Latest / Words & Numbers / Episode 501: Blowing Bubbles

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Episode 501: Blowing Bubbles · Words & Numbers

0:09
Hi, I'm James and I'm Anthony. And this is the grand return of
0:13
words and numbers. And it's been a while since we
0:17
how? Long has it been James.
0:19
It has been so long, so long that two cabinet members have
0:27
been fired. We involved ourselves in a war
0:30
in Iran that we've been told we've won at least five times.
0:34
JD Vance has released a book about his conversion to
0:37
Catholicism which features a Protestant church on the cover.
0:42
A high-ranking FEMA official says he was teleported 50 miles
0:46
to a Waffle House. The entire Afroman legal saga
0:52
has unfolded. JD Vance back to him has
0:56
declared that aliens are actually demons, and Christine
1:01
Umm's husband has been outed as a particular sort of
1:05
crossdresser. Oh, and Donald Trump today in an
1:09
Easter message we're recording on Easter Sunday offered praise
1:13
to Allah in a profanity. So truth social message to the
1:17
Iranian leadership. But on the plus side, Ant on the
1:21
plus side, you can now, for the first time in 50 years, eat fish
1:27
that were fished out of the Hudson River.
1:29
That, my friend, is how long it has been since our last episode.
1:34
Wow. And it doesn't look like that.
1:37
That feels like 3 years. That feels like 3 years worth of
1:40
nonsense. But it's only been 4 weeks.
1:43
Yeah. And here we are.
1:45
Here, here we are. I I want to hear more about the
1:48
guy who claims he was teleported to a Waffle House.
1:52
Oh, you, you really don't you, you really don't.
1:55
It's as it's as idiotic as it sounds, but but anyway, if.
1:58
If aliens are going to teleport you, don't you think they'd
2:01
teleport you somewhere more important than waffle?
2:04
House. But as Shitty Vance told us, and
2:06
aliens are demons, so you know, wouldn't they teleport them
2:09
straight to the bowels of hell? I guess, yeah, right.
2:13
I just expect like a Ruth's Chris or something.
2:16
Yeah, but that would be nice. Strip club maybe whole car right
2:20
inside the the club 'cause he was teleported in his car.
2:25
Oh, his car as well, OK. So he could get home, you know,
2:29
the 50 miles. Anyway, I could tell by the
2:32
look. Let's not.
2:33
Even go there. By the look on your face, it's
2:36
time for me to say what's new and exciting in your world this
2:39
weekend. Well.
2:42
I ran across this thing on NPR. I wasn't paying attention to
2:46
this, but the NPR thing grabbed my attention that the Supreme
2:52
Court was hearing the arguments in the birthright citizenship
2:56
case, and President Trump was the first sitting president to
3:01
attend a Supreme Court. What did you call that?
3:08
Case hearings, he. He.
3:12
Shouldn't he should never been there?
3:14
Yeah, yeah. It seemed, it seemed odd to have
3:20
a president, a sitting president.
3:22
There is if you're mixing the branches in a way that they
3:26
shouldn't be mixed, or I mean. He was clearly there to to apply
3:29
pressure. Yeah, well, apparently it wasn't
3:34
very successful because even the conservative justices, from what
3:38
I've read, seemed not to be buying his argument.
3:41
Yeah, it looks like he's got it. Was this one too?
3:44
And it got me thinking about this.
3:47
So you could probably name some other things, but just off the
3:53
top of my head, the big, the big controversial things that
3:56
President Trump has been involved with the birthright
3:59
citizenship business where he wants to revoke citizenship from
4:06
people who were born here of parents who were here illegally
4:09
or on long term visas. That the tariffs, the Iran war
4:16
and the the natural inclination is to point to him and say, yo,
4:26
look at all of this stuff, it's because of him and he shouldn't
4:30
be doing this. And I don't want to let him off
4:33
the hook. But at the same time, I want to
4:35
make sure that that Americans who are concerned about this
4:40
sort of thing focus their concern correctly.
4:44
And I think we aren't giving nearly enough attention to
4:50
Congress. So this question of birthright
4:55
citizenship, this should be if it's not a constitutional
5:00
question, it's clearly within the purview of Congress.
5:05
And if you look at the 14th Amendment right, at the very
5:07
end, it says Congress can enforce this with appropriate
5:10
legislation. There we go.
5:13
OK, so that's clearly in purview of Congress, the tariffs, Yeah,
5:17
Congress did give the executive branch the ability to mess with
5:22
tariffs under certain conditions.
5:24
But again, this is Congress. The authority sits ultimately
5:28
with Congress the Iran war granted it's we're still within
5:33
whatever it is the 150 day period of quote UN quote police
5:38
action, but nonetheless declaring war's congressional
5:41
thing. Congress has done nothing and
5:44
and when I say nothing, you might say, well, it's a
5:48
Republican Congress so you wouldn't expect it to go against
5:52
the president. OK, but why has Congress not
5:56
passed legislation affirming these things that he's doing?
6:01
It's neither affirmed nor denied.
6:03
It is sat on its hands and done absolutely nothing.
6:06
That that's right now, I think the war powers act specifies in
6:10
90 days, but I'm I'm not a war powers act expert, so take that
6:14
out for whatever it's worth. I, I think that's exactly right
6:18
what you just said, aunt, they Congress has habitually ceded
6:23
its authority to the executive branch for the better part of
6:27
100 years at this point, and it's time.
6:32
I think it should never have done it.
6:34
But having said that, it has done it, it's time to take it
6:38
back bit by bit, brick by brick, however they want to do it.
6:43
And I, you know, I, I think we've got a number of cowards in
6:47
the legislative branch and we always have, you know, they're,
6:49
they're at the whim of their various electorates.
6:54
You know, the House is up for re election every two years.
6:56
We're coming up on a, on an even numbered year or and you know,
7:03
there's going to be problems for the Republicans in the House
7:05
without question. And they're all thinking, how do
7:08
I just get through this with my skin intact?
7:12
But that's always their first consideration.
7:16
And it's about time, I think, God help me for saying such a
7:20
crazy thing that they put country above re election.
7:25
Yeah, because it should be country above all things if you
7:29
are a representative in a federal body.
7:32
And it's just not. And I wonder if if part of our
7:37
problem is that Congress, particularly the House, has
7:40
gotten so large that it's easy to hide.
7:44
You know, you're a handful of of Americans.
7:47
You can claim you're doing all sorts of things, but what can
7:50
they see you're once you're 1 amongst whatever it is 535 total
7:55
in the. Congress, I once, I once did the
7:57
math on this because if you read the The Federalist and the, the,
8:01
the original Constitution there, there's an electoral scheme in
8:04
there. And if we stuck with it, with
8:07
the numbers that were offered in 1787, we would have a House of
8:11
Representatives exceeding 3000 members right now.
8:15
You know. And could you imagine the daily
8:19
shit show that that would be? I mean, it's, it's so many
8:23
people, you'd never get anything done.
8:26
Yeah, I well, that's interesting.
8:28
You'd, you say you'd never get anything done?
8:31
I imagine that it would be easier to get things done even
8:35
in that environment if you had multiple parties because you
8:39
would have people, you know, different factions getting
8:43
together and, and, you know, offering votes in exchange to,
8:48
to, to form coalitions. But we don't even have that.
8:51
Yeah, you would always still need a majority and the winner
8:56
take all system that we have does not yield more than two
8:59
parties over time. So, you know, we would end up
9:03
with two parties there, just be divided among 3000 people
9:07
instead of the 35 we've got. Is it possible that the problem
9:13
here is not the people we have elected, but rather that it is
9:20
simply not possible to govern a country this size under the
9:25
system we currently have? Or perhaps there is no system
9:29
that could govern a country this size.
9:31
I would be more inclined towards that second answer and I I would
9:35
say there is no system other than authoritarianism, right?
9:40
Because you can always crush a massive number of people under a
9:44
boot. The Soviet Union ran pretty well
9:48
for a while, right? Well, which in a sense we're,
9:52
we're headed toward maybe a benevolent 1, but at the moment
9:57
the, the only entity in the federal government is that seems
10:01
to have any ability to rein in the executive branch is the
10:04
Supreme Court. Yeah, and you know, we'll see
10:08
how long that lasts. We had we had you could have
10:11
said a very similar thing under FDR and the the court ultimately
10:15
knuckled under. Yeah, I want to.
10:18
I want to give us something a little happier to think about.
10:21
I want to bring us to my ancestral homeland of Ireland
10:26
where there is a Saint of a human being, I mean an absolute
10:32
St. named Matt Cortland. Matt, if you're out there and
10:35
I'm guessing one of your buddies through you know, hooker by
10:39
crook will will get you this little bit.
10:42
He has done something for the ages Ant he walked into a pub in
10:50
well hell if I know Dublin I guess it was and paid €7.80 for
10:56
a pint of Guinness and thought to himself that seems a little
11:02
expensive and he said how can I find out if that was a little
11:06
expensive. So he created an AI agent that
11:10
called every pub in in Dublin, which is a bit much if you've
11:16
ever been to Dublin, there's a literally 3 pubs on every block.
11:22
And he, he had his AI agent call every single one of them and ask
11:27
it was the three 3000 pubs across Ireland let me get it
11:30
right. And they, his agent asked
11:33
whoever answered the phone, what is the cost of a pint of
11:37
Guinness? And he came up with the actual
11:42
price of Guinness, which he called the Gindex, which is just
11:46
brilliant. And the, and the Gindex
11:49
indicates that the average across Ireland is 6 year OO1.
11:55
So he overpaid significantly and now he's got the data to back it
12:00
up and he's making a bit of a bit of noise with it.
12:05
And apparently when his AI agent called a number of the pubs,
12:09
they they gave the price but immediately said what?
12:11
But we'll give you a discount if you want to come in right now.
12:15
So now we wait to see what this St. of a man can accomplish in
12:21
lowering the price of Guinness throughout the Emerald Isle.
12:24
God bless to you, Mr. Cortland. This is beautiful.
12:29
But you had me on. He had his AI agent call.
12:33
I didn't know agent AI agents could do that.
12:37
Mr. Cortland figured out a way. He even gave it a nice female
12:41
voice that was an homage to an Irish actress.
12:45
Wow, that's impressive and bad news for those of us who are
12:51
plagued by telemarketers. That's that's probably right.
12:55
But you know, you raise the price of a beloved product and
12:59
maybe you should pay a little bit for that.
13:02
Let the people be hurt, aunt. But the people be right.
13:05
Which brings us headlong into the foolishness of the week.
13:09
And I've missed this. And, you know, we had so many
13:13
options upfront as we started the episode of what could be the
13:19
Foolishness of the week. And for my money, it was going
13:21
to be JD Vance declaring that aliens are demons.
13:25
But there's a a race, a congressional race in Texas that
13:30
has taken a very, very odd turn. There's this guy named Bobby
13:35
Polito, and he's running down there and, and he's a bit of an
13:39
entertainer. And his Republican opponent,
13:42
whose name I don't even know, which tells you something, said
13:48
you'd be you'd be better to performing at parties than you
13:53
would be at Congress. And Bobby Polito said hold my
13:58
beer and started offering his services to quinceanera parties
14:04
across Texas. And every weekend he goes and
14:08
performs at multiple quinceanera parties for free.
14:12
All he asks is that he be allowed to leave his QR code
14:16
somewhere in the in the case. And I got to tell you, man, I
14:20
growing up in New England, I, I had no idea what a quinceanera
14:24
party even was until I was in my 40s.
14:28
And that was back to Utah the second time.
14:31
And it turns out our building at Strata, the nonprofit for, for
14:35
for which I toiled, we, we shared kind of like a building
14:40
space with an Event Center, which, you know, during work
14:44
hours was never an issue. But you know, in my, in my
14:47
world, work hours are I'm going to stay here until 3:00 in the
14:50
morning. And one night about 9:00, the,
14:53
the Mexican music just lighted up.
14:55
And it was. Loud.
14:57
And the crowd was huge. And I'm like, what the, what the
15:01
hell? What the hell is going on next
15:04
door? And I went over and I, I looked
15:08
at all these people. They'd spilled out into the
15:10
parking lot. And I said, what the hell are
15:13
all you Mexicans doing? And they said it's a
15:16
quinceanera. And I said, OK, what the hell is
15:18
a quinceanera? And they explained it to me and
15:21
everybody was having so much fun.
15:23
And then they said, do you want to come?
15:24
And I said, well, of course I want to come.
15:26
What? What's wrong with it?
15:27
Yes. So I, I went to my first
15:29
quinceanera and it was just a gas.
15:32
I mean, it was, it was fantastic.
15:35
And look, the, the Mexican population in Logan, UT, pretty
15:39
minimal, but that place was jammed, right?
15:43
And if Bobby Polito is going across Texas from one
15:47
quinceanera to another, he, he is going to make a dent in that
15:55
election. And I look forward to seeing if
15:58
it works 'cause he's looking to flip a seat, right?
16:01
This is a Republican seat. And you might, you might recall,
16:06
but I said Once Upon a time, and I'm going to reiterate this now.
16:09
I predicted that the Texas redistricting would end up
16:13
costing the Republicans seats because they had based their
16:17
redistricting on previous numbers that indicated the the
16:23
Mexican vote breaking for Republicans because that it did
16:27
break for Trump. But in the in the two years
16:31
between then and now, the Republican Party's managed to
16:34
lose that group of people in Texas and they're going to turn
16:39
out for Democrats this time in a way they turned out for
16:42
Republicans last time. So Mr. Polito might have a baked
16:46
in advantage in this seat because I think a lot of
16:50
Democrats in Texas might have a a baked in advantage.
16:53
It remains to be seen what happens, but I don't think it's
16:56
going to be nearly as rosy for the Republicans as they thought
16:59
when they redistricted. Well, it's interesting that your
17:03
people complain about redistricting and is it fair?
17:06
And it sounds like from what you're saying, it doesn't matter
17:13
the voter is so long as the voters vote their interest as
17:17
opposed to mindlessly voting for one party or the other, then
17:24
redistricting doesn't matter. But you're always driving
17:28
through it through the rearview mirror.
17:30
I mean, it matters, right? Let let's stipulate that it
17:33
matters. But if it were the be all and
17:36
the end all, you would redistrict once and then never
17:39
have to do it again, right? And, and we know as a matter of
17:45
fact that that just doesn't happen.
17:47
So you can get an advantage, but it's probably going to be
17:50
temporary. And when the opposing party
17:53
figures out a way to beat you, they're going to redistrict, and
17:56
then they're going to have an advantage that will probably be
17:59
temporary. And on and on and on and on.
18:02
So politics works in its own way.
18:05
But you wanted to get us back to AI, at least after a fashion,
18:08
Isn't that right? Well, well, kind of the the
18:12
topic I want to talk talk about today, we could I guess more
18:15
generally describe as bubbles. And I should, I should say
18:20
right, I should say right off the top that when I was a junior
18:24
high school student in Watertown, CT, we had an
18:28
assistant, we had a vice principal whose name was
18:30
Bubbles. Oh, I bet he got all kinds of
18:33
guff from the students for that. Well.
18:35
Obviously it was she and obviously that was the name
18:39
given to her by her. Oh, excuse me.
18:42
OK, OK. She dressed like a like a bit of
18:45
a high end call girl. I see.
18:48
Well, the, the, I'm we're talking about financial bubbles
18:51
here. And what brings us up is
18:54
somebody raised the question to me in passing about, you know,
18:58
financial bubbles, particularly with, you know, the latest being
19:01
AI and you know, looking for some confirmation that bubbles
19:07
are a bad thing and maybe we need some regulation to prevent
19:10
that sort of thing. And, and I kind of always
19:14
ignored them. And, and the reason is
19:18
economists, when we look at the economy, we look at what we call
19:22
the real economy. The real economy is the
19:25
production of goods and services as opposed to the movement of
19:30
dollars. So you can move dollars from me
19:33
to you, but if we haven't produced anything, then really
19:37
nothing's happened. It's just movement of dollars.
19:40
And so too, financial bubbles often are simply movement of, of
19:44
dollars. So I tend to ignore them.
19:47
However, I started thinking about this and I realized that
19:52
people who so many people who are concerned about bubbles and
19:55
they're dangerous things and so forth, are only looking at the
19:58
financial side. They aren't looking at the at
20:02
the real economy, the effects on on production of goods and
20:05
services. And, and it occurs to me that a
20:14
price mechanism in markets is reflects it so long as it's a
20:19
free market reflects all of people's expectations and their
20:24
abilities and their their constraints.
20:27
So when you pick up a bottle of water and it's $2.50 or whatever
20:32
it is, you can, in a free market environment, pretty well
20:37
understand that that price reflects everything that went
20:40
into producing it all the way up the production chain, and
20:44
reflects how badly people want water, how easy it is to get it
20:48
to them, all that stuff. It's all reflected in the $2.50
20:51
price. But here's the thing, how can a
20:55
how can a free market price reflect all of that for a
21:00
product that isn't well defined? Well, you know a couple of
21:06
things. It's, it's interesting, right?
21:08
Because first, when I have to go get gas, I don't compare prices.
21:14
I understand that there are three gas stations on on the 1st
21:17
2 miles out of my house, always the same price or within a
21:21
penny. So do I really care about the
21:24
$0.16 I could save on a full tank of gas?
21:27
No, I, I most certainly do not. So prices work right?
21:31
We know this. Am I going to pay a lot more for
21:35
my groceries if I go to Fry's or Albertson's or Safeway?
21:39
No, it's going to be roughly the same.
21:42
And then there's the issue that you bring up right the the great
21:45
unknown. When you price the unknown,
21:48
you're going to get all kinds of distortions andirememberthe.com
21:52
bubble. I remember doing something you
21:54
did not do, watching the Super Bowl during the the.com bubble.
21:59
Must've been 99 and I didn't understand the single ad that I
22:03
saw because every every company that bought 1 was pushing
22:08
their.com brand. But they never said what they
22:11
did right? Right.
22:13
And most of those companies are out of business now.
22:16
They could afford a Super Bowl ad.
22:19
They're all gone. You know, now go go back to your
22:23
example of gas for a moment, because that's a good one.
22:25
We all understand what a a gallon of gas is.
22:28
And yeah, you know, some are 87 octane, some are something else,
22:31
but we understand all this. So when I say the price of gas
22:34
is of 87 octane, gas is something that communicates
22:37
something to youbutyoumentioned.com, I want
22:41
to go back a little bit further. Think about the invention of the
22:44
automobile. When it was first invented, it
22:48
was unclear what an automobile was.
22:51
I mean, we know what an automobile is today, right?
22:53
But, but back then it was a new invention.
22:56
Does it have three wheels? Does it have 4?
22:59
Does it have a retractable roof, A fixed roof?
23:01
Do you have the crank on the front or a electronic thing?
23:05
Do you have two headlights or one?
23:07
How big is it? How many people does it see?
23:09
None of those questions had been answered yet because it was a
23:14
brand new thing. My favorite example automobile
23:19
might become my new favorite example.
23:21
It's actually quite compelling if you think about it.
23:24
But my favorite example heretofore has been television
23:27
networks and or channels, right? In 1955, what is a television
23:33
network? Right.
23:35
I mean, you can look at a television and know, all right,
23:38
this is the future. I'm going to invest in it.
23:41
Did you invest in the DuMont Network?
23:44
Hope not, right? Kind of like with the AI
23:47
business, there are, you know, 8 or 10 different prominent AI
23:51
companies right now. Will there be in three years,
23:55
I'm guessing half of them will be gone, right?
23:59
And they're all worth in fortune right now.
24:01
Well, in in that's happening because I guess there are two
24:05
things going on here. 1 is the market.
24:07
The real economy is trying to figure out what is this thing.
24:12
So you know, we start off with the car.
24:14
In fact, back in the day, one of the first cars when cars were
24:17
first invented had a horse head on the front of it because
24:21
people were used to, you know, when you're traveling there's
24:23
you're seeing you're seeing behind a horse had a full, you
24:26
know, full size horse head not, not a, not a hood ornament the
24:30
real thing, right? People didn't know what a car
24:32
was and it took, it took entrepreneurs performing trial
24:38
and error of this guy produces one thing, this guy produces
24:42
another. And the, the consumers figured
24:44
out I like this thing better or that thing better.
24:46
And over time it settles down. And so we have today the car.
24:51
Sure, there's variations, but basically a car is a car, right?
24:56
But here's where the bubble bubble comes in.
24:58
As the entrepreneurs are doing their thing, trying to figure
25:01
out what's a car and we're trying different, different
25:05
variations, investors are backing them.
25:09
And of course, the investors are hoping that consumers choose the
25:13
particular entrepreneur that the investor's backing.
25:17
And that's how you get the bubble.
25:19
All of a sudden people jumping on board saying, yeah, this is
25:22
going to be great. You see it now with, you know,
25:24
I'm a huge fan of ChatGPT and you know, as soon as that goes
25:28
public, I would invest my money in it.
25:32
That's the one I'm backing. And of course, the price of the
25:35
stock is probably way above what it should be worth.
25:37
But that's reflecting the fact that that we're still figuring
25:41
out on the good side, what's AI on the investment side, all the
25:46
entrepreneurs doing their thing and investors trying to back
25:49
them, while the rest of us are are figuring out, you know,
25:51
what, where, where should we put our money, both in terms of
25:54
investment, in terms of consumption.
25:56
Yeah, meanwhile, just a couple of days ago, one of, and it
26:01
happened on April 1st and I thought it was an April Fool's
26:04
Day joke. One of the one of the prominent
26:07
AIS, I think it was Claude, had its source code put up online.
26:11
That really, it was. Serious.
26:13
Yeah, that that's going to cause a problem, right?
26:15
That yeah, that's proprietary information.
26:17
Now it isn't. And you know that that's going
26:21
to affect the bottom line. Meanwhile, I'm a, I'm a grok guy
26:25
myself. Why?
26:26
Because it's free and easily accessible and I can use it as
26:31
long as I want without restriction, right?
26:33
This kind of thing, is it better than ChatGPT?
26:37
No earthly idea. It's more convenient and
26:41
convenient equals better in some respects.
26:45
So who the hell knows? And I I honestly have no
26:48
prediction which a is will still be around in five years.
26:52
None whatsoever. Let me, let me help you out with
26:55
that prediction. And, and I agree with you.
26:57
I don't know which one's going to be around in five years, but
26:59
I bet you whatever AI is in five years will be markedly different
27:05
from what it is today. I suspect that's right, and I I
27:09
hold open the possibility that will it will kill us all.
27:12
I'm less sold on that idea as time goes by, but you know,
27:17
these things are theoretically possible.
27:20
So in all likelihood it will follow the development of every
27:26
other man made thing and it will get decidedly better very
27:31
quickly. Over time it will become
27:34
commonplace, it will become integrated, and then after a bit
27:41
we'll move on to the next thing. The same way that we don't think
27:45
about right now, the Internet. Great.
27:49
I, I, I remember and do you remember?
27:51
A lot of our. Listeners are not going to
27:53
remember this. In order to get the Internet,
27:56
you used to have to go out to your mailbox and get ACD, right?
28:00
Yeah. And put it into a machine.
28:03
And then all of a sudden magic happened and you had Internet
28:07
for X number of hours and then you could sign up for AOL if you
28:12
wanted to. The Internet is still around.
28:15
It's become so ubiquitous that we don't talk about it anymore.
28:18
Remember when Al Gore talked about access to the information
28:22
superhighway and how we had to dump all these billions of
28:25
dollars into it so rural people could get it?
28:29
That turned out to be exactly the problem we both predicted.
28:32
Not at all. And you know, here we are.
28:35
We don't even think about it anymore.
28:38
Of course I have the Internet. What kind of idiot wouldn't have
28:41
the Internet? And I think AI will be kind of
28:44
like that. And I think the one of the ways,
28:47
you know, that we don't think about it that much is imagine
28:51
what would happen if it went down.
28:52
As you know, you lose connectivity from time to time.
28:56
It goes down. So I was working.
28:57
Well, now I can't work 'cause the Internet's down.
28:59
I'm going to go visit my Aunt Mildred instead.
29:01
Oh wait, I don't know how to get there because Google Maps is is
29:05
down, so I'll stay here. I'll do my taxes.
29:08
Oh wait, I can't. Because TurboTax is online and
29:12
you don't realize how much you use it until it goes away and
29:15
all of a sudden all these things you can't do.
29:18
Yeah, I mean they typically do the the routine maintenance at
29:23
1:00 in the morning and I am routinely awake at 1:00 in the.
29:26
Morning, right? And the, the epic tirades of
29:29
swearing that happened in this house when they do routine
29:32
maintenance at 1:00 in the morning, you could probably hear
29:35
them in, in Virginia where you live.
29:40
But I, you know, look, I, I, I, I don't know where this is going
29:43
to end up. And that's the interesting part,
29:45
right? And people are taking their best
29:47
shot and a lot of people are going to get really, really rich
29:52
and a lot of people are going to lose every, every dollar they
29:55
put into it. Yes.
29:57
But all of that is happening on the financial side of the Ledger
30:02
as opposed to the real economy side of the Ledger.
30:04
Yeah, people will lose their shirts.
30:06
People become very rich. But that, if you look at it, is
30:09
really just dollars moving from one person's pocket to another
30:13
person's pocket. And it's a result of the bubble
30:16
being inflated and then crashing.
30:17
But what happened as that bubble inflated, it was attracting
30:21
capital and entrepreneurs and investors to try more and more
30:25
different things. And the more things they try on
30:28
the real economy side, the more options consumer have and the
30:32
better consumers are able to say that works and that doesn't.
30:37
Well, as as I learned when I became an economist, open
30:41
parentheses, honorary close parentheses, prices are
30:44
information. You know.
30:47
They're information in real time, right?
30:49
And OK, sometimes things get way out of whack.
30:53
And that's information too. When you look at something and
30:57
you say Company X is selling for, you know, $300 a share,
31:02
there are X numbers of shares out there.
31:04
The market cap is thus this many billions, but they've never once
31:10
been in danger of turning a profit and they can't tell me
31:13
how they're ever going to. There's a lot of information
31:17
there. Wait, yeah.
31:19
And, and people will, I've heard people point to that as kind of
31:23
the, the, that's the final say. Well, the, the the companies has
31:28
no prospects for profit. You can't justify this price,
31:31
therefore bubble. But I point back to Amazon
31:34
because back in the days of Amazon, people said the exact
31:38
same thing. I was describing Amazon and as a
31:41
matter of fact the financial chattering class would say on
31:46
CNBC all day long. I don't know how this company
31:49
expects to sell dollar bills for $0.75 for the rest of its life
31:53
and hope to ever turn a profit. Yep, and yet a profit was
31:58
turned. A profit was turned, and I was
32:02
actually quite surprised because the first time they turned a
32:04
profit, I believe the company was at least 10 years old.
32:09
It was old enough that it it shocked me that they hadn't been
32:12
profitable to that point. But what happened was over those
32:16
years, Amazon was doing trial and error figuring out how to
32:20
turn a profit. It finally figured it out.
32:22
And it's not something that the entrepreneur, Amazon does by
32:26
itself You it's a dance that occurs with the consumer.
32:30
Entrepreneur tries things, consumers say yes or no.
32:33
Entrepreneur tries different things, Consumers say yes or no
32:36
by by giving or withholding their dollars.
32:39
And Amazon finally figured it out.
32:41
And now yes, indeed, it's it's profitable.
32:43
It's worth What is stock prices? And there were enough people
32:46
along the way who said, I believe in this company, I will
32:50
invest in this company. And that kept, that's what kept
32:53
it afloat. Yeah, right.
32:55
So. There there's plenty of examples
32:58
in the. Other direction, for every
33:00
Amazon there are hundreds if not thousands of not Amazon.
33:06
Yeah. And I think that's that's the
33:08
thing People will say, well, look at this is clearly a
33:12
failure of markets because, OK, fine, you've got an Amazon, but
33:16
then you have on the other side 100 different companies that
33:19
tried and failed. And look at all that wasted
33:22
money and talent and all of that.
33:24
To which I respond, we only know in retrospect that those were
33:29
failures. And why were they failures?
33:32
Because they tried something and consumers said no, you've got to
33:35
try it. And let the consumers tell you.
33:37
We had no idea that Amazon's model was the right one at the
33:41
beginning. We had to go through that, that
33:44
trial and error. Yeah, that that's exactly right.
33:47
And the consumer gets the last say every time.
33:50
And I my mind always goes to VHS versus Betamax, right.
33:56
The Betamax was a superior product in literally every way.
34:00
And they made one critical mistake on their way to full
34:03
integration into the home, and they disallowed pornography on
34:06
their platform. Sony did.
34:08
And people were thinking, yeah, I don't think so.
34:12
This gets me out of going to these awful Pee Wee Herman style
34:16
movie theaters where I have to interact with the public in a
34:20
way I don't want to, and this allows me to have privacy and,
34:24
you know, the whole bit. And it was just one bad business
34:27
decision that maybe couldn't have been foreseen in its
34:31
totality at the time it was made.
34:33
But the market spoke immediately, and Sony never
34:37
caught up again. Never.
34:39
Never. So Amazon, right?
34:41
Think about what Amazon does now.
34:43
This is a bookstore. People seem to forget that now.
34:47
It's an everything store, right? Amazon was books.
34:50
It was books and books only. The first place I go every time
34:54
I need anything is Amazon. And then I ask myself, is this a
34:59
reasonable price? If it is, I just pay it and they
35:01
bring it over. If I look at it and I say, geez,
35:03
I don't know. Then I compare the price to
35:05
everybody else. And if there's a significant
35:08
difference, I'll rethink it. And they're all kinds of
35:12
specialty items you would never buy from Amazon, right?
35:14
But for the most part, the stuff you need day-to-day, and then
35:17
all of a sudden now they're a pharmacy.
35:20
You can have your your medications fulfilled by Amazon.
35:27
My, my goodness, that's that's pretty, pretty good for a
35:30
bookstore. Yeah, but nobody thinks of
35:34
Amazon as a bookstore anymore. And you're, you're, you're
35:37
missing. And all of that is correct.
35:38
You're missing one of their important products, which most
35:41
people aren't aware of. Amazon sells computing services,
35:45
compute, online storage, this sort of thing.
35:48
In fact, backinthe.com era, I was with a start up and our
35:54
business model was we were, we were selling supercomputation
35:58
online. So you could log in and you've
36:00
got via the Internet a supercomputer sitting in front
36:03
of you. If you only need one for 10
36:06
minutes, we'll sell it to you for, you know, we'll rent you 10
36:09
minutes on this, on the thing and and you can do this.
36:13
Amazon basically is one of the companies that put us out of
36:17
business, but it put us out of business because it had much
36:22
better hardware, more hardware than what we had.
36:25
How did it get it? Because it needed it to sell
36:28
books. So basically, Amazon's selling
36:32
books at a loss to support buying its hardware that that
36:36
actually ended up being its its later product.
36:40
I, I, I wait for Amazon to get into the light truck business
36:46
because they buy all these light trucks for all their deliveries.
36:49
Why not just make them ourselves?
36:51
Somebody over there will say sooner or later.
36:53
And then you, oh, that's buy yourself an Amazon truck.
36:56
That's funny. I'm now imagining Amazon Air.
37:00
They're flying. Don't don't they have like the
37:02
largest? No, it's UPS has the largest
37:04
fleet. Yeah.
37:05
Yeah. But you could see something like
37:07
that happening. Yeah.
37:08
So there are there are all kinds of things that come as secondary
37:11
effects when when these sorts of things happen and we don't
37:15
really think of how wonderful they all are.
37:17
We just look at the one winning company and we say, well, that's
37:22
not fair. And you said something really
37:25
important a moment ago that the consumer has the final say.
37:30
This is something people do not appreciate.
37:33
And it it's probably one of the probably the most fundamental
37:36
truths of free market economics is the you as an individual
37:42
consumer. Maybe the corporation doesn't
37:46
care about you because you're going to spend 20 bucks a year
37:48
or whatever, but the corporation is terrified of you, plural.
37:53
Plural, because if the consumer has the ability to walk away and
37:58
take their dollars with them, the corporation dies.
38:01
Period. Budweiser still hasn't recovered
38:04
from the Bud Light nonsense. That they endured when they
38:08
decided that they were going to leave the redneck market and
38:12
chase after the LGBTQ market, which, you know, that's just
38:18
crazy. It's bud, like, for God's sake,
38:22
know your audience, right? Know your audience.
38:25
And they, they, they haven't fully recovered from that.
38:28
Yeah. Wow.
38:30
And people who say that the customer is is unimportant in
38:36
the individual instance, they're often correct.
38:38
In the aggregate, they're never correct.
38:41
Yep, right. I've been mistreated in, in so
38:43
many different retail places that I don't even know what to
38:46
say about it. And if it's only me and I refuse
38:50
to go back to those places, and I often do, no big deal on the
38:54
part of the purveyor, But if they treat everybody like that
38:58
and everybody stays away, they're out of business real
39:00
fast. Right.
39:01
And this is where social media becomes so important because
39:04
you, you and I do the same thing.
39:06
If we have have a bad experience, we have enough
39:07
followers, we get online and say something bad and all of a
39:11
sudden the company is now bending over backwards to make
39:13
it right. Not because they care about us,
39:16
they care about all the people who are listening.
39:18
That's right. I, I responded to somebody's
39:20
tweet not too long ago about pre authorizations in medical care
39:25
and I said, yeah, don't I know it.
39:27
I'm in the pre authorization limbo with my, my healthcare
39:30
provider, LA Blue. It's a Blue Cross Blue Shield
39:35
subsidiary. And I didn't give it a second
39:38
thought, but I, I tab them in it just to say, you know, what's up
39:42
with you guys? And they have an employee whose
39:46
job it is to find every negative thing posted on X and she found
39:53
it and called me on the phone. She had them dig through their
39:56
records to find my phone number so she could call me and say
40:02
what can I do to speed this along for you?
40:06
Nice, nice. You got to be you got to be
40:08
kidding me. It it, it was one of the most
40:11
amazing things I've ever experienced.
40:14
Was within two days on a throwaway post that I didn't
40:18
think twice about, and yet it mattered enough to them to get
40:22
me to stop doing that. To, you know, maybe see if I
40:26
could be hushed up in some meaningful way.
40:29
And turns out I can be. Now let me let me go back in,
40:34
offer a criticism, which is people who are listening might
40:37
say, OK, I'm following everything you said, the
40:41
wondrousness of, you know, the trial and error process and all
40:43
of that. But the fact is when a bubble
40:45
forms and then it bursts, they're real people who lose
40:49
their shirts. To which I reply, but they're,
40:54
they're people who were there in the 1st place voluntarily.
40:58
No one is required to invest in a bubble.
41:01
And if you get caught up in it and say, well, there's only
41:04
upside and I'm going to make $1,000,000, you know, and you
41:08
end up losing your shirt, that's on you.
41:10
I made. A bad call.
41:12
Yeah, I had a friend who duringthe.com bubble said I just
41:16
bought thousands of shares of this company as CSO or CS Cisco.
41:22
Whatever it was, no Cisco. Yeah.
41:24
And I said, do you know what that company does?
41:26
And he said I can't lose. He lost 3/4 of his investment
41:32
within a year of of making it. Yeah.
41:34
Absolutely you can lose. You can lose, right?
41:38
And regular people tend to lose more as a percentage basis
41:43
because they don't have the interior knowledge of the
41:46
product in the market that they're investing in.
41:49
This is why the S&P 500 beats individual.
41:53
The S&P 500 does better than professional fund managers.
41:57
You think you can beat it, right?
41:59
Probably not. Yeah, it reminds me of something
42:04
I ran across recently. It seems to be the case.
42:09
This was an article talking about, I believe it was talking
42:12
about the AI bubble and the bursting and so forth.
42:15
And, and it's the first time I've seen an article that
42:19
described, you know, dropping stock prices in a positive tone.
42:25
And it was saying there's a great opportunity here for
42:29
people to get in at low prices. I'm thinking thank God because
42:35
starting back in 1929 with the, the stock market crash, people,
42:41
people seem to have this attitude that you should buy in
42:44
when the price is high and when the price drops, get out.
42:48
That's the exact opposite of what you should be doing.
42:52
And now it seems that Americans have had enough.
42:54
Americans have had enough experience with stocks that when
42:58
the price tanks, they they regard it the same way they
43:01
would regard their favorite pair of shoes going on sale.
43:05
They say, oh, this is a great time to buy.
43:08
Yeah, the best investment I ever made was in the broad markets
43:13
couple of days after 911. Yeah, I just watched it, tank
43:17
and tank and tank and tank, and I said, well, it's probably
43:20
time. Yeah.
43:22
You know, and then this is, this is the way buy low, sell high
43:27
and, and people's natural inclinations to do the exact
43:30
opposite. You know, they buy high on a
43:32
wave of good feelings and they sell low as they panic.
43:37
But interesting way to maybe leave this one.
43:41
And I, I did a little digging not too terribly long ago about
43:46
the Tulip bubble in highland the Netherlands.
43:51
Turns out it may not have ever happened.
43:53
You know, I thought I heard something about that.
43:56
And that's that's remarkable because it's like in every
43:58
economics principles textbook. It's, it's kind of like the,
44:04
the, the cobra problem, right? It's or Isaac.
44:09
Newton in the apple falling on his head.
44:11
It's in every book. It it leads every story and yet
44:15
it probably did not happen. So I, I'm going to get back to
44:19
the tulips business one of these days.
44:22
Not today, of course. I'm going to watch basketball on
44:26
my TV like a normal human being. But one of these days I'm going
44:29
to get back to tulips. Because that's the lore, right?
44:34
That's the mythology of bubbles. Reality of bubbles might be
44:39
very, very different. And I think you and I both think
44:42
it is. Anyway, see you next time.
44:45
And by next time, I mean next week, because we're back, we're
44:51
here, we're something, and we're proud.
44:53
And you figure out what we are. And until next time, because I
44:59
haven't said it very much in four weeks, Be nice to each
45:04
other in these trying times. Everything's going to work out.
45:06
It's all right. See you next time, Aunt.
45:09
See you next time, James.