with. No, no, we are building this to replace employees or not hire them in the first place. Correct. Isn't that the truth? What is the bullshit? But who? The question is which employees. Right. And that's where I think a lot of people are making a whole big deal about the fact that this is about efficiency. See, what I'm telling my team is you better learn this.

30:00I tweeted this the other day. I direct all members of my team to work on Claude immediately. I don't care what you do. Just get on it. You know, and like the idea is we can become super advisors by having AI agents helping us do all of our work. And we do a lot of like behind the scenes work, let's say building a financial plan. And now with AI, we'll be able to, we're already, we've already built platforms on quad that are super awesome. Right. So we're just trying to figure out how to deploy this across the company because like you literally can't even share the documents and or save data, you know.

30:36So we've got like templates that we've built that are amazing already and better than the stuff that these companies that charge us$10 ,000 a month for, we don't need to pay anymore. So when you're talking about employees, well, certainly if you're in what I call real work, like construction, electrical, putting in electrical infrastructure, AI can't do that. Right. When you're thinking about -

31:02Ross Gerber:Mechanical. Yeah. And you're thinking about like a lot of jobs are you physically have to exist to do those jobs. Right. And then you have this whole what I so this is what I was saying the other day. The the the generation that's graduated from college over the last decade, their degrees are worth substantially less than ours. Okay. So the education system has gone down the gutter of tube of shit. Okay. And what it's become is some sort of consensus building, woke, weird thing where you don't even learn the history that's actually the history anymore. like it's the least prepared college educated people that have ever been produced by the colleges let's say and so now they're graduating and they're all these entitled kids who think that facebook is everything or instagram and that they spend half their day wasted you know high just like playing on their social medias and then they go get a job which is basically like how can i fuck around as much as possible and look like I'm working.

32:10And then they post this stuff online, which is even funnier. And those are the people losing their jobs and they'll never get jobs again. Because, you know, if you're not, if you don't really have a skill, you're screwed because of AI. So all these kind of cushy jobs at Meta, look at what happened at Block the other day. And they go, well, Block's not doing well. You know, Block's not doing well. So maybe it was just layoffs. I go, that's absolutely true. They have literally thousands of people who do nothing there, you know? And how did it get that way? Because we just hire and we hire and we hire and companies get big and they don't even realize that half the people don't actually do anything every day.

32:47And so it's going to be a tough time for college educated, younger people who don't actually have real skill sets and actually didn't really learn anything of value in college. Right.

32:59Ross Gerber:This is a story that I've always had that if you don't know how to add and subtract, multiply and divide and understand the basics, how you can actually use that powerful Excel to its fullest. You know, if you don't understand what an average difference between a median mean or whatever, pick whatever. How about if you don't understand why we're fighting in Iran right now, you should be like going back to school. Right. Well, you missed history. Like you just missed history. Exactly. You know, let's talk about that. Let's talk about that. You've been pretty vocal about the ongoing conflict there.

33:29Ross Gerber:Yeah, I'm pretty excited. We see this market destabilization, energy spikes. I like it. You like it? What part of it? I love it. I want to buy stocks. I want to buy stocks because when this is over, like the world has changed so much for the better. There is nothing more concerning to our future than a nuclear armed Iran. Right. I agree. And, you know, honestly, it's not an opinion. It's just a fact. Like, you know what I'm saying? Like, I'm not trying to say this. Like, I'm just saying that if they had a nuclear weapon right now, they would be using it. That's why we cannot let this happen. And we've played this game with them for like 20 plus years while they've attacked us and terrorized us and supported.

34:14Lied, lied, lied. I mean, it's just a million things. They played this game and they were building a weapon. Okay. I don't care what kind of propaganda nonsense you're reading online. They're building weapons. They have the ability to highly enrich uranium, and they just don't give a crap about the West. And they are trying to arm up to destroy our civilization. That's a reality. Then the Ukraine war starts, and they're the first people to help Russia massacre our Ukrainian brothers and sisters left and right. And so then he – who do you think was behind October 7th? So the Arab world wants to like end all this nonsense.

34:56And, you know, Israel and Saudi Arabia start talking and then they unleash this Hamas attack on Israel, which just changed everything, you know. And whether Iran realized it when they unleashed October 7th that it was going to be their undoing, I'm sure they did not think that in the end Netanyahu and the Jews would destroy them. They probably didn't, they did the old Sun Tzu era of underestimating their enemy of 5 ,000 years on Purim, nonetheless. Okay. Yeah. They didn't even read the story of Purim. Okay. Which is about them. Yeah. Okay. It's amazing. So today we actually sunk a ship with a torpedo, an Iranian Navy vessel.

35:49I was like cheering. They have no Navy. They have no Air Force. And we are just systematically taking apart their entire military apparatus that have killed tens and tens and thousands of their own people in the most harsh and horrible ways. So how is the world not a better place today than it was two weeks ago?

36:11Ross Gerber:Yeah. I want to also talk about, though, the traditional war footing when it comes to markets for a second, because there are, I think there's three phases, give or take. I mean, we could probably talk about this and argue about this, but there's this, you know, the initial, right? The shock. This is why things are done on the weekend. So they let it sink in a little bit, right? This is purposeful. Right, give it a few days. Give a couple of days. Maybe it'll end by Sunday night. Sunday night at about 5.58 would be very nice, Eastern time, right before futures open. Right. And, you know, you get that shock.

36:40Ross Gerber:Then you get that kind of adjustment. This is the old frog boiling in a pot, right? Then you get this normalization that, okay, we're in a war. We've been in a war forever. Who cares? It's over there. The only time it really gets crazy is if I got a bomb blowing up on my doorstep. Other than that, it's over there. Which is next, by the way, you know, here in LA. You're closer. No, I mean, I'm not kidding. I'm not kidding. You know, the Persian community here in LA is so happy. I've never seen anything like it. They're dancing in the streets. I have Persian friends also. And I'm telling you, it's a risk that they're going to attack us here in Los Angeles between the Jewish community, the Iranian Jewish community, and the Persian community that's just everybody here.

37:18L.A. is so happy right now, I can't even tell you. You know what I mean? And like everybody, so we're a target. So it's kind of what I told my kids. You know, I gave my kid, I don't let him have the phone, you know, and I gave him my, he's 13, I gave him the phone. I said, listen, if shit goes down, I want you having the phone because shit's going to go down. And just when they get desperate enough, they will attack. And so I think Americans need to not be complacent at this period of time. We're at war. And many of the young people today don't remember the wars that we've been fighting for the last 55 years that I've been alive.

37:50And so, you know, I'm prepared. You got to, you know, Americans need to watch out for each other right now. We got to be smart.

37:57Ross Gerber:Let's talk about, though, what mistakes people make when wars happen when it comes to markets. Like we saw, for example, you know, the first day, they panic, they get upset because we don't know. There's a lot of uncertainty, isn't that? Is this just the same uncertainty curve as any uncertainty curve? Tariff uncertainty, new political thing, you know, this with Trump, there's uncertainties that you can't quantify, which I think market participants don't like. But if you would have told me that the market really isn't down from all this, I would have said zero chance. You know, like I like Monday morning, I had my like combat gear on, you know, ready to deal with clients in panic mode.

38:37You know what I mean? So I've done this pony. You know, that's why people pay me. I've I'm the guy you want in your bunker. You know what I mean? When the markets are getting killed, I've been there, done that. I'll get you through it. So, you know, my wife doesn't understand these things. She doesn't pay attention to the news and stuff. And she's trying to act like everything's normal. I looked at her and said, we just started a war. Okay. In my business, that means we're included, you know? And so like, I'm not the same today as I was yesterday. Like I have to deal with some potentially really difficult things right now.

39:10So please be supportive, you know? And so, you know, and just understand the stress I'm under because I warn my family because my job most of the time is not too bad, but these kinds of times can be tough. But what you're saying is you were surprised.

39:25Ross Gerber:You were surprised. I'm surprised. You know, I think the market should be down 5%, you know, maybe 10. But when I thought from like a rational perspective of like what is the potential outcomes and how good or bad are they, I was like, dude, we got them all the first night. Right. Okay? Right. So when I started extrapolating out six months from now, to me, there's the potential that this could be one of the greatest paradigm shifts in modern American history. Like eliminating the Iranian regime threat, which ultimately neuters the Russian regime threat, maybe ends the Ukrainian war. and oh my God, this would be wildly bullish, wildly bullish.

40:18And so that's why I'm saying if it goes down, I'm a buyer, hardcore, because I think we're going to win this war. I think Iran is just, you know, I think they're done. I think that people want to be free. And if we can give them a window to somehow take over their country, it'll be messy and it'll be messy for a long time, But there's an opportunity to rejigger the world into a much better world order for everybody. And like the Middle East could become one of the wealthiest trading areas in the world. And I venture to guess that the Persian community, if they come back to their country and rebuild it, will build an amazing country.

41:01Ross Gerber:So I'm hopeful. Yeah. Let's pivot to another hopeful area. Let's talk about SpaceX, XAI. We'll talk about. Yeah, I mean, I knew that he was going to start combining those things. That was like a. I'm glad I got out of my Twitter investment. And now I own SpaceX. That's the best outcome I could have asked for. Yep. So. Because I got screwed. Well, but the. Listen, I think the valuation of. Well, what is it now? When he went. When Twitter folded it. When Phil, when Twitter got folded into XAI, the number that came up was like this pie in the sky number of what Twitter was worth. Let's be honest.

41:32Ross Gerber:But, you know. Well, it started with 44 billion for Twitter. Right. Then they merged it with XAI and they said it was$110 billion. Then they merged it with SpaceX and they said it was worth$250 billion. Right. And what do you say is worth now? Now they're saying it's worth more. I don't know. It's just some crazy number. So you were very against Musk dabbling in his governmental duties of the Doge, Coca-Cola and all that. And you were right. That worked out well, didn't it? Yeah, that whole thing was ridiculous. I mean, it was a game. And Christine Noem is flying around on a private jet with her own bed.

42:04and sleeping with the special government employee and giving her friends$150 million contracts right under Elon's nose. Yeah. You got to love that. The whole thing was bad. Poor Elon.

42:16Ross Gerber:Are you, first of all, do you think that Tesla's going to become another division of X eventually? Of XAI, SpaceX, whatever you want to call it at that point? It'll be part of X. X will be the company and it'll be multiple verticals of the future, basically. And at this point now, I think that Elon's a little bit frustrated because he wanted to get this thing out public. And now we've got a war. It's very hard to take companies public during conflict. And so it makes a lot of sense for Tesla and SpaceX to merge. They're basically worth the same amount of money. And then it's like they could go public through this reverse merger process kind of thing.

42:54Ross Gerber:And if they do that, does he then get the benefit of the valuation benchmark to give him the $40 trillion that he was now having in his new contract? Or is that something different? I don't know. You know, I don't know how that would affect the goals that were set for the new contract. And my assumption is that goals are goals. And so you still have to achieve those goals to achieve the pay. You know, at this point, I don't know how many goals they're going to achieve. So, you know, I don't know. I, you know, I've never, I was just actually at the Tesla dealer taking my car in and, and there's cars everywhere and these people are working their butts off and, and, and Tesla makes great vehicles and they pretty much can drive themselves.

43:40And I just think that moving away from the vehicle sales business is a death blow to Tesla. Their vehicle sales stink. It stinks because they don't want to sell. They don't care. Well, like Elon's not trying to sell cars. He is basically saying, you're going to take my cabs and we're going to build these robots and, and, and we'll sell cars too, but I don't care. I'm going to end the Model S, the best car. Every time I go over the Tesla, I can't believe that.

44:07Ross Gerber:That's the only Tesla I would buy, by the way. It's the best car they made. Yeah. The Model S Plaid with full self-driving is the best vehicle that's ever been made and they discontinued it. and over this fluffy lie that putting a robot line in Fremont makes any sense at all, because we all know if you've ever been to Fremont, you're not putting a robot line there. It's a mess over there. Okay. Yeah. So then the valuation of where Tesla is and the price it is in the market currently is really a factor, not of the anything to do with Tesla, really. It's just a hope for roll up into X. Hope for the future.

44:43When I talk to my Tesla clients that won't sell their shares, And I'm and, you know, I approach it very delicately because they love Elon and Tesla. And I say, look, you know, what do you think of the Model S being discontinued? And, you know, they have this big dissonance that they're having trouble with. But what they've bought into is that this future abundance with robots and cabs is the future of Tesla. And they're fine. They don't care about selling cars anymore. That's what I'm saying. They just don't care about selling cars. And that is, you have$100 billion revenue business that was doing$15 billion a year in profit and probably worth$300 to$400 billion, right?

45:28Yeah. And they're going to abandon it. So I don't know what happens, but I know nobody's buying Teslas right now.

45:35Ross Gerber:So when you look at what they're trying to do, the optimist ambitions and this whole issue with, you know, I don't know whether it's a scene from Sleeper. I keep envisioning this scene from Sleeper with the robots, you know, with Woody Allen with his little orb. Yeah. And the— I mean, I just go straight to like RoboCop. Yeah, RoboCop. Tattoo. And that was L.A. That was in L.A. Yeah. And where do you see the limitations, the boundaries, the potential for adoption for this whole thing? And are we ready for this? You know, first of all, getting a robot to work is really hard and to work for a long time, you know.

46:21So let's be real. We've got some time here before. Or, you know, I use the example all the time of my hands, you know, because I'm a guitar player. You know, the complexity of your hands and calluses and playing a musical instrument and the dexterity that humans have developed over millions of years of evolution is not that easy for them to build. And Elon will tell you that himself. And then you got eyes and you got feet. So it turns out eyes, feet and hands make humans super unique as animals. So we're fundamentally, we're animals and animals adapt to millions of years of different challenges and the animals that don't adapt die and the stronger ones survive.

47:06And we've evolved over millions of years and most species, if you drop a human into Africa right now, humans would get eaten very quickly and we're not adept to survive in the wild anymore. We're domesticated animals now like a cat. And so when you think about this idea that we're going to just replace ourselves with these metal robots that think and need power, and you look at some of the incredible feats that humans do on a day-to-day basis like that dude who just climbed that building. Oh, don't go. Don't underestimate the humans is what I say. Right. So I'll bet on the humans over the robots for a long time.

47:48But now, because of what I'm reading in the military circles, what I actually believe is Tesla will be a military contractor.

47:56Ross Gerber:That's interesting. That's interesting. Both on the AI side and the robotics side? SpaceX, Tesla, robotics, AI, GROC, all of it. That's what he likes. He always likes that. He's building an army. He's building the U.S. army. But isn't that the game he always played was to go after the highly profitable and very squishy government budgets? Well, there's that. I mean, Elon's been doing that since he started. And then there's the Iron Man model that he kind of buys into, like, I'm creating technologies to protect America from its adversaries. And there's no question that Starlink has been a major factor in the conflicts that we're seeing today.

48:35And so for the first time in history, we launched a drone attack using Starlink antennas in the back of the drones that we can now drive directly to the target from anywhere in the world. This is a game changer technology when it comes to the modern combat and warfare that we're seeing in the battlefield today. And then when you extrapolate out robotics and what Tesla is building and cyber trucks, and all of a sudden you've got an army of drones, robots, and autonomous vehicles that could be extremely effective against our adversaries. So I think that argument is probably a better argument than any human wanting some stupid metal robot in their house.

49:19Ross Gerber:I would agree with that. I mean, obviously, there's a long, as you said, a long way. Now, what about the CyberCab or the RoboTax? Which is it? Is it CyberCab or RoboTax? I call them all RoboTaxies because certainly Tesla's not the only one. I'm a Waymo user. And, you know, one of the advantages you get about living in Santa Monica is you see all the technologies before everybody else. And you see them compete. And that's how we found Tesla was because they were here in Santa Monica. And so the fact that robo taxis aren't even operating in Santa Monica currently just shows you how behind they are.

49:56Ross Gerber:Right. Because, you know, they're operating in San Francisco, supposedly, and basically Austin. But they're not robo taxis. They're driven by drivers on full self-driving essentially. So it's no different than an Uber driver who uses full self-driving. You see what I'm saying? And so the promises have become a joke at this point because by the end of the year, the people were supposed to be out of the cars. They're not out of the cars. And there's a reason why they're not out of the cars because the cars will kill people. And so we need the safety drivers. And I use full self-driving extensively all the time.

50:33I think that the software is better than it's ever been. I think it works really, really well. I just went to San Diego and back and I had to disengage several times in that trip for safety reasons. And, and a lot of that had to do with things that are super random that just happened. Like there was a motorcycle accident in the middle of the freeway that we drove right up on. Cars were like all over the place. People were out in the freeway trying to help this guy who was hurt. You know, it was a, it was a tough driving situation. Well, humans can communicate with each other in the car. This is another thing that, you know, cabs can't do with robots.

51:14You know, it's like you wave at the person, you look at them so you don't hit each other. You know what I mean?

51:19Ross Gerber:Yeah. Yeah. Or you see where they're looking. You see where they're looking. Well, we had to navigate around all this mess, you know? And, and, and so, you know, fortunately I was right. One of the first person, cause the traffic, you know, was going to be a nightmare for the rest of the day. But, um, and I almost had to stop to help these people, but there was already somebody doing that. So, um, but that said, self-driving didn't know what to do, you know what I'm saying? And so you just have to disengage, you know? And, and so there's a lot of scenarios now that happen in LA driving that are non-quantifiable because it's LA.

51:53And so this is what's made it very, very hard for full self-driving to work. And that Waymo solution, which turned out to work is just put like tons of sensors everywhere so that we can really measure everything. And in, and the cars don't look as good, but they work and they're safe because we know everything around us, how far it is, how fast it's going and we're safe. So, you know, I think there's something to Tesla, just like putting some sensors on the car and fixing their problem and moving on. But, you know, They're just too stubborn.

52:21Ross Gerber:Let's talk about this getting me off of the edge of the ledge here and talk about this whole idea where these, we've seen these hyperscalers, right? We've seen Amazon and Alphabet and Meta, Microsoft, NVIDIA. Well, they're not hyperscalers, but NVIDIA. All these guys spending, in your lifetime, I'm telling you, and you can agree with me, you've never seen spend like this. The spend is absurd. The numbers are absurd. The numbers are absurd. They dwarf any, I think, any stimulus package that has ever been given out by a government over time. Oh, come on. Biden was sending checks to everybody. It was like a trillion dollars.

53:03Ross Gerber:Okay. Yeah, yeah, yeah. You know, this government's going to be changing the San Andreas Fault name. Did you know that? To what? To Biden's fault.

53:18Ross Gerber:I fell for that joke You got me, but that was funny So this whole spend You should do that This whole spend that we've been hearing about and the numbers just go on and on You're telling me that when NVIDIA gives money to OpenAI and OpenAI then turns around and buys NVIDIA chips or Microsoft to OpenAI, OpenAI buys cloud service, blah, blah, blah, blah, blah, blah, blah. This is not some kind of weird deal where brilliantly you take money off your balance sheet and you turn it into income and then you boost your EPS and then your stock goes up. This is like what everybody does. This is what everybody does.

53:59This is profound. Okay. No, it's, it's, it's common in business. So now you got to share the wealth, you know, like NVIDIA can't just make$43 billion in a quarter and just like distribute it to their shareholders. Like they have customers that are spending all this money and they want to own a piece of all these people. And if they're going to spend the money with them anyways, why not put, give some of it back to these guys and own a piece of all of it. And that's what NVIDIA is smart.

54:27Ross Gerber:But when you get a piece of it and you get like a deal with AMD, right? Where meta deploy AMD is going to deploy six gigabytes of this GPUs over time, blah, blah, blah. They're going to get this money. They're going to pay for it. And then they're going to get 10 % of AMD meta. You may like that as a meta shareholder because they basically just got free shares of AMD. But what the hell? Well, that's what AMD has to do to get business because they're inferior to NVIDIA. And so - They gave away 10 % of the company. Yeah, I wouldn't have done that. But that's like, we've done the analysis comparing an AMD chip to NVIDIA.

55:00It's like day and night. So they're not competitive. They've never been competitive with NVIDIA. they've always been a second tier chip company and if i want to build gpus with them i'm accepting a lesser product essentially and so why would you do that so everybody's trying to spread the wealth and and do all this stuff but i think you know if you look at a company like core weave which is probably like the epicenter of where people don't like it where it's like people invest in core weave core turns around buys the chips then they build a data center and then they rent it out basically the same people, right?

55:35But, you know, you have to understand, it's actually quite smart. I'll give you an example of my company. When we were starting, we needed money. And we, you know, talked to LPL, we moved our business there. And we said, Hey, look, you know, and they said, Look, we have a forgivable loan problem program, we'll give you XYZ. If you guys do XYZ. Now, it's smart for them to give us money because we've grown to be 20 times bigger things with their help. It helps. And so you can say, oh, they're just giving money to the same RIAs that come back and pay them. Well, that's true, but it's also now we're 20 times bigger.

56:12So it's a huge win for them.

56:14Ross Gerber:Whatever they gave us, they're making back way more. You know what I mean? And so I think that's part of the calculus. It's like, if we invest in this ecosystem and we build it, like, and these companies succeed, what NVIDIA's business is going to look like in 10 years will be way more than if they just are selfish and they keep all the money for themselves and pay it all to shareholders and pay dividends and do all this shit. You know, all these companies might struggle a lot more and then they have less better customers in the future, you know? So it's smart business. You see it all over the place.

56:45Almost every industry does this where they try to support the businesses that will help them get more business down the line.

56:53Ross Gerber:But does the increase in market cap that was based on some of these things? immediately makes sense. It took years for your business to grow. Well, if you want sense, you do not trade the stock market. Okay, you trade in the stock market because you know that there isn't sense in certain areas and there's opportunity for you to make money. So there's opportunity for you to lose money too. You see what I'm saying? And so nobody forces you to buy CoralWeave. You know what I mean? And I looked at CoralWeave three or four times and I actually still think it's a good company, But I don't own it because I don't like the economics of investing, let's say,$50 billion into NVIDIA technology today to build data centers.

57:35Then I've got to depreciate over, let's say, six to 10 years. And then I have to get all this revenue into the future, which I'm sure they'll get. But it's so uncertain. It's like, how do you draw out the numbers, you know? And so that's my issue with Coyweave. How much business are they going to get in the future? I don't know. It could be tons. I, you know, I don't know. I know the demand is off the charts, but like, do I want older chips or do I want to like diversify into different layers of different chips? You know, like, I don't know. So there's a lot of people doing a lot of things and some of it's not going to work for sure.

58:11But I think Zuckerberg said, I would rather over invest. I would rather lose money on some of this than not be in the game because the game's over already. You get that, right? Right. Like these are household names now. Gemini, Quad, you know, Chat. Like my kids talk about Chat. You know, like, you see what I'm saying? So if they didn't do this.

58:34Ross Gerber:But what's interesting, Ross, is we don't know who's actually come out. And one of the things I wanted to mention is that. No, they won already. The game's over already. OpenAI has pledged so much money to so many companies on the come. That one in particular, right? Well, Sam Altman's a little bit crazy, yeah. Yeah. And the question is, are they going to be the winner in five years from now, two years from now, ten years from now, whatever the number is, when the rooster comes to Crow and has to pay up all this money? Well, remember who started the internet? We started this podcast. I was talking about AOL.

59:06Where's AOL today? I still use it, actually. Yep. You do you? For what? I have my email. I have an email, an AOL address, and I keep it because it makes me happy because it's, I was the first person on the internet. I was, I was, you know, I was like Al Gore. You and Al Gore together, huh? Emailing back and forth. In Al Gore, I have the first AOL address. You know, like I take pride in my AOL, you know? That said, AOL is not the leader in the internet today. You know, so will OpenAI be the leader of AI in like 30 years? I have no idea. And if you are an investor, it would probably be a mistake not to invest in these companies right now.

59:49You know, like we don't know who's going to win. I'm a big investor in Google. I think Google wins here. You know, I'm an investor in Microsoft. I think they win here. You know, I love that Google owns part of Anthropic. I would invest in Anthropic. I would invest in open AI. You see what I'm saying?

1:00:08Ross Gerber:That's where you got Microsoft and then you got Amazon too, of course, opening. Right. Do I want to buy open AI at 680 billion? No, I don't. But like, it doesn't change that it's not a good company, you know? But like, as I said, I think the hyperscalers have already won. Like if I want to be a startup AI large language model and compete against any of these models, like how much money do I have to invest? Like hundreds of billions. So the game's over. And so these companies knew that if they didn't go all in, they had good cards. If they didn't go all in, there's very potential possibility that a third party that they don't know could have come and eaten their lunch.

1:00:51And so this is the cost of the moat. It's the cost of the moat is$150 billion a year. And I think they're smart. I think they're smart. I think that the way the world will look five years from now is extremely different than what any of us can imagine. Well, that's pretty cool. Let me ask you this on the end. I wish I could tell you what that is. I'm not sure.

1:01:19Ross Gerber:I'm going to ask you something that's a little bit shorter term as a closing question. And recognizing that we said last week we wouldn't know what's going to happen. This week we're not going to know what happens next week. But six months from now, what will investors wish they had been paying more attention to today?

1:01:40Ross Gerber:I mean, is it going to beat around a few things? The price of fuel, maybe? The fact that we have a new—the fact that the Fed is a new Fed's coming in, and that's going to be very theoretically dovish? I don't know. Is it— I don't know if they're going to be dovish. Is it the NVIDIA comment from a couple days ago about not spending any more on open AI? Oh, how about this? Private credit? Well, you know, it's funny because they do a lot of these shows and I get asked a lot of the same questions. So, you know, private credit is just junk bonds that rich people bought that suck and they lose money.

1:02:15And that's that, you know. It's not going to infect the market because people in the market don't own it. It's just rich people. um so rich people like losing money on high fee products and i'm all for it you know if that's

1:02:28Ross Gerber:what they want to do they could just call me and i tell them not to buy it you know what i mean we've been trying to get some clients out of it that we adopted some stuff for yeah it's hard it's hard to get out of the stuff that's why we don't sell it to people because my theory is how you know i start with like how do i get my money back you know when you when the private credit guys come and the vc guys and the hedge fund guys come in and pitch me i'm always like, well, how do I get my money back? And they're like, oh, nobody ever gets their money back. You know, it's like, what? And Ross, why do they always come in with two people in the office?

1:02:58Well, they always come with two people. Right. Am I right? It's always two. No, you're totally right. And, and, and, and I always pose the same question to them. You know, we manage the client. It's a lot of effort to get the client, manage the client, get their assets under management, make them happy, service the client. And then they come to us with a two and 20 product. And they go, well, I'm charging 75 basis points. And you want me to pay you 2 and 20 to buy a bunch of junk bonds. And it's like, no. Why should you make 4 % off my clients? So you're buying garbage at 12 % and you're paying them 8 and 9.

1:03:34You know what I mean? It's like a recycling machine. It's like a pay-for recycling machine. So we don't do that here at GK. We just don't do it. You know, every year, like even this year, all these guys come in and then, you know, guys in my firm are like, they see all this stuff and they're like, shouldn't we be offering all this stuff? Ross, why are you so stubborn? And I said, you know why? Because when these things go bad, everybody hates you. And so I've protected you multiple times through multiple cycles of garbage products that are pitched to us because I'm fortunately old enough to have seen many cycles of garbage products being pitched, including ones that caused the financial crisis for that matter.

1:04:15Ross Gerber:Yeah, it's funny because private credit always seemed to me to be the crap that already nobody wanted to buy that's being bought up by the people. That's right. And if everything's fine, okay, it all goes good because they don't market. They just kind of let it sit. Or rates go down. Yeah, or rates go down or something like that. Then they can market whoever they want. Then they don't have to remarket until some other deal, and they can do side pocketing. And then in the end, though, those are the ones that are going to have the worst problem because of the liquidity issues. And they have liquidity issues.

1:04:41Ross Gerber:That's why we have liquidity issues. Right. To begin with. Right. And like if I if I give you a thousand dollars as a loan and you're going to pay me 10 percent, you know, it's not bad credit if you just pay me back. So, you know, what I was saying the other day is that if you're looking to, you know, deploy capital, let's say 50 million dollars into private credit, you know, that's probably pretty easy to do and you could hold out for good companies. But if you're looking to deploy a billion dollars, you start to have to go down to the bottom of the barrel here to find investments or else you don't get paid.

1:05:13So so much money goes into the sector. But how many high-quality private companies really exist? And private companies are really tough to invest in. You can't get your money out easy. And what's your exit strategy? Is them going public or borrowing from somebody else to pay you back, I guess, right? Right, right, right. So, you know, there's a lot of people that don't want to do the hard work we do at GK, like getting and managing clients. And they rather just sell products to our clients. And that's why we don't let them in is because it's like you lose the money. I'm the one that has to deal with it, you know, and I lose a client and you still got paid the whole way.

1:05:53Right. You know? Right. Right. So we don't have that here. It's not a problem for me. and as I tell most people, I love liquidity. You know, like I learned this lesson. I mean, it's like, how old do you have to be before you just learn lessons? And one lesson that is constant is when things go bad, liquidity is a massive premium. You know what I mean? It's like, it's great to have liquidity because you can actually take action when things get bad. Like you can now buy this private credit at 15 cents on the dollar. And when things go bad,

1:06:28Ross Gerber:it's not like, let's do a redo. Let's have a second chance. Oh, maybe, let me go backwards a minute. You're in it, you're in it. That's right. Once you're in the quicksand, you can't get out. And it's real hard to tell clients, you know, they wrote a$100 ,000 check for Blue Owl Fund 7. Yep. And then you say, it's all gone. Thank you. It's really hard to do that. And I'm glad I've never had to do that. I agree, I agree. Ross Gerber, Gerber Kawasaki. Always a pleasure to have you on the show. Appreciate you. We're going to have all the information on how to get in touch with you on thedisciplineinvestor.com.

1:06:55Ross Gerber:Episode notes for number 963. Thanks, buddy. Wow. Yeah, thank you. Thanks for having me. Yeah. That's going to wrap up this episode of the Discipline Investor podcast. That was awesome. I mean, Ross Gerber, we seemed to hit it off really well and I really enjoyed that conversation. So if you did too, send me a note, drop me a line, go over to thedisciplineinvestor.com. Click on the Ask Andrew button to contact us. Find somewhere, something to click. Send me a note. Tell me what you think. I appreciate all the good feedback. I'll take the bad feedback and read it, but then probably toss it. But nonetheless, I like your feedback any way you want to send it.

1:07:33Ross Gerber:Thanks for joining me this week and every week. Next week coming up, we got a great guest. We got Thomas Petrify. He is the founder. He is the guy that created. He is the current one in charge of Interactive Brokers. And quite a history and something that I'm going to enjoy. I've never really had the opportunity to speak with him before, but this is going to be a great episode. Make sure to be there next week when we bring him on. Thanks for joining me this week and every week. I'll see you again real soon. This podcast is intended for informational purposes only and does not constitute personalized investment advice.

1:08:07Ross Gerber:Investing involves risk, including the possible loss of principal and past performance is not indicative of future results. The views and opinions expressed are those of the host and any guests and may not necessarily reflect those of Horowitz & Company, Inc., an investment advisor registered with the U.S. Securities and Exchange Commission. Registration with the SEC does not imply a certain level of training or skill. Advisory services are only offered to a client or prospective clients where Horowitz & Company is properly registered or is excluded from registration requirements. Any mention of third-party companies, products, or services is provided for informational purposes only and does not constitute an endorsement.

1:08:46Ross Gerber:Hypothetical scenarios or forward-looking statements are for illustrative purposes and should not be viewed as guarantees. Content is intended for U.S. residents only and may not be applicable in other jurisdictions. Listeners should consult a qualified financial advisor before making any investment decisions. Please visit our website for additional information, disclosures, as well as a copy of our form CRS. advertisements are not related to the host or affiliates and are not considered recommendations by the host of the show or any affiliates of Horowitz and Company.