While Luke is motorbiking across Europe, Krzysztof is doing aerial acrobatics above Warsaw and dropping down on jet-skis, Bond-style.
Luke reads about Ray Kurzweil’s latest AI prognostications, which include discovering how to use hundreds of thousands of new compounds, leading to the promise of free energy and the need to capture that energy. Krzysztof, despite his $EOSE investment waiting to flower, cautions in favor of more tempered expectations with all things AI-pie-in-the-sky. $RLAY therapeutics being a good example: while it has the strongest AI platform in biotech, getting the drugs from clinical trials to revenue is a whole ‘nother ballgame.
Escape velocity in longevity science: fact or fiction? We discuss and debate whether we’ll be young enough to take advantage of all the medical advances. Hint: Badger needs to replace the bourbon with some tomato juice!
Read more here: https://www.economist.com/by-invitation/2024/06/17/ray-kurzweil-on-how-ai-will-transform-the-physical-world
AI avatars are coming to British politics. Is this another sign that we’re at some kind of AI bubble/market top?
$NVDA, the poster child of AI, is an astoundingly great company. But does that make it a good investment from these levels? Kryzsztof discusses the dangers of being an arrogant investor who disregards valuations and disparages the old in favor of the new, with absolutist thinking.
See Walter Deemer’s Special report from 2000 about investing arrogance: https://www.walterdeemer.com/m3spcl.htm
Segments:
[00:00:00] Intro
[00:02:22] Ray Kurzweil on how AI will transform the physical world
[00:11:03] AI Fakery in UK Politics
[00:14:13] The Dangers of Arrogance in Investing
WSW E33
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[00:00:00] Intro
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Woo, woo, woo, woo.
Luke: Hey, and welcome to the latest episode of Wall Street Wildlife with Luke and Christophe. Uh, today we’re going to talk about some big predictions made by Ray Kurzweil.
Christophe’s going to help us answer the question, Are you arrogant? If you’re an Nvidia investor today. Christophe, how are you?
Krzysztof: I’m doing well, Luke. Uh, I am back from my adventures in Poland where my uncle tried to kill me on a glider plane and then, uh, going full throttle on the jet ski right on the river where I grew up.
Luke: Nice.
Krzysztof: So you’re lucky you’re
Luke: At least, like, at the same time, James Bond, like, glide down, leap out, dive onto the moving jet ski and you’re away.
Krzysztof: Actually, the events were separated by a full day in between, so, uh,
Luke: to change the underwear.
Krzysztof: yeah, that’s right. And you, my friend, uh, are, look like you’re recording from quite a posh, luxurious, burgundy couched.
Luke: was nearly my bed last night. been on a motorbike tour, back and forth over the Alps. We’ve been up to the peak of lots of different, uh, ski resorts. And I was just exhausted and I, the trip finished yesterday. I flew in from Milan to Budapest, uh, last night and then promptly passed out on the sofa from exhaustion.
Um, but yeah, I’m in Budapest now and I got some buddies coming on Tuesday for a, uh, a week of mayhem.
Krzysztof: Right. So lest our esteemed listeners forget this lifestyle of being exhausted and passing out on motorbikes can be yours. If you listen to our investing wisdom, you too can find yourself in Budapest sleeping on burgundy couches,
Luke: You too can be gliding and water skiing, uh, with your incredible, gains made from short term trading. If you follow Christoph’s advice,
Krzysztof: Oh, come on now. That’s so unfair. That is so unfair, but we’ll get to that. Uh, when we talk about the, uh, potential arrogance in, investing that comes with, uh, having a, system that only, you know, that you believe in at the expense of others.
[00:02:22] Ray Kurzweil on how AI will transform the physical world
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Krzysztof: So, uh, you did some reading about an O. G. Of the AI movement.
Luke: Yeah. Ray Kurzweil. . He wrote an article quite recently, which I found pretty fascinating. And he just talked about, he opined on some of the outcomes. Of ever increasing I capabilities and, um, he listed a few things, but probably two, I will pick up on.
They’re both, they’re both pretty related. , one was around, Google’s project around genome understanding, material science and the properties of different materials. And up until Ray tells us up until about last year, uh, we had discovered 20, 000 stable inorganic compounds. And then Google has recently increased that to over 400, 000.
But this is still like right at the start of material science. And as we move into ever increasingly powerful AI models, they’re going to help us understand how to use those compounds in real life. ever increasing and what may seem today to be magical ways. So one simple prediction Ray made was how that will affect the efficiency of solar power capture and energy storage.
And essentially Going to race us towards unlimited free energy. That’s a real game changer for actually many of the companies that you own, Christophe. If we suddenly have essentially, um, we’ve reached sort of escape velocity with energy. Maybe companies that are investing in what could overnight become legacy battery technologies or solar technologies, uh, they could be hurt if they’re not ahead of that.
What do you think?
Krzysztof: Uh, I agreed. I mean, that’s one of the main reasons I have, my investment in EOS, uh, still a little bit of, uh, skepticism though. Um, healthy, hopefully healthy skepticism. I still own shares of Relate Therapeutics which is, I think the best AI positioned biotech. That whole space, we all investors have to remember that, um, it’s a lot more complicated than we think.
And just because there’s massive amounts of data coming out, say from an AI program, like DeepMind does not translate to clinical trials and revenue coming in. The reason that I still have Relate Therapeutics is because I think they have the combination of data and. modeling proteins in time to see, to increase the likelihood of a certain compound doing what we think or needed to do.
But out of the whole space, there’s still quite a few success stories. So we’re still very, very early innings. And I guess to underscore what I just said, maybe more simply, more does not necessarily equal more at this stage of the game. So a lot of these biotech companies and AI led promises feel still to me like more pie in the sky type predictions than reality, and we might be some years away before that channel closes.
Luke: Yeah. Let me, let me pick up on, um, another one of Ray’s comments and then we’ll tie that together with what you were just saying. So he, he also talked about something called he terms and longevity escape velocity. And so this is actually something I’ve been thinking about for a while. over a decade now, as the gray hair started to come in.
So evidently today, in the Western world, we’re extending the average life expectancy of a regular person by six to seven weeks every year. So if you lived say another 10 years, Then you could have expected to add 60 to 70 weeks based on current technology to your final lifespan. And hopefully what we’re doing there is expanding like the healthy life, not just extending like the really grim bit at the end where you’re bedridden and, uh, I’m really not in great shape and not enjoying life.
So sort of coming to your comments on relay and biotech more so than energy storage, but I think they’re very related. Um, as we understand the human genome, as we understand, like, the proteome, all the different proteins that exist, um, and there have been really big breakthroughs in that in the last month or two, um, as we start to develop personalized biotech.
targeted medicine for an individual, we’re going to really push that boundary. And Ray terms longevity escape velocity as being the point where extending the average life by not six weeks per year, but 52 weeks per year, i. e. every year you live, You’re going to, you could expect to live an additional year and eventually you’ll essentially get younger and younger.
So I’m, uh, you’re a younger man than me by a good, nearly a good decade. You know, you might, you’re in the gray zone with me, but you’re probably more likely to reach escape velocity than, than my post 50. Year old abused, battered, booze ridden body is going to manage. But, um, uh, you know, young kids today for sure, barring some really horrible accident probably could choose to live forever.
So, uh, if those of us in that gray zone, somewhere around our age, if we can look after ourselves and stay relatively healthy, maybe we can, my term is catching the train, if we can catch The live forever train, by just hanging on to as much health as we can, until the science catches up with us.
Krzysztof: Boy, there’s a lot there. I’ve thought about this topic quite, quite a lot too. That’s why I had you taking those cold showers. If you remember, this is the origin of a lot of that. it’s interesting. I’m feeling a little more skeptical than usual today. because usually it’s these kinds of things that get me really revved up and, you know, optimistic, which is a trait you and I I don’t think living forever is in the cards.
no matter what the technology is, uh, unless we’re talking about centuries away and who knows, but I don’t, I think the main point still stands. It’s what we’ve been talking about for so long now that we’re at this fascinating cusp, clearly transition from. Major revolution in speed at which things are changing and I think we’re all you’re saying Maybe is that or maybe it’s a slightly more grounded way is if you are wise enough to take care of yourself now Enough then you will have enough time to take advantage of technologies.
That might be so mind blowingly Disruptive that they’re hard to fathom still in this moment And it’s not hard to see that as soon as the possibility of, say, curing, uh, many kinds of cancers get on the table, things like curing the predominant reasons for Alzheimer’s or causes of Alzheimer’s get cured, then that health span you were talking about, as long as that gets expanded.
Then if I’m, if I’m still, you know, uh, fit and walking and being able to really travel well when I’m 80, that’s sort of, kind of, right, in, in my deep 80s, right, if I’m still traveling around the world, mid 80s, that’s kind of the equivalent of living to, what, 105? Because you cut out those, um, degenerative years.
Luke: Well, you know, the other benefit of living much longer is you give compounding even longer to work. Uh, if I can keep my 20, 21 percent CAGR running for like an extra 10, 20, 30 years, I’m going to make the hall of fame, baby.
I’m going to be a hall of fame investor. I may not be around to, uh, to enjoy the glory. But certainly my returns are going to be, uh, uh, world class if I can keep, keep a 20 percent CAGA, let’s say for 50 years, I’m 20 years in today.
Krzysztof: Right. So you’re saying all we need is an extra decade for there to be a badger statue, palace. hopefully with its claws out, you know, with, uh, with your net worth, like somewhere in diamonds below. Um, So, uh, any other insights from the Kurtz file?
Luke: Uh, a bunch of stuff. I’ll, I’ll drop a link to the full article. It’s paywalled, unfortunately. So you need a membership to go read it, but it’s worth a read. It’s a good article.
[00:11:03] AI Fakery in UK Politics
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Luke: Hey, Christophe, let me tell you about some other, uh, AI innovation. Uh, I saw on the interwebs. Just the other day, did you know in the UK, we have a general election coming up on the 4th of July, funny enough, uh, hopefully it’s going to be independence day from the incumbent party.
And one of the independent candidates standing for Brighton and Hove, where one of my friends is an AI avatar, AI Steve. Have you heard of such a thing?
Krzysztof: I have not, even though I have lived in Brighton and Hove.
Luke: tech AI person. I don’t know. I don’t give a huge amount of credence to, AI technologists in the UK unless they’re working for DeepMind. But anyway, evidently this guy, uh, made his fortune. In a company called neural voice, he’s standing as the independent candidate and that’s part of the country.
And so he’s, he claims he’s deployed on the internet, AI Steve, which you can go and chat to, and then you can ask questions and you can set policy and then, uh, and then that will feed into him and it will aggregate all the suggested policies, uh, into his position. if he wins a seat in the House of Commons, which is the way our government works.
I signed up today to have a chat to AI Steve and see how insightful that conversation was. And, uh, sad, sad to report, but not surprised remotely, it’s a complete gimmick and it’s a BS. Basically, you sign up, they catch your email address. And then you get like a nice thank you message with a frankly, pretty horrifying actual photograph of Steve Endicott, not the handsome looking avatar that you see on the signup page.
Uh, and there’s no ability to talk to AR Steve. There’s nothing there. So, uh, there we go. tweeted about it today because I think typical of, the overall UK political system. Uh, what you got there is a gimmick with a bit of a sound bite and no real substance behind it. Anyway, if you can’t tell I’m looking forward to a change in governance in the UK in the next month or so.
Krzysztof: What was interesting when I saw the photos of. A. I. Steve’s avatar and his real photo. I thought it might actually have been, uh, sort of parody satire paper where surely the candidate, surely this is somebody making fun of, uh, Steve. But it seems like this is self inflicted because the discrepancy between the avatar and his real photo is really, uh, on first impression, quite startling.
Is this, uh, I wonder from, for investing purposes, is this just another, you know, the 20, 000th example of, Not all AI things are shiny and good glittery and gold and maybe this is another sign of um AI fever , getting a little ahead of itself.
Luke: It certainly seems to be, doesn’t it? There’s some, there’s real AI and there’s just some fakery. And this isn’t even any of those. This is just marketing bullshit, I guess.
[00:14:13] The Dangers of Arrogance in Investing
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Krzysztof: Okay, so that takes us to the never ending conundrum with NVIDIA, both the company and the stock being our poster child for how should investors think about this very moment where we have a new company that is the most richly valued in all of the world, uh, but is, uh, what’s its valuation? 35 times next year’s earnings, I think
Luke: something like 90 times free cash flow. That’s the one I look at.
Krzysztof: right, okay, so whatever metric you’re using, it’s extraordinarily expensive. Now, this is a complicated situation because on the one hand, like we’re saying, AI is becoming the backbone of much of the world and much of the world’s advances from here, but, uh, not all great companies make for good investments.
Right. So I dug up an old piece written in the, during the internet boom, I think it was published in 2001, where the hedge fund manager was talking about the arrogance of a lot of the young money guys saying, Uh, all of these old stocks, the nifty fifties from, from the seventies and these. Dow 30 companies, those are now dead and you’d be a fool to invest in them because obviously the world is heading toward this new internet thing and, the hedge fund manager in question is, is, uh, retelling this from the perspective of, be careful when as an investor, you say things like, this is the way it is.
which he says could be clearly true. Like you and I would not disagree. I think that currently AI is the way it is, but then he pauses and urges us to consider that this is the way it’s going to be from now on is where the arrogance trap lies. What are your thoughts about that, just, just that piece?
Luke: Yeah, I think that’s probably true. Um, and it’s something I’m guilty of, I guess, as well. Like I love to invest in real sort of future looking things. And I love to cast aspersions on. Like yesterday’s technology or sectors that are not embracing technology to accelerate. and that, that, that probably does give you an advantage in the short to medium term, let’s say, but the world moves fast and today’s groundbreaking technologies could be tomorrow’s legacy.
Yeah,
Krzysztof: Well, I think that that’s what made the rest of that article interesting to me because there was a long period of time I think he used At that time, McDonald’s as the example for what happens when you buy a company that is richly valued. And even if it continues to perform very well over and over and over and over again, that compression of the multiple could last a lot longer.
And you as an investor might actually be out of a lot of money. So, I mean, ultimately this is, you know, one of these warnings about don’t buy companies that are Richly valued or rather I guess that’s a piece of it.
Luke: a key takeaway I took was. Like the stock is not the company, they, they’re certainly aligned and the company’s performance drives the stock’s performance, but you could have the greatest company in the world and it might be a terrible investment if all of that greatness plus , massive optimism is built into the valuation. you could have like a really boring, not very good company. But just such an attractive price, it could still be a good investment.
Krzysztof: right. Which I think, um, I mean, look, you know, going, going to, uh, our king of the jungle contest. When I compare our two portfolios right now, The companies that I love are all in yours. The companies that I think are the better investments are in mine. And up to this moment, your performance is much better.
, like you said, there’s a difference between a good business and a good stock. When the hype cycle ramps up, it becomes harder to tell the difference between the two. And when money managers and the public starts becoming extremely confident in, in their selection of a stock, in this case, say NVIDIA, then the arrogance bit starts to creep in.
And I think there’s, uh, red lights and flashing warning signs up ahead because we know the market could turn, on a whim, so to speak. And so, I guess I’ve been saying this for some time. Caution is warranted, even with the best of megatrends.
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