WILLIAM COHAN.

WELCOME BACK TO THE SHOW.

>> THANK YOU, WALTER.

NICE TO BE HERE.

>> ONE OF THE BIG QUESTIONS OF OUR TIMES IS WHETHER AI IS GOING TO KILL JOBS.

THE AI APOCALYPSE IS COMING.

IT'S BEEN FOUR YEARS SINCE THE LLMs WERE FIRST RELEASED.

AND EVERYBODY SAID IT WAS GOING TO DESTROY.

AND I KEPT THINKING WELL, TECHNOLOGY ALWAYS ADDS JOBS FASTER THAN IT KILLS JOBS.

THE LATEST JOBS NUMBERS SEEM PRETTY GOOD.

UNEMPLOYMENT HASN'T GONE UP MUCH.

57,000 JOBS IN JUNE.

WHAT'S REALLY HAPPENING WITH AI AND JOBS?

>> THERE IS A VERY BIG DEBATE GOING ON, FRANKLY, ABOUT WHETHER OR NOT IT WILL ELIMINATE JOBS OR CREATE NEW ONES.

I THINK YOU'RE RIGHT AGAIN THAT EACH SORT OF TECHNOLOGICAL INNOVATION THAT HAS OCCURRED IN PRETTY MUCH ALL OF HUMAN HISTORY HAS RESULTED IN SOME JOBS BEING LOST, BUT EVEN MORE JOBS BEING CREATED.

I WAS RECENTLY IN ANTWERP AT THE PRINTING PRESS MUSEUM, AND THAT SUPPOSEDLY WAS GOING TO RUIN A LOT OF JOBS, THE PRINTING PRESS.

AND THE NEXT THING YOU KNOW, IT CREATED A LOT OF JOBS.

IT MAY BE A LITTLE TOO EARLY IN THE AI GAME TO KNOW WHETHER --BECAUSE ADOPTION IS HAPPENING, BUT NOT ACROSS ENTERPRISES QUITE AS QUICKLY AS YOU WOULD ASSUME.

AND THEREFORE, JOBS HAVEN'T BEEN ELIMINATED AS MUCH AS MIGHT HAPPEN, OR NEW ONES CREATED.

I THINK PEOPLE ARE STILL TRYING TO FIGURE OUT IN ENTERPRISES HOW TO USE AI AND INCORPORATE IT INTO THEIR DAILY WORK LIVES AS OPPOSED TO, OH, WELL, NOW WE'VE DONE THIS SO QUICKLY WE DON'T NEED PEOPLE ANYMORE.

I DON'T THINK WE'RE QUITE THERE YET.

>> ONE OF THE THINGS I'VE NOTICED FROM MY STUDENTS I TEACH AT TULANE AND OTHER YOUNG PEOPLE IS THAT ONE PLACE IT HAS AFFECTED IS ENTRY-LEVEL WHITE COLLAR JOBS, THE ABILITY OF YOUNG PEOPLE TO GET JOBS.

IS THAT REFLECTED IN THE NUMBERS?

>> WELL, I DON'T KNOW IF IT'S REFLECTED IN THE NUMBERS YET.

I THINK LIKE SAY FOR US IN WALL STREET AND LAW FIRMS ARE STILL GOING GREAT GUNS.

THEY ARE STILL HIRING PLENTY OF PEOPLE.

AND YET I'M WELL AWARE OF AI FIRMS THAT CATER DIRECTLY TO WALL STREET FIRMS.

HOW CAN WE DO WHAT THE JUNIOR PEOPLE IN WALL STREET FIRMS, IT USED TO TAKE THEM A WEEK TO DO BY HAND OR WITH COMPUTERS, IMPLEMENTING NUMBERS INTO SPREADSHEETS, HOW CAN WE DO THAT MORE QUICKLY?

AND THE NEXT THING YOU KNOW, IT TURNS OUT THAT CAN BE DONE MORE QUICKLY.

IT CAN TAKE HOURS INSTEAD OF DAYS.

AND THEN THE QUESTION IS WHAT DO YOU DO?

YOU NEED TO CHECK THOSE NUMBERS, BECAUSE GUESS WHAT?

AI MAKES MISTAKES.

SO YOU ALWAYS HAVE TO CHECK YOUR WORK, WALTER.

NOW YOU HAVE TO CHECK AI'S WORK, IF YOU'RE DOING IT THAT WAY.

AND THEN THAT POTENTIALLY COULD LEAVE MORE TIME FOR SOME OF THE NUANCES AND SUBTLETIES OF SOME OF THESE PROFESSIONAL SERVICES, BUSINESSES LIKE LEARNING HOW TO GIVE GOOD ADVICE, LEARNING WHAT, YOU KNOW, LEGAL NICETIES THAT CLIENTS NEED TO HEAR OR THE SUBTLETIES OF GIVING GOOD ADVICE.

THAT TAKES A LONG TIME.

THOSE ARE APPRENTICESHIP BUSINESSES.

BUT TO GET TO THAT POINT, TO BECOME LIKE THE FELIX ROATAN OF INVESTMENT BANKING AGAIN, YOU HAVE TO MASTER THE BASICS OF SPREADSHEETS AND FINANCIAL ANALYSIS AND VALUATION WORK THAT MAYBE AI WILL HELP YOU DO MORE QUICKLY AND LET YOU GET TO THE NEXT LEVEL, WHICH IS WHERE ALL THE QUOTE, UNQUOTE VALUE IS ADDED AND THE BIG FEES ARE MADE.

>> ARE WE IN AN AI BUBBLE?

>> WELL, WHAT WE'RE IN IS AN AI VALUATION BUBBLE.

AND WE'RE INNER A CAPITAL EXPENDITURE BUBBLE.

SO THERE IS WAY TOO MUCH MONEY BEING INVESTED IN AI AND AI-RELATED THINGS, WHETHER IT'S CHIPS OR DATA CENTERS.

AND SO AT WAY TOO HIGH VALUATIONS.

AGAIN, JUST LOOK AT SPACEX AS ONE EXAMPLE.

IT WAS A $3 TRILLION COMPANY.

THREE WEEKS LATER IT'S A $1.

5 TRILLION COMPANY.

SO IT WAS OVERPRICED BY 100% FOR A LITTLE WHILE THERE.

AND I'M SURE PRIVATELY OPENAI AND ANTHROPIC AND SOME OF THESE OTHERS ARE ALSO OVERVALUED.

THE COMBINATION OF THOSE TWO THINGS IS NOT GOING TO BE GREAT FOR INVESTORS IN THE LONG RUN.

NOW, DO WE NEED THE INFRASTRUCTURE OF AI?

DO WE NEED THE DATA CENTERS PERHAPS?

WHAT ARE THE EFFECTS -- WE OPENED THIS CONVERSATION BY WONDERING ABOUT THE EFFECTS ON THE JOB, THE EMPLOYMENT MARKETS AND THE JOB MARKET AND WHAT JOBS WILL BE CREATED, WHAT JOBS WILL BE LOST.

I THINK AGAIN, WE'RE TOO EARLY TO KNOW THE EFFECTS OF THAT.

BUT, YOU KNOW, WE PROBABLY DO NEED THE INFRASTRUCTURE.

IT REMINDS ME, WALTER, OF THE TELL COM BUILD-OUT FOR THE INTERNET IN THE LATE '90s AND EARLY 2000s.

PRETTY MUCH EVERY COMPANY THAT WENT PUBLIC AND RAISED CAPITAL AND SPENT THAT MONEY ON BUILDING OUT THE INFRASTRUCTURE TO BUILD THE INTERNET WENT BANKRUPT, AND INVESTORS LOST A TON OF MONEY.

BUT WE NEED THE INFRASTRUCTURE.

IT'S IN THE GROUND.

WE STILL USE IT TODAY, AND WE'RE GLAD TO VISIT.

SO THERE PROBABLY WILL BE A SHAKEOUT IN VALUATIONS, AND MONEY WILL PROBABLY BE LOST, JUST AS IT WAS IN SPACEX, UNFORTUNATELY.

BUT THE INFRASTRUCTURE, THE TECHNOLOGY, THE ADVANCEMENTS, THE WAY PEOPLE ARE USING IT ALL WILL END UP BEING PRETTY VALUABLE AND WE'LL TAKE IT FOR GRANTED AS ESSENTIAL, JUST LIKE I THINK WE DO TODAY WITH THE INTERNET, THAT PEOPLE --IT DIDN'T EVEN EXIST MUCH BEFORE 1996.

SO, YOU KNOW, TECHNOLOGY HAS TO ADVANCE.

IT HAS TO BE DONE IN A SAFE WAY, HOPEFULLY THAT DOESN'T HURT PEOPLE AND DOESN'T LOSE TOO MANY JOBS, CREATES MORE JOBS THAN ARE LOST.

BUT THERE IS NO QUESTION THAT INVESTORS ARE GOING TO LOSE THEIR SHIRTS TO SOME EXTENT BECAUSE THE VALUATIONS ARE JUST COMPLETELY OUT OF CONTROL AND TOO MUCH CAPITAL IS GOING TOWARDS IT BECAUSE OF THOSE HIGH VALUATIONS.

>> THERE HAS BEEN A WHOLE LOT OF TARIFFS SLAPPED ON.

IT'S ALMOST HARD FOR ME TO KEEP UP WITH IT.

BUT THE PAST COUPLE OF WEEKS, MAJOR TARIFFS.

WHY HASN'T THERE BEEN MORE INFLATION, OR DO YOU THINK THAT'S COMING?

>> WELL, I THINK THERE IS PERSISTENT INFLATION.

YOU KNOW, WITH THE OIL PRICES RISING, THE PRICE OF GASOLINE AT THE PUMP, TARIFFS ARE A TAX ON AMERICAN CONSUMERS, DESPITE WHAT PRESIDENT TRUMP MAY SAY DIFFERENTLY.

IT LITERALLY IS CAUSING US TO PAY MORE FOR GOODS AND SERVICES.

AND SO I THINK INFLATION IS PERSISTENTLY HIGHER.

AND THAT'S WHY I THINK THREE FED GOVERNORS AT THE MEETING THIS PAST WEEK SAID THAT THEY WANTED TO RAISE INTEREST RATES.

AND IT WAS 9-3 VOTE, WHICH IS VERY UNUSUAL, FRANKLY.

USUALLY THERE'S SOME UNANIMITY ON THIS.

AND THIS IS ALL HAPPENING AT THE TIME WHEN, OF COURSE, PRESIDENT TRUMP CHOSE KEVIN WARSH TO BE THE NEW FED CHIEF BECAUSE HE WANTS RATES TO BE LOWER.

THAT DOESN'T SEEM TO BE HAPPENING ON THE BOND DISSENTERS THIS PAST WEEK, I SAY RATES ARE GOING HIGHER, AND WALL STREET IS PREDICTING THERE WILL BE ONE SHORT- TERM INTEREST RATE HIKE BEFORE THE END OF THE YEAR.

>> WELL, AS YOU MENTION, KEVIN WARSH, THE NEW FED CHAIR, WAS PRETTY MUCH PUT THERE BECAUSE TRUMP WANTS INTEREST RATES TO GO DOWN, AND NOW IT DIDN'T HAPPEN.

IS THERE A SILVER LINING IN SOME OF THIS IS THAT THE FED HAS SHOWN IT IS INDEPENDENT?

>> WE, OF COURSE, MUST HAVE AN INDEPENDENT FED.

AND, YOU KNOW, SO FAR, I DON'T KNOW --I THINK THE FACT THAT YOU NEED THEIR 12 VOTERS TO RAISE OR TO CHANGE THE DIRECTION OF INTEREST RATES, AND I ASSUME IT HAS TO BE A MAJORITY TO DO SOMETHING, THE FACT THAT, YOU KNOW, THERE IS THREE WHO ARE HOLDING THE LINE AND SAYING THAT RATES SHOULD BE INCREASED TO TRY TO COMBAT INFLATION TO ME IS A VERY HEALTHY SIGN, A SIGN OF AN INDEPENDENT FED, AND MORE IMPORTANTLY, A SIGN THAT INTEREST RATES ARE GOING TO GO UP.

TO COMBAT INFLATION, BECAUSE, OF COURSE, THAT'S ONE OF THE TWO MAIN REQUIREMENTS OF THE FED TO TRY TO CONTROL IS INFLATION IN THAT 2% TARGET RATE.

>> SOME PEOPLE HAVE CALLED THIS 2026 IS GOING TO BE A YEAR OF THE IPO.

AND WE ALREADY SAW THE SPACEX ONE COME ABOUT.

I THINK YOU USED THE TECHNICAL TERM FOR THE SPACEX IPO.

YOU CALLED IT PURE BONKERS.

WHAT DID YOU MEAN BY THAT?

>> WELL, YOU HAVE TO LOOK AT IT FROM A DIFFERENT PERSPECTIVES.

FROM THE COMPANIES' PERSPECTIVES, FROM ELON MUSK'S PERSPECTIVE, IT WAS, YOU KNOW, A BONANZA.

IT WASN'T BONKERS AT ALL.

IT RAISED $86 BILLION, THE MOST EVER RAISED IN EQUITY FOR A SINGLE IPO, AND IT WAS GREAT FOR THE WALL STREET UNDERWRITERS, THE 23 OF THEM WHO SPLIT $550 MILLION IN FEES, LITERALLY HALF A BILLION DOLLARS INCLUDING GOLDMAN SACHS AND MORGAN STANLEY WHO EACH GOT PAID $111 MILLION WHICH HAS TO BE ONE OF THE LARGEST FEES EVERY PAID ON WALL STREET.

AND SO FROM THE COMPANY'S PERSPECTIVE, THE UNDERWRITERS' PERSPECTIVE, ALL GREAT.

FROM THEIR FRIENDS WHO ARE INSTITUTIONAL INVESTORS WHO GOT THEIR HANDS ON THAT STOCK AT $135 A SHARE WHEN IT WAS PRICED AND WATCHED IT GO TO $225 A SHARE AFTER FOUR DAYS, THEY PROBABLY GOT OUT, THEY PROBABLY MADE MONEY.

WHO GOT LEFT HOLDING THE BAG?

THE SAME PEOPLE THAT ALWAYS GET LEFT HOLDING THE BAG IN THESE WALL STREET IPOs THAT ARE OVERHYPED, RETAIL INVESTORS WHO FINALLY PROBABLY GOT IN AT CLOSE TO 225 OR AT THE TOP, NEAR 225 OR AT 225.

AND NOW THE STOCK IS AT 115.

SO WHO'S SUFFERING THOSE LOSS?

NOT THE UNDERWRITERS.

NOT THE COMPANY.

NOT THE INSTITUTIONAL INVESTORS, BUT IT'S THE PEOPLE LIKE YOU AND ME WHO BOUGHT THE SPACEX IPO, BOUGHT IN ALL THE HYPE, AND NOW WE'RE HOLDING IT AT $115 A SHARE, HALF OF WHAT IT WAS WHEN THEY BOUGHT IT.

OUCH!

>> IN A RECENT COLUMN, YOU TALKED ABOUT ALL THIS, AND YOU SAID THE IPO PROCESS IS DESIGNED TO ENRICH WALL STREET BANKERS.

HOW COME?

AND HOW CAN THAT CONTINUE TO SURVIVE?

SHOULDN'T THAT SYSTEM BE DISRUPTED?

>> THERE HAVE BEEN PEOPLE WHO HAVE TRIED TO DISRUPT THIS FOR YEARS, WALTER, BUT WALL STREET'S A CARTEL, AND THEY LIKE IT JUST THE WAY IT IS.

THEY ARE THE ULTIMATE INTERSTITIAL MEN.

THEY ARE THERE BETWEEN THE COMPANIES AND THE INVESTORS, AND THEY DESIGNED THE IPO PROCESS.

THEY WRITE THE PROSPECTUSES, ALTHOUGH AI MIGHT BE HELPING.

AND THEY FIGURE OUT WHERE THE DEMAND IS, AND THEY PRICE THE IPOs.

SO THEY ARE DEFENDING THEIR TURF, AND THEY LOVE IT.

WHY NOT?

THEY'RE MAKING -- >> EXPLAIN HOW THEY GET ALL THAT MONEY OUT OF AN IPO.

>> WELL, THEY ARE THE INTERSTITIAL MEN, OKAY.

SO THEY DEAL WITH THE COMPANY.

THEY WRITE THE PROSPECTUS WITH THE IAIL.

THEY SHUFFLE THE PROCESS THROUGH A ROAD SHOW.

AND ON THE OTHER SIDE, THEY'VE GOT SALESMEN WHO ARE TALKING TO INSTITUTIONAL INVESTORS TO FIND OUT HOW MANY SHARES THEY WANT, AT WHAT PRICE.

AND THEY --THEN IT GOES INTO THIS BLACK BOX THAT NO ONE CAN EVER SEE.

AND THE NEXT THING, LO AND BEHOLD, SPACEX WILL BE PRICED AT $135 A SHARE.

WELL, THE REASON IT'S PROBABLY PRICED AT $135 A SHARE INSTEAD OF, SAY, $200 A SHARE IS SO THOSE INSTITUTIONAL INVESTORS WHO ARE BIG CLIENTS OF GOLDMAN SACHS AND MORGAN STANLEY AND THE OTHER BIG UNDERWRITERS CAN GET THAT FIRST- DAY POP.

AND IT DID.

THE STOCK WENT FROM 135 TO 150 BEFORE THE FIRST TRADE.

AND THEN CLOSE TO 200 AT THE END OF THAT FIRST DAY.

SO WHO BENEFITS FROM THAT?

THE PEOPLE WHO THEY CAN GIVE THAT STOCK TO AT $135 A SHARE WHILE IT RIDES UP DURING THAT FIRST DAY POP.

AND THAT'S BY DESIGN.

THAT'S NOT AN ACCIDENT.

THAT'S NOT COINCIDENCE.

THAT'S BASICALLY HOW THE IPOs ARE DESIGNED TO PERFORM.

BUT THAT DOESN'T REALLY DO ANYTHING EXCEPT FOR THE UNDERWRITERS AND THE INSTITUTIONAL INVESTORS WHO ARE THEIR BIG CLIENTS.

SO THAT'S WHO BENEFITS FROM IPOs.

YES, COMPANIES GET TO OFTEN RAISE THE MONEY THEY WANT.

BUT ACTUALLY, THEY PROBABLY COULD HAVE SOLD THE STOCK AT A HIGHER PRICE HAD THEY PRICED THAT STOCK NOT AT $135 A SHARE.

AND OF COURSE RETAIL INVESTORS WHO CAN'T GET IT AT $135 A SHARE AND HAVE TO WAIT UNTIL IT STARTS TRADING, AND THEN BUY IT AT $200 ARE NOW HOLDING ON TO SOMETHING WORTH $215.

SO THAT IS A BROKEN SYSTEM.

THERE ARE PEOPLE LIKE BILL HAMBRICK AT HAMBRICK AND QUIST BEFORE IT WAS SOLD, AND NOW HE HAS HIS OWN FIRM WHO TOOK GOOGLE PUBLIC AND DO AN AUCTION IPO WHICH IS BASICALLY A DUTCH AUCTION ALLOWING THE INVESTORS TO SET THE PRICE, THE MARKET TO SET THE PRICE, AND NOT THE UNDERWRITERS.

>> WAY, THAT DUTCH AUCTION SEEMED REALLY GOOD AT THE TIME.

A LOT OF PEOPLE WERE DOING IT.

IT SEEMED TO MAKE THE SYSTEM MORE FAIR.

HOW COME IT WENT OUT OF FASHION?

>> WELL, THERE WERE ABOUT 25 OF THEM WITH GOOGLE BY FAR BEING THE MOST SUCCESSFUL.

YOU BOUGHT GOOGLE AT THE IPO, YOU HELD ON TO IT, IT'S NOW CALLED ALPHABET, PROBABLY GOT 23,000% RETURN.

BUT THE BIG UNDERWRITERS DON'T LIKE THAT, WALTER.

IT'S LIKE A DIRECT HIT ON THEIR POCKETBOOKS, THEIR INSTITUTIONAL CLIENTS' POCKETBOOKS, BECAUSE THE INSTITUTIONAL INVESTORS DON'T GET THE BIG POP.

THE UNDERWRITERS DON'T GET THE BIG FEES.

SO YOU'RE BUCKING AGAINST A CARTEL, YOU KNOW.

WHY DO WE STILL PULL OIL OUT OF THE GROUND?

BECAUSE THERE ARE OIL COMPANIES THAT MAKE A LOT OF MONEY FOR DOING IT.

WELL, WALL STREET IS A CARTEL TOO.

AND THEY GET A HUGE, $555 MILLION FOR TAKING VIRTUALLY NO RISK.

THERE WAS NO RISK THAT THEY WERE GOING TO BUY THESE SHARES IN THE SPACEX IPO AND THEN LOSE MONEY WHEN THEY RESOLD THEM.

THEY WERE SOLD INSTANTLY TO INSTITUTIONAL INVESTORS WHO RODE IT UP UNTIL THEY SOLD.

SO THIS IS A SYSTEM THAT IS PRETTY MUCH TRIED AND TRUE.

IT'S BEEN AROUND FOR A LONG TIME, AND THE UNDERWRITERS LIKE IT THAT WAY, AND THEY'RE GOING GOING TO CHANGE IT.

>> PRESIDENT TRUMP'S SOCIAL MEDIA GROUP, TRUTH SOCIAL, AND OTHERS, HAS COME OUT WITH A PLAN THAT THEY'RE GOING TO CHARGE CERTAIN BUSINESSES $100,000 PER MONTH IN ORDER TO GET EARLY ACCESS TO TRUMP'S POSTINGS.

AND IT SEEMS TO BE PART OF A SORT OF TRANSACTIONAL ALMOST PAY FOR PLAY TYPE MENTALITY.

WHAT DO YOU MAKE OF THAT?

DO YOU ANY THAT THAT HURTS THE AMERICAN ECONOMY IN THE LONG RUN, THIS TYPE OF TRANSACTIONAL AND SOME WOULD SAY ALMOST, WELL, SELF-DEALING?

>> YEAH, I FIND THIS EXTREMELY DISAPPOINTING.

IF THERE WAS A REAL S. E. C. AND REAL S. E. C. ENFORCEMENT, THIS THING WOULD HAVE BEEN KILLED IN THE CRADLE.

BECAUSE THIS IS EXTREMELY OFFENSIVE.

IT'S --IT'S --I'M NOT A LAWYER, BUT IT STRIKES ME AS DOWNRIGHT CRIMINAL THAT THE PRESIDENT OF THE UNITED STATES WOULD BE SELLING EARLY FOR $100,000 SUBSCRIPTION TO INVESTORS WHO WANT EARLY ACCESS TO HIS INFORMATION, WHICH BY THE WAY A LOT OF PEOPLE HAVE BEEN TELLING ME, NOT THAT HE'S BEEN CHARGING FOR IT, BUT PEOPLE HAVE BEEN TRADING ON THIS -- HIS MUSINGS EARLY, PEOPLE AROUND HIM, WHO HAVE ACCESS TO WHAT HE IS THINKING AND WHAT HE IS GOING TO WRITE AS SOME OF THOSE TRADES HAVE BEEN SHOWING UP IN THE FUTURES PITS, BECAUSE I GET EMAILS ALL THE TIME FROM PEOPLE TELLING ME ABOUT THESE TRADES THAT ARE GOING ON THEY CAN'T BELIEVE THAT ARE MAKING PEOPLE A LOT OF MONEY.

AND THIS IS SORT OF MAKING, YOU KNOW, DE FACTO WHAT WAS ALREADY DU JOUR THAT PEOPLE ARE TRADING ON THIS INFORMATION ANY WAY SOMEHOW, AND I GUESS NOW TRUMP'S DECIDED HE WANTS TO GET PAID FOR IT.

WE CAN ONLY HOPE, WALTER, THAT TRADERS WILL BE AS DISGUSTED BY THIS AS I AM AND WON'T DO IT OR THAT THAT THEY WILL PAY FOR IT AND THEY'LL LOSE MONEY MAKING THESE TRADES BECAUSE, OF COURSE, YOU CAN NEVER BE SURE WHICH WAY THINGS WILL GO, AND THEREFORE IT WILL BE A PRODUCT THAT WILL DIE ON THE VINE.

>> WILLIAM COHAN, THANK YOU SO MUCH FOR JOINING US AGAIN.

>> THANK YOU, WALTER.

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