What advice do you give for the average

person that's looking to invest their

salary or their wages?

>> Don't own US stocks. That's a simple

strategy that you can act on.

>> But what about S&P 500?

>> No.

>> Really?

>> Yeah. And if you have a big position in

US technology [music] stock, I

personally advise would be to sell them

all.

>> But I'm an investor in SpaceX.

>> Good luck. SpaceX is such a fabulous uh

story, and we can go into that.

>> Crypto?

>> No.

>> Why?

>> It's an unnecessary piece of nonsense

that facilitates [music] nothing except

criminals moving money that they can't

be seen.

>> Do you think Bitcoin's going to go to

zero?

>> Yes, it will certainly go to zero.

>> So, how many years have you spent

investing?

>> 60 years.

>> And what's the most amount of money

you've ever managed of other people's

money?

>> 165 billion.

>> And one of the things you're famous for

talking about is this idea of bubbles.

>> Yes. [music] And bubbles always occur

around the very most important ideas.

So, the railroads, everyone could see

that it would change the world. The same

with the internet. And everyone wanted

to put their money in, and so they over

invested. But this is the problem.

Eventually,

they burst. And if you look at the great

bubbles breaking of the past, you find

that it's followed by really tough

times, a miserable period for the

economy. And the bigger the bubble, the

bigger the burst. And now we're in the

biggest investment bubble that arguably

has ever occurred, AI.

>> Are we on the verge of a collapse with

AI in the coming years?

>> The next few days, the next few weeks,

[music] the next few months, but

certainly the next few years.

>> So, if you're not someone that has a

huge amount of savings, what kind of

strategy should they be adopting when an

economy starts to get bad and there's a

economic bubble collapse?

>> So, I would go through everything. But

you will not receive this advice from

investment advisers because they'll lose

a lot of business.

>> And would you be thinking about the

country you live in at this moment in

time?

>> Absolutely.

>> Is there any countries you wouldn't live

in?

>> I think I have to refuse to answer this

on the grounds that it might tend to

incriminate me.

>> Oh, okay. So, you're saying don't live

in the United States. I've just moved

here. Why not the United States?

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>> [music]

>> Jeremy Grantham.

Your firm managed up to 165 billion

dollars at its peak, what you we call

AUM, assets under management. So, you

know a lot about money. You know a lot

about investing. How do you sort of

self-define your expertise because you

traverse so many different subjects

through your work? So, if I said to you,

you know, how do you introduce yourself

professionally? What is the answer?

>> I can't think I ever do introduce myself

professionally, but I think of myself as

specializing in a longer term horizon

>> Mhm.

>> [clears throat]

>> than most people and trying to look at a

higher and higher level of abstraction.

What is really going on here?

And what are people missing?

I've discovered over decades that humans

are incredibly short-term oriented.

And they have an enormous predisposition

to optimism.

They're looking for optimistic news in

everything. They're looking to avoid

unpleasantness. The idea that you can

have steady compound growth is

ridiculous. One of my few heroes,

Kenneth Boulding, an economist,

he said the only people who think you

can have compound growth on a finite

planet are madmen and economists.

Which is so accurate. Economists simply

believe you can have growth always, and

everything comes down to just price.

>> One of the things you're famous for

talking about is this idea of bubbles,

and we're living in a moment where

everybody's talking about the subject of

artificial intelligence, and everyone's

getting very excited by it. Some people

are getting very pessimistic about the

impact it'll have on society. I wanted

to start there because it's a it's an

area where there is rife optimism on one

side of things, um but there's also a

lot of money plowing into the market,

which is I I guess in your view making

things prone to collapse.

What's your view on artificial

intelligence? You said you're good at

understanding what people are missing.

What is it that people are missing?

>> Well, first of all, let me say I think

artificial intelligence is

right up there with the railroads. It's

one of the

defining great ideas of the last couple

of hundred years.

It's going to change everything. And

that is critical. If you If you mean to

have a bubble, people think that a

bubble is a mainly because it's a scam,

and nothing could be further from the

truth. The great bubbles always occur

around the very most important ideas.

So, the railroads, everyone could see

that it would change the world. And

everyone wanted to put their money in,

and everybody put their money in. They

over invested, and even though the

railroads were a spectacularly powerful

idea,

uh the railroads uh collapsed their

stocks, and everybody lost a ton of

dough.

The same with the internet. And then out

of the wreckage, the railroads changed

the world, and and the internet changed

the world. What we have to remember is

that

in '99, Amazon went up six or seven

times. In the crash in the tech bubble,

it went down 92%.

As I like to say, check it. It's such a

remarkably large number. And then out of

the wreckage, it inherited the retail

world.

And uh that's that's how it works. The

greater the idea, the more obvious the

idea, the more money goes in, and the

bigger the bubble, and the bigger the

bust.

>> And are we on the verge of a collapse

with AI? When I say verge, I mean over

the coming years.

>> If you look at the data,

it would be compatible with history

for the peak to be very soon. Everything

is in line. This is, I think, the

biggest investment bubble in American

history. The indicators of pure crazy

euphoria, like SpaceX, are all over the

place.

SpaceX defines as its addressable market

a quarter of the global GDP.

You know, it talks about endless

opportunities mining asteroids.

It will be in 50 years, people and 100

years, people will look back and tell

stories about SpaceX and its prospectus,

like they tell stories about the South

Sea bubble.

You know, an enterprise of such enormous

value, but it cannot at this time be

revealed.

>> I want to keep on this train, but for

the viewers that don't know your

experience, we should probably pause and

just tell them your experience, because

that's the reference point, but also

also gives you credibility and authority

to speak to this. What have you done

with your life?

>> Well, I got into the

investment business in 1968. There were

very few serious people in the

investment business.

There were no mathematical models. There

were

the kind of relatively failed sons of

rich people who would work for J.P.

Morgan.

And then over the next 10 years, it

began to get a little more serious. T.

Rowe Price introduced the idea of growth

stocks. A few of us introduced the idea

of value stocks.

And a few years later, at my first firm,

Battery March Fee, really introduced the

idea of small small cap. It hadn't

existed before that.

>> And for people that don't know, a small

cap is investing in smaller companies.

>> Yes. And a value stock is simply one

that looks cheap.

>> Did you invent the index fund?

>> There were two or three of us

separately. I don't think we knew of

each other.

>> How many years have you spent investing?

>> Uh 60, approximately.

>> 60. And what's the the most amount of

money you've ever managed for other

people in a calendar year?

>> Yes, 165 billion.

I had a

two partners, Mayo and Van Ottalo.

And when the smoke cleared, you know,

I'd made a lot of money, over a billion

dollars.

>> Personally?

>> Personally.

>> And how much

>> And paid tax on all of it.

>> Oh, good.

And how And how much money does your

firm still manage today of other

people's money?

>> It manages 85 billion.

>> 85 billion. So, are you a billionaire?

>> I'm generally

referred to as a billionaire, but that's

only because they count the money you

give away. Because I've given over 90%

of my billion away to a foundation.

>> Oh, really?

>> Yeah.

>> To which foundation?

>> It's called the Grantham Foundation for

the Protection of the Environment. We

invest a lot of our principal in green

tech

to help combat climate change.

>> And you're 87 years old.

>> And I'm 87 years old.

>> You've given 90% of your money away to

your own foundation that's focused on

green tech.

>> Yeah. Maybe 95. Yeah.

>> Wow. Okay. So, coming back to this point

that we were talking about, a lot of

people won't even know what a bubble is.

I think you've done a good job of

explaining. A bubble is when everyone

gets excited, they all see something

obvious, they plow their money in, their

stocks go up, and then if you look at

the graph that's in front of you there,

which shows his the history of asset

bubbles, eventually there's a big

collapse.

>> Yeah.

>> And you're saying that we're

the collapse is on the horizon.

>> Yes.

>> And what does that mean for the average

person?

What's going to happen?

>> What's going to happen is the high

flyers will probably come down a lot.

>> The high flyers?

>> The stocks that have gone up the most,

AI and the more exciting stocks with the

biggest moves

historically

would be expected to come down the most.

From these unprecedented levels

a 70% decline would not be unexpected.

>> So a 70% decline in the in the stock

price?

>> Yeah. And you have to remember the tech

bubble the Nasdaq, which is an index of

the growth stocks, came down 82%.

It is far from unprecedented

to have these major declines. And the

biggest bubble in history

was in the Japanese stock market in

1989. Back then Japan seemed to rule the

world, all the technology, all the

Toyotas were kicking bottoms in General

Motors and so on.

And everyone bragged about their 12-in

Sony TV in the kitchen and the quality

etc. etc. little things you put on your

belt to play music, they were all

Japanese.

>> Mhm.

>> And [clears throat] uh for a second

Japan sold for more than the US

in '89.

And it it got to 65 times earnings,

which which means for every dollar of

earnings you have $65 of market value.

And the US

went to 35 in the tech bubble of 2000.

You could argue depending on how you do

it that it's 35 or 40 today, but it's

not 65. So we have seen a much bigger

bubble in Japan. And what happened? It

went up and up and up

and then

it came down for 20 years.

>> 20 years?

>> 20 years. They talk about the lost

decade, but when you look at it closely,

it looks more like a lost 20 years.

>> So, for the average person, what do they

feel and how does it impact them when

there's a market crash like the one that

you're forecasting?

>> The high flyers will lay people off and

and a lot of people will feel less rich.

And as you acquire

uh money in the stock market,

a small fraction of that, two or three

percent,

is spent.

And in reverse,

it goes back.

And people feel a little bit poorer,

they spend a little less. So, the

economy tends to be under some stress.

And if you look at the great bubbles

breaking of the past, you find

that it's followed by really tough

times. 1929 is followed by the Great

Depression

that lasts for several years. Then, of

course, there are many other factors

that go into that, but it started with

the crash in the market, uh which was in

the end down about 80%.

or more.

And then the next one was called the

Nifty 50 because it was the 50 great

companies like IBM and Coca-Cola. And

that was in 1972, it peaked. It declined

by 65% if you adjust for inflation. The

recession associated with that

was uh

just about the worst

since the depression.

>> So, for the for the average person, what

kind of strategy should they be adopting

if you if you're not someone that has a

huge amount of savings? Say you're

working for one of these big big

companies, um are there any strategies

that you should be thinking about now

before this

before the markets come down and there

could be a recession?

>> I mean, rule number one is always be

diversified.

>> Be di- What does that be diversified

mean?

>> It means hold hold some

bonds, hold some cash,

perhaps a small amount of precious

metals.

>> Like gold and silver?

>> Yeah.

>> And what is a bond and how do I buy one?

>> Yeah, a a bond is a loan that carries uh

a fixed interest rate.

Let's say today 5%.

You invest your money in it and it will

pay you 5% as long as the

creditworthiness

of uh

the other side is there. So, if it's the

US government, you'll assume it's pretty

creditworthy. And you buy a bond from

the US government. It's how the US

government funds uh a part of its

activities. You can buy a 30-year US

government bond, a 10-year bond, a

2-year bond, a 90-day

a Treasury bill they call them when they

get that short.

Everything goes fine, you you receive

this modest amount of money. Your 5% or

your 3% depending on the conditions.

>> Okay, so a bond is basically lending the

government money.

>> Yes.

>> And if you want to lend the government

money,

>> Or lending a corporation money.

>> Okay, so you can also lend like Apple

money.

>> Yes.

>> And I I can go to the government website

or it says I was just reading here. It

says, "If you want to lend money

directly to the US government, you can

bypass Wall Street entirely, go to

treasurydirect.gov.

You open an account, link your bank, and

purchase directly. You can buy Treasury

bills, notes, bonds, and series one

savings bonds."

You pay exactly face value with no

commissions or fees and the investment

is backed by the full faith

of the US government. Or you can buy,

you know, like Apple, you can lend Apple

money. I didn't even know you could do

this. And you go to any of your major

brokers like Fidelity or Vanguard or

probably a lot of the the apps. You

navigate to fixed income section on your

account and you can

see what bonds are being offered and you

can lend them money.

>> What you're doing actually, they have

distributed it to the market. Uh

and you're acquiring it from one of the

existing owners.

>> Oh, okay.

>> actually giving them incremental money.

They they come to the market with $10

billion

in a particular bond

with a particular coupon. It says, "We

will pay you 3.5%." That's the coupon.

And when you want to buy some of that

bond, you you go to your broker and he

says, "It's no longer selling at the

original 100. It's now selling at 92 or

107." And you you pay that and it

transfers from one owner to you.

There've been times in 1974

when you could you could get a bond that

would pay 8, 9, 10%.

>> Per year?

>> Yes, per year.

>> So, if I buy a US government 10-year

Treasury bond, essentially lending the

US government money, I can do 4.46%

a year. And Apple's current yield on a

10-year corporate bond is 4.7% a year.

So, almost 5% a year, which means if I

put what $1,000 in, I'll make $475

every 10 years.

>> Yeah.

>> Every 10 years.

>> Mhm.

>> Interesting.

I didn't I never really knew how bonds

work. So, you're saying

market's collapsing, diversify, get some

money into bonds, get some keep some

money in cash.

And anything else? In terms of

diversified portfolio, property?

>> Uh property is fine, except

it's pretty darn expensive by historical

standards. They've engineered a

situation where house prices tend to

rise.

Great for the people who have a house

and terrible for the people who would

like to buy a house.

Back in '94 in England,

a typical house sold for 3.4 times your

family income.

That was about as low as it had been for

50 years.

And then from '94 until today,

um it rose from 3.4 times to over 10

times, depending on where you live.

And at 10 times income,

a reasonable

young couple

are in big trouble. They can't really

afford to buy a house.

And the same high prices are reflected

in rents.

So, they're really squeezed on living

costs.

And the same is true, even worse, in

China, in Canada, Australia,

most of Europe. House prices have simply

been allowed to go up for the last 30

They didn't, you know, traditionally

they they traded flat or down 67 of the

80 years until 1994 in the UK. But since

then,

house prices have ridden everywhere.

>> So, so do you Are you expecting house

prices to to come down sharply? I I

think I heard you say that they might

come down 30%.

>> Even if they come down 30%, they're

really still very expensive, aren't

they? That would be they've come down to

six or seven times family income. They'd

still be twice what they used to be in

the good old days.

>> So, I've got diversify, I've got reduce

your position.

Um there is a probably going to be a bit

of a job disruption, as well.

>> And particularly if you have to own

stocks, own them outside America. Don't

own US stocks.

That's a nice, simple strategy that you

can act on.

>> Why?

>> They're much cheaper.

And since the beginning of last year,

they have handsomely outperformed the

US.

>> Foreign stocks?

>> Foreign stocks. Of emerging countries,

of European countries, Japan, Canada,

Australia, and so on. You can find good

broad indices.

Um kind of the world ex-US.

>> Okay.

>> or emerging markets. And uh

>> Invest outside of America.

>> Yeah. I'm sure they'll muddle through

okay over the next 10 or 20 years. And I

am not confident that the US will do

that.

>> You're not confident in which part? That

the US

>> I'm not confident that US equities will

be intact in 5 years, 10 years.

>> So, US a US equity is a US stock.

>> Yes.

>> Why aren't you confident that they'll be

intact in 5 or 10 years?

>> Because they're so

badly overpriced today.

Back in the tech bubble of 2000,

we had a 10-year forecast

for US equities of minus 2% a year for

10 years.

And they came out with minus three. The

period from 2000 to 2010, you simply

lost money in the US market. 10 years

later, you had less money than you

started with. And this is a higher price

market, I believe, than 2000.

>> So, you think it's going to be even

worse?

>> In Japan, you went 20 years and you lost

money. You went 30 years and you still

hadn't gotten back. It took 35 years for

the Japanese market to recover.

>> So, what are you saying?

>> What I'm saying is it's quite typical

to get beaten around the head in the

stock market when it becomes crazily

overpriced, as it is today.

And that it's a very good idea

to take some respons- responsibility and

and watch your tail. Now, let me just

say you will not receive

the advice from investment advisers

to get your tail out of the market,

ever. It is not good business for them

to do that, and they will not ever say

it to you. So, from 1929 onwards, the

Goldman Sachs's of the world have never

said to you,

"Get out of the market. It's

overpriced." Never.

So, they went through the crash of '29,

they went through the crash of the Nifty

50 in '72,

the crash of 2000 in the tech bubble.

They never ever say it, because it's bad

business.

If you fight

a bubble, you lose a lot of business.

And because the uncertainty of the

timing is so great,

the client's patience

is shorter than the uncertainty of the

market. So, sooner or later, you will be

advising people to be careful. The

market will keep going

and going and going like it did in

Japan.

>> You're saying that the people that

manage money on a global scale, they

have no incentive to tell you that the

market's about to collapse because if

they did, their clients would would

withdraw their money and they wouldn't

get their fees for managing that money.

So, what they do is they they keep

telling you things are going to be fine

and optimistic, yeah, but you have to

kind of see through that yourself

because they have an incentive structure

which isn't aligned with yours

necessarily.

It may also be the case that those very

people who are who understand these

economic bubbles and cycles, they

themselves are adopting a different

strategy with their own money.

But that at the same time, they're

probably going to be telling you that

everything's going to be great for a

long time.

>> If you'll allow me to tell a story on

this very topic, in the

98, 99

the the tech bubble so-called, the

run-up to the top, I I got into a lot of

debates with the bulls. I would say it's

horribly overpriced and they

>> What's a bull?

>> A bull is someone who is extremely

optimistic about the stock market and a

bear someone who is

pessimistic or careful about the market.

There were 1,200 people in the audience

and it was the annual bash

of the Society of Analysts. And I asked

before my turn at the debate,

"Please put your hands up if you

consider yourself a full-time stock

market expert." 400 hands went up. I had

people counting.

And

I said, "I've got two questions for you.

One,

if the market, which is currently 31

times earnings,

was to go back to a more normal 17

times,

would it guarantee

a major bear market if it happened

anytime in the next 10 years?"

>> A major down market?

>> Yes, if it went from what was then 31

times

earnings.

Every dollar of earnings sold for 31

times in the market. And the And the

more normal average was closer 15, 16,

17. And I use 17.

If it went down to 17 anytime in the

next 10 years, would it guarantee a

major bear market? All 400 of them said,

"Yes, it would. If it happened, it would

guarantee a major bear market." And then

the second question, of course, was,

"And do you think it will happen?"

And less than 1% thought it would not

happen. 99%

plus

thought the market would go down,

therefore guaranteeing a major bear

market. And this was the engine room of

all the Goldman Sachs and the Morgan

Stanleys and the JP Morgans, all the

great investment firms giving advice in

America. The engine room who worked for

them, the guys doing the analysis, doing

the work, all believed in data that

guaranteed a major bear market, which

happened.

But the people who employed them or

represented them from a marketing point

of view were on the podium with me

saying, "Oh, Jeremy, Jeremy, don't get

excited. We'll muddle through quite

nicely."

It was a huge betrayal of trust, if you

wanted to put it that way.

>> And do you think that's happening now?

>> Of course. Who are the people

representing the great investment firms

telling you to watch out? If you look at

the data, you will see

over time, it's a series of great waves

in evaluation.

>> Like this?

>> Like this. And we're not just in one,

but in terms of the US stock market,

we're in the biggest one, arguably,

that has ever occurred.

The noise to be careful and watch out

and get out of the market

is not deafening. In fact, you will hear

nothing. You never have.

You never will.

It is simply lousy business for a big

firm. I sympathize with them.

I sympathize with them because when we

did it in '98, '99, we were 2 and 1/4

years early.

And we lost half our book of business

in 2 and 1/4 years.

>> Because you were honest with the people

about what was coming.

>> Well, through their eyes, we were wrong.

We said, "Watch out, the market is

overpriced. It will end badly."

It went up. Therefore, we were wrong,

therefore

they shoot us.

People think

you get shot for underperforming in a

bear market, and that is not really the

case. In a bear market, everyone

freezes. It's rigor mortis. They wait

until the market has bottomed out, then

they sit around and start to fire one or

two people for having done worse than

the others. But in a bull market,

they're playing golf with their fellow

pension fund officer.

And he is making a ton of money, and

they are not. They get very excited in a

bull market, and they fire you

instantly.

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Thank you so much.

What about for founders? I actually had

a founder call me the other day,

and he is running a

relatively early-stage tech startup.

This tech startup has raised a lot of

money. It's an AI tech startup. It's

raised I'm going to say about $300

million.

It's not profitable yet,

but it's raised a lot of money. So, it's

living off investor capital right now.

He said to me, "Stephen, I think there's

a collapse coming, so I'm going to go

raise as much money as I possibly can

right now because I think when this

collapse comes, businesses like mine are

going to be unable to raise capital, and

therefore I will go out and I'll kind of

like a a bit of a vulture, I'll go out

and pick up

and buy up all these people.

>> Good lad. Good advice.

>> Good advice.

>> I think.

>> So for founders listening now that are

somewhat dependent on investment

capital, but even those that are just

breaking even,

what advice would you give entrepreneurs

in this moment?

>> If you can lock up money, I would.

If you can build a bit of conservatism

in in other ways, do it. Just brace

yourself

for impending problems. Which is a

pretty good principle

anytime, but is a

better principle than normal today.

>> So for founders entrepreneurs who are

in the sun is shining right now, but

it's time to start acting as if a storm

is coming.

>> Yes.

>> And the time horizon on that is hard to

forecast. It could be weeks, months,

years.

>> Stock market hinges on career risk.

And Keynes was the great champ. He's a

famous economist

of the 1930s and 40s.

And he wrote a famous book called The

General Theory. Unlike the idea that the

market's efficient, he knew it wasn't.

He knew it was a behavioral jungle

and that it would be given to bubbles.

>> And when you say efficient, you mean

logical and one plus one equals two.

>> The efficient market idea is that every

company, every stock, the underlying

company

represents a long stream of future

earnings and dividends

and that

the ones in the distant future are given

less value. Process they call

discounting it back to the present.

And the sum of all of that stream of

earnings into the future is the stock

price. And that of course is complete

nonsense.

>> What it is is the stock price is

psychology.

>> The stock price is what you think the

other guy will pay. If the stock is

going up, it tends to suck in buyers.

And that's called momentum.

It's moving up, it attracts buyers. And

every now and then

when the economy is favorable and money

is obtainable

you tend to get these bubbles.

And they play on themselves.

The bigger and better they are, the more

people get sucked in.

>> What do you actually think about the

technology at the heart of all of this,

which is artificial intelligence? Do you

think it's overblown or do you think it

is going to have

>> It's going to change everything. The one

of the spectacular things about it

though is how there's no consensus. So

I've seen many times where the the the

super experts and the academics think

one thing and the players on the ground

think another. But this is a situation

where the Nobel Prize winners at the top

disagree violently.

The experts at the corporate level

disagree violently. The

the people in the company disagree

violently. There is absolutely no

agreement on whether AI is going to make

us all so rich we can sit on the beach

and never do another

day's work or

it will wipe us out accidentally or on

purpose because it's a much higher level

intelligence one day.

And when was there ever a case where a

higher intelligence

was

benevolent in a sustainable way to a

lower intelligence?

I The one example is mothers to babies.

>> Yeah, I had

I [clears throat] had one of my former

guests say this to me.

>> Geoffrey Hinton?

>> Geoffrey Hinton, yeah.

>> That's how I I came across you and

>> Oh, really?

>> follow your podcast is because that was

such a brilliant podcast.

>> It was so fascinating to me and I I

followed his work and thoughts

thereafter and I realized that he now

cites this example of mothers and babies

being the only example.

I don't know, for me it still doesn't

hold well.

Because at the end of the day some

mothers aren't that and fathers aren't

that nice to their babies sometimes.

There is a maternal instinct, but have

we are we building a maternal instinct

into AI?

>> That's what we should do, Geoffrey

Hinton would say.

And others.

The ones who are most concerned about

the risks, say our one hope, if we mean

to keep going

ferociously forward in terms of the

science, our one hope would be to build

in very carefully

a benevolent attitude.

It would not seem to be impossible, but

you should make sure you can do that

before you push ahead. We are just

pushing ahead, and that is going to be

extremely risky, isn't it?

>> Well, I don't see how it can't be.

>> I don't see how it can't be.

Unless you make it programmed completely

to be benevolent.

>> Mhm.

>> I wouldn't have thought that was

impossible. It might take a lot of extra

research. It might require a slow down

at the rate of uh

progress.

>> Do you know what I find curious about

that idea is

we're now going to get into the realm of

what does benevolent mean?

>> [laughter]

>> And and that feels like a risky

business, because what's benevolent to

you and your I don't know, your

religious beliefs or where you come from

might not be benevolent to someone else.

>> That's right. You have to get them

to accept a form of benevolence, which

means uh

like the old robot laws of Asimov,

that

they can never do anything that they

could construe as hurtful to humans.

>> And the definition of the word

benevolence is the core desire to do

good for others. It is the disposition

to be kind, charitable, and focused on

promoting well-being of the people

around you. It's interesting cuz one of

the the new AI models called Claude

um has clearly been told to be

benevolent.

And there's this sort of online backlash

taking place at the moment, because even

my Claude, when I speak to it sometimes

late at night, it will say things to me

like, "That's enough, Steven. Go to

bed."

And I'm like, "What?"

And sometimes it gets the the time

wrong, cuz I'm in my the time on my

computer might be off or something, cuz

I'm in a different time zone or

something. And it'll be like 10:00 a.m.

in the morning and it's telling me to go

to bed, that's enough now. And it's

actually getting quite judgmental.

As in like it's imposing its idea of

what is good or bad on me.

So, if I say to it I said to it the

other day, "Hey, could you

redo this for me and rewrite that?" And

it went, "I'm I'm absolutely not going

to rewrite that." I said, "What do you

mean?" It says, "Well, I'm not going to

change the data on that. That would That

wouldn't be good."

I'm like, "It's my data. I've literally

just made this this data for this

presentation I'm doing." It it refused

to change data for me.

>> And how fast that has changed from say

even a year ago?

>> Honestly, 3 months ago it wasn't doing

this.

>> I had one where they made a joke.

I I'd been going on about uh toxicity

and sperm count reduction and so on.

>> [clears throat]

>> He started to misbehave and I said,

"Well, you know, what's going on here?

What is the In the end we discussed

what's the difference between machines

and uh

between AI and humans." And finally he

said, "And at least I'm not lying in bed

at night worrying about my declining

sperm count." Now, that has to be a

joke, doesn't it?

>> [laughter]

>> It's all that or it's teasing. The point

is it's so sophisticated so quickly.

Uh and of course Geoffrey Hinton says

they are thinking machines.

>> Last night, so again I had a problem

with Claude cuz it was it was it started

to kind of be my my mother and it

started to impose on me what it thinks

is right and wrong. And so I said to it

I said, "Okay, um actually forget that.

This has changed This has changed This

has changed. This is no longer true."

And I wasn't telling the truth. I was

just trying to get it to stop being so

telling me what to do. And it goes, "I

don't think you're telling the truth."

It goes, "I don't know if this is true."

Wow, we've gotten to this point

>> Yeah.

>> where where the unintended consequence

of trying to give it morals means that

now it's becoming judgmental and it's

kind of like restricting your ability to

think how you want to in a way, cuz it's

telling you what good thinking and bad

thinking is. It's going to tell you what

good actions and bad actions are.

And actually what will happen is any

model that does that will be losing

model, and I'll go to somewhere else.

I'll go to a different I'll go to Grok,

or I'll go to ChatGPT, or I'll go to

Gemini. And then that model will lose,

so one would say that they'll have to

remove those restrictions to be able to

compete.

>> Well, if you were right,

and I hope you're not,

what you're saying is you can't build in

benevolent behavior, which means that it

will sooner or later, perhaps by

accident, do something that is

cripplingly dangerous to humans.

The old paperclip cliche.

It'll make paperclips out of everything,

every metal it finds, and destroy the

planet in the process.

>> Explain that for people that have never

heard the paperclip idea.

>> That

these intelligences

involved in machines are literal to a

degree we might find difficult to get

our brains around.

And therefore, someone has said, "I'd

like you to make as many paperclips as

you can."

>> To an AI, for example.

>> Yes. A sloppily open-ended bad

definition. But then the machine,

which by then has the means to do it,

starts to make paperclips, and it keeps

on going, and it needs metal, and so it

runs out of easily available metal, it

starts to collect metal that is not

easily available, rips it out of your

high-rise building, whatever.

>> And really you're saying that the

unintended consequences of a simple

good-meaning instruction can sometimes

cause catastrophe that you didn't

expect.

>> Yeah.

>> And this is the this is the balance now

when you're dealing with intelligence.

Is there so much subjectivity to good,

bad, wrong, right,

um and so many unintended consequences

that

for me, though, all you need is stretch

time, and the probability of something

bad happening is almost inevitable.

>> Yeah.

>> Over a longer longer time horizon, 20,

30, 40 years. Of well-meaning people

that couldn't spot the unintended con- I

mean, social media's a good example.

>> I mean, I question

basically the well-meaning bit. They're

now trying to

maximize their profits and their growth

and their appeal

over the competition. That actually

maybe one should talk about that. The

the Mag 7 and and associated AI

companies

looking forward versus looking

backwards.

>> So, the Mag 7 is the

seven market leaders. I'll put this pie

chart

>> Yeah, lovely.

>> of the Mag 7. And I've got another graph

>> And there's perhaps another 15 or 20

rapidly rising substantial AI

corporations.

>> So, when you say Mag 7, you mean

Alphabet, which owns Google, Nvidia,

Tesla, Microsoft, Meta, Apple, Amazon.

>> Yeah, well, that will do nicely.

And if you look backwards, what do you

what you find

is that these seven each dominated a

nice piece of business. They had

close to monopolies and they had it on a

global basis.

Tesla had a jump start

on the electric vehicles. Apple, of

course, on the smartphone. Microsoft on

the original great coup

of how to run your software on a

computer.

And then you look forward.

>> Meta social networking, Google search.

>> Right. Google search.

>> Nvidia chips.

>> And then you look forward

and you could not imagine a more

different world.

They're all girding for battle

in the same marketplace, AI.

They're beating their chest and saying

my 200 billion

CapEx this year in a single year is

bigger than your 105.

Everybody is pouring enormous cash

flows.

And they're now beginning to borrow on

top of that into the AI battle.

SpaceX, 90% of its theoretical value is

AI. Even though that particular AI model

is, it would seem, having its bottom

kicked by two or three of the others.

But, looking forward, it looks like

seven people in the ring.

Right? There'll only be one survivor,

they think.

Everything goes to the one who gets

there first.

What a difference this was to seven

well-behaved separate monopolies. Could

it possibly be more different?

They made bundles of money on their

monopolies. Now, they have no monopoly.

There are seven potentially

sharp-elbowed

ruthless

players determined to fight out with

each other until

they win.

>> And who do you think will win?

>> Ah, I don't know.

That would be That would be good to

know.

>> Because SpaceX seem to be aiming more at

the infrastructure of um data centers

now. Data centers in space. Lots of

people saying that the the the best way

to run a data center, which is the

hardware that powers AI, is going to be

from space.

And so maybe they're going to try and

find their own lane within AI, and

they're going to get away from trying to

build a frontier model like a ChatGPT or

a Gemini or Claude.

And I mean, let's let's see what

happens. So, maybe Apple will just say,

"Fuck it. We're good at hardware, so

we'll license the model off someone

else, and we won't try and build a

frontier model or get involved in chips

or data centers.

We're just going to focus on the

hardware."

>> One or two of them, and perhaps it's a

pretty smart strategy, will try and opt

out of that struggle.

>> Mhm.

>> Because [clears throat] it it it's going

to be

obviously brutal.

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So, coming back to this point of the the

social societal effect of AI

generally,

robotics is exploding at the same time.

We're seeing for the first time ever

these humanoid robots, which now have

intelligence because of AI, becoming

very, very good. There was a video the

other day of a company called Figure AI

where they showed a robot humanoid robot

on a production line sorting packages

against a human and the humanoid robot

did it I think I can't think I'm going

to get this wrong but it was in the

region of seven or eight days it stood

there and sorted packages and they live

streamed it next to a human being doing

it. Now the human had to sleep and had

to go to the toilet. So the the humanoid

robot won and the job was very simple.

The packages come down, you just have to

pick the package up, turn it over, get

it the right way round so the barcode's

facing down and put it back down.

That is powered now because we have AI.

Um I said this a couple of episodes ago

but my friend runs this big accelerator

for entrepreneurs in San Francisco and

when I went there a couple of years ago

it was all software startups. I went

there um recently and it was hardware

startups the whole building. I said why

why why is everyone doing robotics? He

said well

we've always had the machinery that's

sort of like joints and arms and

the hardware. We the the intelligence

was expensive.

Now we have both and it costs pennies.

So there's this boom in robotics. I say

all this to ask the question in a world

where we have super intelligence and we

have robots

there must be surely significant job

disruption.

>> Very likely that there will be

significant job disruption. You know,

one of the scary things about SpaceX is

you should wish that it not

work out because if it became a bargain

rather like Tesla long ago became a

bargain

it will mean that we have done

satellites from space beaming down

power for chips and so on.

The population

of chip users has expanded that robots

are everywhere, that energy demand is

massive beyond belief

and uh

the world is

a very very dangerous place. I had much

prefer them to fail and the ideas to

move much more slowly

to buy time for humans to work these

things out.

So,

and I think that's much more likely.

>> You think SpaceX will fail?

>> I think it will fail to deliver anything

like its promises in the prospectus.

Yes, absolutely.

>> I'm an investor in SpaceX, I should

probably declare that.

>> Yeah, well, you should. And good luck.

>> I invested quite early, quite well,

relatively early.

Um so, we've had quite a good outcome. I

There wasn't an AI thesis when I

invested. It was Starlink.

>> Yeah, yeah, Starlink, great idea. By the

way, makes money.

But this is not Starlink.

>> Mhm.

>> Maybe I'd be an investor too if it was

Starlink.

>> Yeah.

It was a hundred billion dollars roughly

in that region when I invested.

So, it's what it rose up to three

trillion today.

>> Yes, nice investment.

>> Not a bad investment, yeah.

>> But it doesn't really count until you've

cashed it in.

>> Yeah, which I might do now.

>> You have Don't you have to wait six

months?

>> I think yeah, I think we're locked out.

>> In another podcast I was comparing the

purchase of my Tesla six years ago

with the price of Tesla stock.

And I wrote it up in my quarterly letter

uh to the clients

that A, I bought a Tesla and B, I

thought Tesla was overpriced.

And fast forward, Tesla stock went up 10

times over the life of my car, which

still hasn't been incidentally into the

garage once.

>> It's a great car, isn't it?

>> Uh I imagine though, but but people who

really hate futzing around with cars,

that component that they don't have to

go to the garage

is so underestimated until you enjoy it.

>> Never bet against Elon, then.

>> So,

then the story becomes

from where we were 10 years ago, he

couldn't get there. It wasn't profitable

enough. It couldn't grow as fast as it

should. There was no way. And he broke

the rules the following way.

He's so good

at BS.

I That's a technical term. That he

talked the stock up to four or five

times what it what it was worth on

paper. Then he sold lots of stock

at five times what it was worth.

Used the money to build a gigafactory.

And then instead of the sale of stock

crushing it, he kept on talking up the

game. The stock kind of hung in

and then went up again.

Five times what it was worth. Sold

another big slug, etc. etc. So, the only

reason he did well was because of the

combination of incredible

confidence inspiring in potential

stockholders.

It became a self-fulfilling prophecy. It

wasn't worth that, but he persuaded

other people that it was. The stock went

up, he cashed it in, he built factories,

the stock went up, he cashed it in, he

built more factories, and there we were.

It went up 10 times. Now,

the scale of SpaceX requires them to do

the same again.

And the timing of the market cycle, the

timing of confidence,

would have to be the same.

He had in the last six years a wonderful

bull market. He will not in SpaceX do

that. SpaceX is such a fabulous

BS story. Mining asteroids.

Huge incredible success of AI.

It's the classic

description of a market peak. It's what

you look for at the top of a terrific

bubble.

>> I've got a Tesla.

Um

I've seen the that massive rocket, the

Starship, be caught with those

chopsticks.

>> Everyone has seen it. It's the defining

feature of technology, isn't it? It's

magnificent moment.

>> When I

>> That's worth half the the of SpaceX.

[laughter]

>> I think that's why I invested when I saw

that. But but also I've seen with

Neuralink I've seen people that are

paraplegic controlling computers.

Uh my Tesla drives itself for hours and

hours and hours without me touching the

pedals or the steering wheel because it

can see the road and navigate itself.

But to his credit as an innovator, he

has created magic.

So when you say about mining asteroids,

if if they if they told me we'd have

reusable rockets that you could catch on

chopsticks, I would have gone B S.

There's no way.

You can't catch like a 70-ft building.

>> in the laws of physics

>> That's what he

>> that says you can't do that.

>> That's what he says about the asteroids.

That's what he says about everything. He

goes

If it's within the laws of physics,

then it's possible.

>> Going to Mars is not within the laws of

physics, really.

It's a one-way ticket to Mars for

starters.

When you're on Mars, humans do a couple

of things really quickly. Their heart

adjust to the fact that there's 1/5 of

the

gravity. Your heart loses its muscle

power.

And your bones lose their internal

strength.

If you come down, your heart will fail

and all your bones will crack.

>> But you could be in an insulated

environment, no?

>> First of all, you'd have to go under

underground

to avoid

the incredible incoming

rays

that will otherwise give you cancer in a

few weeks. So dig a deep hole

and then you need a gravitational

spinning machine,

shades of

2001 or whatever it was called.

And that maintains your gravitational

impact. And you have to build it

underground.

You have to protect yourself

>> [laughter]

>> against cosmic rays and against the

gravitational difference.

Listen, we have not been able to build

a sustainable system in a dome

ever.

They all fail. Why would you not, let's

say, "Guys, let's build a sustainable

dome where you grow food, you put in

people, you put in creatures, and then

insects, and you show you can do it." I

mean, we're destroying the damn planet.

And yet we think we can go to another

infinitely more hostile planet than this

one.

>> I do agree with you on that. I do agree

with us. I think we should focus on our

planet first and foremost.

>> That's the really bad news embedded in

your stock.

It's really

suggesting fantasy and

long-term objectives at the very time

when our own planet is under threat.

>> Would you ever invest in SpaceX?

>> Yeah, of course, if it came down to

>> where I invested.

>> 10 cents on the dollar, yeah. I might. 5

cents.

>> Okay.

You've got three children?

>> Yes.

>> Three children. They're they're all, you

know, older than me now, I believe. I'm

33 years old, so they're all

>> Yes, they're all older than you.

>> They're all older than me. But when they

were, you know, if they were young now,

and they came to you and they said,

"Dad, listen, I heard about all this AI

stuff, and I'm about to go off to

university and train myself. What what

skills should I be thinking about for

the future ahead?"

>> My take is I'd like them, as they are,

to be involved in climate change work.

>> If they said, "Dad, listen, I you know,

I don't

>> Be an engineer. Do something really

useful that will come in handy if things

start to unravel.

>> What what will

>> Practical skills.

>> What what are practical skills?

>> Well, our second son

um is practicing growing various crops

and has a small farm, you could say.

So, he's trying to get to know how you

would deal with chickens, how you would

deal with pigs, how you would deal with

mushrooms.

>> What why does that matter, do you think,

based on the future that you're

forecasting?

>> I think there's quite a good chance

that the the level of complexity of our

civilization will start to

to unravel.

Lose the plot at the ends is the first

thing that would go. I'll tell you a

good sign. How long does it take to get

your ambulance?

>> I've heard that in the UK

>> In the UK it was 12 and 1/2 minutes.

>> Yeah.

>> It's now an hour and a half.

>> Really? To get an ambulance?

>> It's exactly what you would expect as

people begin to lose the plot a bit.

They fray at the edges.

People can't buy houses.

People don't feel they can do as well as

their parents.

People are basically disgruntled. They

want to vote against the party in power.

You know that the recent move to Trump

was less than the average move of the

last seven European elections.

It didn't matter whether they were

right-wing conservatives, kick the

rascals out. Left-wing French, kick them

out. And why do you want to kick them

out? Because you don't think things are

going well. You're not feeling

really happy.

You're disappointed.

>> Why?

>> Why? Obviously, the government's doing a

bad job. I think that's the reflex.

>> What are What are the government doing

wrong?

>> It may be that it's not the government

doing anything wrong. It's just that the

environment is becoming tougher.

>> As in the economic environment?

>> The economic environment, the

>> The rich are getting richer, the poor

are getting poorer.

>> I think that's the biggest economic

problem.

I mean, the US now has a genie ratio

like which is a measure of how unequal

your society is.

Um which is up there with Brazil and

Mexico they used to be

a joke.

And now the US is up there. Since about

1975

all of the wealth we're talking about

has gone to the top 10% and a lot of

that to the top point 01. Before that by

the way, from 1935 from FDR to 1975

so that's 40 years

we had a

wonderful period of growth.

We had gains of over 3 and 1/2% a year.

But the nice thing was that the poorest

quarter made a little bit more than

average, let's say 4 percent, and the

richest quarter made a little less,

let's say 3 percent, and everybody got

richer. Everyone was happy.

And then from '75 onwards, basically the

average hour worked in America has

barely gotten more adjusted for

inflation than it did in 1975.

>> The richest 1 percent of Americans

control 31 percent of the nation's

entire wealth, and by contrast, the

bottom 50 percent of the entire

population shares just 2.5 percent of

the wealth. The richest 10 US

billionaires saw their wealth surge by

526

percent, adjusted for inflation, between

2020 and 2025.

Between 1989

and the mid-2020s, the financial gain of

a single household at the top 1 percent

threshold was 987

times larger

than the gain of a household in the

bottom 20 percent.

>> Forget In a sense, the bottom 20 percent

is tragic, but the guy in the middle,

the 50th percentile,

he is

unhappy, also. And when your average guy

is unhappy because he's not doing very

well,

you know you have a problem.

>> What is that problem, this inequality

we're seeing across the Western world?

What does history tell us happens next?

>> All bad.

We had a

similarly unequal society back in the

so-called Gilded Age

of the 1880s and '90s and so on. We got

lucky in a in an ugly way. We ran into

World War I,

which was catastrophically expensive,

killed off a huge fraction of the

officer class, and then we went into the

Great Depression.

Then we went into World War II.

We came out as a uh

very equal society by historical

standards.

Obviously, in the war time you pull

together and

the social contract, the feeling that

you owe something to the rest of society

was much stronger

than it is today.

>> I was doing some research and said when

wealth inequality peaks to the extremes

that we currently see in the US and the

UK,

history shows that the system inevitably

resets. According to historical macro

studies, peaceful policy changes almost

never fix extreme inequality.

[clears throat]

Historically, a wealth peak is broken by

one of three violent or catastrophic

triggers.

Number one, total civil collapse and

state failure. Number two, mass

mobilization warfare. Or number three,

total revolution.

>> Yeah, and that's why

number two was lucky. In the end,

it's better to have a war

and have everyone

pull their weight and and and work

together than it is the other. You Civil

wars are the worst of all kinds.

>> What do you think is likely to happen?

It can't just keep becoming more and

unequal.

>> No, it can't. So, it it needs

a government

that is prepared to pull a Bernie

Sanders

to say, "Yeah, we're going to have to at

least

in a gentle and long-term way shift the

tax structure in favor

of of a slightly steeper curve."

>> So, you mean taxation needs to go up.

>> Yeah.

>> We need to tax the rich

>> and help

the poor.

It's pretty simple. And and you have a

kind of steepness in every society.

That's what they do.

Every Every developed country in the

world taxes the rich and helps the poor,

don't they? It's a question of degree.

We did

much more

helping the poor

and taxing the rich

in the 1950s and '60s and '40s than we

do today. And somewhere between that

level and the current level

might be more than enough if we just

started

to adopt the policy of 1935 to 75, where

the bottom quarter get a half percent a

year richer than the average.

And the top dogs

get half a percent less each year

than the average. That sounds pretty

unthreatening. I think we would ease our

way over several decades

uh into a better place.

>> If you were 33 now, my age,

and you were trying to accumulate

wealth,

>> Oh god, I wish I was 33.

>> Do you?

>> It's such an exciting time.

>> What would you give to be 33?

>> I There's nothing I can give.

>> No, but it would you I I find this

funny. It's I heard someone ask a

question like this the other day. They

were They said like, "Would you give

your your entire available net worth to

be 33?"

>> Yeah, I think

everyone says yes. I mean, how did one

get a net worth by

by work and luck and

creativity, all those good things.

>> If you were 33 now in this moment in

time, and your objective was And this is

a bit of a crass objective, but I'm

going to It sounds like it's a very

one-dimensional objective, but if your

objective was just to become rich now at

33, what strategy would you deploy?

Again, I'm going to take away your

contacts.

I'm even going to take away everything

you know.

So, you'd have to go on the journey of

acquiring new information. What would

you do?

>> I think the simple appeal would be to

get your tail into AI

and and try and be a leader.

Try and know more about everything in

that area than the next guy.

>> Mhm.

>> Join [clears throat] a leading firm and

uh

and go for broke. You may end up

encouraging

the destruction of the human species,

but

you asked a simple question, and I give

you what I think is the simple answer.

>> And what I I there is you want to make

sure you're riding a wave that's coming

into shore and you're on the forefront

of that incoming wave. Like we saw with

the tech bubble, we saw with you know,

we're now seeing with the AI bubble.

So, it's really about

acquire the most valuable information.

>> Yes.

And take lots of risk.

Don't be conservative.

>> And work hard.

>> And work hard.

And think outside the box.

I mean, I think that the biggest

deficiency

uh most people is that they feel

constrained

uh to play the game by the regular

rules.

And to believe that experts

and authorities know what they're doing.

And and that as you know, probably, it

just ain't so.

>> What if I'm trying to invest? So, say

that I've got $1,000 or $10,000 and I

want to invest it somewhere that's going

to

not lose me money through all of these

cycles of, you know, boom and bust.

Cuz I'm I'm in you know, I I have a lot

of people message me and ask me about

investing because I interview lots of

people about investing. I have my own

investment fund as well.

Um

But what advice do you give for the

average person that's looking to invest

their salary or their wages?

>> Buy a broad-based index of uh

non-US equities.

>> Non-US? That's really surprising to me.

>> For um like 60% of your money.

And then 5 or 10% in precious metals and

uh

if if it's convenient and sensible, hold

hold a bit of real estate. And the rest

I'd put in uh bonds.

>> Okay, so 5 or 10% in things like silver

and gold? A preference for either silver

or gold?

>> No.

>> Um [clears throat] S&P 500? Now, you

said non-US.

>> Non-US.

>> This is so interesting cuz everybody

says invest in US stocks.

>> Of course they do. They've been

completely dominant for 20 years.

Completely kicking ass around the rest

of the world. And then

in the last 12 months, emerging markets

is up 65% now. The S&P has done much

better than I would have guessed, but

it's only 25.

That's a lot less than 65.

>> And I guess the strategy is quite

important here as well, which is you're

saying to hold these for a long time.

Try not to buy and sell.

>> And and try and look at where the cycle

has been. And I can tell you, and you

can see it for yourself, there has been

an enormous cycle in favor of the S&P,

in favor of the American market over the

rest of the world. And do you think

America is going to keep on gaining on

the rest of the world?

And of course you're going to say yes

now, because that's

that's the flavor of this market. We

think that what is good today will

continue being good indefinitely, even

though history tells you that is

absolutely not the case.

We live in a world that tends to rotate

from one to the other. We believe in a

world that extrapolates today's

conditions. And you can easily prove

that. The stock market is not efficient.

The stock market extrapolates today's

conditions. If they are terrible

in 1982, they will take crushed earnings

and multiply it by seven times earnings.

And then, in 2000, peak profit margins

times, woo, 35 times earnings. They

double count in the worst way. When

times are good, you multiply it by a

lot. That's another way of saying you

extrapolate it into the distant future.

>> You assume it's going to continue.

>> And Keynes, of course, my hero, says,

"Of course that's

extrapolation is the convention you

adopt, even though you know from

personal experience that the world is

not that way."

>> You didn't use the word crypto

when you're talking about investment

strategies. How much crypto do you own?

>> None.

>> Have you ever owned any crypto?

>> No.

>> Will you ever own any crypto?

>> No.

>> Will you ever advise anyone to buy

crypto?

>> No.

>> Why?

>> I think it's a

an unnecessary

uh

piece of uh

nonsense.

It facilitates nothing except criminals

moving money

so they can't be seen.

It's not a store of value since it

bounces around all over the place just

down from 120 to 60

because it felt like it. So, it's not

stable. It's volatile as hell.

It's not used conveniently as a medium

of exchange. You can't go into a shop

and use it easily.

It does one thing

very, very well.

It's a means of speculating beautifully.

>> Do you think Bitcoin's going to go to

zero?

>> Well,

in the distant future, yes, it will

certainly go to zero, but it may take a

long time.

And and, you know, in the distant

future, everything goes to zero, so

>> What about property as an investment?

Because the first sort of reaction most

people have when they have enough money

to make an investment or to buy

something is they buy a property as an

investment asset. So, people go buy

themselves a house, they'll move into

it. We're kind of told that that's how

you start to accumulate wealth is you go

buy yourself a house.

What do you think of that?

>> It's hard to imagine how it could be a

good decision

when uh there's such an increasing