Full Transcript: Click Beta Ep. 12
The K-Shaped Economy, Tokenization, and AI’s Hidden Impact
Matt: Those other podcasts, they’re clickbait, but this is click beta. Should we market professionals have private conversations in public? Probably not, but we’ll prove. All we know is that we don’t know nothing. Who’s with me? If Tara Lipinski and Johnny Weir had a baby, it would be this host and the parents would tell it like it is to this young bedazzled blades of steel baby that they aren’t skating anymore, they’re doing choreography. Little White Christmas reference for you. It’s our favorite commentator. Not complimentary just of markets, but of course. Cameron Dawson, are you ready to click some beta?
Cameron: Yes. I wasn’t sure if that was gonna be for Dave or who. Me neither. Please be me. Please be me.
Dave: I love that.
Matt: Weird if Bad Bunny and yes, I’m gonna go there, if Bad Bunny and Kid Rock made a sweet little love child this host. He’d still have grown up loving Turning Point as much as he does today. A Turning Point, not the Turning Point. But thanks to Papa Rabbit and we all know Kid Rock is the mama in this case. Captain James T. would be his Kirk of choice. It’s the B.A. with de ba de bang nod diggy diggy. Dave Bunny himself. Dave Ick. You ready to click some beta?
Dave: Oh man. How do you come up with these? I don’t even know. It’s ridiculous and I always feel like it’s not fair. We don’t have one for you.
Cameron: I know. Next time we’re gonna surprise him.
Dave: That’s true. We’ll workshop something.
Matt: You workshop, but not AI generated.
Cameron: Definitely.
Dave: No, not AI generated.
Matt: You can’t go AI — caffeine at 5:30 in the morning is the only tip that I have for this. Alright. Rules are simple. One agreed upon topic. Nobody googles nothing while we’re live. And we each bring a surprise topic to the table. Big topic today. You both had great pieces in the last month. And so since we haven’t gotten to talk, I wanna go through these. Cameron, you wrote this piece, “The Master Plan.” I wanna just spend a moment shouting out the idea that I’ve been trying to reclaim 1995 here on top of my head for the last year. I had I think the single of, of Oasis that contained this. I remember learning the guitar part from the single, so extra, extra props for taking me back to that memory. You wrote this piece, “Raise the Top: Consensus Forecasts Are Average, and That’s a Problem.” I love this. We’re coming outta forecast season. We’re in the beginning of February. Why, why is that true? Why are consensus forecasts average, and that’s a problem?
Cameron: I mean, the whole point of choosing “The Master Plan” song from Oasis, which is really funny — it’s from a collection of B-sides that Oasis released, and it was effectively like Liam Gallagher and Noel Gallagher being like, we’re so upset that all of these great songs never got the play that they needed to. Here you go. So we’re gonna put into a compilation album, and it ended up, you know, being quite the album. But one of the lines in it is that all we know is that we don’t know. And I think that that’s the observation when everything is effectively expecting average returns — you know, seven to 10% returns — or everybody’s expecting, effectively, at the start of the year, it was 2% GDP growth. Right now, that’s been revised up to 2.4% GDP growth. Nobody’s going out on a limb to say that either the economy is slowing in a meaningful way or the economy is accelerating in a meaningful way. That’s changed. We can talk about how the new narrative this time around is big global reacceleration because of what’s going on in certain pockets of the market.
But I think that’s where it becomes fascinating because it’s almost as if nobody’s really willing to stick their neck out in their forecast. And if you look at how people are positioned though, in some places, people are positioned for things to be absolutely awesome. And then other places we can see institutional positioning is still in that neutral camp. So it’s like I have no conviction on where the forecast should be, I’m not gonna have conviction in my positioning. And I think the last place where conviction is sort of lacking within this market is if you look at the bond market — bond yields on the ten-year have effectively been flat for quite some time, and all the moving averages have coalesced into this tiny area. And we’re just oscillating around these small points. And you know, one day bond yields drop and everybody’s like, the world’s ending, and then they go up and they’re like, inflation’s coming back. And the reality is there’s no direction. So it’s just, you know, it’s always a good practice whenever trying to make your own forecast, know what everybody else’s forecasts are. And that’s why we did the piece. Back then, we probably should do an update because some of those forecasts have become a little bit more extreme.
Dave: Is part of the problem here that we get the headline forecast of like, what’s the market gonna do or what’s the economy gonna do? And then, to me it seems like we keep getting increasing data that shows dispersion in actual economic data — maybe not in stocks, although we’ve certainly seen some real return for dispersion in stocks as well. I mean, we had these weird days where the Dow was up and NASDAQ was down. Like, when does that happen? Right. So we’ve had some real movement there, but then we get things like the last set of payroll numbers where it seems like every job in the entire country is now in healthcare or higher education and manufacturing has fallen off a cliff. And so, but again, on a net basis, we had a good jobs report. So I feel like that’s a lot of what’s going on — these sort of averaging numbers are in fact pretty average, but there’s this giant blowup going on in the pieces of the economy. Is that just me as an idiot or you think that’s true?
Cameron: No, I just gave a lecture about this where I argued that data died, and what to do about it. And of course I started the lecture by reciting — not singing, ‘cause I can’t sing — the first few lines of “American Pie,” and said, you know, the day that the data died. So the whole idea behind data dying is that we’ve seen data diverge, which is effectively what you’re talking about, where the aggregate data very much belies what’s going on under the surface. So, K-shaped economy, K-shaped markets, lots of dynamics in the jobs market driven by non-cyclical things versus cyclical hiring. So if you just look at the headline, it tells a very different story than the components underneath. But there’s also a lot of examples with data having challenges where data relationships have also broken down in meaningful ways — where we used to say, if X happens, then Y will happen, and those relationships have completely broken down since arguably the pandemic. Something like the relationship between freight data and durable goods consumption — it used to be that they moved together. But now they don’t. And so there’s a few interesting examples of where data is far less reliable today than it was at any time in recent history.
Matt: There was a crazy point — Eric Packman, “Data for the People” — he put this out the other day on Twitter, and he was talking about how you can look at this report, the BLS jobs data, and you can basically say, here’s what’s in the report. But if you actually unpack this over the last year, it was plus 615,000 private jobs, 758,000 — to Dave, to your point — were in healthcare and social service, social assistance. And if it weren’t for healthcare taking care of the elderly in the US, we would’ve lost 143,000 private jobs over the past year, which is also on top of 256,000 government jobs. Of the jobs that are actually been adding back to that K idea — Peter Atwater, thank you for this word — because those jobs that we added are all in like the $40,000 and less range. In normal circumstances, this looks like a recession.
Cameron: Well, and here’s another fun paradox, right? You revised out all of those jobs from 2025, and there were quite a few months where you had job losses and yet personal consumption expenditures and total retail sales continue to make new highs. And that speaks to the distortions of the K-shape — how if you have a big portion of the economy driven by something like the stock market, for example, and the wealth effect, which is helping to support consumption at the very high end, that it can really, really mask some of the pain happening underneath the surface.
The question is, when does it matter? Like, when does it actually matter for markets that there are significant cohorts of people in the US economy who are in a very perilous state? And markets as of right now haven’t cared because we have all the AI spending and all of that. But at the end of the day, the people spending all this money are primarily advertising businesses. People don’t have money to spend. When you advertise to them, then arguably you don’t live in your own economic bubble — these tech businesses actually have to have a reliable US consumer under the surface.
Dave: Well, and all these folks that are spending the moonshot level of CapEx that we seem to be going on — like we seem to be fighting another world war in terms of CapEx spend — most of that CapEx is not accruing to the average investor or the average company. We’re seeing the potential benefits basically accrue to those companies that are either doing the spending or talking about the spending the best, as much as anything else. And yet you see other sections of the market — whether it was Reuters and Morningstar, like all of these sort of data and analytics type companies — just got shellacked, right? Over effectively 200 lines of text that got released by Anthropic showing that they could do some legal work. I mean, we’re in this weird position where we’re talking about wiping out hundreds of billions of dollars of market cap with literally a text file that shows you can do a thing. So there feels like a big disconnect between perception and reality on that stuff right now.
Cameron: Well, and to add to that — where’s the money going? You’ve seen huge rallies in energy and consumer staples stocks and industrials, and people are making this argument. And look, the most dangerous thing oftentimes is to ascribe narrative to price action. So people are seeing the price action, and they’re like, ooh, why are people racing into staples? Or why are they racing into energy stocks, even though oil prices haven’t broken out? And people will say, well, it’s because they wanna find anything that can’t be disrupted by AI. You know, you can hide out in these names.
Now, the idea of hiding out in highly cyclical stocks is — it’s sort of like my straw house is fire retardant, right? Like no. Like that’s probably not the best plan. I would argue it’s more about just positioning — effectively, you’re going from a very liquid part of the market in tech and software that got really crowded and you are repositioning into a much shallower liquidity part of the market that’s underowned. So you get these mega upside moves. Not necessarily about the fundamentals, but it’s interesting — if the narrative continues, we’re hiding out in these things, you hope that the earnings will eventually support it, but we’ll see.
Dave: Yeah, and I mean, this speaks to the challenge of entering a reshuffle period like this with so much concentration at the top — because people just deciding to lighten up their Nvidia exposure by a percent or two, if they’re reallocating that back down into the 497, that’s gonna have an enormous effect on the 497 because of how much a percent of the Nvidia would matter to the bottom companies in the index. So there is this weird dynamic we’ve seen. It does show up in the numbers — like RSP has had the best year it’s had versus SPY in God knows how long. We’re in a bit of an anything-but-market-cap-weighting environment, which we’ve been in before. The 2010s, we had a couple years that were like this as well, where just anything but market cap would give you some juice. It doesn’t quite feel that bad yet, but it does feel like we’re heading there.
Matt: Feels to me that there’s a lot of — and maybe this is part of the flow story too — where it’s like anybody and everyone who takes a little bit of money away from these large cap names wants to take a little bit of money away from there. And then to the magnification effect that I think you’re talking about here, Cameron, it’s like if some sovereign wealth fund decides they wanna own a little bit less SPEW, or they wanna own a little bit less Nvidia or something like that, and put the tiniest amount of money into utilities, energy, oil field services — get as small as you want. That’s a giant ripple effect at the opposite end of the spectrum, when you go from something that’s several percentage points of the index down to something that’s a couple of months.
Dave: Or just the same thing happening in international diversification, right? I mean, we’ve seen, yes, the S&P had a pretty damn good year — all things considered, pardon my French — but it was also like the 23rd best performing developed market. I mean, we were the worst performing developed market last year, and we are still pretty much on that track this year, even though we’re having a supposedly relatively okay year. I think some of this is just that the endless bid is still a very real thing. And we had a whole bear market last week that lasted exactly as long as we all thought it would — about a trading day. And then lo and behold, Friday payrolls show up again, markets back up. I mean, we’ve seen this pattern over and over again. We can’t sustain a downturn, so when we get them, they’re really violent and really fast.
Cameron: So here’s a predicament, which is that last year we started the year where non-US markets were effectively trading in the 50th percentile of their last 10 or 15 years of valuation. And it’s good to remember international stocks actually used to trade at a premium to US stocks, which seems absolutely wild. But where you’re in that valuation range, you’re now effectively in the 90th percentile of your valuation range for these non-US markets after the rallies that they’ve had. Now, they’re still significantly cheaper than the US market. So the question is, does that gap — which has been a gap that has not been able to be jumped over ever since the bursting of the international bubble back in 2007, and I will argue it was a bubble, mostly in EM — since the bursting of that, you have not seen that gap be able to close. So is this time going to be the time that the gap actually starts to close? Where we go above the 90th percentile in recent history and we go way, way back to those glory days of the 2000s and everybody has to wear low-cut jeans again.
Matt: That’s probably part of it. They’re coming, they’re coming.
Cameron: I mean,
Matt: They already — they’re coming, they’re already here.
Cameron: Coming back.
Matt: I’m waiting for my Kendrick Super Bowl flares still to come back. I’ve got ‘em ready. What about the dollar impact on this? Because the other part that I keep hearing — I talked to international investors and they’re like, yeah, we had the US allocation and it was up 30 last year. It felt pretty good for us. But then we looked in our local currency and our local country index was up 50, and they’re going, all of a sudden the justification to hold that US got way diminished last year in a way that is becoming more of a reality on paper for these allocators. I’m just curious — Cameron, you wrote in this piece about the dollar too. They got the dollar wrong last year. You think they might get it wrong again this year? Could you explain that?
Cameron: Yeah, I mean, dollar positioning has been probably the most important factor for the dollar, in my opinion. There are FX gurus out there who will be like, absolutely not, you’re wrong. But what we can see is that when you get positioning to extremes, you should expect a reversal in direction of the dollar. That’s exactly what happened. Last year, everybody was America First, super long the dollar, and we saw a max overweight position in the dollar.
What happened? The dollar weakened by a significant amount, caught everybody off guard, everybody started to have to hedge. It created this feedback loop of dollar weakness, and what you ended up having is that super long position became a super short position. And then as we’ve moved through effectively the last nine months or so, you keep having these moments where the dollar will rally a bit, everybody will close their shorts, and then of course the dollar falls and then they’ll get short again and they keep kind of chasing this positioning. Which, now as we’re looking at it, given the recent weakness in the dollar, people have actually gotten to a point where they’re as short as they were back in the spring of last year. So that would suggest that we should have the imagination that we could see dollar strength, just given the fact that people would be off sides. Obviously there’s a lot of other drivers for that too — all of the Fed independence stuff, and growth and et cetera, geopolitics and blah blah blah.
Dave: Yeah, yeah, yeah.
Matt: The point that you landed this one on, Cameron, was positioning versus narrative, and that’s where the real surprises hide. Unpack that.
Cameron: Yeah. I mean, that’s the thing — whenever we all agree on something, and that’s why I was mentioning the cyclical upswing: everybody seems to agree that we’re having a cyclical re-acceleration. Not everybody — obviously there will be some people that push back — but it’s a very popular narrative and they have the evidence for it. Look at what’s going on within trucking stocks. Look at what’s going on within trucking data. And that’s typically earlier cycle than what you would see show up in employment and manufacturing, for example, which is a very lagging piece of data. So, performance of the equity market is suggesting that there’s an expectation for a cyclical reacceleration.
I’m just asking — I’m raising the question of, could that performance just be a function of the fact that these areas have underperformed and they’re benefiting from this liquidity tide moving from point A to point B, and we’re finding the narrative about an acceleration in order to justify that stock price move. But it really is just more about positioning. I don’t know which one the answer is, but I think we have to consider both as potential outcomes. I do know that every industrial person I talk to is super, super bulled up and they’re so excited to be cool for the first time ever. Industrials weren’t cool, ‘cause it was the industrial recession. So now I feel like I missed my opportunity to actually be relevant.
Matt: Where are they back? We’ll hold the door open for you.
Cameron: Thanks.
Matt: Dave, you wrote an outstanding piece over on etf.com — tokenization, really important and not for the faint of heart. And this is one of those areas that I feel like I haven’t paid a lot of attention to since the pandemic. It keeps cropping up and all of a sudden I’m going, okay, tokenization isn’t hype anymore, it’s plumbing. And I’m like, oh no, I missed a lot. I fell asleep in class.
Dave: Well, not missed a lot. I think, again — to the point, maybe this is the theme of the episode — narrative is not reality. We’ve had so much attention in the last 18 months on crypto. Like, that’s the story, right? And then that tends to get rolled basically into a conversation about Bitcoin, ‘cause it’s the big one that everybody sees on the top of the Wall Street Journal page scrolling by. Meanwhile, the actual sort of decentralized finance ecosystem we used to talk about back in the day when we weren’t just caught up in the hype cycle — that’s actually moved on at a pretty good pace. And the interesting thing is that while a lot of the hype cycle was around how we individually were all gonna be trading tokens with each other and the New York Stock Exchange was gonna disappear, and there was a big push towards that — like, no institutions, no central clearing — what’s actually happened is that the DTCC, the clearing corporation that runs the US stock and ETF markets, put out a quite useful proposal on how to sort of baby-step into real tokenization by taking the same kind of creation/redemption process we use in ETFs for essentially portfolio tokens — whether you call them ETF tokens or index tokens, doesn’t really matter. So they’re taking those very first steps of figuring out how to roll exposures into something that isn’t a private blockchain or a secured blockchain with known wallets that institutions can start moving big exposures around in.
And that bolts along with a bunch of work that the institutions themselves have been doing around cash collateral. So we’ve got BlackRock out there now with a $2 billion token called BUIDL, which is basically just a money market token that moves around whose sole purpose in life is effectively to be collateral. It’s a liquidity maintenance token more than anything else. And that’s a big business now — there are major firms out there building those kinds of tokens, actually having them used by large institutions that are overnight needing to pledge a hundred million dollars because they have a cash management issue. Core corporate finance stuff. And that’s sort of going on in its own bucket while the DTCC is sort of building these rails along with the New York Stock Exchange primarily for a future where individuals or asset managers would actually be transacting in tokens.
The missing piece here, and the reason I’m sort of not bullish — or slightly bearish — on this as a big thing that gets adopted is that this is actually a problem for most players in the market. Right now, if you’ve got big institutional players moving a lot of money around in the day, they rely on the fact that they don’t have to have all that cash all the time. They rely on the fact that at night the NSCC will match everybody up, and the only thing they have to deal with is the net difference between how much they owe Goldman Sachs and how much Goldman Sachs owes them on any given position. All this token stuff is atomic settlement — it happens instantaneously. So if you’re on a trading desk and you trade that Tesla token, well, you’re either gonna get handed that cash right away and need to do something with it, or if you’re the buyer, you gotta have that cash in the bank right now to make that token transaction happen.
So it takes what was previously a net capital problem — the industry had figured out how to maximize, meaning how to get the maximum juice out of their capital, reuse it as much as possible, pledge it in as many places as possible — and it destroys that entire capital ecosystem and makes everybody have to work out of their actual wallet all day long. No institution really wants that. They’re too reliant on the other system. So we’re in this really interesting place where we’re building this atomic settlement system that the major institutions are — it’s actually creating a problem, not solving a problem. So I think it’s really interesting. The technology’s clearly right there, but I’m very skeptical on adoption of this outside these narrow institutional use cases, even when all the plumbing gets solved.
Matt: Cameron, is any of this even on your radar?
Cameron: I mean, it raises a few questions, right? Does the adoption of the technology have any correlation to the price of the ecosystem? That’s question number one. If you do these bull cases and people are like, we’re gonna tokenize everything, and that’s why I’m bullish crypto or whatever — I’ve never, I guess I know that there are specific arguments for specific tokens or coins that may have higher prices with greater use, but maybe not.
Matt: The network effects of some of these things may exist at a certain scale.
Cameron: Right. But I think that’s question number one. And then question number two — Dave, it kind of reminds you of the stablecoin question, which is that with stablecoins, if they’re going to be this big buyer of treasuries, effectively isn’t that a more inefficient use of capital? Because if all of a sudden I have to hold treasuries when I didn’t have to hold treasuries before, that suggests that I have to have more cash that’s just sitting around versus cash that’s working and doing stuff. I don’t know. Sometimes it’s like coming up with a solution and then finding the problem.
Dave: Yeah. I think you’ve nailed it. I think this issue — the banking system is actually a nice imperfect metaphor for this. Like, everybody forgets about fractional reserve banking until somebody asks the question, well, what if everybody wants all their money out in one day? Which never happens in the history of the US really, but it is a legitimate question. If in fact everybody wanted all their money out of every bank all at once, it wouldn’t work — we know how fractional reserve banking works. I think the crypto and token ecosystem is gonna have similar qualities there, where we’re giving up a lot of reuse and rehypothecation of capital that the system relies on. That’s what actually generates liquidity — that I don’t have to have this stock in my hand to sell it to you. I have a window to go get it from someone else. All, not all, most of our clearing and settlement processes work like that. And once you go with this atomic tokenized settlement, you destroy that.
So the stablecoin example I think is great. The difference between a bank account and your stablecoin account is largely who’s sitting there with the capital.
Cameron: I know this is a very different topic, but it’s somewhat related — with what’s going on with all these discussions of shrinking the Fed’s balance sheet and this idea that you could increase leverage ratios at banks in order to allow the Fed’s balance sheet to shrink. So effectively you get this offset. You know, I was writing some notes and speaking with some research analysts, and I was like, why? Like, why would we want to do that? Why would you want to go back to the leverage levels seen before the GFC? Why would you want to go back to leverage levels that clearly created the capability for financial crisis? We haven’t had a financial crisis since we put some of these restrictions in place, and we had some pretty big whoopsy moments when it comes to the economy. So it raises the question — and that’s where I’m tying it back — it’s like, just why? Why are we doing this? Are we doing this because it’s an interesting intellectual exercise and it’s a technology that exists and is cool? Or is there actual benefit? And then to your point, Dave, maybe the benefits are more narrow than this universal kind of, it’s gonna solve everything and everything’s gonna be on the blockchain.
Dave: I think that’s absolutely right. I think the use cases are gonna be narrow, and that doesn’t mean it doesn’t matter. I mean, think about something like escrow. You can create all sorts of reasons why escrow should not have to exist in the modern world anymore, and yet it happens thousands of times a day. I mean, escrow is a standard part of contract law, real estate, et cetera, and it’s deliberately a way of slowing down and intermediating a transaction you could just do — you could just walk up and hand somebody a gold bar and then take the deed to the house, but nobody does that. Everybody uses an escrow agent. Because at some point you actually want a little friction, because that friction allows you to catch errors. And that’s the big issue here — if there’s no friction, there’s no way to stop a fat-fingered trade. Somebody accidentally sells the wrong decimal point number of tokens, and that settles and that cash moves. Good luck. Like there’s not gonna be a clearly erroneous trade rule on your atomic settlement. You’re gonna get screwed. Maybe you get to sue somebody and get it back, but it ain’t gonna be instant.
Cameron: I remember that one — I think it was Citi.
Dave: Yeah.
Cameron: They transferred a bunch of money into like —
Dave: $400 million or something like that. Yeah.
Cameron: Yeah.
Matt: What could go wrong? I mean, it’s not like private credit can blow the bubble all by itself. We might as well let the big banks get in on the bubble blowing too. And then we’ll have a proper crisis.
Dave: Good, solid crisis. Good hard rain. That’s what we need.
Matt: No, a good hard rain’s gotta fall.
Cameron: Well, but on that point though — I really do resent all of the, like, “we should, you know, recession is healthy and a reset and this and that.”
Matt: Because they suck. They suck.
Cameron: They suck.
Matt: I would really not like to go through one.
Cameron: Like, kids’ nutrition goes down, suicide rates —
Dave: A lot. No, it really sucks for poor people. Like, that’s what people don’t forget. Like the dollar value may look like it’s all happening at the top, but recessions really suck for the poor.
Matt: Back to that BLS data, that K economy — we put a lot of people down there right now. Don’t look at the Gini coefficients on wealth and income distributions, ‘cause that recession — torches and pitchforks might be on their way faster than we’re thinking.
Cameron: That was a really popular thing after Liberation Day — a bunch of people came out and were like, no, recessions are good. They reset stuff and it actually would be healthy and this and that. And that’s someone who hasn’t bought their own groceries in a really long time.
Dave: Yeah, and I think people mistake “we need a good hard recession” for “maybe some of the stocks that are overvalued should become less overvalued and maybe some of the forgotten ones should get their value increased.” Which is different than saying we need a recession.
Matt: A rotation. A rotation in market cap or valuation.
Dave: Is not a recession necessarily.
Matt: Especially if you’re a value investor, and that’s what you’re asking for.
Cameron: I mean, you do need these clearing events within markets. Trees don’t grow to the sky, and the more they do grow to the sky, we’ve been arguing that with precious metals — that they end up becoming like the sword of Damocles and it’s a victim of your own success. The more parabolic you go, the greater the risk is not just to the downside, but the greater risk is to the correlation of the rest of your portfolio. Meaning the more gold was going parabolic up, the more likely it was going to become highly correlated to other risky assets in your portfolio and not provide the diversification benefit that you wanted.
Matt: Yeah, an extra sword of Damocles. We know what happens in Rocky Horror. We know that Eddie was the failed experiment. Rocky didn’t make it better. It’s just not the way it’s gonna work out for anybody. Take me to a surprise topic, Cameron. We might lose you earlier than expected here. What do you got for us? You’re going first.
Cameron: I mean, well now you said Rocky Horror — I love Meatloaf. Like, I really love — oh my God.
Dave: Unironically.
Cameron: Unironically love Meatloaf. And I think “I Would Do Anything for Love, But I Won’t Do That” — not the radio edit version. No, you need the full version.
Dave: The long one. The opera.
Cameron: Is one of my favorite songs ever. I just get disappointed that the full version’s never on karaoke. Not that I would sing it — I can’t sing.
Well, my random topic is actually a life update in the sense that — remember I asked, is it appropriate to shush somebody in yoga when like people were talking?
Matt: The shushing. Yeah.
Cameron: The shushing. I’m not a shusher. I can’t shush. I’m like, let people be people. But it was a very cold Sunday morning and it was such a peaceful room. And these two gabby people come in and start talking very loudly. And I got up and I was like, “It’s a silent room, thank you.” And I got the dirtiest look. And then it was in my brain the whole time. And I’m like, they hate me, they hate me, they hate me. But then other people looked at me afterwards and said thank you, like respecting the space. So then I’m thinking, oh gosh, I’m a Karen and the whole thing. But at a certain point there’s also a reverence for certain things that make a space special — that keeping that reverence and defending it in a way is good. So I shushed. I shushed for the first time. I hope I never have to shush again, but there it is.
Dave: But you’re the guardian of the space. You should own that role. Yes. Take the —
Matt: You didn’t just become the David Spade church lady — like you became a proper guardian of the space here.
Cameron: I just now see myself as a little raccoon with an Ozzy.
Matt: As long as you’re not the one coming out of the dumpster on fire behind you, you’re fine.
Dave: No raccoon for Ozzy, okay.
Matt: No. Yeah. We support this shushing exercise. I will also say I’ve got a Meatloaf story coming out with Roger Mitchell on “An Intentional Investor,” and it does include a publicity event — I think in Italy in the nineties — with Meatloaf running down a hill and a young intern possibly tied or held by hand by Mr. Meatloaf saying, “Mr. Loaf, Mr. Loaf, please stop,” ‘cause she doesn’t know what to call him. It’s amazing. Mr. Loaf. Every time I hear Meatloaf’s name. Dave, you got something for us. You shushing anybody these days?
Dave: No. I was trying to think if I had a special topic. I think here’s my big news — I think I finally let go of Twitter, or X or whatever we’re calling it. I think I’m off. I’m off the drip. And I would encourage everybody to do their own analysis of their media diet. I’ve been trying to take on board the idea that we are what we consume, mostly. And I just realized that 90% of the people that I actually wanted to hear from on Twitter, I could hear from elsewhere. And it just hasn’t become a platform where real conversation happens anymore. And that’s the reason I cared about it. I don’t have enough to promote that it’s that important for me to be saying things out loud, and nobody’s having a real conversation. So people wanna find me — Blue Sky, LinkedIn. LinkedIn, oddly, for all the jokes we’ve all made about LinkedIn over the years, there have been more actual intellectual conversations about markets and finance and all this stuff going on on LinkedIn than anywhere else right now, which is bizarre.
Matt: If you can get past the AI bot thing on LinkedIn, ‘cause I feel like there’s maybe not more — I run into a lot of AI on LinkedIn.
Cameron: I’d love to do a proof-of-life check of all the people like, “this is what this taught me about software sales.”
Matt: Oh God, no. I saw one the other day and I was like, oh, no chance. No chance.
Dave: I mean, I’m pretty good about only following people I want to hear from on LinkedIn and muting people who are just spamming their advisor practice or something poorly. And that seems to work pretty well. But yeah, there is still plenty of that and a lot of it is very ridiculous.
Matt: It gets pretty ridiculous pretty fast. Okay. I’ve got one more thing for Cameron to hear and then Cameron, if we have to let you go, I’m gonna let you go. So I can ask Dave an AI related question after this whole thing. But the thing that I have was — first off, halftime show. Did we watch the halftime show?
Dave: Loved it.
Matt: Is that part of life? Did you see Tonya?
Cameron: Tonya Wa?
Matt: Was that the New York City lady? Who’s Tonya? Yes. Yes. She the one with the drink?
Cameron: Yes.
Matt: She — you can’t go there anymore because she took that picture on Instagram a while ago?
Cameron: Like, she runs this beautiful little dive bar in Williamsburg and she’s amazing. There’s a big street festival that happens for her birthday every year in June, and she’s just an icon. And it was really cool to see her in there.
Matt: I had only heard of her from my New York City friends and that they can’t go there anymore. They were just like, it’s so many people there, it’s too busy, every time we look. Yeah. Which is amazing and ridiculously cool. Shout out to the marriage. I don’t know who the young couple was.
Dave: I was gonna say the marriage was my favorite part of the whole thing. And I read there’s an article from the pastor — or the minister — who actually did the marriage live and was convinced until like three weeks beforehand that he was marrying Bad Bunny or something.
Matt: That would’ve been a move. That would’ve been a move.
Dave: That would’ve been a balling move.
Matt: Okay. So favorite moment was — was that your highlight, Dave? Was that the —
Dave: The marriage. The marriage was absolutely — when they actually, when you could see that they were three people doing something insane and laughing about it. And it wasn’t just actors and dancers. I could tell in that moment it was like those people just got really married and I was shocked. It was great.
Matt: Alright, on your scale of prior halftimes, where are you rating this one? How high up?
Dave: The problem is that I remember the Michael Jackson one really vividly. That one has — I don’t think anything’s ever gonna permanently beat it. Like, wait, he’s on the billboard? No, he’s down here. Wait, he came up from this? I mean, it was so amazing at the time. That was like hard to imagine beating that.
Cameron: I have a confession to make. I love dad butt rock.
Matt: Okay. Okay. It’s there. There you have it. So the —
Cameron: The Creed halftime show is amazing.
Matt: Wait, the Creed halftime show? Do my ears deceive me? Okay. Yeah.
Cameron: But also — Prince. Prince was really good too.
Matt: Yeah.
Cameron: But Creed. Oh man. And rest in, rest in power, Mr. Three Doors Down.
Matt: Yeah. That’s —
Cameron: And the Cake guitarist.
Dave: Really? I miss the Cake guitarist too.
Matt: And James Vanderbeek — it’s been a rough day for the era.
Dave: Too bad.
Matt: All right, Dave. We’re one person down. So now the real question — I bled into it in the intro. Did you watch the alternate halftime, prerecorded, whatever that was?
Dave: I watched some YouTube coverage of it. I watched it after the fact. Ironically, and with a sense of humor.
Matt: With a sense of humor, I do suggest the Pat Finnerty livestream.
Dave: Oh, did Pat Finnerty do a —
Matt: I was holding off until after this. I can only imagine — I’ll text it to you because I was like, you’ll love this. You’ll also love the Bad Bunny emergency update video that he does daily.
Dave: I can’t imagine it didn’t take him like four hours to go through the 15 minutes of it.
Matt: Well, he livestreamed it, so it’s all — he doesn’t pause.
Dave: He doesn’t pause anything.
Matt: No. Yeah. Well, I think he does rewind at least one ouch note from the violin player. He has the debate over the lip-syncing thing. And so first off, you took this in at least ironically, just to be aware of what it was. Okay. Also need to check in — have you followed through on the story where Kid Rock is accused of the lip-syncing? He’s clearly lip-syncing.
Dave: Yes.
Matt: Have you followed through on the outcome of this though?
Dave: All I heard was that he was trying to claim he wasn’t, that it was prerecorded, but he wasn’t lip-syncing. And none of that made any sense to me because I could sit there and watch his mouth all the way over here while his voice is coming from over there.
Matt: So there’s an amazing video of him clearing his name and trying very hard not to throw the Turning Point people under the bus, but also trying very hard to say like, “We prerecorded this. They sent me an edit. I said, your sync’s off. Like it looks good, but the sync’s off.” And they couldn’t get the sync right. He’s like, “I told them, I sent it back. They’re very good people, very good events.”
Dave: Just for his part.
Matt: Just for his part.
Dave: Just for the parts where it looks like —
Matt: On his most popular song. So because he’s been performing that song since 1997, I think he’s in Nashville — he gets his DJ, Paradigm or Freddy, whoever his DJ guy is — he flies them in from Detroit and they’re live doing the entire thing acapella with each other to prove once and for all.
Dave: I was fairly certain he knows the words. Like that wasn’t my concern. I don’t know the words, but I’m pretty sure he did.
Matt: Alright, so I fully encourage you — if you have not seen Kid Rock and Paradigm doing their live acapella rendition to prove that they weren’t lip-syncing and that there was a sync issue and they’re pinning it back on them but trying to say very nice things — it might be the most interesting political debate right now that I care to stomach. God. I just — I think, what does it say? So the thing I’m wrestling with to write about is a reliance on distribution for an idea. And I’m really intrigued by this in particular because I think a lot of people encountered Bad Bunny for the first time. I think — and I don’t think there’s any shame in that. Bad Bunny’s a wildly popular artist, but I still remember when we were in Nashville together.
Dave: But also not in English. And like, let’s be honest, I don’t listen to a lot of non-English music. I listen to more French music probably than I do Spanish music. But I think it’s very fair if most people who do not speak Spanish as either a first or second language did not know who Bad Bunny was or did not know the music.
Matt: 1000%. 1000%, because it’s not part — so there’s this distribution mechanism that happens here. And I think it’s really interesting. I think it was a good decision both for Bad Bunny and the NFL to pick this as a distribution mechanism. And for Apple — let’s be honest, behind this event — to say, let’s take somebody who already has this much steam over here and try exposure to a larger audience.
Dave: Do you feel like the Kendrick was the same thing? Because, I mean —
Matt: 1000%.
Dave: A lot of people I talked to afterwards were like, I don’t listen to rap music and hip hop. And who is this guy?
Matt: I’ve got nothing for you. But if this is not on your radar, if you don’t know Kendrick Lamar, then you just don’t listen to very much popular music. And that’s okay. You’re right, yes. It’s a distribution platform for artists. A hundred percent.
Dave: So interestingly in that same regard — because I’m watching this thing, ironically, probably to laugh at it — I’m gonna give Kid Rock his credit. He still had the best quality voice. Pat said this too in his livestream. I was like, yeah, the guy has a singularly recognizable voice. He could still sing. He’s infinitely better in that regard than the other people who were part of that performance. And to the guy with the brass knuckles on the microphone — I just got nothing for that one. And pantsuit lady, whatever that whole thing was. Anyway. Kid Rock trying to reframe himself as adult rock, or whatever he is now, using his real name and doing his Bible-thumping song — I’m also looking at that and going, this is the best distribution platform for him to take this message into, yeah, for sure. Even though this thing is not for most of America now, and it’s probably just driving off a cliff — if not into a wall — as far as just like, sunset, end of his career, ‘cause it’s so far removed from what he was previously famous for. I’m like, this is actually the right distribution choice if this is the lane that he wants to exist in right now.
Dave: Yeah. And I totally agree with that. And you know, you have to pick horses for courses — you gotta be in the right place.
Matt: I think there’s a very, very interesting point in these two pop cultural events that everybody wants to politicize. And I think there’s actually some very intelligent and thorough marketing strategy inside of this — of going, if you want distribution for your thoughts, your ideas, or something else, you gotta pick the right place to put that message across.
Dave: Well, I think also there’s — I’ve increasingly been realizing that a lot of the cultural stuff that we seem to be fighting about isn’t so much that “I rejected this person’s culture and they reject mine.” It’s that there’s still this idea that somehow there’s going to be an American monoculture. That there is going to be, that everybody — 400 million people — are all going to agree: we love X, whether X is football or God or Kendrick Lamar or whatever it is. And I think the reality of modern life is that partially because of technology allowing us to pick our echo chambers, but also there’s twice as many people in this country as there were when I was a teenager. Like that’s a real thing. Population growth happened. People are more crowded. Inevitably, things that used to be niche are going to now have hundreds of thousands of people who are into them. And I think that’s a tough thing to onboard, right? Because we all think that the world looks exactly like it looked when we were kids. We get locked into that, and the reality is that somebody like Bad Bunny can be the best performing and best-selling artist on Spotify, yet half of America may literally not have any idea who he is. And that’s a weird place to be. And the answer isn’t probably that everybody should know who Bad Bunny is, and that’s the American monoculture for a week. It’s that we need to acknowledge — hey, you know what, opera’s really cool. Maybe not for me, but I love that other people are really into opera. It doesn’t mean it has to become the American monoculture.
Matt: I think it’s so interesting. I’m gonna tie it back to this idea of like, everything is AI, or everything is tokenization or Bitcoin or crypto or whatever else. And it’s like this desire to make everything follow the same rule book. And I feel we are starting to look at all these examples — or at least I feel hyper aware of all these examples — of, it’s so clearly this can’t be everything. Like, clearly the NFL over here and Bad Bunny over here, and there’s some of that Venn diagram that crosses over and there’s a whole bunch that doesn’t. And we are being reminded over and over and over again that this is not representative of anyone anymore and that monoculture is leaving us behind.
It’s weird ‘cause it seems like we’re getting down to these final pillars of, again, AI is gonna solve all the problems in the world. Like, what if it solves a bunch of little problems? What if it just continues to solve — trying to think, in Kai’s paper — did you read their investor letter for Sparkline Capital?
Dave: No, didn’t.
Matt: I’ll send this to you. It’s phenomenal. Go look up this — he was just on Excess Returns talking about it — like storage facilities and rental units. He’s like, the biggest gains from actually applied AI, when we comb through all the earnings reports and the companies that are actually implementing — it’s like, yeah, this bank did some of this and this tech firm did some of that, but oh, you have a bunch of rental units and a bunch of storage facilities? Like, they’re getting their money’s worth.
Dave: Hmm.
Matt: And it’s fascinating the way these things, even those will splinter in use cases.
Dave: Interesting. Yeah, the AI thing — I think that’s absolutely right. I still think that small and medium businesses are gonna be the biggest percentage beneficiaries of AI. In my own case, we run a very small company at etf.com. We’re probably a couple bodies short of where we would’ve needed to be to do the exact same amount of work six years ago. Hard to quantify.
Matt: What do you think for that? Especially — and I’m saying this from a small company too — where we have three or four different AI vendors that we use. And it’s very regulated as it should be, you know?
Dave: Yeah.
Matt: As it should be, for financial services, for financial providers space. So we have to use different AIs in different areas to do different tasks. However, I’ll go as far as to say that’s probably like ten people, or four good vendors that we don’t need anymore, or that we use at a fraction of a cost because of the productivity gains here.
Dave: Yeah.
Matt: And that is a massive boost. That’s hard to point at in bottom line profits, where this is showing up. But if we actually mapped back out how we would possibly do some of this stuff without these tools, there would not be profits left over.
Dave: Well, and I think that’s the tricky thing about AI — a lot of this stuff is gonna be extremely difficult to quantify in any meaningful way. Putting aside the “does it make your company more profitable” thing, just think about how it’s impacting people’s day-to-day lives. I have two people in my family who are in nursing school, and the ability for them — my wife in particular — to take a two and a half hour lecture and before she’s even home from class, have that transcribed, and not just transcribed, but here’s the outline, here’s the slides copied out. And by the way, I went to the professor’s website and I grabbed the slide deck. So now I’ve got the transcript that he actually said with the slides he actually used. And before she sits down to study at night, she’s got a two- to three-page study guide for a two-hour lecture.
How do you quantify the time savings of that, or just the exhaustion of having had to have done that in real time as a normal student? I think these things are gonna be really tough to measure, and instead what we’re gonna do is we’re just sort of gonna say everything’s great and the economy is gonna continue to do this, and there’s gonna be this sort of hidden AI tailwind underneath all of it that’s keeping that afloat, but it’s not gonna show up as a step function in every business.
Matt: I increasingly share that view. It’s not gonna be a step function in every business. There will be some that experience the step function reality, but I think it’s gonna take a deal of time.
Dave: Most of the step functions seem to be that way. Yeah. Like Thomson Reuters, LexisNexis, right?
Matt: Yeah. It’s very, very real. Do you think this helps solve the K problem at all, in any way, shape or form? Does it have to get worse before that gets better?
Dave: I do, only in the sense that I think for those people in the economy who have both the capital and the intellect and the animus to actually build a business, to go do their own thing, to use these kinds of tools to find a wedge into the economy that they might not have found otherwise — that is net positive for people who might otherwise be left behind. I think those of us who live in the internet cognoscenti sphere of ideas are deeply out of touch with how little this matters for most people. Most people don’t interact with the internet continuously for work. They interact with the internet for a little bit of information and a lot of entertainment.
Matt: I was told the other day by someone in their mid seventies that they used — I think it was ChatGPT — and based on a Facebook group, because I was asking, I was like, where did you learn to use this? And she’s telling me, well, through this Facebook group. And this is how we figure out where to go to lunch. Like, this is how we —
And I was like, I am amazed and delighted that this is the use case for this, that people are experimenting with this and actually at least playing around with it. I don’t know what the economic value is for that.
Dave: Yeah, that’s the challenge — I’ve seen this with my mom as well and some of the older folks that I know. ChatGPT has made great inroads because it doesn’t require anything technical from the user. It’s actually ideal for somebody who’s 80 and doesn’t use a computer, because as long as they understand, “I push this button and talk and then it will talk back to me” — that is a categorical removal of detritus in their world. Before, if they wanted to understand when Jeopardy was on, they would have to find a newspaper, or maybe they would be smart enough to type on their phone with their thumbs, or maybe they knew how to use a voice note and ask Google, and maybe they got an answer. Now they just click the ChatGPT button and say, “When’s Jeopardy on?” and it says, “7:30 on your ABC station.” Right. Or whatever.
Matt: Yeah. It takes the whole voice thing and actually finally makes voice useful.
Dave: Yeah. Which I think is partially understood, but it’s completely changed my workflow. I do 90% of my writing now by dictating, which has not been the case in the past.
Matt: Really? 90%? That much you think?
Dave: Yeah, absolutely.
Matt: Conversationally, or like, dictate and then reflect on the screen with the writing?
Dave: What I’ve actually started doing is — if I’m sitting, like meditating, or if I’m doing sort of contemplative stuff where I’m sitting there with a pad — I’ll just record a voice memo, and the voice memo might be two hours long and maybe I spoke for 15 minutes, but it doesn’t matter because it compresses. So a two-hour voice memo with me not talking doesn’t take any space. So I just dump voice memos into my Claude instance and it just transcribes it all back out to me and says, “Do you want me to add this to this article? It seems like it’s part of your tokenization thing.” And then it bolts it in, and then I manually go back and edit the way I always have.
Matt: Yeah, that’s incredible. I do think we’re gonna see continued use cases in this. My only hope is that that bottom leg of the K doesn’t fall off before we start to get a generation of people through, figuring out how to be students who can still think for themselves but also use these tools to maybe improve some of the industries that we’re most worried about —
Dave: Yeah.
Matt: — like education, like healthcare, like taking care of those seniors, because I heard we got a few of them in our country.
Dave: Yeah. And this could probably help. I think there are real pros and cons there. With two kids and two family members in nursing school — on the one hand, this huge acceleration of the academic part, but also complete irrelevance in learning how to do 25 blood pressure screenings in 25 minutes. Like, that’s a physical skill that you’re gonna have to learn. Or doing rounds with the doctor and the doctor’s quizzing you on what kind of side effects should we expect from this — no amount of ChatGPT learns that for you as the nurse walking, doing rounds, getting quizzed by the doctor. Maybe it helps you study. Maybe it made you better flashcards, but it’s not gonna do that job for you.
Matt: I had a moment in our veterinarian’s office the other day where I’m trying to figure out — nobody’s taking notes. I’ve got two people in there. They’re having a dialogue with each other while they’re checking out my dog. And I’m realizing that they’re just dictating. There’s a sign on the wall and they’re just recording the whole thing. And I finally figure it out because they say something and they’re like, “Oh, that doesn’t go in the record.” And I forget what they said — “strike from the record,” or some version of that, some veterinarian version of that. And I was like, this is changing the way that all this gets captured.
Dave: You should be thinking about this in your own writing as well. Because while I’m militant on the “I will never let AI write for me” camp — which is a whole other long conversation we can have — when you’re dictating and you know that it’s going to be heard first by an LLM, it lets you do things like say something and, you know, like we were just talking about the K-shaped economy and how this is impacting healthcare workers in particular — you can mid-sentence say, “Go find me a chart of the healthcare versus manufacturing jobs for the last 13 months. Keep talking.” And the LLM is smart enough to, when it pulls it back, not forget to literally drop you the chart with the Department of Labor link in the file that you just made. Like, that’s a huge time saver.
Matt: Alright, let’s go save some time. Maybe save the world. I don’t know. Dave — etf.com. Anywhere else we should send people to find stuff?
Dave: Blue Sky, LinkedIn, places like that. And Dave Nadig everywhere.
Matt: Alright, make sure — Dave Nadig everywhere. Look up Cameron Dawson everywhere. NewEdge Wealth. All of her stuff. I know she’s got a new note coming out soon, but by all means, that one from January is still very, very relevant almost.
Dave: And hey, if people are down at Futureproof Citywide in Miami the first week in March — etf.com’s gonna have a big booth. We’re just gonna be having conversations just like this.
Matt: Just like this. So financial advisors, investors, allocators, tech people, venture people — we know you’re listening. You might’ve even made it this long in this episode. Go say hi to Dave Nadig. Tell ‘em that you like Click Beta. Nothing would make my day more than that. Dave, thanks for joining me.
Dave: Thanks for having me.
Matt: All right, we’re out.