1 00:00:00,120 --> 00:00:01,920 Welcome back, everyone. Today on the Joseph Carlson 2 00:00:01,920 --> 00:00:05,760 Show, David Einhorn, the legendary billionaire investor 3 00:00:05,760 --> 00:00:09,000 himself, has given a pretty scary warning about artificial 4 00:00:09,000 --> 00:00:11,360 intelligence. Now, it's not a warning about 5 00:00:11,360 --> 00:00:15,160 the powers of AI or what it might do to society, but rather 6 00:00:15,160 --> 00:00:18,160 a warning about the return these companies are getting when they 7 00:00:18,160 --> 00:00:20,800 spend hundreds of billions of dollars on CapEx. 8 00:00:21,280 --> 00:00:22,960 That's right. David Einhorn believes that 9 00:00:22,960 --> 00:00:26,200 there's going to be, quote, tremendous levels of capital 10 00:00:26,200 --> 00:00:28,040 destruction. We're going to be taking a look 11 00:00:28,040 --> 00:00:30,800 at his remarks, why he's so concerned about it and how we 12 00:00:30,800 --> 00:00:33,360 can think about it. We also have in terms of his 13 00:00:33,360 --> 00:00:36,520 remarks, Tom Lee giving his thoughts on the AI build out, 14 00:00:36,680 --> 00:00:39,800 what he believes the returns will be, what he believes is the 15 00:00:39,800 --> 00:00:42,160 immediate impact of these companies and why some AI 16 00:00:42,160 --> 00:00:44,360 companies are trading down. So he'll be looking at his 17 00:00:44,360 --> 00:00:48,080 comments as well as Jensen Wong's as the CEO of NVIDIA. 18 00:00:48,080 --> 00:00:50,280 Of course, he has something to say about this as well. 19 00:00:50,560 --> 00:00:54,800 He gives specific examples about the returns of spend on AI and 20 00:00:54,800 --> 00:00:57,160 how he sees it playing out. So we going over all these 21 00:00:57,160 --> 00:01:00,480 commentators, investors and CEOs to see what we can make about 22 00:01:00,480 --> 00:01:03,920 the return on AI spend. If the hundreds of billions of 23 00:01:03,920 --> 00:01:06,520 dollars these companies are using to build out this CapEx 24 00:01:06,840 --> 00:01:08,880 are going to get investors a good return. 25 00:01:09,040 --> 00:01:10,720 Of course, we have a lot of other news to get to. 26 00:01:10,720 --> 00:01:13,720 Costco just reported earnings. This is one of my larger better 27 00:01:13,720 --> 00:01:16,800 investments that I've made. I've owned the stock for years. 28 00:01:16,800 --> 00:01:19,640 Costco stock is down a couple percent after the earnings, but 29 00:01:19,640 --> 00:01:22,360 should investors be concerned? I'll be going over the earnings 30 00:01:22,360 --> 00:01:24,960 showing you my thoughts on it. We have news of a fresh 31 00:01:24,960 --> 00:01:28,160 potential scam. You know, Taya Lopez, that guy, 32 00:01:28,480 --> 00:01:31,080 remember him that this is my garage guy. 33 00:01:31,080 --> 00:01:34,640 Well, apparently he owns RadioShack and Pier One and he's 34 00:01:34,640 --> 00:01:37,000 been accused of a lot of things. We'll be taking a look at that 35 00:01:37,000 --> 00:01:39,160 report. And then finally, we have a a 36 00:01:39,160 --> 00:01:42,160 new advertisement from Duolingo showing off some of the changes 37 00:01:42,160 --> 00:01:45,480 they're making to chess. Duolingo is pushing full steam 38 00:01:45,480 --> 00:01:47,520 ahead in chess. I'll share some thoughts on that 39 00:01:47,520 --> 00:01:49,280 as well. So as always, we've got a lot to 40 00:01:49,280 --> 00:01:51,280 get to in this episode, a ton to cover. 41 00:01:51,280 --> 00:01:54,360 And we kick things off today by talking about this stark warning 42 00:01:54,520 --> 00:01:56,920 from David Einhorn. Now, if you're not familiar with 43 00:01:56,920 --> 00:01:59,720 David Einhorn, he's this legendary investor and 44 00:01:59,720 --> 00:02:02,600 billionaire hedge fund manager of Green Light Capital. 45 00:02:02,880 --> 00:02:06,680 He became most notable from his short of Lehman Brothers. 46 00:02:07,040 --> 00:02:09,320 So while everything was going on with the big financial collapse, 47 00:02:09,320 --> 00:02:12,040 there's only a few investors that really anticipated that 48 00:02:12,040 --> 00:02:14,080 beforehand. These were investors that could 49 00:02:14,080 --> 00:02:16,040 determine that things were going to go South. 50 00:02:16,120 --> 00:02:19,240 You have, of course, Michael Bury, you have Mark Baum, you 51 00:02:19,240 --> 00:02:22,200 have all these bigwig investors that knew things were going to 52 00:02:22,200 --> 00:02:24,480 go South and they bet against the big banks. 53 00:02:24,800 --> 00:02:26,200 Well, David Einhorn was one of them. 54 00:02:26,400 --> 00:02:29,480 He correctly anticipated that Lehman Brothers was going to go 55 00:02:29,480 --> 00:02:31,960 belly up. He saw all the money they were 56 00:02:31,960 --> 00:02:33,800 spending, all the promises they were making. 57 00:02:34,000 --> 00:02:36,240 He looked at the actual financials and he identified 58 00:02:36,520 --> 00:02:39,400 that things weren't what they seemed, that there is far more 59 00:02:39,400 --> 00:02:43,320 risk in the situation that investors could ever comprehend. 60 00:02:43,600 --> 00:02:46,440 And he made a fortune and his name at least a more notable 61 00:02:46,440 --> 00:02:50,240 name from that big event. So you get a lot of credibility 62 00:02:50,240 --> 00:02:52,600 when you make a big bet against something like that. 63 00:02:52,600 --> 00:02:54,960 And it goes. So right after Green Light 64 00:02:54,960 --> 00:02:58,040 Capital made a fortune betting against Lehman Brothers, David 65 00:02:58,040 --> 00:03:01,840 Einhorn has consistently given caution where other investors 66 00:03:01,840 --> 00:03:03,920 are bullish. So you see the similarities 67 00:03:03,920 --> 00:03:05,520 here. Investors are really amped up 68 00:03:05,520 --> 00:03:07,520 about AI. We're all excited about it. 69 00:03:07,520 --> 00:03:10,280 We see the future. Many of us are super bullish on 70 00:03:10,280 --> 00:03:14,360 these companies like Google and Meta and Microsoft and NVIDIA. 71 00:03:14,600 --> 00:03:16,640 We're all looking at all the possibilities. 72 00:03:16,960 --> 00:03:20,160 And David Einhorn here sees it very similar to 2008. 73 00:03:20,560 --> 00:03:22,560 He's looking at it where everyone else is bullish, 74 00:03:22,600 --> 00:03:25,680 everyone else is making money, and he's looking with a bit more 75 00:03:25,680 --> 00:03:28,400 skepticism. And so he's ringing this warning 76 00:03:28,400 --> 00:03:31,360 once again, and it causes a bit of concern for investors. 77 00:03:31,400 --> 00:03:34,160 Bloomberg reports that the hedge fund manager David Einhorn 78 00:03:34,160 --> 00:03:37,800 cautioned that the unprecedented amount of spending on artificial 79 00:03:37,800 --> 00:03:41,600 intelligence infrastructure may destroy vast amounts of capital, 80 00:03:41,880 --> 00:03:44,760 even if the technology itself proves transformative. 81 00:03:45,320 --> 00:03:48,880 So that's the distinction here. He's not bearish on AI itself. 82 00:03:48,880 --> 00:03:51,800 He's not saying the artificial intelligence isn't incredible or 83 00:03:51,800 --> 00:03:54,040 transformative. He's simply saying that it may 84 00:03:54,040 --> 00:03:56,960 not give the best returns. The Green Light Capital founder 85 00:03:56,960 --> 00:04:00,360 said the trillion dollar build out by companies overall such as 86 00:04:00,360 --> 00:04:05,480 Apple Meta Open AI is so extreme that the eventual returns are 87 00:04:05,480 --> 00:04:08,240 highly uncertain. While he expects AI will 88 00:04:08,240 --> 00:04:10,920 ultimately surpass today's bullish forecast, he questioned 89 00:04:10,920 --> 00:04:13,560 whether, quote, spending, and this is the important part, 90 00:04:13,920 --> 00:04:17,800 quote, spending a trillion dollars a year or 500 billion a 91 00:04:17,800 --> 00:04:20,959 year will deliver good outcomes for the firm's making those 92 00:04:20,959 --> 00:04:23,600 investments. So he's basically just saying, 93 00:04:23,600 --> 00:04:26,680 we're spending so much money, how can you actually do analysis 94 00:04:26,680 --> 00:04:28,640 of whether or not we're going to get a good return here? 95 00:04:28,680 --> 00:04:31,160 Quote, The numbers that are being thrown around are so 96 00:04:31,160 --> 00:04:34,600 extreme that it's really, really hard to understand them. 97 00:04:35,120 --> 00:04:38,360 I'm sure it's not 0, but there's a reasonable chance that a 98 00:04:38,360 --> 00:04:41,640 tremendous amount of capital destruction is going to come 99 00:04:41,640 --> 00:04:44,560 through this cycle. There you have the big line. 100 00:04:45,000 --> 00:04:48,480 These numbers are extreme, really, really extreme. 101 00:04:48,840 --> 00:04:52,080 You can't understand them. And there's a reasonable chance 102 00:04:52,080 --> 00:04:55,320 that a tremendous amount of capital destruction is going to 103 00:04:55,320 --> 00:04:57,920 come through this cycle. Now, this comes directly after 104 00:04:57,920 --> 00:05:01,160 Sam Altman himself said he wants to spend trillion dollars on 105 00:05:01,160 --> 00:05:03,880 this problem open AI. Sam Altman said he wants to 106 00:05:03,880 --> 00:05:06,560 spend trillions of dollars on infrastructure over the not 107 00:05:06,560 --> 00:05:10,080 distant future. So in the very near future, he's 108 00:05:10,080 --> 00:05:11,560 he's talking about numbers of trillions. 109 00:05:11,800 --> 00:05:14,760 While Meta's Mark Zuckerberg has also talked about spending 110 00:05:14,760 --> 00:05:16,560 hundreds of billions of dollars in data centers. 111 00:05:16,920 --> 00:05:20,800 In February, Apple said it would plan 500 billion domestically 112 00:05:20,800 --> 00:05:24,800 over the next four years. We had Zuckerberg just at the 113 00:05:24,800 --> 00:05:27,520 meeting with Trump saying he's going to spend $600 billion. 114 00:05:27,920 --> 00:05:30,720 It's hard to grasp the the gravity of these numbers. 115 00:05:31,040 --> 00:05:33,680 Then you also have Amazon, which is one of the biggest spenders, 116 00:05:33,920 --> 00:05:37,440 spending just untold fortunes on data centers, building out this 117 00:05:37,440 --> 00:05:39,280 capacity. So we have the CE OS very 118 00:05:39,280 --> 00:05:41,400 excited about this. They're very excited to invest 119 00:05:41,400 --> 00:05:43,120 all this CapEx. They have a place to put all 120 00:05:43,120 --> 00:05:46,040 their excess returns, but what do we get out of this? 121 00:05:46,040 --> 00:05:49,440 What is the expected return? As investors, we need to know 122 00:05:49,440 --> 00:05:52,640 the ROI we're going to get before we make an investment. 123 00:05:52,720 --> 00:05:54,760 So David Einhorn made a couple things clear. 124 00:05:54,760 --> 00:05:57,760 He's aware of the technology and he's not debating whether or not 125 00:05:57,760 --> 00:06:00,960 the technology is amazing. So people saying look what AI 126 00:06:00,960 --> 00:06:03,760 can do, it can do this and that. He's aware of that. 127 00:06:03,800 --> 00:06:07,520 He's only saying that these tremendous numbers have to have 128 00:06:07,520 --> 00:06:11,080 an ROI, and what we don't see right now is clarity with that 129 00:06:11,080 --> 00:06:13,040 ROI. And he's very skeptical. 130 00:06:13,040 --> 00:06:15,840 He believes like many of the cases in the past, like building 131 00:06:15,840 --> 00:06:18,880 out telecom or Internet infrastructure, lots of 132 00:06:18,880 --> 00:06:21,480 companies actually had poor returns in the past. 133 00:06:21,840 --> 00:06:24,800 And there's many cases also where technology can be amazing, 134 00:06:25,160 --> 00:06:28,640 it can be innovative, it can it can revolutionize the world, but 135 00:06:28,640 --> 00:06:30,200 it doesn't make for a good investment. 136 00:06:30,240 --> 00:06:32,440 We can look at airlines as an example of that. 137 00:06:32,440 --> 00:06:35,880 So it's not always a case where you have incredible technology 138 00:06:35,880 --> 00:06:38,000 always leading to incredible investments. 139 00:06:38,280 --> 00:06:40,240 In some cases it can be just the opposite. 140 00:06:40,480 --> 00:06:43,080 And this is what David Einhorn's particularly concerned about 141 00:06:43,520 --> 00:06:46,520 now, given his context, he is one of those people that often 142 00:06:46,520 --> 00:06:49,680 has this skeptic bent. He's also looking at things 143 00:06:49,680 --> 00:06:51,400 through a little bit of a a pushback. 144 00:06:51,720 --> 00:06:54,240 He's never just taking the narrative for what it's sold to 145 00:06:54,240 --> 00:06:56,160 be. And so he has a history of 146 00:06:56,160 --> 00:06:59,200 making these type of contrarian calls in the past, no doubt 147 00:06:59,200 --> 00:07:00,680 about it. But I don't think that should 148 00:07:00,680 --> 00:07:02,280 discredit the points that he's making. 149 00:07:02,320 --> 00:07:05,120 And overall, his discussion on this panel restating these 150 00:07:05,120 --> 00:07:08,640 concerns has started this debate all over again of whether or not 151 00:07:08,640 --> 00:07:12,080 we're going to get a good return from all this AI CapEx. 152 00:07:12,280 --> 00:07:14,280 Now, of course, we have Fundstrats, Tom Lee, who 153 00:07:14,280 --> 00:07:16,240 believes that this is a super cycle. 154 00:07:16,240 --> 00:07:17,720 It's worthy of being invested in. 155 00:07:18,040 --> 00:07:20,800 But he does share some similar concerns that that doesn't mean 156 00:07:20,800 --> 00:07:24,440 every single company today is a good buy as long as it's an AI 157 00:07:24,440 --> 00:07:25,360 company. A. 158 00:07:25,360 --> 00:07:29,240 Period where there is a super cycle and exponential growth 159 00:07:29,240 --> 00:07:34,440 opportunities within AI, but it doesn't mean every company that 160 00:07:34,640 --> 00:07:38,840 has elevated valuation today deserves to actually have the 161 00:07:38,840 --> 00:07:42,400 capital and that and and that company may not even reinvest 162 00:07:42,400 --> 00:07:44,760 that capital properly to be a survivor. 163 00:07:44,760 --> 00:07:49,840 So I agree there is going to eventually be a shake out, but I 164 00:07:49,840 --> 00:07:53,840 think valuations strangely enough are actually pretty 165 00:07:53,840 --> 00:07:57,800 reasonable today compared to 1998 because you know, 1998 was 166 00:07:57,800 --> 00:08:01,240 that lift off point before that final 18 month surge. 167 00:08:01,240 --> 00:08:05,240 And I I'd say the best benchmark is NVIDIA trades at 26 times 168 00:08:05,240 --> 00:08:08,960 forward earnings. Cisco at that same exact moment 169 00:08:08,960 --> 00:08:13,360 was at 60 times and Cisco's PE peaked at 210 times forward 170 00:08:13,360 --> 00:08:15,520 earnings. So NVIDIA to me is still a 171 00:08:15,520 --> 00:08:18,240 bargain at 26 times. It's cheaper than Costco and 172 00:08:18,240 --> 00:08:21,000 Walmart, which are close to 50 times forward earnings. 173 00:08:21,000 --> 00:08:23,520 He accurately points out that many of the AI leaders like 174 00:08:23,520 --> 00:08:27,440 NVIDIA are at a cheaper PE ratio than the more stodgy retail 175 00:08:27,440 --> 00:08:29,440 companies that have been around forever, like Costco and 176 00:08:29,440 --> 00:08:31,760 Walmart. He also points out correctly, 177 00:08:32,080 --> 00:08:35,039 that NVIDIA today trades at a much cheaper valuation than any 178 00:08:35,039 --> 00:08:37,240 of the companies precedingthe.com bubble that 179 00:08:37,240 --> 00:08:38,880 were blown up. So if you're trying to make 180 00:08:38,880 --> 00:08:41,919 comparisons to this epic collapse, we're having terrible 181 00:08:41,919 --> 00:08:45,280 returns for the next 10 years. Comparing it to the.com bubble, 182 00:08:45,280 --> 00:08:47,280 the situations are just not the same. 183 00:08:47,280 --> 00:08:50,360 The valuations are vastly different between companies now 184 00:08:50,440 --> 00:08:52,040 and when they were in the.com bubble. 185 00:08:52,320 --> 00:08:54,600 In fact, you still have companies like Meta and Google 186 00:08:54,600 --> 00:08:58,440 at mid 20s PE ratios. That's not even a high PE ratio 187 00:08:58,440 --> 00:09:00,640 even historically speaking for great companies. 188 00:09:01,000 --> 00:09:04,400 So there's many forward-looking AI companies investing heavily 189 00:09:04,400 --> 00:09:07,480 in CapEx that are still trading at reasonable valuations. 190 00:09:07,960 --> 00:09:10,800 And I don't believe that David Einhorn here was saying that 191 00:09:10,800 --> 00:09:13,640 we're in the.com bubble. He didn't say that anywhere, to 192 00:09:13,640 --> 00:09:16,120 be fair to him. But I do believe this gives us a 193 00:09:16,120 --> 00:09:19,160 bit more safety. He says that a lot of this CapEx 194 00:09:19,160 --> 00:09:22,120 may be wasted. Well, a lot of it's being priced 195 00:09:22,200 --> 00:09:25,000 today as being wasted. These companies aren't being 196 00:09:25,000 --> 00:09:27,280 priced to have exponentially high returns. 197 00:09:27,560 --> 00:09:32,240 They're being priced 20 to 25 PE ratios, which is very good PE 198 00:09:32,240 --> 00:09:34,720 ratios for high margin sustainable business models. 199 00:09:35,240 --> 00:09:36,960 So I, I see what he's saying here. 200 00:09:36,960 --> 00:09:38,760 I agree to some extent with David Einhorn. 201 00:09:38,760 --> 00:09:40,960 I think there is going to be a lot of wasted capital in the 202 00:09:40,960 --> 00:09:44,160 future, but investors are pricing that in to some degree. 203 00:09:44,440 --> 00:09:47,320 We don't see the same exuberance in this market that we saw 204 00:09:47,320 --> 00:09:51,880 anywhere in 2021 or even 2000. It's far different by the math 205 00:09:51,880 --> 00:09:54,880 in both of those situations. Now in terms of return that 206 00:09:54,880 --> 00:09:57,800 we're getting on all this AI CapEx spend, this is also 207 00:09:57,800 --> 00:10:00,200 something that I think mathematically can be pointed 208 00:10:00,200 --> 00:10:04,520 out that we are getting return already on AI spend and nobody 209 00:10:04,520 --> 00:10:06,720 really says it better than Jensen. 210 00:10:06,800 --> 00:10:11,240 Jensen argues that we're already at $100 billion plus of AI 211 00:10:11,240 --> 00:10:14,640 revenue across these various tech companies and that other 212 00:10:14,640 --> 00:10:17,120 industries, in fact other trillion dollar industries, are 213 00:10:17,120 --> 00:10:18,600 going to be moving to AI revenue. 214 00:10:19,360 --> 00:10:21,360 You can't do tick tock without AI. 215 00:10:21,600 --> 00:10:23,480 Correct? You can't do YouTube short 216 00:10:23,480 --> 00:10:26,240 without AI. You can't you know you can't do 217 00:10:26,240 --> 00:10:29,960 any of the stuff without AI. The the amazing things that that 218 00:10:29,960 --> 00:10:35,320 meta's doing for for you know, customized content, personalized 219 00:10:35,320 --> 00:10:37,000 content. You can't do that without AI. 220 00:10:37,280 --> 00:10:41,000 It's all of that stuff used to be humans, you know, doing 221 00:10:42,920 --> 00:10:50,000 content a priori, creating for choices that are then selected 222 00:10:50,000 --> 00:10:54,400 by a recommender engine, and now it's infinite number of choices 223 00:10:54,400 --> 00:10:57,080 generated by an AI, right? Jensen argues that the 224 00:10:57,080 --> 00:10:59,640 transition to AI revenue has already started. 225 00:10:59,880 --> 00:11:01,840 And you can see it in these big tech companies. 226 00:11:02,080 --> 00:11:04,600 Many of the products that they have today, from advertising to 227 00:11:04,600 --> 00:11:06,880 algorithms, are now all AI driven. 228 00:11:07,040 --> 00:11:10,280 They are in part AI revenue. So a lot of people are viewing 229 00:11:10,280 --> 00:11:13,600 this as we're building out all this AI infrastructure and we 230 00:11:13,600 --> 00:11:16,480 have to wait to see the return. But Jensen is saying you don't 231 00:11:16,480 --> 00:11:18,360 have to wait. We're already seeing it. 232 00:11:18,520 --> 00:11:20,480 Look at the revenue growth growth of Google, look at the 233 00:11:20,480 --> 00:11:23,240 revenue growth of Amazon, look at the revenue growth of Meta 234 00:11:23,440 --> 00:11:26,280 and Microsoft, and so on. These companies are enhancing 235 00:11:26,280 --> 00:11:30,200 their core business models from online retail to advertising all 236 00:11:30,200 --> 00:11:32,600 their algorithms. TikTok has made their algorithm 237 00:11:32,600 --> 00:11:34,600 better through artificial intelligence. 238 00:11:34,600 --> 00:11:36,640 That's what's driving usage engagement. 239 00:11:36,840 --> 00:11:40,200 More views, more money, more ads, more optimized ads and so 240 00:11:40,200 --> 00:11:42,120 on through artificial intelligence. 241 00:11:42,640 --> 00:11:44,520 And he's saying that it's going to work its way through the big 242 00:11:44,520 --> 00:11:47,280 tech companies to the rest of the world to overtime $10 243 00:11:47,280 --> 00:11:49,520 trillion of revenue. So while I agree with the 244 00:11:49,520 --> 00:11:52,360 concerns of David Einhorn, I agree with the skepticism, 245 00:11:52,480 --> 00:11:55,080 especially when these massive numbers are being thrown around. 246 00:11:55,360 --> 00:11:57,360 In some cases, I believe that these numbers are a bit of 247 00:11:57,360 --> 00:12:00,240 marketing from the CEO's. They're trying to one up each 248 00:12:00,240 --> 00:12:01,880 other and say that they're spending more and more. 249 00:12:02,040 --> 00:12:04,160 We'll see how it really manifests over time. 250 00:12:04,160 --> 00:12:07,520 Nothing's guaranteed, but I tend to find myself agreeing more 251 00:12:07,520 --> 00:12:09,960 with Jensen here. I believe the transition to 252 00:12:09,960 --> 00:12:13,640 revenue through AI has already taken place, and you can see it 253 00:12:13,640 --> 00:12:15,600 in virtually every single digital product. 254 00:12:15,640 --> 00:12:18,800 You use everything. Look at any digital product you 255 00:12:18,800 --> 00:12:21,080 use and it will have some type of AI application. 256 00:12:21,360 --> 00:12:24,800 Even call Trim, which I've built, has dozens of AI 257 00:12:24,800 --> 00:12:27,160 applications. We summarize the news. 258 00:12:27,280 --> 00:12:30,680 We we look at all the articles. We judge it based on what's the 259 00:12:30,680 --> 00:12:32,600 most notable. We display the most notable 260 00:12:32,600 --> 00:12:35,000 news. AI summarize, this is an AI 261 00:12:35,000 --> 00:12:36,240 feature. Now. 262 00:12:36,320 --> 00:12:38,800 Are we able to directly track the revenue from that one 263 00:12:38,800 --> 00:12:41,800 feature implemented? Not directly, because it just 264 00:12:41,800 --> 00:12:43,760 makes the product a little bit better overall. 265 00:12:44,040 --> 00:12:46,880 And every single company is doing the same thing, infusing 266 00:12:46,880 --> 00:12:49,840 their products with enhancements, engagement and 267 00:12:49,840 --> 00:12:51,600 tooling with artificial intelligence. 268 00:12:51,680 --> 00:12:54,360 Big tech companies that are spending the most in investment 269 00:12:54,520 --> 00:12:57,400 like Microsoft, Amazon, and Google are the ones that are 270 00:12:57,400 --> 00:12:59,880 creating all this tooling. They're the backbone of all of 271 00:12:59,880 --> 00:13:01,280 this. They're hosting all these 272 00:13:01,280 --> 00:13:05,000 websites, they're doing all the processing power for this AI. 273 00:13:05,320 --> 00:13:08,080 Nvidia's selling them a very important ingredient of that 274 00:13:08,080 --> 00:13:09,720 tooling. So I'm much more inclined to 275 00:13:09,720 --> 00:13:12,920 invest in this technology. I do not see it as a flavor of 276 00:13:12,920 --> 00:13:14,400 the month. I don't see it as something to 277 00:13:14,400 --> 00:13:17,240 be left behind on. I think the AI is very real and 278 00:13:17,240 --> 00:13:19,920 investors are going to be very hurt if they try to avoid it. 279 00:13:19,920 --> 00:13:21,320 Now, let's go ahead and get to some news. 280 00:13:21,360 --> 00:13:23,680 First of all, we have Costco just recently reporting their 281 00:13:23,680 --> 00:13:25,800 earnings report. And as I noted here, Qualtrum 282 00:13:25,800 --> 00:13:28,200 gives us a nice summary of the most important news of the day. 283 00:13:28,480 --> 00:13:31,000 We have here that Costco reported their earnings. 284 00:13:31,000 --> 00:13:35,480 It says that revenue was $86.16 billion and earnings per share 285 00:13:35,480 --> 00:13:38,920 was $5.87, both of which topped estimates. 286 00:13:39,160 --> 00:13:41,840 So they be on the revenue and the earnings per share. 287 00:13:42,120 --> 00:13:46,240 They said the membership fee was up 14%, which is incredible. 288 00:13:46,680 --> 00:13:49,680 That's that's membership fees. That's a growth in the 289 00:13:49,680 --> 00:13:54,040 membership business, up 14%. The share slipped 1% after hours 290 00:13:54,040 --> 00:13:58,880 yesterday because they missed their company comps with 6.4% 291 00:13:58,960 --> 00:14:01,720 adjusted. Now the comps are basically the 292 00:14:01,720 --> 00:14:04,240 same store sales. Whether or not it goes slightly 293 00:14:04,240 --> 00:14:07,440 above estimates or below estimates causes the stock to go 294 00:14:07,440 --> 00:14:09,240 up or down. In this case, they missed 295 00:14:09,240 --> 00:14:11,880 estimates on their comps ever so slightly. 296 00:14:12,040 --> 00:14:14,720 The stock is down. In my opinion this is very short 297 00:14:14,720 --> 00:14:17,240 term stuff. Costco has missed these comps. 298 00:14:17,240 --> 00:14:19,440 They've beat their comps many times throughout history. 299 00:14:19,680 --> 00:14:22,320 What matters here is the overall growth of the company. 300 00:14:22,360 --> 00:14:24,440 So we have their overall a decent earnings. 301 00:14:24,440 --> 00:14:26,240 It looks like they came rather in line. 302 00:14:26,400 --> 00:14:29,360 If I look at my equity stake in Costco, we can take a look at it 303 00:14:29,360 --> 00:14:31,480 here. It's in the consumer category. 304 00:14:31,800 --> 00:14:35,440 It's a $79,000 position, $45,000 in the green. 305 00:14:35,800 --> 00:14:38,360 Now, I've held Costco for years and years. 306 00:14:38,360 --> 00:14:41,400 I bought the first share of it at the tail end of 2017. 307 00:14:41,840 --> 00:14:44,880 So this has been just a massive winner, a stock that's gone up 308 00:14:44,880 --> 00:14:47,160 and up, and the fundamentals continue to improve. 309 00:14:47,160 --> 00:14:50,040 So I've done well in Costco, but I'm not buying it today because 310 00:14:50,040 --> 00:14:52,680 of the higher PE ratio. In fact, I've pointed this out a 311 00:14:52,680 --> 00:14:55,680 few times, but there's a chart here that shows the historical 312 00:14:55,680 --> 00:14:57,800 valuation of a company, and I think it's one of the best 313 00:14:57,800 --> 00:15:00,320 charts in Qualtrim. You can easily look at the past 314 00:15:00,320 --> 00:15:03,440 five years, for example, we have Costco here, and this is where I 315 00:15:03,440 --> 00:15:06,000 last bought Costco, right about there. 316 00:15:06,400 --> 00:15:09,920 So I bought it right there and the trailing PE ratio at the 317 00:15:09,920 --> 00:15:12,080 time was a trailing PE of like 40. 318 00:15:12,440 --> 00:15:16,320 Right now the trailing PE is 55. So it's far more expensive today 319 00:15:16,320 --> 00:15:19,240 than my last buy. What have I done in between now 320 00:15:19,240 --> 00:15:21,280 and then? I've simply just held the 321 00:15:21,280 --> 00:15:23,400 company. That's what I do in my companies 322 00:15:23,400 --> 00:15:25,920 that I really love, get a little bit overvalued. 323 00:15:26,360 --> 00:15:28,920 If they get a little overvalued, I don't sell. 324 00:15:28,920 --> 00:15:32,880 I just hold and Costco pays these massive special dividends. 325 00:15:33,200 --> 00:15:34,760 These dividends are just incredible. 326 00:15:35,040 --> 00:15:37,560 In this case, I reinvest these dividends into different 327 00:15:37,560 --> 00:15:39,280 companies. So I'll show you an example of 328 00:15:39,280 --> 00:15:41,880 one other special dividends. Here's their normal dividend. 329 00:15:41,880 --> 00:15:45,520 They pay about $1.30 every quarter and then all of a sudden 330 00:15:45,520 --> 00:15:48,800 they paid $15 per share in a single quarter. 331 00:15:49,240 --> 00:15:51,760 To me, that was a couple $1000 in a single dividend. 332 00:15:52,120 --> 00:15:55,480 I took that money and instead of reinvesting it back into Costco, 333 00:15:55,880 --> 00:15:58,720 I bought more Google. I'll buy more whatever company 334 00:15:58,720 --> 00:16:01,480 I'm buying at the time outside of Costco, which I think is a 335 00:16:01,480 --> 00:16:04,480 little bit overvalued. O this is the case for these Tye 336 00:16:04,480 --> 00:16:07,360 of companies, and these are the judgment calls investors have to 337 00:16:07,360 --> 00:16:09,280 make. When a company becomes at a 338 00:16:09,280 --> 00:16:12,760 point where you consider it slightly overvalued, like I do 339 00:16:12,760 --> 00:16:15,680 with Costco, you have to make the judgement call of whether to 340 00:16:15,680 --> 00:16:19,560 hold or whether to sell. And I'm very resistant to sell 341 00:16:19,800 --> 00:16:22,160 in most cases. I like just holding on to it, 342 00:16:22,480 --> 00:16:24,880 letting the fundamentals catch up a little bit, and then it 343 00:16:24,880 --> 00:16:26,480 resumes its growth and share price. 344 00:16:26,480 --> 00:16:28,120 So that's what I've done with this company. 345 00:16:28,560 --> 00:16:30,920 Now, looking specifically at this past quarter, I just want 346 00:16:30,920 --> 00:16:32,760 to highlight the excellence of Costco. 347 00:16:33,120 --> 00:16:35,480 Even though the stock has been flat most of the year, the 348 00:16:35,480 --> 00:16:37,680 company's performance has not been flat. 349 00:16:38,120 --> 00:16:41,520 In fact, it's rapidly bringing down the valuation while growing 350 00:16:41,520 --> 00:16:43,480 organically. If we look at the revenue, for 351 00:16:43,480 --> 00:16:47,880 example, the revenue is up 8%. But this kind of masks the real 352 00:16:47,880 --> 00:16:50,680 organic growth of the most profitable part of Costco. 353 00:16:50,720 --> 00:16:53,720 When we look at Costco's warehouses, another 2 1/2 354 00:16:53,720 --> 00:16:58,200 percent increase. So they went from 905 to 914, 355 00:16:58,640 --> 00:17:00,640 incredible growth in their warehouses. 356 00:17:00,920 --> 00:17:03,480 We look at the card holders. These are the people paying 357 00:17:03,480 --> 00:17:06,720 Costco. We have right here it increasing 358 00:17:06,720 --> 00:17:11,640 by over a million, about 1,000,000 1/2 from 142.8 to 359 00:17:11,640 --> 00:17:15,160 145.2. So we have a nice gradual 360 00:17:15,160 --> 00:17:17,720 increase in the membership. They're literally gaining 361 00:17:17,720 --> 00:17:19,359 millions of members every single quarter. 362 00:17:19,680 --> 00:17:23,440 What company does this for like 20 years gains consistently 363 00:17:23,440 --> 00:17:26,359 millions of new members. These are paid members every 364 00:17:26,359 --> 00:17:28,800 single quarter. What I see from Costco is a 365 00:17:28,800 --> 00:17:32,280 company that just marches bigger and bigger every single quarter. 366 00:17:32,640 --> 00:17:34,480 Every single quarter there's new warehouses. 367 00:17:34,800 --> 00:17:36,760 Every quarter there's a million more members. 368 00:17:37,160 --> 00:17:39,720 Every quarter, they're growing that active membership revenue. 369 00:17:39,960 --> 00:17:41,880 Every quarter, they're keeping the retention rate. 370 00:17:42,280 --> 00:17:44,160 It's just hard to not like this company. 371 00:17:44,520 --> 00:17:47,120 And I'm aware of the valuation. I know that you can make these 372 00:17:47,120 --> 00:17:50,440 comparisons like NVIDIA being cheaper, but frankly, I think 373 00:17:50,440 --> 00:17:53,000 that investors are a little bit more certain about the future of 374 00:17:53,000 --> 00:17:56,680 Costco over the next 20 years than any rapidly evolving tech 375 00:17:56,680 --> 00:17:58,160 company. I think that's just the 376 00:17:58,160 --> 00:18:00,080 difference. People know you're going to want 377 00:18:00,160 --> 00:18:03,040 your groceries, you're going to want milk, you're going to want 378 00:18:03,040 --> 00:18:05,560 your water, you're going to want your your meats and produce. 379 00:18:05,560 --> 00:18:07,920 You're going to want all of that a very nice, convenient place to 380 00:18:07,920 --> 00:18:09,680 get it. You're going to want value in 381 00:18:09,680 --> 00:18:12,080 the future. And while NVIDIA may be cheaper 382 00:18:12,080 --> 00:18:14,800 on APE ratio today, there are reasons for that. 383 00:18:15,040 --> 00:18:18,480 Nvidia's far more reliant on rapid technological advancement, 384 00:18:18,840 --> 00:18:22,280 more reliant on having extremely skilled developers and engineers 385 00:18:22,280 --> 00:18:25,200 constantly building stuff. Nvidia's competing with many 386 00:18:25,200 --> 00:18:28,280 great companies in China and across the United States, like 387 00:18:28,280 --> 00:18:30,600 AMD. Costco doesn't have to deal with 388 00:18:30,600 --> 00:18:32,440 all those rapidly evolving changes. 389 00:18:32,800 --> 00:18:36,040 Costco's disruption risk, rapid technological advancement, 390 00:18:36,360 --> 00:18:39,000 things that could really hurt the business seem much fewer 391 00:18:39,000 --> 00:18:42,240 than a company like NVIDIA. So I think part of the elevated 392 00:18:42,240 --> 00:18:46,200 valuation is not an assumption that Costco will grow faster, 393 00:18:46,560 --> 00:18:49,160 but an assumption that Costco will grow more consistently, 394 00:18:49,160 --> 00:18:52,400 more predictably for longer. And I believe part of that is 395 00:18:52,400 --> 00:18:53,960 justified. Now it's going to move on. 396 00:18:53,960 --> 00:18:57,200 We have other news here. This came as a bit of a surprise 397 00:18:57,200 --> 00:19:00,040 for a lot of different reasons. We have here from the New York 398 00:19:00,040 --> 00:19:03,600 Post that the owners of RadioShack and Pier One Imports 399 00:19:03,920 --> 00:19:08,400 were accused by the SEC of operating a 112,000,100 and $12 400 00:19:08,400 --> 00:19:12,080 million Ponzi scheme. Now, this headline's a mouthful 401 00:19:12,280 --> 00:19:13,840 and there's a lot of surprises in it. 402 00:19:14,200 --> 00:19:16,240 Right off the bat, I'm surprised by a couple of things. 403 00:19:16,480 --> 00:19:19,760 First and foremost, that RadioShack is still a thing. 404 00:19:19,760 --> 00:19:23,720 Is that really still a thing? I haven't seen a RadioShack in a 405 00:19:23,720 --> 00:19:26,320 long time. That's where you go to get 406 00:19:26,320 --> 00:19:29,160 batteries that are twice as expensive as they are on Amazon. 407 00:19:29,760 --> 00:19:31,640 That's where you go if you aren't aware. 408 00:19:31,640 --> 00:19:34,320 If you're like part of human society that's not aware that 409 00:19:34,320 --> 00:19:37,440 Amazon exists. I'm convinced those are the only 410 00:19:37,600 --> 00:19:40,640 people using RadioShack. But anyway, apparently 411 00:19:40,640 --> 00:19:43,720 RadioShack is still a thing and now it's turned into a big Ponzi 412 00:19:43,720 --> 00:19:45,600 scheme. Let's go ahead and read some of 413 00:19:45,600 --> 00:19:46,920 this. It says a pair of flashy 414 00:19:46,920 --> 00:19:50,560 e-commerce entrepreneurs who brought who bought bankrupt 415 00:19:50,560 --> 00:19:53,960 retail giants including Pier One Imports, RadioShack Madila's 416 00:19:53,960 --> 00:19:57,520 Sporting goods have been accused of running a $112 million Ponzi 417 00:19:57,520 --> 00:19:59,480 scheme. According to the new lawsuit, 418 00:19:59,760 --> 00:20:03,120 the US Securities and Exchange Commission accused Alex Mayer 419 00:20:03,440 --> 00:20:07,640 and Tai Lopez. Tai Lopez, this guy, I haven't 420 00:20:07,640 --> 00:20:10,560 thought about him since. Here I am in my garage. 421 00:20:11,240 --> 00:20:13,400 Remember the guy that's in his garage and he has all the nice 422 00:20:13,400 --> 00:20:15,880 cars? He has the books in his garage 423 00:20:16,160 --> 00:20:19,040 because that's totally normal to keep a big library of books 424 00:20:19,040 --> 00:20:22,600 right in your garage. You know, here he is stepping 425 00:20:22,600 --> 00:20:24,760 out of a what looks like a private plane. 426 00:20:25,480 --> 00:20:27,840 According to the federal Southern District of Florida 427 00:20:27,840 --> 00:20:31,280 filing obtained by The Post, Lopez is also social media 428 00:20:31,280 --> 00:20:33,760 influencer who has written several self help books, 429 00:20:34,040 --> 00:20:37,320 including his 67 steps on how to become wealthy that incorporate 430 00:20:37,320 --> 00:20:40,440 teachings of powerful and famous people like Bill Gates, Charlie 431 00:20:40,440 --> 00:20:45,640 Munger, Peter Drucker, Gandhi and my personal mentors. 432 00:20:46,040 --> 00:20:48,160 So he's name dropping a lot of names there. 433 00:20:48,440 --> 00:20:50,720 But I can't bash that book. I have not read it. 434 00:20:50,840 --> 00:20:54,120 Now, these two guys, apparently they made, quote, material 435 00:20:54,120 --> 00:20:57,280 misrepresentations to hundreds of investors about the brand's 436 00:20:57,280 --> 00:21:01,080 performance between 2020 and 2022, including claims that the 437 00:21:01,080 --> 00:21:03,960 companies were on fire, the SEC alleged. 438 00:21:05,040 --> 00:21:08,720 Material misrepresentations, I believe is just a legal, nice 439 00:21:08,720 --> 00:21:11,600 way of saying that they lied. They completely misrepresented 440 00:21:11,600 --> 00:21:14,800 how the companies were doing. Now, in terms of disclosures, if 441 00:21:14,800 --> 00:21:18,600 you have investors, the purpose of a disclosure is to show how 442 00:21:18,600 --> 00:21:20,920 the company's doing, to be truthful about it. 443 00:21:21,360 --> 00:21:24,960 You can use some interpretation, but you can't lie. 444 00:21:25,960 --> 00:21:28,960 The SEC saying that they, they said the companies are on fire 445 00:21:29,160 --> 00:21:31,720 is signifying that they're doing great, right? 446 00:21:31,720 --> 00:21:33,360 That's, that's everybody's interpretation. 447 00:21:33,360 --> 00:21:35,120 That is the most straightforward, reasonable 448 00:21:35,120 --> 00:21:38,560 interpretation that if I say a company's on fire, I think it's 449 00:21:38,560 --> 00:21:41,120 doing great. So let's see what the companies 450 00:21:41,120 --> 00:21:44,520 were actually doing contrary to these representations. 451 00:21:44,760 --> 00:21:48,200 While some of the Rev retailer brands generated revenue, none 452 00:21:48,200 --> 00:21:50,720 generated any profits, the lawsuit said. 453 00:21:51,400 --> 00:21:55,160 So these companies that were on fire, maybe they meant it in the 454 00:21:55,200 --> 00:21:57,520 the terms that they were literally like on fire, like 455 00:21:57,520 --> 00:22:00,080 they're burning and they're in desperate help. 456 00:22:00,520 --> 00:22:03,040 Maybe they were saying it's like they're on fire, a fire that 457 00:22:03,040 --> 00:22:05,520 needs to be put out, right? Like I'm putting out a lot of 458 00:22:05,520 --> 00:22:06,840 fires. Maybe that was the case here 459 00:22:07,080 --> 00:22:08,720 because none of these companies made any money. 460 00:22:09,480 --> 00:22:12,000 We don't have here, whether or not they were growing rapidly, 461 00:22:12,080 --> 00:22:14,000 whether they're trending towards profits. 462 00:22:14,600 --> 00:22:17,560 But if you're saying that your company's on fire and it's just 463 00:22:17,560 --> 00:22:21,040 losing money, that may not be the most accurate way to 464 00:22:21,040 --> 00:22:24,000 describe it. Consequently, in order to pay 465 00:22:24,000 --> 00:22:26,920 interest, dividends, maturing note payments, defendants 466 00:22:26,920 --> 00:22:30,480 resorted to using a combination of loans from outside lenders, 467 00:22:30,560 --> 00:22:34,160 merchant cash advances, money raised from new and existing 468 00:22:34,160 --> 00:22:37,080 investors. That's a problem there, money 469 00:22:37,080 --> 00:22:39,880 raised from new and existing investors and transferred from 470 00:22:39,880 --> 00:22:43,160 their other portfolio of companies to cover obligations. 471 00:22:43,840 --> 00:22:46,560 So this is a common theme in Ponzi schemes. 472 00:22:46,560 --> 00:22:49,200 And again, I don't know if this one actually is, but a common 473 00:22:49,200 --> 00:22:51,960 theme is that you're you're portraying things to your 474 00:22:51,960 --> 00:22:54,880 investors that aren't true. You're basically just lying to 475 00:22:54,880 --> 00:22:57,520 your current group of investors. You're seeing things are going 476 00:22:57,520 --> 00:23:00,280 better than they actually are when they're expecting to get 477 00:23:00,280 --> 00:23:02,680 paid certain amount of money or when they withdraw money. 478 00:23:02,920 --> 00:23:04,880 You have to come up with that money, but your companies aren't 479 00:23:04,880 --> 00:23:08,000 generating any profits. So to come up with it, you have 480 00:23:08,000 --> 00:23:10,320 to dig deep. You have to find different ways 481 00:23:10,320 --> 00:23:12,680 to come up with that money that doesn't really exist. 482 00:23:13,000 --> 00:23:15,480 And in many cases, you're just giving back the same money that 483 00:23:15,480 --> 00:23:17,960 the people put in. But instead of saying it's the 484 00:23:17,960 --> 00:23:20,600 same money, you're saying this is the return on your 485 00:23:20,600 --> 00:23:22,800 investment. It's highly misleading. 486 00:23:23,120 --> 00:23:24,840 And usually this is how it all ends. 487 00:23:24,840 --> 00:23:26,920 This is how it typically Ponzi schemes end. 488 00:23:26,960 --> 00:23:30,960 The agency also accused them of taking $16.1 million for 489 00:23:30,960 --> 00:23:34,720 personal use. So they're they're using this as 490 00:23:34,720 --> 00:23:37,640 their personal Piggy Bank. That's a big no no. 491 00:23:37,640 --> 00:23:40,520 That's generally frowned upon. Taking investors money and just 492 00:23:40,600 --> 00:23:43,880 using it for whatever you want and then also returning back 493 00:23:43,880 --> 00:23:47,480 their money from new investors raises a lot of red flags. 494 00:23:48,000 --> 00:23:52,200 So I'm not surprised to see Taya Lopez back in the news, but I am 495 00:23:52,200 --> 00:23:53,480 a little surprised to see it this way. 496 00:23:53,480 --> 00:23:55,200 I'd completely forgotten about this guy. 497 00:23:55,600 --> 00:23:58,880 And I'm even more surprised to see RadioShack back in the news 498 00:23:58,920 --> 00:24:00,840 as well. But there you have it, we have 499 00:24:00,840 --> 00:24:03,360 RadioShack and Tai Lopez. No surprises here. 500 00:24:03,440 --> 00:24:05,400 Now moving on, we have more news about Duolingo. 501 00:24:05,640 --> 00:24:07,480 This is my most recent investment. 502 00:24:07,880 --> 00:24:09,800 I outline my thesis for the company, why? 503 00:24:09,800 --> 00:24:11,600 I believe it's actually a decent company. 504 00:24:11,800 --> 00:24:14,480 It's growing quickly, it's high margin, has great cost 505 00:24:14,480 --> 00:24:15,960 structure. It has a lot of users. 506 00:24:16,360 --> 00:24:19,480 It's a company that trades at a relatively low market cap and we 507 00:24:19,480 --> 00:24:22,240 have it here back at $321.00 per share. 508 00:24:22,560 --> 00:24:26,720 Now this is a stock that it's up 2 1/2% today, and that's normal. 509 00:24:27,040 --> 00:24:30,960 It's up and down to to three percent, 4%, even 5% on a daily 510 00:24:30,960 --> 00:24:34,000 basis with literally no news. It is one of the most volatile 511 00:24:34,000 --> 00:24:37,720 stocks that I own in terms of the stock price trading, but the 512 00:24:37,720 --> 00:24:40,760 company itself is rather stable. The revenue continues to grow, 513 00:24:40,920 --> 00:24:43,680 the users continue to grow, and I like it fundamentally. 514 00:24:44,000 --> 00:24:46,320 When I look at Duolingo, there's been a lot said about this 515 00:24:46,320 --> 00:24:49,520 company and this investment when it's actually been relatively 516 00:24:49,520 --> 00:24:52,800 tame overall. It had initially a massive surge 517 00:24:52,800 --> 00:24:55,920 in stock price, then the stock price dropped, and now it's come 518 00:24:55,920 --> 00:24:58,200 back up kind of to where it was right now. 519 00:24:58,200 --> 00:25:00,480 I'm down around 8% on this position. 520 00:25:00,480 --> 00:25:02,520 Now when we look at what Duolingo's currently doing, I 521 00:25:02,520 --> 00:25:05,120 just want to outline the marketing prowess of this 522 00:25:05,120 --> 00:25:07,560 company, how good their marketing actually is in their 523 00:25:07,560 --> 00:25:10,360 social media, and their ability to cross sell within their 524 00:25:10,360 --> 00:25:12,400 platform. Here's a new advertisement they 525 00:25:12,400 --> 00:25:15,520 just released on their new development of the CHESS program 526 00:25:15,680 --> 00:25:27,520 within Duolingo. Another win for Oscar. 527 00:25:27,880 --> 00:25:30,000 But hey, we all have to start somewhere. 528 00:25:30,120 --> 00:25:33,320 Experience my genius. Become a chess master. 529 00:25:33,560 --> 00:25:36,320 One lesson at a time. New to the game? 530 00:25:36,640 --> 00:25:38,960 I'll show you the basic moves. Giddy up? 531 00:25:39,880 --> 00:25:44,440 Already a king of the board? I'll teach you advanced tactics. 532 00:25:44,480 --> 00:25:46,400 Fork, baby, fork. I've. 533 00:25:47,160 --> 00:25:50,720 Right there they outline that this is for new players, the 534 00:25:50,720 --> 00:25:53,480 chess and Duolingo is it starts you off at a new player. 535 00:25:53,480 --> 00:25:55,840 In fact, it asks you for how advanced you are when you're 536 00:25:55,840 --> 00:25:57,760 starting off. But it will teach you right from 537 00:25:57,760 --> 00:25:59,400 the beginning. If you've never played chess, if 538 00:25:59,400 --> 00:26:01,160 you even don't know how the pieces work or what they're 539 00:26:01,160 --> 00:26:03,600 called or what they're worth, it'll teach you all these 540 00:26:03,600 --> 00:26:06,440 strategies from the beginning. But he also highlights there 541 00:26:06,640 --> 00:26:08,360 that it's also for advanced players. 542 00:26:08,440 --> 00:26:11,400 They do have courses for advanced tactics within chess. 543 00:26:11,800 --> 00:26:14,040 So this isn't something where they're just treating it lightly 544 00:26:14,040 --> 00:26:16,760 for introductory players. They're trying to address the 545 00:26:16,760 --> 00:26:19,360 entire market of chess, from beginner to advanced. 546 00:26:20,040 --> 00:26:23,360 We've got thousands of puzzles ready for a real match. 547 00:26:23,400 --> 00:26:25,400 Don't worry, I'll go easy on you. 548 00:26:25,560 --> 00:26:29,360 Whoopsie, I won. This is another thing when 549 00:26:29,360 --> 00:26:33,080 you're playing against Oscar and the AI, he will talk to you as 550 00:26:33,080 --> 00:26:34,760 you're playing. He'll kind of rib you as you're 551 00:26:34,760 --> 00:26:37,320 playing and make these little remarks as you take pieces or he 552 00:26:37,320 --> 00:26:39,120 loses pieces. It makes it a bit more 553 00:26:39,120 --> 00:26:41,800 interactive. But this is where Duolingo Chess 554 00:26:41,800 --> 00:26:44,040 is today. And now we get to the direction 555 00:26:44,040 --> 00:26:47,360 it's headed. You says smart and talented 556 00:26:47,360 --> 00:26:49,480 Oscar, what will you think of mixed? 557 00:26:49,680 --> 00:26:53,280 Oh, you know me. I've got some big, big plans. 558 00:26:54,320 --> 00:27:00,040 Scintillating new animations. The first thing there he 559 00:27:00,040 --> 00:27:03,360 mentions new animations. Now again, if you're an advanced 560 00:27:03,360 --> 00:27:06,840 chess player that's been playing chess for years on chess.com or 561 00:27:06,840 --> 00:27:10,120 one of these other bigwigs, smart chess competitors, you're 562 00:27:10,120 --> 00:27:12,160 going to look at that in scoff. What's the big deal about 563 00:27:12,160 --> 00:27:14,560 animations? They are a big deal. 564 00:27:14,560 --> 00:27:17,880 Making the game more fun, more entertaining, making you laugh a 565 00:27:17,880 --> 00:27:20,400 little bit when you're playing it is a pretty big deal. 566 00:27:20,400 --> 00:27:22,080 And that's what Duolingo excels at. 567 00:27:22,360 --> 00:27:25,280 They're going to make the game a bit more engaging, just a bit 568 00:27:25,320 --> 00:27:27,680 better of an experience than a lot of the other competitors. 569 00:27:27,960 --> 00:27:30,600 And they do this through consistent AB testing. 570 00:27:30,840 --> 00:27:32,960 So the animations while you're playing, I believe it's just 571 00:27:32,960 --> 00:27:36,320 going to be 1 aspect of it. Track your ELO progress. 572 00:27:38,520 --> 00:27:40,680 ELO is a ranking of how good you are at chess. 573 00:27:40,800 --> 00:27:43,640 It's an overall ranking of your skill level, and you can see 574 00:27:43,640 --> 00:27:45,520 your skill level going up over time to see if you're 575 00:27:45,520 --> 00:27:47,160 progressing. This is another thing they're 576 00:27:47,160 --> 00:27:49,320 implementing. They already have ELO, but now 577 00:27:49,320 --> 00:27:50,960 you're going to be able to track your progress. 578 00:27:51,600 --> 00:27:55,160 Undo those pesky stalemates and finish the match with a proper 579 00:27:55,800 --> 00:27:58,720 boom. Oh, and there's one more thing. 580 00:27:58,880 --> 00:28:01,520 Soon you'll be able to play against other learners. 581 00:28:02,280 --> 00:28:07,160 Go for the win. I believe this is a first time 582 00:28:07,160 --> 00:28:09,840 for Duolingo, the first time they've introduced anything 583 00:28:10,040 --> 00:28:12,520 where you have player versus player experiences. 584 00:28:12,800 --> 00:28:15,120 So far everything has been kind of a solo experience. 585 00:28:15,120 --> 00:28:18,120 Even though you have rankings and like ladders of your 586 00:28:18,120 --> 00:28:21,480 progression, you never directly interact with other players or 587 00:28:21,480 --> 00:28:23,040 other speakers when you're learning a language. 588 00:28:23,400 --> 00:28:25,680 But now you're going to be able to play directly against other 589 00:28:25,680 --> 00:28:28,400 players of similar the same skill level to see if you can 590 00:28:28,400 --> 00:28:38,760 move up against them. Maybe I've taught him too well. 591 00:28:41,000 --> 00:28:44,920 Just a reminder, chess has over 500 million players worldwide. 592 00:28:44,960 --> 00:28:47,440 It is one of the most popular games ever made. 593 00:28:47,720 --> 00:28:50,600 It takes a lifetime to learn how to actually get good at it. 594 00:28:50,920 --> 00:28:53,360 So it's one of these games that's widely popular, takes 595 00:28:53,360 --> 00:28:55,840 forever to learn. It's the perfect type of 596 00:28:55,840 --> 00:28:57,600 vertical for Duolingo to go into. 597 00:28:57,760 --> 00:29:00,120 That's why they selected it and I believe why they're going into 598 00:29:00,120 --> 00:29:02,120 it so much. When we look at the growth of 599 00:29:02,120 --> 00:29:05,160 this company, the daily active users is the most important 600 00:29:05,160 --> 00:29:07,200 metric by far. This has been growing overtime 601 00:29:07,200 --> 00:29:11,120 steadily, now at 47.7 million and they already have over 602 00:29:11,120 --> 00:29:14,040 1,000,000 on chess alone. So I believe this represents a 603 00:29:14,040 --> 00:29:15,960 pretty meaningful growth path for the company. 604 00:29:15,960 --> 00:29:18,560 I'm excited to see what happens and as you have player versus 605 00:29:18,560 --> 00:29:21,880 player ladder rankings, social media, I believe it's going to 606 00:29:21,880 --> 00:29:24,440 garner a lot more interest from pros that want to climb the 607 00:29:24,440 --> 00:29:27,040 ladder on Duolingo. And I could see this a lot more 608 00:29:27,040 --> 00:29:28,560 on social media. This is going to be an 609 00:29:28,560 --> 00:29:31,160 interesting one to see how it transforms over the next three 610 00:29:31,160 --> 00:29:33,880 years, if it is a good investment or if it's not, if 611 00:29:33,880 --> 00:29:36,200 the Bears are really correct on this one or if they're wrong. 612 00:29:36,560 --> 00:29:38,680 But either way, as of now, I'm still invested. 613 00:29:38,760 --> 00:29:40,080 That's going to be it for this episode. 614 00:29:40,080 --> 00:29:41,880 Enjoy your weekend and see you in the next one.