Latest / The Fourcast / AI boom or bubble? why economists fear a global meltdown

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AI boom or bubble? why economists fear a global meltdown · The Fourcast

0:00
Is there going to be an AI bubble burst?
0:03
Yes or no? F Yes, there's no question that
0:06
we're in a significant bubble. If you've got a pension, if
0:10
you've got savings anywhere in the world, you will not be left
0:15
standing. If there is a reckoning in this
0:17
market, everyone keeps talking about the risks and the
0:20
possibilities, but they keep piling in and buying, buying,
0:24
buying. When the retail investors are no
0:26
longer willing to be at the end of this chain of people passing
0:29
off the investment to one another, that's when the whole
0:31
thing bursts. And who gets stuck for the bill?
0:34
The answer is the mom and pops. When is this crash that you've
0:38
predicted very confidently on this podcast going to happen?
0:41
And if anything can be done to stop it, what would that be?
0:48
Hello, and welcome to the forecast.
0:50
Is the AI tech sector about to crash and burn, scorching the
0:54
world economy as it implodes? A growing chorus of analysts say
0:59
it is. So I thought I'd better quickly
1:01
ask AI to write me an introduction to this episode
1:04
while it still can. Here goes.
1:06
In my voice, but not my words. Listen, has the world's AI boom
1:11
turned into a bubble? Even open air eyes, Talismanic
1:15
CEO Sam Altman admits that parts of the sector are kind of
1:19
bubbly. And now economists, banks and
1:21
investors are warning the crash could drag down the global
1:24
economy. So are we looking at thenext.com
1:28
bust or just the growing pains of a genuine technological
1:32
revolution? Thanks, ChatGPT.
1:35
You're welcome to my day job. Now, to discuss this, I'm joined
1:38
from Silicon Valley by the entrepreneur, author and
1:40
futurist Jerry Kaplan. Perfect to have a futurist on
1:44
the forecast. And from the World Bank Group
1:46
annual meeting in Washington, our very own economics
1:49
correspondent, Helia Ibrahimi. Jerry, first to you, is there
1:52
going to be an AI bubble burst, Yes or no?
1:56
Well, since I was just warned not to swear on on camera, I'll
2:00
just say F yes, OK, There's no questions.
2:04
Please elaborate. There's no question that we're
2:08
in a significant bubble. I've now been through this will
2:14
be my fourth major bubble and they all have exactly the same
2:19
structure and I I see all the same signs today that I've
2:23
experienced in the the previous four bubbles.
2:25
But this AI bubble, if indeed it is a bubble and it's going to
2:28
burst, is it big? Is it ugly?
2:31
And my understanding is that if you look at the total numbers
2:34
involved in this, it's quite a bit bigger than the last major
2:38
bubble, which was very destructive, of course, which
2:41
was the so called.com or Internet bubble.
2:44
So I do think there's considerable danger.
2:47
My understanding is that about 80% of the gains in the US stock
2:51
market have been attributable to a very small handful of
2:55
companies, all of which are big in AI.
2:58
So I think I, I think that that speaks to a lot of risk both in
3:05
the stock market and the collateral damage that would
3:07
occur in the wider economy. And we're in a financially
3:10
precarious position. I fully expect that this bubble
3:13
is going to burst at some point and when it does it, it's going
3:18
to have some very negative effects.
3:20
It's actually having negative effects.
3:22
Now. The problem is that they're
3:24
masked by the the appearance of so much activity and deals, deal
3:29
making and, you know, capital flowing around.
3:32
So that's a pretty dim view. Let's go to Helia at the IMF in
3:35
Washington. DCI mean Elliot.
3:36
One of the reasons why we're doing this podcast, this
3:38
forecast today on the AI bubble bursting, if it's going to
3:42
burst, is because the IMF has been warning about it, although
3:45
it's not been using any F words or any anything nearly as
3:48
dramatic the language as the language that Jerry is not.
3:50
Quite as colourful as Jerry's? Not quite.
3:52
As colourful but. What?
3:54
What are they, what are they saying, and why are they saying
3:57
it? Listen, everyone is talking
3:59
about this. It's policy makers, it's
4:01
politicians, it's bankers, it's investors.
4:05
Everybody's worried because the valuations we're talking about
4:08
are massive. You know, NVIDIA, the chip maker
4:11
is now bigger than the UK economy by a stretch.
4:16
You know, this is not just a little bit bigger, but almost
4:18
20% bigger than the whole of the UK economy.
4:21
The valuations of these companies are huge.
4:25
And so if you own a ISA in the UK, if you've got a pension, if
4:29
you've got savings anywhere in the world, you will not be left
4:34
standing if there is a reckoning in this market.
4:38
So the question is, you ask, you know, is this a bubble?
4:41
And I think there's two ways of answering that.
4:43
In the IMF, they were talking about the chief economist was
4:46
talking about similarities with the.com bubble.
4:51
And if you look at that, there's 2 perspectives, 1 is on a
4:54
valuation perspective. And yes, there are similarities,
4:57
but I have to say the valuations are still far away from what we
5:02
saw in the.com bubble. And for viewers at home, that
5:05
was another era in which the World Wide Web had been created.
5:09
And there's there was lots of Alan Greenspan, the former chair
5:12
of the Federal Reserve, called it irrational exuberance, where
5:16
the market was so excited by the possibilities of the World Wide
5:20
Web that they just thought, Oh my God, these companies are
5:23
going to make more and more, more and more, more and more
5:25
profits. And we're going to give them the
5:27
kind of valuations that have nothing to do with the money
5:31
they're making right now. And then when it burst, it all
5:35
kind of crashed down. So are you saying that just
5:38
remind me the the valuations in the.com era when that crashed or
5:43
just before the crash were much higher than now?
5:45
Yahoo, Cisco was, they were talking about 100 times forward
5:50
earnings. It makes kind of Nvidias 29 * 30
5:53
* 26 earnings look sort of modest, sort of sensible.
5:58
Now, that doesn't mean that there isn't going to be some
6:02
kind of reckoning with AI stocks because the kind of money and
6:07
capital you're seeing invested. And as you said, everyone is
6:11
talking about it now. Jamie Dimon, the boss of JP
6:15
Morgan, was talking about it. The Bank of England warned about
6:18
the asset prices and how frothy it is.
6:21
But I just want to make clear that both from the regulator
6:25
perspective and what we were hearing out of the IMF, yes,
6:28
it's similar to the.com bubble, but they're talking about it not
6:31
having systemic risk, like, for example, the financial crisis.
6:36
And why is that? Well, because it's not in
6:38
lending, you know, the that's the Jeff Bezos line.
6:41
Now, obviously these people all have skin in the game and they
6:44
want to talk up their companies. But his point is that, yes,
6:48
there's a lot of froth in the market because there's a lot of
6:50
potential in lots of possibility.
6:52
And even if that bubble burst, there's something happening
6:57
underneath that is useful innovation, invention that is
7:01
useful for society. I mean, like if you invested in
7:05
Amazon in 1999, you were at the peak, but you were beforethe.com
7:09
bubble burst. If you invested $1000 and like
7:14
you, I went to DeepSeek and ChatGPT to get my calculation,
7:19
you would now be sitting even adjusted for inflation, on
7:23
$33,000. So even though Amazon lost 90%
7:27
of its stock market value, they were one of the winners.
7:30
And a couple of weeks ago I was interviewing the NVIDIA boss,
7:34
Jensen Huang, and he was, they had the same vibe basically that
7:38
we, there will be losers, there will be people who fall at the
7:42
edges, but there will be winners in this.
7:45
And backing those winners and making sure they can build out
7:49
this, you know, if we build it, they will come data, you know,
7:52
countries and countries of GPU's is going to have a huge impact
7:57
on the society. Jerry, let me bring you in
7:59
again. I mean, you, you know, you, you
8:01
experienced the.com crash and you've been working in tech in
8:04
Silicon Valley for decades, if I may.
8:07
So you, you know, you know what you're talking about and you
8:10
know what these things look like.
8:11
Tell me, intrinsically, is there anything more valuable in
8:16
aithantherewasin.com or are they both, you know, do they both
8:22
have the same ability to change our society to to, to come up
8:26
with new products, but the valuations are just different?
8:31
Well, I I want to make sure we can keep 2 seemingly contrary
8:35
things in mind at the same time. The new wave of AI is a
8:39
wonderful step forward in the in the future of automation.
8:44
It's another major advance and it's going to have very broad
8:47
societal effects. The same thing was true about
8:50
the Internet back in 9899 when my company on sale got signed
8:57
behind me. You know, we went public.
8:58
We had a multibillion dollar valuation at one point.
9:01
Now your colleague is talking about, well, if you'd invested
9:05
in Amazon and you just held it, you would have been fine.
9:07
Here's the problem. There were dozens of other
9:10
companies that looked just as good.
9:11
Take that same $1000 and put it into Yahoo.
9:14
Where would you be today? The point is that you, you know,
9:17
you can't pick the winners. You don't know who the winners
9:20
are going to be. People sometimes ask me, well,
9:22
who are going to be the winners in this?
9:23
Is it going to be open AI? Is it going to be NVIDIA?
9:26
And my answer is I think the winners are are going to be
9:29
Yahoo and Netscape. So with with with that in mind
9:33
that you can't pick those winners.
9:35
And so many companies are going to waste or lose all of the
9:41
invested capital. They've been put in hundreds of
9:43
billions of dollars we're talking about that's going to be
9:47
a problem. Let me take you back to 1999, if
9:49
I can go on for one more second on this.
9:52
One of the major areas of investment that happened at that
9:56
time, the Internet, everybody knew that was going to be great
9:58
and it was absolutely true. But in addition to that, there
10:02
was, as a result of that, I should say there was a
10:04
tremendous amount of investment in laying fiber optic cable
10:08
because Oh my God, what are we going to do?
10:10
There isn't going to be enough bandwidth to be able to handle
10:13
all of this Internet traffic if it continues to grow at the rate
10:16
at which it's growing, which it did not.
10:19
Well, what happened was they laid in all of this fiber optic
10:22
cable and several companies that I will not mention, there were
10:25
huge high Flyers with huge valuations.
10:28
They're all gone. They're all out of business.
10:30
Yeah, the fiber optic cable's still there, and we still
10:33
benefited from it. But those companies are gone,
10:36
and that investment money simply burned up and went up in smoke.
10:40
Today, we're seeing exactly the same thing.
10:42
It's a bit like the railway bubble though, isn't it?
10:44
It's a bit, you know, like there was a bubble in railways, you
10:47
know, but the railways ultimately, once the bubble was
10:51
burst, the railways, you know, underpin in this country, it
10:55
created a federal system. It created a superpower,
10:58
ultimately helped create a superpower.
11:00
So I, I, I think the, the techno optimist would say, yes, there
11:04
might be a bubble, yes, it might burst.
11:08
There might be losers. As Jerry, you quite rightly
11:11
point out, there might be many losers, but the systems in place
11:15
are, are going to be so important or going to usher in
11:19
this new revolution, this new AI revolution that it, that it's
11:23
worth fighting for. But the question is, there's
11:27
another risk there. And it's nothing to do with
11:29
valuations, Matt. It's that macro view of does
11:33
this even work? Do we have the energy
11:35
infrastructure to build all of this out?
11:38
Does the technology work well enough?
11:41
And and also, you know, the, the, the kind of feedback that
11:44
we're getting about the implementation of this
11:47
technology within society, it shows that's there were still
11:52
some missteps happening. So it's not quite as glorious as
11:56
people in Silicon Valley will necessarily have you believe.
12:00
Just Jerry just briefly cast us back to, you know, the beginning
12:04
of the noughties. I mean, there's so much talk now
12:06
about how AI is the most fundamental revolution, you
12:09
know, you know, in since the industrial revolution will do
12:12
more to change our lives than anything since the invention of
12:15
the steam engine or maybe even, you know, the, the printing
12:18
machine or whatever the printing press.
12:20
I mean, is it fair to say that AI will expand our human
12:25
capabilities morethanthe.com era did or not?
12:30
Well, that's a very difficult question to answer.
12:32
This is like asking is the invention of the, let's see, the
12:38
electric motor, What kind of economic effect does that have?
12:42
And was that bigger than the invention of the electric bulb?
12:46
Well, you know, they're both very important and obviously
12:48
they changed society. They changed the way we live and
12:51
the way we each work. But I'd like to respond to
12:54
something that was just said, if I may, because it's important to
12:57
understand there is not going to be a need for anywhere near the
13:00
kind of capacity that's being built out in these data Centers
13:03
for a very long time. And if you were going to invest,
13:07
nobody ever made money betting that computing was going to be
13:11
more expensive in the future. That's just that's always been a
13:15
non starter. So you're investing here in
13:17
these NVIDIA chips that are very high-priced right now.
13:21
And when you look at that and and think about what are they
13:24
going to be worth in three years, the lifetime of those
13:27
chips is maybe three years. Now you go buy 10 billion of
13:30
those and you stuff them into some kind of giant warehouse out
13:33
in the middle of some remote desert.
13:36
And what do you think that's going to be worth in three
13:38
years? And is this going to pay back in
13:40
that kind of timeframe? The answer is obviously not.
13:43
So it's very clear to me that we're in a bubble and that whole
13:45
thing has to collapse. We're going to wind up with a
13:49
new kind of ecological hazard. We're going to have these
13:52
enormous acres and acres of data centers out in the middle of
13:57
nowhere and with the lights out, and it isn't even worth the
14:00
electricity to keep them running.
14:02
And they're going to be rusting away and they're full of all
14:05
kinds of toxic materials. There could be, there could be
14:08
bowling alleys or indoor golf or whatever, you know, think of it
14:11
like that. There aren't many.
14:12
People out there, maybe the coyotes, I.
14:15
Just want to OK, so, so, so there's obviously, so some
14:19
people, as you say, are going to lose a ton of money.
14:21
What about ordinary consumers? Are the people who've got, you
14:24
know, money invested in the stock market, people who've got,
14:27
you know, money in savings or jobs for that matter?
14:30
Those are different kinds of questions.
14:31
Let me start with that. Let me tell you what my
14:33
experience was. I can always speak to my own
14:35
experience. Really.
14:36
I'm not an economist. Talk about all the the specifics
14:40
of the numbers. That's what they do at the IMF.
14:42
That's their job. But let me tell you what my
14:45
experiencewasthe.com bubble burst when something very simple
14:48
happened, when the retail investors, the mom and pop
14:52
investors were no longer willing to eat any more of the risk that
14:57
the major private investors and venture capitalists could shove
15:01
down their throats through the investment banking process.
15:04
I watched while the investment banks kept putting out more and
15:07
more risky product to their customers, to their retail
15:10
customers. And eventually it was there was
15:13
so much money to be made by the bankers that everybody got
15:16
involved. When when the retail investors
15:18
are no longer willing to be at the end of this, this chain of
15:21
people passing off the investment to one another,
15:24
that's when the whole thing bursts.
15:26
And who gets stuck for the bill? The answer is the mom and pops,
15:30
the four O 1 KS, the people who put their money in the stock
15:33
market, and their faith in those people on TV on those TV shows
15:38
were pumping up allthese.com companies, and those are the
15:41
ones who wound up holding the bag when the whole thing
15:45
deflated. Before that, all the other
15:47
people in the chain still have an incentive to keep pumping up
15:51
the valuations and passing the investments slow.
15:54
And presumably, Heller, that is exactly what the IMF is worried
15:56
about. Yeah.
15:57
And I mean, I think there's an interesting dynamic as well.
16:00
When you look at the US economy, 40% of U.S. economic growth at
16:06
the moment is entirely AI. So it's, it's doing something
16:11
that's quite political too. It's really giving the White
16:15
House a huge boost, not just because of, you know, what's
16:18
happening in the stock market with these record high
16:20
valuations. And, you know, here there is a
16:23
real connection between, you know, the, the, the tenant in
16:27
the White House and what's happening on Wall Street.
16:29
There is a real if that's happening, if that's going well,
16:32
then I'm doing my job well, but it's also boosting the entire
16:36
the US economy. If you take out AI from the US
16:40
economy at the moment and look at business investment, then
16:44
it's actually a downward trend, which means all of the other
16:47
Trump economic policies, including, for example, tariffs
16:52
or somehow being shielded by this huge capital investment.
16:57
You know, Jerry was talking about all these warehouses, AI
17:01
warehouses. I think that they're thinking
17:04
about three, $4 trillion worth of investment into these endless
17:10
warehouses. And as Jerry rightly says,
17:13
there's a whole debate about whether those chips will be
17:15
obsolete. So I think, yes, it has an
17:19
impact on both lifting. Yes, there's a risk, but it also
17:23
has a political benefit of lifting the US country and
17:28
economy at the moment, which has a very political impact on
17:32
policy. And Jerry, Donald Trump, you
17:35
know, has fallen in love with the AI.
17:36
He's had all the AI Bros over in the White House for, you know,
17:39
for lunch, breakfast and dinner and all the rest of it.
17:42
What can he do to make sure, if anything at all, that this
17:45
bubble doesn't burst? What can he do to make sure that
17:48
this bubble doesn't burst? I don't think he has any control
17:52
over this whatsoever. Are there federal funds that he
17:55
can unleash? It would make a difference.
17:57
Or would that just make it worse?
17:58
Well, the problem is that's a forward-looking thing, which is,
18:01
let's just say, not in his wheelhouse.
18:03
What he's concerned about is what's happening today and what
18:06
he can get away with today, and he's not really worried about
18:08
tomorrow. Now, I got to say that has
18:10
worked for this man for a very long time, which is a rather
18:14
disturbing prospect, I'm sorry to say.
18:16
But what is what's what's being covered up by this massive
18:20
investment is a very interesting fact, which is when all that
18:23
money's going into something which is very unlikely to have
18:26
an economic return in a time frame that's relevant to
18:29
investors, that money is not going into other valuable
18:33
investments that could be made. Money's being pulled from a
18:37
clean energy projects and electric vehicles.
18:40
And you know, for God's sake, health research.
18:44
You know, I mean, this is covering up the fact that we're
18:47
giving up on, you know, this is your and my health we're talking
18:51
about. It's going to suffer because
18:54
we're not doing research and vaccines and other important
18:57
things that have been fundamental to improving the
18:59
health welfare of Americans. Investing for the future is it's
19:04
not with this current U.S. government, it's about, it's
19:07
about exploiting what we've got right now to get as much as you
19:10
can for a very small group of very wealthy people.
19:14
And of course, AI has been sort of covered in this Halo of, you
19:17
know, of being awestruck and people think it's going to
19:20
replace human brains, etcetera, etcetera.
19:22
But actually, increasingly we're getting reports, aren't we helly
19:25
of AI getting stuff wrong, of just not being particularly
19:28
good. I wonder if that is the thing, a
19:31
kind of collective realisation that AI is not quite what it's
19:34
cracked up to be, that might eventually burst the bubble.
19:37
I think there's one discussion, very excited discussion
19:41
happening in San Francisco and in Silicon Valley about the
19:44
frontier of this technology, about artificial general
19:48
intelligence. How fast can this kind of
19:52
agentic revolution go? And then how fast can we get to
19:55
artificial general intelligence where it has consciousness,
19:59
where it has? Kind of superhuman.
20:01
It becomes its own God. And then there's the kind of
20:04
more pragmatic argument about how is the real economy able to
20:09
utilise this technology and what is the application of that
20:14
technology? Because sometimes technology can
20:16
race ahead of how companies on the ground can use them.
20:21
And some of the survey results by leading universities suggest
20:25
that at the moment, AI is still failing.
20:29
Now you're in my my wheelhouse on on this kind of thing.
20:32
Artificial intelligence is a fabulous innovation and it's
20:35
going to be a tremendous advantage in automation.
20:38
But it is not what you see on TV.
20:41
It's not what you see in the movies.
20:43
It's got very specific limitations which are are quite
20:47
real and they're fundamental to the current wave of technology.
20:50
And we don't have time to get into this in a lot of detail,
20:53
but let me just say this at a very high level.
20:55
These systems are very good at certain kinds of prediction, a
21:00
short term prediction of new words and pictures and things
21:04
like that. But there's a myth that they can
21:07
reason and that they think. And the truth is that these
21:11
systems cannot reason and cannot think at all.
21:14
They are not logically based on, they give you the most plausible
21:19
answer, not the most accurate answer.
21:22
And that's a very important distinction.
21:24
Now people are going to get get wind of this when they start to
21:27
really work with them and go, well, I couldn't make a mistake.
21:29
That seems that stupid. Well, that was the most
21:31
plausible answer to give you. It wasn't the right answer to
21:34
give you. Now, that doesn't mean the
21:36
technology's bad. It just means like every
21:38
technology before it, it has certain strengths and certain
21:40
weaknesses. And I will tell you, since I
21:42
live here in the Silicon Valley, most of the people working in
21:45
this field, even right here in the Silicon Valley, do not
21:48
understand the fundamental limitations of this new wave of
21:52
technology. This other thing that's worth
21:54
saying is every time there's an advance like this, it takes
21:57
5101520 years for businesses to figure out how to make
22:03
productive use of this new technology, how to reorganize
22:06
their processes to make it to get value out of it.
22:09
So that's why you're seeing people going, well, I don't see,
22:11
it's not helping me in my business right now.
22:14
There's a there's a process that we need to go through and it's
22:17
going to take 10 to 20 years for that to work out.
22:19
So basically, Jerry, are you saying that if it's overvalued,
22:22
it's because it's over? Hyped.
22:24
I sure I'll I'll give you a yes to that.
22:26
It's overvalued because it's over hyped.
22:28
This is not suddenly going to breakthrough some this
22:33
artificial general intelligence AGI ceiling, and now it can do
22:37
anything and everybody will be out of work.
22:38
That's not going to be the case. I would give people a little bit
22:41
of comfort about this bubble though, in terms of the
22:43
employment picture, which is this, every advance in
22:47
automation has had exactly the same effects.
22:50
Short term, it puts some people out of work.
22:53
It makes us wealthier and that wealth creates new kinds of
22:58
jobs. And So what it really does in
23:00
the end is it changes the nature of work, what we how we will do
23:04
our jobs and what jobs we will get paid to do.
23:08
Those are the things that are going to be shifting in the
23:11
future. Here's my point of comfort.
23:13
If you've been around since, if you're over the age of 30 or so,
23:17
you'll remember the Internet bubble.
23:19
Well, the same thing was said about the Internet, and it was
23:22
true. All kinds of professions,
23:24
including yours, if I might point out, was devastated by the
23:27
Internet. Now, does that mean everybody's
23:30
out of work? Of course not.
23:32
Here we are at full employment. But the nature of what we do is
23:35
very different today than what we did in 1995, and that's
23:39
what's going to change. But just looking at unemployment
23:42
numbers, who's more likely to lose their job first, the
23:45
computer programmer working for the AI industry that's
23:48
overheated, or Someone Like You and me doing a white collar job
23:52
in a studio? Well, the answer is the the, the
23:55
computer programmer because the nature of program is is in the
23:59
process of changing. Now, I have to tell you how
24:01
surprising this is to me. I've been telling people for
24:03
years, I mean, everybody's parents say to me, hey, what,
24:06
what, what should my kids study in school?
24:08
I say, well, if you want to always be sure they have a job,
24:10
go get a degree in computer science.
24:12
Well, now for the first time at Stanford University, one of the
24:18
top universities, the graduates that were so sure they were
24:20
going to get out and get that big ticket job, they they're not
24:24
getting getting job offers. Well, the nature of programming
24:27
is changing, which is a fascinating story.
24:30
But the people who are involved in face to face interactions,
24:34
who are in professions where the authentic expression of human
24:38
emotions such as empathy or concern are very important.
24:43
They're the fundamental to this, the, the success of you and your
24:47
job. Those are the people we're not
24:48
going to have a problem because you really can't get that out of
24:52
the computer. Computers are never going to
24:53
substitute for that, and I don't think that they need to worry
24:57
about the the the skills that are going to be important in the
25:00
future are your ability to think clearly, to express yourself
25:04
clearly, and to properly apply new kinds of ideas.
25:09
Going back to your central premise of is, is, is this a, is
25:12
this a bubble and is it about to burst?
25:16
One of the things that doesn't help that and one of the
25:18
anxieties that I'm picking up here in Washington and around
25:22
with thinkers is this circular financing that's been happening
25:27
with all of these companies. This is when you know, NVIDIA is
25:32
investing $100 billion into open AI.
25:36
So you're you're investing in the company who's buying your
25:40
chips, who's your customer, who's then pumping the share
25:44
price higher. And it's the circular motion
25:48
that makes people wonder about, hang on is, is some of the froth
25:53
that we're seeing all about these same companies going in a
25:58
cycle and just investing and reinvesting and pumping and
26:02
again, getting that excitement, the market excitement.
26:05
And I think we haven't touched on this, but Jerry was talking
26:10
about all the investment that has come out of other fields,
26:13
drug discovery or green technology, and is all being
26:17
pummelled to AI at the moment. And it's that fear of missing
26:21
out by investors. You know, the amount of money
26:24
that is going into some of these deals to build out this
26:28
infrastructure for chips that may or may not be obsolete, to
26:31
build this new AI revolution is, is reflective of how people get
26:37
in bubbles, which is, Oh my God, Oh my God, Oh my God.
26:39
There's so much money being made and I'm looking at the share
26:42
price and I don't want to miss out.
26:44
And that kind of all these companies Open AI and Oracle
26:48
call and Microsoft and NVIDIA and AMD and all the deals that
26:52
we've seen in the past few months I think make people feel
26:56
even more nervous that it's the same players at the top that are
27:00
feeding this frenzy. OK, and I guess like all bubbles
27:04
and but you know, like like so much of the economy, it's about
27:07
greed and it's about fear and when to call time on one or the
27:12
other, you know, whether it's fear of missing out or you're
27:14
just too greedy and you're putting your money where you
27:16
shouldn't be putting it. So finally, to wrap it up,
27:18
Jerry, what are the, I mean, when is this crash that you
27:21
predicted very confidently on this podcast going to happen?
27:25
And if anything can be done to stop it, what would that be?
27:28
Other than people suddenly drinking lots of green tea and
27:31
being very. Reasonable.
27:32
Well, look, this is of course the question that every
27:35
interview like this always ends up in.
27:37
When's it going to happen? Well, I remember was around in
27:39
1999. You're a.
27:40
Futurist, you should know the answer.
27:42
OK, well, you know, the answer is tomorrow something I'm old,
27:47
I'll be gone before I have to answer for what I had to say.
27:49
So, you know, let me be, be careful about this.
27:52
The I think the honest answer is when the retail investors, when
27:57
there's nobody at the end of the line who's going to pick up the,
28:00
the, the investment at a markup for the people who hold it.
28:03
Now, that's when the whole thing will collapse.
28:06
And unfortunately, that's usually when it comes down to
28:09
the retail investors. So that's when I would would
28:12
what I'd really look out for is when there's all of a sudden
28:15
there's a way for mom and pop in, you know, Topeka, KS to be
28:19
able to invest in AI and you know, something AI fund or
28:23
whatever it is. That's that's when I think we're
28:25
going to, we're going to really see, see the end of this bubble.
28:28
And that's not going to be a pretty process.
28:31
And the answer to your other question, what are we going to
28:32
do about it? You got to pop, pop it now.
28:35
You got to pop it now. The sooner you take the pain,
28:38
the sooner people wake up and understand that this is over
28:41
investment in the area. That the fact that these
28:43
companies are investing in each other is a big problem is if
28:47
there was real demand for their product, why would they have to
28:50
put their money at work propping up their customers?
28:53
That's the real question that people have to ask.
28:56
I saw exactly this happen and it's everybody passing the money
29:00
back and forth with each other. And if you just look at 1 little
29:03
slice of that, it looks like it's up, up up until it's down,
29:06
down, down. Right, Helia, you're with the
29:08
custodians of the world economy. They don't want to see anything
29:12
go pop. What they might want to see is
29:13
sort of gradual deflation of the balloon, right?
29:17
Is it possible to deflate a balloon like the AI1 gradually,
29:23
carefully, without too much collateral damage?
29:25
By saying the right things, you know the right the right words
29:28
coming out of the right mouths. I think there there's no bubble
29:31
in history, economic bubble that has slowly deflated.
29:36
I think that just doesn't exist, Matt.
29:37
The truth is that you could, it's the momentum and to the
29:42
point about fear of missing out, people can still make a lot of
29:46
money on AI trades today, even though everyone is discussing
29:51
this bubble imminently bursting. And therefore there there could
29:56
be still can some considerable time to go before you see this
30:01
first. And by the way, there's an
30:02
average of, you know, about 6 to 9 months before bubbles burst.
30:06
Even when you call it even in the credit crunch, you know,
30:10
that came so close to when there was a credit peak.
30:13
Actually, people think the history books seem to write it
30:17
as you know, one day everything's great and then the
30:19
next day it all goes to toast. That's not true.
30:23
In reality. The truth is that everyone keeps
30:25
talking about the risks and the possibilities, but as you have
30:29
seen in recent weeks and recent months, they keep piling in and
30:33
buying, buying, buying. What are you doing?
30:35
Are you piling out into cash? Are you being careful?
30:38
I do not even try to market time.
30:42
As you probably know, I, I was tempted.
30:44
I went to my financial person. I said, hey, you know what, we
30:47
got to get out of this before the, you know, the party's over.
30:50
Let's stop drinking and go home and you know, go, go into cash.
30:54
And they reminded me and they were right.
30:56
You can't tell when it's going to burst and you don't know the
31:00
best long term strategy is very simple.
31:02
I just, I just hold on. I hold on.
31:05
I've been through this four times.
31:07
Each time I just held on and it gets ugly.
31:10
It rains for a while and then the sun comes back out and
31:13
everything's fine. Very wise advice, Jerry Kaplan,
31:16
I hope you're all right. I hope your financial guy is
31:19
right, and I wish you all the best.
31:21
Let's hope the bubble doesn't burst in the next few days.
31:23
That's it for this episode of The Forecast.
31:25
Thank you so much for watching. Until next time, goodbye.