{"id":1508,"date":"2024-12-17T22:52:55","date_gmt":"2024-12-17T22:52:55","guid":{"rendered":"https:\/\/europaskolos.lt\/index.php\/2024\/12\/17\/transcript-tony-kim-blackrock-active-technology\/"},"modified":"2024-12-17T22:52:55","modified_gmt":"2024-12-17T22:52:55","slug":"transcript-tony-kim-blackrock-active-technology","status":"publish","type":"post","link":"https:\/\/europaskolos.lt\/index.php\/2024\/12\/17\/transcript-tony-kim-blackrock-active-technology\/","title":{"rendered":"Transcript: Tony Kim, Blackrock Active Technology"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p><iframe class=\"lazy lazy-hidden\" style=\"width: 100%; max-width: 660px; overflow: hidden; border-radius: 10px;\" data-lazy-type=\"iframe\" data-src=\"https:\/\/embed.podcasts.apple.com\/us\/podcast\/from-technology-in-focus-to-finance-with-tony-kim\/id730188152?i=1000680192949\" height=\"175\" frameborder=\"0\" sandbox=\"allow-forms allow-popups allow-same-origin allow-scripts allow-storage-access-by-user-activation allow-top-navigation-by-user-activation\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p><noscript><iframe style=\"width: 100%; max-width: 660px; overflow: hidden; border-radius: 10px;\" src=\"https:\/\/embed.podcasts.apple.com\/us\/podcast\/from-technology-in-focus-to-finance-with-tony-kim\/id730188152?i=1000680192949\" height=\"175\" frameborder=\"0\" sandbox=\"allow-forms allow-popups allow-same-origin allow-scripts allow-storage-access-by-user-activation allow-top-navigation-by-user-activation\" data-mce-fragment=\"1\"><\/iframe><\/noscript><\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>The transcript from this week\u2019s, <em>MiB: Tony Kim, Blackrock Active Technology<\/em>, is below.<\/p>\n<p>You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify,\u00a0YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.<\/p>\n<p style=\"text-align: center;\">~~~<\/p>\n<p>This is Masters in business with Barry Ritholtz on Bloomberg Radio.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: This week on the podcast, another extra special guest, Tony Kim, is managing director at BlackRock, where he heads the fundamental equity technology group helping to oversee all of the active technology investments BlackRock makes. In addition to being a portfolio manager and running a number of mutual funds and ETFs, he is just a world-class technology investor who understands the sector like few other people do. Not only has he put up a a very impressive track record, his entire approach to the ecosystem of technology covering everything from robotics to ai, to software to semiconductors is, is really quite fascinating. If you\u2019re at all interested in technology, in ai, in the process of thinking about tech investing, then you\u2019re gonna find this conversation to be absolutely fascinating. With no further ado my discussion with BlackRocks Tony Kim.<\/p>\n<p><strong>Tony Kim<\/strong>: Thank you, Barry. It\u2019s a pleasure to be here.<\/p>\n<p><strong>Barry Ritholtz<\/strong>: Pleasure to have you. So let\u2019s start out with your background. Bachelor\u2019s in industrial engineering from University of Illinois, and then an MBA from Columbia. What were the career plans?<\/p>\n<p><strong>Tony Kim<\/strong>: Career plans? Yeah. First of all, thanks for having me, you, your, your show title, masters in Business. I, I am no Master in business. Well,<\/p>\n<p><strong>Barry Ritholtz<\/strong>:\u00a0 You have an MBA, so you automatically qualify. That\u2019s a master\u2019s, right? Yeah,<\/p>\n<p><strong>Tony Kim<\/strong>: Yeah, that\u2019s true. That\u2019s true. Yeah. The origins of the career. You know, I, I grew up in the Midwest. It\u2019s the first phase of my life. And growing up in the eighties in, in Illinois, I, I, you know, as a, I\u2019m from Korea actually, but, so the natural, I was a STEM kid and, and that, that kind of propelled me into the engineering side, but I always had other interests outside of that. But the reason I went to Champaign, we were all from state of Illinois, and my siblings and I all went to school in the state of Illinois, and, and I gravitated initially to engineering, and that\u2019s kind of the, that, that got into that. And then eventually I ended up in New York and then transitioned into finance. We we\u2019re<\/p>\n<p>00:02:37 (Speaker Changed) Gonna talk about that transition in a minute. Yeah. But before we get there, you, you really begin your career as an engineer at Rockwell Automation. Yeah. What did you do there?<\/p>\n<p>00:02:46 (Speaker Changed) This is first job, right? First job, first real job out outta school. It really, it was the first entree into a company, not only a company a, this was a automation company that\u2019s often known for, works with many industries, but helping automate, we were help, I was working on projects to automate manufacturing. They had these things called PLCs, which are basically industrial computers with sensors, with drives, drive systems, motor control, robotics, and all of these things. And then you package them together, and you work with many different kinds of manufacturing companies in the early days of automating manufacturing processes across many industries. So that was my first entree in seeing the diversity of, of the manufacturing base in this country. I was particularly, I was in, I was working in, on the East coast and, you know, any, everything from like pharmaceutical to automotive to, to what a, what a distribution network looked like. What, what tier one, tier two kind of systems integrators were with the technology of automating manufacturing. And so we working on different projects and see the, across a lot of industries, but I realized I, I didn\u2019t want to, you know, I had other, I had other ambitions, and this is what led me to going to graduate school.<\/p>\n<p>00:04:16 (Speaker Changed) So, so let, let\u2019s talk about some of those other ambitions. You end up doing investment banking in New York in the mid nineties. Yes. What was the transition from being an engineer slash operator to an investor? What was that like?<\/p>\n<p>00:04:32 (Speaker Changed) Well, when I was at, when I went to Columbia, you know, I did the engineer, I worked in an engineering company, and I thought I wanted something, a higher level, more strategic in nature. And I actually thought I wanted to, I wanted to try to get into consulting. That\u2019s the classical, right? Classical role for A MBA. None of the consultants would wanted to hire me, but the, somehow the investment banking side found me, or I found them. And it was an engineering, here\u2019s a guy from engineering with engineering background. And, you know, at the time, those was the early days of pre pre.com, and it was, it was a new emerging industry. And so I think they saw that linkage between some technical expertise with finance, maybe working that with that industry. So that was, but the, but the, the finance is what, what pulled me in on the investment banking more so than the consulting because of that angle, I think.<\/p>\n<p>00:05:37 (Speaker Changed) And your timing was perfect, the 1990s, timing was great. Time to be doing iBanking in technology. Tell us about some of the transactions you saw late nineties, early two thousands. What sort of deals were you working on?<\/p>\n<p>00:05:51 (Speaker Changed) Yeah, I just, that, that transition, I, you know, I was originally hired by SG, or which is a British investment bank, and it got acquired. And then after the<\/p>\n<p>00:06:00 (Speaker Changed) War, that became Warburg Pincus, is that right?<\/p>\n<p>00:06:02 (Speaker Changed) That became SBC Warburg, and then UBS bought SBC and then UBS Warburg, and then the Warburg name went away. But I was there right at the time when Warburg was acquired. And, and then that transition, I joined Merrill Lynch, and then Merrill Lynch said, go west young man.<\/p>\n<p>00:06:23 (Speaker Changed) Right?<\/p>\n<p>00:06:23 (Speaker Changed) Okay. So I,<\/p>\n<p>00:06:25 (Speaker Changed) I remember Merrill Lynch during the 1990s was absolutely a powerhouse, or at least became a powerhouse towards the, the back half of that decade.<\/p>\n<p>00:06:34 (Speaker Changed) Yeah, it, yeah, yeah, yeah. So it was very much a new thing for them in, in the West Coast. And so I, I went, and I still recall to this day, there were several of us that were, were the origins of the MM and a group on the West Coast for Merrill Lynch. In fact, three of those people, 20 some years later, were back at or joined at BlackRock. And I can tell you the story of that.<\/p>\n<p>00:07:03 (Speaker Changed) Sure. Let\u2019s hear<\/p>\n<p>00:07:03 (Speaker Changed) That. Oh, okay. Yeah, there were, there were, there were three of us that were VPs and directors at the m and a group. It was, feel,<\/p>\n<p>00:07:11 (Speaker Changed) Feel free to drop names.<\/p>\n<p>00:07:13 (Speaker Changed) A guy named Drag Vic, who is now Vice Chairman of JP Morgan, runs the tech m and a. This guy Michael Lightner, and then myself, and then we work for this guy named Rob Stewart. And then Mark Schafer above led the group, but Mike Michael at 10 Bone BlackRock later acquired them. And he was one of the partners at 10 Bone. And then recently BlackRock bought GIP, and then Rob is one of the partners at GIP. So three of the four of us, Rob, myself, Michael, all ended up at BlackRock in some famous,<\/p>\n<p>00:07:49 (Speaker Changed) Let\u2019s get the band back together, get the band,<\/p>\n<p>00:07:51 (Speaker Changed) See if we can Mad Drago did not. Drago still is at JP Morgan right now. So, so, but those were the original days. And then, you know, the transactions, you know, this was pre.com and you know, the internet was just getting going.<\/p>\n<p>00:08:05 (Speaker Changed) Are you talking early nineties or<\/p>\n<p>00:08:08 (Speaker Changed) Mid? Mid nineties? Mid nineties. Mid late, mid to late nineties.<\/p>\n<p>00:08:11 (Speaker Changed) Like, I remember being on a trading desk in 96 when the Netscape and I was not allowed to trade it when the Netscape IPO happened. Yeah. That was really what kicked off a giant explosion. Were you there around that time?<\/p>\n<p>00:08:27 (Speaker Changed) Yes, in that time. And, and this, these were the deals when, when Cisco was going crazy, and there were, you know, there\u2019s so many transactions and networking. There was the optical communications boom, some of the original software internet assets. And so I did transactions in this, especially a lot in the networking telecom. I remember working on one or two software deals. And I did that for a while. And then, then I real, I decided to leave investment banking, which I, or I learned a tremendous amount, especially the, you know, putting, you know, the strategic nature of looking at industries and companies, and of course all of the, the financial acumen, the rigor of, of doing very intensive financial analysis. But you\u2019re always at working at the behest of a client, right? Right. You, you\u2019re working on it, it was transactional related. And, and this is when I decided to go and, and take a, take a career path changed to the investment side.<\/p>\n<p>00:09:30 (Speaker Changed) So tell us what that transition was like. What is it like going from transactional m and a on the west coast to No, I just wanna find companies public and private and invest capital in them.<\/p>\n<p>00:09:44 (Speaker Changed) Yeah. I, I think that\u2019s, that was a transition. The, the, the, the financial financial analysis is the same, effectively, maybe it\u2019s even more intensive on the, on the, on the m and a side. \u2019cause you\u2019re doing much more detailed work. The way you look at industries and companies are relatively similar. It\u2019s that on the transactional side, you work on projects for a short duration of time, and then you move on and move on and move on. And hopefully over time, you, you persist. You have persistence and you learn more about, about that industry and the domain. When you go to investment side, I, I started as an analyst, right? I wasn\u2019t, you know, and here you are looking at wider array of companies. You\u2019re doing financial analysis, but not as detailed as you were working on one deal, one transaction for months at a time.<\/p>\n<p>00:10:43 And, and then you, but you, yet you have persistence because you\u2019re able to look at sectors and industries and companies for a longer period of time consistently. And, and so you build deeper domain knowledge. And, and, and so that was one. The second is that you\u2019re no longer working for a client. You\u2019re, you\u2019re, you are working to find the best inve, you know, investments and, and put your own capital at risk, right? And so that was a change of the mindset of how to assess, because you\u2019re, you\u2019re not working really. You\u2019re not just servicing a client here. You\u2019re putting your own capital at risk. And, and, you know, that was the, that was the first big change of just assessing how that works and then, and then going from, and then, and then learning many, many, many domains. And, and then that was the, working with many different kinds of investors, different kinds of investment philosophies. I must have worked for 30, 40 portfolio managers across four, four or five investment firms. And that\u2019s, that was like, I guess my second fair era here was to learn the skills of investing.<\/p>\n<p>00:12:00 (Speaker Changed) Huh? We we\u2019re gonna spend more time on what you\u2019ve learned in a little bit. Yeah. You said something I have to explore a little bit. Sure. It, it was more in depth, more intensive on the m and a side than the investing side. I\u2019m curious as to why the two ideas that immediately pop into mind, you\u2019re covering a whole lot more companies on the investment side, but, but one can help but imagine on the m and a side, Hey, it\u2019s all in, you\u2019re taking the whole thing as an investor. If you buy something and you have second thoughts, well, you sell a few million shares and you\u2019re done, you could walk away with maybe a little worse for the wear and tear. But when you buy an entire company, hey, it\u2019s really hard to unwind that, isn\u2019t it?<\/p>\n<p>00:12:50 (Speaker Changed) Yeah, that\u2019s, that\u2019s right. You know, and, and you\u2019re buying the whole thing, or you\u2019re representing, or you\u2019re selling the whole thing, or you\u2019re selling pieces of it, and you\u2019re working on one company and another company, maybe two companies at a time. And you want to get every, every number right? Every, every comma, every nuts and bolts to, to the, as many, as much detail as you can. So the precision and the accuracy and the, and the information fidelity is much higher because that\u2019s what you\u2019re just working on. That one company, that one transaction versus, like you said, you\u2019re looking at hundreds of companies and, and you can make a decision with the push of a button and sell or sell or buy. And so the, the time spent on that analysis will invariably be less than the time spent on this one definitive transaction.<\/p>\n<p>00:13:52 (Speaker Changed) Huh. Really, really interesting. So you\u2019ve been in BlackRock since 2013. Obviously passive has been a huge success for BlackRock. You\u2019re on the active side. Is there any crossover? Do you get pulled into any discussions from, you know, any of the big BlackRock ETFs sector funds, passive indexes?<\/p>\n<p>00:14:17 (Speaker Changed) So the passive industry, passive part of BlackRock is separate to the active part. I guess what would be one trend is that we are also launching many active ETFs, which is the container in which most of the passive funds are traded at. And then there\u2019s like passive decisions, you know, are, you know, a lot of the passive index thing is now an active decision, I guess you could say. That\u2019s what, that\u2019s<\/p>\n<p>00:14:45 (Speaker Changed) Hey, it always has<\/p>\n<p>00:14:45 (Speaker Changed) Been. It always has been. Right?<\/p>\n<p>00:14:47 (Speaker Changed) We,<\/p>\n<p>00:14:48 (Speaker Changed) Yes, that\u2019s right.<\/p>\n<p>00:14:48 (Speaker Changed) It, it, it\u2019s, it\u2019s, Hey, we\u2019re gonna make it market cap index. That\u2019s an active decision. Yeah. We\u2019re gonna, we are gonna cap apple, nvidia, Microsoft at X percent. That\u2019s an active decision, right? There\u2019s lots of active decisions. People don\u2019t realize there\u2019s quite a bit of active in their passive.<\/p>\n<p>00:15:03 (Speaker Changed) Yeah. So now we\u2019re, we\u2019re joining that, that, that party as well. We have now active s we launched two recently, one on the AI side. So where we fail that dynamism, like especially an industry that is in rapid change, like an ai, I think you need a lot of adaptation flexibility because things are changing so rapidly.<\/p>\n<p>00:15:27 (Speaker Changed) So, so I wanna stay with that. We\u2019re gonna talk about the, the multiple ETFs you, you actively manage. But generally speaking, after passive captured more than half of, of the mutual funds and ETF assets, there has since been an explosion of active ETFs as well as mutual funds. Some are thematic, some are sector based, but they all have in common that it\u2019s not relying on a passive index. What are your thoughts on the future of active management in the ETF space?<\/p>\n<p>00:16:01 (Speaker Changed) Well, I think the, the future of active management, you know, as, as you correctly pointed out, I think there are generic sections of the market where it is the broad market exposure, S and P, those I think, continue to be under pressure as it moves to, to those passive indices. But I, but you, you, you said something very interesting there. You know, the industry is, is specialized, you know, sectors, thematics in the container of an active ETF. I think that is more representative maybe where the future of active industry\u2019s going, where, where one can express a, a differentiated view. And invariably that is a function of specialization, I think. And, and I, of course, I\u2019m, I\u2019m biased in that \u2019cause I am focused on a specialized area, which is the technology area. And, and then within the technology area, there are many further sub-specializations. And I, I think those that have broader depth of domain knowledge, hopefully that is the advantage.<\/p>\n<p>00:17:14 And, and that, that gets expressed in an active fund and ETF or a mutual fund or whatever. And, you know, I, as I, as I\u2019ve been in this technology industry for a long time, you know, 20 years ago, tech was 20% of the s and p, it\u2019s over 40 and it\u2019s probably going higher as, as, as now we\u2019re entering the AI era. And so generalists, I think are at a information asymmetry disadvantage to those that have domain specificity. And if you have better information, better knowledge, hopefully that leads to better decision making, which is, you know, which will hopefully sustain the active management<\/p>\n<p>00:17:54 (Speaker Changed) Industry. You know, I\u2019m so glad you said that you think the technology sector of the s and p 500 is going higher. When, whenever people say to me, aren\u2019t you concerned that tech is 29% of the s and p 500 or whatever the number happens to be? My answer is always the, the magnificent seven are responsible for something like two and a half trillion dollars in revenue and $500 billion in profits. I\u2019m shocked it\u2019s only 29%. Why isn\u2019t it half of the s and p 500? This is what\u2019s driving the economy in the market. Doesn\u2019t it deserve a, a richer valuation? I\u2019m curious as to your thoughts on that.<\/p>\n<p>00:18:34 (Speaker Changed) 100% agree. Okay. I 100% agree. The, you know, the multiple in aggregate has not changed dramatically, but it has driven by free cash flow. And, and the 40% I quoting is a combination of comm services, which they carved out, which is really tech companies, right? With classic tech that\u2019s over 40%. And when you look at the contribution of free cash flow, right, which is the ultimate profit metrics, it\u2019s followed, it is 40% of the free cash flow. Right? You know, the other thing about tech, I don\u2019t think people realize it. It has represented the highest growth. It actually has the highest margin. It is the highest free profitable margin. If people think it\u2019s unprofitable, it\u2019s like, but 90 some percent of teve profitable,<\/p>\n<p>00:19:26 (Speaker Changed) This is not,<\/p>\n<p>00:19:26 (Speaker Changed) And the highest profit margin and the highest free cash flow growth. And that\u2019s what\u2019s driven the market cap appreciation. That is the, that is not, not well understood,<\/p>\n<p>00:19:38 (Speaker Changed) Fair to say. This is not the late nineties.com No, no. You know, whimsical ideas with hardly any revenue and no profits, these companies are printing money and are wildly profitable. Yeah.<\/p>\n<p>00:19:53 (Speaker Changed) And in fact, I would even make another distinct, you know, the, the max seven, the most profitable sector in all the s and p of any is the semiconductor industry. Hmm. They even have higher margins now than the software industry. And the software industry is amongst the highest, right? So tech in general, if you say software and semis are two thirds of all of tech, right? They have the highest margins in the world. Huh? So they have the most profitable companies with the most growth, which generates the most free cash flow, which generates the returns, which generates the 40% of the market cap, which is, and most of those are max seven.<\/p>\n<p>00:20:31 (Speaker Changed) Doesn\u2019t, doesn\u2019t sound like a bad place, doesn\u2019t not sound<\/p>\n<p>00:20:34 (Speaker Changed) Bad place<\/p>\n<p>00:20:34 (Speaker Changed) To, to<\/p>\n<p>00:20:35 (Speaker Changed) Keep your, and now we have AI and it probably goes higher. It\u2019s gonna go higher, huh.<\/p>\n<p>00:20:40 (Speaker Changed) Fascinating. So we were talking a little bit about what makes technology so interesting. Share a little bit of your perspective. How do you go about identifying technologies that are going to drive future growth and as we\u2019ve seen, reshape the entire economy?<\/p>\n<p>00:20:59 (Speaker Changed) You know, I, I guess I would say first I\u2019m a deconstructionist. I like to deconstruct problems, deconstruct any kind of situation, deconstruct sectors and industries. So I like to break things down and then be even before breaking \u2019em down, this kind of goes to my childhood. I, I always had a fascination love of maps. So maps. Maps, huh,<\/p>\n<p>00:21:21 (Speaker Changed) That\u2019s<\/p>\n<p>00:21:21 (Speaker Changed) Interesting. Cartography, ancient maps. And so I would, I\u2019d like to map everything out. Okay. And, and so like the ancient mariners would say all the oceans that you, you\u2019d want a map of where you\u2019re navigating to. And, and so I start with that. I, I, I like to break things down. I break technology down into five or six major sub-sectors, and then we just continually deconstruct and break those down. And so once you start breaking these things down, you then create a, a map of the whole landscape, the semiconductor and landscape internet landscape, the software landscape, et cetera, and continually break things down. And so then they are digestible pieces. And then within those pieces, then you interrogate all of the technologies that are going. And so now you have this, this giant, giant map of all of technology, all reconfigured and mapped out. And then you go into detail.<\/p>\n<p>00:22:21 And then this way you start, it\u2019s kinda like a battlefield commander looking at a giant war map. And you see hotspots, this is hot, this is cold, this is hot, this is cold. And, and then you have systematized a way of looking at all of those different categories and technologies and sub-sectors, and you know, all the companies that are there, you know, the competitors there. And then you\u2019re observing what\u2019s hot and what\u2019s not. And so then, so that\u2019s the current, that\u2019s the initial framework. And so then you, you start to see trends that are, that are happening and you think you see other trends that are, that are declining.<\/p>\n<p>00:22:58 (Speaker Changed) So what\u2019s so intriguing about that is we tend to think of fundamental research, CFP type research as very balance sheet driven. What you\u2019re describing is something that\u2019s much more holistic and comprehensive. You\u2019re, you\u2019re really looking at the whole echo system of technology to, to see what is, is moving and use the magic word systematize. How, how do you systematize that? Is it, is it just identifying what is on a mathematical basis, popping its head up? Yeah,<\/p>\n<p>00:23:33 (Speaker Changed) I, I think, I think if we use AI as a great framework, as a test, as a case study. So if I were to frame technology industry as we have this hardware industry, and inside the hardware industry, there are many categories like smartphones and robotics and servers and things. And then there\u2019s a semiconductor industry. There\u2019s different kinds of chips, accelerator chips, memory chips, foundry, logic, analog. And then let\u2019s say the software industry, there\u2019s security and applications, infrastructure, et cetera. And once you have mapped all of these things out, and you know, where all the companies, where all the bodies are buried and you know, who\u2019s, who\u2019s competing with whom and what, who\u2019s working on what along comes ai, AI starts with chat, GPT and GPT-3 0.5 in the end of 2022, early 2023. And it, it shows up as an application, a chat application. Well, the first thing you, when I saw that, I said, wow, this is going to change the world. And that<\/p>\n<p>00:24:42 (Speaker Changed) Was your initial response to the first demonstration you saw of chat, GBT,<\/p>\n<p>00:24:48 (Speaker Changed) That and having a meeting with Jensen, Huang in January, 2023, those two things kinda triggered it. Then once you see that, then you say, okay, how is this gonna cascade through? You know, it\u2019s kind of like in biology, there\u2019s a, there\u2019s a thing called what I call a trophic cascade, an ecological ecosystem. And, and then you say AI is, is the trigger, the first thing that you see it, it\u2019s the first representation\u2019s, well, you gotta build these models and to build the models, you need these chips. And so then you go, well, then you interrogate, well you need these kinds of grab GPUs and memory and things. Then you say, well, then you need to, well, those are connected to the packaging systems. And those packaging systems are connected then to foundries. And then these foundries are connected to the wafer output, which you need the equipment.<\/p>\n<p>00:25:40 And then you start to build a chain of this is what\u2019s needed to build this part. And then those chips get thrown in servers, and servers need this whole eco supply chain. And then those servers get then deployed in clouds, right? And these clouds then need, oh, by the way, these things generate a lot of electricity. And that spawned the whole power energy movement. And then you, but then, you know what the power transmission and grid and technical thermal equipment that needs to power and cool these cloud data centers. And so you have built that supply chain down. And then, and then after the AI is built, you bring the AI into, into the, into business at Bloomberg and BlackRock, and you bring those into a software, and then you embed that in applications. And then, oh, by the way, that same AI that\u2019s being will, will throw that into the self-driving car and robots. And so once you see that whole chain and how that gets diffused, and then you have interrogate, you\u2019ve already built these maps effectively of every single one of these little ecosystems and supply chains. And then you see how diffusion works and, and then, then you say, well, is it worth investing in these companies or not? And that\u2019s when then you get into the financial analysis. So,<\/p>\n<p>00:27:00 (Speaker Changed) Huh, really interesting. So I\u2019m hearing infrastructure, which is everything from power to cloud to database to intelligence, which is the modeling. Yeah, that\u2019s right. And then software, tools, application solutions. So this isn\u2019t, you know, I think people tend to think of, oh, ai, that\u2019s Nvidia. But what you are really saying is this is dozens, if not hundreds of companies working across a whole ecosystem.<\/p>\n<p>00:27:28 (Speaker Changed) That\u2019s exactly right. Now, in the public stock market, the man, the, the first two years, the manifestation of what I just described, or what you just eloquently described, gets expressed in the mag seven. You know, if I were to re, let\u2019s recompile that as a, as a nine layer cake, okay? At the bottom of this, of this, of this cake is the power and the energy. And then that feeds the servers and chips. And then those servers and chips get live in a, in a, in a data center cloud. That whole bottom layer, those three layers is what I call infrastructure. Okay. So that\u2019s why you\u2019re seeing most of the mag seven are here.<\/p>\n<p>00:28:18 (Speaker Changed) So that\u2019s Google and Amazon. Yeah. And Microsoft, to say the very least.<\/p>\n<p>00:28:23 (Speaker Changed) And now Tesla\u2019s building a AI I and<\/p>\n<p>00:28:25 (Speaker Changed) Cloud centers, right?<\/p>\n<p>00:28:26 (Speaker Changed) And, and then above that layer, let\u2019s call it, that\u2019s the models and the data. So this is where you also have more back seven, Microsoft, Google, OpenAI, these, some of the private companies and now xai and, and you know, there are six or six of these companies building these foundation models. And then the data, you\u2019re feeding the data, and then you have all these data companies that have, let\u2019s say, legal data, healthcare data, insurance, data. And then some of \u2019em are proprietary data, which are helping train these models, right? So<\/p>\n<p>00:29:01 (Speaker Changed) We\u2019ve seen a couple of stories about the Wall Street Journal and Reuters That\u2019s right. Leasing their entire corpus of all their content to various AI models to, to work on.<\/p>\n<p>00:29:13 (Speaker Changed) Correct. And you know, companies like Reddit have done a deal like that Wall Street Journal, there\u2019s some lawsuits, even New York Times,<\/p>\n<p>00:29:21 (Speaker Changed) Well, they have in, in some instances seem to have borrowed stuff that was Yes, yes. You know, you, your $99 a year subscription to the Washington Post doesn\u2019t entitle you arguably to scrape all that data, but hey, they\u2019re cutting checks and cutting deals and I think everybody just wants their piece of the pie.<\/p>\n<p>00:29:39 (Speaker Changed) That\u2019s right. And then there are some companies, you mentioned Thomson Reuters, which was, you know, they have, they run one of the, one of, they have one of their biggest legal DA data sets, you know, and they control that legal data. And so then they\u2019re putting AI on top of that. So that\u2019s that, that\u2019s that intelligence and the data layer. And then above that layer, you have the applications, the tools and data infrastructure, and then the services, the human IT labor to implement and, and to the ai.<\/p>\n<p>00:30:12 (Speaker Changed) Give us some, give us some names. I have a couple of things on my phone. What, what do you like?<\/p>\n<p>00:30:17 (Speaker Changed) Oh, on the app side? Yeah.<\/p>\n<p>00:30:18 (Speaker Changed) Yeah. I mean, I\u2019m using perplexity.<\/p>\n<p>00:30:20 (Speaker Changed) I use perplex. Perplexity use it.<\/p>\n<p>00:30:21 (Speaker Changed) It, it\u2019s so clean and so simple.<\/p>\n<p>00:30:23 (Speaker Changed) I love perplexity. I love Chachi pt.<\/p>\n<p>00:30:27 (Speaker Changed) They\u2019re, they\u2019re slightly different. Slightly different, yeah. Right. Just the output. Yeah. But they\u2019re still, and I\u2019m finding far fewer hallucinations than, than I used to. Yes. Like I had Bill Dudley from the New York Fed in, who was born in, you know, the late 1950s and chat, GBT mentioned he happened to be a linebacker for the Detroit Lions in, in 1952. It took it a and there was a guy named Bill Dudley who was a, it took it a while for it to figure out, like after a certain period that eventually got cleaned up. Wait, if you\u2019re born in 57, you\u2019re probably not a pro football player in 55. It, but it took, it definitely took months, right? Yes. For it to kind of somehow recognize that. Yeah.<\/p>\n<p>00:31:12 (Speaker Changed) And, and that\u2019s on the consumer side. And there\u2019ll be a lot more consumer apps coming, you know, you know, companies like Apple have this Apple intelligence, right. If any in, they\u2019re absolutely locked in on your private seed, but they\u2019re gonna know you the best. And so there\u2019ll be AI assistance coming.<\/p>\n<p>00:31:29 (Speaker Changed) I hope it\u2019ll be better than Siri, which was a huge disappointment for sure, for sure. But, but I would trust an Apple agent. You would Exactly. Absolutely. To be able to say, Hey, make dinner reservations for Friday at this restaurant, here\u2019s my calendar, and invite Bob Smith and Mary, and hopefully it can manage that.<\/p>\n<p>00:31:44 (Speaker Changed) Absolutely. And, and even more things even more difficult than let\u2019s say that like, oh, I need to help with my, I need to do my taxes. I want my taxes help, or I need,<\/p>\n<p>00:31:56 (Speaker Changed) So I\u2019m skeptical on really complex things. And at the same time, I, I just read yesterday the latest comparison of AI diagnostics versus doctors AI just moved ahead. They moved ahead on things like x-rays and MRIs a while ago. Correct. But now on here\u2019s 20 data points, diagnosis, illness, it just moved ahead of the accuracy rate of, of human doctors. Yeah.<\/p>\n<p>00:32:22 (Speaker Changed) You, you said exactly. The complexity of the tasks will only go higher in terms of what they\u2019ll be capable to do. And so, and, and these ais are following, you know, these what we call these scaling laws of scaling intelligence, but the things that they will be capable of, it\u2019s not just booking a restaurant. It\u2019ll be doing very complex tasks. And so we are just at the very, very, very beginning of that.<\/p>\n<p>00:32:50 (Speaker Changed) Huh. That, that, that\u2019s really fascinating. So given the mapping you do of the whole ecosystem and then the dive into the financial background, what strategies do you, do you then use in saying, okay, I understand the whole ecosystem, I understand the various balance sheets of these companies. How do you then pick which stock you wanna own? Ah,<\/p>\n<p>00:33:15 (Speaker Changed) So I, I, I have cer certain small, you know, rules, I guess if you could call it that, that I\u2019ve, I\u2019ve, or observations that I\u2019ve made over many years, especially in tech, right? \u2019cause this is a very dynamic industry. One of those is like, there\u2019s a power law. What I, I believe in power laws, and I, it seems like every industry I\u2019ve ever looked at, there\u2019s number one, a number two, and then maybe a number three.<\/p>\n<p>00:33:46 (Speaker Changed) So very fat head, and then a long, yeah. Minor,<\/p>\n<p>00:33:49 (Speaker Changed) Let\u2019s just say 50% number, market share, number 1, 25, number two, and then cats and dogs, right?<\/p>\n<p>00:33:55 (Speaker Changed) Winner takes all,<\/p>\n<p>00:33:57 (Speaker Changed) Yeah. Winter takes true everywhere. And it doesn\u2019t matter if you\u2019re selling frozen pizza to search advertising, okay? It there, these power laws and, and, and then, because, but the thing is that you could have power laws that apply to hundreds of categories, right? It doesn\u2019t have to be all encompassing in one. And so when I look at tech and those, all those different categories, I firmly believe in these power law concept that you want to be betting on, number one, or number two, especially number one, not even number two, you want number one, ideally. And, and so are you. And so in many cases there\u2019re already existing players. Okay? And so if they are already existing players and then their, their hegemony is not being challenged, that\u2019s kind of an easy answer. You, you keep riding the wave. And that\u2019s why people are always complaining about mag seven.<\/p>\n<p>00:34:51 (Speaker Changed) You you anticipated where I was gonna go next. Oh yeah. What you\u2019re essentially saying is, mag seven is, they\u2019re focusing on the number seven while ignoring the magnificent side. You wanna be in the number one stock everywhere, which is gonna naturally force the crowd investors to the top 5, 10, 15 companies.<\/p>\n<p>00:35:12 (Speaker Changed) That\u2019s exactly what\u2019s been happening, huh? The, the strong gets stronger Unless, unless there are signs of weakness, right? I if there is it,<\/p>\n<p>00:35:22 (Speaker Changed) Is it competition? Is it missteps by management? Is it some new disruptive technology that thrusts the winners aside? Yeah. What, what do you look for to say, Hey, X, Y, Z has been killing it for five, 10 years, but their run is over.<\/p>\n<p>00:35:39 (Speaker Changed) That\u2019s exactly right. Usually, usually it, these companies do not get disruptive, but on occasion they do. I think the most obvious one recently was the ascendancy of Nvidia versus Intel, right? For 30 years Intel what ran, ran Legion. And, and then there was a transition, there are several, several reasons, but there was a, a transition to, to accelerated computing from CPUs. And, and then they\u2019ve lost leadership on Foundry to TS MC<\/p>\n<p>00:36:14 (Speaker Changed) And then MA Mobile, they lost<\/p>\n<p>00:36:16 (Speaker Changed) Leadership on that. And they didn\u2019t, they didn\u2019t engage in mobile. And so, so there are times, there are times where companies, you know, different, different transitions. Like if Microsoft did not pivot to the cloud from Windows, right? And the government, you know, went after them on, on, on Windows, but they were, they were litigating yesterday\u2019s war, right? Right. But Microsoft found Azure and then, and then history was rewritten. And what<\/p>\n<p>00:36:43 (Speaker Changed) Do, what do you think of the job Saudi Nadal been that, you know, people forget,<\/p>\n<p>00:36:47 (Speaker Changed) That\u2019s gotta be one of the great right? The great great CEO and, and and, and what he has mastered in the history of business.<\/p>\n<p>00:36:55 (Speaker Changed) Mi, Microsoft was dead money for a decade. For a decade. I know that sounds ridiculous to say. Yeah, I know people<\/p>\n<p>00:37:00 (Speaker Changed) Don\u2019t remember that.<\/p>\n<p>00:37:01 (Speaker Changed) Not that Balmer was a terrible CEO, but he was a founder and maybe just wasn\u2019t nimble enough to see the next generation. He he was, you know, like many founders, they\u2019re stuck in, you know, Microsoft 1.0 yes. And Nadella is, I dunno, maybe he\u2019s 3.0 or 4.0, but<\/p>\n<p>00:37:20 (Speaker Changed) Yeah, definitely he\u2019s gotta, this has gotta be one of the greatest unbelievable business turnarounds Yeah. In history. That doesn\u2019t get that much enough recognition in my<\/p>\n<p>00:37:28 (Speaker Changed) Opinion. I, I, I, I totally, totally agree.<\/p>\n<p>00:37:32 (Speaker Changed) And, and so they had this power law concept, going back to your idea. The other one is you need a second act. You, well, you need multiple acts. If you even look at these great companies, right? You know, Microsoft for example, you had the windows and then you had a second act, which is Azure, right? Right. And Azure has been driving the company, right? Even Apple found the iPhone after Mac, right? And so you need companies that have, and then Amazon, I don\u2019t even know how many acts they\u2019ve had. They have so many different acts, right? And, and so the great established companies can, can continually add multiple new businesses. Not only what you\u2019re currently doing, you gotta anticipate the next, so these power laws can do you have, you know, multiple acts, because then that helps you have duration that you can endure and, and then are you differentiated enough? And, but then there is a whole new class of companies, right? So there you have the Max seven, these power law companies, but there\u2019s always history is for tech has always given you the opportunity for the new companies, the new companies to come. And so it\u2019s really the combination of let\u2019s continue to ride the power laws of the established companies, and then let\u2019s find those new companies that can rise and, and, and become the new challenger. So it, it\u2019s that those two, those are the two components of, of a technology<\/p>\n<p>00:38:58 (Speaker Changed) Fund ab absolutely fascinating. Before we get into the funds, I I, I really wanna just touch base on two really interesting things you, you said earlier. One is just generally on the valuation question with technology and similarly, the market concentration of the magnificent seven. Share your thoughts on that.<\/p>\n<p>00:39:23 (Speaker Changed) Yeah, I think valuation to, right, if I were to broadly say is, is at a fair level now there\u2019s dis dispersion in that you mentioned the max seven and the crowding and these, these giant winners, they have valuations that are higher than the rest of tech. The rest of tech has not, for the most part, recovered from, from the depression that we had, the recession we had in 2022, they went, they were well way exaggerated in 21, it crashed in 22 and there\u2019s been not that much of a recovery. So a large part of tech is still in at depressed levels. I I I would say we\u2019re back to pre, you know, 20 18, 17 levels except the Max seven and a few companies like that, that have, that are at higher levels, but their performance have been better, you know, so. Right.<\/p>\n<p>00:40:24 (Speaker Changed) And you know, it\u2019s funny, we, we still have o over a month ago this year, this could be the first year the s and p 500 beats the NASDAQ 100 in, in a long time. That\u2019s, I\u2019m trying to remember the last time we saw that.<\/p>\n<p>00:40:39 (Speaker Changed) Yeah. Because a large part of the, of, of, of the Nasdaq, especially non mag seven, they\u2019ve not done well. You know, large parts of software, large parts of semiconductors. Even if you\u2019re not in the AI class, you know, you\u2019ve been left behind.<\/p>\n<p>00:40:59 (Speaker Changed) Huh. Really interesting. So I wanna talk about something that you do with your team every year. You conduct a tour of, of Silicon Valley. You meet with leaders of both public and private technology companies, often 25, 30 different companies and their senior management. Tell us a little bit about what that experience is like, what do you learn? Does it actually help you with your investing process?<\/p>\n<p>00:41:26 (Speaker Changed) Yeah, I think you\u2019re referring to our annual, every summer we do a, a bus tour. Effectively we bring 30 BlackRock investors. Now that said, we do, you know, 2000 meetings a year with companies on my team. Wow. I personally do almost a thousand meetings with companies. Now, this is a special event \u2019cause it, it pulls together are 7, 8, 9, 10 different teams at BlackRock, 30 plus execs and investors. And then we, we get on a bus and we go visit the top managements and CEOs, both public and private companies every year. This has been, I\u2019ve been running this now 11 years. Wow. And, and what that does is that, you know, you, you\u2019re on site, you know, it\u2019s a little, it\u2019s a little less formal. You, you, the companies feel more comfortable \u2019cause they\u2019re, they\u2019re hosting you and it\u2019s, and, and it\u2019s really more of a strategic discussions than re-litigating the quarter. Right. So it is a and and, and much<\/p>\n<p>00:42:32 (Speaker Changed) Longer term than<\/p>\n<p>00:42:33 (Speaker Changed) The usual discussion. Yeah. Yeah. And then, you know, it\u2019s always a great barometer of like, what, what, what were the topics of the tour in 2014 versus 2024? And you could really see an evolutionary of what was topical every year. And it, and so it\u2019s a great way, it\u2019s also great for the people because many times, even, you know, within a firm like BlackRock, any of the teams don\u2019t get that much time to be with each other. So, so, so it\u2019s both for representing a unified front to the company and then also within, within the interpersonal relationships that, that are strengthened. And, and then it\u2019s a really a great barometer of what are the, the key topics. And then if you looked at the last two years of, of the bus tour, there\u2019s only one topic ai.<\/p>\n<p>00:43:26 (Speaker Changed) Yeah. Yeah. So, so let\u2019s go before the previous two years. Yeah. Give us some examples of ideas that were surfaced via this bus tour.<\/p>\n<p>00:43:35 (Speaker Changed) So I\u2019ll give you some specific examples. Sure. I remember distinctly, there was one about a MD when a MD had just announced its new chip based, you know, Jim Keller was still working there. And it was one of the fame chip designers, and they had redesigned the processor and the CPU and that zen architecture was the basis in which 10 years later they\u2019ve gained all that market share from Intel. But that was that day. And, and, and I remember because a MD was on its back,<\/p>\n<p>00:44:14 (Speaker Changed) It was on its perennially always a laggard, always short of capital, always like, Hey, these guys gonna be here in five years.<\/p>\n<p>00:44:21 (Speaker Changed) But they made that seminal bet to really change that chip architecture and that. And then another one I remember distinctly when there was lots of questions around Tesla, right. Can they get the model three? There, there were, there were, they had warehouse, you know, not even a warehouse, a tent Right. To, to make remember that? Yep. Everyone was saying you\u2019re<\/p>\n<p>00:44:43 (Speaker Changed) Losing 24 hours a day. Yeah. It was, it<\/p>\n<p>00:44:45 (Speaker Changed) Was, they had a tent to make the model three. And I think that kind of unlocked, that\u2019s like, well, we\u2019re about to, we\u2019re about to turn, we\u2019re about to make it, we\u2019re this production is about to scale. And that was another seminal moment. So you have these, these events like that, that come through.<\/p>\n<p>00:45:00 (Speaker Changed) Let me ask you relative to Tesla, an ecosystem question. So for the longest time, Tesla had the market all to itself. Recently I saw a chart that showed for the first time Tesla\u2019s market share dropped below 50%. Not because their sales have fallen, but because there are so many other players in, in the EV space. I can\u2019t help but give either credit or blame to Jeff Bezos who so totally destroyed sector after sector after sector that when Musk came along, the automobile industry said, Hey, we saw what Amazon did, we better, you know, get our act together pretty quickly. Any truth to that urban legend?<\/p>\n<p>00:45:47 (Speaker Changed) I would say in ev, just pure ev cars, Tesla\u2019s share and its ascendancy the entire market is, especially in the us especially in the west, not China is definitely slowed if not stalled. Okay. Right.<\/p>\n<p>00:46:05 (Speaker Changed) Arguably I had the CEO of Lucid in here Yeah. Who made a very aggressive claim that whether it was battery technology, motors, range software, Tesla was a leader and lucid is as leapfrog them. You, you could, you can, we could debate that.<\/p>\n<p>00:46:22 (Speaker Changed) Yeah. I would, I would keep that. But<\/p>\n<p>00:46:23 (Speaker Changed) At least, but it\u2019s a credible, whether it\u2019s true or not, it\u2019s a credible claim, which would not have been remotely credible five years ago, even three years ago.<\/p>\n<p>00:46:32 (Speaker Changed) I would say to that, and, and I don\u2019t want to comment on that specific company, but you know, companies like that, they\u2019re selling a hundred thousand dollars car, right? Tesla\u2019s selling a $40,000 car, the $50,000 and up market<\/p>\n<p>00:46:49 (Speaker Changed) Is very different,<\/p>\n<p>00:46:50 (Speaker Changed) Which is, which is most EVs. Right. You know, if you remember, you go in the past, the greatest, the best selling single car was like the Toyota Corolla, you know, like couple million a year. And, and you look at Tesla\u2019s model three and y and they\u2019re also in that range coming up on that. Anyway, so basically if you\u2019re in that kind of category, you, you get to a certain market level, a saturation level. And, and I think that in, in the west, and then, you know, with the more reticence to adopt ev and still in the United States, you kind of have a certain ceiling you need. And this is why there\u2019s so much discussion about Tesla either having a lower cost robot taxi or lower cost car to get at the market sub 50,000 where you have, you know, that unlocks a market three times bigger. It\u2019s like a $30,000 car or a 25,000 car. But I think Tesla\u2019s main pivot really, and, and, and even Elon would, would tell you it\u2019s not about the car. The car is a mere means to deliver autonomy. Right. Huh. And it\u2019s a robotics company. Right. It\u2019s, and and, and autonomy is the meet big unlock not, not selling the car itself.<\/p>\n<p>00:48:09 (Speaker Changed) Huh. That\u2019ll be interesting. We\u2019ve been waiting autonomy for a while. Yes. One can\u2019t help but wonder how much easier it would be if, if built into the roads and other vehicles where some form of RF device that allows other cars to know where here\u2019s where the exit is, here\u2019s where the lanes are, here\u2019s where other cars are. Like there could be an infrastructure build out that makes that Have you,<\/p>\n<p>00:48:38 (Speaker Changed) When\u2019s the last time you were in LA Or this year? Yeah, this year. Okay. Did you see Waymo\u2019s running around<\/p>\n<p>00:48:44 (Speaker Changed) In I did not. Oh, okay. I did not.<\/p>\n<p>00:48:46 (Speaker Changed) So Waymo\u2019s now operating in Los Angeles and they\u2019re everywhere in San Francisco, Phoenix. And<\/p>\n<p>00:48:54 (Speaker Changed) The future\u2019s here, it\u2019s just not even distributed.<\/p>\n<p>00:48:56 (Speaker Changed) It is, it is. It\u2019s within grasp. Finally. It\u2019s, it\u2019s always been three years in the future, but like it really is now, I<\/p>\n<p>00:49:02 (Speaker Changed) Think. Yeah. So, so now let, let\u2019s bring this conversation. Yeah. Full circle back to the funds you run. Yes. Let, let\u2019s talk about bi BAI, which is the iShares AI innovation and technology active ETF. Tell us a little bit about that. That that\u2019s a fairly concentrated portfolio, isn\u2019t it?<\/p>\n<p>00:49:21 (Speaker Changed) That\u2019s right. This, this is, we just launched this, this is our first foray, our first, we have two ETFs. Now we\u2019re jumping on that, that ETF bandwagon if<\/p>\n<p>00:49:33 (Speaker Changed) You will. Right? Yeah. I, I think that that might work out for BlackRock.<\/p>\n<p>00:49:35 (Speaker Changed) Yeah, that\u2019s what I hear. I hear. But this, this one is, you know, I think, you know, hopefully we look back, this is the second year of AI as we would, as I would say, and I think this is gonna be a decade long if not longer trend. And we are trying to express in a concentrated way, 30 plus companies and an ETF that represents this whole stack of AI<\/p>\n<p>00:50:05 (Speaker Changed) From Nvidia down to the all<\/p>\n<p>00:50:07 (Speaker Changed) Stacks, all the way up to the apps from the compute to the, to the apps and everything in between. And, and I do know one thing. So we want a concentrated exposure to the builders of AI companies building the key elements of ai. And I do know one thing, it will be, it\u2019s gonna change dramatically what we think is the companies of today might not be. And so we need, I, I feel like especially when there\u2019s high rate of change in the early days of an industry like this, we need dynamic adaptation. We need to be flexibly and adaptive. And so to lock yourself into a fixed passive structure versus a dynamically changing structure, that\u2019s really the goal of this ETF.<\/p>\n<p>00:50:55 (Speaker Changed) Let\u2019s talk about iShares technology opportunities. Active ETF or TEK, broader portfolio, 50 to 70 global tech companies. Tell us what that focus is.<\/p>\n<p>00:51:06 (Speaker Changed) That is basically the ETF version of our mutual fund. And so that includes tech companies, not only ETF, not only AI companies, but broad tech globally, larger companies. But you know, there\u2019s lots of tech companies that don\u2019t really, that don\u2019t really have that much to do with AI building ai. And so you\u2019re gonna get the whole totality of tech in that, in that.<\/p>\n<p>00:51:33 (Speaker Changed) So you said something before that has stayed with me about looking at the entire map of the ecosystem and, and watching what becomes hot and, and what fades techno technological change today is just so rapid. Yes. It changes at, at light speed. How do you keep up, how do you stay aligned with the industry dynamics as they evolve in real time? It seems like it\u2019s not even quarter to quarter anymore. It\u2019s minute to minute.<\/p>\n<p>00:52:04 (Speaker Changed) Maybe not minute to minute, but you, you\u2019re, you\u2019re absolutely right in ai. So there are different timescales according to different industries. So let\u2019s say in ai, you\u2019re right, it might literally be minute to minute, day to day, okay. On the smartphone, you know, things are more sta they\u2019re, they\u2019re slower paced. And, and so you have a, a, a a spectrum of, of rates of, of change. That\u2019s number one. So number two, how do we keep, keep up? I mean, you know, I\u2019ve, I I read a lot and not only read, you have to stay attuned to all this new multimedia, like there\u2019s so many experts and podcasts like yours and, and scientists and, and then we do, like, I do personally a thousand company meetings a year.<\/p>\n<p>00:52:56 (Speaker Changed) That\u2019s amazing.<\/p>\n<p>00:52:57 (Speaker Changed) So<\/p>\n<p>00:52:58 (Speaker Changed) That\u2019s four a day if you\u2019re working 50 weeks a year.<\/p>\n<p>00:53:02 (Speaker Changed) Yes. I mean, yes, I do many, many, many, many meetings a week. Huh. So, and so then you assimilate all this information and then you are all, I\u2019m always doing the calculus. Who\u2019s winning, who\u2019s losing, who\u2019s winning, who\u2019s losing, what\u2019s changing, what\u2019s not.<\/p>\n<p>00:53:23 (Speaker Changed) So how do you balance having a long term perspective for a technology like AI with, you run a fund, you run a couple of funds Yeah. You get judged every quarter. Absolutely. That\u2019s a very short term. And, and Wall Street is notorious for being too short term focused. How do you manage the trade off between, hey, this is gonna be a dominant technology over the next five years to oh, it, it\u2019s September 30th and we know what happens starting in October. How, how do you manage that trade off?<\/p>\n<p>00:53:57 (Speaker Changed) That is the essential question because we are being challenged all the time. You know, I, I feel you, you get some latitude if you have already a historical track record. So for example, 2022 was just brutal hell on earth for tech.<\/p>\n<p>00:54:17 (Speaker Changed) It was, you know, not only was it hell on earth for tech, it was the first year in over 40 years where both stocks and bonds were down double digits. Yeah. Like once every half century. And then the, the only saving grace was 2021 was so spectacular that it felt like we\u2019re giving back some profits, but it\u2019s not, you know, it didn\u2019t feel like it was oh 7, 0 8 0 9, which was<\/p>\n<p>00:54:43 (Speaker Changed) 2022 was worse than, was worse than 2008 nine<\/p>\n<p>00:54:49 (Speaker Changed) For technology for<\/p>\n<p>00:54:50 (Speaker Changed) Tech. Oh yeah, for sure.<\/p>\n<p>00:54:51 (Speaker Changed) Really? Oh yeah. That\u2019s a big statement<\/p>\n<p>00:54:52 (Speaker Changed) Because in, in 2009 it was a universal collapse.<\/p>\n<p>00:54:57 (Speaker Changed) That\u2019s correct. It<\/p>\n<p>00:54:58 (Speaker Changed) Centered mostly in, in, you know, bank<\/p>\n<p>00:55:01 (Speaker Changed) Of finance, finance real estate. Yeah. Tech<\/p>\n<p>00:55:02 (Speaker Changed) Went down of course, but it didn\u2019t go down more in, in 2022. It was predominantly a tech collapse.<\/p>\n<p>00:55:12 (Speaker Changed) But it wasn\u2019t like the dotcom implosion where the NASDAQ 100 fell 80 plus percent. That\u2019s<\/p>\n<p>00:55:18 (Speaker Changed) Right. It wasn\u2019t, it wasn\u2019t.<\/p>\n<p>00:55:19 (Speaker Changed) And, but it was still no fun. You were down. Yeah. Heck was down 30 plus percent. Yeah. Yeah. Lost a third of its value. That\u2019s a<\/p>\n<p>00:55:25 (Speaker Changed) Big hit. But I, in my, in my, in my career, 2022 was the worst year. Huh. And, and, and so do you have the latitude and, and the confidence and support by, by investors and management to allow you to continue, you know, and, and you know, and then obviously the last couple years has been good, right? And so, but do you, does everybody get that avail, that opportunity to, and, and that goes to the short term long term, but I try not to focus on the short term and, and you know, we\u2019re, we\u2019re trying to make systematic bets to the best of our ability with, you know, especially an active manager. You know, it is, you need to show, \u2019cause we\u2019re, we hold generally fewer companies and you need, you need a couple of years to show that those longer duration bets start to manifest. And, and so if I was always chasing the quarter, you, you would, you know, you\u2019re, you\u2019re now, you\u2019re trying to be,<\/p>\n<p>00:56:40 (Speaker Changed) You\u2019re not a momentum trader.<\/p>\n<p>00:56:42 (Speaker Changed) You would you Yeah. Or Yeah, exactly. We, we, and that\u2019s really kind of at, at the end, we\u2019re, we\u2019re, we\u2019re saying our decisions that are born out of all of this domain and expertise and all of this, an analytical rigor. And then we express that for a multi-year basis. And then that ultimately comes through. And if we were to continually shift by the wind every quarter, you kind of lose your, your soul effectively of what you stand for. And, and so we try not to do that obviously in 2022. We had to make a lot of adjustments. But other than that, I, we kind of stick to the same framework.<\/p>\n<p>00:57:17 (Speaker Changed) Huh. Really, really fascinating. Alright, so I only have you for another few minutes, let\u2019s jump to our favorite questions. Okay. Alright. That we ask all of our guests starting with what\u2019s keeping you entertained these days? What are you listening to, watching streaming, et cetera.<\/p>\n<p>00:57:34 (Speaker Changed) Okay. I don\u2019t get a chance to watch that much TV and, and streaming, but streaming shows, the ones I\u2019ve recently seen, I, I\u2019ve seen, I really like Show Gun. Oh really? The new one. The new one. The remake from the, from the eighties or three body problem. I, I, I enjoyed, I love that.<\/p>\n<p>00:57:56 (Speaker Changed) I couldn\u2019t get through the book, but the show was great. Yeah.<\/p>\n<p>00:57:59 (Speaker Changed) And then, but I, I\u2019d watch a lot more. I\u2019m a history guy, so I, I love Epic history on, on YouTube. It is absolutely fantastic.<\/p>\n<p>00:58:10 (Speaker Changed) Epic history.<\/p>\n<p>00:58:11 (Speaker Changed) Epic history tv. Yeah. It\u2019s fantastic. I I watch a lot of science stuff like World Science Festival, Columbia professor here, Brian Green. Oh, sure.<\/p>\n<p>00:58:22 (Speaker Changed) Also, he\u2019s a prior guest. I<\/p>\n<p>00:58:24 (Speaker Changed) Also, he\u2019s great. Yeah. I also like chess. I watch like chess.<\/p>\n<p>00:58:28 (Speaker Changed) You watch chess.<\/p>\n<p>00:58:29 (Speaker Changed) Yes. I love watching chess. Huh. So, like, chess dog is, it\u2019s a great show. Especially the old, old matches of the, of the great, the great players like Bobby Fisher and Paul Morphy and things and the podcast. I think the best podcast for me is the ancients.<\/p>\n<p>00:58:46 (Speaker Changed) The ancients. I\u2019m gonna check that<\/p>\n<p>00:58:48 (Speaker Changed) Out. This is on ancient civilizations in ancient history. So those are what Yeah, that\u2019s what kind of occupies me. I I, I don\u2019t do as much business shows and business pods. I\u2019ve listened to yours a few times and a few others, but I\u2019m more about, you know, I\u2019m, I\u2019m in finance all day long. I, I don\u2019t really need more finance. So I, I go for my, my love of of history is probably the, I<\/p>\n<p>00:59:17 (Speaker Changed) I have the same issue. It\u2019s like, I don\u2019t want to hear a guest I\u2019m going to interview on another show. Yeah. I wanna, I don\u2019t wanna repeat questions or steal questions. I wanna bring a fresh approach. And when you\u2019re immersed in it all day, I, you just don\u2019t wanna go that way. Next question. Yeah. Who are your early mentors who helped to shape your career?<\/p>\n<p>00:59:39 (Speaker Changed) The, you know, mentor would imbue a personal one-on-one like tutor tutoring and things. I didn\u2019t have too many of those. I would say my earliest mentors, I, I go to high school. Those were my formative years in, in, in Illinois. My English teacher, who was also my debate coach, the, my history teacher and my chemistry teacher. I, I look back and they really helped form who I am today. And then in the professional world, I would say I, I go to, and this is like BlackRock, when I, and I joined, it was Tom Callen who hired me and Tom said, not so much as a mentor, but he said, here are the keys and you express your creativity and build the business. And he gave me that latitude. And so I, I, I give credit to Tom Callan, but I didn\u2019t have too many people mentoring me of doing this. It was more, most of my mentors are dead. I have people that I have influenced me. Like, like, like Napoleon and Frank Lloyd Wright and, and, and, and Beethoven and others. And<\/p>\n<p>01:00:54 (Speaker Changed) So you grew up in Illinois? Yeah. Did you do any of the Frank Lloyd Wright tours?<\/p>\n<p>01:00:59 (Speaker Changed) Oh yeah. I<\/p>\n<p>01:01:00 (Speaker Changed) Did all that. Right. I did that. So we spent every Thanksgiving in Wilmette. And so I\u2019ve done that whole run. Yeah. And I have to assume you\u2019ve been to falling Waters, right? I\u2019ve not<\/p>\n<p>01:01:08 (Speaker Changed) Been falling water.<\/p>\n<p>01:01:09 (Speaker Changed) So I, I call<\/p>\n<p>01:01:11 (Speaker Changed) Esen. I\u2019ve been<\/p>\n<p>01:01:12 (Speaker Changed) 20. Oh really? I, that\u2019s on my list. In 2017, I bought a car in Indianapolis, flew out, test, drove it, signed the papers, drove home, and halfway home was falling waters. Mm. And we were there the first day it was open in, I wanna say it was early March, and it was like a light coat of<\/p>\n<p>01:01:31 (Speaker Changed) Snow. And you went inside as well?<\/p>\n<p>01:01:32 (Speaker Changed) Oh yeah, we did the whole tour. That\u2019s, it\u2019s absolutely astonishing. Astonishing. Yeah. Not just because how delightful the building is, but never before and probably never since Will a house be so ideally suited to its surroundings? Yes. It\u2019s just Absolutely.<\/p>\n<p>01:01:50 (Speaker Changed) Yes. It,<\/p>\n<p>01:01:51 (Speaker Changed) It, it\u2019s, it\u2019s always interesting when you see, oh you, you could see the thought that went into Yeah. Every curve, every line, every detail. It\u2019s really, it\u2019s really amazing<\/p>\n<p>01:02:01 (Speaker Changed) The, the genesis of that. My, my interest in architecture. Yeah. I read the Fountain head. You read that book? Anne Rand, I,<\/p>\n<p>01:02:11 (Speaker Changed) I slog through it in college and basically gave up on her because of that book.<\/p>\n<p>01:02:17 (Speaker Changed) Oh, you gave up. But like that really,<\/p>\n<p>01:02:19 (Speaker Changed) It\u2019s such a painful book<\/p>\n<p>01:02:20 (Speaker Changed) To read. It\u2019s, yeah. But it spawned this, there\u2019s<\/p>\n<p>01:02:24 (Speaker Changed) Some ideas in it that are interesting.<\/p>\n<p>01:02:25 (Speaker Changed) The idea, especially the architecture that really triggered all architecture. Right. But<\/p>\n<p>01:02:31 (Speaker Changed) So since you mentioned the Fountain head, let\u2019s talk about books. Oh. But what are some of your favorites? What are you reading right now?<\/p>\n<p>01:02:37 (Speaker Changed) Okay. There are certain books that are influential to me. I, I, I, I was grew up in just people on, on the show. They don\u2019t, I grew up before the internet,<\/p>\n<p>01:02:49 (Speaker Changed) As did I, as you did. I don\u2019t think we\u2019re that far apart in age.<\/p>\n<p>01:02:52 (Speaker Changed) Yeah. And, and I was a nerd. I was a total nerd. Same. And so the Lord of the Rings and told me,<\/p>\n<p>01:02:59 (Speaker Changed) I knew you were gonna go there. Oh, how did you know that? So, \u2019cause that was the, I reread The Hobbit and the Lord of the Rings every summer throughout my teen years.<\/p>\n<p>01:03:06 (Speaker Changed) Oh my God.<\/p>\n<p>01:03:07 (Speaker Changed) Yeah. And someone just told me that the character actor who played Smigel<\/p>\n<p>01:03:13 (Speaker Changed) Smigel Yes.<\/p>\n<p>01:03:14 (Speaker Changed) In the movie Yes. Actually narrates the book on the audible version. Ah. And people have told me it\u2019s not like listening to a book on tape. It\u2019s like a, a full radio play that he does Voice, voice any circus. Yeah, that\u2019s right. He, it\u2019s supposed to be fantastic. Yeah.<\/p>\n<p>01:03:31 (Speaker Changed) I, I even, yeah, I loved it. And then I went even, I went really deep. I I the silmarillion and the 20,000 year prehistory to the Lord, the Rings. Like I went that,<\/p>\n<p>01:03:41 (Speaker Changed) How far afield did you go in sci-fi? Did Hyland, Philip k Dick<\/p>\n<p>01:03:46 (Speaker Changed) Hyland, Philip kj,<\/p>\n<p>01:03:47 (Speaker Changed) CJ Shera.<\/p>\n<p>01:03:47 (Speaker Changed) Only CJ Shera. But<\/p>\n<p>01:03:49 (Speaker Changed) He pride of Shano Strong recommends pride of Shara, pride of Nu Shanore. So, okay. Just fascinating book. Give us one or two more books and then we\u2019ll get to our<\/p>\n<p>01:03:59 (Speaker Changed) Last two. And currently I\u2019m reading, I read a lot of history books, so I\u2019m reading three books. I read, I, I browse, I read a lot Parallel, and I tend to, not to finish it all, but I\u2019m reading right now, campaigns of Napoleon by David Chandler. I\u2019m reading The Fall of Carthage by Adrian Goldsworthy and SPQR, Mary Beard. And I just bought the, my 16 Memorable Games by Bobby Fisher. I just wanted to go read<\/p>\n<p>01:04:22 (Speaker Changed) All the, did you read, I forgot who the author was, but there\u2019s a great Youngest Khan biography.<\/p>\n<p>01:04:29 (Speaker Changed) Ah, yes.<\/p>\n<p>01:04:29 (Speaker Changed) That\u2019s really interesting. I could see the book.<\/p>\n<p>01:04:32 (Speaker Changed) Oh, I, I want Yes. That, I<\/p>\n<p>01:04:33 (Speaker Changed) Would like to write that. But I have one other, I have a book recommendation to you<\/p>\n<p>01:04:36 (Speaker Changed) That you would love. You tell me. You tell me. Yeah.<\/p>\n<p>01:04:37 (Speaker Changed) And it\u2019s called How to Invent Everything, A Survival Guide to the Stranded Time Traveler. And it, it\u2019s just a history of technology, but they use the, the whatchamacallit, the cheat is they\u2019re using the guide for time travel as, Hey, if you ever get stuck in ancient history, here are the tools you can build and here\u2019s how you should do it. And it\u2019s just a, just a history of technology 10,000 years ago to today. Absolutely fascinating.<\/p>\n<p>01:05:05 (Speaker Changed) 10,000 years ago.<\/p>\n<p>01:05:06 (Speaker Changed) Right. Going back to the invention of glass, the invention.<\/p>\n<p>01:05:09 (Speaker Changed) I, I have, I I like to collect some of those ancient artifacts. Oh,<\/p>\n<p>01:05:12 (Speaker Changed) That would be, that sounds like fun. Yeah. Alright, so I only have you for two minutes. Okay. Let get to my last two questions. Yes.<\/p>\n<p>01:05:17 (Speaker Changed) Last<\/p>\n<p>01:05:17 (Speaker Changed) Two questions. Like, that\u2019s the problem with sci-fi geeks. You<\/p>\n<p>01:05:19 (Speaker Changed) Can, yes. Okay. I did know you\u2019re sci-fi geek.<\/p>\n<p>01:05:21 (Speaker Changed) Oh, oh, absolutely. Yeah. What sort of advice would you give to a recent college grad interested in a career in technology investing?<\/p>\n<p>01:05:30 (Speaker Changed) Not so much technology, let\u2019s say investing in general. Sure. I, I think you gotta be a great thinker. It\u2019s not so much the finance. Finance can be taught easy. It\u2019s about thinking. And it is about a flexibility to have a, to be reason and plan and think at a, you know, in, in a kind of a holistic and a, in a flexible manner. Because AI\u2019s gonna do so many of the tasks. And, and, and they will often know more than you about any specific domain. So do you need to be above that in a way, almost like an architect would, would,<\/p>\n<p>01:06:20 (Speaker Changed) Makes, makes a lot of sense. Yeah. And our final question. Yes. What do you know about the world of technology today? You wish you knew back in the mid nineties when you were really starting out.<\/p>\n<p>01:06:30 (Speaker Changed) You know, if I knew what, how this would unfold, I, I, in the Silicon Valley, has I, I would\u2019ve just gone straight to Silicon Valley, the company maybe, maybe instead of being on the investment side. Huh? I don\u2019t know. It it, it is, it is a, it it\u2019s a double-edged question. \u2019cause I, I like the, I like the dynamic exposure to many companies, but like,<\/p>\n<p>01:06:56 (Speaker Changed) Plus the path you\u2019ve taken is so fascinating. Yeah.<\/p>\n<p>01:06:59 (Speaker Changed) I would say another point of, for the young people, always bet on the future, not on the current past bet on the future. What<\/p>\n<p>01:07:07 (Speaker Changed) A, what a great way to wrap this up. Tony, thank you for being so generous with your time. We have been speaking with Tony Kim, managing director at BlackRock, where he heads the fundamental equity technology group. BlackRock manages about $11 trillion in assets. If you enjoy this conversation, well be sure to check out any of the 500 previous discussions we\u2019ve had over the past 10 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcast. And be sure to check out my new podcast at the Money short conversations with experts about topics affecting your money, earning it, spending it, and most of all, investing it at the money wherever you find your favorite podcast. And in the Masters in Business Feed, I would be remiss if I did not thank the crack team that helps with these conversations together each week. My audio engineer is Meredith Frank. My producer is Anna Luke. Sean Russo is my researcher. Sage Bauman is the head of podcasts at Bloomberg. I\u2019m Barry Riol. You\u2019ve been listening to Masters in Business on Bloomberg Radio.<\/p>\n<p style=\"text-align: center;\">~~~<\/p>\n<p>\u00a0<\/p>\n<p><iframe class=\"lazy lazy-hidden\" style=\"width: 100%; max-width: 660px; overflow: hidden; background: transparent;\" data-lazy-type=\"iframe\" data-src=\"https:\/\/embed.podcasts.apple.com\/us\/podcast\/masters-in-business\/id730188152\" height=\"450\" frameborder=\"0\" sandbox=\"allow-forms allow-popups allow-same-origin allow-scripts allow-storage-access-by-user-activation allow-top-navigation-by-user-activation\" data-mce-fragment=\"1\"><\/iframe><\/p>\n<p><noscript><iframe style=\"width: 100%; max-width: 660px; overflow: hidden; background: transparent;\" src=\"https:\/\/embed.podcasts.apple.com\/us\/podcast\/masters-in-business\/id730188152\" height=\"450\" frameborder=\"0\" sandbox=\"allow-forms allow-popups allow-same-origin allow-scripts allow-storage-access-by-user-activation allow-top-navigation-by-user-activation\" data-mce-fragment=\"1\"><\/iframe><\/noscript><\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<p>\u00a0<\/p>\n<div class=\"printfriendly pf-button pf-button-content pf-alignleft\"><img decoding=\"async\" class=\"pf-button-img\" src=\"https:\/\/cdn.printfriendly.com\/buttons\/printfriendly-button.png\" alt=\"Print Friendly, PDF &amp; Email\" style=\"width: 112px;height: 24px;\"\/><\/div>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/ritholtz.com\/2024\/12\/transcript-tony-kim\/\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>\u00a0 \u00a0 The transcript from this week\u2019s, MiB: Tony Kim, Blackrock Active Technology, is below. You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify,\u00a0YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here. ~~~ This is Masters in business with Barry [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":12,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3],"tags":[2516,2515,2605,2517,2513,49],"class_list":["post-1508","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-ekonomika-finansai-bankininkyste","tag-active","tag-blackrock","tag-kim","tag-technology","tag-tony","tag-transcript"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/posts\/1508","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/comments?post=1508"}],"version-history":[{"count":0,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/posts\/1508\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/media\/12"}],"wp:attachment":[{"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/media?parent=1508"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/categories?post=1508"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/europaskolos.lt\/index.php\/wp-json\/wp\/v2\/tags?post=1508"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}