Economy of Tomorrow

25:03I'd say it's pretty difficult at this point. I will tell you the level of risk that we've had to take on UEV, on the execution side, large unit castings, building a vehicle in a way we've never built before. It's not a guaranteed project. This is all gonna come together just like we thought. And so we think we're even with them right now, but the speed of innovation we're seeing is very humbling for me. Even if we have a stable platform on cost today, will that platform be competitive in five years when the battery tech does another full cycle of innovation? Hard to say. I'm thinking about 2032 right now.

25:41To answer your question, I'm there. I have to make those capital choices now for 2032. To answer your question right now, I think there's a chance, but without huge support, where it's more of a level playing field, where it isn't in Europe, I think it's going to be really tough. Maybe the toughest battle of my career. Up next, the Australian economy has been powered for three decades by its rich natural resources. We travel down under to see firsthand its efforts to diversify into new and more cutting-edge areas of growth.

26:23Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London. We're the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday, keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled, and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

27:00So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts.

27:27This is a story about the need to be good as well as lucky. Australia has been lucky in the natural resources that have been driving its uninterrupted growth for three decades. But now it needs to be good in innovation and investing to keep that growth going, as our colleague Heidi Stroud-Watt reports from Sydney. Australia has long been known as the lucky country, a land of sun, surf and abundant resources. Yet for those looking to drive its future, fortune has been harder to find. We now find ourselves at a place where there is basically no interested growth capital in Australia. Our last round, which was a world record setting series B, 80 % of the funds inbound were foreign direct investment.

28:15Only three out of 20 investors who joined us were from Australia. So we are obligated to look outside. It's the lack of familiarity. Michael Biersuk is the founder and CEO of Q-Control, a quantum tech startup based in Sydney. It's not about loyalty to Australia or disloyalty. It's about economic opportunity. The US and the UK right now are making massive investments from the public sector and of course the private sector in advancing this technology for sovereign capability. Australia has not yet done that. And we're looking forward to that kind of investment in the future. This is a real map of data coming from commercial airplanes.

28:55At Q-Control, we focus on this new field of quantum technology. And our specialty is building new kinds of AI that make this emerging technology area actually useful for end applications. One of the core areas that we've invested in is helping navigate when there is no GPS. Now, on a daily basis, GPS completely governs our lives. Unfortunately, the reliability of GPS has diminished tremendously just in the last year. Since March of 2024, we've seen almost a thousand flights a day, commercial aviation flights, disrupted by deliberate GPS jamming. This is emerging as a major threat. And it's not just in commercial aviation.

29:36Defense sees exactly the same challenges. We set out to try and fix this through our work in quantum sensing. And we built a new technology that lets us navigate without GPS. It's the business of tomorrow, the kind many believe should play a far greater role in shaping Australia's economy of tomorrow. Well, we've won the risk of falling behind. I mean, there's no question about that. You've got to stay at the head, at the front of the pack. And to do that, you've got to keep innovating, you've got to keep asking every day, are our policies working? Complacency is a killer. in politics and government as in business.

30:18But before examining the Australian economy of tomorrow, it's worth explaining the economy of today. It was 1964 when the author Donald Horne famously took aim at Australia, calling it a lucky country run mainly by second-rate people who share its luck. It was a jab at its complacency, a country whose wealth, he argued, came not from innovation or ingenuity, but from its abundant natural resources. iron ore, coal, gold, the list goes on. There's no doubt that the economy has a pretty narrow base. Jennifer Westacott is a senior advisor at KPMG and a former CEO of the Australian Business Council.

30:59She says that although the country's economy might not be highly diversified, it's proven to be very lucrative so far. I think the economy still has incredible kind of foundations in mining and resources and there's still a long, long way to go in resources. Australia ranks second in the world for median wealth per capita, but its narrow base is showing fragility. Commodity earnings are expected to fall to US$271 billion this year, about AU$385 billion, and continue to drop over the next two years on falling prices and an uncertain global economy. While the Reserve Bank of Australia recently slashed its forecasts for economic growth and productivity.

31:40So I think, you know, that the first thing we need to do is make sure that we protect and strengthen that incredible base that's propped up living standards for many, many years and has made the country extremely prosperous. And so there's lots of ways of diversifying the economy and driving greater innovation in the economy. The first is to drive higher levels of investment and investment as a share of GDP is around the same level it was in the 1990s. we need to get investment happening. That's about lower taxes or a more competitive tax system. It's also about reducing regulation. We've also got to drive more innovation.

32:19That's about skilling our population, making sure that we drive the new skills of the future, embracing things like AI, and going with sectors of the economy that are in our comparative advantage and things that we can scale up. And the economy's fragility places even more importance on setting up its future. Australia, for all its wealth, spends just 1.7 % of GDP on research and development, well below the OECD average of 2.7%. Malcolm Turnbull was the Prime Minister of Australia between 2015 and 2018, and before that ran Goldman Sachs Australia. At the level of the economy, the big priority has always got to be productivity, and that is driven by innovation.

33:05So you've got to, you've got at one level, get rid of as much regulation and red tape as you can. At the same time, you've really got to supercharge innovation. This was a really important part of my time as PM, my first big economic agenda, the National Innovation and Science Agenda in 2015. That gave tech, R &D investment, venture capital a huge lift, and which they're still benefiting from. But you've got to do it again. You can't just do it once and put it aside and say that's it. How do you characterise the environment when it comes to tech and innovation? Do you think it's not getting as much attention or as credit as it should be?

33:50Or do you think that progress has stalled? Well, look, Australia does not spend enough on research and development. The false Australian business doesn't, and we're not spending enough in the pure research, primary research realm of universities and research institutions. So that needs more encouragement. As a result, Australia's foreign direct investment is still heavily skewed towards mining, forcing companies like Q-Control to look overseas for investment. We have not seen the same level of major tech successes, minting billionaires, building generational technology businesses in Australia as we've seen in the United States.

34:31And as a result, I think that lack of familiarity has made people just less willing to take some bets. And our objective, frankly, is to show by example, whether you're in government or a local investor base, that the upsides are enormous and real. And, you know, we're just trying with everything we can to deliver on that opportunity. Could there be that kind of transformative sort of movement in Australia? And if so, what are the policy measures? What are the things in terms of supporting that possibility that you see? I think there's no question that the opportunity is there. I came to Australia from the United States because the research community was so strong when I was an academic at the University of Sydney.

35:11The bigger challenge has been building an industry base around the transition from basic science over into industrial applications. In that, Australia has been lagging. Now, we were the first venture-backed company in the field in Australia. The challenge is we haven't seen that many more in the last seven years. Westacott, who also serves as Chancellor of Western Sydney University, believes Australia should be capitalising on funding cuts to US universities to attract talent and drive innovation. I think the first thing that we need to do is of course continue to invest in our universities, continue to invest in research and development, but we also need to send very consistent and clear policy signals that we're open for international students.

35:58Now we have a cap on international students at the moment, which is very controversial in Australia. We need to send that message that we want international students, one of our biggest exports. We also need to make sure that we are encouraging skilled migration from young people. KPMG did a study several years ago which showed that we'd add$30 billion to the economy by targeting those highly skilled young people. And when I ran the Business Council of Australia, the key message that big employers would give to me is that they want more skilled, very specialised skills. So we should be really targeting those young people from the United States, come and even work in Australia, greatest country on earth, and really targeting those super skills.

36:40So it's an opportunity, but we can't just kind of sit back and expect it to happen. We're going to have to have deliberate and purposeful policies and actions to encourage those people to come to Australia. We have a huge opportunity in terms of talent. And while no Australian government wants to go out there and say to talented people in other countries, you're living in a terrible country, come and live in ours. You've got to be tactful about this. But let's face it, there is a war for talent, human talent. And we have some very attractive things going on, which is why, by the way, we need to be putting more money into research because those scientists and you know technologists will want to come here and work with it but you think about the livability of our cities for example you know we have some of the most livable cities in the world ultimately lifestyle can only take you so far if australia wants to remain competitive it needs to be more than just a great place to surf it needs to be a great place to invest its luck may not be running out entirely But to get the economy humming, it needs investment and innovation.

37:51It needs to be good as well as lucky. I think Australia is lucky, but we've made a lot of our own luck too. So I'm very optimistic about Australia's future. Coming up, AI may already be playing a big role in your next visit to the doctor, without you even knowing about it. We tell the story of artificial intelligence in healthcare, next.

38:23I'm Barry Ritholtz, inviting you to join me for the Masters in Business podcast. Every week, we bring you fascinating conversations with the people who shape markets, investing, and business. CEOs, fund managers, billionaires, Nobel laureates, traders, analysts, economists, everybody that affects what's going on in the market, whether you own stocks, bonds, real estate, commodities, crypto, you really need to hear these conversations. Sometimes it's behaviorists like Dick Thaler or Bob Schiller. Sometimes it's fund managers like Peter Lynch, Bill Miller, Ray Dalio. Sometimes it's authors, Michael Lewis, author of The Big Short and Moneyball.

39:08Regardless of the conversation, these are the folks that move markets each week. That's the Masters in Business podcast with me, Barry Ritholtz. Listen on Apple, Spotify, or wherever you get your podcasts.

39:27This is not yet another story about the promise of artificial intelligence. It's the first in a series of stories that go beyond the hope and the hype to see where AI is making a real difference today, starting with something important to us all, our medical care. Yes. Good morning. On any given day, Tennessee-based oncologist Samyukta Mulangi could see as many as 25 patients. Medical oncologists like me are pressed for time and we're overwhelmed with sort of clinical duties. Trying to do that work of charting in ahead of time, seeing the patient, documenting after the fact, and also now trying to like squeeze in record retrieval in the middle of everything is just very impossible.

40:15And so you have the concept of pajama time where oncologists and other physicians are just sort of finishing up their daily work at home after, you know, the kids are put to bed and after dinner, and it just contributes to a lot of provider burnout. Dr. Malangi is not alone. All across the country, doctors in all specialties are often stretched thin. The American Medical Association found that almost half of U.S. physicians experienced at least one symptom of burnout. It's little wonder that our doctors are feeling the burden, given the explosion of medical research. So Daniel Nadler decided to do something about it.

40:53The rate of doubling of medical knowledge in 1950 was roughly every 50 years. In 2025, there are different estimates and there are different numbers. In a study in the British Medical Journal and another study in Nature, they found that the rate of doubling of medical knowledge was 73 days. Nadler's Ph.D. thesis from Harvard was on analyzing derivatives, which he turned into a startup using machine learning for financial analysis. After selling that company for half a billion dollars, he turned his attention to helping doctors make sense of the tsunami of medical research coming their way. We looked at this and we did another analysis and we said, let's ignore the doubling for a second and just ask the question, if you had to read just the top third of peer-reviewed medical literature just within your specialty, which is not ideal, right?

41:45That means no cardiologist is reading anything in neurology and vice versa, which is not ideal. But even if you just said that, how long would it take every day for a specialist to just read the top third of peer-reviewed medical literature just within their specialty? And the answer turned out to be something like nine hours. So practically, that's obviously impossible. They would never see patients or never see their family or they would never sleep. And that led Nadler to found Open Evidence in 2022. Open Evidence is designed to do for physicians what the advent of computer systems, let's call it that, on Wall Street, achieved for Wall Street knowledge workers.

42:23Open Evidence is an AI model trained on medical literature, carefully curated to ensure high-quality results. For the first time in the last, let's call it three, four, five years maximum, we've reached a point in the sophistication of artificial intelligence, of computers broadly, that they can store not just the right letters and the right words in the right order, but they can understand the semantic meaning of the findings of these studies. So open evidence is an artificial intelligence, it's a computer system that's able to understand the semantic meaning of the findings of these studies so that it can act as a brain extender to physicians who have, even in the best and most generous reading of what they have to do as a physician in terms of keeping up with the pace of medical knowledge, such that they don't have to spend nine hours a day just reading the top third of peer-reviewed medical journals.

43:17Doctors are piling into the platform, which says it has signed up around 50 percent of all doctors in America and is adding 65 ,000 every month. Investors are piling in, too. Its latest funding round valued the company at$3.5 billion. What is it that open evidence should be relied upon to do, and what do we still need the physician to do? For example, can open evidence diagnose? No. So the physician is still relied upon to do everything that a physician was always relied upon to do. I see open evidence as a continuum or a continuation of a very traditional technology called search, right? So historically, physicians needed to search for findings in medical journals.

44:06That's not a new behavior. They've been doing that for years and years and years. One way to think about this is we spend a lot of time as a society celebrating the golden age of biotechnology. And we should, right? Every metric and proxy you look at in the data shows that we are accelerating the rate of drug discovery, including using artificial intelligence. We're accelerating the rate of drug development. And so we celebrate that. We're in this golden age. And it's amazing, right? This golden age of biotechnology. But what's not talked about a lot or enough is that this golden age of biotechnology is really the dark ages for physicians in terms of burnout.

44:46We expect that almost all physicians in the United States will be on the platform within the next year. Dr. David Reich is president and chief clinical officer for Mount Sinai Health System in New York. He uses open evidence, but as part of a larger range of AI models, they are integrating into their hospitals. I have the app on my phone and it's available through our medical school library and people do use it. However, we do also work with ChatGPT and they've created an environment where we can have our medical students ask questions that contain protected health information. And that protected health information stays within the cyber secure environment that we work so hard to maintain.

45:31And so I think cybersecurity remains a key consideration in any tools that are a great assistance to us. And I'm sure that Open Evidence will work very hard to address that along with others. But I'm very enthusiastic about it. I think it's a great tool. One of the reasons Open Evidence has become so popular with doctors so quickly is that it licenses the best medical literature from trusted sources and it's free to doctors relying on advertising for its revenue. We, right from the start, licensed content, licensed journals, licensed information, medical information from the relevant copyright holders.

46:13So we have a agreement with the Massachusetts Medical Society, which owns the New England Journal of Medicine. It's a nonprofit. We have a licensing agreement with the American Medical Association. Again, it's a nonprofit, but it owns the Journal of the American Medical Association, as well as all the specialty journals, the JAMA Oncology, JAMA Neurology, and so on and so on and so on, not just those. So we took a very different approach to copyright, to licensing, to all of this. And we're extremely proud of the fact that we're probably the only pure AI company in America that is not currently being sued for copyright violations.

46:50Our business model is the exact same as Google, which is, I think it's public. Google is one of our largest investors and has been an enormous patron to the company in many ways. So you can build very successful software as a service companies. And there are many examples of 10, 20, 30, 40, 50, 100 billion dollar market cap software as a service companies. But once you start getting into the rare air of multi-trillion market cap companies, it's notable that almost all of them, again, excepting NVIDIA and Apple, are either primarily advertising business models or have advertising as a significant component of what they do.

47:28And I think the explanation there is it is the business model that most aligns the incentives of the platform and the users to make sure you're delivering to your users the highest quality product possible because your incentive is not reducing cost. Your incentive is attracting more users and increasing your engagement. AI tools like Open Evidence are already providing much needed help to physicians who must focus on their patients even as they need to keep up with a deluge of new research. But for AI to realize its full potential in healthcare, Dr. Reich says it needs to become fully integrated into the workflow.

48:05Mount Sinai is doing the genetic information analysis on up to a million patients in partnership with Regeneron. And we're several hundred thousand patients into this. And we have a vast trove of information on patient medical images. and we have incredible information in our electronic health record. Now when we start to marry all of those data sources together and follow the promise of AI, in the not-too-distant future I should be able to say to you when you come in, not only did I screen you and I found particular risks, not only do I have care pathways which suggest how I should go forward, but it's specific to you, to your family history, to your genetic markers, and hopefully giving you the best and safest possible experience.

48:56So think of the future as being much more personalized. And the advance of technology is so inspiring right now that I think that what I've witnessed over several decades of medicine could vastly change in the next several years as long as we learn the lessons of past mistakes of being maybe too exuberant about technology and making sure that people who are truly in touch with that social contract between patients in this nation and the payers and the government and the providers that we actually find really good solutions. Where Dr. Reich emphasizes the integration of all the data into a single workflow, Daniel Nadler envisions a world connecting physicians with others around the world who are working on the same clinical challenges.

49:48As open evidence develops, if we go back to my metaphor of the sort of 1940s World War II telephone operator who's routing and connecting a human to another human on a battlefield, in this case, it might actually end up in a world where the AI is the least interesting part of the technology. And what's really happening is the AI is serving as connective tissue between a human and a human, between a human physician presenting some atypical combination of symptoms and another human somewhere in the country that is an expert on that and where the job of the AI is as far as possible from answering the question and as much more about getting out of the way as quickly as possible and connecting that one human to another human.

50:36And that's a very wonderful and sort of optimistic vision for what the future of AI can be. You know, most scenarios for the future of AI, or many, are very dystopian. I can't comment on what happens outside of medicine, but in medicine, I think you have a very beautiful possibility where the technology ends up serving as connective tissue between a human and a human. But whether it's connecting the doctor with the data or the human with the human, Right now, AI products like Open Evidence are providing much-needed relief for practicing physicians like Sam Mulangi. I would say that for me, Open Evidence solves two rather unrelated but maybe orthogonal problems.

51:17One is that actually Open Evidence taps into the entire medical corpus of academic literature, which actually, for the most part, tends to be paywalled.

51:32around natural language processing and reasoning to try and interpret my requests and retrieve records easily in a very time-efficient manner. So having sort of smart AI tooling that is able to provide fast queries has just been really been a game changer for me. And that is one application of artificial intelligence that is making a real difference in the here and now. Next week, we'll continue our exploration of where AI is already being put to good use, this time when it comes to education. That does it for us here at Wall Street Week. I'm David Weston. See you next week for more stories of capitalism.

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