James, if anyone doubts your deep understanding of the market and investing, I give you Exhibit A. I'm impressed with your knowledge, as well as your ability to unpack a very complicated subject, in an engaging manner, into something easily understood by those who aren't well-versed in this subject. Very well done!
Larry, thank you. This is a complicated topic and if I could have, it deserves about 100,000 words, not 1,000. But if I’d written 100,000 I might not have been able to understand it myself!
Well, I know very little about finance, economics and money management (and I have the "portfolio" to prove it!). However, your discussion about all this was very clear and engaging.
"A better question might be, what will this next transformation be like?”
The way you compare the current money situation to a hurricane economy, and how you reframe the hurricane economy is brilliant….and then to bring this all around to transformation to potential and possibility that we cannot even imagine, is so full of hope and expectation. I have been thinking about how the AI boom is exponential in comparison to the dotcom boom and wondering what is next with awe and wonder.
This doesn’t feel heavy to me, it feels like utter AWE!
Teri, thank you. I’m glad it resonated with you in a manner that made sense. It’s going to be a fascinating time, these next five, ten, and twenty years.
How do you do, James? I'm meeting you because Mo Rivers referred me to your writing. Writing is the very core of my business and personal life, so I'm always eager to read the good stuff. As a former resident of Florida and Mississippi, I know a lot about hurricanes and their consequences--your piece alluding to hurricanes as a metaphor for economic issues is spot on and an enjoyable read! I published an ebook looking at what I call the bot-com bubble--your explanation had me nodding my head all the way through the reading. I'll continue to keep an eye on what you're doing over here and get to know your work with pleasure. Thanks for the good read.
Hi Maryan, it is indeed a pleasure. I'm catching up on Substack comments and just sent you a DM wondering if you might like to connect via Zoom sometime. I'm also eager to read good stuff and learn and develop as a writer. I would look forward to getting to know you and the work you do.
As I am an investment advisor and own a wealth management firm, I write about both money and meaning, but my heart comes more fully alive when my muse follows the threads of meaning, than the aspects of money that live in the head.
Thank you for taking the time to comment here. Living my whole life in the pacific northwest, I'm a bit ashamed to admit that hurricanes and tornados are a bit abstract, happening elsewhere, and on TV. :(
Take care and I look forward to hearing from you. - James
Love this analysis... so much deeper and more thoughtful than any I've read on this topic. And your closer is brilliant, "We are most alive in motion. Like capital, when in motion, we grow. We compound."
Hi again Chris. I appreciate the reply here. As I wrote this piece I couldn’t help realize the host of issues/problems the AI build out will have for society. There are many negative externalities. But I didn’t go there as it would have been a thread ball that wouldn’t end and I have considerably less knowledge about. I do believe that one of the benefits of the build out is that it’s like a massive private sector stimulus plan, that doesn’t require massively indebted governments to finance. The most profitable companies in the world are financing it mostly from cash flow (besides Oracle) even if they are using some convoluted deal structures.
I could go on..
Thank you again for taking the time to comment. The passage you quoted came out of my muse serving me up “personal T-bills” and how often we “husband our own chestnuts” for too long.
Yes, AI is a complex ball of yarn for sure. Like many things, it's impact will depend tremendously on multiple factors, one of which is how we humans, as a collective, decide to use it or allow it to be used.
James, this is fascinating (as always) and gives me a lot to think about. I've been more focused on the pro's and con's of AI from an education standpoint as a parent and a writing standpoint as a writer, even the ability to support communication in my work as a nonprofit leader. But I hadn't considered it as an investment opportunity (math isn't my strongest point) and the ways that it can accelerate investment and financial activity and how that changes the market. You bring up a great point about how companies were holding money - the image of a safe comes to mind- to deploy it now.
Curious about your adjacent thoughts about the ethics of AI in the midst of all this? Just read a fascinating novel called Culpability by Bruce Holsinger about where AI could go in the future....
Serena - I have so many thought about AI - pros and cons and ethical implications. And no way to bring them together cogently. Used to think that we humans would come together to accentuate the pros, and diminish the cons of any big changes and significant transformations. Today I’m not so sure, which demoralizes me.
I used to work in tech during the 1990s and had a front row seat to the dot com build up and I do feel strongly that the productivity gains from AI will be significant and a net good for businesses (which as the focus of my essay) but it will come with big dislocations in the short run. I’m not sure we can put the genie back in the bottle so we now need to focus on minimizing the downsides.
I will look up Culpability. Thank you for the recommendation. 🙏😊
An interesting fact about the economics of hurricanes. What institution provides the first dollars to get rebuilding ? The answer is Home Depot through the short term trade credit that they price to contractors.
In reading your excellent piece and thinking about the velocity of money, I was reminded of the many gospel passages that encourage the active deployment of funds. In quite a few of Jesus’s parables, the wicked servant is the one who just sits on the money. There is a clear Christian exhortation to get money working.
I also had a thought about the wisdom of investing in index funds. Not likely that I would have picked up on early Nvidia. Yet there it is in the S&P.
Drake, great to hear from you. Also, thank you for the perspective on the gospel passages. I hadn't seen that connection and it's such a good one for how to live life. A piece I've been working on and will be one to come in the next few months, explores why the structure and process behind how an index fund works is so important - because they pick up these needles in the haystack - like Nvidia - when they are incredibly small and they continue to build them on the way up. And where is the capital coming from to build the position? From companies like GE, who are are their way down. No prediction required, no buy and sell price targets, etc.
Thank you again for reading Drake, and for commenting. I hope and trust you've been well.
I look forward to the piece on index funds - one of the great paradoxes of investing.
I read recently that Buffett recommends for the typical investor 90% S&P 500 and 10% Fed money market. Although it sounds a little sporty to me, I get the point.
Some of the big companies like Apple backed up the truck to the bond market loading dock when interest rates where really low and investors, particularly life insurance companies, were willing to go long. During the past few years, they could just invest in Fed funds and get a positive carry. That is where some of this AI cash is coming from.
Extremely useful James. I'd like to test my thinking here in the presence of your expertise. I see another layer to what is being created with the massive amount of investment flowing into the digital economy and AI. It's the coming need for non-AI, low-tech sanctuaries. As all of this new technology becomes more pervasive, I'm betting on the growing need for humans to have points of refuge where authentic human contact is prioritized. Community. My goal is to focus on making sure I have a solution to offer those who need an alternative to what the current wave of investment will produce. A need that is going to grow in inverse proportion to the market's direction. Yes, something new is being created, but in this wave there is also something that is being broken and in need of maintenance and repair. Human connection. I'm looking forward to being part of that economy. Does this make sense in light of your understanding?
HI Rick, You're touching on something that is at the core of everything - and will (and must), I think, persist through time - that being community and human connection. No matter how our world transforms to be more productive, we humans will still need to gather, to connect, to ideate, to bear witness to each other. Not that I know anything or something remotely close to answer, but it's my observation that most transformations increase productivity but do not necessarily decrease human interaction and connection. But those interactions change. I think of kids today who connect via social media, and not face to face (argh!) but there is still connection going on. I think of Zoom and how we connect Rick, even though we've never connected in person. And I also think about al the companies, who in the aftermath of Covid - reversed their remote work policies, because connection is what helps to spark creativity and there is no substitute for in person connection.
Many executives I know would say that you can "run" a current mature business with remote work and zoom meetings, but it's exceedingly difficult to spark new businesses and replicate all the dynamic interactions that are necessary in the incubation stage of formation.
Last, off the topic of your reply here - this piece was focused on a question I have been getting consistently for months from investors. There are so many social aspects to the transformation that I didn't attempt to address, no do I even feel qualified to address. But they are real.
The thing I would say to anyone with a ten year investment time horizon, is that it's likely a very good time to "be an owner" of human ingenuity through a globally diversified index fund. If history is any indication, there are going to be some fascinating new businesses that will be created, and an index fund is designed to own them and not require anything from the owner of the fund, other than to hold on.
OK, I've gone on too long now.
I'm grateful for you, Rick, and for our connection, and for the community creator you are.
Very useful James. Thank you for taking the time to share your thoughts. Especially the observation that productivity does not necessarily devolve connection.
James I love your comparison of redeploying resources in the market to times when life gives us the opportunity to change and shift, redefining ourselves for new chapters. I think finance is a mere reflection of processes at work in our hearts and minds. Great, stimulating article.
Emily, “finance at work in our hearts and our minds is so lovely” I hadn’t felt it that way before and it is so true. Thank you for reading and for commenting :)
I'm grateful for your metaphors, always, James: the way they clarify, expand, and complicate previous assumptions. Thank you for this distillation. Hope you are well, my friend!
Alissa, and I’m grateful we are in each other’s orbit. Maybe one of your boys will marry one of my girls and we can finally spend time together!
And I’m sorry to be passing along complications… this topic is indeed rife with them.
It’s my hope that these large US tech firms will take a lead in creating solutions for the problems that they are creating. Or that human ingenuity in some other form will spark the solutions.
Beautiful and thoughtrovoking writing ... once again. Having lived through both the dotcom bubble and the real estate bubble/Great Recession, your insight that this is different really made me think and made great sense to me.
And then, in true James fashion, you brilliantly bring it back to your own velocity and the belief that "we are most alive in motion" and that is when we grow and compound and over time, transform.
Happy Thanksgiving Rich! 🦃. You indeed had a front row seat to those transformations in your list above. It’s going to be fascinating to be a part of this next one.
Thank you for commenting on the personal reflection at the end. I think one of the reasons why I write is to discover. That reflection came out of nowhere (obviously somewhere - probably my soul) at the 11th hour. It was never in the realm of what I set out to put on paper. Yet it is now part of my own awareness going forward.
Always love reading what you toss out to us! Although I had read your present piece a couple of weeks ago, I pulled it up again today, as I languished in my hospital bed! Should be discharged in a couple of days to return to my cave.
Miss my trips to your old homestead. Travel probably not on my “to do“ list, as aging causes one to pause & think twice before embarking on adventures too far from one’s nest!
Thus, I reiterate the invite to you to re-visit your mom’s “formative years“ locale. I’m still here , albeit a bit slower after this recent medical “adventure!“
Hope all is well with you & your tribe. Hugs & much love........
What a treat to read you this week, especially on this topic. Two things come to mind for me recently.
First, what if AI is less like big tech and more like big telco? What if the trillions spent on data center infrastructure doesn't find a profitable home for a decade and becomes the next dark fiber of the next decade? Will the winners be broken up? how many companies will be in the marketplace grave yard with their assets to be snatched up for future investments?
Finally, will there be a career boom with AI? Sure building a data center creates short term jobs, but when the box is built, it maybe only creates 100 jobs per 100,000sq/ft of space. And that is a best case scenario. On the office end, AI stands to consume more jobs, or at least allow existing career incumbents to do more in the work place. Perhaps we will all become "owners" but not more than gamblers placing bets on what's worth holding for the moment. I don't want to be cynical about this, however, having spent over a decade in tech, and specifically having been a part of cumulatively building over 1,000,000 sq/ft of data centers across North America, I'm not sure this is the same as individuals down stream receiving enduring value.
The more interesting thing may be the nearing 10 fold decrease in wattage needs for chips as sub nanometer computing becomes possible and profitable. The companies with their own stack that can run at that kind of efficiency with a tenth of the deployed energy resources will wipe the floor with bigger boxes trying to cool hotter chips.
The questions I have been asking now, is how to take a long term ownership stake in infrastructure, without being directly exposed to consumer hardware which may take a hit here. And who are the companies in the watt-to-bit pipeline from John Deere (Generators), Siemens, SquareD, APC, and others who we don't know, that will create 2-10 fold efficiencies in that pipeline. That to me is the very exciting bet in this coming age.
Ah I feel like I could talk about this stuff for days. When the day comes that we get to catch up I hope we can talk more on these things. My best to you always James.
James, if anyone doubts your deep understanding of the market and investing, I give you Exhibit A. I'm impressed with your knowledge, as well as your ability to unpack a very complicated subject, in an engaging manner, into something easily understood by those who aren't well-versed in this subject. Very well done!
Larry, thank you. This is a complicated topic and if I could have, it deserves about 100,000 words, not 1,000. But if I’d written 100,000 I might not have been able to understand it myself!
Well, I know very little about finance, economics and money management (and I have the "portfolio" to prove it!). However, your discussion about all this was very clear and engaging.
Thank you Larry.
My favorite line.
"A better question might be, what will this next transformation be like?”
The way you compare the current money situation to a hurricane economy, and how you reframe the hurricane economy is brilliant….and then to bring this all around to transformation to potential and possibility that we cannot even imagine, is so full of hope and expectation. I have been thinking about how the AI boom is exponential in comparison to the dotcom boom and wondering what is next with awe and wonder.
This doesn’t feel heavy to me, it feels like utter AWE!
Teri, thank you. I’m glad it resonated with you in a manner that made sense. It’s going to be a fascinating time, these next five, ten, and twenty years.
Happy Thanksgiving. I’m grateful for you. 🙏
How do you do, James? I'm meeting you because Mo Rivers referred me to your writing. Writing is the very core of my business and personal life, so I'm always eager to read the good stuff. As a former resident of Florida and Mississippi, I know a lot about hurricanes and their consequences--your piece alluding to hurricanes as a metaphor for economic issues is spot on and an enjoyable read! I published an ebook looking at what I call the bot-com bubble--your explanation had me nodding my head all the way through the reading. I'll continue to keep an eye on what you're doing over here and get to know your work with pleasure. Thanks for the good read.
Hi Maryan, it is indeed a pleasure. I'm catching up on Substack comments and just sent you a DM wondering if you might like to connect via Zoom sometime. I'm also eager to read good stuff and learn and develop as a writer. I would look forward to getting to know you and the work you do.
As I am an investment advisor and own a wealth management firm, I write about both money and meaning, but my heart comes more fully alive when my muse follows the threads of meaning, than the aspects of money that live in the head.
Thank you for taking the time to comment here. Living my whole life in the pacific northwest, I'm a bit ashamed to admit that hurricanes and tornados are a bit abstract, happening elsewhere, and on TV. :(
Take care and I look forward to hearing from you. - James
Love this analysis... so much deeper and more thoughtful than any I've read on this topic. And your closer is brilliant, "We are most alive in motion. Like capital, when in motion, we grow. We compound."
Hi again Chris. I appreciate the reply here. As I wrote this piece I couldn’t help realize the host of issues/problems the AI build out will have for society. There are many negative externalities. But I didn’t go there as it would have been a thread ball that wouldn’t end and I have considerably less knowledge about. I do believe that one of the benefits of the build out is that it’s like a massive private sector stimulus plan, that doesn’t require massively indebted governments to finance. The most profitable companies in the world are financing it mostly from cash flow (besides Oracle) even if they are using some convoluted deal structures.
I could go on..
Thank you again for taking the time to comment. The passage you quoted came out of my muse serving me up “personal T-bills” and how often we “husband our own chestnuts” for too long.
Yes, AI is a complex ball of yarn for sure. Like many things, it's impact will depend tremendously on multiple factors, one of which is how we humans, as a collective, decide to use it or allow it to be used.
James, this is fascinating (as always) and gives me a lot to think about. I've been more focused on the pro's and con's of AI from an education standpoint as a parent and a writing standpoint as a writer, even the ability to support communication in my work as a nonprofit leader. But I hadn't considered it as an investment opportunity (math isn't my strongest point) and the ways that it can accelerate investment and financial activity and how that changes the market. You bring up a great point about how companies were holding money - the image of a safe comes to mind- to deploy it now.
Curious about your adjacent thoughts about the ethics of AI in the midst of all this? Just read a fascinating novel called Culpability by Bruce Holsinger about where AI could go in the future....
Serena - I have so many thought about AI - pros and cons and ethical implications. And no way to bring them together cogently. Used to think that we humans would come together to accentuate the pros, and diminish the cons of any big changes and significant transformations. Today I’m not so sure, which demoralizes me.
I used to work in tech during the 1990s and had a front row seat to the dot com build up and I do feel strongly that the productivity gains from AI will be significant and a net good for businesses (which as the focus of my essay) but it will come with big dislocations in the short run. I’m not sure we can put the genie back in the bottle so we now need to focus on minimizing the downsides.
I will look up Culpability. Thank you for the recommendation. 🙏😊
An interesting fact about the economics of hurricanes. What institution provides the first dollars to get rebuilding ? The answer is Home Depot through the short term trade credit that they price to contractors.
In reading your excellent piece and thinking about the velocity of money, I was reminded of the many gospel passages that encourage the active deployment of funds. In quite a few of Jesus’s parables, the wicked servant is the one who just sits on the money. There is a clear Christian exhortation to get money working.
I also had a thought about the wisdom of investing in index funds. Not likely that I would have picked up on early Nvidia. Yet there it is in the S&P.
So much to think about.
Drake, great to hear from you. Also, thank you for the perspective on the gospel passages. I hadn't seen that connection and it's such a good one for how to live life. A piece I've been working on and will be one to come in the next few months, explores why the structure and process behind how an index fund works is so important - because they pick up these needles in the haystack - like Nvidia - when they are incredibly small and they continue to build them on the way up. And where is the capital coming from to build the position? From companies like GE, who are are their way down. No prediction required, no buy and sell price targets, etc.
Thank you again for reading Drake, and for commenting. I hope and trust you've been well.
I look forward to the piece on index funds - one of the great paradoxes of investing.
I read recently that Buffett recommends for the typical investor 90% S&P 500 and 10% Fed money market. Although it sounds a little sporty to me, I get the point.
Some of the big companies like Apple backed up the truck to the bond market loading dock when interest rates where really low and investors, particularly life insurance companies, were willing to go long. During the past few years, they could just invest in Fed funds and get a positive carry. That is where some of this AI cash is coming from.
Extremely useful James. I'd like to test my thinking here in the presence of your expertise. I see another layer to what is being created with the massive amount of investment flowing into the digital economy and AI. It's the coming need for non-AI, low-tech sanctuaries. As all of this new technology becomes more pervasive, I'm betting on the growing need for humans to have points of refuge where authentic human contact is prioritized. Community. My goal is to focus on making sure I have a solution to offer those who need an alternative to what the current wave of investment will produce. A need that is going to grow in inverse proportion to the market's direction. Yes, something new is being created, but in this wave there is also something that is being broken and in need of maintenance and repair. Human connection. I'm looking forward to being part of that economy. Does this make sense in light of your understanding?
HI Rick, You're touching on something that is at the core of everything - and will (and must), I think, persist through time - that being community and human connection. No matter how our world transforms to be more productive, we humans will still need to gather, to connect, to ideate, to bear witness to each other. Not that I know anything or something remotely close to answer, but it's my observation that most transformations increase productivity but do not necessarily decrease human interaction and connection. But those interactions change. I think of kids today who connect via social media, and not face to face (argh!) but there is still connection going on. I think of Zoom and how we connect Rick, even though we've never connected in person. And I also think about al the companies, who in the aftermath of Covid - reversed their remote work policies, because connection is what helps to spark creativity and there is no substitute for in person connection.
Many executives I know would say that you can "run" a current mature business with remote work and zoom meetings, but it's exceedingly difficult to spark new businesses and replicate all the dynamic interactions that are necessary in the incubation stage of formation.
Last, off the topic of your reply here - this piece was focused on a question I have been getting consistently for months from investors. There are so many social aspects to the transformation that I didn't attempt to address, no do I even feel qualified to address. But they are real.
The thing I would say to anyone with a ten year investment time horizon, is that it's likely a very good time to "be an owner" of human ingenuity through a globally diversified index fund. If history is any indication, there are going to be some fascinating new businesses that will be created, and an index fund is designed to own them and not require anything from the owner of the fund, other than to hold on.
OK, I've gone on too long now.
I'm grateful for you, Rick, and for our connection, and for the community creator you are.
Very useful James. Thank you for taking the time to share your thoughts. Especially the observation that productivity does not necessarily devolve connection.
James I love your comparison of redeploying resources in the market to times when life gives us the opportunity to change and shift, redefining ourselves for new chapters. I think finance is a mere reflection of processes at work in our hearts and minds. Great, stimulating article.
Emily, “finance at work in our hearts and our minds is so lovely” I hadn’t felt it that way before and it is so true. Thank you for reading and for commenting :)
Happy Thanksgiving 🍁🦃
I'm grateful for your metaphors, always, James: the way they clarify, expand, and complicate previous assumptions. Thank you for this distillation. Hope you are well, my friend!
Alissa, and I’m grateful we are in each other’s orbit. Maybe one of your boys will marry one of my girls and we can finally spend time together!
And I’m sorry to be passing along complications… this topic is indeed rife with them.
It’s my hope that these large US tech firms will take a lead in creating solutions for the problems that they are creating. Or that human ingenuity in some other form will spark the solutions.
Take good care for now :)
And what a dream indeed it would be for our kids to meet and have time and excuse to gather together!
Beautiful and thoughtrovoking writing ... once again. Having lived through both the dotcom bubble and the real estate bubble/Great Recession, your insight that this is different really made me think and made great sense to me.
And then, in true James fashion, you brilliantly bring it back to your own velocity and the belief that "we are most alive in motion" and that is when we grow and compound and over time, transform.
Thank you for the reminder!
Happy Thanksgiving Rich! 🦃. You indeed had a front row seat to those transformations in your list above. It’s going to be fascinating to be a part of this next one.
Thank you for commenting on the personal reflection at the end. I think one of the reasons why I write is to discover. That reflection came out of nowhere (obviously somewhere - probably my soul) at the 11th hour. It was never in the realm of what I set out to put on paper. Yet it is now part of my own awareness going forward.
I’m grateful for our friendship.
Always love reading what you toss out to us! Although I had read your present piece a couple of weeks ago, I pulled it up again today, as I languished in my hospital bed! Should be discharged in a couple of days to return to my cave.
Miss my trips to your old homestead. Travel probably not on my “to do“ list, as aging causes one to pause & think twice before embarking on adventures too far from one’s nest!
Thus, I reiterate the invite to you to re-visit your mom’s “formative years“ locale. I’m still here , albeit a bit slower after this recent medical “adventure!“
Hope all is well with you & your tribe. Hugs & much love........
“Aunt“ Nancy
What a treat to read you this week, especially on this topic. Two things come to mind for me recently.
First, what if AI is less like big tech and more like big telco? What if the trillions spent on data center infrastructure doesn't find a profitable home for a decade and becomes the next dark fiber of the next decade? Will the winners be broken up? how many companies will be in the marketplace grave yard with their assets to be snatched up for future investments?
Finally, will there be a career boom with AI? Sure building a data center creates short term jobs, but when the box is built, it maybe only creates 100 jobs per 100,000sq/ft of space. And that is a best case scenario. On the office end, AI stands to consume more jobs, or at least allow existing career incumbents to do more in the work place. Perhaps we will all become "owners" but not more than gamblers placing bets on what's worth holding for the moment. I don't want to be cynical about this, however, having spent over a decade in tech, and specifically having been a part of cumulatively building over 1,000,000 sq/ft of data centers across North America, I'm not sure this is the same as individuals down stream receiving enduring value.
The more interesting thing may be the nearing 10 fold decrease in wattage needs for chips as sub nanometer computing becomes possible and profitable. The companies with their own stack that can run at that kind of efficiency with a tenth of the deployed energy resources will wipe the floor with bigger boxes trying to cool hotter chips.
The questions I have been asking now, is how to take a long term ownership stake in infrastructure, without being directly exposed to consumer hardware which may take a hit here. And who are the companies in the watt-to-bit pipeline from John Deere (Generators), Siemens, SquareD, APC, and others who we don't know, that will create 2-10 fold efficiencies in that pipeline. That to me is the very exciting bet in this coming age.
Ah I feel like I could talk about this stuff for days. When the day comes that we get to catch up I hope we can talk more on these things. My best to you always James.