AI-Era Internet, Spaceport Investment, Bolivia’s Investability 

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1:09This is Wall Street Week. I'm David Weston bringing you stories of capitalism. Coming to an internet near you? Artificial intelligence. Will those helpful chatbots kill the search and advertising paying for all that content that you enjoy? And liftoff of Falcon 9. Plus, the race to make money in space. Companies are competing to launch 100 ,000 satellites in the next five years as China builds out its own space infrastructure in Latin America. And investing in Bolivia. A new regime aims to be friendly to private enterprise. But when is the right time for investors to dip their toe in the water?

1:51But we begin with the continuing conflict in Iran. Harvard professor and former IMF chief economist Ken Rogoff chronicled the U.S. dollar's rise in the beginning of its decline as a global currency in his latest book, Our Dollar, Your Problem. It turns out that it's not just oil and aluminum at risk in the Iran war. It also may be the status of the dollar. Ken, in your book, Our Dollar, Your Problem, you talk about the position of the U.S. dollar as declining gradually over time in relation to other currencies. We now have a conflict in Iran. Is that affecting that decline? I don't think there's any question that it will affect the decline.

2:33It could go either way. It depends on how it comes out. If the U.S. comes out incredibly triumphant, there's peace in the Middle East, everyone looks to the United States to maintain peace, that's one outcome. Another outcome is where it's viewed as a strategic defeat and China gains. But, you know, it's a step. I don't think either way it's changing a dynamic that was going to happen anyway. There are things on the outside that it influences. So it's definitely going to help China accelerate getting other countries to use its currency, particularly for Chinese imports. For example, if China buys oil or China buys anything, it's going to help in that dimension.

3:20But it's also affecting global debt because everybody sees a lot of need for military expending. The U.S. is the biggest debtor in the world. We lose the most when global interest rates go up. So there are pressures from the outside coming from everybody trying to look for other options and pressures from the inside that we're running this big debt that is manageable if we wanted to, but there's not a lot of will to want to. Is the strength of a currency reflective of the strength, including military strength of the country? In your book, you go back to the Armada, actually, with Queen Elizabeth I and the Spanish.

4:03Is this potentially a barometer of how the world is perceiving the relative military strength of the United States? The military strength is a piece of being the dominant currency. And here, just to be clear, we're talking about the dollar's market share, which reached an incredible peak about 10 years ago. But also, military strength gives you the ability to affect negotiations. They can be over very unrelated things. They can have to do with how the IMF works. They can have to do with how global banking regulation works. So having the military power at the end of the day says, well, you know, of course it matters for a lot of things.

4:43And if you're looked at as weaker, it hurts you. And part of the protection historically going back to like 1974 was of the Gulf states, countries like Saudi Arabia, because of U.S. military protection. Now, as you say, it depends on how this all plays out. But if, in fact, the United States does not have a triumph of some sort over Iran, does it really undermine the confidence of the Gulf states using the U.S. dollar? Well, the Gulf states are a really important anchor of the U.S. dollar. And, you know, it's interesting you picked the 1970s because it really fell in the 1970s. Europe left the dollar.

5:20That's worth remembering. And the Gulf states, when they sort of did their recycling of their petrodollars through the United States and priced oil in dollars, I think it was sort of helpful. Although, nevertheless, that period was down. I don't want to overstate the petrodollar. I want to be a little careful about that because oil is a very flexible price. We're all staring at Brent crude. It's still here. It goes here. it can move very fast. So it's a little bit like my paying with Visa or MasterCard. It matters a lot more whether goods, manufactured goods, are priced in dollars. But it's important.

6:06I mean, it fills a lot of roles. The Gulf states use dollars. Saudi is still pegged to the dollar. I don't know how long that's going to last, but they still are. and because so many of them are pegged to the dollar, rotate around the dollar, they hold more dollars. They've been very important to our business model, not as important as China, but they've been important. And it's unclear how this is playing out. I mean, I think a lot of the Gulf states are looking at us and saying, wait, I thought you built those bases to protect us. I didn't know you built those, you know, various military complexes in our country so we could be target practice.

6:52And are you on our side? Are you on their side? Like, what's going on? That's been a delicate dance. I don't think we know how it comes out yet. So, you know, China's kind of playing it cool. A lot of people say they may benefit. They might. But I just think we have to see what the endgame of this is. The Chinese might benefit. Will the yuan benefit? Because we see Iran saying we'll let oil through the straight-over moves if you sell it in yuan, for example. And China certainly wants more transactions to nominate it. They're doing quite a bit in crypto, too, also, by the way. Yeah, I mean, if they get paid in dollars, we can sanction them immediately.

7:31They're putting it hostage. Why the heck should they do that? That's certainly significant. But the big thing of the Iran war in the future of the dollar is its raised global interest rates. They were going up and up and up. So if I look at the dynamic of how I see things unfolding, it's that there's this pressures from the outside that are very slow moving, but they're happening, to have a more multipolar system. And there are problems on the inside. We're the richest country ever, ever, ever, but we still have trouble paying our bills and running these crazy large debts. There's no political consensus in either party.

8:16The Republicans don't want to tax anyone. The Democrats think 1 % of people can pay, which doesn't add up. And so we are racing towards having a fiscal problem. and then central bank independence becomes a problem because when you have a fiscal problem, you're kind of looking for the central bank to bail you out. And if all that's happening, that's sort of what happened in the 70s in a way. It undermines the dollar. So what are the metrics that people should use in figuring out where we are in the relative prominence of the dollars? What do you look at? I mean, for example, were you surprised that the dollar was not more of a safe harbor when the Iran conflict broke out?

8:55So there are people in finance who are doing all these papers showing that the premium we used to extract on longer term debt is gone. So on short term debt, there's still a premium to dollars. It's still the safest asset. Long term debt, it's not there anymore. I mean, it's safer than, let's say, some African or South American countries' debt. But if you compare it to many European countries, Japan, it doesn't rank that way they used to. And so there are ways in which what we're getting out of the deal is going down. Now, we can crowd everything into short-term borrowing. And Secretary Besant said, I think interest rates are going to go down.

9:46I'm going to borrow more short term. Okay. But that's very risky. In fact, I think he was saying not to do that 10 years ago. And so we're losing. You see that in many measures. On the other hand, these things are very slow moving. If you do foreign exchange trading, it overwhelmingly goes through dollars. If you do currency of denomination of debt, it's overwhelmingly dollars. Of course, part of that's because more than 50 % of the debt of the advanced countries is ours. More than that in global bonds, it might even be 60 or 70 % is ours. So there's a lot of liquidity in it. I still remember 20 years ago, a prominent European economist getting up at a meeting and saying, Today is a big day.

10:43There's more euro debt than dollar debt, which was true that day. Well, how did that work out? You know, I mean, it's I think this is a slow moving thing. We're seeing it in the interest rate spreads. We're seeing it in reserves. So what countries are choosing to do? We're seeing it in actions that the Europeans and the Chinese are taking to develop independent systems. But this isn't something the private sector is just going to do. It's mostly the Chinese, the Europeans are leading the way. We are digging our, you know, grave, so to speak. And it's all the actions of the government. It's not something that's happening overnight.

11:32Coming up, the content business made a long and difficult transition from print to the internet. But what happens if scrolling online is now replaced by AI? We bring you the story of another revolution in how we get our information and entertainment.

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13:05This is a story about big changes on tiny screens. Since its inception, the Internet has become where we turn for content, content we mostly access through search, and that's mostly free. But, of course, it's not really free. When we searched on platforms like Google, we were directed to web pages created by publishers who got paid for all those ads we spent time looking at. Now all that is changing. And as AI becomes the new gateway to the web, it's transforming the economics of the internet.

13:41We believe the high watermark for internet traffic that was sent out from social media and search and AI tools, which were quite nascent at the time, was 2022. Essentially, over the last four years, those numbers have been dropping. Rand Fishkin is an author and entrepreneur who specializes in online search, the main way that most of us interact with the web. I do a lot of research with clickstream data, which essentially looks at devices and what they visit and don't visit. Whereas in 2011, Google was sending north of 70 % of all searches to a third-party website, right? a website not owner-controlled by Google.

14:25And today that number is in the mid-40s and falling. That clearly indicates this zero-click trend. Zero-click. It's a term for an online search result that doesn't lead to any other webpages. That can be good news for users if their question has been answered quickly and correctly. No need to spend time scrolling through all that text and pages of ads. But if you are a publisher counting on that click to bring traffic to your website and to sell those ads, it's very bad news, which means the creators of all that web content have to rethink the game. Long before AI, Google started disintermediating content providers by answering questions right in the search results.

15:11You search for the METS score, the score's right at the top. And AI just enhanced their ability to do this. For an idea of just how big this change is for Google itself, here's the company's head of search talking about incorporating AI just last month. Now we're entering the next chapter of Google Search. Where incredible AI features aren't just in search, Google Search is AI search through and through. Now this is the biggest upgrade to our iconic search box since its debut over 25 years ago. The problem is that most people don't click on the links. Caitlin Petri is author of All the News That's Fit to Click and a professor at Rutgers who studies the way algorithms shape online media.

15:57News sites that were counting on referrals from Google for their traffic, for their ad revenue, to draw maybe subscribers who might come to the site, get interested, and then subscribe, are now seeing, in some cases, very dramatic decreases in the traffic that they're getting from Google. The move from print to the Internet, many people think, actually eliminated some news sources. A lot of local newspapers, for example, were eliminated, partly because of the business model challenge, the revenue challenge. Do we face a risk of that with AI, that we will eliminate even further sources? I think we do.

16:32I think it's a major concern. It was really revealing. Perhaps nobody in the world has a better view of these changes and what they mean for online content creators than Neil Vogel. What happened was our audience, right, and we reach half of America each month, our audience on the Internet was 75 % from Google search. 2022, maybe a little bit more, maybe a little bit less, but ballpark that. That is now 25 % of our audience. Vogel is CEO of People, Inc., the largest online and print publisher in America. It reaches 175 million people each month, with dozens of publications whose names you know well.

17:15Better Homes and Gardens, People, Entertainment Weekly, Travel and Leisure, Food and Wine. And we put all these brands together because we believed we understood how to run these classic heritage brands on the Internet. And we've been proven right. Although Vogel has had a front row seat to the collapse in search traffic that AI has ushered in, he also told us something surprising. His business is booming. We're very profitable, and we're defying the narrative around publishing, that is, publishers can't succeed in this world, and we're succeeding. We feel really good and really optimistic about the future of media.

17:52Back in the day, before there even was an internet, believe it or not, there was a time. If you look at a publisher, newspaper, magazine, their revenue came from two sources, subscription and advertising. What's your revenue model? If you look at the internet, that is where we thrive. That is our bread and butter. 90 % of our profitability comes from our internet and our online presence. That is very much advertising, but it's also lots of other things. Those other things include deals and branded products. But, Vogel says, they've also got a new revenue stream. We licensed content to LLMs and AI engines.

18:27We sat with Sam Altman at OpenAI right before they could launch the first commercial LLM. This is the fall of 2022. And we saw this LLM and we saw what it could do. And we were like, uh-oh, the world is going to be different from here. And there's moments in your life where you know the world's going to be different. Like you have your first kid or the Philadelphia Eagles win the Super Bowl, and you know that like your world's going to be different from there. This was one of those moments. This was like the business version of that moment. And we took a look at this, and our first reaction is, thank God we have brands.

19:01Because what we knew was this was going to be a new paradigm in media, and we knew there were going to be risks, and there were going to be opportunities. And we made the bet and had the thesis that says, if you have these intangible assets that really, really means something to people. You have something that is going to increase in value in an artificial era. And starting in 22 and 23, we started to build other ways to distribute our brands. TikTok, Instagram, YouTube, our own emails, product licensing, all of these things we did. And cut to today, five years later, we've made 10 straight quarters on Wall Street.

19:36We're growing in an area where most publishers are struggling. And we did it because we have these amazing brands that can live in all these places, and our aggregate audience size is multiples what it was when we started here. You mentioned that you do have licensing arrangements with some of the LLMs, large language models. How does that work for you? Is it real money? So it's real money. It's material for us. I think we made a decision. Maybe it's right, maybe it's wrong. So far, I think it's right that we wanted a seat at the table. The important thing to understand and realize is AI needs three things.

20:14It needs power, which has been a lot of talk about power. It needs a model. It's been a lot of talk about models. And it needs inputs. We are the inputs. We are the training of the models. Now, we believe, and I think if you talk to any of these AI professionals, believe the Internet's been crawled. All the data in the world is already in the models. So the value should accrue to those of us that are still making substantial amounts of new things that are needed for the search use case, which is a very big use case, and are needed for all the corporate clients that want to use LLMs for their stuff.

20:46So it could be something simple as we have 15 new recipes with avocados in them, and avocados are important, to I can tell you every single thing Kim Kardashian did yesterday. But these are things that are very valuable, these pieces of data. The other thing we did, which is really important here, is part of having a seat at the table is we wanted to control our own destiny. Last summer in July, we made a decision and we partnered with a group called Cloudflare to block every AI crawler you could possibly block. So you cannot get access to our content unless you pay us for it. And given your model to license the training using your content to an LLM, it's basically found money, right?

21:29It's not taking away from your other business because that's based on brand? I mean, so it's interesting. Is it? It's funny. We have this conversation all the time. And the answer we always come back to is cash is cash. It would be amazing if we could make money the way we made money three or four years ago. It would be super fun. I'd have a lot more free time. But I don't. and we have to work hard. So it is what it is. For a publisher with strong, well-established brands, even the uncertain future with AI may be bright. But for smaller publishers, and for the web as a whole, the outlook may not be as encouraging.

22:06Potentially in the longer run. What could this mean for the internet itself? Because the internet really has thrived on very rich production of content. If content providers don't get paid for that, sooner or later, there's not going to be as much content. Yeah, this death spiral that you're describing has been something that people have theorized over the last three or four years with no discernible solution. I'm going to tell you what I think is the most likely scenario, but it's also the most tragic one, which is that in a few years, AI tools find themselves unable to get enough content to train on, whether that's video or text or audio, long form, short form.

22:48And they decide to build their own publishing departments. And in years to come, a decade, two decades from now, it would not surprise me if OpenAI or Anthropic looked a lot like TikTok, where they have a creator fund and they pay creators a certain amount based on the amount of traffic, page views, and value to the training set that these creators provide. And so they're contract employing these creators and we get an AI-shaped internet, right? An internet that is built not only for, but by AI tools. That seems quite probable. I think that that is something that if I worked at an AI company, I would really be thinking about because if the traffic drops so significantly that we see even more jobs in journalism be lost, we see even more, especially local outlets, but a lot of news outlets shutter themselves because they can't stay afloat, that diminishes the amount of content that these LLMs can train on too, right?

23:53So this is something that I think we should all be concerned about, not just journalists, but also those who work at AI companies, anyone who cares about the future of democracy should be thinking about this right now. Tell me how broadly, apart from people, beyond people, how do you think generative AI is going to change the nature of the internet, the content on the internet? What do you mean? So we can end up being fairly myopic around here and looking at our own use case. I am, and I have to be, I'm like a crazy optimistic person. And I'm very optimistic about AI for us, right? The risk for AI for us is already out.

24:31It's already killed our biggest piece of traffic from five years ago, but we've built something even better over here that we use AI to do more of. Like we are today, we make about 50 % more content than we made when this whole process started for roughly the same cost. And humans make every single thing you read and see because we've been able to use AI in the background to streamline so many processes. If you look at it as an opportunity, it's incredible for us. And we have no choice but to look at it that way. If we look at it any other way, it's too scary. And it's sort of like riding a bike.

25:08Don't look down, look towards the horizon, like, and you'll be fine. Since we talked with Neil Vogel, People, Inc.'s parent company made an offer to buy the part of MGM it doesn't already own. In making the bid, Chairman Barry Diller emphasized the value of what he called real-world assets that AI cannot easily replicate. pursuing a part of the media world very different from the online content brands that Vogel continues to build. Up next, we've come a long way from Cape Canaveral. Today, there's a booming business in space launches, which means a long waiting list for satellites trying to get into orbit.

25:44And the latest opportunity may lie 1 ,000 miles south of Florida in the Dominican Republic.

25:58Wall Street Week is brought to you by OTC Markets Group. Thinking about joining the exploding overnight market space, but unsure where to start? Designed to meet the needs of a growing international investor base, OTC Markets' overnight platform for exchange-listed securities, Moon ATS, provides access to global securities in U.S. dollars from 8 p.m. to 4 a.m. Eastern, Sunday through Thursday. Extend your trading day and trade global securities in U.S. dollars through a FINRA-licensed broker-dealer. In April, over 4.5 billion US dollars traded on Moon ATS.