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- [00:00]
Raoul Pal
Today's episode is brought to you by Abra. ABRA aims to provide individuals and institutions with a secure way to control, manage and grow digital asset wealth. From a separately managed account, Abra helps his clients get exposure to crypto and crypto financial products like yield and lending through one full service platform. If you're looking to gain access to additional liquidity, Abra has one of the most competitive loan products in the market. You can borrow against Bitcoin, ETH and Solana at up to 50% loan to value. Rates are in the 4 to 6% APY and and are open term. You can continuously draw down against your collateral as the price appreciates. Abra has other strategies to add yields and their team is happy to help align your portfolio to your risk profile. Reach out today and get a complimentary consult in your portfolio. It's worth seeing if they can help you manage your allocation, reach investment goals, manage risk and add additional yield. Go to realvision.com abra and tell them I sent you. Hi, I'm Raoul Pal and welcome to my show the Journeyman. As ever, we travel to that nexus of understanding between macro crypto and the exponential age of technology. Now today I've got a special edition for you. We filmed it live at the Real Vision Crypto gathering in Miami at the end of January and it's with a good friend of mine, Jordi Visser. And Jordy, like me, lives entirely at that nexus of macro crypto and the exponential age. So our conversations are always a lot of fun. Very interesting. We got a few questions from the audience so I think you'll enjoy it. And this episode today is brought to you by Figure Markets. And right now they're giving away 25,000 USDC. One individual will win 25,000 USDC with five additional winners receiving 1,000 each. Enter for your chance to win by clicking my link below and depositing it into their democratized prime product where you can earn up to 9%. APY offer is only available for US residents and $1 equals one entry. And don't forget figure markets. Crypto backed loans let you borrow against your Bitcoin or your Ethereum with up to a 75% loan to value ratio, one of the highest in the industry. Whether you're looking to reinvest and double back down into more Bitcoin, cover everyday life expenses, or just have cash on hand, these loans make it simple. Interest rates start as low as 8.91% with no credit checks, no long applications and no prepayment penalties. Download the figure Market app today. Anyway, let's go over to Miami and Jordi Visser.
- [02:19]
Join me, Raoul Pal, as I go on a journey of discovery through the macro, crypto, and exponential age landscapes. In the Journeyman, I talk to the smartest people in the world so we can all become smarter together. So this is a live episode of the Journeyman. So we'll start as ever, is. Hi, I'm Raoul Pal, and welcome to my show, the Journeyman, where I travel with you to that nexus of understanding between macro, crypto and the exponential age of technology. Jordi is one of my favorite people ever to talk to because, see, they love you.
- [03:01]
Jordi Visser
Very nice.
- [03:02]
Raoul Pal
It's because we share the same background, we share the same stories, and we come at the world independently in the same kind of way. Weird mix of macro, crypto and the exponential age of technology. So, Jordi, let's start a bit with the macro first. You wrote a piece for Global Macro Investor for our January Think piece, which I think everybody's had by now. Talk to us about the business cycle because that's confusing a lot of people, why it's so low and what's about to come. And you've got some pretty strong views on that.
- [03:31]
Jordi Visser
Yeah. And for those of you who didn't see the piece, I'm going to use something that I've heard here from the questions being asked, and I talked about it yesterday a little bit, but most people have talked about what's happened with silver, and let's just use silver as an example so you guys hear this and you can go do your own homework on it. Silver is an industrial metal. It is not a precious metal, and it is critical as the gateway to intelligence in machines. So the whole paper I wrote is about us being at the inflection point where for basically three years, once ChatGPT was launched and everyone started to use artificial intelligence, as opposed to just a few hedge funds and Silicon Valley places and machine learning and everything, it really became democratized. They focused on getting intelligence up to a level to where it is today, where you could accomplish an enormous amount of things that I think Raul and I talk about as being disruptive towards labor and really accelerating what's happening. Well, at some point, it gets good enough that it gets into machines. And what I wrote about was that we're at that point now. We are embedding intelligence into everything that we've used in a mechanical basis. So cars, computers, phones, factories, every single thing. You'll have humanoids in five years. All these things you've heard about but have to get to an inflection point. The technology needs to get good enough. We're there now. But you also have to build all the data centers. You have to build the edge devices. You have to do that. And the reason silver fits into it, you can't have a humanoid scale in any amount. You can't have drones, you can't have anything for warfare. So think about the fact that Europe is now going to increase spending on defense. Well, that defense is not going to be tanks, it's going to be drones. For drones you need an enormous amount of silver. So all of this stuff aligns. And see you guys here, we're at this change now. Before this it was a software world, so 15 years of software as opposed to hardware. But now we're taking that software and we're putting it into machines for both military reasons, but also for everything that we do in our daily lives. And that is a big, big build out. And during this week at Davos Jensen yuong on an interview with Maria Bartiromo put the number at $85 trillion for the build out of the world to put intelligence over the course of the next 15 years. You guys can do your own math. That's a lot of trillions of dollars every year. So we're at the beginning stage of this and PMIs are going higher around the globe. But commodities are in a super cycle because normally there's demand destruction and that happens from energy. This one is about minerals and materials.
- [06:25]
Raoul Pal
It's less likely to be about oil. I mean, oil gets a cyclical pickup because of the business cycle. Factories are selling more goods. But that's not where the game is being played, right? For me it's like solar because it's the fastest way of scaling which uses tons of silver, to your point. And copper. I mean everyone's talking about this massive copper shortage. And it's all the same thing. And I was writing in GMI and I've been writing for a while about everything is now coalescing about this race to superintelligence. It's all geopolitics, it's all economics, it's all politics, it's everything. And it's all going for this thing. And so that is the big driver of commodities in this.
- [07:02]
Jordi Visser
And you and I have spoken a lot and one of the things we've talked about is this concept of no recessions. And one of the reasons it's important for this is because what you said and the reason that for silver, you're all wondering when it's going to fall. It's parabolic. That means it's too late to get in. That's not the way this cycle works. So one thing Raoul said, which I completely agree with, oil's probably going to go higher, but it's not going to do what it has done in the past and almost all commodity cycles. So the 1970s ended pretty much with oil going up to levels that made it demand destruction kick in. In 2008 when we finally saw emerging markets in China, peak oil got up to 155, 150. There's not going to be demand destruction this time because fossil fuels are plentiful. We solved that problem in the 2010-2015 period with fracking, another technology. So the second point of what he said is you're going to do this because China can't lose to the US US can't lose to China. So they're going to keep spending it.
- [08:01]
Raoul Pal
The biggest arms race of all time.
- [08:03]
Jordi Visser
Exactly. And the hyperscalers at the same point, they view it as an existential risk whether they're right or not. They view it that way because I
- [08:09]
Raoul Pal
play through the hyperscaler thing. People like one of these is going to go bust. It's a bubble. Right. So play through the day. Open air goes bust or, or anthropic. Whoever you choose your thing. The next day Microsoft or somebody buys all of the compute and doubles their ability to compute and they win the entire race. That's how big this race is. There is no downside at the moment. It's crazy.
- [08:35]
Jordi Visser
Yeah. And I guess at some point if the debt grows to massive levels, which I don't think, I mean we're definitely in the early stages that I don't see anything. It's not going to be anything. We're spending it out of free cash flow. We just changed the accounting rules in the one big beautiful bill to be able to depreciate things in a particular way. This is going to be the next five years a certainty that we will have a build out. So these commodities will go up violently. They'll have pullbacks. But it's not just a shortage of copper. We will have a shortage of silver for the next 15 years because it is equally as hard to get more silver. And so when I'm writing things now and I just did my video which will get released tomorrow, it's all about avoiding investing in abundance. So anything that is already headed down the abundance trail and we can segue into that abundance is a very, very dangerous thing for investors. The ability of having things that are so deflation and so uber competitive, meaning snapping your finger and there's a new competitor immediately before you turn around. That deflationary pressure is present already in the software world and it's going to continue to be there. So it's going to be very difficult on the one side. And believe it or not, every investor here who has any money in The S&P 500, in MSCI World or anything, you're heavily invested in software. By definition, you're heavily underweighted in materials and energy. They make up 5% of the S&P 500, while the S&P 500 is 50% tech. When you include Tesla and you include all of the communication service names. So we're going to have a repricing and a rebalancing. And that was the other point in the paper, is that small caps a lot of the value names related to commodities. This is going to be a long cycle, this is not a short one.
- [10:13]
Raoul Pal
And I've put together this framework called the Universal Code, where I think the kind of fundamental principle of the universe is to convert units of energy into units of intelligence. And what we've got to is the point where it's now becoming the coherent pattern across all of humanity, all of geopolitics. So once you look at that framework, you see really simple things like that's why there's a squeeze in silver, it's because it's required for this process. It's a bottleneck. Copper is a bottleneck. Greenland, that's what that's all about. Venezuela, Iran, they're all about the same. Thing is how do we keep the cost of energy as low as possible, produce as much of it as possible, whilst allowing intelligence to accelerate and not lose to the other superpower doing it, or amongst the labs, amongst each other. That's the whole process for everything.
- [11:05]
Jordi Visser
Yeah, I was just thinking, you guys are. This is not a pat on our backs, but I think it's fair to say we might be two of the only people like truly in the planet that can go to this depth in macro, crypto and AI at this point. And the AI part is really important because I can speak and people can talk about crypto, they can talk about macro and have fun with it, but to actually understand this concept of how fast AI is moving, the disruptive nature of it, and have a vision of what the world is going to look like where technology works at such a fast pace that our linear brains can't deal with it, and everything that you just said, I think that is the issue that is behind everything. So when you get into things like Venezuela, I posted an X and I'll debate anyone on this. This wasn't about energy. This was about South America, which basically has minerals, has mining capacity, has labor. And Russia and China were embedded already in Venezuela. China already owns Africa to a major degree. You can't have the minerals of the world. And strategic situations like Greenland, like Venezuela, they're trying, we're trying to divide the world into different parts. And this is what normally happens when there's a shortage of commodities and it's. And we found that out last year with the rare earth trade. So at the end of the day, much of what we need is below the ground. We don't have the labor for it, we don't have the investment for it. It's going to be a shortage and we can't depend on that, especially after what we went through with supply chains
- [12:33]
Raoul Pal
during COVID And it's interesting because the other thing people talk about is like kinetic warfare. That's where it's going. But you can't because of Taiwan. Of all of the bottlenecks, that's the worst of all. That's the entire way to stop AGI asi and the whole thing is to disrupt Taiwan. So you can't.
- [12:56]
Jordi Visser
The CEO of and I don't know if you heard this, but the CEO of Anduril was on, I believe it was an A16Z podcast and during this was, I want to say October, September. But the US effectively had run out of munitions because of giving stuff to Ukraine, but also because of really needing to give Israel a lot of defense side. So we had used up a lot of minerals, we'd used up a lot of munitions. And it became evident, I think to everyone. And that's why if you just. It's hard to watch Elon Musk and pay attention to his post because he posts about every three minutes somehow. But he posted about how important silver was not as a precious metal, but as an industrial metal. He's put up about rare earth. He's talked about every bottleneck that becomes a major issue. And I think this is going to be the case. But the end rule CEO basically said if China wanted to take Taiwan, there's nothing the US could do at this point because they had just spent its the minerals and bullets that it had. So I think that's important just for people to put in the context that the military is definitely talking to the White House from a fear place of we could be way behind and there's nothing we can do. And I think that's why not only on the kinetic side. And I was having a convers with Chris Perkins about this at breakfast yesterday. This is a big part of what's happening on this whole battle around the globe.
- [14:24]
Raoul Pal
The other thing that I figured out by using this everything code framework is we all, and you and I have had this conversation many times, what the fuck are Europe doing? And then you realize that everybody plays a role in this great game. Europe's goal actually is to accelerate renewable energy. It's not to build. They have no ability to build the AI at the scale for the US because they can't coalesce the resources. They don't have the power because it requires power to do this. Power, meaning military power and geopolitical power. So Europe opts out and says we're going to go to green energy, but what they're actually doing is hyper accelerating the collapse of cost of renewable energy, which is the resource that matters. And again, going back to Elon, unfortunately, he's the guy saying this. He's like, well, solar is the only outcome, really. Everything else is sideshow.
- [15:16]
Jordi Visser
So I love doing my weekly video and saying every week, all right, Europe's going to outperform the US for the foreseeable future. But I'm an AI person. How can that possibly be? And to your point, whenever I explain it, and for the Europeans here, of which I've met many of them, especially the Germans, when you're not allowed to fire people, it's a bad thing for equity markets during a software period, it's a very good thing when you're at a point where the way you get your profit margins to go higher is by not hiring people. And Europe's allowed to do that. They're allowed to be more efficient, but getting rid of people isn't there. So I've joked that Japan has benefited by finally being forced to focus on shareholder value. You and I have. I mean, we started around the same time. I mean, Japan was uninvestable for the early part of our career, and now it's gone completely MSCI X Japan. Exactly. Yeah. When I joined Morgan's Stanley Ms. Or, Japan was more than 50% of MSCI World. So I've seen the rotation happen before. So Europe is going to benefit from that. But to your point, if you didn't try to compete with software, and Basically Germany is 90%, search is Google, and there it's all American companies, the good side is again, that means you have a lot of manufacturing, you have a lot of commodities and they're in the sector and you haven't really become digitized. You benefit in this new world of manufacturing and needing all the actuators for motors and everything along those lines. So the world going the opposite direction from the way it's weighted now is going to be a big theme. And that's the irony is that AI is a commoditized abundance situation that is highly deflationary. And I think the deflation is already happening. And if there was a way to measure it, it will be about companies that profit margins are very low, they're benefiting. And that's why when I've, you know, I said this to Pomp yesterday, we can talk about it if you want, but I've never viewed Bitcoin as the biggest benefit coming from inflation. I viewed it. The biggest benefit is coming when deflation sets in.
- [17:16]
Raoul Pal
Yeah, absolutely. And again, you and I have talked about this before. This is a deflationary nuclear bomb. This is the largest deflationary shock of all time. Even with commodity prices going higher, it's not going to matter versus everything else. And we've already seen the software company share prices starting to fall because they become instantly replicatable overnight by Vibe coding on Claude code. And it's crazy what's happening right now. The other thing that I've also noticed is we've seen governments starting to shift away from using central bank balance sheet and central bank liquidity measures. And they're moving like the change in the US to the eslr, which means the banks take it, which means they can have a leverage multiplier because they've all been deleveraging for two decades now. Japan is moving towards growth as well when you actually dig into what it's doing. They're trying to juice growth because it lowers debt to GDP. But also there is no way of raising the $85 trillion without the private sector and without leverage.
- [18:20]
Jordi Visser
Yeah, this is one of my favorite topics because I always say when people bring up the debt that I don't care about it.
- [18:26]
Raoul Pal
And just so you really angers people.
- [18:27]
Jordi Visser
It really does because they're so focused on it. Since ChatGPT got launched, the US 10 year yields have been between 4 and 4 and a half for about 90% of the time. It's the gift that keeps on giving in terms of everyone getting worried every time yields start to go higher. So just be very wary when you're in this world of deflation, of trying to think that the best Trade is to short bonds and that this will all end in disaster. You've got leverage at the government level, but you also have leverage in another way. And for everyone here, that's in crypto. I've never really talked about this in a long form, but I'll bring it up now and I'd love to hear your thoughts on it. So household net worth in the United States of America is $175 trillion. Now that's net worth makes the 38 trillion of government debt look really, really tiny, doesn't it? Like it doesn't really matter because the value of all the assets that people own. And Jeff Bezos is going around with his new wife and his boat and everyone's having a great time and they've got trillions of dollars everywhere. In Elon Musk will be a trillionaire. The reality is we're going to see deleveraging. I believe that the bank change people are going to start to realize that the fiat system is devaluing. And the way it's going to devalue is by the assets that make up the globe, which are about $700 trillion non crypto assets. For bitcoin to go up to where I'm certain it will go, there has to be a rotation away from those assets and into the other. The only way that happens is if those assets are not producing the returns necessary to meet the requirements of pension funds, necessary to meet the requirements of endowments, necessary to meet the spending ability of the 7 billion people on the planet that don't have the money. So for me, I believe what's happening is a wealth transfer that is going on and will continue. And it is a deleveraging part. So as the banks are levering up to try and get growth, you're going to see assets actually start to delever. I think real estate had its end when Covid came and you've already seen commercial real estate be under pressure.
- [20:30]
Raoul Pal
That's in a secular downtrend over time.
- [20:32]
Jordi Visser
Yeah, not shrinking population.
- [20:34]
Raoul Pal
No, but shrinking population. Exactly. Work from home, restructuring of how things work. Add in AI and robots and it's
- [20:40]
Jordi Visser
just and illiquid investments. Anything long dated when the world's Moving now at 10 times the speed it used to, by definition something that used to be 20 years is 200 years in current terms.
- [20:50]
Raoul Pal
And I think of private equity and even some a decent amount of vc. The problem is they're on a duration of which the world has completely changed within three years. By 2030 we're in an entirely different Planet and the p investments of today are not likely to be worth a lot.
- [21:12]
Jordi Visser
I listened to the end of the talk that was on before us and it was all about Web3 and they said some really interesting things. But one of the topics that they mentioned that I talk about every week on my video is how quickly business businesses can go from 0 to 10, 20, 50, 100 million ARR fastest in history. The problem is they might get there. But when Cursor did it, there's now lovable, there's windsurf, there's a hundred of these things that are competing. And so what happens is you might get to that level, but the question is, will you ever monetize it? Will you ever be able to turn it into a business the way that it was in the past? And it reminds me of the crypto world with the pump and dump. It's just a different version of it. It.
- [21:54]
Raoul Pal
Yeah, what crypto shows us. Crypto's really good at hyperscaling in. In dramatic speed ideas. And I've always said mean coin craze was really about attention and coalescence of coalescence of capital in super short periods of time. So in a world of agents, an agent spins up a business or you spin up a vision business with a bunch of agents. Whether it's replacing an existing business or it's a novel idea. You don't need corporation, you don't need lawyers, you don't need accountants, you don't need staff, you don't need anything. So you launch the thing, it goes, it takes off. You try and harness as much capital as you can before somebody replaces it and it disappears again. Because like meme coins, we can create endless software businesses, literally endless. And it can all happen instantaneously. So it becomes a factor of how long can you grab attention to coalesce some capital from the idea and move on. So the bots will just arbitrage that limited time horizon. It's a bizarre world, but velocity of capital is going to go exponential.
- [23:02]
Jordi Visser
Yeah. And if you guys take anything from this, almost everything we're talking about is time at the end. The reason the physical world is good investment is because it takes a long time to get copper, it takes a long time to get silver. And, and the amount we need at this point is insatiable. It's not cyclical.
- [23:20]
Raoul Pal
That's a great construct to think of it as. The things that take long and are in demand have a problem. The things that don't take long are in vast supply right now.
- [23:32]
Jordi Visser
And so let's Go back to oil. I don't think people realize how much we shorten the time to get oil from the ground. With fracking, we were at the stage back in 2008 where we were having to drill down in oceans that we had never tried before. Brazil was going into the Atlantic Ocean. I mean, we had never tried before. The Gulf of Mexico is flat water. At least you can do it there. So without fracking, we were going to run out of oil. Fracking changed the equation of time. And so that leads to the fact that theoretically we have as much fossil fuels as we would ever need because of fracking, because we're only doing it really in the United States. But if we wanted to do it in Argentina, there's a huge field there. And so we've changed everything in time. So when you go through and think about what are you investing in, that's why this week's video is, I don't want to be in anything that can be abundant like that. I only want to be long things that are scarce. So it gets back to bitcoin. And it's the reason why I'm not concerned at all with what's happening. I'm much happier this year with everyone depressed than people wearing bananas last year. It's much, much better from an investment standpoint.
- [24:40]
Raoul Pal
I was forced into it. Just want everybody to realize it was not my idea.
- [24:46]
Jordi Visser
It was very uncomfortable having to put that badge on last year.
- [24:50]
Raoul Pal
Yeah. And it was the peak almost to the day.
- [24:53]
Jordi Visser
Well, let me give people some good news on that and you comment on it. So when I thought about the things that could slow bitcoin, when I first got involved, I really thought there were two things that would be almost impossible to have happen. One was the etf. And I knew there'd be groups that would try, but I also knew it had to get through the regulators to some degree. And I never thought the US government would embrace bitcoin. If you go back to when those two things. We live in a world where you buy the rumor, you sell the fact. Okay, so bitcoin was about 25 to 30,000 when the ETF started to, in Kalsh terms, get above 50%. That was in 23. Then Donald Trump was guaranteed to be president at over 80% during 24. So if you literally start going through when he took over as president and launched a meme coin and did all these things and you had your event with bananas out, that is about as good of a sell the event. So if this was a bear market and were Unchanged since December of 24. That's not a bad thing.
- [26:01]
Raoul Pal
Thing. No, I don't disagree. And because once you've got the macro understanding of where we're going, how we're going there, where the liquidity lies, what has to happen. So, again, if we go through this process of converting energy into intelligence, we're going to go to a very, very, very important midterm election. And it's not about the politics, unfortunately. They politicized technology right now. That'll change over time and it'll morph into something different. But the Republicans, driven by Scott Bessen, will throw absolutely everything at it, which goes back to the beginning of our conversation. They will not allow the ism to be below 50 because their voter base is Middle America and they have to see prosperity from the Trump administration. They have to appease the crypto overlords who paid them to win the election. They have to appease the tech overlords who paid to win the election. And because the big game is you can't lose to China, and if you stop, pause, do anything, they'll win. So I think what we're going to see this year is something people aren't quite prepared for. It's going to feel like the pandemic in terms of the amount of stimulus coming. Yeah.
- [27:13]
Jordi Visser
And the assets are showing it. So I heard you and Julian talking on the first night. And, you know, alligator jaws can last for a long time, particularly when it's the asset that you've kind of bet your life on and it's the only one you're focused on. It makes it kind of hard. I have three. I have a proxy for bitcoin that helps keep my frame of mind for breaking it down into three components. One is the PMIs, which is copper. So I have copper as part of it. One is. I'll call it the debasement. But really, this is a lack of trust of, of the. The governments of the world. Not just the US but the governments of the world. So gold's been going higher, and the third one is digital innovation and how far we are getting to kind of this abundance thing. So I know for me, everything changed in September. PMIs are going higher. So I don't. I don't. I mean, I'd hate to disappoint people. They're going higher. It's not even a question. It'll probably start this month. But here's the thing. Dram prices have gone up 500% since September. Silver only broke out in November. If you guys want a Good proxy that I use for Bitcoin.
- [28:25]
Raoul Pal
On this, there is a phasing of the supply chain. It was first Nvidia, then it was tsmc, then it was Dram prices, then it's silver. It'll be. Every component part is playing part of this story.
- [28:38]
Jordi Visser
Yeah. And silver is utility, Ethereum is utility, gold is Bitcoin. If you look at the ratio of ethereum to Bitcoin and the ratio of silver to gold, and you look at it from 24 until recently, they were tracking each other. Exactly. So I keep saying it's very positive that Ethereum has outperformed Bitcoin since April. And the chart looks great. And silver outperformed gold. And then all of a sudden, silver went parabolic. The reason it went parabolic is because now we're at the stage where the physical connection to AI has to start. And I can't say this loud enough, there is no physical AI without silver. It is the single most important part. If I were to use Sherlock Holmes, there's no DOT connection, there's no Sherlock Holmes, there's just a bunch of noise. He picks out the components. That is what it is. It is the synapse of the brain. That is how important. Silver is much more than copper. Copper just moves energy. It's needed for the electricity. Silver is in every single smart device, everything. So we will run out of silver and it will be that way for the foreseeable future because we're only just building out. So you look at silver, it starts to run up. You look at copper, it finally starts to run up. It breaks out, and now the energy charts are starting to break out. In terms of the stock, so far this year, energy's up 10%, materials are up 9%, and tech is down one and a half. We're starting off the way it's supposed to be.
- [30:04]
Raoul Pal
So a quick break in your regular programming. If you're serious about your future, grab my free report called prepare for 2030. I think you've got five years to
- [30:14]
make as much money as possible.
- [30:15]
And this guide will help you navigate what's coming. The link is in the description. Download it now. The other thing I think about when I think of all of this and we talk about silver, blah, blah, blah. The most staggering thing is we run energy through sand and produce super intelligence. What the fuck, you know, we think we're special, we're biological, compute, and we're so amazing. Sand, it's an infinite supply. You run some energy through it, do a few smart things and produce hyper intelligence.
- [30:50]
Jordi Visser
So one of the things that's funny about that. So if you guys haven't noticed, if you watch my video, I use Nano Banana a lot to make things easier to understand. Because if I talk about some things, I look in people's eyes. I went, all right, how do I make this easier? With a visual. So Nano Banana is great for this. So in this week's video is literally a visual of what you just said, which is how do you take solar, fossil fuels, any kind of raw energy and then put it through this mixer and you come out with intelligence. Now you mentioned one of the components which is the advanced packaging and the silicon and everything over there. You also need high bandwidth memory there. There's a whole bunch of components, but there's a second track and that second track, we've already heard about the shortages. That's where the turbines are, that's where the transformers are, that's where all of this component is. The reason I wanted the visual for people is to just show that if you invest in these two converters from taking raw power to intelligence, that's where you're going to make your money. Not the software, the output anymore. The software is not to be. It's these boxes in any single part of it, any semiconductor. These are the oils of the 1970s and we have shortages of all of that stuff. So you're 100% right.
- [32:05]
Raoul Pal
So talking about the investability of equity markets, ignoring the commodity stuff, because even, even if we're wrong about a super cycle, it's that point in the commodity cycle. It's the business cycle, stupid. You know, it does, this is what it does. They all go up. How else do we think through the over performance underperformance and where the opportunities lie? Because it's complicated. Because you know, I can't see a world where stuff like Salesforce survives, although it is a diversified portfolio of other businesses. And maybe they figure it out, where does Microsoft. It's software that could be replaced, yet it has all the compute. It's not straightforward. Now who is what? So how do you sort through in your head at the tech space, which a lot of people are invested in, what is investable?
- [32:52]
Jordi Visser
So let's start with the software. I brought up two points because believe it or not, I wrote a piece this week for 22V that was titled the New AI Bubble. Is everyone trying to pick a bottom in software? I don't understand. I mean if you look at software relative to the NDX or relative to semis and I did it that way because for some reason in our world, people love to short things that go parabolic. They don't like to buy things that are falling like a falling knife. It's for some reason. So I just invert the chart and say, well, you're trying to buy this relative to this. You wouldn't do that. You're just trying to sell this versus this. So software is in trouble for two, two reasons. And I do a lot of presentations to people who code, so they're ready to fight me and tell me you don't know anything about coding. So we're going to argue on your software side. Here's the argument that usually gets them stuck. It always has to do with customization. To me, I've run businesses since I was 29 and I've always, since that point been focused on revenue per employee. It's the way that I wanted everyone to get paid the most amount of money. If you care about your team running a business, you care about revenue per employee. That's the metric. You get everyone on board and you go, if we're all going to get paid lots of money, it's because our revenue is going to grow and we don't have to grow headcount or at least keep it as small as possible. The problem is when I would have places like salesforce.com and I'm. You can go back. Even before there was SaaS businesses, they were never customized to my business. I had to adapt my situation to their flows. AI is completely the opposite. You can customize the flow based on the agents. And that was the point. If you can have 100 competitors in a, in a minute, well then why not just tell it what your business does and have it customized to you? That's where we are is customization. You're going to see the same thing in the medical side. We take medicine based on who the doctor was taken out to a basketball or football game with the sales rep for the pharmaceutical company, not based on our DNA and not based on the genetics. It is literally a random thing. It is not customized to us. Everything with artificial intelligence is about customization. And SaaS is about the bloated businesses of enterprise that are just trying to make things more efficient. If you want to get to a hundred percent to where you can get rid of an employee or not hire an employee, the agents have to do the work. It can't be a software.
- [35:27]
Raoul Pal
And part of this universal code framework is, I think it's going to be about the efficiency of generating intelligence. And that means you destroy all the component parts around it that cost money. Software companies are lots of employees, lots of costs, lots of buildings, lots of this, lots of that. And you don't need any of it. I mean, it's even. Elon said this the other day, again, frustratingly we have to keep mentioning him, but he's like, well, the vast majority of the entire US Stock market, most stock markets around the world are software companies and they're all a zero. I mean, that's obviously hyperbolic, but it's kind of true.
- [36:07]
Jordi Visser
And you've said an important thing. So let's assume that Salesforce can figure it out. You're trying to get them to figure something out, which Clayton Christensen wrote an entire book about that. Adapting to technology as a big company is impossible for the incumbents because they have the bureaucracy, they have these silos. It's very challenging. You work for Goldman, I work for Morgan Stanley. I joke all the time when they're like, well, why aren't they using AI at a very high level yet? Well, let's get something straight. We were both. You were in equities, right?
- [36:42]
Raoul Pal
Yeah.
- [36:42]
Jordi Visser
Okay, the fixed income. They had their own systems, they had their own software. Commodities had their own system, their own software, their own way of, of saving data. It's all unstructured. There's no way for them to talk. That's why Palantir went up as fast as it did is because it's not just the military. It's how do we get all this data and bypass all of the SaaS side, get rid of all this software. So it'll take a long time for the big companies to get through their bloat. But I don't see how Salesforce in this can do it without getting and hiring lots of people to try go sell the agent force. And that is a cost that is too.
- [37:15]
Raoul Pal
And also that was a really good point. The, the adaptability of large companies in rapidly emerging technologies like this is incredibly slow. I mean, talking to some people working at large corporations, they have to appease their workforce first. We're not trying to replace your jobs. We're trying to help you. Oh, but you're not allowed to use ChatGPT because we have not approved it. We need to approve a corporate subscription and it'll end up being to Microsoft Copilot or some bullshit. And then that takes. Oh, but we need a team to implement it and do training. So you're talking like a large corporation. And even the investment banks are going to take three years while intelligence is doubling within a year and they're being left behind. And this is the rise of everything from Defi to all of the vibe coders building stuff is the inertia of the corporate world is allowing massive scale disruption to come in ways that are so cheap because you don't need any of the corporate structures. You can run businesses without any people.
- [38:31]
Jordi Visser
So let me. We haven't talked about this. This is, this is something that I get, I get pushed into a corner occasionally by someone like doing a back and forth and something will just come out of my mouth. I'm like oh, that's pretty good, I should use that a little bit more. So I'm very good when you corner me occasionally. I haven't thought. Yeah. So because there was no debt over the last 15 years by the hyperscalers until recently, the margins of these companies because they didn't need to hire many people and they didn't have to take any debt out. So they had profit margins at 50, 60, 70% and software dominated everything in the globe. They were valued in price to sales to justify the level that they were now. Historically if you were a cyclical company in manufacturing, the fear that would cause the underperformance of stocks eventually from a cycle perspective was if you took out a lot of debt eventually that would become a problem. And your debt to GDP was the issue that people would care about on commodities and anything along those lines, what I believe is happening. So when you have high price to sales, you need one thing to happen or you are in really big trouble. You need to keep growing. And so one of the parts with price to sales is I'm not saying SaaS companies are going out of business tomorrow, but I am saying their growth will be non existent. To grow your business means to find a way to convince these bloated companies to move at a speed that matches their valuations for them not to go out and hire lots of people so their margins don't get whacked. But here's the other component. They also depend on something we already talked about which is small businesses come up to replace the older businesses with inside the market. No, small businesses today that are getting money from the VC world are anything but AI. It's all AI. Which means every business is AI native. If you're AI native, you're not paying Salesforce.com for their software thing which means every business today that is going to be entering the world, they're not going to pay these guys. So you have two problems. One is they're measured, their valuations are Extremely high. And they're under growth problems from the SaaS businesses of the bloated industries. But they also don't have anyone to replace those bloated businesses with the new businesses. So I really do believe for everyone here, if you want to change your view, you're probably 50% in software without knowing it, and you're probably 5% in commodities. And you see the silver chart, you're like, I can't get involved in this. I think you got to get involved in this.
- [41:09]
Raoul Pal
But the issue is with commodities is even in a structural secular bull market that happens from time to time. Like when China came into the world, it's still preposterously, horribly cyclical and it mean reverts. Right. So it's not high. I think of commodities as you rent them and don't own them because they're not in secular trends. Even if we're in a accelerated part of a cycle, I still think you've got to be careful. You can make a lot of money out of them.
- [41:37]
Jordi Visser
Here's the thing in, in the silver chart. Would it look any different if it was 200 or 100, 300, 400?
- [41:45]
Raoul Pal
Yeah. I'm not saying it can't go higher any.
- [41:46]
Jordi Visser
Oh, no, no. That again, the only reason I'm bringing it up is I do believe in exponential time. Again, the same thing is going to happen. So everything in time is these charts look like this micron technology. I'm not saying people should just throw all their money into it. I'm just saying the weighting in your portfolio is next to nothing.
- [42:05]
Raoul Pal
So let's say there is a lot of physical silver been locked up by speculators now. Okay.
- [42:11]
Jordi Visser
Yep.
- [42:12]
Raoul Pal
So when that unwinds eventually, as it does, you get a lot of physical silver that comes onto the market and it kind of alleviates some of this. So you've kind of exponentialized the demand cycle within this. But I think supply then comes back from some of that as well. So that's the caution with commodities is, you know, you can dump the supply onto the market from speculators.
- [42:37]
Jordi Visser
Yeah. I think for everyone out there, they should go look at the equities of the mining companies and not focus on the commodities.
- [42:44]
Raoul Pal
I wrote the whole piece on this. There's huge opportunity. All of these, everything Rio Tinto to,
- [42:49]
Jordi Visser
they're so cheap relative. And they're going to go, I think this is a different time because I think we have a strategic petroleum reserve for oil. The total cost of silver in all the things I mentioned as an input Price, it is price inelastic for intelligence. We've never seen anything like this before. So if oil got to a thousand, the economy would crater. If silver went up 10 times from here, it would be less than 5% of the cost of a data center 10 times from here. That's how it's just an odd lot of the overall side of where the money's being spent. And again, this is meant more to say that when you enter the physical world, I'd rather be long Brazil at this point, I'd rather belong countries that are, you know, commodity havens that have not rallied yet. Brazil is my favorite investment for this year from a country basis because of the fact that, that they have a lot of minerals and a lot of commodities. And I think they're going to be in a secular bull market even with the 20 to 30% pullbacks.
- [43:52]
Raoul Pal
The other thing I think a lot about is you can see the macro cynics who've now caught the bull run in gold and stuff, but they're like, everything else is going to go to shit. And look at Oracle's CDS pricing. They're going to default. And again, this goes back to the same point I made about Anthropic. I was only just thinking about this now talking to you, thinking, okay, let's play through Oracle going bust. The best thing to do would be Microsoft, Amazon or whoever to buy the whole lot, fire all the customers, take all the compute, win the entire game tomorrow. The cheaper it goes, the faster intelligence accelerates because the probability that somebody gets all that compute goes through the roof.
- [44:34]
Jordi Visser
I don't know if you've noticed this, but the United States government now has a sovereign wealth fund. I know. And they, they buy stuff, they're not letting any of these companies, they're not backing them.
- [44:43]
Raoul Pal
Intel, we saw that.
- [44:44]
Jordi Visser
Right? Exactly. But as we learned with COVID and Scott Besson knows this, all you have to do is raise your hand as the government and go, all right, we'll buy all corporate debt. And then you never have to buy corporate debt because it just goes higher. If the government even rumored the fact that they would come in and bail something out or that they would get a bunch of buyers together to go through would stabilize. So I'm not, I'm not in any way, shape or form. I'm on the same page.
- [45:10]
Raoul Pal
People got really pissed at Sam Altman for mentioning that in his outside voice. Yeah, but it's so obvious because if you don't, you lose to China.
- [45:17]
Jordi Visser
It was his CFO which made it Worse.
- [45:19]
Raoul Pal
Oh yeah, that's right. So I think we're going to break with tradition. I've decided to go rogue and ask, see if the audience has any questions as well because you never get to answer the questions in the journeyman. So you can yell. I don't think there's microphones but.
- [45:35]
Jordi Visser
So you talked about the US and China in a race. China right now is really being very aggressive with their solar and our, our government and then obviously because our government's throwing money at it, our government is kind of pulling back that solar as you're saying, is the big piece of the energy capital, the E for intelligence. You think the private sector is going to start stepping in here at some point or.
- [45:57]
Raoul Pal
Yeah. One of my trade recommendations is tan the solar etf. The only way to bring power online in a two year time horizon, the only way is solar. And China's just shown it. They doubled the entire world's supply of solar. The entire world's supply in one year. Oh, the private sector will do, you know, forget state, Europe's doing it, it, the US will do it because it has no choice. And Elon's telling you this every single day. It doesn't matter. Just buy the tan ETF and it'll go up.
- [46:37]
Jordi Visser
So here's the thing. We do have plenty of gas in the country. We have a turbine shortage. We have a lot of stuff. So for the next whatever years the efficiency of Blackwell and Rubin takes the need in a data center of or at least for the output you go from 10 gigawatts to 1 gigawatt with Rubin versus Hopper to get the same out. So one thing's going to happen with China and the US over the course of this year. The Chinese have hoppers and that's the best they can do. It really does matter that they don't have access to Blackwells and they don't have access to Rubin. So the efficiency side is going to grow. Our big problem is the turbines. It is the transformers and a lot. Elon has figured this out to some degree with Colossus, but he said publicly, especially recently, that by the end of this year we will have a power problem. I think this becomes a bigger issue as we get to the end of the year, not with the power situation because the models are much further ahead than the adoption and that's kind of the critical point for everyone. What will be an issue is I think we're going to have a freak out on OpenAI, Oracle and all of this stuff and it won't become A major event, but you're going to have a lot of dark GPUs waiting for power to connect to. So that will be a story according to him before the end of the year. And I think he knows better than anyone on this situation. So I do think it's an issue. I agree with Raul that there are solutions for it. And as this becomes more evident, we'll get there. Just remember, we only use 50% of the grid, so there will be solutions that are going to come out. And I would not. I would not get past solutions to problems. Just like with fracking, which came kind of out of nowhere. It had been a technology which had been around for a while and then it solved the peak oil trade almost overnight. With AI, you're going to make solutions to grid optimization. And I'm sure we'll be able to kind of stumble along here until some of the nuclear plants and things like that become more optimal in maybe five years.
- [48:37]
Raoul Pal
And what's interesting is like silver energy is a very small input into the actual output. And so what I think they will move to is there's a really nice version of universal basic income or superabundance for all is basically. And the US Administration started talking about this, and I talked about six months or a year ago, they will just charge the hyperscalers for all electricity. They take more for the grid, less from their own solar or whatever. They're doing nuclear, whatever, but they will charge them for electricity and everybody else will get free electricity. So I think that's coming. The US has already started talking about basically a tax on these guys because there's no way of taxing intelligence. So tax the energy because it's energy per unit of intelligence. So tax the energy costs like we all have at home. You've got a meter. Whatever you consume, you pay your bills. So I think that's coming. Any other questions?
- [49:36]
Jordi Visser
I got a question.
- [49:38]
Raoul Pal
Oh, we got microphones. Look at this. We're almost professional.
- [49:41]
Jordi Visser
Hello. So it's a question for both of you, I'm curious to know, because you're both, you know, future thinkers looking forward 10 years, what would you say are. Or I guess what would you say one thing that you're looking forward to the most or you might be more excited about, and one that maybe gives you pause or concern.
- [50:09]
Raoul Pal
Probably looking forward to not working. Having cheaper bills would be nice as well. What I'm worried about is how society deals with. I'm actually worried about it earlier. We talk about AI and all of this stuff. People are not Simply ready for one thing that's about to happen. When you put AGI, which is happening this year, whichever methodology you want to call it, and you put it into a body of a human, an Android robot, and then put them at scale into our planet, and they're smarter than us, physically more able than us. Nobody is ready for that. I'm not ready for it. He's not ready for it. We have no comprehension in our mental model. We see robots as these slightly dumb creatures we order around. But when they have super intelligence, what the fuck does that mean? So that's what. Of all the things in my head when I think about Little Cayman, I think, they're not coming for Little Cayman. There's 150 people there, and I'm sure the iguanas will lead a revolution and kill the robots.
- [51:16]
Jordi Visser
All right, Samantha, here's my answer. So the only time I seriously get. I'd say sad for, like, any event. So I've been to many funerals. As you get older, you go to a lot of them, some of them people older than you, some of them people younger. And I am most saddened by people who die early in life for unexpected reasons. But if it's an accident, I can deal with it better. It's tragic, but what always gets me is when people die from some health thing that happens. And I am an optimist and a believer in longevity. Many of you have talked to me. I spend a lot of time on it, and I believe in it. And it's something that makes me happy to be healthy. And I know that if people were healthier, the place would be happier and everyone on the planet, it would be a better planet to be around. So I do think the health thing gets minimized. And I think that is coming. And I believe in the next five years, they will be solving so many diseases. On the other side, I worry only about one thing. I have four kids, and I worry about them dealing with what you said and also making it through the next five years. I think the next five years is very, very challenging. I think the rise of artificial intelligence makes it very difficult. I've publicly said I created strategic Bitcoin reserves for my kids, told them they can't touch them. I believe in that. I believe that's going to help me mentally get through the next five years where I expect Bitcoin to go up significantly. And I don't care when. I just. Just care that it would be happening. When AI agents and digital employees come in, it makes them very difficult to enjoy Life to worry about things. They're in their 20s. My son is just graduating in two years. So I worry about my kids dealing with the next five years because they're worried about it already.
- [53:01]
Raoul Pal
Okay, I think we've got time for one final question over there. I actually had a question. My name is Morgan, I'm 23 years old. And you were speaking about your four kids and thinking about the future for them. What would you say is your number one piece of advice for people in the Gen Z generation who are just coming of age now, navigating this uncertain time in the next five years?
- [53:29]
Jordi Visser
That's simple. I tell them every day to use artificial intelligence as much as possible regardless of what their school says, their work says. And number two, spend a hell of a lot of time in nature and realize that this whole thing of work and everything is going to end. So prepare for when we don't have work or when it's not necessary and just enjoy nature.
- [53:47]
Raoul Pal
Yeah, I'm the same. Nature is the off ramp for all of this. The other side is learn to be a human. You can spend your whole time at your desk at your computer. It's all worthless over time. Using AI now to give yourself a hyper advantage over any peers is super important. Learn to communicate, be around humans, be a good human and you'll find a role and you'll find money from it. Because humans want attention. Humans like community. So that human attention economy I always use. The best example I've got in all of this is chess. Humans haven't beat a computer at chess in 35 years. Yet the chess industry is the largest it's ever been. It's a multi billion dollar industry. Watching flawed creatures play a sport of which we shouldn't, we can't beat, win at, but we do. And we'll do that in music, we'll do that in the rise of re rise of religions, we'll do that in sports, we'll do it in all sorts of things. Because we're humans, we want to be around other humans. Even if you think about a football game, AI doesn't have an influence on that. The game gets played amongst flawed humans doing flawed things or occasional brilliance. And we can bet on that. We can entertain each other, we can be part of that. And it's now, it's real time, it's not in the future, it's not in the past, it's in the present. That's incredibly valuable. So be involved in that. See humanity for what it is, which is the greatest thing we've got.
- [55:17]
Jordi Visser
Let me add one more thing because you actually two, because you piqued my interest on something. One thing you brought up that you said the other day which connected with a conversation I had with someone recently, but on the topic of AI. So you guys, you get this. Just the next time you see a child that is one years old, look at how they run around and their curiosity is everywhere. They just want to learn stuff. AI gives you the ability of taking everything that we said and double click and learn something new. It is the most amazing gift that has ever been given to me. I hated school. I'm public about it. I hated it. I was trapped in this horrible world. AI allows me to go from topic to topic to topic, connect dots in a way that is brilliant. I'm talking to the smartest person I've ever met because they know something about everything. Second thing, NFTs I now when people ask me, I go there's three parts of crypto. I'm interested in it. I'm interested in stablecoins as a network effect. I'm interested in Bitcoin as the only true store of value in the abundant world. And NFTs to me have now connected in a way that I believe it. And those are the three things that I will only be.
- [56:32]
Raoul Pal
Finally, I got you across the line.
- [56:34]
Jordi Visser
You did, but it was something. I'm a very. I'm a non materialistic person. I don't care about things. I care about experiences. I care about humans. I care about the conversations we had. People have told me they can't believe I remember their names. I am present, I am aware and I'm there. When I go to sporting events, those memories, they live. Even when I give eulogies, I live for that moment of just. I look at everyone, I'm there. That's what NFTs are for me.
- [57:03]
Raoul Pal
They are cultural memory packets.
- [57:07]
Jordi Visser
Yes.
- [57:08]
Raoul Pal
And if we are going through the largest, fastest change in all of human civilization, we're living it. And this is the mimetic compression package of this story's being told on the Internet. And they're scarce. They mean something to us. Our stories mean a lot to us. Warhols mean a lot to, to the baby boom generation. These are going to mean a lot to us. There's no other way around me seeing that. And I remember where I was when this happened.
- [57:38]
Jordi Visser
Of course, that is a, a human quality that cannot be replaced.
- [57:41]
Raoul Pal
Exactly. Great. Well, thank you everybody. I hope you've enjoyed it and we'll see you at the party in an hour.
- [57:52]
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