Compound Growth

The Market as AI: What a Listener Question Changed About How We Think

• Compound Growth • Season 2 • Episode 21

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0:00 | 45:14

A listener noticed something: when Wheeler and Colin talk about the market, they talk about it like it's alive. Like it knows things. Like it's learning. So this episode starts with that observation and goes somewhere genuinely surprising.

The stock market and artificial intelligence turn out to share more DNA than most people realize. Both process enormous amounts of data to generate an output. Both reflect collective intelligence at scale. Both are, in their own way, always learning. But the differences matter just as much — the market isn't trying to predict the next sentence. It's trying to maximize profit, from every direction at once, with no central brain running the show.

Wheeler and Colin work through the Ben Graham "Mr. Market" framework — the idea of the market as an irrational business partner you deal with every day — and trace how much the market has changed since Graham was writing. They unpack efficient market theory alongside Shiller's case for irrationality, and land on a framing that actually holds: the market is efficient until it's not. From there, the conversation covers what AI managing your money would actually look like, why robo-advisors have underperformed, what the SaaSpocalypse has in common with a market hallucination, and why Fastenal is still around despite Amazon.

One question threads through all of it: if the market is this kind of distributed intelligence, always absorbing new information, always compounding its own understanding — what does it mean for how you invest?

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Credits:
Created By: Wheeler Crowley and Colin Walker
Production, Editing and Post-Production: Tori Rothwell

There was a Nobel Prize in 2013, and it was awarded to Fama for the efficient markets theory.In the same year, they awarded the Nobel Prize to Shiller for basically saying that the markets are irrational.So in one year, they awarded the Nobel Prize to dif- 2 different views and perspectives, right?The market is efficient, the market is irrational.How can it be both of those things at the same time is a good question that you might wanna ask yourself.If I had to think about that, I would say most of the time it is efficient until it's irrational.Um, that's a good framing of it.Thank you.I just came upUh, from an operational perspective, just in the day-to-day, it's going to be extremely efficient.And because it's traded by algorithms and because the market capitalization of these companies have grown and the amount of trades being placed, there are so many more data sets now that would make it efficient.But in the event of something like a black swan or a news article that came out or something that was out of left field, then it'sbecomes irrational.Mm-hmm.So it's just like, the way that I think about it is a car is driving down the road, everything's predictable, nothing going wrong, but then a tire blows out, and then, you know, what happens at that point?Or there's debris in the road.You know, never, like, it's never gonna be absolutely perfect, and that's the way that I look at the market, is it's probably efficient most of the time until it's not.Welcome to the Compound Growth Podcast with Colin and Wheeler, where we talk all things growth.From financial growth to career growth, personal development to societal progress, we explore how each layer builds on the next, compounding over time to shape who we become.Each week, we break down complex ideas and emerging trends into clear, actionable insights, because growth isn't just about numbers.It's about understanding the world and our place in it.I'm very low energy today.You might need to carry the show, Colin.Why?What's up with Stone Face?So here'sAnd this is actually part of why I'm low energy.It's not because I had 3 Hold Study shows over the weekend, and they almost killed me, because they did- Mmalmost kill me.But it's because I did that Everlywell study, the thing where you do the blood work and- Yeah, yeah, yeahso I did a food sensitivity test.They have a bunch of different blood tests that you can check, you know, for, um, thyroid or just- Yeah, the whole thingwhatever.So I did one for food sensitivity, and surprisingly, the food I am most sensitive to is kale.Out of all the things to give up- Uhthat might be the easiest.No.You would think so, but it's, like, in my smoothie 3 or 4 times a week.Really?And then, and then when we go to Stone Face- Yeah, the kale Caesarwe get the kale, the kale Caesar salad.So I'm sad about that, but it's manageable.To your point, like, of all the things to give up- Yeahlike- Like, what if it was dairy?Well, further down the list is dairy, and dairy, like, asit's, like, some of the individual components are things I have to be aware of.But in general, dairy as, like, a category had the most components that I'm sensitive to.Hmm.So my smoothie, which has, like, yogurt- Kale, yogurtkale, yogurt, Lactaid, which is like I'm being smart and I don't have the lactose.No, but it's the yo- it's the proteins in the dairy that I'm actually allergic to.See, I thought you were gonna tell me this restaurant, like, wronged you- Noin some way.No, no, no.And I was worried about it.My body is wronging me is what's happening.Whey has been my protein that I've been using.I had to switch from whey.What- See, I, I worry if I do this, they're gonna, like, mail me a scroll- Of all the thingsthat, like, I'm going to release, and it's just gonna fall and roll, like, all the way across the floor- Yeahand down the hallway of all the things.No, it's a digital scroll.It's a scrolling on your phone.It, itThey're tech- I see.they're tech forward.Here's the, here's the biggest issue for me though.I would've preferred a printed scroll, to be honest.So in addition to kale and just dairy as a category- Yeahthere were things, like, are easy for me toLike octopus, like I'm not gonnaNo fish oils.Oh, yeah.Octopus.They tested a lot of differentRaisins, not good for me.I can't do raisins.And it'sThese are not, likeThey're, they're not even, like, intolerances.They just, like, have different, like, inflammations and the way that youimpacts your energy, et cetera.Coffee, great for me.totally good with coffee.Here's the hardest one.Sweet corn.So- How was that hard?So IOriginally, that was my take on this, like, "Okay.Well, I just won't get the cans of sweet corn, or, like, sweet corn on the cob or whatever."No, no, no.Here's where the hidden sources of sweet corn- Oh, no.Is it- So hidden sources are in- Is it canola oils?It'sWell, tortillas- Yeahcorn meal, corn bread, cereals, corn flour, tamales, polenta, corn flakes, corn starch, corn syrup, high fructose corn syrup, corn oil, dextrins, maltodextrins- So that's basically everythingfructose, ethanol, sorbitol.Like, it just keeps going.Dude, it's so bad.That sucks.And I'm like, "Wait."So they recommend an elimination diet.Like, and it's like a 3week eliminate.Like, cut it out, and then start to work things back in after 3 or 4 weeks or whatever.But I'm like, if I were to eliminate kale, sweet corn, and dairy, IRaw chick- I'm just gonna eat, like, straight chicken all the time.Water.Coffee.I can do coffee.Coffee.Yeah, that's true.So I'm in a space because I have all this data, and now I have to do something with the data, and I'm wearing my Whoop again, so I can track it.I noticed that.I was gonna ask you about it.I'm, I'm, I'm handcuffed to my data again.Here I am back where I started.You know, you were the one that told me I needed to get a Whoop or an Apple Watch for a long time.And well, it's useful.Then you get off of it-and now you're back on it again.Are you saying it's a roller coaster?It is a roller coaster.Me and this relationship.I have decided that I just don't care about my health anymore.Given up- Yepjust altogether.I've given up.I don't care.It's like, it's like you, when you went bald, you're like, "Ah."But I just feel as if at this point in my life, if I just eat relatively healthy, you know, I've, like, done all these different workout plans and cutting things out, and I realize, like, I'll drop 10 pounds, and then I'm like, "My life sucks."And then it just comes right back.But I'm alwaysLike, I do believe in set points for weight in general.Like, there's, like, a fixed place that's your normal.There's a fixed place that your body has just become accustomed to.Yeah.And I just feel as if my body, over the last, like, I haven'tMy weight has hardly changed in 15-plus years.Hmm.You know?No matter, like, if I work out every single day for 5 months, it's still relatively the same.It fluctuates by 3 or 4 pounds, which is a relatively small percentage amount in regards to my size.But, um, yeah, I mean, at the end of the day, I'm just gonna continue to do whatever it is I'm doing because while my BMI says it's terrible as a man, it's so mes- Yeah, BMI's a horrible- Like, you're not, you're not gonna hitIt's a horrible metric.Yeah.Yeah.So.I'm not trying to lose weight, though.No, I know you're not.What, what I, what it is, like, I wouldn't mind if I, as a byproduct, I, like, all of a sudden having a 6pack.Yeah, I would not complain.Yeah.Um, but I'm just trying to figure out, like, what healthy looks like.Mm-hmm.Right?And so I'm getting all this data, and I'm, like, figuring out what to do with it, and then I use those, like, that information to make my decisions.Makes sense.Much like you do as an investor when you're looking at the stock market.And all the different data points that go into the stock market to inform the direction of where your investments are going.Yeah, that's true.That was a rough one.Transition.No, come on.That was a good one.You know, he, he's like, "That's a rough"No, no, I think it was good.It was a rough one, it was a rough one, meaning I think it was a stretch, but we got there.I'm just saying it's all data.It is all data, and that's what we're talking about today-I don't wanna say the data that goes into the market, but we had an interesting question that- Yeahcame from a listener that I think spurred this whole thing that popped up, which is a comparison between AI, which is a machine learning kind of model, versus the market and the different data points that go in and how they're kind of correlated- Let's read the quotein a way.Let's read the actual"You were talking about the market as an entity.It occurred to me that you were talking about the market as though it is some type of AI, compiled collective knowledge spitting out measurable data."And I just wanna point out that this topic was not our idea.It was not.It was Tori's idea, and sheSorry, Tori, you brought the AI into this one.This is not us.Yes, that's true.This is the first time we did not bring up AI on our own.I think the point that our listener was trying to make is that, especially as an advisor, I feel like we talk about the market as its own entity, and there are certainly some similarities that we can unpack regarding kind of the collective intelligence that the market represents and how you can find some similarities to that collective intelligence in AI, right?They're both basically sources of collective intelligence.They have all of these different data points that they refer to and assess and then move forward.Right.Yeah, exactly.And I'll say, well, I don't wanna get too far ahead, but there are a decent amount of similarities in the sense that it is a massive amount of data that's being collected and analyzed, whether it's through algorithms or machine learning or whatever it might be, to give you a specific outcome or result or a target, and that's what we're diving into.Yeah.But this is not a new concept.So, like, the concept of Mr. Market, so that was populized, popularized by Ben Graham, right?And he thought of the market as basically an irrational business partner, right?It's basically you, you come into your office every day, and you are trading withIt's in connection to the market, and the market is, you know, basically off its meds from day to day- Rightand just making some irrational things happening, et cetera.And so he, I think it helped him to frame the space within which he was working as, like, an entity.It's like, "Well, Mr. Market's doing this today.What am I gonna do about it?"gonna do about it?"Right?Right.Yeah.The thing with Ben Graham, and for those of you that don't know, wrote The Intelligent Investor- Mm-hmmand kind of the father of behavioral finance in a lot of ways.Value investing.Value investing, for sure.But, uh, the market was also a very different place when he was writing the book- Totallyback in the day.Totally.And if you were to even go back further than that, I think in the n- right in the Great Depression, only 2% of the American populous actually owned stocks.Very close to that number.Yeah.It was very, very low versus now we have, I think, close to 56% of the US populous- Mm-hmmown stocks in one way, shape, or form, whether it's through 401ks, IRAs, or brokerage accounts, or whatever it might be.So the market has changed a lot since then, um, but he was the one that originally coined that thought.Yeah.And I think what's changed the most about the market at that time is that all the data points that you mentioned are n- are originally, like the algos or machine learning or whatever- Yeahthose are the modern data points, and what he was referring to was the market as just like a collection of trades being placed, and those trades were always being placed by individuals, right?Yeah, exactly.It's, it's basically crowdsourcing on some level.What do we think this investment is worth as a crowd?And it's worth pointing out that for every buy, there's a sell and vice versa.You don't just, like, buy or sell into the ether, right?Yeah.There's always somebody buying.And that's what makes the market goes up, right?Like, if you look at Intel as an example, we were just talking about- Yeahthat in a recent episode.The reason why that went up is because there were a ton of trades placed that drove the price up.Right.The, it doesn't just go up randomly.There is a reason and a purpose behind what's actually driving it up, and it's just like supply and demand.Exactly.Buying, the stock price goes up.When people are selling, it goes down.Yeah.Everybody wants Intel.Nobody wants JetBlue.No.No, they do not.And then you have a very- With that being said, I did just buy JetBlue plane tickets last night, but- Well, you gotta use those points.I know.I gotta use them before they go bankrupt.I have, I have on good authority from one of our clients who just has determined that they're going bankrupt.Um, I don't know, for sure.That is not insider knowledge, by the way.Not investment advice.But I think what's interesting to me is you have kind of like that push/pull.It's the idea that if the market is the Ben Graham Mr. Market, then it's very inefficient, and you can find different ways to make money, right?Profitin relationship, in relation to the market.Now, we have all these algos and machine learning, et cetera.It would suggest that the market is efficient, right?Right.Like, it's, doesn't matter what you do, the market is the market.Everything comes, reverses to the mean, and then you can't outsmart the market.There was a Nobel Prize in 2013, and it was awarded to Fama for the efficient markets theory.In the same year, they awarded the Nobel Prize to Shiller for basically saying that the markets are irrational.So in one year, they awarded the Nobel Prize 2 different, I think they were mathematicians, but 2 different views and perspectives, right?The market is efficient.The market is irrational.How can it be both of those things at the same time is a good question that you might wanna ask yourself.If I had to think about that, I would say most of the time it is efficient until it's irrational.Um- That's a good framing of it.Thank you.I just came upUh, I think from an operational perspective, just in the day-to-day, it's going to be extremely efficient, and because it's traded by algorithms and because the market capitalization of these companies have grown and the amount of trades being placed, there are so many more data sets now that would make it efficient.But in the event of something like a black swan or a news article that came out or something that was out of left field, then it's becomes irrational.So it's just like the way that I think about it is a car is driving down the road.Everything's predictable, nothing going wrong, but then a tire blows out and then, you know, what happens at that point?Or there's debris in the road.You know, never, like, it's never gonna be absolutely perfect, and that's the way that I look at the market is it's probably efficient most of the time until it's not.I'm gonna take a unplanned detour here.Okay.So I spent some time in Boston over the weekend, Boston and the surrounding, you know, Cambridge, Somerville, et cetera, and I'm not driving around the city so much as I used to, right?Driving around here is much moreIt's, it's easier to get on autopilot to a degree, right?Yeah.Like, there are fewer interruptions to your progression.But when you're driving around Boston, there are many, many interruptions.Especially Boston.Especially Boston, right?But there are, there are, you know, jaywalking pedestrians and masshole drivers and- Uh-huhlike, and just, like, all of these different, like, stop-go opportunities, right?So we were driving, uh, through Somerville yesterday, and we were trying to find this tiny museum, I guess is the right way.I think it's like a small Smithsonian or something like tiny Smithsonian.It's like this, this woman outside her, built this little thing outside her house, and you wouldn't know about it unless there's pr- I don't know.There might be a Yelp page for it.I'm not sure.Okay.Sure.Just found about, found out about it in a book, and she said, like, "Let's go check it out."And so we were driving there.We're approaching the destination, and I have my GPS saying, "Here's the destination," and, "Here's the left turn I need to take," and, and here's this woman getting out of her car on my right hand-side right in front of me.I'm paying attention to that, and Jess says, "Watch out."I'm like, "All right, I see her."And she's like, "Stop."I'm like, "I don't think I need to stop because I can see her."But what Jess was seeing was on the other side of the woman in the car were 2 people waiting to cross at the crosswalk- Ohwhich I wasn't paying attention to because I was paying attention to the 3 or 4 other things happening at the same time.Sure.So Jess had a different point of view.Mm-hmm.And she said, from her point of view, "Watch out."Yeah.And from my point of view, I saw something to watch out for, and I watched out for it, right?But there are 2 people basically next to each other looking at the same scenario and seeing different things and reacting very differently to those things.Right.And what I found interesting about that, I'm bringing it back to this, to the market situation, is that's regularly what happens with the market as a whole or as these individual stocks, et cetera.You look at something, you interpret the data, and then you say, "Well, I think this," and somebody else says, "Well, I think that," and then you're on opposite side of the trades, right?So I feel like we're constantly trying to tune out the noise and, and curate the information and tell our clients how we see things from their perspec- from our perspective, but all we're doing is perspective providing.Yeah.Well, I think you just called on, in my opinion, the biggest difference between what, like, an AI model is versus what the market actually does.Yeah.And if you think about AI as a whole, it's very centralized, meaning that whatever your flavor of the month is, whether it's ChatGPT or Claude or Grok or whatever it might be, you're going to have an AI learning model that is going to be a machine-based learning model, and the whole point of this thing is to collect as much data as humanly possible to basically predict using machine learning what the next best outcome is.So, like, as an example, if you start a sentence, you know, what it will do is kind of predict the end of that sentence using- Rightlike the highest probability of what typically comes next.So it's learning, but it doesn't necessarily have a motive per se.Versus if you think about the market, yes, it is similar in the sense that there are a million different data points and sets going in, but there's no centralized core to it.You have hundreds and thousands of decentralized theories trying to maximize profit at the same time.So you have hedge funds, you have quants, you have institutions, you have people like you and me, you have individual, you know, clients that are trying to buy and sell- Yeahon a day-to-day basis.And so advisors and then clients that are trading on their own.Correct.Yeah.So the thing is, is while AI is learning because it's a centralized model and it's constantly building the algorithm, in the market you have everybody competing against each other.And the thing is, is while AI is constantly building and getting better, the flip side of that on the market, which is kind of interesting, is if let's just say you have a hedge fund that has some sort of strategy and it does super well because it finds a niche, money's gonna flood in- Mm-hmmand then at that point they're gonna lose their advantage- Yeahbecause it's basically going to homogenize it with the rest of the market.The market's learned what it knew.Right.Exactly.With the advantage- So it gets absorbed.Yeah.Yeah.So it's just like what we were saying earlier, it's efficient until it's not.Right.And then once it's not efficient, it reverts back to the mean.So let's assume then that you're kind ofYour point of this is it's like an amalgamation, right?Yes.Like it's, it's this immersive phalanx that is just continuing to grow and learn and, and just it does that on repeat, right?Yeah.I think of that as in our, in our prep when Tori did some of our production prep for us, which is always very helpful, some of the prep suggested that we should think of hallucinations, AI hallucinations, as essentially a direct connection to when there's a, a bubble in the market, right?The market thinks that there's something up like this, blah, blah, blah, and that's like hallucinating value.I think that the, the marketI don't think that the market ever hallucinates anything, but it can have those irrational moments.Like the, the SaaSpocalypse earlier this year.Yeah.Right?So we have, you know, Claude come out with all these, or Anthropic come out with all these different utilizations for their technology, and all the software stocks go to, you know- Yeah.Dropget cut in half.And that to me is an overreaction.The market will frequently overreact to things.Mm-hmm.And then it adjusts and moves forward.So as to your point, it's, you know, rational until it's not.Yeah.Well, it's like when first Republic Bank- Yeahwas another example fairly recently.Totally.You know, where that went under, and then basically all the other bank stocks people were freaking out about.Silicon Valley Bank was- Yeah, yeah.Yeah, Silicon Valley Bank, yeah.So if it'sAnd maybe it's, maybe it's my lack of familiarity with hallucinations and how, how AI reacts to hallucinations, but does AI learn from hallucinations?Is that- Well-appropriate to suggest?I think it's fairly appropriate, assuming there's enough data points to it.You know, like, it's going to basically, from what I understand, take all the data from maybe all the hallucinations that it has access to- Yeahand then compile that into what it thinks would a reasonable output would be.Right.So I think it'sWhenYou, you brought up a, a point earlier that, you know, at the turn of the century and into the Great Depression, it was, it was less than 5%.It was a small amount of- YeahAmericans that had stocks, right?And now we have the majority- Mm-hmmon whatever level, of Americans who are invested in the stock market- Yeahat some point, right?And we've had all these different gyrations along the way.We did have that depression.We've had, you know, the Nifty50.We had stagflation.We had the crash in '87.We had- Dot com bubbleyeah, the dot com bubble- Yeahet cetera.We had the GFC and COVID.Mm-hmm.And, like, all of these little things, or some of them are pretty big things, are learning opportunities for the market, I think.And what I appreciate about the market isn't that it's always right, because it's not always right.No, of course.But it's always forward-thinking, so it's always pricing in overall the collective understanding of what something's going to be worth in the end.Yeah.Right?But it doesn't mean that it has to be right, but the truth is, overall, it grows, and it grows not just in, in terms of increasing value, but it grows in terms of its ability to understand what's happening.We, you know, we help it grow.We create break points, breakers, right?So that if the stock market goes down too fast, it just shuts off temporarily.Right.Right?We do these things to, to, like, well, in this type of situation, we'll haveWe know what the, the political playbook is to support the country if there's, like, a GFC type situation.Mm-hmm.Right?Yeah.Or COVID, whatever.Yeah.I was having a conversation with a client the other day about this, and they were talking aboutI was talking about portfolios, and, you know, I was like, "You know, do you wanna be more growth oriented, or do you wanna be more conservative?"And, you know, she was like, "I, I don't really wanna be more growth oriented, 'cause I don't wanna lose my money."You know, I, I think that is a fear that a lot of people have when they hear the word growth or risk, but the purpose of the market versus what AI is doing, AI is trying to basically make something that's as efficient as possible and as accurate as possible.The purpose of the market is to drive revenue and growth.You know?Yeah.Like, people are trying to profit here, so that is the purpose of this.And for someone to invest their money in, let's just say, an index fund, and for all 500 of those companies within the S&P 500 to go bankrupt at the exact same time- Is unrealisticis unrealistic.And there are quotes out there, you know, youIt's not what you don'tOr it's not what you don't know that gets you into trouble.It's what you think you know for sure that you're wrong about- Rightthat gets you into trouble.Mark Twain.And with the market, the market is extremely efficient.That is true, but there are always black swan events that pop up, like the great financial crisis, or whether it's the dot com bubble or COVID, X, Y, and Z, but then that becomes another data set.And then once we have that, we can then learn from it and then implement, so in long term, the market will become more profitable and predictable because we have more data points.Yeah.I think what happens in a scenario like the GFC, you know, the black swan event essentially is the housing market.Yeah.Right?And all the leverage that is underneath the housing market.Yeah.And the issue is that thereIf the market acts on collective information, not enough people have that collective information.Some people did, and they made a lot of money,But it's all about getting all the information, and I think it's not that the market said, "Well, I guess stocks are worth 45%, 54%," whatever it might be, less, you know, this year than they were last year.It's that the market says, "Well, I think everything's worth a little bit less," and everybody else overreacts and says, "It's worth way less.Let's just-" Yeah"sell everything," right?Yeah.And that's when you have the human behavior part of it.And I think maybe the way to think about this is actually the directional aspect of it.It's not that the market is right to go down by 20% or up by 20%.It's that the market is directionally looking in the right direction, right?It's just moving the way that things should be moving, and then we as investors amplify that in one way or the other.This reminds me of 2021, 2022, when interest rates started to go up- Yeah.Yeahand then there was that year where no matter what you did, you pretty much lost money because fixed income was going down dramatically- Mm-hmmand stocks went down, too.There was war in Ukraine and a bunch of other stuff.But bonds were super frustrating.Yeah.Because we all know through basic eco-economics classes, and those of you who don't know, it's when interest rates go up, the value of your bonds tend to go down.And if you think about it, it makes perfect sense, right?If you're a bank and if you give out a mortgage at 3% interest, let's just say, everybody's gonna want to have a 3% mortgage.Mm-hmm.However, when interest rates go up, that means that people can no longer get that 3% mortgage, so people will pay more for your 3% mortgage.It makes it more desirable if you can no longer get it.On the flip side, if mortgages go down, so let's just say they were 3%, now they're at 2%, that makes your mortgage less valuable, 'cause you'll refinance it to go down to the 2%.So there's an inverse relationship between interest rates and the value and price, or the value of bonds.So we had a situation where interest rates were going up and the value of bonds were going down, but people were panicking about it, and they were also pulling all of their money out at the exact same time from fixed income, which was driving the value down further.So to your point, it was directionally accurate that when interest rates went up, the value of the bonds went down, but they went down way more than what anyone anticipated at the time.Well, there's also, and, and we've talked about this a little bit, when you have the shorter duration bonds, the ones that are, like, one to 3 years or- Mm-hmmless, right?They're gonna be less fluctu- They don't fluctuate as much in value because they don't have that traditional driver, right?They don't have that investor force that's really moving the value of those bonds.When you think about treasuries, people are betting essentially on what the interest rates will be in the United States 10, 15, 20 years from now.Right.And that's really unpredictable.When you have kind of a trajectory where directionally inter- interest rates are going up, people carry that too far, and then you see the bond values that are further out on that curve, on the yield curve, go down more because they have that price dependence that you're, you were talking about.Yeah.Yeah, exactly.So to your point, I mean, directionally accurate is the best way to think about it.Yeah.You know, if some news comes out about tech and AI is taking over or whatever, or software is having a rough time and Apple stock drops 20%- Yeahthat doesn't mean that it was justified necessarily to drop 20%, but just that sector in general- Yeahsuffered because of it.I heard a, an interesting fact today, and this is actually, it's very logical.It just makes common, it's common sense if you really think about it.But there, you know, the turn of the century, we had the internet kind of coming to fruition in the business world, right?Mm-hmm.Like, it's, you know, the internet is here, it's going to disrupt everything.You know, all these brick-and-mortar stores are gonna go out of business because you can buy everything online.Amazon will destroy the world.Sure.If you look at the top e-commerce websites, top e-commerce businesses, right?'Cause it's, whatever, some of it's not done on a computer.But e-commerce as businesses by volume, what businesses have the highest volume, do you think?Do you mean like Amazon or something?Yeah, sure, Amazon.What are, like, the top 5 largest e-commerce volume business you, you would think of?That I could think of?It would probably be Amazon, maybe Walmart.Mm-hmm.Yep.That would be on there.Yep.Um, I wanna say Home Depot, but- No.But- But Walmart's on there.Yeah.So did AmazonAmazon came in, was a massive risk to Walmart.Best Buy's on there.I wasYeah, I get a lot on Best Buy, but I thought that was just me.BestNo, no.It's, it's Best Buy's theBut Best Buy, Walmart, brick-and-mortar stores, they have a ton of e-commerce volume.Oh.Right?So did Amazon, where everybody was gonna buy things online, come out and destroy Walmart?No.No.Right?Walmart just adapted to become more like Amazon.There's a, there's a comp- there's a company out there called Fastenal, and Fastenal sells nuts and bolts.Literally nuts and bolts.And they will basically, any, any large scale job site will have Fastenal, like, suppliers essentially there.Hmm.And you can literally, they'll have vending machines.That's comfortable.Like, you need 20 whatever size bolts, you go to the Fastenal- Yeahvending machine type of thing.So when, Fastenal's a, a company that's been around for a long time.Tech bubble era, Amazon comes out, everybody says Amazon's gonna destroy Fastenal,Fastenal is up like 400, 500%.It's massively improved the size of their business.It's still here.It's still a very strong business even though Amazon came out.Amazon didn't just destroy everything that could be sold anywhere.Other businesses had to adapt, or Amazon had to choose, "Do we wanna be in the nuts and bolts business?"It's just like healthcare.Like Amazon was supposed to destroy all the healthcare companies because they- Yeahgot into the healthcare space, but that's not what happens.Why is Anthropic any different?It's not.I, I have been a very firm believer that I don't necessarily think that AI in general is going to destroy a lot of businesses.I think it's going to improve a lot of businesses.That's personally my, my own opinion.You wanna know what this brought me back to is we had the SpaceX, you know, um, episode that we did the other day.Yep.And I was watching TV last night, and there was a T-Mobile commercial, and T-Mobile was talking about how, you know, we're going to roll out satellite and all these kinds of other things for businesses, and we have all of this business benefits that you can tap into in regards to high speed internet, and then at the end it said, "Brought to you by"Do you know what I'm gonna say?No.Go ahead.Starlink.Starlink.Brought to you by Starlink.Interesting.So- T-Mobile brought to you by Starlink.Okay.Yeah.So I thought that was very fascinating that, once again, I don't think Starlink is going to- Huhreplace these businesses, but T-Mobile is now using Starlink satellites to provide business internet.Well, the best businesses are B2B, right?Yeah.It's w- 'cause business people like doing business with other businesses.Yeah.It's like it's such an easierLike we're not in a B2B business.Sure.No, I know.But-Fastenal, I misspoke.From they're not up 400 or 500%.They're up 2400%.So Amazon did not kill Fastenal, and there, there will be other companies that got mixed up in the SaaSpocalypse that will not be killed by Claude or Groq or whatever.Totally.But there will be some that don't survive, right?Yeah, definitely.There will beThose businesses will be disrupted.Well, look at like Sears, Macy's.Sure.Like all of those brick and mortar companies that are now being replaced by the bigger presences online, like the Arlos or Lululemons or all- Yeahof those types of companies that people are now trying- Yeahto go to online, so.Wayfair.Wayfair, yeah.Yeah, but I think those are just companies that didn't adapt.Yeah, exactly.So- Adapt or die.Yeah.So- It's Blockbuster.Exactly.It's Blockbuster.It's, it's always Blockbuster.It is always Blockbuster.But it, that's what I think the directional aspect comes from.Directionally, there should be a reassessment of the value of all of these software as service stocks.Yes.I get that 100%, but that doesn't mean that all of these management teams that we all thought were, like, really well-run management teams are just stupid all of a sudden.It means that they're probably doing something too.If they recognize the threat, they can adjust to the threat.And so I think that is the, it's the compound growth effect of learning, right?Yeah.The stock market is always compounding and growing, and I think in that relation or in that aspect, it is similar to AI.It's funny because I might take this narrative now.I might, like, help explain the market to somebody.I might, like, say it's similar to AI, and it's, it's not our idea, but I like it.Right.Yeah, it is pretty good, but also AI and threats to the market in certain industries is nothing new.Yeah.I mean, we've been through this a million times, not just, not with AI, and I recognize that every time it's different.Yeah, sure.And there have been a ton of threats to our own industry in regards to new rulings that have come out.Roboadvisors.Yeah, the internet come out.Yeah.You know, going even further back, you know, you had the assembly line in manufacturing and all these other things that change the way businesses operate.So there's a million things that will inevitably come up over the next 100 years that we can't even anticipate that will be threats to some businesses but will pave the way for others.And I think the, the expectation, and it's maybe the market is innocent until proven guilty in this manner, but I think the underlying truth is that the market will digest and absorb and continue higher.It will go down.It always goes down at some point.Mm-hmm.And then it goes back up, and it's, that's been a tale as old as time when it comes to investing in the US stock market.And the market now, as it grows and, and compounds on itself, it just becomes a better version of what it was before.So the question then is, if the market is similar to AI in that way, what if AI was investing for you in the market?Like what if you kind of like hybrid hot glue these 2 things together?What is the outcome?To be honest, I feel like I know the answer to this.Okay.You already know.Yeah, I already know.Oh.Now, now I'm not sure.Okay.So, so we started in the beginning of this saying that what AI is, is it is a collection of data, and then it uses that pr- to predict the most likely outcome.Yeah.Right?So if that's the case using machine learning, then it will look at the stock market and say, "What is the majority of people doing?"And then I'm going to use that to predict what mostly, most likely you're gonna be doing.Hmm.I doubt that the market isI doubt that AI is going to look at the market and say, "You know, you need 3 hedge funds, 4 alts, and then this random mutual fund over here."Right.It's going to be doing what collectively the majority of people are doing to get to a desired outcome, which would be indexing.'Cause that's what it would do.It wouldn't do anything that's necessarily-crazy or different, because if it was to do something that's crazy or different, then that technically wouldn't be a machine learning model, that would be an algorithm built by a completely separate source.I wonder if that would then smooth out the volatility or heighten the volatility.I think it would concentrate it.Well- But you could argue the same thing with passive investing right now.Yeah, I mean, theoretically, what really underlies and kind of props up the value of the market is that everybody is averaging into it- It's consistent purchasingconsistently through passive investments.Mm-hmm.Right?It's just, it doesn't really matter.They're not picking Nvidia versus Intel.They're basically just saying, "I want both."Yeah.And, you know, I'll let the market decide.Yeah, exactly.And I, IThere's definitely value to that.I think over the long run, like, when I wasI was thinking about my daughter's Roth IRA today.And I was like, I, you know, I believe in owning stocks, individual stocks, for a long per- long periods of time, longer than- Mm-hmmthe average hold period is, like, 5 months for an individual stock now.Really?Yeah.Five and a half.That's actually shocking to me.It's not great.No.Um, because people are trading more than they're investing, and I prefer the investing side of things.But when I think about the time horizon for my daughter's Roth IRA- Oh, Godit's gonna be another 50 years before she uses it.Um, am I sure that I know what stocks she should ow- hold for 50 years?Probably not.I'm not that deep in my time horizon.More like, well, I can be more certain that the stock market will be up overall in 50 years than Apple or Nvidia or whatever.Yeah, that's the tricky part.Yeah.You know, with the further you take out the time horizon, the more unpredictable it becomes.Yeah.And I guess you could diversify.You could have the ideaThere's this book that just came out called The Coffee Can Investor, and the concept is you take, they used to actually have stock certificates that people would have when they bought the stocks, but you could take, in the '90s, you'd have stock certificates, and maybe you have Apple and Xerox and Microsoft and Nike- Disney, yeahwhatever, and you just stuff them in a coffee can, and then 50 years later you take them out, and what are they worth,It's not quite 50 years later, but- Yeah.I know what you meanUm, and some of those, Apple and Microsoft, great.Xerox, not so good.And Nike was good until 5 or 6 years ago.Yeah.Um, but I guess, like, diversification being the key there, like, you know, the winners, we were, we were talking about going long the market and short the market the other day, and you pointed out that you can't lose as much as you stand to gain, right?You can lose 100%.You stand to make much more than that.Yes.And if you have, if you hit on, like, 2 or 3 out of 10, that can offset the others and then some- Yeahin the long run.I don't know.Yeah.I, I- What if you miss on all 10?I, I loveYeah.I, IWell, Ben Graham, I think it was 22 stocks.Yeah, I mean, the perfect portfolio is- His perfect portfolio was 22.Yeah, 22, 25, something like that.22.Yeah, it was somewhere around there was the perfect portfolio with 22 random, randomly selected stocks in theory.Well, not random.Ra- Yeah.You have to have certain sectors covered.You have to have some analysis, but you cover a lot of- You cover the sectorsBut you do, you are, in theory, diversified at that point- Yeahwith 22 stocks.Whether or not that still holds true, it's been a while since I've looked at it, I'm not 100% positive, but the problem becomes, once again, time horizon.And you can argue that, you know, maybe those companies wouldn't go under, they would get acquired, so you'd get shares of something else, or whatever might happen.But for someone like Mikayla that has a 50-year time horizon, indexing is certainly the easy button, and that, in my opinion, is what pretty much every AI would do for you at that point.So then the question becomes is, is it really that much of a benefit to AI managing your money at all?Yeah, and w- I mean, the risks would be, like, hallucinating, I guess, like- Yeah.You know, it's funny.I think that, you know, when Bitcoin became more publicly adopted, right?When it became something that you could buy ETFs for, and when it became something that the administration was championing- It immediately lost its cool.ItYeah.It's like now you can't makeI mean, people are still investing in Bitcoin and, and maybe they'll make a lot of money, and I can't predict it, but it's definitely changed the dynamics underneath, right?Like- It's made it very efficient.Yeah.It has certainly made itYou don't have the same volatility in Bitcoin- No, you don'tthat you used to have, and it's because of the, I, I guess, as it graduated and grew into what it is now, it lost the ability to be as volatile.It's kind of like when I graduated from college.Okay.I was going out, I was having a great time.Things were really fun, you know?Yeah.But as I get older, I'm in bed at 7:45, kind of have the same routine every, every day for the most part.In no way is this a complaint.I love my routine.But, like, when it comes to a stock or something like that, in the beginning it's very exciting and unpredictable.You never know what's gonna happen, which direction it's gonna go, what legislation's gonna come in and change it.But once it's been around for a long time and as, you know, big money comes into it, as, you know, legislation comes into it, it doesn'tIt makes it more efficient, which means that there's less opportunity there, in theory, for an adverse return.Yeah.I would certainly think that AI, I guess, like, to your point, I think that AI would make things more efficient, and it would become maybe a more efficient market that could then become irrational in a very special way.Yeah.Because if youI mean, all the things that are built into the, the market are still there.Like, the breakers are still there, et cetera.But if you have AI making your investment choices and it thinks something is coming and it's wrong, then it could become very irrational, and AI is not one by one by one by one.It's, like, the same AI for for everybody.It's like a contagion aspect.What's kind of funny about this, we were talking about AI learns from data points.Yeah.Right?So if the data points that it has is people tend to sell when the market goes down- Won't it just do that?wouldn't it just do that, and it would just be the exact same thing than if you were to just, had a normal investor invest for themselves?Yeah.In theory, hopefully they wouldn't do that.They would adopt it from another source, but I don't know.All right.Now I'm scared again.I don't know.It's one of those situations where I, I personally, at this stage of the game, wouldn't trust AI to run my own money, but, you know, robo-advisors have been around for a very, very long time now.This is- And they've been underperforming for a very long timenothing new, and they've been underperforming for a very long time because they're justWell, they're programmed byAnd now we're getting in the weeds, but- Yeahthey're, they're programmed by modern investment theory.They are.And that hasn't been a great theory for a long time- No, it hasn'tuntil, until as of late, right?Yeah.But anyways, I think thinking about the stock market as a collection of data points and thinking about AI as a collection of data points is a fair comparison, and I think if that helps you understand what we're referring to when we're referring to the market, that's fine.But it's also important to remember it's not rogue, right?Yeah.There are some very, very key differences between- Yeahthe 2, you know, versusAnd it's just kinda like what we talked about, having an isolated unit, you know, over here, whether it's ChatGPT or Claude, that's trying to basically predict something.That's not what the market's trying to do.The market over here is trying to maximize profit, and there's a bunch of different sources out there that are trying to do that differently.Yeah.And, you know, like we just talked about, as one source becomes very profitable, it immediately homogenizes and it loses its edge.you know, it's efficient until it's not.Efficient till it's not.I like that.That's my favorite takeaway.Cool.All right.Cool.Thanks.Thanks, Colin.Let's wrap it up.Thanks, Wheeler.Uh, yes.Like, subscribe, share with a friend.Thank you.The information in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.Investment advice offered through Integrated Partners doing business as CoFi Advisors, LLC, a registered investment advisor.Integrated Partners does not provide legal, tax, mortgage advice or services.Please consult your legal tax advisor regarding your specific situation.Past performance is no guarantee f- of future results.All investing involves risk, including loss of principal.No strategy assures success or protects against loss.The economic forecast set forth in this material may not develop as predicted, and there can be no guarantee that the strategies promoted will be successful.Compound Growth with Wheeler and Colin.Sponsored by CoFi Advisors.Reach out today.Yay.