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- [00:07]
John Tinsman
You've had a dynamic where money's become freer than free. If you talk about a Fed just gone nuts, all, all the central banks going nuts. So it's all acting like safe haven. I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor. I mean, that's part of the bull case for Bitcoin. If you're not paying attention, you probably should be. Probably should be. Probably should be.
- [00:36]
Marty Bent
John Tinsman, welcome to the show.
- [00:39]
John Tinsman
It's a pleasure to be here, Marty. Thank you.
- [00:41]
Podcast Co-host / AI Expert
It's a pleasure to have you on such short notice too. I think we threw this together less
- [00:44]
Marty Bent
than 12 hours ago.
- [00:46]
Podcast Co-host / AI Expert
I'm excited to have this conversation because
- [00:47]
Marty Bent
we've, we've had analysts covering the AI space on quite a few times over the last year.
- [00:54]
Podcast Co-host / AI Expert
Jordi Visser, probably the most prominent. I've really liked his coverage and was telling you before we hit record, I
- [01:00]
Marty Bent
found some clips of you talking about your thesis and what you're doing and
- [01:05]
Podcast Co-host / AI Expert
said I had to reach out to
- [01:06]
Marty Bent
John, get him on the show. And for anybody who's unaware, John is the founder and portfolio manager of AOT Invest, which trades on nasdaq. He's also the director of procurement and investments at Twin State Inc. Family fertilizer
- [01:20]
Podcast Co-host / AI Expert
business, which is maybe a topic we
- [01:22]
Marty Bent
can get to later, but I think really respecting your time and jumping into
- [01:27]
Podcast Co-host / AI Expert
it, I think first laying out your
- [01:31]
Marty Bent
framework and I believe your thesis is low marginal cost, high growth businesses, trying to find who can outlay the least
- [01:39]
Podcast Co-host / AI Expert
capital and get the highest multiple on that capital for your ETFs. And I think just walking us through
- [01:46]
Marty Bent
that, because most people hear AI investing, they think Nvidia.
- [01:50]
Podcast Co-host / AI Expert
But your framework filters for something more specific, from what I understand.
- [01:54]
John Tinsman
Yeah. So my first ETF I launched in 2022 is AOTG. That's the ticker, the AOT Growth and Innovation ETF. So, you know, I came from the world of market making, which was all about high speed and algorithm and algorithmic trading and statistical probability. So I tried to take that statistical probability to long term investing. And so when you invest 10 years from now, you can almost guarantee that the stocks that have gone up the most have had the best earnings growth. So like in 10 years, if there's a company that's earning 30x more, that is probably have gone up quite a bit. And so I think like when you invest for the future, you think, well, what Companies give me the best probability of earning the most in the future. And so the first thing I came back to was the companies that are earning the most today, like growing the fastest earnings today. So like companies that have really high earnings growth statistically are the most likely to be doing that again tomorrow. So I target and I weight by high earnings growth and high revenue growth, which is really unlike modern investments, I think, because the modern investments I think fall into two categories. You've got the, you've got the index funds that are weighting by market cap. So like if you have a growth fund, Apple might be a top weight and Apple's like barely growing faster than inflation. Right. And so why would you not put a top weight in something like Micron instead if they're growing their revenue at 300% year over year, you know, like it's a good question to ask, why would you not wait higher on companies like AMD and SanDisk if they're growing their earnings at a thousand percent year over year? You would think in a growth fund that you would want the highest possible growth. So that's what I do in aotg. Then the, the and then the other thing about active management, modern active management is that they focus a lot on like the betas and the Sharpe ratios and things like that. And that was kind of counterintuitive because you're using a backward looking volatility metric. Like it's not necessarily indicative of the future. Well, meanwhile you kind of avoid companies that are doing really well if they just go up and down too much, maybe like SanDisk and Micron. So like I kind of take a common sense approach to buying high growth companies at the most reasonable valuation metrics possible. So if there's something like super overpriced like Palantir, it won't be in my fund. And you know, even if it is decent growth, like why would you even bother wasting your ammunition on it if you can buy something at 110 the valuation metrics, three times the growth. So I take that approach with AOTG. And then number two, the second highest thing I found correlated with long term stock price performance in my research was low marginal cost. And I think this one's really interesting because nobody else was focusing on it. And that's the second criteria for aotg, high growth and low marginal cost. So low marginal cost is the cost to produce one additional unit of good. So think about a company like Microsoft. If they make one additional unit of Microsoft Office and sell it to you, that costs them nothing to make, that means they have 100% profit margin, which is great for, for shareholders. That means they can scale to meet demand without any debt. And then they can also have an enormous amount of free cash flow to keep innovating. So you've got higher innovation, higher profits, higher, higher growth. You compare that to a traditional company like Boeing, if they have to build another airplane for, you know, and they're selling it for a hundred million dollars, it might actually cost them $99 million. And if they really want to grow, so they have a very low profit margin on new sales. And if they really want to grow, they have to build new factories, and then they have to sell product at a negative profit margin to. To steal the business from a company like Airbus. So growth, not only is it funded by huge amounts of debt, it comes instead with 100% profit margins. It comes with negative profit margins and losses. So that's traditional industry. I learned this in my family business of fertilizer because I always, like, I'm an ambitious guy. It's like, let's grow the business. And everybody's like, no, if you grow the business, you'll just light your money on fire and you'll never see it again. And so it's like, let's just be happy with what we have. And it was hard for me to wrap my head around that being, you know, wanting to grow and do better than the year before every year. So. And so I take that investment approach that I've learned from personal, you know, managing family businesses and took it to an ETF and focus on that high growth, low marginal cost within profitable businesses. And so it's been out for, you know, three and a half or four years. And it's up, you know, it launched at 24 on the NASDAQ and it's trading, I think it traded Yesterday in the 63. So in. In that short amount of time, it's up over 160%. So it's been great to do. Well for shareholders, of which I'm a big one, of course, it's like, oh, I have all my money in.
- [06:35]
Podcast Co-host / AI Expert
Well, I mean, jumping deeper into the framework and particularly I think your hottest thesis right now, which is being all over this Xai anthropic deal, which was announced, I believe, last week or the week before, or anthropic, I believe they're paying, what, 1.9, 1.6 to 1.9 billion a month in compute from one of the Colossus sites.
- [06:56]
John Tinsman
Yeah, yeah. And I tweeted about it because I hadn't seen anybody talk about it. I'd seen people talk about oh they're leasing it but nobody had talked about the profitability metrics. They were open up the, they opened up and it's so crazy Marty. They opened up the S1 and they're like oh hahaha, look at how much money XAI is losing. And in that they basically had $15 billion a year coming online like next month. So like in like three days and they somehow didn't realize that it's going to be making money. Like not only is the XAI revenue going to jump 300%, maybe a lot more, but year over year, but also they're going to be making a ton of money. And so, and so the, so like everybody was just kind of wrong on their take. And so I tweeted this and like all the celebrities are in the replies. It's gotten like hundreds of thousands of views on X, maybe millions by now. I haven't checked but, but the interesting thing is that they spent 3 to 4 billion, some people say as high as 7 billion. And these are kind of closely guarded secrets. You kind of have to look at how much XAI was spending and try to say okay, how much of that did they spend on Colossus 1? But they build a 300 megawatt data center. They did it in 122 days. And you know this thing probably costs a couple hundred million dollars a year to run. On the very highest side, you know it might cost only 150, I don't know. But so if they spent 4 billion on it, let's just say and they, they lease it to Xai for $15 billion a year for three years it will make $45 million on a $4 million investment or billion $45 billion on a $4 billion investment. So that's a 10x ROI. And I think in three years the asset is probably will appreciated in value. So like I don't think like it's depreciating, I think it'll still be very useful in three years. So so the ROI is really a lot higher than 10x and in my opinion and so that's like the tip of the iceberg because I think this is a closely guarded secret in the industry. Nobody wants to talk about how much money they're making in data centers because they don't want everybody to know. At the same time the Hyperscalers are spending $1 trillion now this year building them. And you know, did you know like Microsoft and Google historically their return on capital invested is over 35%. And why are they spending so much more now? Is the ROI trending upwards to 100%? And if you look at Google Cloud, if you look at Microsoft Azure, if you look at Amazon Web Services, Oracle, it seems like it quite possibly is. Like the revenue growth is accelerating, the profit margins are getting fatter and fatter and, and I think there's a chance that what we're doing is we're building data centers in the US and we're leasing it out to the rest of the world at like 90% profit margins. And I live in Iowa. I'm not sure where you are, Marty, but like the data center boom here is huge. Like my neighbors work for Oracle. Electricians and welders that used to be making like $50,000 a year, making 250k a year building these things. And like they're going up everywhere and it's just bringing an enormous amount of wealth. But here's the crazy thing. You talk to these people and they're booked out five years like, like the data center demand's not going down. Meanwhile, Anthropic grew their tokens sold by 80x in, in 12 months. 12 months. And Goldman Sachs is saying they think they're going to see another 24x token token demand growth. And so like we are so far past like, like 20% revenue growth, 34% revenue growth. When you're starting 20 80x, 24x, how do you even value that? And it's so bullish. The ROI is so good on data centers that is people really going to order less semiconductors? Because people are like, are we at the top of a cycle? And you look at the numbers and you're like, this is absurd. I've never seen anything like this before. And so I think there's like, well, it's always good when you invest to have a little bit of pessimism and make sure you keep in mind the downside potential. I think it's really good to be focused on the upside right now and not to kid yourself about what the potential is.
- [10:54]
Podcast Co-host / AI Expert
Can't be dooming, can't be dooming. Especially not right now. And it's funny, today in our newsletter we actually covered it. We've been sleuthing the banking reports and one came out of Morgan Stanley yesterday where they're citing these CapEx numbers and they're warning, they're saying, has AI made the US economy inelastic hyperscaler. CapEx estimates nearly doubled to 805 billion for 2026. Headed towards 1.1 trillion in 2027. US GDP has been revised up to
- [11:20]
Marty Bent
plus 2.3% S&P earnings growth revised up plus 23%.
- [11:25]
Podcast Co-host / AI Expert
Their thesis is that Google, Microsoft Met and Amazon aren't cutting capex in response to higher rates because AI spending is
- [11:30]
Marty Bent
too strategic, too essential or too well
- [11:33]
Podcast Co-host / AI Expert
funded to care if the biggest spenders in the economy are rate insensitive. The Fed's transmission mechanism is weaker than at any point in history. So they're making a, a comment on this capex spending as juxtaposed to high rates and what the Fed may want to do moving forward. I think to your point, what people haven't really groked is the ROI on these capex investments, particularly if you're, you own the compute and the energy infrastructure is so high it's hard to pass up.
- [12:02]
John Tinsman
Yeah, I mean, I think there's two things to think there. One, like, if the Fed raises rates 1 or 2% and your ROI is 100% or actually like an XAI case, like 1000%, do you even care? And the answer is of course not. The second thing is you have to remember all these hyperscalers were sitting on more cash together than the US treasury had. So they were sitting on huge amounts of cash. And somehow we're supposed to be sad that they're spending it and they're spending it with the most absurd ROI we've ever heard of. So somehow some people want you to be bearish about that. Oh my gosh, look at, they're spending their cash that they had hundreds of billions sitting on cash on hand. And we should be sad that they're building stuff with it. And then like, you know what they're doing, right? Like you build compute, but then you're leasing it out to customers in like Europe and you're leasing it out to customers from Africa or the Middle East. So like our compute is really funding and training the whole rest of the world. So we're not talking about like serving 300 million. Our compute is serving the whole 7 billion people of the world. And so the scale of this is not like domestic, the scale of this is international. And the ROIs are great. And they're not, in a lot of cases, they're not borrowing money to do it. So they are. Some of them are like, obviously Oracle is, you know, people like that, but like, but like a lot of them are using it with their own cash on hand or funding it with their current revenues. Right? Because like if Microsoft has, you know, a 50% profit margin, that means that they can roll 50% of the profits into building data centers. Right. So, like, it's that I do agree that that spending is not going to slow down, and the Fed doesn't really have any control over that. And by the way, that's a good thing because what we're doing is we're bringing in profits from the whole world to the US where we're winning the air race. And our shareholders, you know, our people in, like, my neighborhood in Iowa, like, everybody's flourishing from it, right? The stock markets at Rockyard Highs. And it's something to celebrate. And you see, like, people on, like, Elizabeth Warren, like I said, she tweeted, like, we need to tax these people and stuff. Like, they're mad that they're doing well. Like, how can you be mad about that? Like, we all want to win as America, and that's what we're doing. That's what it looks like we're doing. And I'm super excited. I think it's one of the most exciting times to be investing.
- [14:18]
Podcast Co-host / AI Expert
Yeah. And to this point, too, what are the barriers to entry to this compute leasing market? Is it the constraints of the energy grid and access to power and power infrastructure? Like, how long can these ROIs persist? Is it because of the supply of the infrastructure is still constrained?
- [14:39]
John Tinsman
Well, we have a lot of natural gas in the U.S. and so, like, in Iowa, what they do, we have natural gas pipelines that run up from, like, the shale drillers. And what in Iowa, what they do is they build their own generators onto the data centers, and then they try to get, like, wind energy, too, and things like that. But, like, generally, they're building, they're bringing their own power. So is it a concern if we use more natural gas when we have plenty of it and we're exporting it to the rest of the world? Like, I don't think so, because it's pretty stupid to put natural gas on a natural gas tanker and send it to Europe to power a data center over there and raise the cost of natural gas, like, 20 bucks. You know what I mean? Like, how dumb is that? Like, so expensive to ship it. Why don't we just do the compute here? Save the $20, you know, a cubic whatever of natural gas. Like, it's. Everything's more efficient about it and. And do the compute closest to where the energy is, you know? So I think there's two things you need. Land and you need. But the craziest thing is you've got places like California that are just Full of empty deserts. Like they won't let them build data centers there, I don't know. So we're building them in Iowa, I guess. So Iowa farmland's a little more productive than California desert unfortunately, but that's the way things are. But yeah, I mean it's good for everybody involved and it's going to be really good I think for shareholders when we start to see the ROI roll in from the data. I mean we've hardly seen any of these data centers come online. Elon Musk was like one of the first one to do it because he could build them so fast. But like we're going to see in the next year, these come online and the revenues come in and that's going to be really exciting for shareholders.
- [16:12]
Podcast Co-host / AI Expert
Yeah, that Memphis build out, I was telling you before we hit record, I was been in the bitcoin mining industry for, for almost 10 years now and watching How They Did Colossus 1 by Daisy Chaining to gen sets and putting the, the battery powers the battery walls inside. He was acting like a bitcoin miner because a bitcoin mining. To your point, the, the whole name of the game is basically shortening the distance between the power production and the compute. And it seems like AI is adopting that quickly as well. And I mean to that point it looks like SpaceX is going to build another large data center, Colossus too. Looks like it may be a $17 billion outlay.
- [16:56]
John Tinsman
Yeah, for 2 gigawatts. So like if you can lease out 300 megawatts for 45 billion, how much can you lease out 8 times more compute for? Like if they only spend 17 billion, it sounds like at the current rate they could lease that out for over 100 billion. I'm sorry, they could lease that out for over. I was way low on that. But they could lease that out for over 300 billion if you do a 10x ROI on it. Like they're getting on whatever. I mean it's, it's a lot. And how is that going to be for SpaceX shareholders? The space X is going to go public in like two weeks. You know, they obviously can grow their Starlink division. I mean it provides so much value. I think starLink could easily 10x their revenues over the next 5 years and then what can they bring in from compute? And you know this is really smart. They have to build the compute leasing business before they take it to space because like you don't want to go to space with no customers. So like you build the customer base then you take it to space and it's so strategic, it's so smart. And the biggest question I have, like, I think I'm going to be pretty bullish on SpaceX when it iPodOS in two weeks. But the other question is what are the best ways to make money off of this, these rising compute like leasing profits. And is it, is it like the hyperscalers like Oracle and Google and Microsoft, or is it some of the smaller ones like Core Weave Iron and some of the bitcoin miners that are rotating to the leasing out their compute like, like Terra Wolf, you know, the tickers W U L F and Cipher. So I think that's pretty exciting. And it's hard to know for sure who are the winners. Can the bigger people like Elon Musk just do it faster and better or can people that are in like Texas and they have really friendly regulations down there and they own a lot of the land, can they scale a lot like the fastest? So I think a lot of this is going to be who can scale the fastest and get it done quickly and have that edge to bring in the revenue first. And I don't know what the future holds, but I do think it's, I do think it's going to be good for shareholders.
- [19:09]
Marty Bent
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- [19:10]
Sponsor Representative
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- [19:11]
Marty Bent
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Podcast Co-host / AI Expert
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Marty Bent
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Podcast Co-host / AI Expert
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- [21:19]
Podcast Co-host / AI Expert
well, I mean that begs another question too. Like how many winners could there be? I could see there being a lot of winners in this just because of the insatiable demand for tokens. It doesn't seem like to your point of. I forget which bank was saying it, but the growth in token usage just in the last year. And if you think about robotics and things that haven't even come to market at scale yet that are going to demand probably exponential amounts of compute compared to the nation agentic economy that exists now, you could see a ton of winners. And not only. And I think that begs another question I mentioned, I sit on the board of Cathedra. We're in the process of merging with a company called Sphere 3D but we operate on a lower scale like 20 to 25 to 50 megawatts.
- [22:04]
John Tinsman
I hope you have stock based compensation.
- [22:06]
Podcast Co-host / AI Expert
Excuse me?
- [22:07]
John Tinsman
I said I hope you have stock based compensation.
- [22:10]
Podcast Co-host / AI Expert
Well That's, I mean, some stock options in case it spikes going back to, I mean, how many winners could there be? Could you see a scenario where there's a ton of winners?
- [22:21]
John Tinsman
Oh, of course, I think that's where we already are. So we've already seen a ton of winners in the semiconductors because first they have to order the stuff, right? So we've seen all this like we've seen Sandisk and Micron. I mean Micron was up like 20% the other day, like so many back to back, 5, 10% days. It's crazy. And I think the thing is when you have like a 200% ROI and you really want the stuff because you want to get this data center built right now, how much pricing power does it give the semiconductors? And I think they're figuring that out. Amd, you know, Nvidia, they can continue to raise their prices because these, these semiconductors are crucial to, to the compute, are generating such a high profit for the people that have the data center. So I see that, that, that profit, you know, continues and they're just the first ones to see it. So the question is like when we built out the, when we built out like the first ones we saw Nvidia like skyrocket, it went up, it's earning like 25x more than a couple of years ago. Its stock went up like thousands of percent because of course it's earning a lot more. And then we saw the memory chips go up and those went up thousands of percent like SanDisk and Micron. And now we've seen the CPU rally. So we've seen AMD and Intel really take off. And so the question is these are all people that are getting the orders to turn in to build the data centers and the products that they need to do them. But the question is when the data centers come online, I think we're going to see the data center winners. And here's the thing, like almost all the semiconductors are doing well. So I could see a scenario where anybody that's been investing in this space gets a really high ROI on their data center. So long as they're like, you know, they're able to, you know, do things like house quads like, like Elon Musk's Colossus 1 is. So I think it's, I think it's going to be great. It's just hard to know right now because you haven't really seen it in the earnings. So how much do you want to speculate to say I think this is going to happen versus how much do you want to be grounded in the earnings and wait for the results to come in first? But by that time, you know, if it turns out to be true, the stock will have probably already rallied quite a bit. And by the way, you've seen it in Cipher and Terra Wolf, they're up a lot. So there's people in on this trade already that are pushing these stocks. I mean, I'm pretty sure they're up like 500% in the last year. So there's other people that are, you know, that are moving before us, I think, on this one. Yeah.
- [24:41]
Podcast Co-host / AI Expert
And to that point, when, when do you think it'll. The we'll know for sure that, that this is happening. Like, you don't want to wait for those, those earning reports. Is this Q3, Q4 this year, Q1 next year? When do you think all these numbers will hit?
- [24:55]
John Tinsman
Well, I think like a month ago, people, people in the industry started to talk about it. And one of the people that posted it was like, David Sachs, and he's like, hey, guys like you can build a $50 billion data center and lease it out for 30 billion a year. And then we just learned with what Elon Musk did that his numbers were way low, way low. You can build a 30, $50 billion data center and maybe lease it out for 150 billion a year. So he was off by a magnitude of 5. And that's what's happened. What we've seen in memory chip stocks. And the analysts are just like, oh, they'll earn a little bit more next quarter. And then they go and they grow their revenue 100% quarter over quarter and just blow away everybody. And so I think it's hard. I think the thing is the market's used to valuing growth that's like one like 20%, 30% revenue growth, like year over year. Nobody knows how to value things that could grow by 25x earnings. And nobody is that bullish. Nobody's like, Cypher is going to be earning 25x more next year. Oracle is going to be earning 30x more next year. So nobody really knows how to do that. And so I think the market frequently, especially in tech, especially when people can make at low marginal costs. So especially when you can make additional sales at 100% profit margins, nobody really knows how to value that. And when you think about the history of companies that have done that, like Google and Microsoft and Amazon and Nivisa, they've all crushed the s and P500 by enormous amounts. And so now we kind of have this next stage of these companies that can sell this compute at very high profit margins is what it seems. And, and yeah, do you want to be a first mover or do you want to wait six months to see it roll into the earnings and to be a little less speculative? So I think it's probably, you know, for me it probably makes some sense to do a little bit of both, you know, go in, but don't, but, but be a little cautious and be ready to double down, you know, when the earnings come in.
- [26:46]
Podcast Co-host / AI Expert
What, what would slow this down? I mean, we've seen the headlines in the last week. Uber has run through their, their compute budget for the year. They ran through it, I believe mid April. You have many other companies saying, hey, the use of these models isn't helping us add bottom line revenue to the business. What could slow this down? Is it the inability for companies to actually integrate these models in a way that makes them more productive, more efficient, most importantly, more profitable? What could pop a hole in this growth story right now?
- [27:24]
John Tinsman
So I think the interesting thing is anybody buying these tokens in the first place has probably already really done the math on it because you'd be pretty stupid to just buy tons of them and make it more expensive than human labor. Okay, so like imagine this. You're sitting in a data call center and your job is literally just to answer the phone and take customer service calls. You know, so they're paying everybody 25 bucks an hour. You have thousands of employees sitting in this call center. Like you could have a chatbot that's like, oh, okay, like we've seen that you, you know, got a fee on this credit card or this card, this payment was fraudulent. Like, we're going to go ahead and reverse it and send you a new card. Like, you don't actually need a human to do most of this. Like probably like 90% of the stuff. So almost every customer service call you take today, that's basically done by a token. That's like a tokenized chat box, chat. So like with your credit cards, with your banks, pretty much all that they're paying, they're buying tokens to fund what they're doing to fund these agentic AI agents that are carrying out tasks that humans used to do. So like, first of all, I don't think that they're doing that because the ROI is bad. And then the second thing is in software development and like Uber and Salesforce, they're buying huge amounts of tokens too, because they can write 10 times the amount of code for 1, 10 the cost. And so they're doing it because the ROI is really good on it, and they're the first movers. So you have to remember when, like, somebody in New York City or Silicon Valley is doing this, the rest of the country and the rest of the world isn't even close to being where they are and adopting it. So, like, you see, like, the first 1% moving. You don't see the other 99% yet. And that's why the token demand is, like, projected to just explode. Like, when I'm sitting here in Iowa, I don't know anybody that uses them, you know, but I talked to my friends that I went to, like, Northwestern and University of Oxford with, and they're, you know, they're, you know, work for some of the tech companies and stuff, and they're all like, yeah, we use this all the time, every day. And so I think we've seen the early adopters move, but we haven't seen the rest of the 99% of the world. And the rest of the world and the, and the rest of the people in Iowa and everything, they're going to be buying those tokens from these companies. And the tokens are going to be made in the United States, they're not going to be made in Europe, or natural gas is 50 times higher. They're not going to be made in Africa, they're not going to be made in China. So, like, we really are the answer to the whole world here. And you cannot, like, do you remember, like, Google, like, $100 billion market cap, and people are like, oh, it's so big, it can't grow anymore. You know what I mean? And they just forget that Google can go and sell their AdWords, the entire rest of the world, 100% profit margins. Like, nobody can even fathom that the demand will actually be 50 times higher. 100% profit margin. Same thing with Microsoft. Like, and so they just underestimate it. And then the stock goes up, what, 10,000%? Like, so I think we're probably in the same scenario here. I just think it's like, you know, I think it's just the biggest threat would probably be that Anthropic tries to build their own data centers. But I still think that they're so far behind the ball and there's. The demand is so big that they can't possibly do that. So. And they don't even have the capital to do it. So I'm not sure, I'm not sure what what could deflate this? But right now I'm not thinking not much. I'm thinking that there's not much that could deflate this at the moment. Yeah, I mean, there's political opposition against it, but isn't that, like, even better, you know, like, if the rest of the world doesn't want to build them because there's political opposition and the red states will, you know, like, isn't that better that we have, like, the place where we can break the red tape and put them up faster than anybody else anywhere in the world? So, like, that. That just gives us a bigger moat and it makes our. It makes investing in them safer.
- [31:09]
Marty Bent
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- [31:54]
Podcast Co-host / AI Expert
Not looking back.
- [31:55]
Marty Bent
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- [33:13]
Podcast Co-host / AI Expert
Yeah, I mean two points out there. I think when it comes to implementation of these AI workflows or agentic workflows, it really comes down to being able to implement it. I think Jack Dorsey and Block are a great example. I've watched their implementation of AI into their company over the last year and I think they're doing it the right way. And I think Jack's interview with the Sequoia partners a couple of months ago really highlighted how they're viewing it. And I think the approach to how you actually implement these AI systems is very important. There's going to be a ton of companies who don't think strategically about those implementation details that that messed it up and they wound up wasting a bunch of money. And then on the other hand, like I think for small teams, like my humble media company that we're running here, we've been running an open claw agent since January and no way it is expanded our ability to do what we do here by orders of magnitude. And I think for small teams it's going to be particularly powerful. And then when you think about the profit margins that can be gained by small teams that implement this from zero, the profitability of the smaller team is going to way exceed the larger companies that have a ton of bloat. And I think that's going to be actually an interesting theme to watch moving forward is the incumbent behemoths that were using headcount as a KPI back in the easy money days of the 2010s and early 2020s trying to unwind the mistake of that KPI.
- [34:48]
John Tinsman
Yeah, I mean how amazing is it that like Elon Musk went in and like cut 80% to X and it worked just the same, you know what I mean? And I do think There's a thing of like when people throw crazy money out of at things there's like kind of infamous for getting ripped off. And so what companies are run so well that they can build on the leanest and I think they'll have a huge competitive advantage right. To build them the fastest and the leanest. So you probably honestly it sounds like maybe you know more about some of these like data center place and it's amazing that you're in this space on the board of a company so you're going to know better than anybody. But it sounds like you don't want to scale back your quad bot and it also sound or your openclaw and it sounds like you also like so you know you would maybe use more but also I would say you're a first mover because you're like a high tech guy. So like how soon until everybody else figures out what you're doing and how great it is?
- [35:41]
Podcast Co-host / AI Expert
Yeah, and I mean that's the thing, it's not right now. The other thing you have to consider too is these models are progressing so quickly. So you'll build something one week and then a new model will be released. It's like okay, I have to take this out, put this in and rejigger things a certain way and there it's a lot of learning on the go. And so to your point about like the early movers and not trying to blow smoke up my own ass, but it is like an evolved process and if you're not staying up to date with the latest developments in the space, it's going to be hard to keep up. But there will be a point I think where the return on the model, the model progression plateaus, maybe doesn't plateau but it becomes more stable of a rise in efficiency gains and I guess the IQ of the models themselves that you'll be able to create out of the box solutions like setting up an open call in January was extremely hard. It's easier today. I imagine a year from now there will be point and click out of the box sort of agentic flows for companies that are very easy to set up.
- [36:55]
John Tinsman
Yeah, I mean and if Demand grows by 24x or ADX we don't have anywhere near amount of computer even what we're building today, it's nowhere close. So it honestly seems like it could be like an 8 or 10 year build out to catch up which means we'd be in the very early, I mean like in the first year or two of like a decade long build out. So it could be one of the longest capex cycles that's ever been in the history of the world. I mean, it can really only be compared to when they needed to build railroads across the whole world because they realized that was better than taking stuff on a donkey.
- [37:33]
Podcast Co-host / AI Expert
Yeah, well, I think many people are comparing it to the Internet and the broadband build out too. And to your earlier comments about people worrying about this being a bubble and it being too hard to believe and they're pointing at the dot com bubble. I think that's one thing that many people are missing, is that the demand for tokens is there. The dot com bubble, the infrastructure was built out and we didn't have the means to really lean into the digital economy that exists today in the 90s. And it didn't. You weren't able to monetize websites the way you are today. There was a ton of software development kit infrastructure and payments infrastructure and logistics infrastructure that needed to be built out and Amazon and Google and many others did that in the late 90s, early 2000s and then that caught up. But I think with AI it's different because the models, they work, if you know how to use them, they work well for you and you want to use them more. But the tokens simply aren't there yet. The ability to ping the models as much as you want isn't there. Whereas in the broadband era, the fiber was there, it was laid, but the supply of people bringing businesses that actually worked on the Internet wasn't there.
- [38:47]
John Tinsman
Yeah, and I think the thing is it's kind of like the railroad Wells Fargo started as a carriage delivery, like a wagon delivery service. And so like they'd go down the Oregon Trail from whatever in New York all the way down to Oregon and it's like the railroad basically put that out of business overnight and they became a bank. But it's like if you can do something for 1 1000, the cost, you know, and software has always been limited by extremely expensive developers sitting in seats. If you can like lower things by 1/1,000th of a cost, do you really ever go back to the way things were do? Is there really any slowing down the adoption because its savings are so big it only accelerates and, and I think that's probably where we sit today.
- [39:30]
Podcast Co-host / AI Expert
Yeah. Outside of compute infrastructure specifically, again bringing back to energy, because that's one thing I've identified is maybe the biggest constraint right now is energy infrastructure. I know you talked about natural gas pipelines, but I think we really need to expand generation and great interconnectivity by orders of magnitude in the next decade as well. And I think that's another part of the market that provides an incredible opportunity.
- [39:58]
John Tinsman
And it's just, well, the data centers aren't. So I think if the data centers are bringing their own energy and they barely connect to the grid, then one, is that true? And two, and two, there's people like Bloom Energy making, obviously they make electric generators, right? So that you can bring your own power to a data center. But like the question to that is, is that like that's really expensive to build each data center so. Or to build each generator. I mean, so the question is like that's not low marginal cost, right? Like you can make an additional memory chip for not a lot of cost, but it's really expensive to build a big generator. So the question is, is the, is the earnings growth going to be the highest there? And like producing electricity is always going to have a high marginal cost because it costs a lot to make. Whether it's a natural gas or wind turbines or solar, it actually costs something. And each additional unit you make is not free. It really has a cost associated with it. So I don't think the ROI is going to be the highest in that sector for that reason. Doesn't mean it won't be good. Doesn't mean it won't be good. I think that you can make more money in semiconductors or something, in my opinion. I think the other thing that I think has really been overlooked is software in this. And I know the software, these are some of the people buying the tokens. And so there's some increased costs. There's. Because they maybe necessarily haven't scaled back their workforce. So they've like kept all the high costs, but, but they've also spent all the money on the tokens. So they were like kind of double slamming themselves. But, but software has always been limited by the number of subscribers sitting in a seat, right? So manpower, manpower is expensive. So here's the thing, like you open your open claw and you're, it's doing, you know, advertising work for you and it's working in Adobe and maybe you have one doing sales outreach for you and it's working in Salesforce. Software is no longer limited by the number of people you have. So now you could have one person and they could have 20 subscriptions, right? Like you could have the same thing drawing CAD drawings in Autodesk, right? Like, and so now the question is, does demand get totally unleashed? It was always limited by expensive manpower and now software demand is totally unleashed because AI agents need the tools to get the work done. And so I think that could be like really interesting in that, in that the demand is actually going to be higher. Additional sales come at 100 profit margins and you have you know, 5x demand or something as the tools just become, you know, because the most expensive thing to Adobe was never, was never that a subscription cost of 300 bucks a year, a thousand, it was the person that was, you were paying to do the work in it. You know what I mean? They might cost a hundred thousand. So if you're lowering the cost to use these by or magnitude of 100, doesn't demand go up? And because the additional sales come at high profit margins, doesn't earnings explode? And so I'm bullish on software. I hold it in aotg, I have some of the top holdings or besides semiconductors and besides some of this AI infrastructure are names like Applovin and Microsoft and Toast. And so I think it could really be unleashed. And I think that the potential there like should not be understated, you know, and there's, there's downside of course that some of them are losers and always keep that in mind when you invest. But, but when everybody focuses on the downside and nobody focuses on the upside and, and the ratios are like 15 and 20 and they're really, they're really reasonably valued with, with very robust earnings growth still today. I think that sets up to some of the best trades and you saw that a year ago with memory, everybody was bearish on it and the PE ratios were really low and the growth was good. I think when you have those things and you. Sorry, I hit my mic. When you combine those all together, those are the makings of the best trades. And so we'll see what the future holds. Anything can happen. But I am excited for it.
- [44:04]
Podcast Co-host / AI Expert
Yeah, I think we saw an example of this a couple of weeks ago when Figma announced their Q1 earnings and they surprised massively to the upside. I think many people were thinking Figma UI designer tool was going to get blown out by people just building it themselves. But they actually implemented some AI functionality and I think to your point, what they experienced is people actually using them more because they had these tools to go in there and leverage their software tools.
- [44:34]
John Tinsman
Yeah, well, here's the most interesting thing is a lot of these companies have like a 5, 10% profit margin. So imagine you're a company like Spotify and you can look at the earnings today and their year over year operating expenses are Falling. Meanwhile, they're still growing the revenues at 10%. So what, what that tells me is that their profit margin will go from 5% to all the, all the additional, you know, 10% sales go straight to profit. So now their profit margin will be 15%. Well, that's 200% year over year gap earnings per share growth for a company that had a low PE ratio. So I mean, usually when they have low PE ratios, they shouldn't get any lower. You know, like, usually they should keep up with earnings growth. And so like making 200% in a year is big deal, like in any stock. Right. You know that. And so how many companies today like Applovin and Robinhood are implementing, I mean, Robinhood's financial services? But what are they really? Like, they're really proprietary software to implement brokerage services. So like how many of these companies are going to keep their expenses constant and grow their revenues not just 10%, but maybe 50%. And like applovin's obviously growing at like 60%. And that's really, you know, that really the upside of that potential I don't think can be overstated.
- [45:46]
Podcast Co-host / AI Expert
Yeah. So you're not a doomer at this. You don't think AI leads to massive job disruption that completely throws the economy into a tizzy and destroys the demand for tokens that existed in the first place. Do you think this is going to be an accelerant for human productivity and creativity?
- [46:05]
John Tinsman
Yeah, yeah. I mean, it brings in a lot of wealth. Like, I just look at what it's doing in Iowa and it seems like people are doing better than ever. And so, I mean, I think in the 1900, they were building the Panama Canal and they built, they came out with a steam shovel. And there was actually a political debate at the time with like the presidents and stuff. Should we bring this steam shovel to Panama Canal because a bunch of people lose their jobs or should we just keep paying all these people to die of malaria in Panama and, and, and like keep doing it because we want them to be employed? And is that not crazy that they were considering digging the Panama Canal with the shovel because they didn't want to fire people? Like, they didn't want to reduce the workforce and have a cause like a political firestorm. And then they did do the steam shovel and guess what? Everybody went and got better jobs and provided more value to the economy. And so, like, I think that's where we are today. Like somebody that's just doing payroll right now or something, or they're doing accounts payable and it can really be automated. They can go get a better job doing something else and they'll add more to the GDP than being able to automate that task. So, like, when you add more to the gdp, you increase the output. Like the country gets wealthier and as a whole, everybody gets wealthier together. So I'm really bullish on it. I'm really bullish because nobody's just going to go and sit at their house. They're going to go and do something like, like you and I would go make a company. You know what I mean? Like, so, like, like people go do that. They're not just going to sit around in general, I think, the majority of people. And then they'll provide value and it'll. You'll see a GDP explosion, I think, and you'll see some of the best growth maybe that's ever been seen.
- [47:36]
Podcast Co-host / AI Expert
Is there anything on this AI topic that we haven't covered yet that's top of mind that you think the audience
- [47:43]
John Tinsman
should be aware of? We've been, we've been whacking all the moles on this one. So I'm trying to think, but you got me in the corner now. I'm trying to make sure I don't leave anything out. Yeah, you can't think of anything, man.
- [47:59]
Podcast Co-host / AI Expert
Well, on that note, moving to fertilizer, since you, since you're close to the fertilizer industry as well, I think there's been a lot of headlines about obviously the straight of Hermes messing up the supply chain for sulfur and helium, which are key inputs to fertilizer. What are you seeing on that end?
- [48:20]
John Tinsman
Yeah, it's not great. So now, now we're taking a little worse of a step. But I think there's, there's three things to keep in mind. I won't hit on helium, but so you've got nitrogen. The way you make nitrogen is you use a ton of natural gas to superheat the air and cause a catalyst and you take the nitrogen out of the air. So it's like naturally occurring. But you take nitrogen out of the air, the atmosphere is 70% nitrogen, and then you turn it into like ammonia or uae, and that's what you use to put on corn and things like that. So, so 30% of the natural gas flows out of Qatar and it goes to places like India and China and Europe. And so they can't get their natural gas. So all of their nitrogen plants shut down. So they're not like making very much nitrogen over there. So that's a big problem because they made like the majority of the world's supply. So the US Actually is a net importer. We have a lot of plants, but we actually bring in more than we export. So now the US Producers are sitting there making like they have. You know, they're obviously using. Buying natural gas at like 3 bucks. And they're making it, and everybody else is like, you know, getting slammed on it in the rest of the world. So the US People like CF Industries and UAE and stock, they're all doing really, really well, like great years. Everything but it there. But it's because there's such a tightness and they can export it to the rest of the world. That raises the prices here in the US that's bad for farmer because they have higher input costs. So I think that, like, That's. That's number one. Nitrogen prices are up like 100%. So that's tough. That stuff. And corn's not up 100%, so that's tough for the farmer. The second thing is that sulfur. So sulfur you actually put on corn, like, and that price is going up, of course, so. So that's bad. But the second thing is you, like, try catalyze sulfur into sulfuric acid, and then you use sulfuric acid to melt phosphate ore. So when you're mining phosphate, you melt the ore, and that takes. That makes a phosphoric ac. Well, phosphoric acid is the base of phosphate fertilizers. And so now the sulfur prices are so high that they can't make phosphate profitably, so they're shutting down. Like, Mosaic is a publicly listed company. They're shutting down production in their phosphate plants because they can't get enough sulfuric acid. And so phosphate prices are now going through the roof. And sulfur prices, which is another key ingredient. And so you've got sulfur, phosphate, and nitrogen that are all getting. Are spiking really high in prices. At the same time, you don't see corn really necessarily reflecting that rally yet. So it's creating really tough farm economics. And what's really interesting for us is that our customers. So what we do at Twin State Inc. Is started by my grandfather, is we buy nitrogen, we buy phosphate, and we buy potash and sulfur and zinc from people that make it. And we turn it into, like, when you fertilize your yard, you get a blended fertilizer, right? So. So you get something that has all five of those ingredients and more, and then you put it on your yard. Well, we're the people that blend it all together. So we're so we have to pay the higher input costs also. It's not like we're like, like, oh my gosh, prices are higher. We're making more like. It's exactly the opposite. Prices are higher and our, our quantity being sold is dropping because people are having to cut back because the prices are so expensive. So, So I mean, it's, it's tough there. It's hard on the farmer. What we really need to see is a rally in corn and then, and then the economics will make sense again. And I think that's going to happen. It's just that there's. It just takes time to have the commodities market react. These things are cyclical, but sometimes it takes a year to see reactions as you draw down stockpiles, things like that. So we'll see what happens. But not, not the best year for ag, I'd say.
- [52:00]
Podcast Co-host / AI Expert
Have you experienced an environment like this before as your family?
- [52:06]
John Tinsman
The. The. Not me, my. The farm. The farm Crisis in the 80s was bad and we're not near that, but that's when a lot of people are going bankrupt. But I would say that usually all of our customers use John Deere financing, which is, you know, kind of thought of as being very easy to get because John Deere will like, lend. A, you know, they'll lend and they'll finance. They actually make more money financing, I think, from John Deere than they do from their tractors. Nobody seems to know that. But, but this year John Deere is saying like, oh, you guys are so stretched. We won't lend to you. So they're going to like non traditional lenders at much, much higher interest rates. So that's like, I mean, we might be seeing 40% of our, our customers that we sell to doing that. So that's not good to see. That means that like, people are distressed and the assets are. So, you know, the liabilities are becoming more than the assets. So people won't. Traditional lenders are no longer lending to them. And that's usually what you see before you see bankruptcies because after that, then obviously they can't pay the interest rate and they go bankrupt. So, like, I hope we don't get there. I hope we see corn go up and the incomes go up and then they, everybody gets out of the tough spot. But there are, you know, you know, you could see makings of a crisis here that could be similar.
- [53:17]
Podcast Co-host / AI Expert
Yeah, very interesting times. You got the incredible optimism and growth potential with AI and then some supply chain disruptions messing up, messing up the food supply. But I Think learn anything from 2020, 2021 specifically, is the supply chain disruptions can be fixed in time, maybe.
- [53:41]
John Tinsman
And part of the problem is that land prices just had gotten so high. Right. So people kept buying higher and higher land and you need a higher profit just to cover the cost of the land, and then they rent it out for more. And so some of it is just that the asset prices had been so high. Kind of like how you could see, like, you know, home prices getting too high in an area, and then they kind of stall out for a while and fall. And, you know, I think there's some of that going on too, which is that this was like farming had been so safe, the land had been such a good investment that it was so reliable that just more momentum money just kept pouring into it and it overpriced the land and that exacerbated, you know, a tough time because rents are high and, you know, interest that you're paying on overpriced land is high and all that stuff.
- [54:27]
Podcast Co-host / AI Expert
Yeah. Maybe the agents can help us figure out a solution to these problems, you know.
- [54:33]
John Tinsman
That's good. That's good. I hadn't thought about that one yet.
- [54:36]
Podcast Co-host / AI Expert
Awesome. Well, John, again, thank you for hopping on and short notice. This was a fascinating, high dense, highly dense conversation. And I. I have a lot of people on here who are very, very skeptical of the AI thing, but just using it myself over the last couple of years, but with the agents over the last five months, it's become pretty obvious to me that there's a there, there. It's real. If you know how to use, can make you a better operator. And it's just going to be. There's just going to be a lag period before the broader market wakes up, so that begins implementing this. And if that happens, the demand for these tokens is going exponential. We're at the cusp of what we're going to see in the next decade.
- [55:23]
John Tinsman
Yeah. Well, you've got a great show. You provide enormous value to your viewers through your insights. So I'm just happy to be a part of it. And thanks for having me on.
- [55:31]
Podcast Co-host / AI Expert
All right, we'll link to John's X account, what he's doing at AOG in the show notes, and hopefully we can do this again soon.
- [55:40]
John Tinsman
Yeah. So thank you. And yeah, check out AOTG ETF if you guys are interested.
- [55:45]
Podcast Co-host / AI Expert
Awesome. Peace and love, freaks.
- [55:47]
Marty Bent
Okay, thank you for listening to this episode of tftc. If you've made it this far, I imagine you got some value out of the episode. If so, please share it far and wide with your friends and family. We're looking to get the word out there. Also, wherever you're listening, whether that's YouTube, Apple, Spotify, make sure you like and subscribe to the show. And if you can, leave a rating on the podcasting platforms, that goes a long way. Last but not least, if you want to get these episodes a day early and ad free, make sure you download the Fountain podcasting app. You can go to Fountain FM to find that $5 a month get you every episode a day early ad free helps. The show gives you incredible value, so please consider subscribing via Fountain as well. Thank you for your time and until next time.