Grant Williams: All right, John Mauldin, it’s
that time of year again. We’re back for the Strategic Investment Conference. John Mauldin: That was last week. I know, right? Was that a year? It’s crazy. God. It’s crazy. You and I seem to find ourselves in the same
ZIP code so often around the world. And every time you walk into the room, I light
up because it’s just fun to be with Grant Williams. Well, thank you. It’s always fun for you and I to sit and chat. It’s nice to have the cameras there once,
so other people could join in, right? Because we get to do this way more than you
would think in various places around the world. And you know, we’re here for your conference
again, and the title this year is Paradigm Shift. And so what I want to talk you about today
are some of these big picture– you know, we’ll forget markets and economies. Let’s get that out of the way. We’re going into some really big picture stuff
that I know you always spend a lot of time thinking about. So you know, what’s uppermost in your mind? Some of these really big, secular, generational
shifts? Where do you begin when you try and pull that
together? Well, you know, I’ve been working on for a
long time now of writing a book called The Age of Transformation, where the world’s going
to be in 20 years. And I’ve actually written and published two
books since I started writing that book. If you started writing it 20 years ago, we
got a problem. But when I come back from this conference,
and then I’ll tell your readers, I’m going to the Virgin Islands and I’m going to get
married to Shane. All right, finally. And finally, finally getting married to Shane,
one of my better life future decisions. Studying, thinking– I mean, just this massive
amount of information. Because it’s not just technology. So many people when they think about the future,
they want to focus on technology, or they want to focus on this. I want to talk about the world. And really, every chapter is potentially a
book. So I have to really pull it in. But when the reader is going to walk away
from the book, I think, he’s going to go, oh my god, everything is going to change. And you and I have talked about before in
our lives that the four most dangerous words in the world are this time, it’s different. But if we hear somebody say that– Don’t do
it. We click them off. We click– I can see you’re going to do it. I’m going to do it. It’s different this time. Things really are going to be different. And the thing that I think I’m focused on
and worried about the most is the future of work, because for much of humanity, how we
see ourselves, what our innate nature is is carried out in our work and our passions and
what we do. And Eberstadt wrote this wonderful book, called
Men Without Work. 10 million American males have dropped out
of the workforce. This has been a 40-year lower left to upper
right curve. So it’s not something that happened with Reagan
or Obama or Bush. I mean, it’s just been– it’s been a steady
state. It’s going to change more. When we went from the farm, 80% in the late
1700s to 50% on the farm in 1850 to 2% today in the US, it was 10 generations. And each generation, a smaller piece of the
total pie was working on the farms. They’d leave and go to the city. We’re going to have that same type of occupational
shift in the next 10, 15, 20 years. Pricewaterhouse Coopers came out with a report
here just a few weeks ago that said 38% of American jobs will be automated between now
and 2030. Really? 38%? Long list, details. What are they going to do? Where do they go? Well, automation is going to create new opportunities,
new jobs. I mean, we’re going to be down 250,000 information
analysts. Where are we going to find them? Are we going to retrain the taxi cab drivers,
the truck drivers to be information analysts? How does this societal change work? We think that the frustration that produced
Trump, the frustration that almost produced Bernie Sanders, was like this final denouement
of frustration. What I’m telling you, when you look at the
causes, when you get into the picture, Trump’s the harbinger. He’s the beginning. It’s going to be societal angst on steroids. We’re going to get whipped back and forth
and back and forth, because people at the end of the day, they’re uncomfortable with
change. Yeah, I think we all are. We all are. But this kind of change is, from the technology
standpoint, it’s incredible. I mean, human beings do things to make their
lives easier. But it feels like we are at that point where
we’re going to make things so easy that there’s nothing for a lot of people to do. Well, there will be something for them to
do. I mean, you– seeing the charts of how many
companies and manufacturing companies are looking for workers, and how many they’re
actually hiring. OK, they can’t find people to do the tinkering
and the pushing and the– I mean, there’s stuff to do, but there just may not be stuff
to do in your city. The great irony is that America came as the
land of immigrants. 99% of us came from somewhere, Europe or Asia. And yet today, people don’t want to move from
Ohio to Texas to get a job. I mean, they’ve got their family, they’ve
got their roots. And that may be where the jobs are. And that’s going to be wrenching. I mean, it’s just– I read about a new steel
mill– let’s call it “steel.” Let’s put quotes around steel. New materials mill. And it’s launching in Ashland, Kentucky because
it’s a right to work state because they had sold it and they never want to deal with a
union again. $1.2 billion. It’ll cost them $10 million a year to maintain
it, as opposed to $100 million. They’re using materials that’s– they’re going
to produce materials that’s three or four times stronger than steel, that’s lighter
than steel. That mill and all the others that come out
from the changes, the radical changes in material science, are going to put one steel mill after
another out of work all over the world. So it’s not just taxi drivers and automation. No, it’s not. But the problem is this is a trend that you’re
right, it’s sweeping the globe. But the problem is, when you build these factories,
you create these new technologies and they do run more automation, it does put people
out of work. And the people that have jobs, if you’re getting
your running cost from $100 million to $10 million, you’re not going to give that $90
million back to the workers and up their salaries. You know, there’s 10% of the workforce, we’re
going to times their salaries by five. No, they’re dropping the price of their product. Exactly right. So how do we pay these people? How do you keep.. Believe it or not, they’re paying $40,000
to $50,000 a year to these workers in Kentucky. I mean, these are the highest paying jobs
in that community. The number of people applying for these jobs–
I mean, it’s 500 workers. Right, instead of 5,000. It will be instead of 5,000, and they’ll be
producing more. I mean, America is producing more today than
we’ve ever produced in the past. We’re just doing it with fewer workers. Yeah. Which is good and terrible. Well, it’s good and terrible. I mean, it’s like– we use a number called
Gross Domestic Product. It’s a theoretical, hypothetical, artificially
derived number. But we quote it like it’s Gospel. Right. If we produce twice as much oil at $50 rather
than at $100, we are saying, in terms of GDP, that it’s the same thing. And yet, you and I know well, wait a minute. We got twice as much oil. We’re producing it cheaper. Isn’t cheaper better? Well, not if you’re measuring GDP. I mean, food is getting cheaper. We’ve pulled two or three billion people out
of poverty in the world in the last 20 years. We’re living longer. We’re living healthier. I mean, things are radically improving. But those aren’t what make the headlines. But nonetheless, it’s the change that is what
we see. And my fear is that the moving back and forth,
the shift from Sanders to Trump, or whoever it is in the future, I mean, the players on
the front of the team don’t make that much of a difference, in the sense of the forces
that are driving them. It is that people are going to be saying,
you’ve got to protect us from change. They want government somehow or another to
solve problems that the government can’t solve. The government cannot solve the problem of
the steel mills that were built to manufacture steel that doesn’t compete with the new mill. Yeah. All the old steel mill can do is retool and
change and somehow or another reconfigure itself on the fly. But to me, this is the crux of the problem
right here, because you’ve got– I mean, Trump, Sanders, they’re two sides of the same coin. They’re disaffection essentially with inequality,
or with the sense of inequality. And what these technologies, these advancements
are doing is amplifying that dislocation. Because to your point about the steel mill
in Kentucky, you’ve got 1/10 of the population are doing great now. The other 90% have been screwed out of a job,
and they see 10% of their former colleagues now earning $50,000 a year and they’re thinking,
hang on a second, this isn’t fair. And so as much as all this change is incredible
for mankind, on a local level, it causes enormous problems in a world where those problems are
already there. And we do have Trump. We do have Sanders. And so that’s– when you say, what am I focusing
on? What is the kind of the big picture leap,
you know? Yes. And these changes are going to happen at a
time when– for you and I are both focused, the sovereign debt in the world is at bubble
levels. Total government and societal debt plus unfunded
liabilities, $500 trillion in an $80 trillion GDP world. How do you cover the carry cost on that? Well, you don’t, right? Yeah? You can’t. So it becomes what I’m calling the great reset. We have to go back through and figure out
as a society, how we want to meet future promises. We want to decide how we’re going to deal
with the debt. I mean, I think it’s probably not a shock
if I say that I’m an intellectual libertarian. And you know, I’m a fan of Hayek. But we’re going to have to embrace heresy
in the next five to 10 years. Grant, you and I will be writing about why
the United States needs to monetize its debt. In the next global recession, US government
debt, Federal, state, and local, over $30 trillion, rising $1.5 trillion, $2 trillion
a year. Until we bring it somehow under control, the
costs keep going up. Because even as stuff gets cheaper, services
don’t. And what are we buying? We’re buying education, we’re buying health
care, and so forth. Now, over time, 30 years from now, I think
health care costs actually go down because technology is going to come to the front. I mean, there’s three guys on the stage at
the conference. Those three guys represent $1 trillion. I don’t know if their companies will ever
be worth $1 trillion, but they’re going to destroy $1 trillion in market cap, just like
Amazon is destroying the market cap of Sears and everybody else. But Jeff Bezos doesn’t have it clear. He’s not on the road to eternal domination. Jack Ma at Alibaba is selling stuff at $0.20
on the dollar for what Amazon is selling its stuff for. Amazon is now selling Chinese material from
Chinese workers in the US. And if you’re willing to wait 30 days, where
the Chinese government subsidizes the shipping, your costs are going down for stuff, but not
for services. Well, obviously. But all I hear when we talk about this, all
I’m hearing is deflation, deflation, deflation, deflation everywhere. And it’s deflation in the stuff, but not deflation
in services. But is that– I mean, it’s this– and by the
way, that means that services, which is salaries, it’s education, it’s going to have to deflate
right along, as well. That’s my point. So you know we’ve got this these huge inflationary
pressures. You’ve got some of society doing very well,
the 1% at the moment. Maybe that can move to the 2%. Something, the 20%. You have on both sides of the philosophical-political
divide, you have the protected class. You have the people that can afford to protect
themselves and to be involved and be on the train of change, and then you have the people
that feel unprotected. And the unprotected are the ones on both sides,
OK, and I’m not arguing with them. I’m just noting as a fact that the protected
class need to figure out how they’re going to take care of the unprotected class. Because eventually, the unprotected class
are going to go, wait a minute, this is just not working for us. But isn’t that what’s happening right now? You say at some point it’s going to happen. It feels to me that that’s starting to happen
now. If Trump is the harbinger of anything, it’s
that, surely. Well, I mean, it’s like this silly call by
the media elite to impeach Trump. Right. I mean, it’s like– OK. I can understand that you might have some
issues with him. I can understand your frustration. I get that. I was frustrated for the previous eight years,
and you were frustrated for the eight years before that. Sure. Yeah, no, of course. That’s the nature of politics. That’s the nature of the beast. But the– can you imagine? Think about the 38% to 40% of honest to God
Republican, I mean Trump backers. Not people who are on the Republican team
and voted for the team, but their backers and their believers. And you go to them and you say, we’re going
to take your man out over issues that they don’t understand, they can’t see the point. Can you imagine the upheaval? No, no. It would be shocking, but can Trump actually
deliver? Because from what you’re talking about, he
was voted in by the steelworkers, right? These are the guys, middleAmerican, blue collar,
hardworking people who voted Trump in because they felt that disaffection. From what you’re saying, it’s impossible for
him to deliver what they want. I– I’m really honest to God skeptical that
anybody– I mean, Grant, if I could magically make you president, OK– and I wouldn’t wish
that on my best friend, like you. But– I mean, I don’t think anybody, given
the structural changes, the structural problems that we have– I remember sitting with Newt
Gingrich in Italy four summers ago, late at night. He was talking about Romney. I mean, literally every day at 4:30, he would
start walking the hills out in this little village in Trequanda, talking to Romney’s
campaign manager, giving him advice for 30 minutes. And he was convinced that Romney could win. I wasn’t. I was sitting with Newt Gingrich in a little
village, Trequanda, in Italy, where we were spending a few days together. And we were talking about the future in America,
because he he’s a bit of a futurist. Not a bit of it, he’s a fabulous futurist,
and really has a good grasp on politics and breakthrough technologies for them. And we’re talking about the future. And I said, we’re rapidly approaching the
place where we’ll have no good choices. And he says, John, that’s not true. We will have bad choices and simply difficult
choices. Fair enough. He was right. If Romney had won, he would have had some
difficult choices. I think we’re rapidly approaching the time
where the world is going to be looking– the developed world is going to be looking more
and more like Greece. Greece’s choices five years ago, six years
ago, were between bad choices and worst choices. And I think they chose the worst choice, but
we’re coming to the place where there will be no even difficult choices. There’s only going to be a choice that you
make that is going to create havoc and chaos. You start having to monetize global debt on
the level that we’re going to have to do it globally. That’s not a recipe for stability. That’s not a recipe for curing inequality. You start taking 38% of American jobs and
automate them, it’s about 30% of English jobs. I mean, America’s the worse. Well, we are a nation of butlers. There’s always a place for a butler in England,
don’t worry. There will be plenty of people becoming butlers,
I’m sure. Well– We may be exporting people back to
England to become butlers, I don’t know. No, you can’t have an American accent if you’re
going to be a butler, John, that just doesn’t fly. It’s just difficult to imagine the societal
change. I mean, we’re going to put four billion people
who are now not connected to the internet, they’re going to be connected to the internet
within the next 10, 15 years. We’re going to see I think within five years
one of three companies will have a full on bullet for cancer. We’re going to see new organs regenerated. There’s so much going to happen. And yet– Inequality is a relative thing. And we see it in the United States. And we feel it, and we feel inequality. Yet you and I go around the world and we see
third world countries who would give everything they had to become and be as unequal as the
average American worker. Yeah no, you’re right, but people vote locally. They don’t vote relatively. That’s the problem. It is all local. It is all a relative problem. And the fact that in 20 years their life is
going to be so much better, they’re going to be so much richer, they’re going to have
so much more access to everything, it’s still going to be relative. And the producers of that change are going
to have this fabulous, phenomenal wealth, and they’ll bring people along with them,
but they’re not going to be bringing everybody along with them. Yeah. And as a society, we have to figure out how
to do that. Now, Sweden’s starting to have some experiments,
Finland’s starting to have an experiment with universal basic income. Grant, if I say the word to you, the words
universal basic income, it’s philosophically abhorrent. I completely agree. But Grant, we may have to embrace heresy as
a culture to survive. Yeah, but you see, well, I disagree. Because if you decide that that’s the way
you want, to go that’s fine. The Finns might try it, the Danes might try
it. OK, that’s fine. These are small societies. If we were trying to implement that when we
had 20% debt to GDP, there’s some space. You could do that. But where we are now, this idea of giving
people more stuff to keep them happy, to try and equal the playing field to do all this
stuff, it doesn’t work. And to your point earlier about what do we
do with this debt, every single solution that’s being offered does one thing in common, increases
that debt, because it’s all future problems, as they’re going to pull forward to try and
sate either demand or sate emotions now. That means monetarily policy wise, we’re going
to have to embrace heresy. We’re going to have to think the unthinkable. And I can think of three or four ways that
we can do it, and they’re all unthinkable. Right. None of them would have been broached by Hayek. No. You know? No. And frankly, I think John Maynard Keynes would
roll in his grave to even think that we’re doing some of these things. These problems that we’re going to come up
to are going to be– I don’t think the word catastrophic is the wrong potential word. No, I agree with you. And how do we as a culture, as a country,
how do we embrace that? And that’s what I’m worried about. So when you ask me, when I think about the
future, I think the societal changes are every bit as difficult and problematic as the economic
and investment changes. Well, and the problem is, with all of the
health care technology, people are going to be being pissed off for longer, because they’re
going to live to be 100. Not only are they going to live longer, they’re
going to live longer and healthier. And Grant, you are young enough– I’m on I’m
on the cusp– that they will turn you younger again. I can’t think of anything worse. I don’t want to go backwards. Why? You don’t– I don’t want to live forever. Why wouldn’t you want to live forever if you
could be young all that time? I’m tired, John, I’m tired. OK, but you would have more time to rest. Oh, I wish. No, if you can achieve that, that I’ll buy
into. If you can find me some more time to rest,
I’ll take that. I’m going to give you a younger you with more
rest. All right. Well, we’ll see. I’m going to keep the receipt, just for a
little time. But let’s talk about this reset, because I
think you’re right. I think there is a reset coming. And that word means a lot of different things
to a lot of people. Some people think of it just in the financial
set, is it a debt jubilee? But I think you’ve hit upon this with what
you’ve said. It’s much broader than that. This reset is not just a financial reset. It’s a societal reset. And the problem with any kind of reset that
is debt based, which is essentially the problem we have here, is it means taking the capital,
the real capital away from the people that have it to fill the holes. Because you can write off the debt if you
want to do that, but the opposite side of the ledger takes a hit. So it feels to me there is a transfer of wealth
coming that is going to be the like of which we’ve never seen before, because the debt
is the like of which we’ve never seen before. Can you see a way that that plays out peacefully? Because I struggle to see how that happens. Define peacefully. Well, without conflict, a real conflict, the
kind of conflict that we thought we were done with as a species. I mean, conflict as in guns? Conflict as in well, whether it’s cyber, whatever
it is, whether it’s one nation that’s hacking into another’s central bank—We saw with
Bangladesh, they took $80 million from Bangladesh, you didn’t even read about it. Yeah. How does this play out? Because I can’t see a peaceful, Bretton Woods
type conference where we all get around a table and we divvy things up, because it just
doesn’t work anymore. If we don’t have a Bretton Woods III where
we all agree to hold hands and walk off the cliff together, to monetize together, to roughly
keep our currencies in line and in balance, over time– can’t do it in one year. No. OK. Then it will become every central bank for
itself, every country for itself. And that will be chaotic. That will be truly devastating. I don’t think we have any choice but to sit
around the Bretton Woods table. I mean, we could say no. We could go into a world where everybody takes
on their problems and it’s every country for itself. That’s not a world that is successful. It’s chaotic. It’s– I don’t know how that transition works,
Grant. You mix with a lot of the people that are
going to make these decisions. You spend time talking to them. Do they understand the scale of the problem,
or is there a little bit of they’re focusing here, as opposed to this much broader dilemma
that they face? They’re more focused on what’s in front of
them, and they haven’t really sat back– a few have. Yeah, sure. OK, a few have stepped back and looked at
the broad picture. And they take deep breaths. And then they have to come back and focus
on what’s in front of them. Just in the same way, when you’re running
your business, you look at the broader picture. But you have to sit down from time to time
and have a conversation that’s– and you’ve got to focus on that conversation rather than
the broader picture. But we’re going to have to have a global conversation. We’re going to have to have a national conversation. We look at the problems in Europe. They’ve got problems. They do. I mean, the reality is that Europe, when you
go from country to country and you look at it, its problems are every bit as big or worse
than the United States. Sure. They got to figure out how to make it through. I mean, do we all become Japan? Do we all say, we’re going to figure out how
to have no nominal GDP growth and we’re going to start monetizing our debt at 10% to 15%
of total GDP every year? And somehow or another, it’s working. Well, it’s working for Japan in isolation. The problem is when everyone starts to do
it. I just- – that’s to me always been the line
in the sand. Well, that’s what we’re going to find out. Well, I think we all– I think we are Japan. I think we’re all Japan. We just we just don’t want to face up to it. I mean, we have different demographic challenges. But at the end of the day, if you look at
what’s happening with global population, you look at the sovereign debt, you look at the
yields, this deflationary world is going to take bond yields lower. It’s going to put all that pressure wherever
you go, and the answer to it, A, should have been given decades ago, and some hard choices
should have been made then. But now we’re in the position where everything’s
a reaction. It’s putting out the next fire. There’s no– no one’s looking forward and
saying– and I’ve told this story before. In Japan, we knew 25 years ago that 2015 was
the year the Japanese population would start– we knew it 25 years ago. No one did anything about it. And the solutions that would work today would
have worked 25 years ago, but they put it off, put it off. It’s the same in US, it’s the same in Germany. The Natural population rates in Germany, Italy,
Portugal, are all declining. With no immigration, the people are dying
off. And the immigration is the solution to Japan’s
problems, it was. That was a nonstarter. It’s causing problems in Germany. It’s causing problems in Italy. So the solutions are very difficult things
to sell politically. So I just don’t see any of these answers being
made and imposed upon people. It’s going to be OK, well, we can’t possibly
say that. We can’t possibly cut Social Security. We can’t possibly do this, we can’t possibly
do that, so we won’t. We’ll come up with a stopgap. And that is spreading around the world. And it’s now reached the point where even
if you had the balls to make these moves, you now can’t, because to your point, the
outcome if you do that is chaos. And so why voluntarily impose chaos upon a
district, a country, a nation, a continent? Why not wait and hope chaos is somebody else’s
problem 4, 8, 12, 16 years down the road? Well, that’s what we’ve done. Yeah, absolutely. And I’m arguing that in the next 2, 5, 10
years, we come to the place where we’re beyond difficult choices and we’re now to, here are
the bad choices in front of you. Choose bad choice A or bad choice B. But at
the moment, bad choice A and B, there’s also choice 3, which is well, let’s print some
more money, rather than make A and B. Well, but I– print more money is bad choice C.
I mean– The reality is optically, because it’s worked right? It’s worked. It’s worked. It’s worked, as you said, for Japan in isolation. Can it work as a group? If all the developed countries say, OK, we’re
going to monetize our debt, what happens in the emerging markets? They don’t have enough debt to monetize. Korea can’t monetize its debt. It doesn’t have that much. If they start monetizing and printing and
trying to defend their currency, they get inflation. Well, that doesn’t sound like a good world. I mean, everybody’s choice is going to affect
everybody else in a globalized economy in the world. So amongst all this stuff, you know, this
all sounds a bit doom and gloom, but there are always places to focus. And you more than anybody the last two years
have had this forward looking, you’ve embraced health care technology and advancements. So talk a little bit on the sunnier side,
when you talk about these changes that are going to make our lives longer and increase
our health, talk a little bit about some of the incredible technology that you’ve seen
happening. Well, I mean, there’s a company– there’s
actually three companies, but there’s one that I’m involved with in terms of I know
what’s happening, because I talk to the CEO a lot– 9, almost 10 months into a Phase I
trial for full on bullet for cancer. We’re dealing with gliomas, pancreatic cancer,
I mean, ugly stuff, walking dead. We’re just now getting up to the levels of
dosage where we think it’s effective, or we hope it will be effective. But nobody’s died. That’s really amazing. Mike West, when I first met him almost 10
years ago, was talking about in 30 to 35 years, he’ll be able to turn us young again. It’s 10 years later, and now he’s talking
10 to 15 years. Every five years he pulls it in another five
years. They are making breakthroughs. The breakthroughs they’re making in communications,
in materials sciences, in automation- – I mean, when Elon Musk first said that they
would have a automated driving car by 2022, I turned to somebody and I said, I’ll take
the over on that bet, and I’ll put size on it now. You know, I’m no longer going to take that
bet. I mean, he landed a silly rocket in the middle
of the ocean on a boat that came out of space. He landed it, reused it, sent it back up again. That was impossible. We have people doing the impossible, doing
the unthinkable every day. I mean, we talked about Amazon and Alibaba,
but I mean, I got a friend of mine, they’re running a $4 billion materials company. And started out with catalogs 30, 35 years
ago, and they have morphed. And Amazon hasn’t bit into them at all. They’re continuing to grow, because they look
at Amazon as a– we could compete with you. We’re cheaper, better faster. I mean, it is not all one way. There are lots of people creating amazing
new companies. It’s not just biotech. I mean, it’s all over the place. I’m terribly optimistic for the future of
humanity. I think when we get to the other side of the
great reset, we’re going to see the greatest bull market in the history of the world. And it may not show up in the indexes, because
those indexes are full of old companies. You know, when I talked about those three
guys that are going to take $1 trillion of market cap out, well, those old biotech companies
are in the indexes. But if you change your trading strategy, if
you change your style, if you– let me propose something truly heretical. I think active management is going to be the
way to run your world from now onto the other side, and then after. This move into passive investing, into index
investing, is going to prove to be just another bubble. And it’s going to continue to grow until Mr.
Market, who is really one of the most devilishly evil people— No kidding. –when he’s got
as many people sucked in so that the most people can get hurt, then he’s going to flip
the switch on it. And you’re going to have wished you stayed
with your active managers. Well, I don’t– you see, that’s not heresy
to me at all. No, I completely agree. But you’re right in a broader sense that that
is right now. But you know, again, we keep coming back to
this stuff. People are piling into ETFs because they don’t
want to pay the fees because they can’t afford to pay the fees, because they can’t afford
to give away 10% or 15% in a zero world. So you kind of– people are being herded into
ETFs, many of them out of necessity. OK, the market’s been going up, so they kind
of say, well, why do I need an active manager? But they’re being forced there because most
them say, I can’t afford to pay fees because I don’t think I’m going to make the hurdle. Well, it’s not even not being able to afford
to pay the fees as that the fees that the active managers are charging haven’t been
justified. No. So a rational investor looks at it and says,
well, wait a minute. I could make more by paying less. So they’re making the rational choice. Here’s the problem– and active managers have
not responded well. I mean– No, because they can’t. OK, how many active managers do you know whine
and bitch and moan because value seems to not be rewarded anymore? Sure. Their active style is not rewarded anymore. And my response is, so then change. Why do you think something that you’ve done
for 40 years is going to be the way the world’s going to work in the next 40? I mean, in the same way that that steel mill
worker is going to have to figure out how to work for the new materials company, or
the steel mill is going to have to figure out how to create new product and adapt and
change, active money management is going to have to figure out how to adapt and change. And we have a lot of– and we have to be careful
about saying this, because as you and I are part of the gray hair, I mean, let’s face
it– but we have a lot of gray hair money managers that don’t want to change. They are convinced that this is what works,
and this is what we should do. And well, it doesn’t seem to be working out
that way. Well, I mean, time would suggest over the
cycle they’re right, and it does work. But again, this is more deflationary pressure. This is you’ve built big overheads, your prices
have to come down. And that’s more deflation. The prices are going to have to come down. The services are going to have to be increased. The overheads have to be reduced. I mean, that same PricewaterhouseCoopers report
that talked about 38% of jobs being automated, it says 61% of financial service workers will
be out of a job in the next 13 years. So we’ve got that going for us. Yeah. And I tell everybody that hears that, I’m
saying, and that means there’s a bull market in competence. Yeah. OK? You have to figure out how to be competent. That’s a great point. You have to figure out how to adapt and change,
because it’s the species, whether it’s a steel worker or an investment money manager, that
figures out how to adapt and change, the clothing company that figures out how to adapt and
change is what’s going to survive. And so when 61% of them are out of a job,
half the brokers and advisors are out of business, I look at the other half and I say, you should
be shouting and leaping for joy, because that means their clients are going to have to find
somebody to go to, and you might as well be the one to double your business at a minimum,
just by surviving. Yeah. And if you can figure out how to thrive, oh,
you’ve got great opportunities in front of you. I mean, the reality is that it’s not the end
of the world when we’re talking about the great reset. It’s not. No, of course not. I mean, we muddle– we’re going to muddle
through. That’s what humanity does. And I honestly don’t think we’re going to
get into a shooting war. I mean, little places here, little places
there. But I mean, nobody is going to come start
thinking about invading Texas, you know, or England. Well, Oklahoma, I mean, you know, those guys,
they– Oklahoma is– you’ve got to get through Oklahoma to get to Texas, OK, and Arkansas. They have good old boys up there, too. I’m not worried about that. I’m worried about the societal upheaval, the
frustrations, the angst. But at the end of the day, we truly are all
in this together. There are going to be fabulous opportunities
for people that can figure out how to solve the problems. Well, I’m just going to keep you on this thing,
just to finish off this. I’ve been wanting to ask you, Mauldin Solutions,
because this is something you and I have spoken about for years now. For years, oh my god. Absolutely. But what you just– you talked about adapting
and active management. Just talk a little bit about that, because
I think if you haven’t launched, like now, I mean, you may have pressed a secret button
in the chair. Well, actually, we pressed the button right
before we sat down, and we launched. So we’re out live right now. So tell me a little bit what it is, because
it is– this is you practicing what you preach. The great reset is going to create difficult
choices. I sat with– I’ve met numerous times now Harry
Markowitz, the modern portfolio theory. And we have to remember that modern portfolio
theory that, graduate paper by a 22-year-old graduate student, was written 65 years ago. He was basically a linear programmer. And he just applied– and you end up with
the efficient frontier. And I would argue– and I’ve done it publicly,
and then he refuted it publicly– that modern portfolio theory no longer applies. And we’ve sat down with him because my view
is that you have to diversify trading strategies. You no longer diversify asset classes. Your trading strategy says to you what asset
class do we want to be in this week. What is the market telling us where we should
be? And so you get great traders who put you in
the position to have the potential to win. I sat down with Harry this last Spring. We were in some fabulous resort somewhere
in Southern California, looking out over the ocean and you know, all of that good stuff. And he says, OK, we’ve been having this discussion
now for years. What are you really going to do? And I begin to explain how I was going to
diversify trading strategies. And he says, well, you’re just doing what
modern portfolio theory says you should do. And I’m sitting there going, no, no, no, no,
no, no. Because you said you should have all of these
strategies– and he says, no. The point is that you have diversification,
number one, and that you– over your broader piece. And he says, you’re still doing modern portfolio
theory. You’re just using the diversification of trading
strategies as your vehicle instead of I want so much small cap and so much large cap, and
so much international. He says, it’s the same thing. And the light, after the 10 years of conversations
that Harry and I have been having, it finally clicked. I’m going, you’re right. It’s just modern portfolio theory 2.0. Because people have interpreted it to mean,
well, you have to get the static asset classes. And so you choose your asset diversification
structure, which is very important. But I don’t think we have that luxury anymore,
because that diversification, when you do it that way, you’re not diversifying your
returns, you are diversifying your loss stream. Yeah. And so now we have to change the strategy. So what I’m doing with Mauldin Solutions is
I’ve found four ETF trading strategists who are professional, depth, team– I mean, there’s
a lot of power in the room. But they’re all radically different in the
way they approach the market. They have global portfolios. We can have 60 or 70 ETFs in that total portfolio. And I really did have to beg and plead and
brow beat on fees. I have to raise 10 times the money that I
would have needed to raise 10 years ago to make the same return, because I’ve had to
take my fees down, too. But that is the way the world is going. And I’m making my own rocket launch. And I hope it’s going to be more successful
than Elon Musk’s first rocket launch. I think he had to do what, three or four times
before he finally got one to go up and stay up, and then getting it to come back down
was even trickier. It’s exciting and it’s important. And I mean, it used to be you could diversify
trading strategies by going to hedge funds. OK, you can do that. And I do. I mean, a lot of my portfolio, I’ve got hedge
funds. But that’s not available to everyone. ETF trading, the technology has changed so
much that we can actually make it global now. We can really offer things that just weren’t
even possible three years or five years ago. I think it’s pretty cutting edge. Well, look, the rocket’s launched today, so
we’ll sit and watch and make sure it lands. I mean, we’ve been trading live for a while
now. But the public face is now launched. Well, I congratulate you on that, finally,
after all these years of you and I talking about it. And you and I are recording this the day before
the conference starts. I’m looking forward to– as always, it’s a
fantastic conference. It’s a great line up of speakers. You know, it is really the most intellectually
powerful team of speakers and conference that I’ve ever done. This is the 14th year. I am so excited about just the thought stream,
what we’re going to be seeing. And you’re part of it. I’ve got you– you are singing for your supper. I am singing for my supper, and I’m very happy
for that. I’ve got you on stage a lot doing moderate,
doing what you’re doing right now. You just moderate and ask questions, and have
this silly British smile. And everybody loves Grant. John, thank you so much for giving me– I
know it’s a busy week for you, and I appreciate you giving me the time. Thank you. Thanks a lot.