I think what the market’s missing is they’re not focusing on something called right’s law. Rights law is a relative of Moore’s law. Moore’s law is a function of time. Rights law is a function of units and it says for every cumulative doubling in the number of units produced costs decline at a consistent rate. These are massive deflationary trends evolving all at the same time. So, we’re going to see s-curves feeding s-curves and I think we’ll see it in space, especially innovation that solves problems. We had a lot of problems because the coronavirus innovation solves problems we have rewarded accordingly since then peak to the trough when we hit our trough thank goodness we’re past it down 75% why inflation and interest rates. So, there is this and it’s really interesting to be here at Walmart territory because I think we’re learning a lot from the retailers now. We’re talking about what we learned about inventory inventories.
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Yes, the fear of rising interest rates and inflation out of control has gripped the market and, of course, that’s the equity market. If you look at the fixed income market. It does not agree with this three-year sentence. I mean the 10-year treasury bond yield is three percent. That instrument should be one of the most responsive to inflation fears right so three percent which suggests GDP growth of three to four percent. During the next 10 years, it’s not being corroborated by the fixed income markets. I don’t think that we are in a period where we can’t extricate ourselves from this. In fact, the inventory stories are a very good example of why inflation has become a problem. The scrambling to bring more and more inventory to satisfy stay-at-home demand went into overdrive and I believe the narrative in the last year of inflation gave purchasing managers this idea that okay what’s the worst that could happen.
If I build inventories the worst that could happen is that I’m able to deliver inventory profits and sell at a higher price. Well, that’s not going to happen, that’s not going to happen. I think it is seeping into the investors’ minds by waiting a minute. Are we right on this inflation call? They felt so right because supply chain issues extended for such a long time then Russia invaded Ukraine, of course, and, of course, monetary and fiscal policy had been so stimulative but as I’ve said many times? We think the greatest greater risk by far is deflation. Deflation cyclically because I think this inventory issue highlights the cyclical reason. We’ve been saying we think inflation will unravel. The secular deflation story is very powerful. As EVS and autonomous mobility of all stripes start becoming a bigger base in the economy that deflationary pull is going to be aggregated because these are convergences between and among different technologies that are all on their own deflationary cost curves. Since OpenaI released dolly 2 found a foundation model in AI that service has gone from flat.
When do you think artificial general intelligence will occur? It’s been flat for the last two years but since those two models have come out the time that these forecasters expect to see art. Artificial general intelligence has shrunk from 30 to 50 years to 6 to 12 years, so it sounds impossible to think that GDP growth sort of that three three percent real terms and so forth is going to accelerate to 30 percent but if you look at the history over thousands of years. You will see that at one point in time GDP in the economy now. This is thousands moving hundreds of thousands. I wasn’t around then, who’s to say. We aren’t close. I just mentioned these s-curves feeding one another and the market’s not being set up for it, really looking to the past for an indication of where we’re going in the future is going to be a real blind side for some. Well, I think people have been saying that all along with Tesla because of SpaceX and I mean he is our renaissance man. But it has ramped up.
Quite a lot it has but as you scale a Tesla, they’ve got that manufacturing scaling under control now. The next challenge there and what he is. I think sticking around for that he doesn’t need to stick around for the EV side of it he needs to stick around for the autonomous side so he and Andre Karpathy together. Let’s bring it back to artificial intelligence. Why is that important? Why does he need to stick around because of Tesla and any cruise automation and WayMo. This is the biggest transportation opportunity out there. It is as I mentioned before, think about this 10 trillion dollars in revenue versus zero now by 2030. That ox ball case was your base case scenario. That’s our base case scenario. Nine to ten trillion dollars in revenues, so I don’t think we’ve seen a bigger opportunity for one. It’s not just one sector again there’s a convergence going on between and among technologies and sectors autonomous taxi networks are. They’re robotics, energy storage and artificial intelligence.
Tesla. What’s so fascinating is the retail investor interest and there’s a potential another stock split on the horizon. You just give your opinion on the Tesla sort of monumental gain the issue of stock split and then more people trying to have ownership of that stock well. I think there was a way before institutional and see. This is a perfect example of what’s gone wrong: many institutions couldn’t even think about putting Tesla in their portfolios until it got into an index. It got into an index when it was 500 billion dollars. Think about all of the alpha generations that institutions made left on the table but retail investors enjoyed. I think retail investors are feeling empowered; they know more about the future than institutions do. They know we’re doing the right work and so I think that’s why they were there early.
They will be early into everything we’re doing because they really love to learn and they’re a part of the future. They have one foot in the new world, they’re going to make it. They’re excited about it and they are willing to put up. I was shocked – how many people! It’s not just young people but come up to me and say: “We’re down 75 percent. They say ‘thank you’ and I’m saying what this would not happen. Of course, they enjoyed the big gains before that because they are long-term in their time horizon. They are long-term, they really believe we are on to something big. It’s not fair that we are blocking these young people who don’t have the income or asset thresholds because they’re not accredited. They don’t get access to innovation, so we’re trying to change that again to a venture capital fund in the public equity market.
This article is a transcription of a video made by Jamie Tree
Original video: https://youtu.be/0C986HwTWZ0