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- [00:01]
Hannah Frei
Enterprises are busy embracing the technologies that underpin Industry 4.0, such as AI and automation. But now the fifth industrial revolution is coming. So what is it and what could it mean for our jobs? I'm Hannah Frei. You can learn more later in the podcast.
- [00:15]
Norton 360
Not all holiday presents get delivered by slay. A lot come from shopping online, which means you may be exposing your personal information to cybercriminals when shopping or browsing during the holidays. Norton 360 provides comprehensive protection for your devices, a VPN for your online privacy, and safe web so you can shop more safely online. Stay safer this holiday season with Norton360. Save up to 58% off your first year at norton.com secure.
- [00:47]
Barry Ritholtz
Bloomberg Audio Studios Podcasts Radio News.
- [00:55]
Tony Kim
This.
- [00:55]
Barry Ritholtz
Is Masters in Business with Barry Ritholtz on Bloomberg Radio.
- [01:02]
Tony Kim
This week on the podcast, another extra special guest. Tony Kim is managing director at BlackRock where he heads the Fundamental Equity Technology group, helping to oversee all of the active technology investments BlackRock makes. In addition to being a portfolio manager and running a number of mutual funds and ETFs. He is just a world class technology investor who understands the sector like few other people do. Not only has he put up a very impressive track record, his entire approach to the ecosystem of technology, covering everything from robotics to AI to software to semiconductors, is really quite fascinating. If you're at all interested in technology in AI in the process of thinking about tech investing, then you're going to find this conversation to be absolutely fascinating. With no further ado, my discussion with BlackRock's Tony Kim.
- [02:06]
Barry Ritholtz
Thank you Barry. Pleasure to be here.
- [02:08]
Tony Kim
Pleasure to have you. So let's start out with your background. Bachelor's in Industrial engineering from University of Illinois and then an MBA from Columbia. What were their career plans?
- [02:19]
Barry Ritholtz
Career plans? Yeah. First of all, thanks for having me. Your show titled Masters in Business. I am no Master in Business.
- [02:27]
Tony Kim
Well, you have an mba, so you automatically qualify.
- [02:30]
Barry Ritholtz
Yes, for sure.
- [02:32]
Tony Kim
That's a Master's, right?
- [02:33]
Barry Ritholtz
Yeah, that's true. That's true. Yeah. The origins of the career I grew up in the Midwest. It's the first phase of my life and growing up in the 80s Illinois, you know, as a, I'm from Korea actually. But so the natural. I was a STEM kid and that, that kind of propelled me into the engineering side, but I always had other interests outside of that. But the reason I went to Champaign, we were all from state of Illinois and my siblings and I all went to school in the state of Illinois and, and I gravitated Initially to engineering. And that's kind of. That got into that. And then eventually I ended up in New York and then transitioned into finance.
- [03:22]
Tony Kim
We're going to talk about that transition in a minute. But before we get there, you really begin your career as an engineer at Rockwell Automation. What did you do there?
- [03:32]
Barry Ritholtz
This is first job, right? First job, first real job out of school. It really. It was the first entree into a company. Not only a company, this was an automation company that's often known for works with many industries. But helping automate. I was working on projects to automate manufacturing. They had these things called PLCs, which are basically industrial computers with sensors, with drives, drive systems, motor control, robotics and all of these things. And then you package them together and you work with many different kinds of manufacturing companies in the early days of automating manufacturing processes across many industries. So that was my first entree in seeing the diversity of the manufacturing base in this country. I was particularly. I was working on the east coast and everything from pharmaceutical to automotive to. To what a distribution network looked like, what tier one, tier two kind of systems integrators were with the technology of automating manufacturing. And so we work on different projects and see across a lot of industries. But I realized I didn't want to. I had other ambitions and this is what led me to going to graduate school.
- [05:02]
Tony Kim
So. So let. Let's talk about some of those other ambitions. You end up doing investment banking in New York in the mid-90s.
- [05:09]
Barry Ritholtz
Yes.
- [05:09]
Tony Kim
What was the transition from being an engineer slash operator to an investor? What was that like?
- [05:18]
Barry Ritholtz
Well, when I was at. When I went to Columbia, you know, I did the engine, I worked at an engineering company and I thought I wanted something a higher level, more strategic in nature. I actually thought I wanted to. I wanted to try to get into consulting. That's classical, right? Classical role for a mba. None of the consultants would want to hire me, but somehow the investment banking side found me or I found them and it was an engineering. Here's a guy from engineering with engineering background at the time. Those were the early days of pre.com. it was a new emerging industry. I think they saw that linkage between some technical expertise with finance, maybe working with that industry. But the finance is what pulled me in on the investment banking more so than the consulting because of that angle, I think.
- [06:22]
Tony Kim
And your timing was perfect. The 1990s, great time to be doing I banking and technology. Tell us about some of the transactions you saw. Late 90s, early 2000s. What sort of deals were you working on?
- [06:36]
Barry Ritholtz
Yeah, just that transition. I was originally hired by SG Warburg, which was a British investment bank that got acquired. And then after the.
- [06:45]
Tony Kim
That became Warburg Pincus.
- [06:47]
Barry Ritholtz
Is that what that became? SBC Warburg. And then UBS bought sbc and then UBS Warburg, and then the Warburg name went away. But I was there right at the time when Warburg was acquired and that transition, I joined Merrill lynch. And then Merrill lynch said, go west, young man. Right, okay.
- [07:10]
Tony Kim
So I remember Merrill lynch during the 1990s was absolutely a powerhouse, or at least became a powerhouse towards the back half of that decade.
- [07:20]
Barry Ritholtz
Yeah. So it was very much a new thing for them in the West Coast. And so I went and I still recall to this day there were several of us that were the origins of the M and A group on the west coast for Merrill lynch. In fact, three of those people 20 some years later were back joined at Blackrock. And I could tell you the story of that.
- [07:48]
Tony Kim
Sure, let's hear that.
- [07:49]
Barry Ritholtz
Oh, okay. Yeah. There were three of us that were VPs and directors at the M and A group.
- [07:56]
Tony Kim
Feel free to drop names.
- [07:58]
Barry Ritholtz
A guy named Draga Rajkovic, who is now vice chairman of JP Morgan, runs the tech M and A. This guy Michael Leitner, and then myself. And then we worked for this guy named Rob Stewart. And then Mark Schaefer, above, led the group. But Mike Michael at Tenenbaum, BlackRock later acquired them and he was one of the partners at Tenenbaum. And then recently blackrock bought gip, and then Rob is one of the partners at gip. So three of the four of us, Rob, myself, Michael, all ended up at blackrock. And some fans.
- [08:35]
Tony Kim
Let's get the band back together.
- [08:37]
Barry Ritholtz
Drago did not. Drago still is a Jimmy Morgan right now. So. So. But those were the original days. And then, you know, the transactions, you know, this was pre.com and you know, the Internet was just getting going.
- [08:51]
Tony Kim
Are you talking early 90s?
- [08:54]
Barry Ritholtz
Mid mid 90s. Mid late mid to late 90s.
- [08:57]
Tony Kim
Like I remember being being on a trading desk in 96 when the Netscape and I was not allowed to trade it. When the Netscape IPO happened, that was really what kicked off a giant explosion. Were you there around that time?
- [09:12]
Barry Ritholtz
Yes, in that time. And these were the deals when Cisco was going crazy. And there were so many transactions in networking. There was the optical communications boom, some of the original software Internet assets. And so I did transactions in this, especially a lot in the networking telecom. I remember working on one or two software deals and I Did that for a while and then I decided to leave investment banking where I learned a tremendous amount, especially the strategic nature of looking at industries and companies and of course all of the financial acumen, the rigor of doing very intensive financial analysis. But you're always working at the behest of a client. Right. You're working on. It was transactional related. And this is when I decided to go and take a career path change to the investment side.
- [10:16]
Tony Kim
So tell us what that transition was like. What is it like going from transactional MA on the west coast to. No, I just want to find companies public and private and invest capital in them.
- [10:29]
Barry Ritholtz
Yeah, I think that's, that was a transition. The financial analysis is the same effectively. Maybe it's even more intensive on the, on the, on the M and A side because you're doing much more detailed work. The way you look at industries and companies are relatively similar. It's that on the transactional side you work on projects for a short duration of time and then you move on and move on and move on and hopefully over time you have persistence and you learn more about that industry and the domain. When you go to investment side. I started as an analyst, I wasn't. And here you are looking at wider array of companies. You're doing financial analysis, but not as detailed as you were working on one deal, one transaction for months at a time. But yet you have persistence because you're able to look at sectors and industries and companies for a longer period of time consistently. And so you build deeper domain knowledge. That was one. The second is that you're no longer working for a client. You are working to find the best investments and put your own capital at risk. Right. And so that was a change of the mindset of how to assess because you're not working really, you're not just servicing a client here, you're putting your own capital at risk. And that was the, that was the first big change of just assessing how that works and then, and then going from, and then, and then learning many, many, many domains. And then that was the working with many different kinds of investors, different kinds of investment philosophies. I must have worked with 30, 40 portfolio managers across four, four or five investment firms. And that's. That was like, I guess my second era here was to learn the skills of investing.
- [12:47]
Tony Kim
We're going to spend more time on what you've learned in a little bit. Yeah, you said something I have to explore a little bit.
- [12:56]
Barry Ritholtz
Sure.
- [12:57]
Tony Kim
It was more in depth, more intensive on the M and A side. Than the investing side. I'm curious as to why the two ideas that immediately pop into mind. You're covering a whole lot more companies on the investment side. But one can't help but imagine on the M and A side, hey, it's all in. You're taking the whole thing. As an investor, if you buy something and you have second thoughts, well, you sell a few million shares and you're done. You could walk away with maybe a little worse for the wear and tear, but when you buy an entire company, hey, it's really hard to unwind that, isn't it?
- [13:35]
Barry Ritholtz
Yeah, that's right. You know, and you're buying the whole thing or you're representing, you're selling the whole thing or you're selling pieces of it and you're working on one company and another company, maybe two companies at a time. And you want to get every number right, every comma, every nuts and bolts to as much detail as you can. So the precision and the accuracy and the information fidelity is much higher because that's what you're just working on, that one company, that one transaction versus like you said, you're looking at hundreds of companies and you can make a decision with the push of a button, sell or buy. And so the time spent on that analysis will invariably be less than the time spent on this one definitive transaction.
- [14:38]
Tony Kim
Really, really interesting. So you've been in Blackrock since 2013, obviously passive has been a huge success for Blackrock. You're on the active side. Is there any crossover? Do you get pulled into any discussions from, you know, any of the big BlackRock ETF sector funds, passive indexes?
- [15:02]
Barry Ritholtz
So the passive industry, passive part of blackrock is separate to the active part. I guess what would be one trend is that we are also launching many active ETFs, which is the container in which most of the passive funds are traded at. And then there's like passive decisions. You know, a lot of the passive index thing is now an active decision. I guess you could say that's a definite.
- [15:30]
Tony Kim
Hey, it always has been.
- [15:31]
Barry Ritholtz
It always has been, right? Yes, that's right.
- [15:35]
Tony Kim
It's hey, we're going to make it market cap index. That's an active decision. We're going to cap Apple, Nvidia, Microsoft at X percent.
- [15:43]
Barry Ritholtz
That's an active decision, right?
- [15:44]
Tony Kim
There's lots of active decisions. People don't realize there's quite a bit of active in their passive.
- [15:48]
Barry Ritholtz
Yeah, so now we're joining that party as well. We have now active ETFs. We launched two recently one on the AI side. So where we feel that dynamism, especially an industry that is in rapid change like an AI, I think you need a lot of adaptation, flexibility because things are changing so rapidly.
- [16:13]
Tony Kim
So I want to stay with that. We're going to talk about the the multiple ETFs you actively manage. But generally speaking, after passive captured more than half of the mutual funds and ETF assets, there has since been an explosion of active ETFs as well as mutual funds. Some are thematic, some are sector based, but they all have in common that it's not relying on a passive index. What are your thoughts on the future of active management in the ETF space?
- [16:47]
Barry Ritholtz
Well, I think the future of active management, as you correctly pointed out, I think there are generic sections of the market where it is the broad market exposure, S and P. Those I think continue to be under pressure as it moves to those passive indices. But you said something very interesting there. The industry is, is specialized sectors, thematics in the container of an active etf. I think that is more representative maybe where the future of active industry is going, where one can express a differentiated view. And invariably that is a function of specialization. I think, of course I'm biased in that because I am focused on a specialized area, which is the technology area. And then within the technology area there are many further subspecializations. I think those that have broader depth of domain knowledge, hopefully that is the advantage and that gets expressed in an active fund, an ETF or a mutual fund or whatever. And as I've been in this technology industry for a long time, 20 years ago tech was 20% of the S&P. It's over 40 and it's probably going higher as now we're entering the AI era. And so generalists I think are at an information asymmetry disadvantage to those that have domain specificity. And if you have better information, better knowledge, hopefully that leads to better decision making, which is, you know, which will hopefully sustain the active management industry.
- [18:40]
Tony Kim
You know, I'm so glad you said that you think the technology sector of the s and P500 is going higher. Whenever people say to me, aren't you concerned that tech is 29% of the S&P 500 or whatever the number happens to be, my answer is always, the Magnificent Seven are responsible for something like two and a half trillion dollars in revenue and $500 billion in profits. I'm shocked. It's only 29%. Why isn't it half of the S&P 500? This is what's Driving the economy in the market. Doesn't it deserve a richer valuation? I'm curious as to your thoughts on that.
- [19:20]
Barry Ritholtz
100% agree. Okay, I 100% agree. The multiple in aggregate has not changed dramatically but it has driven by free cash flow. And the 40% I quoting is a combination of comm services which they carved out which is really tech companies with classic tech that's over 40%. And when you look at the contribution of free cash flow which is the ultimate profit metrics, it's followed it is 40% of the free cash flow. Right. You know the other thing about tech, I don't think people realize it has represented the highest growth. It actually has the highest margin. It is the highest free profitable margin. People think it's unprofitable. It's like but 90 some percent of tech profitable this is. And the highest profit margin and the highest free cash flow growth and that's what's driven the market cap appreciation. That is the. That is like not well understood.
- [20:23]
Tony Kim
Fair to say this is not the late 90s.com, you know, whimsical ideas with hardly any revenue and no profits. These companies are printing money and are wildly profitable.
- [20:38]
Barry Ritholtz
Yeah. In fact I would even make another distinct, you know, the Mag 7. The most profitable sector in all the S and P is the semiconductor industry. They even have higher margins now than the software industry. And the software industry is amongst the highest. Right. So tech in general, if you say software and semis are two thirds of all of tech.
- [21:02]
Tony Kim
Right.
- [21:03]
Barry Ritholtz
They have the highest margins in the world. So they have the most profitable companies with the most growth which generates the most free cash flow, which generates the returns, which generates the 40% of the market cap which is. And most of those are max 7.
- [21:18]
Tony Kim
Doesn't sound like a bad place.
- [21:19]
Barry Ritholtz
Does not sound bad place to keep your. And now we have AI and it probably goes higher. It's going to go higher.
- [21:25]
Tony Kim
Fascinating.
- [21:26]
Hannah Frei
They say that the fifth Industrial revolution is about human centricity, about building technology to enhance our abilities and productivity. But previous revolutions haven't existed. Exactly. Been kind to ordinary workers. Can this one really be any different? Can we build a more utopian view of the future while respecting the forces of industry? I'm Hannah Frei, host of the Exponential Era and I got to sit down with an expert at Nokia Bell Labs to ask these questions. Find out their answers@bloomberg.com Nokia not all.
- [21:57]
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- [22:57]
Tony Kim
So we were talking a little bit about what makes technology so interesting. Share a little bit of your perspective. How do you go about identifying technologies that are going to drive future growth and as we've seen, reshape the entire economy?
- [23:15]
Barry Ritholtz
You know, I guess I would say first, I'm a deconstructionist. I like to deconstruct problems, deconstruct any kind of situation, deconstruct sectors and industries. So I like to break things down. And then even before breaking them down, this kind of goes to my childhood. I always had a fascination, love of maps.
- [23:35]
Tony Kim
Maps.
- [23:36]
Barry Ritholtz
Maps, huh?
- [23:37]
Tony Kim
That's interesting.
- [23:38]
Barry Ritholtz
Cartography, ancient maps. So I'd like to map everything out. And so like the ancient mariners would sail the oceans. You'd want a map of where you're navigating to. And so I start with that. I like to break things down. I break technology down into five or six major subsectors. And then we just continually deconstruct and break those down. And so once you start breaking these things down, you then create a map of the whole landscape. The semiconductor in landscape, the Internet landscape, the software landscape, et cetera. And continually break things down. And so then they are digestible pieces. And then within those pieces, then you interrogate all of the technologies that are going now you have this giant, giant map of all of technology all reconfigured and mapped out. And then you go into detail. And then this way you start. It's kind of like a battlefield commander looking at a giant war map. And you see hotspots. This is hot, this is cold, this is hot, this is cold. And then you have systematized a way of looking at all of those different categories and technologies and subsectors. And you know all the companies that are there, you know the competitors there, and then you're observing what's hot and what's not. And so then, so that's the current, that's the initial framework. And so then you start to see trends that are happening and you see other trends that are declining.
- [25:14]
Tony Kim
So what's so intriguing about that is we tend to think of fundamental research, CFP type research, as very balance sheet driven. What you're describing is something that's much more holistic and comprehensive. You're really looking at the whole ecosystem of technology to see what is, is moving and use the magic word, systematize. How do you systematize that? Is it just identifying what is on a mathematical basis popping its head up?
- [25:49]
Barry Ritholtz
Yeah, I think if we use AI as a great framework, as a test, as a case study. So if I were to frame technology industry as we have this hardware industry and inside the hardware industry there are many categories like smartphones and robotics and servers and things. And then there's a semiconductor industry, there's different kinds of chips, accelerator chips, memory chips, foundry, logic analog. And then let's say the software industry, there's security and applications infrastructure, et cetera. Once you have mapped all of these things out and you know where all the companies or all the bodies are buried and you know who's competing with whom and who's working on what, along comes AI. AI starts with ChatGPT and GPT 3.5 in the end of 2022, early 2023, and it shows up as an application, a chat application. Well, the first thing you, when I saw that, I said, wow, this is going to change the world.
- [26:58]
Tony Kim
That was your initial response to the first demonstration you saw of ChatGPT.
- [27:04]
Barry Ritholtz
That and having a meeting with Jensen Huang in January 2023. Those two things kind of triggered it. Then once you see that, then you say, okay, how is this going to cascade through? It's kind of like in biology there's a thing called what I call a trophic cascada, an ecological ecosystem. And then you say AI is the trigger. The first thing you see it, the first representation is, well, you got to build these models and to build the models you need these chips. Then you go, well, then you interrogate, well, you need these kinds of GPUs and memory and things. Then you say, well then you need to, well, those are connected to the packaging systems, and those packaging systems are connected then to foundries. And these foundries are connected to the wafer output, which you need the equipment and then you start to build a chain of this is what's needed to build this part. And then those chips get thrown in servers and servers need this whole supply chain. And then those servers get then deployed in clouds and these clouds then need, oh by the way, these things generate a lot of electricity and that spawned the whole power, energy, movement. And then you. But then you know what the power transmission and grid and technical thermal equipment that needs to power and cool these cloud data centers. And so you have built that supply chain down and then after the AI is built, you bring the AI into business at Bloomberg and BlackRock and you bring those into a software and then you embed that in applications. And then, oh by the way, that same AI that's being, we'll throw that into the self driving car and robots. And so once you see that whole chain and how that gets diffused and then you have interrogated, you've already built these maps effectively of every single one of these little ecosystems and supply chains. And then you see how diffusion works and then you say, well is it worth investing in these companies or not? And that's when then you get into the financial analysis.
- [29:17]
Tony Kim
Really interesting. So I'm hearing infrastructure, which is everything from power to cloud to database to intelligence, which is the modeling.
- [29:26]
Barry Ritholtz
That's right.
- [29:27]
Tony Kim
And then software tools, application solutions. So this isn't, you know, I think people tend to think of oh AI, that's Nvidia. But what you're really saying is this is dozens, if not hundreds of companies working across a whole ecosystem.
- [29:44]
Barry Ritholtz
That's exactly right. Now in the public stock market the first two years, the manifestation of what I just described, what you just eloquently described gets expressed in the Mag 7. If I were to, let's recompile that as a, is a nine layer cake. Okay. At the bottom of this, of this cake is the power and the energy and then that feeds these servers and chips and then those servers and chips get live in a data center cloud. That whole bottom layer, those three layers is what I call infrastructure. Okay, so that's why you're seeing Most of the Mag 7 are here.
- [30:34]
Tony Kim
So that's Google and Amazon and Microsoft to say the very least.
- [30:39]
Barry Ritholtz
And now Tesla's building AI cloud centers.
- [30:42]
Tony Kim
Right.
- [30:43]
Barry Ritholtz
And then above that layer, let's call it, that's the models and the data. So this is where you also have more Max 7, Microsoft, Google, OpenAI, some of the private companies and now X AI and there are six of these companies building these foundation models. And then the data you're feeding the data. And then you have all these data companies that have, let's say, legal data, healthcare data, insurance data, and then some of them have proprietary data which are helping train these models. Right.
- [31:17]
Tony Kim
So we've seen a couple of stories about the Wall Street Journal and Reuters releasing their entire corpus of all their content to various AI models to work on.
- [31:29]
Barry Ritholtz
Correct. And, you know, companies like Reddit have done a deal like that. Wall Street Journal, there's some lawsuits, even New York Times.
- [31:37]
Tony Kim
Well, they have in some instances, seem to have borrowed stuff that was.
- [31:41]
Barry Ritholtz
Yes.
- [31:42]
Tony Kim
You know, your $99 a year subscription to the Washington Post doesn't entitle you arguably to scrape all that data. But hey, they're cutting checks and cutting deals, and I think everybody just wants their piece of the piece.
- [31:56]
Barry Ritholtz
That's right. And then there are some companies, you mentioned Thomson Reuters, which is, you know, they have. They run one of the. One of. They have one of their biggest legal data sets, you know, and they control that legal data. And so then they're putting AI on top of that. So that's that, that's that intelligence and the data layer, and then above that layer you have the applications, the tools and data infrastructure and then the services, the human IT labor to implement and to the AI.
- [32:28]
Tony Kim
Give us some names. I have a couple of things on my phone. What do you like?
- [32:33]
Barry Ritholtz
Oh, on the app side.
- [32:34]
Tony Kim
Yeah. I mean, I'm using Perplexity.
- [32:36]
Barry Ritholtz
I use Perplexity.
- [32:37]
Tony Kim
It's so clean and so simple.
- [32:39]
Barry Ritholtz
Perplexity. I love ChatGPT.
- [32:43]
Tony Kim
They're slightly different.
- [32:44]
Barry Ritholtz
Slightly different.
- [32:45]
Tony Kim
Right. Just the output, but they're still. And I'm finding far fewer hallucinations than I used to.
- [32:52]
Barry Ritholtz
Yes.
- [32:53]
Tony Kim
Like, I had Bill Dudley from the New York Fed in, who was born in, you know, the late 1950s. And Chatgpt mentioned he happened to be a linebacker for the Detroit Lions in 1952. It took it a while. Then there was a guy named Bill Dudley who was. It took it a while for it to figure out, like after a certain period that eventually got cleaned up. Wait, if you're born in 57, you're probably not a pro football player in 55, but it definitely took months for it to kind of somehow recognize that.
- [33:28]
Barry Ritholtz
Yeah. And that's on the consumer side. And there'll be a lot more consumer apps coming. Companies like Apple have this Apple intelligence, and they're absolutely locked in on your privacy, but they're going to know you the best. And so there will be AI assistants coming.
- [33:45]
Tony Kim
I hope it'll be better Than Siri, which was a huge disappointment.
- [33:48]
Barry Ritholtz
For sure. For sure.
- [33:48]
Tony Kim
But I would trust an Apple agent.
- [33:51]
Barry Ritholtz
You would. Exactly.
- [33:51]
Tony Kim
To be able to say, hey, make dinner reservations for Friday at this restaurant. Here's my calendar. And invite Bob Smith and Mary. And hopefully it can manage that.
- [34:00]
Barry Ritholtz
Absolutely. And even more things, even more difficult than let's say that like, oh, I need to help, I need to do my taxes, I want my taxes help. Or I need help.
- [34:12]
Tony Kim
So I'm skeptical on really complex things. And at the same time, I just read yesterday the latest comparison of AI diagnostics versus doctors. AI just moved ahead. They moved ahead on things like x rays and MRIs a while ago.
- [34:29]
Barry Ritholtz
Correct.
- [34:29]
Tony Kim
But now on here's 20 data points. Diagnosis, illness. It just moved ahead of the accuracy rate of human, you said.
- [34:39]
Barry Ritholtz
Exactly. The complexity of the tasks will only go higher in terms of what they will be capable to do. And these AIs are following what we call these scaling laws of scaling intelligence. But the things that they will be capable of, it's not just booking a restaurant, it'll be doing very complex tasks. And so we are just at the very, very, very beginning of that.
- [35:06]
Tony Kim
Huh. That, that, that's really fascinating. So given the mapping you do of the whole ecosystem and then the dive into the financial background, what strategies the do you then use in saying, okay, I understand the whole ecosystem, I understand the various balance sheets of these companies. How do you then pick which stock you want to own?
- [35:32]
Barry Ritholtz
So I have a certain small rules, I guess if you could call it that, or observations that I've made over many years, especially in tech, because this is a very dynamic industry. One of those is there's a power law. I believe in power laws. It seems like every industry I've ever looked at, there's number one, a number two, and then maybe a number three.
- [36:02]
Tony Kim
So very fathead. And then a long, minor, let's just.
- [36:05]
Barry Ritholtz
Say 50% market share, number one, 25 number two, and then cats and dogs.
- [36:11]
Tony Kim
Right? Winner takes all.
- [36:13]
Barry Ritholtz
Yeah, winner takes all.
- [36:13]
Tony Kim
True. Everywhere.
- [36:14]
Barry Ritholtz
And it doesn't matter if you're selling frozen pizza to search advertising. Okay. These power laws. And then because. But the thing is that you could have power laws that apply to hundreds of categories. Right. It doesn't have to be all encompassing in one. And so when I look at tech and all those different categories, I firmly believe in these power law concepts that you want to be betting on number one or number two. Especially number one. Not even number two. You want number one, ideally. And so are you. So in many cases there Are already existing players. Okay. And so if they are already existing players and then their hegemony is not being challenged, that's kind of an easy answer. You keep riding the wave. And that's why people are always complaining about Mag7.
- [37:07]
Tony Kim
You anticipated where I was going to go next. What you're essentially saying is Mag seven is they're focusing on the number seven while ignoring the magnificent side. You want to be in the number one stock everywhere, which is going to naturally force the crowd investors to the top five, 10, 15 companies.
- [37:29]
Barry Ritholtz
That's exactly what's been happening. The strong get stronger. Unless. Unless there are signs of weakness, right?
- [37:37]
Tony Kim
If there is it, is it competition, is it missteps by management, Is it some new disruptive technology that thrusts the winners aside? What do you look for to say, hey, XYZ has been killing it for five, ten years, but their run is over.
- [37:55]
Barry Ritholtz
That's exactly right. Usually these companies do not get disruptive, but on occasion they do. I think the most obvious one recently was the ascendancy of Nvidia versus Intel. Right. For 30 years, intel ran legion. And then there was a transition. There are several reasons, but there was a transition to accelerated computing from CPUs, and then they lost leadership on Foundry.
- [38:29]
Tony Kim
To TSMC and then mobile.
- [38:32]
Barry Ritholtz
They didn't engage in mobile. And so there are times were companies, you know, different, different transitions. Like if Microsoft did not pivot to the cloud from Windows, right. And the government, you know, went after them on Windows, but they were, they were litigating yesterday's war. Right. But Microsoft found Azure and then, and then history was rewritten.
- [38:58]
Tony Kim
And what do you think of the job Saudi on the Dell has been that, you know, people forget.
- [39:03]
Barry Ritholtz
That's got to be one of the great, great CEO and what he has mastered in the history of business.
- [39:11]
Tony Kim
Microsoft was dead money for a decade. I know that sounds ridiculous to say.
- [39:16]
Barry Ritholtz
I know people don't remember that.
- [39:17]
Tony Kim
Not that Ballmer was a terrible CEO, but he was a founder and maybe just wasn't nimble enough to see the next generation. He was like many founders they're stuck in, you know, Microsoft 1.0.
- [39:32]
Barry Ritholtz
Yes.
- [39:32]
Tony Kim
And Nadella is, I don't know, maybe he's 3.0 or 4.0, but yeah, definitely he's got.
- [39:38]
Barry Ritholtz
This has got to be one of the greatest business turnarounds in history that doesn't get that much. Enough recognition.
- [39:45]
Tony Kim
I totally, totally agree.
- [39:48]
Barry Ritholtz
So they have this power law concept going back to your idea. The other one is you need a second act. You need multiple acts. If you even look at these great companies. Microsoft, for example, you had the Windows and then you had a second act, which is Azure. And Azure has been driving the company. Even Apple found the iPhone after Mac. You need companies that have. And then Amazon. I don't even know how many acts they've had. They have so many different acts. The great established companies can continually add multiple new businesses. Not only what you're currently doing, you gotta anticipate the next. So these power laws, do you have, you know, multiple acts because then that helps you have duration that you can endure and then are you differentiated enough? But then there is a whole new class of companies, right? So there you have the mag seven, these power law companies. But there's always history for tech has always given you the opportunity for the new companies, the new companies to come. And so it's really the combination of let's continue to ride the power laws of the established companies and then let's find those new companies that can rise and become the new challenger. So it's that those two, those are the two components of a technology.
- [41:15]
Tony Kim
Absolutely fascinating.
- [41:17]
Hannah Frei
They say that the fifth Industrial Revolution is about human centricity, about building technology to enhance our abilities and productivity. But previous revolutions haven't exactly been kind to ordinary workers. Can this one really be any different? Can we build a more utopian view of the future while respecting the forces of industry? I'm Hannah Frei, host of the Exponential Era, and I got to sit down with an expert at Nokia Bell Labs to ask these questions. Questions. Find out their answers@bloomberg.com Nokia not all.
- [41:47]
Norton 360
Holiday presents and goodies get delivered by slays. A lot of them get purchased online. And all of that online shopping and browsing can mean you're more likely to expose your personal information to cybercriminals. If a cybercriminal gets access to your personal info, they can use it to unhappier holidays overnight. So keep the holidays happier with Norton360. Norton360 provides comprehensive protection for your devices to help block ransomware and malware. A VPN to help keep your online activity private, whether you're on public or home wifi and safe web so you can shop more safely online and more stay safer this holiday season with Norton360, one of the most trusted brands in cybersafety. Save up to 58% off your first year at norton.com secure that's norton.com secure to save up to 58% that's norton.com Secure to save up to 58% before.
- [42:47]
Tony Kim
We get into the funds. I really want to just touch base on two really interesting things you said earlier. One is just generally on the valuation question with technology and similarly the market concentration of the Magnificent seven. Share your thoughts on that.
- [43:09]
Barry Ritholtz
Yeah, I think valuation, if I were to broadly say, is at a fair level. Now, there's dispersion in that. You mentioned the Max 7 and the crowding and these giant winners, they have valuations that are higher than the rest of tech. The rest of tech has not, for the most part recovered from the depression that we had. Recession we had in 2022, they were way exaggerated in 21. It crashed in 22. And there's been not that much of a recovery. So a large part of tech is still at depressed levels. I would say we're back to pre 2018, 17 levels, except the max 7 and a few companies like that that have, that are at higher levels, but their performance have been better.
- [44:10]
Tony Kim
Right. And you know, it's funny, we still have over a month ago this year. This could be the first year The S&P 500 beats the NASDAQ 100 in a long time. I'm trying to remember the last time we saw that.
- [44:25]
Barry Ritholtz
Yeah. Because a large part of the. Of the NASDAQ, especially non mag7, they've not done well. You look at large parts of software, large parts of semiconductors. Even if you're not in the AI class, you've been left behind.
- [44:46]
Tony Kim
Really interesting. So I want to talk about something that you do with your team. Every year you conduct a tour of Silicon Valley. You meet with leaders of both public and private technology companies, often 25, 30 different companies and their senior management. Tell us a little bit about what that experience is like. What do you learn? Does it actually help you with your investing process?
- [45:13]
Barry Ritholtz
Yeah, I think you're referring to our annual. Every summer we do a bus tour. Effectively, we bring 30 BlackRock investors. Now, that said, we do, you know, 2,000 meetings a year with companies on my team.
- [45:29]
Tony Kim
Wow.
- [45:29]
Barry Ritholtz
I personally do almost a thousand meetings with companies. Now, this is a special event because it pulls together 7, 8, 9, 10 different teams at BlackRock. 30 plus execs and investors. And then we get on a bus and we go visit the top managements and CEOs, both public and private companies every year. This has been, I've been running this now 11 years.
- [45:55]
Tony Kim
Wow.
- [45:56]
Barry Ritholtz
And what that does is you're on site, it's a little less formal. The companies feel more comfortable because they're hosting you. And it's really more about strategic discussions than relitigating the quarter.
- [46:15]
Tony Kim
Right.
- [46:16]
Barry Ritholtz
So it is much longer term than. Yeah, yeah. And you know, it's always a great barometer of like what were the topics of the tour in 2014 versus 2024. And you could really see an evolutionary of what was topical every year. And so it's a great way. It's also a great for the people because many times even within a firm like BlackRock, many of the teams don't get that much time to be with each other. So it's both for representing a unified front to the company and then also within the interpersonal relationships that are strengthened. And then it's really a great barometer of what are the key topics. And then if you looked at the last two years of, of the bus tour, there's only one topic.
- [47:12]
Tony Kim
AI.
- [47:12]
Barry Ritholtz
Yeah, yeah.
- [47:13]
Tony Kim
So, so let's go before the previous two years, give us some examples of ideas that were surfaced via this bus tour.
- [47:21]
Barry Ritholtz
So I'll give you some specific examples. I remember distinctly there was one about AMD when AMD had just announced its new chiplet based Jim Keller was still working there and one of the famed chip designers and they had redesigned the processor and the CPU and that Zen architecture was the basis in which 10 years later they've gained all that market share from Intel. But that was that day. And I remember because AMD was on.
- [47:59]
Tony Kim
Its back perennially, always a laggard, always short of capital, always like, hey are these guys going to be here in five years?
- [48:08]
Barry Ritholtz
But they made that seminal bet to really change that chip architecture and that and then another one. I remember distinctly when there was lots of questions around Tesla, right? Can they get the Model 3? They had Warehouse, you know, not even a warehouse, a tent to make. Remember that?
- [48:28]
Tony Kim
And everyone was saying you 24 hours.
- [48:30]
Barry Ritholtz
A day it was a tent to make the Model 3. And I think that kind of unlocked. That's like, well, we're about to, we're about to turn, we're about to make it. This production is about to scale. And that was another seminal moment. So you have these, these events like that that come through.
- [48:47]
Tony Kim
Let me ask you relative to Tesla, an ecosystem question. So for the longest time, Tesla had the market all to itself. Recently I saw a chart that showed for the first time Tesla's market share dropped below 50% not because their sales have fallen, but because there are so many other players in the EV space. I can't help but give either credit or blame to Jeff Bezos who so totally destroyed sector after sector after sector that when Musk came along, the automobile industry said, hey, we saw what Amazon did, we better, you know, get our act together pretty quickly. Any truth to that urban legend, I.
- [49:34]
Barry Ritholtz
Would say in ev, just pure EV cars, Tesla's share and its ascendancy, the entire market is, especially in the U.S. especially in the west, not China has definitely slowed if not stalled. Okay.
- [49:51]
Tony Kim
Right. Arguably I had the CEO of lucid in here.
- [49:54]
Barry Ritholtz
Yeah.
- [49:55]
Tony Kim
Who made a very aggressive claim that whether it was battery technology, motors, range, software, Tesla was a leader and lucid as leapfrog them. We could debate that. But it's a credible. Whether it's true or not, it's a credible claim which would not have been remotely credible five years ago, even three years ago.
- [50:18]
Barry Ritholtz
I would say to that, and I don't want to comment on that specific company, but you know, companies like that, they're selling $100,000 car, right? Tesla selling a $40,000 car. The $50,000 and up market is very different. Which is, which is most EVs, right. You know, if you remember, you go in the past, the greatest, the best selling single car was like the Toyota Corolla, you know, like couple million a year. And you look at Tesla's Model 3 and Y and they're also in that range coming up. Basically if you're in that kind of category, you get to a certain market level, a saturation level. And I think that in the west and then with the more reticence to adopt EV and still in the United States you kind of have a certain ceiling you need. And this is why there's so much discussion about Tesla either having a lower cost robo taxi or lower cost car to get at the market. Sub $50,000 where you have that unlocks a market three times bigger. It's like a $30,000 car or $25,000 car. But I think Tesla's main pivot really. And even Elon would tell you it's not about the car. The car is a mere means to deliver autonomy.
- [51:46]
Tony Kim
Right.
- [51:47]
Barry Ritholtz
And it's a robotics company. Right. It's and, and autonomy is the big unlock not, not selling the car itself.
- [51:55]
Tony Kim
Huh. That'll be interesting. We've been waiting autonomy for a while.
- [52:01]
Barry Ritholtz
Yes.
- [52:02]
Tony Kim
One can't help but wonder how much easier it would be if, if built into the roads and other vehicles where some form of RF device that allows other cars to know where here's where the exit is, here's where the lanes are, here's where all the cars are. Like there could be an infrastructure build out that makes that have you.
- [52:25]
Barry Ritholtz
When's the last time you were in LA or this year? This year. Okay. Did you see Waymo's running around?
- [52:30]
Tony Kim
I did not. I did not.
- [52:32]
Barry Ritholtz
So Waymo is now operating in Los Angeles and they're everywhere in San Francisco, Phoenix. And the future is here.
- [52:42]
Tony Kim
It's just not evenly distributed.
- [52:44]
Barry Ritholtz
It's within grasp. Finally. It's always been three years in the future, but it really is now, I think.
- [52:49]
Tony Kim
So now let's bring this conversation full circle back to the funds you run. Let's talk about BAI, which is the iShares, AI Innovation and Technology Active ETF. Tell us a little bit about that. That's a fairly concentrated portfolio, isn't it?
- [53:07]
Barry Ritholtz
That's right. We just launched this. This is our first foray. We have two ETFs now. We're jumping on that ETF bandwagon.
- [53:19]
Tony Kim
Yeah, I think that might work out for blackrock.
- [53:22]
Barry Ritholtz
Yes, right here, I hear. But this one is, you know, I think, you know, hopefully we look back, this is the second year of AI, as we would, as I would say. And I think this is going to be a decade long, if not longer trend. And we are trying to express in a concentrated way 30 plus companies in an ETF that represents this whole stack.
- [53:50]
Tony Kim
Of AI, from Nvidia down to the.
- [53:53]
Barry Ritholtz
Small, all the way up to the apps, from the compute to the apps and everything in between. And I do know one thing. So we wanted a concentrated exposure to the builders of AI companies building the key elements of AI. And I do know one thing, it will be. It's going to change dramatically. What we think is the companies of today might not be. And so we need, I feel like, especially when there's high rate of change in the early days of an industry like this, we need dynamic adaptation. We need to be flexibly and adaptive. To lock yourself into a fixed passive structure versus a dynamically changing structure. That's really the goal of this ETF.
- [54:41]
Tony Kim
Let's talk about iShares technology opportunities, active ETF or TEK, broader portfolio, 50 to 70 global tech companies. Tell us what that focus is.
- [54:53]
Barry Ritholtz
That is basically the ETF version of our mutual fund. And so that includes tech companies, not only etf, not only AI companies, but broad tech globally, larger companies. But you know, there's lots of tech companies that don't really, that don't really have that much to do with AI building AI. And so you're going to get the whole totality of tech in that, in that.
- [55:19]
Tony Kim
So you said something before that has stayed with me. About looking at the entire map of the ecosystem and watching what becomes hot and what fades. Technological change today is just so rapid. It changes at light speed. How do you keep up? How do you stay aligned with the industry dynamics as they evolve in real time? It seems like it's not even quarter to quarter anymore. It's minute to minute.
- [55:50]
Barry Ritholtz
Maybe not minute to minute, but you're absolutely right in AI, so there are different timescales according to different industries. So let's say in AI, you're right, it might literally be minute to minute, day to day. Okay. On the smartphone, things are more staid, they're slower paced. And so you have a spectrum of rates of change. That's number one. So number two, how do we keep up? I mean, I read a lot. And not only read, you have to stay attuned to all this new multimedia. There's so many experts and podcasts like yours and, and scientists. And then we do like I do personally, a thousand company meetings a year, that's amazing.
- [56:44]
Tony Kim
So that's for a day if you're working 50 weeks a year.
- [56:49]
Barry Ritholtz
Yes, I mean, yes, I do. Many, many, many, many meetings a week. So, and so then you assimilate all this information and then you are all, I'm always doing the calculus. Who's winning, who's losing, who's winning, who's losing, what's changing, what's not?
- [57:10]
Tony Kim
So how do you balance having a long term perspective for a technology like AI with you run a fund, you run a couple of funds, you get judged every quarter. That's a very short term. And Wall street is notorious for being too short term focused. How do you manage the trade off between, hey, this is going to be a dominant technology over the next five years to, oh, it's September 30th and we know what happens starting in October. How do you manage that trade off?
- [57:43]
Barry Ritholtz
That is the central question because we are being challenged all the time. You know, I feel you get some latitude if you have already a historical track record. So for example, 2022 was just brutal. Hell on earth for tech.
- [58:04]
Tony Kim
It was, you know, not only was it hell on earth for tech, it was the first year in over 40 years where both stocks and bonds were down double digits like once every half century. And then the only saving grace was 2021 was so spectacular that it felt like, all right, we're giving back some profits. But it's not, you know, it didn't feel like it was 0708 09, which.
- [58:29]
Barry Ritholtz
Was 2022 was worse than was worse than 2008.
- [58:34]
Tony Kim
9 for technology, for tech.
- [58:36]
Barry Ritholtz
Oh yeah, for sure.
- [58:37]
Tony Kim
Really?
- [58:38]
Barry Ritholtz
That's a big statement because in 2009 it was a universal collapse.
- [58:44]
Tony Kim
That's correct.
- [58:44]
Barry Ritholtz
Centered mostly in, you know, real estate. Tech went down, of course, but it didn't go down more in, in 2022 it was predominantly a tech collapse, but.
- [58:59]
Tony Kim
It wasn't like the dot com implosion where the NASDAQ 100 fell 80 plus percent.
- [59:04]
Barry Ritholtz
That's right. It wasn't. It wasn't.
- [59:06]
Tony Kim
But it was still no fun. You were down. Yeah, it was down 30 plus percent. Yeah, I lost a third of its value. That's a big hit.
- [59:12]
Barry Ritholtz
But in my, in my, in my career, 2022 was the worst year. Huh. And so do you have the latitude and the confidence and support by, by investors and management to allow you to continue? You know, and you know, and then obviously the last couple years have been good. Right. And so, but do you, does everybody get that avail that opportunity to. And that goes to the short term, long term, but I try not to focus on the short term. And you know, we're trying to make systematic bets to the best of our ability with, you know, especially an active manager. You know, it is, you need to show, because we're, we hold generally fewer companies and you need, you need a couple of years to show that those longer duration bets start to manifest. And so if I was always chasing the quarter, you would, you know, you're now you're trying to be, you're not a momentum trader. You would you. Yeah, or. Yeah, exactly. We, and that's really kind of at the end we're saying our decisions that are born out of all of this domain and expertise and all of this analytical rigor and then we express that for a multi year basis and then that ultimately comes through. And if we were to continually shift by the wind every quarter, you kind of lose your soul effectively of what you stand for. And so we try not to do that. Obviously in 2022 we had to make a lot of adjustments, but other than that, we kind of stick to that same framework.
- [61:04]
Tony Kim
Huh. Really fascinating.
- [61:06]
Hannah Frei
They say that the fifth Industrial Revolution is about human centricity, about building technology to enhance our abilities and productivity. But previous revolutions haven't exactly been kind to ordinary workers. Can this one really be any different? Can we build a more utopian view of the future while respecting the forces of industry? I'm Hannah Frei, host of the Exponential Era, and I got to sit down with an expert at Nokia Bell Labs to ask these Questions. Find out their answers@bloomberg.com Nokia not all.
- [61:36]
Norton 360
Holiday presents and goodies get delivered by slays. A lot of them get purchased online. And all of that online shopping and browsing can mean you're more likely to expose your personal information to cybercriminals. If a cybercriminal gets access to your personal info, they can use it to unhappier holidays overnight. So keep the holidays happier with Norton 360. Norton 360 provides comprehensive protection for your devices to help block ransomware and malware, A VPN to help keep your online activity private, whether you're on public or home wifi and safe web so you can shop more safely online and more stay safer this holiday season with Norton360, one of the most trusted brands in cybersafety. Save up to 58% off your first year@norton.com secure that's norton.com secure to save up to 58%. That's norton.com secure to save up to 58%.
- [62:36]
Tony Kim
All right, so I only have you for another few minutes. Let's jump to our favorite questions.
- [62:42]
Barry Ritholtz
Okay.
- [62:42]
Tony Kim
That we ask all of our guests, starting with what's keeping you entertained these days? What are you listening to? Watching streaming, et cetera.
- [62:51]
Barry Ritholtz
Okay. I don't get a chance to watch that much TV and streaming, but streaming shows, the ones I recently seen, I seen. I really like Shogun, the new one. The new one, the remake from the 80s three body problem I enjoyed.
- [63:12]
Tony Kim
I love that I couldn't get through the book. But the show was great.
- [63:15]
Barry Ritholtz
Yeah. And then. But I'd watch a lot more. I'm a history guy, so I love epic history on YouTube. It is absolutely fantastic.
- [63:27]
Tony Kim
Epic history.
- [63:28]
Barry Ritholtz
Epic history TV. Yeah, it's fantastic. I watch a lot of science stuff like World Science Festival of Columbia professor here, Brian Greene.
- [63:38]
Tony Kim
Oh, sure, he's a prior guest.
- [63:40]
Barry Ritholtz
He's great. I also like chess. I watch like chess.
- [63:45]
Tony Kim
You watch chess?
- [63:46]
Barry Ritholtz
Yes, I love watching chess. So like Chess Dog, is this a great show? Especially the old matches of the. Of the great. The great players like Bobby Fiser and Paul Morphy and things. And the podcast. I think the best podcast for me is the Ancients.
- [64:03]
Tony Kim
The Ancients. I'm going to check that out.
- [64:05]
Barry Ritholtz
This is an ancient civilizations in ancient history. So those are what. Yeah, that's what kind of occupies me. I don't do as much business shows and business pods. I listened to yours a few times and a few others, but I'm more about, you know, I'm in finance all day long. I don't really need more finance, so I go for. My love of history is probably the.
- [64:34]
Tony Kim
I have the same issue. It's like, I don't want to hear a guest I'm going to interview on another show. I don't want to repeat questions or steal questions. I want to bring a fresh approach, and when you're immersed in it all day, you just don't want to go that way. Next question.
- [64:50]
Barry Ritholtz
Yeah.
- [64:51]
Tony Kim
Who are your early mentors who helped to shape your career?
- [64:55]
Barry Ritholtz
The, you know, mentor would imbue a personal one on one, like tutoring and things. I didn't have too many of those. I would say my earliest mentors, I go to high school. Those are my formative years in Illinois. My English teacher, who was also my debate coach, my history teacher, and my chemistry teacher. I look back, and they really help form who I am today. And then in the professional world, I would say I go to. And this is like blackrock. When I joined, it was Tom Callan who hired me, and Tom said, not so much as a mentor, but he said, here are the keys, and you express your creativity and build the business. And he gave me that latitude. And so I give credit to Tom Callan, but I didn't have too many people mentoring me of doing this. It was more. Most of my mentors are dead. I have people that I have influenced me, like Napoleon and Frank Lloyd Wright and Beethoven and others.
- [66:10]
Tony Kim
So you grew up in Illinois. Did you do any of the Frank Lloyd Wright tours?
- [66:16]
Barry Ritholtz
Oh, yeah, I did all that.
- [66:17]
Tony Kim
So we spent every Thanksgiving in Wilmette. And so I've done that whole run, and I have to assume you've been to Falling Waters, right?
- [66:25]
Barry Ritholtz
I've not been to Falling Water.
- [66:26]
Tony Kim
So I. Taliesin, I meant, oh, really? That's on my list. In 2017, I bought a car in Indianapolis, flew out, test drove it, signed the papers, drove home, and halfway home was Falling Waters. And we were there the first day it was open in. I want to say it was early March, and there was like a light coat of snow.
- [66:48]
Barry Ritholtz
And you went inside as well?
- [66:49]
Tony Kim
Oh, yeah. We did the whole tour. It's absolutely astonishing. Not just because how delightful the building is, but never before and probably never since will a house be so ideally suited to its surroundings.
- [67:06]
Barry Ritholtz
It's just absolutely.
- [67:07]
Tony Kim
Yes, it's. It's always interesting when you see. Oh, you could see the thought that went into every curve, every line, every detail. It's really. It's really amazing.
- [67:18]
Barry Ritholtz
The. The genesis of that. My. My interest in Architecture. Yeah, I read the Fountainhead. You read that book? Ayn Rand.
- [67:27]
Tony Kim
I slogged through it in college and basically gave up on her because of that book.
- [67:34]
Barry Ritholtz
Oh, you gave up.
- [67:35]
Tony Kim
But like, that is such a painful book to read.
- [67:37]
Barry Ritholtz
Yeah. But it spawned this.
- [67:40]
Tony Kim
There's some ideas in it that are interesting.
- [67:42]
Barry Ritholtz
The idea, especially the architecture that really triggered. Oh, architecture, Right.
- [67:47]
Tony Kim
But so since you mentioned the Fountainhead, let's talk about books. What are some of your favorites? What are you reading right now?
- [67:54]
Barry Ritholtz
Okay. There are certain books that are influential to me. I always grew up in just. People on the show. They don't. I grew up before the Internet.
- [68:06]
Tony Kim
As did I.
- [68:07]
Barry Ritholtz
As you did.
- [68:07]
Tony Kim
I don't think we're that far apart.
- [68:09]
Barry Ritholtz
And I was a nerd. I was a total nerd.
- [68:13]
Tony Kim
Same.
- [68:14]
Barry Ritholtz
And so the Lord of the Rings and told me I knew you were.
- [68:16]
Tony Kim
Going to go there.
- [68:17]
Barry Ritholtz
Oh, how did you know that?
- [68:18]
Tony Kim
Because that was the. I reread the Hobbit and the Lord of the Rings every summer throughout my teen years.
- [68:23]
Barry Ritholtz
Oh, my God.
- [68:24]
Tony Kim
And someone just told me that the character actor who played Smigel. Sm.
- [68:30]
Barry Ritholtz
Yes.
- [68:31]
Tony Kim
In the movie actually narrates the book on the audible version. And people have told me it's not like listening to a book on tape. It's like a full radio play that he. That's right.
- [68:46]
Barry Ritholtz
He.
- [68:46]
Tony Kim
It's supposed to be fantastic.
- [68:48]
Barry Ritholtz
Yeah, I even. Yeah, I loved it. And then I went even. I went really deep. The Silmarillion and the 20,000 year prehistory to the Lord of the Rings. I went that.
- [68:58]
Tony Kim
How far afield did you go in sci fi? Heinlein, Philip K. Dick Highland.
- [69:03]
Barry Ritholtz
Philip.
- [69:03]
Tony Kim
C.J. shera. I don't know C.J. sherra, but pride of Shanor. Strong recommend. Pride of Shanora, Pride of Shanur. So just fascinating book. Give us one or two more books and then we'll get to our last book.
- [69:16]
Barry Ritholtz
Currently I'm reading. I read a lot of history books, so I'm reading three books. I browse. I read a lot parallel. And I tend to not to finish it all, but I'm reading right now. Campaigns of Napoleon by David Chandler. I'm reading the Fall of Carthage by Adrian Goldsworthy and SPQR Mary Beard. And I just bought my 60 memorable games by Bobby Fischer. I just wanted to go read all the.
- [69:40]
Tony Kim
Did you read. I forgot who the author was. But there's a great Genghis Khan biography that's really interesting. I could see the book.
- [69:49]
Barry Ritholtz
Yes, I would like to, but I have one other.
- [69:51]
Tony Kim
I have A book recommendation that you.
- [69:53]
Barry Ritholtz
Tell me, you tell me.
- [69:54]
Tony Kim
And it's called how to invent Everything. A Survival Guide to the Stranded Time Traveler. And it's just a history of technology but they use the whatchamacallit. The cheat is they're using the guide for time travel as hey, if you ever get stuck in ancient history, here are the tools you can build and here's how you should do it. And it's just a history of technology 10,000 years ago to today. Absolutely fascinating.
- [70:22]
Barry Ritholtz
10,000 years ago, right.
- [70:23]
Tony Kim
Going back to the invention of glass, the invention.
- [70:26]
Barry Ritholtz
I like to collect some of those ancient artifacts.
- [70:29]
Tony Kim
Oh that would be. That sounds like fun. All right, so I only have you for two minutes to get to my last two questions.
- [70:34]
Barry Ritholtz
Yes, last two questions.
- [70:34]
Tony Kim
Like that's the problem with sci fi geeks.
- [70:36]
Barry Ritholtz
Yes. Okay. I didn't know you're a sci fi geek.
- [70:38]
Tony Kim
Oh absolutely. What sort of advice would you give to a recent college grad interested in a career in technology investing?
- [70:47]
Barry Ritholtz
Not so much technology for let's say investing in general. I think you gotta be a great thinker.
- [70:53]
Tony Kim
Uh huh.
- [70:54]
Barry Ritholtz
It's not so much the finance. Finance can be taught easy. It's about thinking and it is about a flexibility to have a, to be reason and plan and think at a, you know, in a kind of a holistic and a flexible manner. Because AI is going to do so many of the tasks and they will often know more than you about any specific domain. So you need to be above that in a way almost like an architect would.
- [71:37]
Tony Kim
Makes a lot of sense. And our final question. What do you know about the world of technology today? You wish you knew back in the mid-90s when you were really starting out.
- [71:48]
Barry Ritholtz
If I knew how this would unfold in the Silicon Valley has it I would have just gone straight to Silicon Valley the company. Maybe, maybe instead of being on the investment side.
- [72:01]
Tony Kim
Huh.
- [72:03]
Barry Ritholtz
I don't know. It is a, it's a double edged question because I like the, I like the dynamic exposure to many companies but.
- [72:12]
Tony Kim
Like plus the path you've taken is so fascinating.
- [72:15]
Barry Ritholtz
Yeah. I would say another point of. For the young people.
- [72:19]
Tony Kim
Uh huh.
- [72:20]
Barry Ritholtz
Always bet on the future, not on the current past. Bet on the future.
- [72:24]
Tony Kim
What a great way to wrap this up. Tony. Thank you for being so generous with your time. We have been speaking with Tony Kim, managing director at BlackRock where he heads the fundamental equity technology group. BlackRock manages about $11 trillion in assets. If you enjoy this conversation. Well be sure and check out any of the 500 previous discussions we've had over the past 10 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast and be sure and check out my new podcast at the Money Short conversations with experts about topics affecting your money, earning it, spending it, and most of all, investing it. He find your favorite podcast and in the Masters in Business feed. I would be remiss if I did not thank the crack team that helps put these conversations together each week. My audio engineer is Meredith Frank. My producer is Anna Luke. Sean Russo is my researcher. Sage Bauman is the head of Podcasts at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.
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