From Technology in Focus to Finance with BlackRock's Tony Kim

Barry Ritholtz speaks with Tony Kim, Managing Director and Head of the Fundamental Equities’ Global Technology Team at BlackRock. Prior to joining BlackRock in 2013, Tony held key roles at institutions like Artisan Partners, Neuberger Berman, and Merrill Lynch. He is also a member of the Advisory Board for Columbia Business School’s Digital Future Initiative. On this episode, Barry and Tony discuss the success of passive investing at BlackRock, the general tech investing landscape, and what it takes to build a career that combines a passion for technology with finance. See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  At K K R, we've spent 50 years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, K K R has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. K K R, understanding what matters. Visit K K R dot com slash what matters.

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• 0:58Speaker 01

  Bloomberg Audio Studios. Podcasts, radio, news.

• 1:05Speaker 02

  This is Masters in Business with Barry Ritholtz on Bloomberg Radio.

• 1:12Barry Ritholtz?

  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 E T Fs, he is just a world-class technology investor who understands the sector like few other people do. Not only has he put up a very impressive track record, his entire approach to the ecosystem of technology, covering everything from robotics to A I to software to semiconductors,

• 1:56Barry Ritholtz?

  is really quite fascinating. If you're at all interested in technology, in A I, in the process of thinking about tech investing, then you're going to find this conversation to be absolutely fascinating. With no further ado, my discussion with BlackRock's Tony Kim. Thank you, Barry.

• 2:17Speaker 04

  Pleasure to be here.

• 2:18Barry Ritholtz?

  Uh, pleasure to have you. So let's start out with your background. Bachelor's in industrial engineering from University of Illinois. And then an MBA from Columbia. What were the career plans?

• 2:29Speaker 04

  Career plans, yeah. First of all, thanks for having me. Uh, your, your show title, Masters in Business. I, I have no master in business.

• 2:38Barry Ritholtz?

  Well, you have an MBA, so you automatically qualify.

• 2:41Speaker 04

  Yes, for sure.

• 2:42Barry Ritholtz?

  That's a Masters, right?

• 2:44Speaker 04

  Yeah, that's true. That's true. Yeah, the origins of the career, you know, I, I grew up in the Midwest. It's the first phase of my life and, uh, growing up in the eighties in, in Illinois, I, I, you know, as a, uh, I'm from Korea, actually, but, uh, so the natural, uh, I was a STEM kid. Um, and, um, 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, uh, we, we were all from the state of Illinois and my siblings and I all went to school in the state of Illinois and, uh, and I gravitated initially to engineering and that's kind of that, that, that got into that.

• 3:28Speaker 04

  And then eventually I ended up in New York and then transitioned into finance.

• 3:32Barry Ritholtz?

  We're, we're going to talk about that transition in a minute, but before we get there, you, you really begin your career as an engineer at Rockwell Automation.

• 3:41Speaker 04

  Yeah.

• 3:41Barry Ritholtz?

  What did you do there?

• 3:42Speaker 04

  This is, uh, first job, right? First job, uh, first real job out of, out of school. It really, uh, it was the first entree into a company. Not only a company, a, uh, this was a, uh, automation company that's often known for, um, works with many industries, but helping automate, we're help, I was working on projects to automate manufacturing. Uh, they had these things called PLCs, which are basically industrial computers with sensors, with drives, drive systems, motor control, robotics, um, 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

• 4:27Speaker 04

  many industries. So that was my first entree in seeing. The diversity of the manufacturing base in this country. I was particularly, I was in, I was working in, on the east coast. And, you know, 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,

• 4:54Speaker 04

  with the technology of automating manufacturing. And so we worked on different projects and see across a lot of industries. But I realized I didn't want to, you know, I had other, I had other ambitions. And so this is what led me to going to graduate school.

• 5:12Barry Ritholtz?

  So, so let's talk about some of those other ambitions. You end up doing investment banking in New York in the mid 90s.

• 5:20Speaker 04

  Yes.

• 5:20Barry Ritholtz?

  What was the transition from being an engineer slash operator to an investor? What was that like?

• 5:28Speaker 04

  Well, when I was at, when I went to Columbia, you know, I did the, I worked at an engineering company and I thought, I wanted something a higher level, more strategic in nature. I actually thought I wanted to, I wanted to try to get into consulting. That's a classical.

• 5:48Barry Ritholtz?

  Right.

• 5:49Speaker 04

  Classical role for a MBA.

• 5:53Speaker 04

  None of the consultants would want to hire me, but somehow the investment banking side found me, or I found them. And it was an engineering, here's a guy from engineering with engineering background. And, you know, at the time, those are the early days of pre, pre dot 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 finance is what pulled me in on the investment banking more so than the consulting because of that angle, I think.

• 6:33Barry Ritholtz?

  And your timing was perfect, the 1990s. Great time to be doing I banking in technology. Tell us about some of the transactions you saw late 90s, early 2000s. What sort of deals were you working on?

• 6:47Speaker 04

  Yeah, just that transition. I was originally hired by SG Orberg, which was a British investment bank. It got acquired and then after the-

• 6:56Barry Ritholtz?

  That became Orberg-Pincus?

• 6:57Speaker 04

  That became SBC Orberg and then UBS bought SBC and then UBS Orberg and then the Orberg name went away. But I was there right at the time when Orberg was acquired. And that transition, I joined Merrill Lynch. And then Merrill Lynch said, "Go west, young man."

• 7:19Barry Ritholtz?

  Right.

• 7:20Speaker 04

  Okay.

• 7:21Barry Ritholtz?

  I remember Merrill Lynch during the 1990s was absolutely a powerhouse, or at least became a powerhouse towards the back half of that decade.

• 7:30Speaker 04

  Yeah. Yeah, so it was very much a new thing for them in the West Coast. And so I went, and I still recall to this day, there were several of us that were the origins of the M&A group on the West Coast from Merrill Lynch. In fact, three of those people, 20-some years later, were back, joined at BlackRock. And I can tell you the story of that.

• 7:59Barry Ritholtz?

  Sure, let's hear that.

• 8:00Speaker 04

  Oh, okay, yeah. There were three of us that were VPs and directors at the M&A group.

• 8:07Barry Ritholtz?

  Feel free to drop names.

• 8:08Speaker 04

  A guy named Dragan Ratchkovic, who is now Vice Chairman of JP Morgan, runs the tech M&A. This guy, Michael Leitner. And then myself. And then we worked with this guy named Rob Stewart. And then Mark Schaefer above him led the group. But Mike, Michael at Tennerbaum, BlackRock later acquired them. And he was one of the partners at Tennerbaum. 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-

• 8:43Speaker 04

  Michael, all ended up at BlackRock and some fans.

• 8:45Barry Ritholtz?

  Let's get the band back together.

• 8:47Speaker 04

  Yeah, get the band. Drago did not. Drago is still at JPMorgan right now. 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.

• 9:01Barry Ritholtz?

  Are you talking early 90s?

• 9:04Speaker 04

  Uh, mid, mid 90s, mid to late 90s.

• 9:07Barry Ritholtz?

  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. That was really what kicked off a giant explosion. Were you there around that time?

• 9:23Speaker 04

  Yes, in that time. And these were the deals when Cisco was going crazy. And there were, you know, there's so many transactions in 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 I decided to leave investment banking, where I learned a tremendous amount, especially the, you know, the strategic nature of looking at industries and companies and of course, all of the financial acumen, the rigor of

• 10:08Speaker 04

  doing very intensive financial analysis. But you're always working at the behest of a client, right? You're working on those transactional related. And this is when I decided to go and take a career path change to the investment side.

• 10:26Barry Ritholtz?

  So, tell us what that transition was like. What is it like going from transactional M&A on the West Coast to, no, I just want to find companies, public and private, and invest capital in them?

• 10:40Speaker 04

  Yeah, I think that was a transition. The financial analysis is the same effectively. Maybe it's even more intensive on the M&A side because you're doing much more detailed work. The way you're looking at industries and companies are relatively similar. It's 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 persist, you have persistence and you learn more about that industry and that domain. When you go to investment side, I started as an analyst. I wasn't, you know.

• 11:24Speaker 04

  And here you are looking at wider array of companies. You're doing financial analysis, but not as detailed as you were working on one deal, one transaction for months at a time. And then, but yet you have persistence because you're able to look at sectors and industries and companies for a longer period of time consistently. And so you build deeper domain knowledge. And so that was one. The second is that you're no longer working for a client. You are working to find the best, you know, investments and put your own capital at risk, right?

• 12:06Speaker 04

  And so that was a change of the mindset of how to assess because you're not working really, you're not just servicing a client. Here, you're putting your own capital at risk. 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 then that was the, working with many different kinds of investors, different kinds of investment philosophies. I must have worked for thirty, forty portfolio managers across four, four or five investment firms.

• 12:49Speaker 04

  And that's, that was like, I guess, my second era here was to learn the skills of investing.

• 12:57Barry Ritholtz?

  We're gonna spend more time on what you've learned in a little bit.

• 13:02Speaker 04

  Yeah.

• 13:02Barry Ritholtz?

  You said something I have to explore a little bit.

• 13:06Speaker 04

  Sure.

• 13:07Barry Ritholtz?

  It was more in-depth, more intensive on the M&A side than the investing side. I'm curious as to why. The two ideas that immediately pop into mind, you're covering a whole lot more companies on the investment side. But one can't help but imagine on the M&A side, hey, it's all in. You're 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're done. You could walk away with maybe a little worse for the wear and tear. But when you buy an entire company, hey, it's really hard to unwind that, isn't it?

• 13:46Speaker 04

  Yeah, that's right. You know, and you're buying the whole thing, or you're representing, or you're selling the whole thing, or you're selling pieces of it. And you're working on one company and another company, maybe two companies at a time. And you want to get every number right, every comma, every nuts and bolts to as many, as much detail as you can. So the precision and the accuracy and the information fidelity is much higher. Because that's what you're just working on, that one company, that one transaction. Versus, like you said, you're looking at hundreds of companies.

• 14:29Speaker 04

  And you can make a decision with the push of a button, sell or buy. And so the time spent on that analysis will invariably be less than the time spent on this one definitive transaction.

• 14:48Barry Ritholtz?

  Really, really interesting. So you've been at BlackRock since 2013. Obviously, passive has been a huge success for BlackRock. You're on the active side. Is there any crossover? Do you get pulled into any discussions from, you know, any of the big BlackRock ETF, sector funds, passive indexes?

• 15:13Speaker 04

  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's like passive decisions, you know, a lot of the passive index thing is now an active decision, I guess you could say.

• 15:40Barry Ritholtz?

  Hey, it always has been.

• 15:42Speaker 04

  It always has been.

• 15:43Barry Ritholtz?

  Right.

• 15:44Speaker 04

  Yes, that's right.

• 15:45Barry Ritholtz?

  It's, hey, we're going to make it market cap index. That's an active decision. We're going to, we're going to cap Apple, Nvidia, Microsoft at X percent.

• 15:54Speaker 04

  That's an active decision.

• 15:55Barry Ritholtz?

  Right? There's lots of active decisions. People don't realize there's quite a bit of active in their passive.

• 15:59Speaker 04

  Yeah. So now we're, we're joining that, that, that party as well. We have now active ETFs. We launched two recently, one on the AI side. So where we feel that dynamism, like especially in industry that is in rapid change, like in AI, I think you need a lot of adaptation, flexibility, because things are changing so rapidly.

• 16:23Barry Ritholtz?

  So, so I want to stay with that. We're going to talk about the, the multiple ETFs you actively manage. But generally speaking, after passive captured more than half of, of the mutual funds and ETF.

• 16:36Speaker 04

  Yeah.

• 16:37Barry Ritholtz?

  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's not relying on a passive index. What are your thoughts on the future of active management in the ETF space?

• 16:55Speaker 04

  Well, I think the, the future of active management, you know, 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.

• 17:18Speaker 04

  To those passive indices. But you said something very interesting there. You know, the industry is specialized. You know, sectors, thematics.

• 17:29Speaker 04

  In the container of an active ETF. I think that is more representative, maybe, where the future of active industry is going. Where one can express a differentiated view. And invariably, that is a function of specialization, I think. And of course, I'm biased in that because I am focused on a specialized area, which is the technology area. And then within the technology area, there are many further subspecializations. And I think those that have broader depth of domain knowledge, hopefully, that is the advantage.

• 18:11Speaker 04

  And then that gets expressed in an active fund, an ETF or a mutual fund or whatever. And, you know, as I've been in this technology industry for a long time, you know, 20 years ago, tech was 20% of the S and P. It's over 40. And it's probably going higher as now we're entering the AI era. And so generalists, I think, are at an 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.

• 18:51Barry Ritholtz?

  You know, I'm so glad you said that you think the technology sector of the S and P 500 is going higher. Whenever people say to me, aren't you concerned that tech is 29% of the S and P 500 or whatever the number happens to be? My answer is always the magnificent seven are responsible for something like $2.5 trillion in revenue and $500 billion in profits. I'm shocked it's only 29%. Why isn't it half of the S and P 500? This is what's driving the economy and the market. Doesn't it deserve a richer valuation? I'm curious as to your thoughts on that.

• 19:30Speaker 04

  100% agree.

• 19:32Barry Ritholtz?

  Okay.

• 19:32Speaker 04

  I 100% agree. You know, the multiple.

• 19:37Speaker 04

  In aggregate, has not changed dramatically, but it has driven by free cash flow. And and the forty percent I quoting is a combination of com services, which they carved out, which is really tech companies with classic tech. That's over forty percent. And when you look at the contribution of free cash flow, right, which is the ultimate profit metrics, it's followed, it is forty percent of the free cash flow, right? You know, the other thing about tech, I don't think people realize it has represented the highest growth. It actually has the highest margin. It's the highest profitable margin. People think it's unprofitable. It's like, but ninety some percent of tech have profit.

• 20:22Barry Ritholtz?

  This is not.

• 20:23Speaker 04

  Highest profit margin and the highest free cash flow growth. And that's what's driven the market cap appreciation. That is the, that is like not well understood.

• 20:34Barry Ritholtz?

  Fair to say, this is not the late nineties dot com.

• 20:37Speaker 04

  No, no.

• 20:38Barry Ritholtz?

  You know, whimsical ideas with hardly any revenue and no profits. These companies are printing money and are wildly profitable.

• 20:48Speaker 04

  Yeah. And in fact, I would even make another distinct, you know, the the mag seven. The most profitable sector in all the S and P of any is the semiconductor industry.

• 21:03Speaker 04

  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.

• 21:13Barry Ritholtz?

  Right.

• 21:13Speaker 04

  They have the highest margins in the world. 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 forty percent of the market cap, which is, and most of those are mag seven.

• 21:28Barry Ritholtz?

  Doesn't, doesn't sound like a bad place.

• 21:30Speaker 04

  It's not a bad place.

• 21:31Barry Ritholtz?

  To, to keep your.

• 21:32Speaker 04

  And now we have AI and it probably goes higher. It's gonna go higher.

• 21:36Barry Ritholtz?

  Fascinating.

• 21:37Speaker 00

  At K K R, we've spent fifty years understanding what matters to our clients and companies. From pioneering private equity to investing across credit, real assets, insurance and sports, K K R has built the experience to navigate complexity, the judgment to recognize opportunity, and the conviction to create lasting value. Because when people and institutions are counting on us, understanding what matters isn't just important, it's everything. K K R, understanding what matters. Visit K K R dot com slash what matters.

• 22:07Speaker 01

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• 22:44Barry Ritholtz?

  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've seen, reshape the entire economy?

• 23:03Speaker 04

  You know, I guess I would say, first, I'm 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, even before breaking them down, this kind of goes to my childhood. I always had a fascination, love of maps.

• 23:23Barry Ritholtz?

  Maps?

• 23:23Speaker 04

  Maps.

• 23:24Barry Ritholtz?

  Huh, that's interesting.

• 23:25Speaker 04

  Cartography, ancient maps. So, I would, I'd like to map everything out. And so, like, the ancient mariners would sail the oceans, you'd want a map of where you're navigating to. And so, I start with that. I like to break things down. I break technology down into five or six major subsectors, and then we just continually deconstruct and break those down. And so, once you start breaking these things down...

• 23:56Speaker 04

  You then create a map of the whole landscape. The semiconductor 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 giant, giant map of all of technology, all reconfigured and mapped out, and then you go into detail. And then this way, you start, it's kind of 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 then you have systematized a way of looking at all of those different categories and

• 24:40Speaker 04

  technologies and subsectors. And you know all the companies that are there, you know the competitors there, and then you're observing what's hot and what's not. And so then, so that's the current, that's 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.

• 25:01Barry Ritholtz?

  So what's so intriguing about that is we tend to think of fundamental research, CFP-type research, as very balance sheet driven. What you're describing is something that's much more holistic and comprehensive. You're, you're really looking at the whole ecosystem of technology to, to see what is, is moving. And you 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?

• 25:37Speaker 04

  Yeah, 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's the semiconductor industry, there's different kinds of chips, accelerator chips, memory chips, foundry, logic, analog. And then, let's say, the software industry, there's security, and applications, infrastructure, et cetera. And once you have mapped all of these things out, and you know where all the companies, or all the bodies are buried, and you know who's, who's competing with whom, and what,

• 26:20Speaker 04

  who's working on what, along comes AI.

• 26:25Speaker 04

  AI starts with ChatGPT and GPT 3.5 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

• 26:45Barry Ritholtz?

  That was your initial response to the first demonstration you saw of ChatGPT?

• 26:51Speaker 04

  That and having a meeting with Jensen Huang in January 2023, those two things triggered it. Then, once you see that, then you say, OK, how is this going to cascade through? You know, it's kind of like in biology, there's a, there's 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 you see, it's the first representation is, well, you got to 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 GPUs and memory and things. Then you say, well, then you need to, well, those are connected to the packaging systems.

• 27:36Speaker 04

  And those packaging systems are connected then to foundries. And then these foundries are connected to the wafer output, which you need the equipment. And then you start to build a chain of this is what's needed to build this part. And then those chips get started on in servers. And servers need this whole supply chain. And then those servers get then deployed in clouds. 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.

• 28:20Speaker 04

  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's being, we'll, we'll throw that into the self-driving car and robots. And so, once you see that whole chain.

• 28:42Speaker 04

  And how that gets diffused. And then you have interrogate, you've already built these maps effectively of every single one of these little ecosystems and supply chains. And then you see how diffusion works. And then, then you say, well, is it worth investing in these companies or not? And that's when then you get into the financial analysis.

• 29:03Barry Ritholtz?

  Huh, really, really interesting. So I'm hearing infrastructure, which is everything from power to cloud to database to intelligence, which is the modeling.

• 29:14Speaker 04

  That's right.

• 29:14Barry Ritholtz?

  And then software tools, applications, solutions. So this isn't, you know, I think people tend to think of, oh, AI, that's Nvidia. But what you're really saying is this is dozens, if not hundreds of companies working across a whole ecosystem.

• 29:32Speaker 04

  That's exactly right. Now, in the public stock market. The manner, the, the first two years, the manifestation of what I just described, or what you just eloquently described, gets expressed in the MAC7. You know, if I were to, let's 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 gets, live in a, in a, in a data center cloud. That whole bottom layer, those three layers, is what I call infrastructure.

• 30:16Speaker 04

  Okay, so that's why you're seeing most of the MAC7 are here.

• 30:22Barry Ritholtz?

  So that's Google and Amazon and Microsoft, to say the very least.

• 30:26Speaker 04

  And now Tesla's building AI.

• 30:28Barry Ritholtz?

  Cloud centers, right?

• 30:29Speaker 04

  And, and then above that layer, let's call it, that's the models and the data. So this is where you also have more MAC7, 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're feeding the data, and then you have all these data companies. That have, let's say, legal data, healthcare data, insurance data. And then some of them have proprietary data which are helping train these models, right?

• 31:04Barry Ritholtz?

  So we've seen a couple of stories about the Wall Street Journal and Reuters leasing their entire corpus of all their content to various AI models to work on.

• 31:16Speaker 04

  Correct. And you know, companies like Reddit have done a deal like that.

• 31:19Barry Ritholtz?

  Mm hmm.

• 31:19Speaker 04

  Um, Wall Street Journal, there's some lawsuits even, New York Times.

• 31:24Barry Ritholtz?

  Well, they have, and in some instances, seem to have borrowed stuff that was.

• 31:29Speaker 04

  Yes.

• 31:29Barry Ritholtz?

  You know, your ninety nine dollar a year um subscription to the Washington Post doesn't entitle you arguably to scrape all that data. But hey, they're cutting checks and cutting deals, and I think everybody just wants their piece of the pie.

• 31:43Speaker 04

  That's right. And then there are some companies, you mentioned Thomson Reuters, which is, you know, um, they have, they run one of the, one of, they have one of their biggest legal data sets.

• 31:54Barry Ritholtz?

  Mm hmm.

• 31:55Speaker 04

  You know, um, and they control that legal data. And so then they're putting AI on top of that. So that's that, that's 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 to the AI.

• 32:15Barry Ritholtz?

  Give us some, give us some names. I have a couple of things on my phone. What, what do you like?

• 32:20Speaker 04

  Oh, on the app side?

• 32:21Barry Ritholtz?

  Yeah. I mean, I'm using perplexity.

• 32:23Speaker 04

  I use perplexity.

• 32:24Barry Ritholtz?

  It's so clean and so simple.

• 32:26Speaker 04

  I love perplexity. I love ChatGPT.

• 32:29Barry Ritholtz?

  They're, they're slightly different.

• 32:32Speaker 04

  Slightly different.

• 32:32Barry Ritholtz?

  Right? Just the output, but they're still, and I'm finding far fewer hallucinations than, than I used to.

• 32:40Speaker 04

  Yes.

• 32:40Barry Ritholtz?

  Like, um, I had Bill Dudley from the New York Fed in, who was born in, you know, the late nineteen fifties, and ChatGPT mentioned he happened to be a linebacker for the Detroit Lions in nineteen fifty-two. It took it a while, 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're born in fifty-seven, you're probably not a pro football player in fifty-five. It, but it took, it definitely took months.

• 33:11Speaker 04

  Yes.

• 33:12Barry Ritholtz?

  For it to kinda somehow recognize that.

• 33:15Speaker 04

  Yeah, and that's on the consumer side and there'll be a lot more consumer apps coming. You know, you know, companies like Apple have this Apple Intelligence, right? If any, and they're absolutely locked in on your privacy, but they're gonna know you the best. And so there will be AI assistants coming.

• 33:32Barry Ritholtz?

  I hope it'll be better than Siri, which was a huge disappointment.

• 33:35Speaker 04

  For sure, for sure.

• 33:36Barry Ritholtz?

  But I would trust an Apple agent.

• 33:38Speaker 04

  You would, exactly.

• 33:39Barry Ritholtz?

  To be able to say, hey, make dinner reservations for Friday at this restaurant. Here's my calendar and invite Bob Smith and Mary and hopefully it can manage that.

• 33:47Speaker 04

  Absolutely, and and even more things, even more difficult than, let's say that, like, oh, I need to help my, I need to do my taxes. I want my taxes helped, or I need.

• 33:59Barry Ritholtz?

  So I'm skeptical on really complex things and at the same time, 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.

• 34:16Speaker 04

  Correct.

• 34:17Barry Ritholtz?

  But now on here's 20 data points diagnosis illness. It just moved ahead of the accuracy rate of of human doctors.

• 34:25Speaker 04

  You said exactly, the complexity of the tasks will only go higher in terms of what they will be capable to do. And so and and these AIs are following, you know, these what we call the scaling laws of scaling intelligence. But the things that they will be capable of, it's not just booking a restaurant. It'll be doing very complex tasks. And so we are just at the very, very, very beginning of that.

• 34:53Barry Ritholtz?

  Huh, that that's really fascinating. So given the mapping you do of the whole ecosystem and then the dive into the financial background, what strategies 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 want to own?

• 35:17Speaker 04

  Ah, so I have a certain small, you know, rules, I guess, if you could call it that, that I've I've or observations that I've made over many years, especially in tech, right? Because this is a very dynamic industry. One of those is like.

• 35:37Speaker 04

  There's a power law.

• 35:38Barry Ritholtz?

  Mm hmm.

• 35:39Speaker 04

  But I believe in power laws. And it seems like every industry I've ever looked at, there's number one, a number two, and then maybe a number three.

• 35:49Barry Ritholtz?

  So very fat head and then a long minor tail.

• 35:52Speaker 04

  Yeah, let's just say 50% market share number one, 25 number two, and then cats and dogs.

• 35:58Barry Ritholtz?

  Right. Winner takes all.

• 36:00Speaker 04

  Yeah, winner take most.

• 36:01Barry Ritholtz?

  It's true everywhere.

• 36:02Speaker 04

  And it doesn't matter if you're selling frozen pizza to search advertising. Okay, there are these power laws. And then, because, but the thing is that you could have power laws that apply to hundreds of categories, right? It doesn't have to be all encompassing in one. And so when I look at tech and all those different categories, I firmly believe in this 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 so are you, so in many cases, they're already existing players. Okay?

• 36:42Speaker 04

  And so if they are already existing players, and then their hegemony is not being challenged, that's kind of an easy answer. You keep riding the wave. And that's why people are always complaining about Mag7.

• 36:54Barry Ritholtz?

  You anticipated where I was going to go next.

• 36:57Speaker 04

  Oh, yeah.

• 36:58Barry Ritholtz?

  What you're essentially saying is Mag7 is, they're focusing on the number seven while ignoring the magnificent side. You want to be in the number one stock everywhere, which is going to naturally force the crowd of investors to the top five, 10, 15 companies.

• 37:16Speaker 04

  That's exactly what's been happening.

• 37:17Barry Ritholtz?

  Huh.

• 37:18Speaker 04

  The strong get stronger. Unless, unless there are signs of weakness, right? If there is.

• 37:26Barry Ritholtz?

  Is it, is it competition? Is it missteps by management? Is it some new disruptive technology that thrusts the winners aside?

• 37:34Speaker 04

  Yeah.

• 37:35Barry Ritholtz?

  What do you look for to say, hey, XYZ has been killing it for five, 10 years, but their run is over?

• 37:43Speaker 04

  That's exactly right. Usually, usually, 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. For thirty years, Intel ran Legion. And then there was a transition. There are several reasons, but there was a transition to accelerated computing from CPUs. And then they've lost leadership on Foundry to TSMC.

• 38:17Barry Ritholtz?

  And then mobile, they lost leadership on that?

• 38:20Speaker 04

  They didn't engage in mobile. There are times where companies, you know, different transitions. Like if Microsoft did not pivot to the cloud from Windows, right? And the government, you know, went after them on Windows. But they were litigating yesterday's war, right?

• 38:40Barry Ritholtz?

  Right.

• 38:40Speaker 04

  But Microsoft found Azure, and then history was rewritten. And management.

• 38:46Barry Ritholtz?

  What do you think of the job Sadiya Nadella has been? You know, people forget.

• 38:50Speaker 04

  That's gotta be one of the great, great CEO and what he has mastered in the history of business.

• 38:58Barry Ritholtz?

  Microsoft was dead money for a decade. I know that sounds ridiculous to say to the Apple listener. Not that Ballmer was a terrible CEO, but he was a founder and maybe just wasn't nimble enough to see the next generation. He was, you know, like many founders, they're stuck in, you know, Microsoft 1.0.

• 39:19Speaker 04

  Yes.

• 39:20Barry Ritholtz?

  And Nadella is, I don't know, maybe he's 3.0 or 4.0, but...

• 39:24Speaker 04

  Yeah, definitely. This has gotta be one of the greatest business turnarounds in history. That doesn't get that much, enough recognition, in my opinion.

• 39:32Barry Ritholtz?

  I totally, totally agree.

• 39:35Speaker 04

  So they have this power law concept. Going back to your idea, the other one is you need a second act. 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.

• 39:51Barry Ritholtz?

  Right.

• 39:51Speaker 04

  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't even know how many acts they've had. They have so many different acts, right? And so the great established companies can continually add.

• 40:12Speaker 04

  Multiple new businesses, not only what you're currently doing, you got to anticipate the next. So these power laws, do you have, you know, multiple acts? Because then that helps you have duration.

• 40:24Barry Ritholtz?

  Mm hmm.

• 40:25Speaker 04

  That you can endure. And then are you differentiated enough? And but then there is a whole new class of companies, right? So there you have the mag seven, these power law companies. But there's always, history is for tech is always giving you the opportunity for the new companies, the new companies to come. And so it's really the combination of let's continue to ride the power laws of the established companies. And then let's find those new companies that can rise and become the new challenger. So it's that those two, those are the two components of a technology.

• 41:02Barry Ritholtz?

  Absolutely fascinating.

• 41:04Speaker 01

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• 41:41Barry Ritholtz?

  Before we get into the funds, I really want to just touch base on two really interesting things 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.

• 42:03Speaker 04

  Yeah, I think valuation, if I were to broadly say is at a fair level. Now, there's dispersion in that. You mentioned the Mac 7 and the crowding and 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 the depression that we had, the recession we had in 2022. They went, they were way exaggerated in 21. It crashed in 22, and there's been not that much of a recovery.

• 42:45Speaker 04

  So, a large part of tech is still in, at depressed levels. I would say we're back to pre, you know, 2018, 17 levels, except the Mac 7 and a few companies like that, that have, that are at higher levels. But their performance have been better.

• 43:04Barry Ritholtz?

  Right, and you know, it's funny, we still have over a month to go this year. This could be the first year the S and P 500 beats the NASDAQ 100 in a, in a long time. I'm trying to remember the last time we saw that.

• 43:19Speaker 04

  Yeah, because a large part of the, of the NASDAQ, especially non-Mac 7, they've not done well. You know, you look at large parts of software, large parts of semiconductors even. If you're not in the AI class, you know, you've been left behind.

• 43:39Barry Ritholtz?

  Really interesting. So, I want to talk about something that you do with your team. Every year, you conduct a tour 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?

• 44:07Speaker 04

  Yeah, I think you're referring to our annual, every summer, we do a bus tour. Effectively, we bring 30 BlackRock investors. Now, that said, we do, you know, 2,000 meetings a year with companies on my team.

• 44:23Barry Ritholtz?

  Wow.

• 44:23Speaker 04

  I personally do almost 1,000 meetings with companies. Now, this is a special event because it pulls together.

• 44:32Speaker 04

  Seven, eight, nine, ten different teams at BlackRock.

• 44:36Speaker 04

  Thirty plus execs and investors. And then 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've been running this now eleven years.

• 44:49Barry Ritholtz?

  Wow.

• 44:50Speaker 04

  And what that does is, you know, you're onsite.

• 44:56Speaker 04

  You know, it's a little, it's a little less formal. You, the companies feel more comfortable because they're, they're hosting you. And it's, and it's really more of a strategic discussions than relitigating the quarter.

• 45:09Barry Ritholtz?

  Right.

• 45:10Speaker 04

  So it is, and, and.

• 45:12Barry Ritholtz?

  Much longer term than.

• 45:13Speaker 04

  Yeah, yeah, yeah, yeah. And then, you know, it's always a great barometer of like, what, what, what were the topics of the tour in twenty fourteen versus twenty twenty four? And you could really see an evolutionary of what was topical every year. And it, so it's a great way, it's also great for the people. Because many times, even, you know, within a firm like BlackRock, many of the teams don't get that much time to be with each other. So, so, so it's both for representing a unified front to the company. And then also within, within the interpersonal relationships that, that are strengthened.

• 45:55Speaker 04

  And then it's 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's only one topic.

• 46:06Barry Ritholtz?

  AI.

• 46:06Speaker 04

  Yeah, yeah.

• 46:07Barry Ritholtz?

  So, so let's go before the previous two years. Give us some examples of ideas that were surfaced via this bus tour.

• 46:15Speaker 04

  So I'll give you some specific examples.

• 46:17Barry Ritholtz?

  Sure.

• 46:18Speaker 04

  I remember distinctly, there was one about AMD.

• 46:25Barry Ritholtz?

  Uh huh.

• 46:26Speaker 04

  When AMD had just announced its new chiplet based, you know, Jim Keller was still working there. And he was one of the famed chip designers. And they had redesigned the processor and, and the CPU. And that Zen architecture was the basis in which ten years later.

• 46:46Speaker 04

  They've gained all that market share from Intel. But that was that day, and I remember, because AMD was on its back.

• 46:53Barry Ritholtz?

  Uh huh. Perennially, always a laggard, always short of capital, always like, hey, are these guys going to be here in five years?

• 47:01Speaker 04

  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 3? There were, they were, they had warehouse, you know, not even a warehouse, a tent to make, remember that?

• 47:22Barry Ritholtz?

  Yep, yep.

• 47:23Speaker 04

  Everyone was saying you're losing.

• 47:24Barry Ritholtz?

  Twenty-four hours a day.

• 47:25Speaker 04

  Yeah, they had a tent to make the Model 3. And I think that kind of unlocked, that's like, well, we're about to, we're about to churn. We're about to make it, this production is about to scale. And that was another seminal moment. So you have these, these events like that that come through.

• 47:40Barry Ritholtz?

  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's 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't 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.

• 48:24Barry Ritholtz?

  Any truth to that urban legend?

• 48:27Speaker 04

  I would say in EV, just pure EV cars, Tesla's share and its ascendancy, the entire market is, especially in the US, especially in the West, not China. It's definitely slowed, if not stalled, okay?

• 48:45Barry Ritholtz?

  Right. Arguably, I had the CEO of Lucid in here.

• 48:48Speaker 04

  Yeah.

• 48:49Barry Ritholtz?

  Who made a very aggressive claim that whether it was battery technology, motors, range, software, Tesla was a leader and Lucid has leapfrogged them. Um, you could, you can, we could debate that, but at least, but it's a credible, whether it's true or not, it's a credible claim, which would not have been remotely credible five years ago, even three years ago.

• 49:12Speaker 04

  I would say to that, and, and I don't want to comment on that specific company, but, you know, companies like that, they're selling a hundred thousand dollar car.

• 49:22Barry Ritholtz?

  Right.

• 49:22Speaker 04

  Tesla's selling a forty thousand dollar car.

• 49:26Speaker 04

  The fifty thousand dollar and up market.

• 49:29Barry Ritholtz?

  Is very different.

• 49:30Speaker 04

  Which is, which is most EVs.

• 49:32Barry Ritholtz?

  Right.

• 49:33Speaker 04

  Um, you, you know, if you remember, you go in the past, the greatest, the best selling single car was like the Toyota Corolla.

• 49:42Barry Ritholtz?

  Uh huh.

• 49:42Speaker 04

  You know, like a couple million a year. And, and you look at Tesla's Model three and Y, and they're also in that range.

• 49:51Barry Ritholtz?

  Coming up on it anyway.

• 49:52Speaker 04

  So basically, if you're 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's so much discussion about Tesla either having a lower cost robotaxi or lower cost car to get at the market sub fifty thousand dollars.

• 50:20Barry Ritholtz?

  Uh huh.

• 50:22Speaker 04

  Where you have, you know, that unlocks a market three times bigger. It's like a thirty thousand dollar car, twenty five thousand dollar car. But I think Tesla's main pivot, really, and, and even Elon would, would tell you, it's not about the car. The car is a mere means to deliver autonomy.

• 50:40Barry Ritholtz?

  Right.

• 50:40Speaker 04

  Uh, and it's a robotics company, right? It's, and, and, and autonomy is the big unlock. Not, not selling the car itself.

• 50:49Barry Ritholtz?

  Huh, that'll be interesting. We've been waiting. Autonomy for a while.

• 50:55Speaker 04

  Yes.

• 50:56Barry Ritholtz?

  One can't help but wonder how much easier it would be if if built into the roads and other vehicles were some form of RF device that allows other cars to know where here's where the exit is, here's where the lanes are, here's where other cars are, like, there could be an infrastructure build out that makes that.

• 51:18Speaker 04

  Have you, uh, when's the last time you were in LA or?

• 51:21Barry Ritholtz?

  This year.

• 51:22Speaker 04

  This year, okay, did you see Waymo's running around?

• 51:24Barry Ritholtz?

  Uh, I did not.

• 51:25Speaker 04

  Oh, okay.

• 51:25Barry Ritholtz?

  I did not.

• 51:27Speaker 04

  So Waymo is now operating in Los Angeles and they're everywhere in San Francisco, Phoenix and.

• 51:35Barry Ritholtz?

  The future's here, it's just not evenly distributed.

• 51:37Speaker 04

  It is, it is, it's within grasp, finally. It's, it's always been three years in the future, but like, it really is now, I think.

• 51:42Barry Ritholtz?

  So, so now let, let's bring this conversation.

• 51:45Speaker 04

  Yeah.

• 51:45Barry Ritholtz?

  Full circle, back to the funds you run.

• 51:48Speaker 04

  Yes.

• 51:49Barry Ritholtz?

  Let's talk about B I, B A I, which is the iShares AI Innovation and Technology Active ETF. Tell us a little bit about that, that, that's a fairly concentrated portfolio, isn't it?

• 52:01Speaker 04

  That's right. This, this is, we just launched this. This is our first foray, uh, first, we have two ETFs now. We're jumping on that, uh, that ETF bandwagon, if you will.

• 52:13Barry Ritholtz?

  Yeah, I, I think that, that might work out for BlackRock.

• 52:15Speaker 04

  Yeah, that's what I hear, I hear. But, uh, this, this one is, you know, I think, you know, hopefully we look back, uh, 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, um, trend, and we are trying to express in a concentrated way, thirty-plus companies, in an ETF that represents this whole stack of AI.

• 52:46Barry Ritholtz?

  From Nvidia down to the.

• 52:47Speaker 04

  All the way up to the apps, from the compute to the, to the apps and everything in between. And, and, um, I do know one thing, uh, so we want a concentrated exposure to the builders of AI. Companies building the key elements of AI, and, um, I do know one thing, it will be. It's going to change dramatically. What we think is the companies of today might not be. And so we need, I feel like especially when there's 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

• 53:31Speaker 04

  versus a dynamically changing structure, that's really the goal of this ETF.

• 53:35Barry Ritholtz?

  Let's talk about iShares Technology Opportunities Active ETF, or TEK, broader portfolio, 50 to 70 global tech companies. Tell us what that focus is.

• 53:47Speaker 04

  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's lots of tech companies that don't really, that don't really have that much to do with AI, building AI. And so you're going to get the whole totality of tech in that.

• 54:13Barry Ritholtz?

  So you said something before that has stayed with me about looking at the entire map of the ecosystem and watching what becomes hot and what fades. Technological change today is just so rapid.

• 54:28Speaker 04

  Yes.

• 54:29Barry Ritholtz?

  It changes 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's not even quarter to quarter anymore. It's minute to minute.

• 54:44Speaker 04

  Maybe not minute to minute, but you're absolutely right. In AI, so there are different time scales according to different industries. So let's say in AI, you're right. It might literally be minute to minute, day to day. Okay.

• 54:58Speaker 04

  On a smartphone,

• 55:00Barry Ritholtz?

  Mm hmm.

• 55:01Speaker 04

  You know, things are more stayed. They're slower paced. And so you have a spectrum of rates of change.

• 55:14Speaker 04

  That's number one. So number two, how do we keep up? I mean, you know, I've, I read a lot. And not only read, you have to stay attuned to all this new multimedia. Like, there's so many experts and podcasts like yours and scientists. And then we do like, I do personally a thousand company meetings a year.

• 55:37Barry Ritholtz?

  That's amazing.

• 55:38Speaker 04

  So.

• 55:39Barry Ritholtz?

  That's for a day if you're working fifty weeks a year.

• 55:42Speaker 04

  Yes, I mean, yes, I do many, many, many, many meetings a week. So, and so then you assimilate all this information. And then you are all, I'm always doing the calculus. Who's winning, who's losing? Who's winning, who's losing?

• 56:02Speaker 04

  What's changing, what's not?

• 56:04Barry Ritholtz?

  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.

• 56:13Speaker 04

  Yeah.

• 56:14Barry Ritholtz?

  You get judged every quarter. That's a very short term. And Wall Street is notorious for being too short term focused. How do you manage the trade off between? Hey, this is going to be a dominant technology over the next five years to, uh oh, it's September thirtieth and we know what happens starting in October. How do you manage that trade off?

• 56:37Speaker 04

  That is the central question because we are being challenged all the time. You know, I feel you get some latitude if you have already a historical track record. So for example, twenty twenty two was just

• 56:55Barry Ritholtz?

  Brutal.

• 56:56Speaker 04

  Hell on earth for tech.

• 56:57Barry Ritholtz?

  It was, you know, not only was it hell on earth for tech. It was the first year in over forty years where both stocks and bonds were down double digits.

• 57:06Speaker 04

  Yeah.

• 57:06Barry Ritholtz?

  Like once every half century. And then the only saving grace was twenty twenty one was so spectacular that it felt like, all right, we're giving back some profits. But it's not, you know, it didn't feel like it was oh, seven, oh, eight, oh, nine, which was

• 57:23Speaker 04

  Twenty twenty two was worse than. Was worse than 2008.

• 57:29Barry Ritholtz?

  For technology.

• 57:30Speaker 04

  For tech, oh yeah, for sure.

• 57:31Barry Ritholtz?

  Really? That's a big statement.

• 57:33Speaker 04

  Because in 2009, it was a universal collapse.

• 57:37Barry Ritholtz?

  That's correct.

• 57:38Speaker 04

  Centered mostly in, you know.

• 57:40Barry Ritholtz?

  Banks, finance, real estate.

• 57:42Speaker 04

  Tech went down, of course, but it didn't go down more. In 2022, it was predominantly a tech collapse.

• 57:52Barry Ritholtz?

  But it wasn't like the dot com implosion where the Nasdaq 100 fell 80 plus percent.

• 57:58Speaker 04

  That's right. It wasn't. It wasn't.

• 58:00Barry Ritholtz?

  But it was still no fun. You were down.

• 58:01Speaker 04

  Yeah.

• 58:02Barry Ritholtz?

  Tech was down 30 plus percent.

• 58:04Speaker 04

  Yeah.

• 58:04Barry Ritholtz?

  Lost a third of its value. That's a big hit.

• 58:06Speaker 04

  But in my, in my, in my career, 2022 was the worst year. And so do you have the latitude 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 of years have been good, right? And so,

• 58:33Speaker 04

  but do you, does everybody get that, avail that opportunity to? And that goes to the short term, long term. But I try not to focus on the short term. And, you know, we're trying to make systematic bets to the best of our ability. With, you know, especially an active manager. You know, it is,

• 58:57Speaker 04

  you need to show, because we're, we hold generally fewer companies. And you need, you need a couple of years to show that those longer duration bets

• 59:11Speaker 04

  start to manifest. And so if I was always chasing the quarter, you would, you know, you're, now you're trying to be.

• 59:21Barry Ritholtz?

  You're not a momentum trader.

• 59:22Speaker 04

  You would, yeah, or, yeah, exactly. We, we, and that's really kind of the, at the end, we're, we're saying our decisions that are born out of all of this domain and expertise and all of this 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 so we try not to do that. Obviously, 2022, we had to make a lot of adjustments. But other than that, I, we kind of stick to the same framework.

• 59:58Barry Ritholtz?

  Huh. Really fascinating.

• 1:00:00Speaker 01

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• 1:00:37Barry Ritholtz?

  All right. So I only have you for another few minutes. Let's jump to our favorite questions.

• 1:00:42Speaker 04

  Okay.

• 1:00:43Barry Ritholtz?

  That we ask all of our guests, starting with, what's keeping you entertained these days? What are you listening to, watching, streaming, et cetera?

• 1:00:52Speaker 04

  Okay. I don't get the chance to watch that much TV and, and streaming, but streaming shows, the ones I've recently seen, I, I seen, I really like Shogun.

• 1:01:04Barry Ritholtz?

  Oh, really?

• 1:01:05Speaker 04

  Three.

• 1:01:05Barry Ritholtz?

  The new one?

• 1:01:06Speaker 04

  The new one, the remake from the, from the eighties, or Three Body Problem, I, I enjoyed.

• 1:01:12Barry Ritholtz?

  I love that. I couldn't get through the book, but the show was great.

• 1:01:15Speaker 04

  Yeah. And then, but I, I'd watch a lot more. I'm a history guy, so.

• 1:01:22Speaker 04

  I love Epic History on YouTube. It is absolutely fantastic.

• 1:01:27Barry Ritholtz?

  Epic History?

• 1:01:28Speaker 04

  Epic History TV. Yeah, it's fantastic. I watch a lot of science stuff, like World Science Festival of Columbia, professor here, Brian Greene.

• 1:01:38Barry Ritholtz?

  Oh, sure. He's a prior guest. He's great.

• 1:01:41Speaker 04

  I also like chess. I watch like chess.

• 1:01:45Barry Ritholtz?

  You watch chess?

• 1:01:46Speaker 04

  Yes, I love watching chess. So like Chess Dog is a great show, especially the old, old matches of the, of the great, the great players like Bobby Fischer and Paul Morphy and things. And the podcast, I think the best podcast for me is The Ancients.

• 1:02:03Barry Ritholtz?

  The Ancients. I'm gonna check that out.

• 1:02:05Speaker 04

  This is an ancient civilizations and ancient history. So those are what, yeah, that's what kind of occupies me. I, I don't do as much business shows or business pods. I've listened to yours a few times and a few others, but I'm more about, you know, I'm in finance all day long. I don't really need more finance, so I, I go for my, my love of, of history is probably the.

• 1:02:34Barry Ritholtz?

  I have the same issue. It's like, I don't want to hear a guest I'm going to interview on another show. I wanna, I don't want to repeat questions or steal questions. I want to bring a fresh approach. And when you're immersed in it all day, you just don't want to go that way. Next question, who were your early mentors who helped to shape your career?

• 1:02:56Speaker 04

  The, you know, mentor would imbue a personal one-on-one, like tutoring and things. I didn't have too many of those. I would say my earliest mentors, I go to high school. Those are my formative years in Illinois. My English teacher, who was also my debate coach, my history teacher and my chemistry teacher. I look back and they really helped form who I am today. And then in the professional world, I would say I go to, and this is like BlackRock. When I, and I joined, it was Tom Callan who hired me. And Tom said, not so much as a mentor, but he said,

• 1:03:41Speaker 04

  Here are the keys. And you express your creativity and build the business. And he gave me that latitude. So I give credit to Tom Callan. But I didn't 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 Napoleon and Frank Lloyd Wright and Beethoven and others.

• 1:04:11Barry Ritholtz?

  So you grew up in Illinois. Did you do any of the Frank Lloyd Wright tours?

• 1:04:16Speaker 04

  Oh, yeah, I did all that.

• 1:04:18Barry Ritholtz?

  So we spent every Thanksgiving in Wilmot. And so I've done that whole run. And I have to assume you've been to Falling Waters, right?

• 1:04:25Speaker 04

  I've not been to Falling Water.

• 1:04:26Barry Ritholtz?

  So I.

• 1:04:28Speaker 04

  Taliesin.

• 1:04:29Barry Ritholtz?

  Twenty, oh, really? That's 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. And we were there the first day it was open in, I want to say it was early March. And there was like a light coat of snow.

• 1:04:48Speaker 04

  And you went inside as well?

• 1:04:49Barry Ritholtz?

  Oh, yeah, we did the whole tour. It's absolutely astonishing. 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. It's just.

• 1:05:07Speaker 04

  Absolutely, yes.

• 1:05:08Barry Ritholtz?

  It's always interesting when you see, oh, you could see the thought that went into every curve, every line, every detail. It's really, it's really amazing.

• 1:05:18Speaker 04

  The genesis of that, my interest in architecture. Yeah, I read The Fountainhead. You read that book, Anne Rand?

• 1:05:28Barry Ritholtz?

  I slogged through it in college and basically gave up on her because of that book.

• 1:05:34Speaker 04

  Oh, you gave up. But like that really.

• 1:05:36Barry Ritholtz?

  It's such a painful book to read.

• 1:05:38Speaker 04

  Yeah, but it spawned.

• 1:05:40Barry Ritholtz?

  There's some ideas in it that are interesting.

• 1:05:42Speaker 04

  The idea, especially the architecture, that really triggered, oh, architecture.

• 1:05:46Barry Ritholtz?

  Right.

• 1:05:47Speaker 04

  Um, but, um.

• 1:05:48Barry Ritholtz?

  So, since you've mentioned the fountainhead, let's talk about books.

• 1:05:51Speaker 04

  Oh, books.

• 1:05:52Barry Ritholtz?

  What are some of your favorites? What are you reading right now?

• 1:05:55Speaker 04

  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't, I grew up before the internet.

• 1:06:06Barry Ritholtz?

  Uh, as did I.

• 1:06:07Speaker 04

  As you did.

• 1:06:08Barry Ritholtz?

  I don't think we're that far apart in age.

• 1:06:09Speaker 04

  And, um, and I was a nerd. I was a total nerd.

• 1:06:13Barry Ritholtz?

  Same.

• 1:06:14Speaker 04

  And so, the Lord of the Rings in Tolkien.

• 1:06:16Barry Ritholtz?

  I knew you were gonna go there.

• 1:06:17Speaker 04

  Oh, how did you know that?

• 1:06:18Barry Ritholtz?

  So, cause that was the, I reread The Hobbit and The Lord of the Rings every summer throughout my teen years.

• 1:06:24Speaker 04

  Oh, my god.

• 1:06:24Barry Ritholtz?

  And, um, someone just told me that the character actor who played Smigel.

• 1:06:30Speaker 04

  Smigel, yes.

• 1:06:31Barry Ritholtz?

  I, in the movie.

• 1:06:32Speaker 04

  Yes.

• 1:06:32Barry Ritholtz?

  Actually narrates the book on the audible version.

• 1:06:36Speaker 04

  Ah.

• 1:06:36Barry Ritholtz?

  And people have told me, it's not like listening to a book on tape. It's like a, a full radio play that he does voices.

• 1:06:45Speaker 04

  Any circus, yeah.

• 1:06:45Barry Ritholtz?

  That's right. He, it's supposed to be fantastic.

• 1:06:48Speaker 04

  Yeah. I, I even, yeah, I loved it. Uh, and then I went even, I went really deep. I, I, the Silmarillion and the 20,000 year prehistory to The Lord of the Rings. Um, like, I went that.

• 1:06:59Barry Ritholtz?

  How far afield did you go in sci-fi? Heinlein, Philip K. Dick.

• 1:07:03Speaker 04

  Heinlein, Philip K. Dick.

• 1:07:04Barry Ritholtz?

  C J Shera.

• 1:07:05Speaker 04

  Not only C J Shera, but.

• 1:07:06Barry Ritholtz?

  Um, Pride of Shannor, strong recommend.

• 1:07:09Speaker 04

  Pride of Shannor?

• 1:07:10Barry Ritholtz?

  Pride of Shannor.

• 1:07:11Speaker 04

  Shannor, Shannor.

• 1:07:12Barry Ritholtz?

  Uh, just fascinating book. Give us one or two more books and then we'll get to our last two books.

• 1:07:17Speaker 04

  Currently, I'm reading, um, I read a lot of history books. I'm reading three bu, I, I read, I browse, I read a lot, parallel.

• 1:07:23Barry Ritholtz?

  Uh huh.

• 1:07:23Speaker 04

  And I tend to not to finish and all, but I'm reading right now Campaigns of Napoleon by David Chandler.

• 1:07:28Barry Ritholtz?

  Uh huh.

• 1:07:28Speaker 04

  I'm reading The Fall of Carthage by Adrian Goldsworthy and S P Q R, Mary Beard. Um, and I just bought the, My 60 Memorable Games by Bobby Fischer. I just wanted to go read all the.

• 1:07:40Barry Ritholtz?

  Did you read, I forgot who the author was, but there's a great Genghis Khan biography.

• 1:07:46Speaker 04

  Ah, yes.

• 1:07:47Barry Ritholtz?

  It's really interesting. I could see the book.

• 1:07:49Speaker 04

  Oh, I want, I want to. Yes, that I would like to buy that.

• 1:07:51Barry Ritholtz?

  But I have one other, I have a book recommendation too that you're gonna love.

• 1:07:54Speaker 04

  Okay, you tell me, you tell me, yeah.

• 1:07:55Barry Ritholtz?

  And it's called How to Invent Everything: A Survival Guide to the Stranded Time Traveler. And it it's just a history of technology, but they use the the, what you call it? The cheat is they're 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's how you should do it. And it's just a, just a history of technology 10,000 years ago to today. Absolutely fascinating.

• 1:08:22Speaker 04

  10,000 years ago.

• 1:08:23Barry Ritholtz?

  Right, going back to the invention, the glass, the invention.

• 1:08:26Speaker 04

  I have, I like to collect some of those ancient artifacts.

• 1:08:29Barry Ritholtz?

  Oh, that would be, that sounds like fun. All right, so I only have you for two minutes. Let's get to my last two questions.

• 1:08:34Speaker 04

  Yes, last two questions.

• 1:08:35Barry Ritholtz?

  Like, that's the problem with sci-fi geeks.

• 1:08:37Speaker 04

  Yes, okay, I didn't know you were a sci-fi geek.

• 1:08:39Barry Ritholtz?

  Oh, absolutely. What sort of advice would you give to a recent college grad interested in a career in technology investing?

• 1:08:47Speaker 04

  Not so much technology, but let's say investing in general.

• 1:08:50Barry Ritholtz?

  Sure.

• 1:08:51Speaker 04

  I I think you gotta be a great thinker.

• 1:08:53Barry Ritholtz?

  Uh huh.

• 1:08:54Speaker 04

  It's not so much the finance. Finance can be taught, easy. It's about thinking. And it is about a flexibility to have a, to be reason and plan and think at a,

• 1:09:18Speaker 04

  you know, in a kind of a holistic and a flexible manner, because AI is gonna do so many of the tasks. And and and they will often know more than you about any specific domain. So you need to be above that, in a way, almost like an architect would would.

• 1:09:37Barry Ritholtz?

  Makes makes a lot of sense. And our final question.

• 1:09:40Speaker 04

  Yes.

• 1:09:40Barry Ritholtz?

  What do you know about the world of technology today you wish you knew back in the mid 90s, when you were really starting out?

• 1:09:48Speaker 04

  You know, if I knew what, how this would unfold in the Silicon Valley has, I would have just gone straight to Silicon Valley, the company, maybe, maybe instead of being on the investment side.

• 1:10:01Barry Ritholtz?

  Huh.

• 1:10:04Speaker 04

  I don't know. It is a, it's a double edged question because I like the, I like the dynamic exposure to many companies, but like.

• 1:10:13Barry Ritholtz?

  Plus, the path you've taken is so fascinating.

• 1:10:17Speaker 04

  I would say another point of, for the young people.

• 1:10:20Barry Ritholtz?

  Uh huh.

• 1:10:21Speaker 04

  Always bet on the future, not on the current past. Bet on the future.

• 1:10:25Barry Ritholtz?

  What 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 and check out any of the 500 previous discussions we've had over the past 10 years. You can find those at iTunes, Spotify, YouTube, Bloomberg, wherever you find your favorite podcasts. And be sure and 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.

• 1:11:09Barry Ritholtz?

  At the Money, wherever you find your favorite podcasts and in the Masters in Business feed. I would be remiss if I did not thank the crack team that helps put these conversations together each week. My audio engineer is Meredith Frank. My producer is Anna Luke. Sean Russo is my researcher. Sage Baumann is the Head of Podcasts at Bloomberg. I'm Barry Ritholtz. You've been listening to Masters in Business on Bloomberg Radio.

• 1:11:42Speaker 05

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• 1:12:14Speaker 06

  With ChatGPT, you can do more than get answers. You can get things done. Whether you're leading a big project, planning an elaborate trip, or trying to balance work and life, ChatGPT can help. Give it a goal, plus things like files, notes, or project plans, develop a trip itinerary with daily updates, or create a prioritized schedule. So you can spend less energy sorting out the details and more on bringing your biggest ideas to life. Get started at chatgpt.com.