Part of you just wants to keep on proving
you can just keep on making more, right?
Yeah.
Then the other side was, well, now I have
kids.
I think artificial intelligence is going to
change everything.
Everything 180 degrees.
All these things have happened that change
how we do business, have changed how we live
our lives, changed everything, right?
The internet.
But what we're going to see with artificial
intelligence dwarfs all of that.
Hi, I'm Raoul Pal CEO and Co-founder of Real
Vision.
I'm really excited to bring you this next
interview.
It's rare to get one legend on the screen
but one legend interviewing another is something
extraordinary.
It's really only on Real Vision you'd find
something like this.
Here we've got Hedge Fund Manager Kyle Bass
picking the brains of his good friend Mark
Cuban.
So what Kyle gets out of Mark is extraordinary,
not something you see elsewhere in the media.
Kyle digs into Mark's investment process,
he finds out what his biggest stock holding
is also.
He talks at length about artificial intelligence
and the future of robotics and how he sees
the world evolving.
He also talks a lot about bitcoin and ICOs.
There's so much in this that they even cover
the ground of how to pass on legacy inheritance
to the kids, and what a kid should get versus
what they shouldn't get.
You know, it's incredible to hear these guys
talk and I think there's a lot you can come
away with.
There's some actionable ideas and some amazing
thoughts.This is what we do at Real Vision,
we try and find the smartest people in the
world, the best investors, people you don't
really get to spend time with, or you'd normally
need to invest millions and millions of dollars
in to speak to them, Real Vision gives you
the opportunity to learn from the mistakes
and learn from the thinking of the masters
of the industry.
You too can invest and think like Mark Cuban
or Kyle Bass.
First of all, Mark, thanks for coming.
This is something that is just going to be
a
conversation.
And I've got so many questions for you.
And I'm sure--
Vice versa.
You might have a few.
But as we sit here in Dallas, it's fun to
not be in Europe, and
not be in San Francisco, and not be in these
other places where so many people feel
like all of the innovation-- and you've done
some amazing innovative things here, in this
city, and you're well respected and admired
here including by me.
By some, yeah.
By some.
By some.
But yeah, I wanted to ask you a few questions.
And Raoul from Real
Vision, here, really wanted to-- it's funny.
When Raoul I talked, he said I want to know
this, this, and this, and I said perfect because
that's what I want to know too.
Fire away.
I'm ready.
So, let's start with, first of all, what you
do for Shark Tank.
We talked offline a little
bit about, let's say, some of the people that
follow you, I know, think that you do Shark
Tank to make money and potentially partner
with people.
And really, it's a labor of
love.
And more importantly, what I know is that
something that you do to foster
creativity and innovation and the American
dream, essentially.
No question.
Tell us about that.
The whole reason I do the show-- and now,
we're going into our ninth season Sunday nights
on ABC-- it's purely because it sends the
message that the American dream is alive and
well.
We'll have people from all walks of life,
from all parts of the country come in with
sometimes good, really impressive ideas and
sometimes just very basic, simple ideas.
But the bigger message it sends to kids, to
families, is that if this person from the
middle of Iowa or from Athens, Texas can walk
in and have an idea and a business they've
started from scratch, so can you.
And if they can walk in and formulate a presentation
and get an investment from us, you can go
out and get an investment and be successful
as well, with or without the investment.
And the show has gotten to the point now where
it's the number one show on television watched
by families together.
I literally will walk down the street-- I
had this happen two weeks ago.
This lady said, Mark, Mark, Mark-- I didn't
know her, obviously-- and she's, like, I just
got to tell you, my son sells slime because
of you.
I'm, like, he sells slime?
I have an 8-year-old son, so I know exactly
what she's talking about, right?
And so, he makes a slime in the kitchen, right,
and goes to his 5th or 6th grade class, whatever
it is, and sells it.
And she's, like, we watch Shark Tank.
We get all the ideas.
He understands cost of goods sold and selling
something at a profit.
And it's all because of Shark Tank.
I had another lady, yesterday, I was doing
a presentation somewhere.
And she was, like, you're my MBA.
I don't feel like we've got to go.
I just watch you guys because there's always
insights that I get.
And she works with small businesses that I
wouldn't otherwise get.
That's why I do the show.
That's awesome.
And you know, when we think about our educational
institutions,
one thing when I was growing up, no one ever
taught me how to balance a checkbook.
No one ever taught me how to think about business
in high school, ever.
I, literally-
And, truthfully, in college, they don't.
I remember, I was a junior in high school,
Mt. Lebanon High School in Pittsburgh.
And I wasn't allowed to take the one economics
class because I had to be a senior.
So, I, literally, started taking classes at
night at the University of Pittsburgh and
decided not to go back for my senior year
because they wouldn't let me take a finance
or business class in high school.
And that ended up getting me to Indiana University.
But yeah.
I agree.
We do, even to this day, we do such a poor
job of educating kids, not only about how
to manage their own finances, but how to see
the world and understand the impact of business
or understand their place within a business
when they get a job.
Yeah.
So, I see the fire and the drive in you that
you probably see in the entrepreneurs you
invest with.
No question.
And you probably don't invest with people
that don't have that fire.
Sometimes you miss it, right?
They come in, and they're rehearsed.
And the good
news is we get to do due diligence after the
fact, after we agree to do something.
And
so, we can pick up some of our mistakes and
cut them.
But there's the old saying,
sometimes you invest in a horse, and sometimes
you invest in the jockey, and I try to get
them both.
But you're right.
If you don't have that fire, if you don't
have that thirst to learn, and that desire
to compete, then you're not going to be successful.
And you see it a lot on Shark Tank because
it's an arduous part process just to get on
the show.
There's more than 50,000 people a season that
apply.
Every year they have open auditions around
the country.
And then they whittle it down to the 230 we
see while we're filming.
And of those, even 20%, 25% don't make it
on air.
Do some of the silliest Shark Tank pitches
get allowed in just to-
Because it's T.
Kind of complete the spectrum.
Yeah.
Because it's TV, right?
So, I invested in a guy-- So when I first
did the show-
- I came on as a guest 7 years ago.
And there was a guy that did a little dance--
I want
to draw a cat for you, right?
And I gave him $25,000 for a third of his
company, and
all we did was draw stick figures of cats.
And he charged $10 a pop.
And people were
buying them.
And so, literally, I got probably a 50% return
of my $25,000 investment.
And also, on top of that, I got hired to do
10 cats at $1,000 apiece by somebody because
the silliness of it is what sold.
But I made the investment, not because I wanted
to draw cats, right, but because he was really
good at SEO.
And so sometimes you see somebody who doesn't
really know how to manifest their skill set.
So, you start with them here, and we did some
things there, and then we took his creativity
and pushed him into other areas.
And now he's on to bigger and better things,
which is great by me.
That's amazing.
So yeah, that's a great story because it takes
an artist that has no idea how to run a business
and took you and--
Yeah.
And the he realizes he's got the skill set,
right?
And sometimes it goes the
other way.
I had one deal-- again, at the beginning,
I didn't know how long the show
would last.
So, I was doing deals like, who cares, right?
But there was this one lady.
And she made chocolate-covered pretzels, and
they were good, right?
And they sold
here in Neiman's another place.
I thought, well, I can help her.
Neiman's is in Dallas,
headquartered here.
And we go-- and I said, you know what, when
this airs, we have to have x amount of inventory,
and let's go over your pricing We're like,
cost us $14 to make.
We sell for $29.
That's a great margin for us, and then we'll
charge shipping on top of that because they
had to be cool to be shipped, right?
And so, I try to stay active and involved,
and so I started getting cash flow reports
almost immediately.
And cash was going straight down.
I'm like, what happened?
She goes, I decided to give free shipping.
How much is your shipping?$15
Not a great business lady.
That's awesome.
Needless to say - well, she's still in business.
But she's out of business.
She just doesn't know it, right?
All right.
So let's move in to the investing side of
things.
Sure.
You were the founder and creator of broadcast.com
and sold it to Yahoo.
And you've always been a tech innovator, and
you are to this day, I know from the conversations
I have with you.
But the question I have for you is, as you
think about your family, the Cuban family,
and the legacy and the assets that you built,
how do you allocate those assets.
I know you own the Mavericks.
It's a giant chunk.
It's worth a lot with a lot of money.
But how do you think about allocating assets
to different asset classes.
Or do you think from the top-down?
I don't, really.
I don't think from the top-down anymore, right?
So, in my mind, I had a number I wanted to
get to.
I had a certain amount of liquidity that I
felt like I needed that would cover generations,
right?
And once I got past that level, you go through
that push-pull where you say-- because part
of you just want to keep on proving you can
just keep on making more, right?
And then, the other side was, well, now I
have kids.
And what's my greater return?
My time with them-- what's my greater return
doing philanthropic things?
What's my greater-- Shark Tank is not the
best return, from a financial perspective,
on my time.
And so, I got to the point where I was, like,
OK, I'll dabble in different things because
it's fun and interesting to me good enough
that I know I'll get a return.
But I'm not worried.
As a family office, I've got x billions of
dollars in assets.
I need to make 7%, 9%, 15% or I'm disappointed.
Right.
Got it.
I'm not at that point.
So now it's more, what do I think is interesting?
What's my optionality?
What can I learn from-- because I'm into tech.
And what do I think can be impactful?
Interesting.
It's an interesting thought.
I'm going to go one place that you might not
want to go because I'm not trying to--
I'll go anywhere.
That's ok.
So when you think about handing some of your
generational wealth to your kids or-- I guess
handing is not the right--
Right I'm not going to live forever.
Let's put it that way.
Moving on some of the wealth to your children,
how do you think about what's enough?
Great question.
Is it your entire estate?
Is there is there a number that you think--
I know Warren Buffett's number, I think, is
$10 million for each child.
So, when I wrote my will initially, it was
$5, and not till they were 30, right?
So that I wanted them to go through life.
And I know my wife, if she outlives me-- probably
will-- she'll fill in the blanks like she
does today, right?
Like, my kids want money today, it's like,
how are you going to earn it?
I'm not that dad that says here's a present,
right, here's a bank account, here's a debit
card, just use it, or whatever-- no.
Here's your
Amazon account.
Not at all.
It's like, you want something?
You have to earn it.
It may be doing math.
Like, with my
8-year-old, it's math for money.
You have to answer math questions to earn
$1 or $5.
With my middle daughter, it's reading a non-school
book.
So, I'll give her a history
book or a biography.
And she'll make $20.
If it's over 300 pages, she can make more.
And then my oldest daughter is a challenge.
My 14-year-old, that's a whole different
beast.
All those things worked up until this year.
So, we're working through trying to figure
out what kind of jobs she can do.
So, the
point being that, I want them to recognize
like I did growing up, that you have to earn
what you're going to get and that it's just
not going to be waiting for you.
And so,
whether that amount is $5 million like I have
now or $10 million when they get to 30,
then who knows?
We can adjust.
But it's I think now is really where it matters
and the
habits that I get them into now are important.
Yeah.
Something I struggle with myself about-- I,
probably like you, I haven't talked to you
about your adolescent life, but I had a job
every day since I was 13.
Oh yeah.
Absolutely.
I didn't go on summer vacations.
I worked.
I worked every day for $3.05 an hour.
My first job was $1.60 an hour.
Mine was $3.05.
Yeah.
And I remember when the minimum wage went
up to $3.05.
It went $2.40,
then $3.05, right?
You're exactly right.
And I struggle with my children because I
want to be with
them.
I don't want them to have a job, right?
I want to go view the world with them.
And that's-- it's hard, right?
Because on one hand, you want them exposed
to all
these different things and to take advantage
of your success, my success.
But at the same time, you want them to have
the same foundation that we had.
Exactly.
Right.
And so, my decision has always been you've
got to work, right?
You're not
going to-- you may come on the private plane,
right?
We may go all these places, and
it may be a dream come true for-- probably
not for them because they're kind of used
to it.
It's like walking it a commercial airline
for the first time-- it's like, where's our
pilot?
Who are these people?
It's hard.
That balance is really difficult.
It really is.
It really is.
It's fun to hear how you interact with them.
Yeah.
It's a challenge.
And you get a sense, over time, whether your
kids are
grounded or not.
And I tell them-- yeah, I tell them I don't
want you to be-- you know,
my biggest fear, after your health, is I don't
want you to be an entitled jerk.
That's right.
Right?
If I think you have a sense of entitlement--
because my oldest daughter slips into that
from time to time.
She called me up one time.
We were on vacation, and she was with some
of her friends.
Dad.
What?
We're in a restaurant.
OK.
I forgot to bring money.
I've done that before too.
I call my friends.
It's ok.
We can put it on to our friends, right?
Yeah.
So, I've got some work to do.
But it is a challenge.
All right.
Thank you.
Let's get into-- I know you and I have had
an online back and
forth about what's going on-- I guess, let's
start with central banks.
Then let's get let's get into ICOs and digital
currencies because I think that'll be what
a lot of people are really interested in.
Yeah.
I'm really - That's what's hot right now.
I'm really interested in it too.
So how do you feel?
How do you think about what
central banks are doing, what they've done
over the last few years, and how our world
sits today, financially?
How do you as Mark Cuban--
How do I look at it?
Look at this?
And then we'll get into how you think about
the digital assets?
Context is everything, right?
So, when you're going through a great recession,
all
you have is theory and history.
And I think our Federal Reserve, globally,
really, they
followed the block and tackling rules, right?
They reduced interest rates and the QE
increased liquidity.
And for the most part, it works, right?
And now we've reached a
point now where there's become a division.
Because the increase in value of assets has
been focused on so few assets, if you will,
that most people don't own.
Maybe some people have benefited from their
house growing up in value until 2008,
and then a lot of it has come back if you
were able to retain it.
But the wealth divide
has gotten bigger and bigger and bigger.
And I think we're kind of in a Catch-22 now
where you don't know what's going to happen
next with the economy.
We're trying to
normalize rates globally.
The global economy is growing faster now than
it has in a
long time.
You've got China who overspent.
And I know you've had a lot of concern
about what's going on over there.
And so, it remains to be seen what happens
there.
And they're such a big part of our economy.
So, you've got all these competing interests
while our economy is growing.
And so, I'm
not an economist, but you would think you're
starting to see normalization here, and
interest rates trickle up, which is fine because
you're still under historic norms, right?
And what Draghi is doing, I think he's right
because you want that pop to continue over
there.
You don't want to see a global economy start
to go into recession, with Chile,
what's going on in Spain, and things that
are happening in Italy.
And then everybody's got a hedge against China,
right?
Because if they start to tank,
even a little bit, and who knows what their
actual growth rates are, right, but if they
tank even a little bit, and you don't have
a hedge, and you don't have some leverage
still available, we're all in trouble, right?
Because they can drag us all down.
So, I'm
not opposed to things that are happening.
I know there are some people that just want
things normalized right now, just get rates
up right now.
I'm, like, it's not-- fix it a little bit
at a time.
So that's where I stand on it.
Yeah.
The incrementalism of all the Federal Reserve
banks is warranted.
Whether
rates should have ever gone negative is as
left to your imagination.
Yeah.
And look, the money went where the money should
go at that point in time.
Here We became more global because of that.
And there's a lot of good things to be
said from that.
Yeah.
So, when we think about-- global cash balances
today are the largest they've
ever been.
So when I think about what happened is-- the
first QE that happened in the
US, and Europe, and Bank of Japan, Bank of
England had to fill a hole, right?
There
was there was a hole.
Given the global financial crisis-- global
financial institutions were
insolvent.
They had to print that money.
They had to inject it--
No question.
--in the banks.
And that's something that you and I would
have done if we were
running these institutions.
Whether or not we agree with expanding fed
balance sheets,
we'd have to do it.
So, the second part was the part that felt
good, the part where we started to see some
growth, and started to see cash getting distributed.
And the interesting thing is it was fed policy
was unintentionally distributed to the wealthy
because the wealthy are the only people that
could use leverage and assets, and they don't
spend it right away.
And because of this drop in the stock market,
people who could afford to lease
got out of the market.
And because so many people lost their homes,
whatever savings
you had, you used to try to save your house
and to try to reimagine your life, if you
will, and recreate your--
Exactly right.
And so, you've got a greater disparity in
standards of living, and that's where we are
today.
And now we're at this point where-- so there's
my view is-- we're at this point where
the feel-good part of the printing is now
maybe moving into the third phase.
And that
third phase is, when I look at global cash
balances, they’re about 110% of global GDP.
They've never been that high in the history
of the world.
110%?
Yeah.
So, there are almost $90 trillion of cash.
OK.
And then, if you include sovereign debt below
1% yield, which I consider-- call it a cash
substitute-- it's another 60% of global GDP
So today that number is 160%, 170% together.
Historically, that number's been 40%.
And how much of that is in commercial entities
versus sovereign-- not just debt, but sovereign
cash versus commercial entities?
So, like, if you're talking about sovereign
wealth?
Yeah.
That's where the majority of it is, right?
There's, call it, $6 trillion, $7 trillion
in sovereign wealth.
And what do you think is in commercial-- the
Apples of the world and just parked cash?
I actually don't know how it breaks down between
the generic individuals and businesses.
And the reason I ask is because, by definition,
if you can get a greater return, then you
can earn just on your cash, you should do
it.
And it's not like it hasn't been easy to borrow
money, right?
You're saying-- I know where you're going.
You're saying there's a corresponding liability
because Apple has cash, but they've borrowed--
to the tax arbitrage?
Well, there's the tax arbitrage-
I think that's not a large percentage of the
total global cash balance.
No.
Where I was going-- more do that is people
are looking at what's the value
of all that cash, right?
What's the impact?
And if it was truly impactful, it would have
been invested.
Yeah.
Right?
Because you could borrow, even if you couldn't
move, right?
You could borrow against whatever money you
have overseas.
You know, Hewlett-Packard, Apple-- they all
do, right?
So, in terms of the impact of all that cash,
the question is can it change anything?
Will it change behavior if it's repatriated
or rates go up?
I don't think it will.
Yeah.
I think you're exactly right.
But the fact that it exists out there-- and
let's say,
at the Milken Conference this year, I sat
in a room with $5 trillion in cash.
And I was
an invited guest, just-- I was a wallflower.
It's crazy, isn't it?
--and just had to stay quiet.
And they were talking about how they're going
to invest their money.
And they're not going to buy stocks.
They're not going to buy bonds at 1% or 2%.
They're going to keep buying infrastructure
projects and ports.
And they are going to invest in hard assets.
That's how they're all thinking.
The point I'm trying to make here is, what
in your life has gone down in price in the
last 10, 20, 30 years?
Oh, nothing.
Right?
The value of cash is certain-
Maybe data plans, right?
When you look at the CPI-
Well, yeah, anything digitally-
Anything digital data.
And truly technology has been-
No question.
--so innovational that we've had good deflation.
But I think now, when you look at
the price of just about anything in life,
it's going up.
My view--
See, I would disagree.
Right.
I think artificial intelligence is going to
change
everything, everything, 180 degrees.
I've been in the tech business.
I started selling PCs
in 1982, right?
I started selling local area networks-- we
were the first companies-- my
first start-up in 1983.
I sold that, and then I started trading just
tech.
I started a hedge
fund-- started just trading tech stocks--
sold that within 90 days.
And then we started
streaming, then first hide-- all these things
have happened that have changed how we
do business, changed how we lived our lives,
changed everything, right, the internet.
But what we're going to see with artificial
intelligence dwarfs all of that.
And you think it will be deflationary?
Yes.
Because there's going to be-
Because it displaces jobs?
A lot of jobs.
OK.
That's not good.
Well, you can make arguments, right-- it's
not a question of how it plays out over
100 years.
It's a question of how plays out over 10 years,
20 years, right?
Who knows what exactly-- But I can tell, at
the beginning, which jobs are going to be
displaced.
I can tell you the real estate is going to
be displaced.
I've talked to major companies that, they're
asking me, Mark, we're going to have all this
extra real estate in all these towns.
What are we going to do with it?
Do you have any ideas?
And I'm talking to them about--
Because they're going to be centralizing their
operations?
Just fewer people.
Fewer people.
Yeah.
Just fewer people.
So, the concept of you calling in to make
an appointment
to have somebody pick up your car to get your
oil changed, right-- someone will still drive
to get your car, but there's going to be no
people in transacting any of it.
That's terrible.
It is what it is.
It's great and terrible.
This is Dickens.
Yeah.
It is what it is.
Yeah.
It is what it is, right?
But so, if you look back at China's ascension
in the WTO-- call it 2001, and you
look at that 10 years later, which Lighthizer
did in a Congressional report-- 4 and 1/2
million jobs were gone in the Rust Belt in
the first 4 or 5 years.
And when you look at a heat map today of the
opioid crisis, it's the Rust Belt.
No question.
And truthfully, if you look at Trump-- OK.
We're not going to go into politics.
I'm going to make-- No.
I'm going to make one statement that is just
an observation of the election.
The place where he won was the Upper Mississippi
River Delta-- that's always been blue, and
it flipped red because they lost their jobs--
They lost their jobs.
-and they were hoping.
Well, yeah- there was no- And that's the challenge
right now.
And I don't think people fully understand
the impacts of it.
But what happens when AI displaces more people?
So, I've seen the first run of the
movie.
Talk to me about the sequel.
Because it doesn't make me excited about America.
So, when I sit down with these companies,
we're not doing it just to commiserate
how bad things are going to be.
The question is what do we do?
So, I've spent way
too much time teaching myself about machine
learning, neural networks, deep learning,
writing code, teaching myself Python just
cause I want to get a hands-on experience
in
this, right?
So, when we have a conversation, I may not
be able to build all of it, but I can understand
it.
You can understand it.
Yeah.
I can understand.
And so, when you talk about-- we went through
this
transition where we started off with spreadsheets
that was what-if, right?
So, you have
all these people here playing what-if, and
you postulate all these different variables,
right?
And you build models.
And then you have different plugs, then you
look at your
models, you compare them to reality, right?
But whatever fits on a spreadsheet-- and if
you get smarter people, they think of better
variables, and then you have better probabilities
based off of what they plug-in when
you play what-if, right?
That's the way you've been doing it since
you started.
That's the
way I've been doing it since I started.
What machine language does is says, OK, we
can take a lot more variables than you can
ever think of.
We can take all of them.
Right.
We take all of them and then say, if this
happened, then there is this
probability that this will happen.
That's only the beginning, right?
Then, we start getting
into something called generative artificial
intelligence where it starts to think, right?
And for the most part, now, not all the way
through, you still have to label everything.
Here's all my variables, right?
But then when you give it to it, and you say,
based off of these
variables that are labeled as such, here's
an unlimited number of opportunities, right?
And so based off of those, we're going to
create biases and weights for them all and
let you come up with some conclusion.
Let it give you a variety of conclusions,
and then
you decide.
Going forward, you won't have to label anything,
right?
But until then, if I
wanted to do an analysis of who knows what--
how to furnish buildings across the world
the most cost effectively.
And part of it was trying to label all anything
that could hold
water, right?
So, it's easy to say that's a cup.
But you're going to need somebody to say,
OK, this is also a receptacle for water in
someplace that has nothing, right?
This can be a receptacle for water, right?
Somebody
standing there with their mouth open-- that
requires image labeling and variable
definition.
Those are the types of jobs that are going
to be available over the next 5,
10 years that didn't exist before.
Now, they're kind of like Amazon warehouse
jobs.
They're brutal, right?
And it's not anything negative towards Amazon.
It's just, it's going
to be make good work.
And then we're also going to have our own
Tennessee Valley
Authority.
Where they had made good public works, we're
going to have make good
jobs where we may use programs like AmeriCorps
just to walk kids to school or just to
read to kids.
We may have to tax robots, right?
Whatever it may be, because--
Did you just say tax robots?
Yeah.
Yeah.
Because there's going to be displacement.
There's going to be a huge
displacement.
And as AI gets smarter, the delta is going
to get greater until, hopefully,
there'll be new jobs created that cross back
over.
But there's going to be this
displacement period that-- so when you say
all assets are starting to go back up, right--
I think if you look at the Fortune 500, the
S&P, whatever, and you look at total employment
from those companies, it's not going up.
Yeah.
You're right.
It's going straight down.
And there's still wage stagnation, which has
been perplexing central bankers.
And it shouldn't be perplexing.
We're back to full employment of those that
are actively searching for jobs-- like
not the U6 number, the U3 number-- but we
haven't seen wage gains.
Except for a few skilled areas we've seen
some wage gains.
Well, yeah.
At the high end, we can't pay enough to get--
so when I talk about,
within the artificial intelligence realm,
there's a company in China paying million-dollar
bonuses to get the best graduates.
Or best professors, for that matter.
They're pulling them out of school.
Exactly right.
And so, Vladimir Putin says the winner in
AI controls the world.
China puts together a future plan saying whoever
dominates in AI-- and they're subsidizing
Tencent, Alibaba, et cetera, right?
They know it's a race.
It is a race.
We cut our Office of Technology and Science
to one person who was
an assistant to Peter Thiel.
That's where we stand.
So, we talk about infrastructure jobs,
robots are built in Germany, and they're getting
bought by Chinese companies.
In some
respects, I think some Japanese companies
bought as well.
We don't build robots here
very well, right?
I just invested in my first robotics company,
Hirebotics that puts robots
into companies.
They're in Kansas City, I think it is, now.
But they lease and rent and sell robots into
all these different types of circumstances
to
replace people, right?
But I had to learn.
I'm not saying it's a good thing or a bad
thing.
It's going to happen with or without me.
But I wanted to learn what was going on.
Those
building up a robotics industry here, investing
in our AI industry here, that's the new
infrastructure.
Because if we don't do it, and China or Russia
win those wars, we're
SOL.
We're out of luck, right?
And so, when we talk about the price of assets
going up-- if you're talking about
intellectual assets, if you're hiring, like
we were just saying, the price is skyrocketing.
Montreal has become the center of the universe
for computer vision.
It's not US-based
schools that are dominating any longer in
those areas.
We've got lots more kids-- MIT,
all different schools, right?
And kids are starting to realize there's a
place for them to
go.
And I'm out there telling people, the first
trillionaire is going to come from somebody
who comes up with something--
-figures that out yeah.
-really unique in AI.
But when I think about-- So as I sit here--
and I don't have the knowledge you have
about AI.
I try to read everything I can.
Yeah.
We all do.
But I don't know it nearly as well as you.
Yeah.
If you go into my bedroom, there's a stack
of Machine Learning for Dummies, Neural Networks
for-- no lie, right?
I have a couple of those books.
I'm not too proud to read those books.
I started with Pedro Domingos's book, and
I can't even get all the way through it.
No.
The Master Algorithm is a great book to start
with.
But as I sit here as someone who follows macroeconomics--
the calculus in what
you're telling me today is, you're going to
see a lot more AI, you're going to see
generative and general AI, which is kind of
the holy grail.
I think that's what everyone's
after.
That's many years off.
But if we're going to see that-- what you're
telling me is there's going to be massively
increased productivity because of AI, and,
therefore, robotics and things are going to
be inserted into the global fortune 1,000.
That does mean fewer jobs.
And when I think
about that from a mathematical perspective,
increased productivity, increased AI, fewer
jobs-- we still have population growth.
Me, as the macro economist, is thinking the
answer there is not a good one.
That means many more wards of the state.
Yeah.
That's the reality.
That's just reality, right?
Larger opioid crisis, many more wards of the
state--
Unless you recognize it's coming.
No.
You're right.
It's a difficult plan.
It's difficult.
But it's a reality.
And so, when I look at-- like I just mentioned,
right?
So, if you think of the Tennessee Valley Authority,
that's where we are.
Whether we
like it or not, that's what's going to happen.
But instead of creating make good jobs to
fix a pothole, because those are transient--
and you can even make the argument that
the increased traffic prior to that reduces--
I don't buy that argument, but I hear you.
Yeah.
There's always two different economists, right?
But the point being that,
when we had infrastructure projects that connected
cities, right, that increased
commerce significantly, and that led to our
boom, right, the baby boomer generation,
right?
We did just win a war though.
Yeah.
And that helped too, right?
But all those together, when you connected--
All those-
You connected Dallas to Athens, Texas, that
opened the door for Athens, Texas,
right?
If we just fix what's already connected, we're
not going to see a boom.
We're
going to spend $1 trillion, regardless of
who spends it, we're not going to get a boom.
We'll get a pop, and it'll come right back
down.
Because now you can drive your car
fast, or maybe it's even an autonomous truck
that goes back and forth.
But it's still the same goods, the trucks
are still the same size, et cetera et cetera.
If we
invest in robotics, in AI, that could be stair-stepped
so that we can truly see a boom.
The question is how do you share that wealth,
right?
Now historically, I'm a libertarian.
The thought of sharing wealth was abhorrent
to me,
right?
But everything is contextual, right?
Because the cost of instability, and the cost
of
social unrest, is always a lot more expensive
than the cost of social programs.
That's right.
And so, if you're just looking at the variables,
and you're looking at it as a math
equation, and you say riots, political instability--
because you have opioid crisis--
Drug epidemic-
-expanding, or make good jobs?
Which would you rather have?
Well, how do you make good jobs if you're
taking all the jobs away?
Well, no.
Make good, as in TVA, where you're creating
jobs, right?
Where, it may
be paying somebody-- let's just say we define
a working wage as $15 an hour, $30,000
a year.
And I'm paying a 62-year-old individual to
walk a kid to school or to read to them when
they get home.
You see it in Japan already.
You see people shining escalators because
they don't have much to do, right?
I mean, there's no crime there.
It's just life is a lot-- well, I won't say
easier.
But they have other challenges.
They have a declining population.
I wonder if we have to go into a population
decline to make it work.
Well, there's evidence that says that we're
starting to decline.
And if we don't have
additional immigration, we're going to have
bigger problems as well, right?
And so
we're going to need people-- Look, we're going
to get to-- in my opinion-- we're going
to get to a point where decisions are made
individually on arbitrage of time, right?
We'll value our time.
You'll value your time.
That's the whole Uber economy, right?
Where people say what's it worth?
We do that now.
We do.
What's it worth for me versus I can hire somebody,
right?
And that somebody can
be for 10 minutes.
That somebody can be for 10 hours.
It can be for two seconds.
Like,
a couple of my company we have scripts now
for Mechanical Turk on Amazon where it might
cost us a penny to label things.
Really?
Oh, it's crazy, right?
I invested in a company because the guy was
a computer
vision genius.
All he does is hand-puppets.
So, you do like this, you know, hand-puppets
like you do with your kids when you were little,
only it digitizes it using AI because he
has to write computer vision AI scripts that
say, OK, this is a knuckle, here's a second,
here's a thumb, right?
And I'm going to recognize--
It shows it spatially.
Right.
And all that stuff is advanced computer vision.
But it all goes back to hiring
people based off the value of time.
When I make decisions build versus buy, robotics
are now part of the decision.
It's what's the most cost-effective way?
What's going to
give me the best return?
What's going to be the path of least resistance
for me,
effectively?
And now it's not just, OK, who can I hire?
It's what can I hire?
Let's move into digital currencies and ICOs.
You've been an innovator in this space.
I've been a spectator.
I don't know if I've been an innovator, but
I've been more spectator.
But yeah.
I'm involved.
Let's put it that way.
I've been a spectator.
I'd love to get your view.
And those are two separate and
distinct categories.
So, I'd love to get your view on both of those
categories separately.
There are actually 3, right?
So there's blockchain-
OK.
Sorry
- technology right?
And I'm a big fan of blockchain.
I am too.
I take that as a given.
So I've put blockchain out.
That's a given
So, then there's-
The decentralized network is perfect.
Yeah.
Now there's challenges right.
But that leads into the fact, can Bitcoin
or Ethereum or any of them be currencies,
right?
Right.
And they can't be because you can't transact
right now, right?
If they were truly
currencies, you wouldn't try to convert them
or value them based off of other currencies,
right, they would just be intrinsic.
And you can only transact-- I think there's
372,000 transactions.
I forget the exact number.
But those are a minute.
Yeah.
Or per second.
Whatever it is.
Whatever it is.
And now they're having to do these segments
where they're branching off to try
to increase more, and they're arguing about
how to do it.
Yeah,
So there's their own central bank issue, right?
That's right.
Right.
So, it's going to be very difficult for it
to be a currency when the time and the expense
of doing a transaction is 100 times what you
can do over a Visa or MasterCard, right?
Right.
So that's another issue.
So then, what is Bitcoin and Ethereum, and
what's their intrinsic value?
Just it's a collectible.
It's just a digital asset that's a collectible?
Yeah.
Right?
And in this particular case, it's a brilliant
collectible that's probably more
like art than baseball cards, stamps, or coins,
right, because there's a finite amount that
are going to be made, right?
There's 21.9 million bitcoins that are going
to be made.
And if enough people hold and don't sell,
and enough people borrow to buy, just like
we saw in the stock market.
Because look, as much as a share of stock
is ownership in a company, that's the all-time
lie, right?
You have no authority, no ownership.
Unless you control it.
Yeah.
Unless you're the controlling shareholder,
or you are willing to spend a lot to make
a lot of noise.
A place where it's not a lie is, in the US,
the capital structure means something.
I know the bankruptcy courts here, sometimes,
are the Wild West.
But if you were to
liquidate a company in theory, you would--
You would get the masses-
--senior lenders first, then the junior lenders,
then the equity.
You actually do have a claim.
By definition, yes, by definition.
But you have no control.
But in practice, the number of public companies,
since that's what's relevant-- the
number of public companies that are going
bankrupt is relatively small.
The number of people were buying shares of
stock-- even though it's a decline.
Look, you can make the argument that part
of the reason the stock market has continued
to go up so dramatically is not just because
of easy money, but because the number of public
companies has declined.
That's right.
When we went public in 1998, there were 8,000,
approaching, 9,000 public companies.
Now there's 3,500.
And 360 of the S&P 500 are engaged in corporate
buybacks.
Yes.
Yeah.
So, the number of shares outstanding-
Just keeps going down.
Look at IBM, right?
They make a living in financial engineering,
right?
And so yeah.
So there's scarcity.
So point being, scarcity sells.
Yes.
Right.
And there's no greater defined scarcity than
Bitcoin and Ethereum.
Do you own any of the-
Yeah.
Which ones do you own?
I own an ETN in Sweden for Bitcoin.
Sure.
So, there's a Swedish ETN-- because I wanted
the liquidity.
And it's a hassle to try
to just buy it.
And you've got to make an investment in time
and effort to do it.
I tried it, and-
It's a pain in the ass, yeah.
-and i failed, truthfully-To buy a small amount.
By the time I got my account open,
it had moved so much that I said, you know,
I'm just not going to do it.
Even for fun, I'm not going to do it.
I own, like, 1 bitcoin from like 10 years
ago or whatever it was, right?
Oh, gosh.
Yeah.
--which is great now, but yeah.
So once I find out about this ETN, as opposed
to
an ETF, obviously, right?
It's liquid.
It's fast.
It marks to market correctly, right?
And so it's growing, and so I liked it.
Does it trade at a premium to Bitcoins.
It trades right on top of it.
Within pennies.
And then, how do you think about-- so that's
the digital currency.
You don't any of the other digital currencies?
No.
They're just interesting to you?
Right.
And then, when you move into ICOs, how do
you think about ICOs?
You mentioned to me, it's a seat license.
Yeah.
That's exactly right.
ICO tokens really are an opportunity-- there's
two there's
two different ways to look at ICOs, right--
one, as a quote unquote, "investment vehicle,"
which I don't, right?
Again, that's just a scarcity play.
It's like it's like an IPO in some
respects.
It's just, if the float is small, and you
can convince enough people on the road
show to buy, it's going up, right?
And whether or not there's any liquidity,
and there's all kinds of uncertainty on the
exchanges, and what they can and can't trade,
and what's legit and what's not-- so I've
avoided the speculative side of it.
I've been involved in two of them.
One is UniCoin
which does Etrade.
It's a company Unikrn, U-N-I-K-R-N, that does
legal sports betting
for Esports and other sports outside the United
States.
OK.
They literally moved to Australia to get legal.
And I've been an investor in them
for years.
And they did an ICO that I participated in.
But I signed an agreement saying
I wouldn't sell any, all that kind of stuff.
So it wasn't a trade for me.
And then I have another one, Mercury Protocol
that we're actually using it to-- it's a messaging
protocolvthat allows for distributed authentication
and the ability to participate in a social
network in a way that allows you to earn more
credits, right?
So by participation.
By participation.
So you can you be rewarded by your fellow
social networking members because this person--
you know, Kyle is great.
-an active participant.
You're an active participant.
So I'm going to reward.
And that, in turn, gives you a level of authentication
and quality that a troll isn't going to get,
like they would on Twitter.
So the whole idea is to eliminate trolls,
to have a better quality handle, but that's
a token, right?
Yeah.
And so it's a protocol that goes out.
Any new social networking software can use
it.
Any existing one can integrate it.
So if Twitter wanted to integrate, or if somebody
else wanted to integrate, they could.
And so, as a protocol, we're trying to take
advantage of the networking effect.
And that's just getting ready to come out.
But again, I'll invest there-- investment
is not the right word.
I'm buying tokens there that I'll use as part
of the protocol.
Yeah.
And too, the comments that I made that began
our conversation on this-- or
I read one I read one offering document about
a coin that was going to reserve-- it was
going to pay for research for whether or not
a synthetic rhino horn was an aphrodisiac.
I'm a student of history.
And I've looked at bubbles and things--
Absolutely.
-throughout my life.
From tulips to ZZ Best, yeah.
There's a Tulip ICO.
I don't know if you're familiar with it.
I haven't seen that one.
So, the Tulip ICO is, essentially, a way for
the people to snub Bitcoin skeptics.
It's a way you can send a Tulip Token to someone
that snubbed Bitcoin to say, you see--
See, it's worth it.
It's just some of these things are so silly.
But that happens with everything, right?
It does, but Mark, again, I worry about it
from a regulatory perspective.
And I'm not a regulator, but ICOs have raised
$3 billion--
Really?
--this year.
It was $2 billion going into September.
So as we sit here today, we're in mid-October,
roughly.
And--
Yeah.
It's only escalating.
$900 million was raised in September.
And when I think about it, I love the
innovative entrepreneurial spirit.
I love the fact that many of these things
are actually going to do really well.
Hopefully, yeah.
But there's so many of them that are just
completely stupid and frauds.
Isn't it like 1995 all over again?
It is.
But it's interesting.
When I look at the SEC and the CFTC, there's
no-- so I know
some people and in various places that tell
me that, at the SEC, each office wants to
keep their functional relevance.
And they want to regulate it themselves.
And I think
there are 6 or 7 regional offices or maybe
more.
And then the CFTC, of course, regulates commodities.
SEC regulates securities.
They're trying to determine whether it's a
security or a commodity, and who's going to
regulate it.
And it's not much-- realize, it's not a secure--
they make it so it's not a security, right?
It's the dumb ones that are going to get shut
down.
Right.
Right.
But I guess my point is, they need to get
on this.
Oh, no.
No question.
They need to be regulating it right now.
And they cut some things out.
It will be good for America.
It will be good for people.
I agree 100%.
--so that the crooks don't
The problem is it's the SEC.
Yeah.
I don't want to point any fingers, being in
the business that I'm in.
But
someone's got to get on this, and they need
to centralize it.
And someone at the top
needs to say you are the czar.
You're going to control this.
It's not going to be 6 different people.
Unfortunately, there's nobody at the top that
has any understanding of it.
And we're not going into politics.
We're not going there.
It's just obvious.
But it is obvious.
So, I'd love to conclude by getting to the
point where-- I'd love to know, in your mind,
in the last, call it, 6 to 12 months.
What are the most interesting investments
you've made that you can talk about.
And then where do you think-- I get it that
you think AI is the place to be in the next
decade.
But where do you think, if you're allocating
capital today, if you're investor, where would
you be investing, let's say, free cash if
you were-- again, if you weren't in the position
you're in now, where you're just investing
in interesting thing--
Right.
If you were thinking about pure-
If I had to get a return, where would I-
-economics, where would you be looking to
invest?
It depends on what my expertise would be,
right?
I mean, I always tell people to
focus on what you know.
And if you don't know, just put it in an SPX
cheap fund, right?
And maybe, now, I might say, OK, put 5% in
Bitcoin or Ethereum, just red or black, right?
Because it's like artwork, but it has--
A finite amount of artwork.
There's a finite amount of artwork, right,
or baseball cards.
But yeah, I would just tell people an SPX
fund.
Because I think the job of America is still
business.
And I think, whatever benefits will come from
AI or whatever, is going to--
Filter into-
Yeah.
And I think the FANG stock's are going to
crush them.
My biggest public holding is Amazon.
OK.
And we talk a little bit about valuations
there because people go up and down
about the valuation.
The way I look at those companies are they're
the world's greatest
start-ups with liquidity.
If you look at them as just a public company
where you want to
see what the P/E ratio is and what the discounted
cash value-- you're never going to
get it, right?
You're never going to see it.
And if you say, Jeff Bezos, Reed Hastings--
those are my 2 biggest holdings.
But even-- to a lesser extent Tim Cook.
I'm not as sold on Apple, necessarily, but
they're
trying to get there-- but Google as well and
Facebook as well.
They're just nonstop startups.
They're in a war.
And you can just see the market value accumulating
to them because of that.
So, if you look at-- and I don't know the
exact numbers you made-- the amount of VC
invested in tech on any given year.
And I have my option of putting in the next
Uber or the next Lyft or whatever versus Amazon,
where I get someone I think is smarter and
better.
And already has a scale.
And already has scale and already has liquidity.
Amazon is the world's greatest start-up.
Netflix is the world's greatest-- next--
Which makes it harder to innovate.
If you were Mark Cuban-
Starting all over again, I still think you
can kick their ass, right?
You do?
OK.
Because I think on the margin-- even at that
scale, even with all the that AI that
they both use, they're still, on the margin,
places to make money where they're
inefficient.
Because it's still vertical, and it still
takes time to get to the edges.
And so I
think there's a lot of opportunities for small
companies to come in.
And you're seen a
lot of that now.
You see growth hacks on Kickstarter.
Well, I have one of my companies-
- a Shark Tank company-- that, all they do,
their whole entire business now is just
releasing products on Kickstarter, delivering
them, and then going on to the next
product.
It's just a pure growth hack.
There's other companies that they measure
what's selling
the best on Amazon.
And then they go out and buy those products,
brand them, and sell just on Amazon, and buy
Amazon.
It's just its own little ecosystem where kids--
I tried to give this kid some money, literally,
because he was so good at it.
He didn't need it.
He was already making $1 million a year working
an hour a day just by tracking Amazon.
Really?
Yeah.
So, you can be smart because they're so big.
But you see Amazon-- It's fascinating to watch
Amazon.
So now they're doing chips.
They're OEMing their own version of chips,
their own teas, their own-- so wherever they
see categories where they can manufacture
and sell, they're competing with their own
sources of product right
now.
Sure.
Sure.
And that's going to be very scary.
They just they just released a sportswear
line with OEMing that had a material
impact on Nike, Under Armour, and the rest
of them.
Oh, yeah.
Without question, and more so, right?
Lululemon.
Yeah.
I do this all the time when I'm giving talks.
I'm like, how many people shop
on Amazon?
Everybody raises their hand except one dude.
How many people know
anybody that works at Amazon?
How many people have ever even talked to
somebody that they-- you talk about the value
of assets over time, but the leveragable
opportunity is there.
And I talked to somebody at Google.
And this is over a year ago.
They're, like, Mark, we used AI in our ad
serving and increased our revenues by $9
billion.
It's crazy, all the things that are changing
and the leverage points.
Now, all that said,
if I had expertise in AI and any area within
medicine-- I invested in this 22-year-old
kid
who has his master's degree and he's a doctor,
a medical doctor.
And he found these
sensors that are able to track the electrical
pulses that every organ in our body emits.
So, our heart emits an electrical pulse.
And with these sensors, he's able to capture
that.
And he captures them, now, into an old-fashioned
WAV file.
But now he runs them through a deep learning
network.
And with 98-point-whatever percent growing
accuracy, they can determine if you have 1
of 5 heart ailments.
And they're going to go next organ, next organ,
and keep on expanding.
It's just--
That's going to make health care really interesting,
yeah?
--changed the dynamics of it.
It becomes a question and a business opportunity
for me to say, OK, how do you change health
care, right?
And so, I'm having something I put together
scored by 2 different economists-- one, a
progressive economists, one, a conservative
economist-- and just saying, OK, what if we
took insurance companies out of health care
altogether?
What if we self-insured as a country, right?
Now, all of a sudden, when you have a direct
connection with everybody--
We might well might have to go to the single-payer
system, right-
Not even single payer.
-given Obamacare.
Yeah because not even single-payer.
Because single-payer, there's going to be
time after time where you have to increase
the debt ceiling, and that becomes a life
or death decision.
Because it's all taxpayer-driven, right?
So I think if-- we're calling it--
"working title"-- Single Guarantor, which
means if you want to go to college, we'll
guarantee a loan for you, right?
If you want to buy a house, we'll guarantee
a loan for you.
If you want to get healthy, you have to go
borrow it from a payday loan company if you
can't afford it or put it on your credit card,
right?
There's no reason why we couldn't guarantee
it as a country and just a means test of repayment.
And if you mean test repayment and make people
responsible for their own health care, even
if it's not 100%, right--
Right.
But just some responsibility-- we'll make
better decisions.
And because you have a direct connection to
them, you can incentovize them to go to a
gym, to go get checked, to go visit a doctor,
or to take their medication-- things we can't
do now because the whole job of an insurance
company is to obfuscate and complicate everything
and to grow the total pie because, if their
revenues don't keep on growing, their profits
don't grow.
Right.
So, I think there's a lot of opportunities
there, whether big or large, to change the
game.
I think AI has got to be a core component
of that.
And I don't think we've stagnated at all in
terms of being creative and innovative and
going in new directions.
Yeah.
That's amazing.
Well, Mark, thanks very much for-
It was fun.
I really enjoyed it.
It was great.
And I hope Raoul and the team loves it.
I hope so too.
And for me, it was awesome.
So I'll send it to you.
Thanks.
We have to keep on having our breakfast.
Yeah.
We shall.
Great.
Thanks a lot.
Thanks, Kyle.
So I think that didn't disappoint, really
great interview.
I think Kyle asked some fantastic questions.
I was really interested to see how Mark was
thinking about how he's going to pass on money
to his kids.
That's not the problem most of us have, but
I thought it was fascinating and I also just
like his simple investment thesis about owning
basically one stock, Amazon, and holding it
because Amazon stands for a lot of the great
opportunities in the world.
I just thought it was really clever.
I just like interviews like that.
This is what you get on Real Vision.
You get the masters of the markets uncovering
the best opportunities for you, finding out
the risks in the markets, and where you can
find the best themes.
You can look at all sorts of interviews on
Real Vision, we have the masterclass of Kyle
Bass, so you can really understand his thinking,
or Joe Duran's rags to riches story.
There's something for everybody and it's always
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of Real Vision.
You can learn from the very best, learn from
their mistakes and see the opportunities that
they see, and have some of the success that
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