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Well, I don't have my finger on the poll, so I don't know where we are today or this week or but I think that when you look for comparisons, the strongest comparison, not a perfect comparison, and I'm not saying this is true in degree, William, but in kind, the strongest comparison is to the TMT internet.com bubble of 98, 99, 2000.
The nifty50 was different because it was not around one novel technology and it was around established great companies for the most part. I mean there were no technological marvels that crapped out in the nifty50 and then the years 0567 with the subprime and the mortgage back securities subprime mortgage back securities is not comparable because that was not a technological innovation that was a financial invention.
Nobody thought that subprime mortgage is going to change the business of housing. The houses were unaffected. It's just that they said well we can make money by giving financing to a new class of buyers which turned out to be a bad idea. People who wouldn't document their earnings or their assets. So this is comparable to the internet bubble.
You know people said the internet will change the world. Guess what it did? Can you imagine today's world without the internet? It's completely changed in a million ways including the fact that we're talking over it. So this is comparable. It's a technological innovation that I think is going to change the world.
But my recollection is we had a clearer view of how the internet would change the world. And the view of many in 99 2000 has become true. And I think a lot of the excitement surrounded e-commerce and e-commerce has become a major force. It just feels to me like we had a vision of how that was going to work out and it mostly came true.
Today, I think we have less of that. I personally, I'm not an expert. I'm the furthest thing from an expert in the world. But I've never heard anybody tell me how AI is going to change the world. We know it's a powerable force. It can think, it can process data. It has access to all the data that's ever been compiled.
Exactly what it's going to do, how that's going to be a business, how people are going to make money at it, how it's going to impact life, I think is less clear. But I I do think that the two are comparable. And in both cases, there was a new new thing that fired the imagination. And most bubbles are around something new.
In ' 69, it was growth stock investing. In ' 06, it was subprime mortgages. In 99, it was the internet. In 1720 was the South Sea Company. And in 1620, it was Tula Bulbs in Hollow. So I always make this point that the bubbles are very very around something new because the imagination is untrapped and it can go off in a flight of fancy and you can imagine trees growing to the sky.
You're never going to have a bubble in paper stocks or timber stocks. You know it's too prosaic. People can say well you know we can tell how many houses you're going to build. We know how much wood is needed in each house. We can't tell where we're going to get it from. So, you know, you can't have these tree grow the sky moments in the prosaic areas.
It's always something new. You had a very interesting conversation recently, Howard, that I was listening to yesterday with Edward Chancellor, author of Devil Take the Heindmost, which had had an important impact on you when you first saw the 2000 bubble, right? And one of the things you said in that conversation, you made two bold statements.
You said, number one, AI will change the world. Number two, most of the companies people are investing in today, in other words, to profit from AI will end up worthless. And then you said, when the naive or hopeful investor takes the leap that the irresistible trend will produce sure profits, that's when you get into trouble.
Well, I should go back and reread that memo, I think. But I, you know, that's right. And and change the world and investors making money are not the same thing. And in fact, Warren Buffett pointed out and I think he said this about the internet. I think it was his in his 2000 annual meeting. There's no doubt that the internet will produce a great increase in productivity.
It's not clear that it'll have a positive impact on profitability. And I think the same is true of AI. My concern is I saw that CNN is running an ad. I on my travel I watch CNN International and they're drumming up interest in a show and the anchor says to a guest, "You say that AI has the ability to eliminate half of entry-level jobs." That was the whole conversation because then they cut to something else.
But the point is that may be true. And obviously if you can reduce the US GDP and eliminate half the entry- level jobs, it could be more profitable or or certainly more productive. But the question is will it be more profitable? To whom will the savings acrew? If different companies are competing to provide the AI service, maybe they'll compete on price to the point where it's not profitable for them.
Or if the people who employ AI service compete for market share, maybe all the savings will go to the consumer in the form of lower prices. So exactly how the laborsaving tool of AI is going to turn into profits, I don't think anybody can say. You often like to ask Howard, what's the mistake here? And so obviously we don't have any idea how this is going to pan out, but when you ask yourself what would be the likely mistakes worth avoiding at a time like this, particularly for either naive and credulous investors or just for smart investors who get sucked into euphoria, what are the likely mistakes we ought to be trying to avoid here?
What I've seen in euphoria after euphoria is number one, you shouldn't make the assumption that today's leaders are certain to be the leaders of tomorrow. They may well be, but you should bet your life on. Number two, you shouldn't assume that because the leaders are selling at high prices that it's a good idea to invest in the lagards because they're cheaper.
People say, well, they have a low probability of success, but maybe a big payoff, so I should buy it. And that's what I call lottery ticket mentality. And you know if they have a low probability success you should accept that that means chances are good of unsuccess. And then on the AI, I'm led to believe that you can make binary bets in companies that have nothing else going on, which will be sinker swim bets, or you can invest in pre-existing great tech companies, which will get moderate benefits from AI if they're successful, but still be in business and profitable if it's not that big a deal.
And now we're back to the very beginning of our conversation. Do you want to have a novel entrepreneurial startup pure play which has no revenues and no profits today but could be a moonshot if it works or do you want to invest in a great tech company which is already existing and making a lot of money where AI could be incremental but not life-changing.
It's a choice. What's your style? What's your game plan? I mean, if you're going to make binary bets on novel companies, you have to understand how risky that is. First of all, I've concluded in the last few months, William, that the toughest questions I get are the ones that start with how. Huh? Because I I can tell you what you have to do.
You have to keep an even kill. I can tell you that it may be desirable if you if you want to be quote safe to have a more defensive portfolio, but how to make that decision and how to keep an even keel is a little harder. But obviously if you let your emotions run away with you, if you buy when things get exciting, which usually means when prices are high, and you sell when things get depressing, which usually means prices are low, it's obviously going to be very counterproductive.
Uh, so I think the even keel is essential, and I think most of the people that you met with and written about have a pretty even keel. So that's my strongest recommendation. And this goes back to not being hyperactivity, not trading, not trading all the time. Don't just do something. Sit there. Let you know investing is not a it's not a fluke that it works.
It's not a pachinko game or a roulette wheel. It works over time because economies grow and companies improve their profitability over time. And the most important thing for investors is to get on that gravy train and stay on it. Invest. Invest early, invest a lot, and don't tamper with it. And having your your emotions under control is essential if you're going to be able to do that last thing of don't tamper with it.
And getting on the gravy train and staying on it and not tampering with it is much more important than getting on, getting off, picking the right times to get in and pick the right times to get out, picking exactly the stocks that'll go up the most and avoiding the stocks that'll go up the least. That's all kind of just embroidering around the edges.
The most important thing is to be a long-term investor. I'm not a futurist. I don't think that my vision of the future is bound to be more right than anybody else's. So, no, I don't think about it that much. And I just try to do, you know, all these things are a little bit counterintuitive and a lot little illogical.
I just try to think of we're laboring in the here and now to buy things that are going to do okay. Well, then you say, "Yeah, but Howard, in order to know whether something's going to do okay, don't you have to have a view of the future?" Yeah. Well, you kind of do, but don't think you know everything.
Don't think you have it right. You quoted Elroy Dempson. The future is not a set single thing that if you're smart enough, you can figure it out what it's going to be and it's going to materialize and make you right. It's a probability distribution. It's a range of possibilities in each thing whether it's GDP growth next year or inflation next year or who's going to win the next election and who's going to win the next World Series or you know whether we're going to have geopolitical peace or any of these things.
only one thing will happen but many things can and you should accept that. You should accept that it introduces uncertainty into the equation and you shouldn't form a certainty around one outcome and bet heavily on it unless you have special expertise which very few people do. So I think that humility is a great way to stay out of trouble.
And I once wrote in some memo or other about my favorite fortune cookie. You probably read that one too. But it said that the cautious seldom er or write great poetry. Every person has to decide for themselves. Do I want to try to write great poetry and get rich if my bets are right or do I want to avoid erring and be sure that I'll do okay if my bets are wrong?
It's a choice. You can't have both. Or you can try to do both, but you have to put your emphasis on one or the other. You can't emphasize both at the same time. And so, you know, this is a matter of mindset that I think most people should adopt. And life is uncertain, the future's uncertain, investing is uncertain. Are you going to go for winners or are you going to try to avoid losers?
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