US-Iran Interim Deal and Fed Chair Warsh

Summary

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Bloomberg Surveillance Podcast

Episode: US-Iran Interim Deal and Fed Chair Warsh

Date: June 15, 2026
Hosts: Jonathan Ferro, Lisa Abramowicz, Annmarie Hordern, Tom Keene, Paul Sweeney
Key Guests: Rebecca Patterson (Council on Foreign Relations), Steph Guild (Robinhood), Julian Lee (Oil Strategist), Jim Rowan (Deloitte)

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Episode Overview

This episode provides an in-depth look at two major themes:

• The market impact and geopolitical implications of a potential US-Iran interim peace deal, particularly as it relates to energy markets and inflation.
• Analysis of Kevin Warsh's role as the new Chair of the Federal Reserve, including his approach to central bank communication, rate policy, and challenges ahead.
  Additional discussions touch on the implications for the US dollar, gold, AI investment trends, and the evolving economics of deploying AI at enterprise scale.

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Key Discussion Points and Insights

1. Fed Chair Kevin Warsh: Communication, Credibility, and Challenges

(01:49–04:03)

• Maintaining Central Bank Credibility:

  • Paul highlights the main challenge for Warsh: “Priority one, two and three this week is reinforce the Fed's credibility. You don't want any questions about any political bias." (02:10)
  • Warsh is expected to tighten Fed communications, consistent with his prior “think more, speak less” philosophy.

• Policy Dilemmas:

  • Despite political pressures to cut rates, current inflation data (“core PCE for May is tracking at around 3.3% year on year”) implies cuts are unlikely soon.
  • Warsh must balance White House wishes, market expectations, and internal FOMC consensus.

• Market Impacts:

  • Financial markets are highly sensitive to Fed messaging, with both inflation and geopolitical news (e.g., Middle East developments) influencing rate and asset expectations.

Notable Quotes:

• Rebecca Patterson: “Think more, speak less it has been for years.” (02:48)
• Tom: “He's got a difficult needle to thread here.” (03:14)

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2. US-Iran Interim Deal: Geopolitical Uncertainty and Oil Markets

(04:03–06:43 & 13:12–20:41, 24:31–24:45)

• Conflict and Energy Prices:

  • The war's outbreak spurred a flight to quality and dollar strength; the prospect of peace is pulling back yields and energy prices.
  • Markets are forward-looking; current optimism is based on expectation, not certainty.

• Deal Uncertainty:

  • Details on the interim deal remain scarce; confirmation could take “60 days, 90 days” (Paul, 06:14).
  • Rebecca Patterson references outside skepticism: “This is really Rick Wilson just out on Twitter with just a scathing quick note like where are the details?” (06:05)

• Oil Market Recovery Timeline:

  • Julian Lee: The deal is expected to include a 30-day window to restore normal flows through the Strait of Hormuz, but this may be optimistic: “There's still a lot of hesitancy among ship owners. They really want to see a bit more than than just talk about this.” (19:18)
  • Damage to regional energy infrastructure and the need for careful, controlled restarts further temper expectations of a rapid price drop.

• Impact on Asia:

  • Asian refiners have been most affected by the Strait's closure; a reopening is expected to bring significant relief, while beneficiaries of high prices (e.g., Russia) may lose out: “Refiners in Asia will breathe a huge sigh of relief. The people who perhaps won’t will be those in the Kremlin...” (23:20)

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3. The US Dollar, Gold, and Markets’ Risk Appetite

(04:03–06:43)

• Currency Movements:

  • The dollar rallied amid conflict due to “higher interest rates following higher energy prices and broader inflation pressures.” (Paul, 04:15)
  • With peace prospects, US yields and the dollar have come off: “Now that that is off the table, you have seen yields...down a little bit. You are seeing the dollar down a little bit today.” (Paul, 04:15)

• Gold Volatility:

  • Gold saw a speculative spike and is now retreating as central banks (notably Russia and Turkey) sell: “Russia sold for four months in a row. Turkey was the biggest seller of gold in March.” (Paul, 06:51)

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4. Investment Trends: AI, Markets, and Retail Flows

(13:12–16:18, 27:45–33:22)

• Energy Prices, Inflation, and Corporate Costs:

  • Ending the conflict is expected to gradually lower input costs for companies, but the rebound will take time (Steph Guild, 13:27).

• AI Investment and Application:

  • Discussion of AI’s evolution from hype to practical enterprise deployment.
  • Steph Guild highlights application-layer advances (e.g., Eli Lilly’s “Lilly Pod”) and the power of “talking to your data.” (14:16)

• Retail Investor Behavior:

  • Clients are still buying stocks, often using ETFs on pullbacks.
  • Prediction markets beyond sports are gaining traction, with political events (e.g., LA mayoral race) and asset prices (bitcoin, oil) seeing strong activity.

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5. Economics of AI: Tokenization, Pricing, and Enterprise Value

(27:45–33:22)

• Token Economics:

  • Jim Rowan (Deloitte) explains the shift from basic AI usage to enterprise-scale deployment, with a focus on managing “token costs” as a key budget line item: “They're looking at their overall token budget much like they were looking at their cloud budget...” (30:03)
  • Input/output tokenization is now the standard for both vendor and enterprise-level AI usage accounting.

• Value Measurement and Market Evolution:

  • Cost per token is expected to decrease, but total token consumption will rise.
  • The main differentiator will be enterprise IP and application, not just raw model power: “What do you wrap around it? Where’s your internal intelligence?” (32:39)

• Competitive Dynamics:

  • Competition will shift from models to differentiated enterprise harnessing of AI.
  • Rebecca Patterson references a Deloitte paper on token economics, noting its relevance as the sector matures.

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6. Lighter Moments and Market Culture

(07:13–09:33)

• Personal Stories:
  • Annmarie Hordern recounts attending a Knicks championship game in San Antonio, highlighting New York fans’ emotional response after 53 years—a touch of human interest amid the finance talk.
• New York Optimism:
  • Tom and guests reflect on the resilience and comeback of New York City post-pandemic, with signs of vibrancy in real estate and everyday life.

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Notable Quotes & Memorable Moments

• Rebecca Patterson (on Fed guidance): “Think more, speak less it has been for years.” (02:48)
• Paul (Fed/Warsh): “He's got a difficult needle to thread here.” (03:14)
• Julian Lee (oil infrastructure): “Being unable to get their oil and their gas out of the Gulf, countries have had to scale back production... Once everything opens up again, all of that has to come back into operation.” (21:47)
• Jim Rowan (Deloitte, AI economics): “They're looking at their overall token budget much like they were looking at their cloud budget that they were dealing with over the past couple of years.” (30:03)
• Annmarie Hordern (sports): “What was not captured was the moment you realized they were about to become champions after 53 years. There was literally tears from New Yorkers...” (08:48)

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Timestamps for Important Segments

• Fed Chair Warsh: Policy, communication, and challenge: 01:49–04:03
• US-Iran interim deal, market and oil impact: 04:03–06:43, 13:12–20:41, 24:31–24:45
• Gold, the dollar, speculative moves: 06:43–07:13
• New York nostalgia, Knicks win: 07:13–09:33
• AI application and Robinhood retail trends: 13:12–16:18
• Julian Lee on energy markets & infrastructure: 18:44–24:31
• Jim Rowan (Deloitte) on AI tokens and economics: 27:45–33:22

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Conclusion

This episode offers a comprehensive, real-time take on the intersection of geopolitics, macroeconomics, and investment strategy. The conversations provide clarity on the uncertainties facing the Fed, oil markets, and retail behavior, while deep dives into AI token economics highlight the profound changes underway in enterprise operations. Human interest moments and cultural touchstones—such as the Knicks win and New York’s revival—create a lively, engaging tone alongside rigorous analysis.

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Transcript

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[Rebecca Patterson]

Rebecca Patterson right now to be kind Senior Fellow at the Council on Foreign Relations. Her work at Bridgewater Bessemer JP Morgan over the years thrilled she could join I guess I got to do the Fed meeting. To me it could be dramatic. If he's going to change things, he doesn't want to dawdle around.

[Paul]

Does he mean I think priority one, two and three this week is reinforce the Fed's credibility. You don't want any questions about any political bias. So that's that's goal number one for Kevin Warsh this week, I think, which he should be able to execute beautifully. I think beyond that, if he does a press conference, I expect he will, but it's not a given. If he does a press conference, then that'll be his opportunity to lay out the priorities. What is he going to focus on first? I would imagine he wants to review all the economic models, the processes. He's going to review communication. He's already been very vocal about having less communication.

[Rebecca Patterson]

Think more, speak less it has been for years.

[Paul]

Yes.

[Rebecca Patterson]

It's not a new thing, Paul.

[Paul]

The balance sheet will wait.

[Tom]

Yeah. So, Rebecca, obviously he's got some level of pressure from the President, from the White House to lower rates, but the data is not there. He's got a committee he has to deal with.

[Paul]

Yep.

[Tom]

I would think the messaging this week is as much for the rest of us that is the market, maybe even more so for the President.

[Paul]

Yeah. I mean, he's got a difficult needle to thread here.

[Unidentified Commentator]

Right.

[Paul]

Keep the President on his side ideally, but build credibility and trust with his colleagues at the fomc. I mean, and to your point on the data, I mean, Right now core PCE for May is tracking at around 3.3% year on year. If that's the number that comes in or something like that, there's no way they can cut rates anytime soon. And even if the straight of the hormones. Straight of hormones does open soon, which we all hope it does, and oil prices retreat further, you still have a strong economy now, probably stronger. You have inflation coming through the air channel as well as other channels. And, and so it seems like the market pricing and the possibility of a hike makes a lot more sense. So that is going to be a challenge for Chairman Warsh for sure.

[Tom]

About the U.S. dollar here. We kind of came into the year, I guess the consensus on the street was for a weaker dollar. And then the war with Iran starts and we had that flight to quality like we typically see now.

[Ryan Reynolds]

What?

[Paul]

Well, the dollar, until the news over the weekend was down or, sorry, was down against only two major currencies, the Norwegian crown and the Australian dollar, both big commodity exporters. It was stronger against everything else, primarily on rate expectations. Higher interest rates following higher energy prices and broader inflation pressures. Now that that is off the table, you have seen yields, as you guys just mentioned, down a little bit. You are seeing the dollar down a little bit today. And the question again, it goes back to the Fed, do we have a hawkish bias in the press conferen or not? I think the rate expectations will continue to be pretty important for the dollar going ahead. And again, it's not just the U.S. right. Two sides to every currency trade. We expect a Bank of Japan hike this week. The ecb, the European Central bank just raised rates. So it's not clear how much stronger

[Rebecca Patterson]

the dollar gets out of Florida and Johns Hopkins. I mean, there was this idea that if you end a war, even as Kaplan says, a middle war, the idea is you get a disinflationary tendency. So not. Rebecca Patterson. Now it's cfr.

[Paul]

Yeah.

[Rebecca Patterson]

But if you're on Wall street right now in what's clearly a boom investment banking environment, do you just assume disinflation?

[Paul]

I wouldn't assume anything right now. Look, we have, we have some tweets and some headlines suggesting that we have a step forward towards peace. But the deal isn't supposed to be signed till Friday and even then it's not clear yet if it sticks. It's not clear what the terms are going to be. I mean, Iran wants and needs funding. I think they could still pressure to have some sort of fee, service fee to go through the strait, not atoll, a service fee.

[Rebecca Patterson]

And Paul, this is really Rick Wilson just out on Twitter with just a scathing quick note like where are the details? Yeah, when do we get the details? I don't have an answer.

[Paul]

And we might not first for 60 days, 90 days. Right.

[Rebecca Patterson]

The markets will flip right around if we do that.

[Paul]

Well, they may do that. Right. And that's the point. Oil has come down, stocks are up. Does it last? Do you want to chase it here? I mean, if the, if we have peace, and it's certainly in both sides interest to have peace. Iran desperately needs money. It needs to rebuild. The US does not want oil at a 4 handle or 30 year yields at a 5 handle. Going into midterms.

[Tom]

Gold, it seems like just a cup of coffee goes. Tom would say we were at $5,000 an ounce. We've seen a pullback here. 4,300. Yeah.

[Paul]

Yeah. I mean you had a lot of speculative money go into gold at the beginning of the year. We had a little bit of a parabolic move. So that was part of it. But the other part of it is we did have two big central banks, Russia and Turkey selling. Russia sold for four months in a row. Turkey was the biggest seller of gold in March. But those are the outliers. Central banks in general are continuing to buy.

[Rebecca Patterson]

Bloomberg surveillance across this nation. And for San Antonio, 3am at a diner, Anne Marie Horton tried to get over the hangover. Joining us now with Rebecca Patterson in studio is Annmarie Horton who was. Yeah. Doing a seminar in Houston.

[Annmarie Horton]

Houston.

[Rebecca Patterson]

Can you get me tickets to San Antonio? I'll take an Uber. How did you get from Houston to San Antonio?

[Paul]

I.

[Annmarie Horton]

Our friend drove me.

[Rebecca Patterson]

Your friend drove?

[Annmarie Horton]

Yeah. So a friend saw that I was in Houston, also saw I was at game three with the president and said, I'm going to game five, why don't you come? And I made a game time. Game time decision. Saturday morning, and I was like, you know what? Like, I'm so close.

[Rebecca Patterson]

Were you sitting with Prince Harry?

[Annmarie Horton]

I was not sitting with Prince Harry. Oh, yeah, you texted me. I saw him. I saw Spike Lee. I was sitting more by Patrick Ewing, which was pretty amazing.

[Paul]

But did he block your view?

[Annmarie Horton]

He did not block my view. He was actually behind me. So I will say San Antonio was the sixth borough on Saturday night.

[Julian Lee]

It was.

[Annmarie Horton]

Had to be 50%, maybe 75% New York Knick fans. And the first quarter or two, obviously we were behind, but we've been there before, and it was a little. A little intense. And then Jalen Brunson does what he does. This team works together so well, and they clinched it. It was incredible.

[Rebecca Patterson]

You have to call him my jalen. Mrs. Keene is calling my Jalen this week.

[Annmarie Horton]

My Jalen.

[Rebecca Patterson]

Emory Horden, I've gotta ask, what was in the arena? The energy that was not captured for America on tv.

[Annmarie Horton]

I think what was not captured was the moment you realized they were about to become champions after 53 years. There was literally tears from New Yorkers and their faces. Grown men just absolutely crying. One guy next to me was a New Yorker, stayed for the whole thing, moved to San Antonio in 1994. So he was technically there supporting the Spurs. But even he was emotional, and he said, this is pretty bittersweet for me.

[Tom]

For our fans on radio, I just have to highlight the outfits that are in this studio here. Rebecca Patterson, New York Knick orange, head to toe. Fantastic. Annmarie Hordern comes in, got the blue, the whole thing going, and Tom's got the bling. I mean, I didn't know Tom either.

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You were a Celtics fan.

[Tom]

Well, we're all Nick fans today.

[Paul]

Yes. It's upset that I just sold him out.

[Rebecca Patterson]

One more question for Rebecca Patterson here. The spirit of this, to me, the single missed call and New York City in the gloom was a census of 2020 where everybody, including smart people, said, oh, we added 600,000 in the MSA here. I mean, it's his bet against New York. That's always been there.

[Paul]

You know what? I think there is a human emotion that you always want to go after whoever's on top. And that could be a company, it could be a person, it could be a city. So it's easy to go after New York. But look, New York's back. People are working five days a week in the office. Real estate prices are coming back. God, I mean, last week, if you tried to get around the city in a cab or even on the subway. It was packed.

[Rebecca Patterson]

Rebecca, thank you so much. Rebecca Patterson with us writing for the Council on Foreign Relations, a terrific podcast. Stay with us. More from Bloomberg Surveillance coming up after this.

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[Tom]

IBM Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto, and they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R and D spend small cap stocks with improving operating margins, or the S&P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria, but on Public you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market and paid for by

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[Rebecca Patterson]

The royal strategist Robinhood joins us right now for two shortest visits. Steph Guild with us as well. If I have an end to this conflict, how does it change your six months forward? View your June30 report.

[Steph Guild]

I think it's, it makes costs a little bit lower for everybody. All those input costs that were elevated obviously should start to come down. I don't think it'll happen right away because it takes a while to restart things. I saw something this morning where Kuwait will take the longest because they're the most impacted. But it, I mean, obviously the market is forward discounting, so the market will care about it now and today and you're seeing it in energy prices and, and energy stocks.

[Tom]

All right, so let's say we do get some type of resolution here with around a little bit more certainty in that part of the world. That brings the AI story right back to the, you know, the front burner here. How do you guys think about AI at Robinhood? Because that's a story that's kind of morphed over the last several years since we've all become involved with AI. How do you guys position it these days?

[Steph Guild]

Yeah, I mean, at the company we use it a lot. But when it comes to, you know, I, I subscribe to Huang's five layer case approach and it starts everything from the materials and the energy inputs down to the application layer. And I think at times you're going to have some things that go back and forth like some fits and starts because the physical world just doesn't move as fast as the agentic world. And so I think that's where obviously the conflict in the Middle east impacted that. But I do think we're moving a little closer to the application layer, which is like that, that top end of the layer, which is if you look at a company like Eli Lilly, they have Lilly Pod where they take all of the data they've ever garnered and have, you know, can work with it in AI. I think that's the most powerful aspect of working with AI is when I take all this data and I put it into something that I can talk to. Talking to your data, I think is extremely powerful.

[Tom]

How do you guys think about just, I mean, what's your approach here? As we go into the second half of 2026 here? Stocks, bonds, alternatives on your platform, what are your clients doing these days?

[Steph Guild]

I mean, the stock market's been really good, so there's been a lot of buying of stocks. Whenever there's a pullback, we see them use ETFs to kind of add a little bit more exposure, but the buying has never really slowed down. I'd say prediction markets is something that's rising and I see a rising inability to people to put their own views into it. Beyond the sports area. I focus beyond the sports area. So for example, the New York City, I'm sorry, the LA Mayor race was one of the top things in the last week or so. And also the price of bitcoin, the price of oil, like that's kind of where they were playing. And we also have Robinhood Ventures, which is our foray into it's a close end fund and it's our foray into into actually private investments stuff.

[Rebecca Patterson]

Kill thanks so much With Robinhood driving all of their strategy this morning. Stay with us. More from Bloomberg Surveillance coming up after this.

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[Rebecca Patterson]

us live on YouTube from Queen Victoria street in London. Julian Lee joins oil Strategist doesn't describe his expertise on a global sense of flows of hydrocarbon Julian I'm looking at a chart of Brent crude. The obvious question is do we get back to $70 from the present 82? But what I see is a convexity. There's a real acceleration to a lower price. Is it the market getting out front of oil or is the market chasing where oil is going to be?

[Julian Lee]

I think, you know, at the moment it's perhaps the market getting a little head ahead of oil. There is a growing expectation that this MOU will get signed on Friday and that will result in an opening of the Strait of Hormuz. It's not going to be back to normal immediately, but there is a timescale to get flows back to normal through Hormuz within 30 days that may be optimistic. So I think the the market is starting to price that in. There's a there's still a lot of hesitancy among ship owners. They really want to see a bit more than than just talk about this. I think they may start to change their position come Friday if this deal is signed. And at the moment, you know, we've seen in the newsroom, we've seen three different versions of of what's in this deal. All of them have come from the Iranian side. They're all slightly different. We've had nothing official out of Washington yet. So, you know, there's still plenty of room there, I think, for wrinkles to appear before Friday. And I think that's what shippers are slightly nervous about. The market, I think at the moment is is much more optimistic about a deal being done than they have been for the past month or so.

[Tom]

Julian I'm looking at just an image on the screen of all the dots representing ships that are in Strait of Hormuz, both sides of it, quite frankly. And there's that are all over the place. Isn't it that the insurance companies who decide if this strait is open or not?

[Julian Lee]

Well, I think it's a mixture of the insurance companies, certainly the ship owners and to some extent the ship's crews as well. You know Is an owner willing to risk its vessel and its crew by sending it through a waterway that is still to some extent contested? They will want to see much more clarity and, and I think some mechanism of protecting these ships, at least legally, if not physically, before they start to move.

[Tom]

Julian, do we yet have a good sense of the damage that may have been done to the infrastructure in the energy complex there in that world? Because I'm not sure we're at. But oil goes even if the strait is open?

[Julian Lee]

Well, I think that's a very good question. I mean there has undoubtedly been damage to some key facilities, certainly liquefied natural gas production in Qatar, some gas and perhaps oil production in the United Arab Emirates, possibly installations elsewhere in the region. The other problem I think is, is not just physical damage, but it's the fact that being unable to get their oil and their gas out of the Gulf, countries have had to scale back production. They've had to shut wells in, they've had to reduce the flow from fields. Once everything opens up again, all of that has to come back into operation. That will take time. We think the shutdowns have been done in a fairly controlled manner. So that shouldn't have damaged the infrastructure, but then it has to be opened in a controlled manner as well in order to avoid surges of pressure that can damage wellheads and pipelines and all that kind of stuff. And that will necessarily slow the process of everything coming back.

[Rebecca Patterson]

Excuse me, what does it mean for the Pacific Rim, Julian? Obviously the boat's going to come out to Paul's great question on infrastructure. I guess that's distillates and refinery caught her in awe. But how does Singapore feel this morning or Japan?

[Julian Lee]

Well, I think, you know, I think Asia in particular has been hit hard by the, the closure of Hormuz. Most of the oil out of the the Persian Gulf, whether it's from the Arab side or the Iranian side, most of that goes to Asia. And so it is is them is refiners in that part of the world who've been scrabbling around for barrels from elsewhere. I think if, if the strait does open fully and if we start to see oil and gas flowing again, I think refiners in Asia will breathe a huge sigh of relief. The people who perhaps won't will be those in the Kremlin who have enjoyed the surge in prices that this war has brought and have enjoyed some relaxation on sanctions on their oil that has allowed Indian refiners back into to the market and perhaps even some of the, you know, the US Oil companies who have have had a real boost from the higher prices and the demand for U.S. crude.

[Rebecca Patterson]

Julian, thank you so much. Really appreciate the brief this morning folks. This is the way we start a really interesting week. Stay with us. More from Bloomberg Surveillance coming up after this.

[Tom]

Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R and D spend, small cap stocks with improving operating margins or the S&P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on public you just type in a prompt and their AI screens thousands of stocks and builds a one of a kind index. You can even backtest it against the S&P 500. Then you can invest in a few clicks, go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by

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[Bloomberg Host]

You're listening to the Bloomberg Surveillance Podcast. Catch us live weekday afternoons from 7 to 10am Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube.

[Rebecca Patterson]

This is an important conversation. Jim Rowan's with us with Deloitte. And this is on the fundamental issue of revenue for all this AI stuff off the $20 billion Nvidia bond deal today, Jim, on these tokens, to me, there will be price discrimination, there'll be all sorts of levels of usage. When do we start seeing a much more sophisticated pricing of how we use AI?

[Jim Rowan]

Yeah, thanks for having me on, guys. I mean, I think one of the key things that we're seeing right now in the market is that people are moving from basic AI use cases, you know, chat, simple agentic workflows to thinking about how they apply AI agents across their business functions. And that's seeing a real explosion in the usage of tokens. But it's also going to see the explosion of value creation because we're now talking about real work getting done by agents in the enterprise and really adding efficiency to what we're seeing.

[Rebecca Patterson]

But do you model price down?

[Jim Rowan]

You know, we're going to expect to see the cost per token go down over a period of time, but the number of tokens people need continue to increase up. And given the constraints that we see in the data center space, there's going to be a competition there for those tokens for each enterprise to get access to them and use them effectively in their enterprise.

[Tom]

Jim, I'm going to speak for about 99% of our viewing and listening audience. Can you explain? I don't know what a token is. Neither does anyone.

[Jim Rowan]

Yeah, what's a token?

[Bloomberg Host]

Right.

[Tom]

What is a token and why does it matter?

[Jim Rowan]

Yeah, think about it. So if you're in front of one of your AI tools and you're putting in some input, that's an input token. So you're asking a question, you're asking it to do something, provide some feedback, you've sent it a picture and you want some help with something, that's an input token. And then the Response back from the, from the large language model is the, is the output token. So organizations price it on both the input and the output. So if you think about a closed source model, they're charging you for the input that you're putting in, the output that you're taking out. If you think about an open source model, that's where some organizations are finding success, putting models inside their enterprise and running their own kind of AI factories where they're running essentially these tokens without having to go outside the enterprise to, to pay those fees.

[Tom]

So is this our token costs now a line item on my PNL that I have to manage?

[Jim Rowan]

Sure, yeah. Like when I talk to a lot of CIOs and enterprises that I'm working with, they're looking at their overall token budget much like they were looking at their cloud budget that they were dealing with over the past couple of years. And so they're saying, you know, how much money do I need to set aside for the tokens for my employees? But also it's not just the amount of tokens that you're using, it's am I getting the value for the token that I'm putting in? Right. Like what's the actual output that I'm getting that helps my enterprise?

[Rebecca Patterson]

Jim Rowan this weekend, Sir Lewis Hamilton did awfully well at Barcelona for Ferrari. And on the top of his helmet is his personal endorsement from Perplexity. So I guess they're behind now. They're not like Apple, but they're behind. Where are we going to be in what is Deloitte say in five years about where the Perplexities and all the matter and all the other non players, where are they going to be?

[Jim Rowan]

Well, I mean, you have to break down the market into a couple of different sets of companies, right? So you have your frontier model, organizations that are advancing the capabilities of these labs. You have the hyperscalers that are out there, you have open source providers as well. And so we think there's going to be continued advancement on the model Frontier. You continue to get better. You see this release after release with the new capabilities that are out there at the same point in time, organizations and other capabilities, like other software companies, are adding a layer above the model of what we call an agentic harness or a wrapper around the model that allows you to do tool calling, maintain memory, really complex technology related things. And those are the areas where they're trying to differentiate, to say that beyond the model, these are the things I have to offer you that can create value for you.

[Tom]

So Tokens allow me to measure the cost of my AI usage. Are companies, is it possible to measure them the value? I mean, is that what they're trying to do now?

[Paul]

Yeah.

[Jim Rowan]

I mean it's a complex equation, right? You put your tokens in, you're not going to get an immediate ROI back out in a calculator. What you need to figure out is what are the workflows like where am I applying this technology today and how is the work getting done differently in a more efficient and effective way? Or am I opening up new areas of revenue growth through the usage of those tokens? And so that's where the application of both where am I spending? But then what's the business value creation side becomes so a big question for clients.

[Rebecca Patterson]

You people did a great essay. I loved what Deloitte did on this. Are we going to compete away the profits of I just compete them away to a perfectly competitive analog?

[Jim Rowan]

I don't think you can beat them away. I mean in our token economics paper that we had back in January, we did an infrastructure survey back in March too. We're seeing a large number of the token volume increase. But it's really what the enterprises add their IP to this conversation that really differentiates what they're trying to do. And so the model is going to be the model. But what do you wrap around it? Where's your internal intelligence that you're adding to the model to differentiate your services and that that's the key piece.

[Rebecca Patterson]

I think I'm going to put this paper out folks, January of this year from Deloitte. I'm sure they'll do an update at some point. Jim Rowan, thank you Gold Principal US Head of AI at Deloitte. This paper was absolutely fabulous on tokens.

[Bloomberg Host]

This is the Bloomberg Surveillance podcast available on Apple, Spotify and anywhere else you get. Your podcasts listen live each weekday 7 to 10am Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg terminal.

[Jim Rowan]

Foreign.

[Ryan Reynolds]

Reynolds here from Mint Mobile. I don't know if you knew this, but anyone can get the same Premium Wireless for $15 a month plan that I've been enjoying. It's not just for celebrities. So do like I did and have one of your assistant's assistants switch you to Mint Mobile today. I'm told it's super easy to [e-mail]

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