August 25, 2025 • 61 mins
The economic revolution we've been waiting for isn't just coming—it's already here. In this eye-opening conversation, Steve Clegg brings decades of financial expertise to explain how artificial intelligence and cryptocurrency are fundamentally restructuring global commerce by eliminating the layers of middlemen that have traditionally absorbed 20-30% of transaction value.
Clegg's journey through international finance began in 1974 when, as a 24-year-old University of Chicago graduate, he wrote a paper identifying the three fundamental challenges of global commerce: exchange rate fluctuations, interest rate differences, and local pricing disparities. That paper caught the attention of Federal Reserve Chairman Arthur Burns, launching Clegg into a career managing foreign exchange for major corporations. Now, nearly five decades later, he's watching cryptocurrency solve those exact problems he identified as a young economist.
What makes this discussion truly compelling is how it connects technological innovation to fundamental economic principles. "There's no such thing as one-hand clapping," Clegg explains. "It requires two people exchanging goods and services." This core transaction—buyer and seller—has remained constant throughout human history, but the systems built around it have grown increasingly complex and extractive. AI and blockchain technology are now enabling a "great inversion," where technology supports rather than exploits commerce.
The implications extend far beyond finance. Manufacturing cycles have compressed from years to just seven months. Energy production is becoming decentralized through mini nuclear reactors. Local food production via hydroponics eliminates transportation costs that typically account for 50% of food prices. These advancements suggest a future where communities can become more self-sufficient economic entities.
Whether you're a business owner concerned about staying competitive, an investor trying to understand market trends, or simply someone wondering how these changes will affect your career, this conversation provides valuable perspective on navigating the most significant economic transformation of our lifetimes. The question isn't whether these changes are coming—it's whether you're prepared to adapt.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Aloha and welcome to another candid conversation.
We're going to go down adifferent path.
Today.
Our guest is Steve Clegg, who Ihave enormous respect for and
what he's done with business,with systems, with thinking.
So with that as a startingpoint, Stephen, welcome to
Chicago, to Hawaii.
(00:23):
Thanks, Rod.
Speaker 2 (00:24):
Stephen, welcome to Chicago, to Hawaii.
Speaker 1 (00:25):
Thanks, rod.
We started to get ready forthis and I said wait a second,
let's just get going.
Steve's always been of theopinion that the world depends
on the transaction between twohuman people beings, and he
doesn't see that changing, solet's use that as a starting
point.
You've used all kinds of AI inthe last number of years.
Speaker 2 (00:52):
Where are you at with this stuff?
We're automating a huge amountof the stuff that we're doing,
so it's following that pattern,but AI has made it possible to
more rapidly make this inversionthat we've talked about in the
past, which is that withartificial intelligence, you've
(01:15):
got the economy.
The human race has the abilityto, you know, invert what has
been a pyramid that has sat ontop of transactions, where you
have layers and layers of peoplesupposedly assisting you in the
exchange of goods and services,where the seller and the buyer
(01:40):
are really not seeing a greatamount of the benefit of that
transaction compared to thepyramid that sits on top.
But with artificialintelligence, what that does?
It allows you to go back to thetwo-people transaction, which
is the core of a viable economy.
There's no such thing asone-hand clapping.
(02:02):
It requires two peopleexchanging goods and services,
and AI allows for the capabilityof supporting that transaction,
so that sits on top of thepyramid, not at the bottom of
the pyramid.
And so rather than beingexploited by the pyramid, it's
(02:24):
being supported by theartificial intelligence.
Speaker 1 (02:28):
Let me pick on something that you mentioned.
Between the buyer and theseller, there's two pyramids of
people that are sucking someaspect of that transaction away,
whether it's freight, whetherit's customs, whether it's
duties, whether it's trade,whether it's customs, whether
it's duties, whether it'smarkups, whatever the heck it
might be.
But with ai, your premise isthat's going to shrink, if not
(02:54):
disappear altogether.
Speaker 2 (02:56):
Yes, and it.
It's been possible in the past,I mean when I first got into
the steel business.
It's been possible in the past.
I mean when I first got intothe steel business.
The steel mills back then hadmore people outside the plant
than they had inside the plantand we were able to take
Birmingham steel and make it thelow-cost producer in North
(03:16):
America for rebar and rod by,you know, having a
superintendent, twosuperintendents, a plant manager
and a salesman or two and oneadmin and everybody else was on
the line.
So basically, turning into thebeginning of an inversion which
allowed us to make rebar forabout under $200 a ton, where at
(03:43):
the time it was going for $600a ton.
So the technology or the desireto do it, has been there, but
there have been some bigstumbling blocks and one of them
has been just having the peoplecontent focused on the
transaction rather than all thethings that support it, and
(04:06):
artificial intelligence ismaking that happen.
And then the big breakthrough,also in addition to AI, has been
the crypto technology, becausenow you're taking out the what
has been a foreign exchangeproblem, a time differential
issue, so you've got localpricing wherever you're sourcing
(04:30):
from, local pricing from whereyou're selling, you've got the
exchange rate issue, interestrate issue for any time delay
and with crypto like an XRP orXLM, that all goes away.
With crypto like an XRP or XLM,that all goes away.
So you don't have to worryabout all of those layers that
(04:51):
are usually collecting anywherefrom.
In my experience, it's as muchas 20 to 30% of every
transaction is absorbed by them.
Speaker 1 (05:00):
So before we go much further, you opened up a whole
bunch of new topics and subjects.
First of all, our systems haveto be a hell of a lot better,
smarter, more capable, andthat's a lagging event.
There's not a lot of people inthe systems world that know the
(05:24):
clients that their systems arebuilt for.
They're more worried aboutmaking elegant systems and
procedures and processes thanthey are in helping the client.
And then you agree with that.
Speaker 2 (05:37):
Yeah, the programmers are myopic.
They aren't even looking at thebig picture there.
What do you want me to do?
So, AI is beginning to takecare of that type of mentality,
so you're going to be left witha very small percentage of
people that have the knowledgein the background to achieve
(06:00):
that.
Speaker 1 (06:01):
Yeah, and that takes me to some fundamentals.
Back and forth with thequestion what do you do?
And you ask people and most ofthem can tell us pretty easily
what they do.
Then the next question is howdo you do it?
Well, now there's a bit of astumble, but they get there.
And then the more tellingquestion is why do you do it?
(06:24):
And they really can't saybecause we're in a rut with work
.
You've got to work to get money.
You've got to have money to payyour bills.
You've got to have the abilityto pay your bills to have a
house and food and people aretrapped.
Speaker 2 (06:40):
They're trapped and also they get paid for doing the
same thing right over and overagain.
So that causes many people togravitate to these very mind
mindless jobs where they're notthinking they're just.
This is what I do and this isexperience I had with this guy
(07:01):
that was missing teeth, he hadwild hair and when we had this
plant in West Virginia and theyhad a problem unloading we were
making roofing materials,unloading the granules because
the chute would get clogged up.
So this guy would climb up intothe rafters with a bunch of of
(07:25):
uninsulated high voltage wiresand pull on this chain as the
granules are being unloaded.
So I'm walking through this andthis guy had been doing it for
his whole career.
That was his job.
So he's up there pulling on itand we're looking at him there,
with this guy that we're lookingat and go, why do you have the
(07:50):
chute bending at the end?
And no one ever asked thatquestion.
Because I said you know, ifyou've got a flow, you're going
to create a bottleneck.
Yeah, so we had him cut the endend of the shoot off, so it
just was a straight run.
Um, and for 40 years this guyhad been climbing up that ladder
(08:15):
, up into the up into theceiling, endangered life and
pulling on this stupid chain inorder to get the granules to
move through because someone hadput an end tip on the shoe.
Speaker 1 (08:31):
Yeah, that's the kind of obvious stuff that we're
confronted all the time, and thedilemma is, one of the
attributes that is missing in alot of people is curiosity.
You know why do we do that.
But then you bring up anotherpoint just blithely and say
crypto.
And all of a sudden we're in adifferent world, and this
(08:54):
morning on one of the businesschannels I was watching, they're
talking about that.
Christine Lagarde, who runs theEuropean Central Bank, now used
to be the, or the World Bankused to be the president of the
European Central Bank now usedto be the, or the World Bank
used to be the president of theEuropean Union.
She's the one that's settinginterest rates for the world,
not the United States.
And Jerome Powell this morningin Aspen or wherever the hell
(09:19):
they have this meeting made acomment about maybe loosening up
interest rates in September,and the Dow went up 900 points
like in about 30 minutes.
Speaker 2 (09:28):
So here comes crypto and that's nation independent
yes, and also the problem thatyou've got that when I went to
University of Chicago, I wrote apaper on this topic.
Speaker 1 (09:45):
Okay, just for grins.
What year was it that paper waswritten?
Speaker 2 (09:49):
I wrote it in 1974.
Speaker 1 (09:52):
Okay, so what is that ?
That's 50 years ago.
Yeah, okay, go ahead.
Speaker 2 (10:01):
So I'd been working in Poland.
I took a job as an assistantproject manager because the
western work crew had walked offand found that we were buying
stuff, you know, from hungary,from east germany, and we had
official exchange rates, blackmarket exchange rates, and we
(10:23):
that we're building this plantto ship to the US but we're
buying locally, where you know.
It was complicated and thechallenge was, you know, dealing
with all this.
I came back and wrote a paperby hand, since I couldn't type,
(10:47):
I could barely read what I wrote, and just laid out what the
problem was, which was thechallenge of local pricing
interest.
Know, how do you value this?
And how do you, if you putinvestment, of which they were,
(11:12):
the plant that I was a systemmanager on, that we're building,
was $100 million investment onthe Russian border.
So what are they gonna book that?
They gonna book that in USdollars, are they gonna book it
in, you know, zawadis, or withthe official rate, the
unofficial rate, rubles?
You know, god knows Right, godknows.
(11:34):
So because of all that you had,you know there's bank issues,
there's exchange rate interest,there's, because of the time,
delays, there's interest costs,carrying costs and what I felt
was because, at the timefloating exchange rates.
Interest rates were justemerging after the Britain Woods
(11:57):
Agreement collapsed, so we'rekind of unmoored at the time
without gold and we were justsitting on the fiat currency.
So I wrote the paper and saidthat the LIBOR market what
became the LIBOR market inLondon was setting the price
because of the dollar overhang,of what the value was and the
(12:20):
interest rates associated withthe US dollar, so freeze-frame
LIBOR.
Speaker 1 (12:24):
What's LIBOR?
Speaker 2 (12:27):
It was the rate that was traded in London that people
used as the primary interestrate.
For a lot of contracts it wasthe largest international broker
.
Speaker 1 (12:42):
The broken rate, yeah , okay.
Speaker 2 (12:45):
And so that was the center of the finance worldwide.
So I wrote this paper and I gotin some scream fest with some
idiot professor.
But then I got pulled in MiltonFriedman and all these guys
were teaching at that time there.
(13:06):
So anyway they grabbed me andactually had someone translate
it into something that waswritable they could read.
So anyway I got whizzed on thisbecause people hadn't really
thought about it that with adollar overhang the last
transaction determines theunderlying value of the assets.
(13:27):
That that's the key, the lasttransaction yeah, and I said,
you know, one little transactioncan set the value on the world
market of the underlying assetsyeah, and it.
Speaker 1 (13:39):
It really is amazing.
Now I don't know, maybe youwant to talk a little bit about
Milton Friedman, because I thinkhe's rather remarkable as an
economist and as a teacher.
Speaker 2 (13:50):
Yeah, he was great.
His view was we just dump allthe data in there and we just
crunch it.
Speaker 1 (13:55):
Yeah, and that's 50 years ago.
Speaker 2 (13:59):
That's 50 years ago.
So he was at that timedeveloping machine learning and
then Black and Scholes thoseguys.
I really went to Poland to makeenough money to buy a seat on
the Chicago Marketplace yeah,because there was beginning to
trade the exchange and so anyway, I ended't end up not doing
(14:25):
that but I wrote this stupidpaper, didn't think much of it.
It got quizzed by a bunch ofthe professors just
brainstorming this and then kindof went on my merry way with a
pissed off professor.
He didn't agree with anythingthat I said.
So I have a bunch of job offersin Chicago.
(14:49):
I have one job offer in NewYork and Jim Bray, who was
running BorgWarner at the time,goes you know, Steve, if you
could take a job in the Midwest,in Chicago, here it'll be worse
than the military.
It'll be worse in the military.
But if you go to New York theydon't care how many, whether you
have arms or legs or how oldyou are, it's all about talent.
(15:13):
He goes you need to go to NewYork, you'll hate Chicago.
Speaker 1 (15:17):
So anyway, I took the job as Peter Grace's assistant
at WR Grace and because I and inthose days, wr Grace, and
because I and in those days, wrGrace was an unbelievably
powerful and successful yeah, itwas one of the major, major
corporations.
Speaker 2 (15:32):
So, anyway, I find myself in the biggest office
I've ever had, up on the 46thfloor of the Grace building,
overlooking Manhattan, and theygot all this crap on.
There's a conference table,there's a conference table,
there's a big desk, and theygave me two secretaries and I'm
sitting there going what am Isupposed to do with all this
(15:52):
stuff?
Exactly, what are you thinking?
But anyway, they had no ideawhat they're doing.
They're actually, it turned out, they're hedging their
positions in the wrong direction, which seemed to be a common
problem with everybody in thosedays, everybody.
They didn't understand it.
Speaker 1 (16:11):
Yeah.
Speaker 2 (16:12):
So I built a model to manage that.
So I took over their foreignlending and their foreign
exchange in their foreignexchange and you have to
remember, I showed up with aplastic suit and cowboy boots
and they looked at me like I wasa Martian and dragged me off to
(16:34):
Brooks Brothers.
Speaker 1 (16:37):
Let me interject for a second.
One of the things that not manypeople know is Steve graduated
from the Air Force Academy, sothe cowboy boots and the plastic
suit, kind of fits.
Speaker 2 (16:48):
I mean, at the Air Force Academy, you really didn't
need anything but jeans and at-shirt other than your uniform.
Yeah, exactly.
So anyway, a couple of weeksinto being there, I get a cough
from this guy named Arthur Burns, and I don't know who he is.
He just says you know, mr Clegg, I read your paper.
I'm thinking what paper did youread?
(17:08):
I don't remember having a paperthat was.
You know anybody would read,but I didn't know who he was.
And he goes.
I want you to come to lunch atthe Bull and Bear at the Waldorf
and I want to have a discussionabout your paper with some of
my associates.
So no one had asked me to lunch.
I'd been there a couple ofweeks and thought, well, okay,
(17:31):
great, so I tell my-.
Speaker 1 (17:34):
And so anybody who doesn't know, Waldorf Astoria is
a very famous hotel in New Yorkthat's famous for all kinds of
meetings the Bull and Bear Bar,you know it's a place that
Sinatra went and had his oldtable in the corner.
I mean, you're talking about apower space, so keep on going.
Speaker 2 (17:54):
So, anyway, I go down the hall and ask the economist
who in the hell is Arthur Burns?
And he says he's chairman ofthe Fed.
You don't know that?
Go for it.
Speaker 1 (18:07):
That's the Federal Reserve.
This is Arthur Burns, who wasthe chairman of the Federal
Reserve before Paul Volcker.
Christ, we're going back a longway.
Speaker 2 (18:17):
So I show up there and he's got Paul Volcker, he's
got a bunch of the other Fedpresidents of the various banks
which I had no real appreciationfor, and it ended up being like
a four-hour lunch.
Speaker 1 (18:37):
How old were?
Speaker 2 (18:37):
you, then I was 24.
Speaker 1 (18:41):
Yeah, imagine that.
Okay, so let me translate thatforward.
You were basically paid to goand think and put that onto a
piece of paper that somebodyelse could look at and say, well
, it's no good or it's good orwhatever.
And if you bring it forward totoday, that's what Silicon
Valley has been doing the last15 years.
They bring people in, goWozniak and creating Apple with
(19:04):
Steve Jobs.
You know they're bright, brightpeople with no real Hewlett
Packard.
That's kind of the melting potof innovation in America and
everybody comes here to do it.
Speaker 2 (19:21):
Yeah, it's wonderful, absolutely, and what I found
was that for the people, thatare actual thinkers.
So, anyway, I went through andexplained to him and at the end
of this, arthur Byrne says to methat the purpose of the Fed is
to ensure that there's liquidityso the banks can open in the
morning.
Yes, that's what the Fed'spurview was At that time.
(19:47):
At that time, and that is areally important thing, because
there'd been financial collapsesas a result of not being able
to manage the liquidity in themarket.
Speaker 1 (19:58):
Okay, so let me attribute that to the fact that
we moved away from the goldstandard.
When we had the gold standard,there was much more stability in
the banking system.
Speaker 2 (20:08):
Yes, it's $34.
People knew what it was thedollar, even though they may
have been printing the dollar.
They could always be exchanged.
At the time I think it was $35or $34 or something.
But once Nixon went off of itbecause Johnson had done two
things, he got into the VietnamWar and printed money like
(20:29):
there's no tomorrow.
And then he started the GreatSociety and didn't realize he
had turned a tiger loose thatjust ate up money.
He stepped on growing ate upmoney.
So they started printing asfast as they could and so that
caused this massive amount ofunderlying inflation.
(20:50):
And they couldn't support thatwith gold because the Fort Knox
was getting emptied out veryquickly because people didn't
believe that the dollar wasworth $34, so they're
arbitraging it.
Speaker 1 (21:03):
Yep.
Speaker 2 (21:04):
And so that meant that they had to come up with a
solution and, to the credit of,at the time, arthur Burns, but
really Paul Volcker, whatemerged was the dollar tied
itself to a barrel of oil, andthat lasted up until December of
(21:27):
this year.
But from that meeting for 15years people at the Fed
contacted me because I ran WRGrace's foreign exchange.
And then Marshall, who wasrunning Avis at the time,
(21:47):
contacted me.
They had a mess on their hands,funding their fleets worldwide
and pricing, interest rates andall that.
So I took over that at Avis at,again, a very young age,
running and funding their fleetsworldwide, running and funding
their fleets worldwide.
So I got a huge amount ofexperience in looking at
(22:09):
sourcing automobiles from onecountry, investing in facilities
to provide, you know, at theairport or whatever, rental both
of cars and also trucks at theports and undercarriages, and it
was a really great education.
But a lot of people couldn'tget their mind around kind of a
(22:33):
three-problem issue, which wasinterest rates, exchange rates
and pricing.
Speaker 1 (22:42):
So let me try and put that into a little bit more
clarity this way.
If everybody in America went totheir bank and asked for cash
that represented what their bankbalances were, how much cash do
you think the banks would beable to give to people as a
(23:04):
percentage of the total bankaccount value it used?
Speaker 2 (23:08):
to be, they had to have assets and not necessarily
liquid assets.
Right yeah, one dollar forevery ten dollars that they had
out in circulation.
Speaker 1 (23:19):
So ten percent.
So if I went to the bank and Ihad a hundred dollars, all the
banks in America are required tobe able to give me $10 back.
Speaker 2 (23:28):
That used to be the case, but because of leverage
and forward contracts, thatleverage moved up to about 70
times and that's what caused thecollapse in 2008.
Right, right.
Speaker 1 (23:44):
And okay, stay with that one for a second.
What was the primary cause ofthe 2008 collapse?
Speaker 2 (24:01):
But what they were doing was they're using math to
calculate portfolios and they'retaking it out and selling it to
Secondary investors.
People that were unsophisticated, similar when interest rates
started floating.
This was pretty funny that evenwhen I was at WR Grace, the
(24:24):
Swiss came and wanted to makeloans they would give us.
I just remember this.
I can't remember which Swissbank it was, but these guys were
quite sharp.
He comes in and he says well,you need money, we will lend you
at the time, which was a lot ofmoney, a $100 million line and
(24:48):
we're only going to charge you1%.
And so I did.
The guy who wasn't thebrightest bulb comes to me and
says, yeah, this is a hell of adeal.
And I said you've got to be outof your mind.
Speaker 1 (25:06):
You're paying a million dollars for nothing.
Speaker 2 (25:10):
What they're going to do is, you know I said we won't
be able to pay it back.
We're in the midst of a massiveinflation and they're betting
that you know the dollar willdepreciate and they're going to
make a fortune relative towhatever their dollar holdings
are.
But because of that, they tookthat offer to pretty much every
(25:32):
fortune 500 company in the USand I think every one of them
fired their CFOs.
I quit in about two years.
It was just like I mean, yeah,america was total rubes.
Speaker 1 (25:51):
Yeah, we've had this thing forever, though, steve,
and money has been theunderlying transaction.
So I go back to the firstmanufacturer was a blacksmith
transaction.
So I go back to the firstmanufacturer was a blacksmith
(26:12):
and you had a horse and I'm aknight and I needed horseshoes.
So there's only one guy in townthat I could go to and he was a
big, strong son of a gun.
His attribute was muscles.
Today, the attribute is brains,and schools today have tried to
normalize everything.
They've dumbed it down andthey've been preaching the same
mantra for about 20, 30 years,when the world has changed now
the schools are so out of dateand exactly.
Speaker 2 (26:35):
It's really sad.
And the education, um, just thetools to be educated aren't?
They're not being taught it.
It's like learn this and thenthey burned it with.
You know kind of worthlessthings that aren't really adding
to their education orbroadening their scope of
understanding.
Speaker 1 (27:14):
It's kind of sad that people are so out of touch with
how these things are appliedand how do they fit within a
business or a community ordeveloping an economic viable
entity.
It's like the guy in WestVirginia that's gone up into the
rafters with his live wires andthere's a bend in the tube at
the bottom that you get rid ofit.
He's not needed up thereanymore.
Yeah, but I'll lose my job ifyou take it.
Yeah, yeah, yeah, you know it'sreally funny.
(27:35):
I guess that's an interestingmindset.
Everywhere I've been, I'veworked myself out of a job and
that allowed me to grow.
But most people look at theirjob as sustenance and you've
(27:56):
heard me say this.
Very few people look over thewall.
We're all on ruts.
So here comes crypto.
It's going to replace currencyeverywhere in the world.
It's just a matter of time, andthat neutralizes currency.
So one of the three legs ofyour paper from 1974 or whatever
it solved the whole problemPrecisely.
Speaker 2 (28:16):
Crypto solves the pricing issue, it solves the
time issue, it reduces thetransaction costs.
So you're not spending anywherefrom 20 to 30 percent of every
dollar that you do overseas justto make the transaction happen.
All that's gone, it'sinstantaneous, it's documented.
(28:39):
You know the money's going tobe there at the other end, so
letters of credit and things ofthis nature are not necessary.
Speaker 1 (28:46):
And that just stay there for a second.
I don't want to get political,but with Biden's administration
they didn't want to haveanything to do with crypto.
Here comes Trump and in thefirst six months, crypto's open.
Speaker 2 (28:59):
Well, they didn't want to have anything to do with
it, because you're going todestroy what people have been
doing arbitraging all this andthe politicians have been
participating in this bullshit.
Big time, big time.
So anytime money.
You know, this was interestingwhen george bush and George Bush
(29:22):
the father of the son dug intothis whole 9-11.
And they discovered that thetrades in the Chicago Exchange
were being I think it was shotover to Belgium or the
Netherlands and then shot backto the floor.
(29:42):
So there's this delay.
So it meant that Europe wasfront-running our market and
placing bids in front ofwhatever the transactions were.
Speaker 1 (29:56):
They were buying futures and they had inside
information to make money with.
Speaker 2 (29:59):
Yeah, and so they've been doing it and Bush makes a
mistake of announcing this andfeeling like he's discovered
something.
And of course, he quickly shuthis mouth because a lot of
people this was a big gravytrain for a lot of powerful
people yes, having hadoperations in Poland, I bought a
(30:24):
bunch of plants in Canada andelsewhere around the world is
that corruption is rampanteverywhere.
It's just part of every economy.
Speaker 1 (30:37):
Yeah, this has probably been true for 10,000
years with humankind, but it'sstill distressing the level of
corruption and the masses, thelevel of corruption and and
we're the masses, the unwashedbrethren we have.
No, we haven't got any chance.
We're not even at the table.
You're not at the table and.
Speaker 2 (30:53):
But also people don't appreciate it the mob.
You know whichever one badmouths the mob, but the mob's
role is been a facilitator toprotect their group from the
abuses of politicians and thepolice state.
So this is.
You know, you got checks andbalances in the US Constitution,
(31:14):
but the economy has a check andbalance also and.
But with crypto, a lot of thesethings will disappear, except
for movement.
So the mob usually controlstrucking rail.
But with crypto, a lot of thesethings will disappear, except
for movement.
So the mob usually controlstrucking rail.
Anything that has to be movedis an opportunity to put a toll
(31:37):
on it and demand rent.
Speaker 1 (31:38):
Yeah, it's kind of funny.
I don't mean this in a bad wayor a good way, it's just an
observation.
Japan very clean, safe, notmuch crime.
It's a joint venture betweenthe government and the mob.
Speaker 2 (31:52):
Yeah, my brother ran the home shopping network out of
Taiwan in China.
Oh, hello.
And he spent half of his timewith the triads in China and the
triads in Japan.
Otherwise you couldn't getgoods moved, you couldn't get
them into port, you couldn't getthem distributed.
Speaker 1 (32:11):
I don't remember what the excuse was, but I had to go
into St Louis.
And when the mob dissipated outof New York, bonanno went to
Vegas.
A lot of people went to KansasCity.
A lot of people went into StLouis, a lot of people went into
(32:32):
st louis and somebody said tome run, you know, it's cheaper
to get somebody killed here thanto break an arm.
They said come on, that'sridiculous.
Yeah, go to st louis, you knowyou don't have to get.
All of this leads to, from myperspective, is cleanliness of
(32:54):
any transaction, and it requires, then, talent.
You take all the noise away,all the influence peddling away.
Now it's up to your skills.
Speaker 2 (33:04):
Yes, it's two people exchanging goods and services on
the line and there will be somefriction to the extent that
there's movement, but it won'tbe from the pyramid that's been
sitting on top of the poorconsumer and often the abused
seller.
Speaker 1 (33:24):
So, prince, lead that into a little bit more common
things and let me frame it AfterWorld War II, trade in the
world was meant to preventanybody else from joining the
Soviet Union, so anybody who wasone of our allies.
We wanted to help themfinancially, we wanted to help
(33:45):
them economically.
We wanted to help themeconomically and we did it with
trade.
So we have all of these thingswhere India is 400% in tariffs
or that kind of stuff.
Here comes Trump and he'skicking the legs of that milking
stool and all of us are fallingon our ass and saying, wait a
second, you can't do that, don'tdo that milking stool and all
(34:05):
of us are falling on our ass andsaying wait a second, you can't
do that, don't do that Right,they've been living off this.
Speaker 2 (34:10):
It's like, yeah, the world's been on welfare.
It's the same thing as currency, isn't it?
Yeah?
So after World War II, whathappened is they printed all
this money to fund the war.
Yep, so Marshall, to his credit, came up with a brilliant guy,
brilliant, brilliant guy.
He came up with Like abrilliant guy, brilliant guy.
He came up with an idea that wehave this money.
The rest of the world has to beredeveloped.
(34:32):
We can continue producing andpush this money out there as the
world's currency to generatethe growth that's necessary to
replace everything that wasdestroyed during the war and
that worked up through Kennedy.
It began to shake when JFK tookposition to his demise,
(35:02):
actually, that the Fed wascontributing to had lost sight
of its true role, which was, asArthur Burns described, it's
just making liquidity availabletomorrow morning, and you had a
(35:26):
CIA that evolved from themilitary secret service, that
was no longer operating totallyto the benefit of the United
States, and so JFK startedthreatening it.
He wanted to get us out of theVietnam War, he wanted to
(35:50):
disband the CIA, and he alsowanted to disband the Fed.
So once he announced that hewas going to disband the Fed, he
was assassinated down in Dallastwo weeks later.
Speaker 1 (36:04):
Yeah, imagine that.
So, putting all this stufftogether, it's still money and
power that rules everything.
We don't give a hoot who's inpower.
Speaker 2 (36:12):
It doesn't matter.
I mean, in Illinois theDemocrats control it, but the
Republicans and Democrats cometogether, decide who's more
likely to win whatever election,and it's really a division of
contracts.
Yeah, who's going to get this,who's going to get that?
Yep, might as well be in a mobmeeting.
Speaker 1 (36:32):
It's yeah, yeah, and, and all of this stuff with the
Texas redistricting has exposed,you know, boston, I don't know
what this is Massachusetts, it'sConnecticut, it's pretty much
all.
Speaker 2 (36:46):
The Northeast has zero Republican representation.
Speaker 1 (36:49):
With 40 to 60% of the population voting for it.
Speaker 2 (36:52):
Yeah, and half the people are Republican.
It doesn't make any sense, andso they're talking about Texas.
I mean, they've opened upPantera's box, Illinois.
You've got more people votingOnce we actually get the real
count.
I live in Illinois, so I got 18ballots at our house that I
(37:13):
could have just walked in anddropped off without anyone
asking for 50 people, you know,for people that had lived here
over the last 50 years.
I'm sure some of them were dead, but in Illinois it doesn't
matter.
Speaker 1 (37:25):
Well, there's the In Hawaii.
I can see the place from whereI lived, my window.
There's a drop box.
It's at a bus terminus and theonly time there's people there
is when they're getting on oroff a bus.
So I can go to this drop box at10 o'clock at night.
There's nobody there butchickens and rats and put in
(37:47):
100,000 ballots.
I mean hell, what is this crap?
Speaker 2 (37:50):
And they're shipping them in.
I mean, all that was found, butthat's been going on.
If you read Carroll's book onLBJ books, I don't think he ever
won a fair election.
They always had boxes ofballots waiting in the wings to
make sure that if he didn't haveenough votes he could deliver.
Speaker 1 (38:08):
What's really interesting, though, steve, in
my naive little world is, slowlybut surely, all this stuff is
getting exposed, so more andmore people are able to think
about it, and people don'treally give themselves the
opportunity to think anymore,and people don't really give
themselves the opportunity tothink anymore.
Speaker 2 (38:27):
Now that's the reason .
After they figured out thatthey could brainwash people,
move them in a direction withtelevision programs, you had the
CIA.
I mean the government wasalways present at all the news
stations, but that was primarilybecause of World War II.
They didn't want anything todisclose, so they had a good
(38:54):
reason to start.
But then they stayed there andas that evolved more recently,
it kind of started with George WBush because of 9-11, but then
Obama unleashed the CIA, givingthem full reign to operate in
(39:16):
the US and do the same crap thatthey're doing overseas taking
down states.
So they applied all that to theUS.
I mean just my background asone of my majors at the Air
Force Academy was Soviet Studiesand the head of the, Colonel
Vassilov, was head of theRussian house for the military.
(39:39):
So anybody that was a defectoror whatever coming across would
come to the Air Force Academy,be put in base housing.
Oh, really, right after the war.
Oh, this is in.
I went there in 68.
Speaker 1 (39:53):
Oh my God, so it was there for 30, 40 years.
Yeah, I'll be damned.
Speaker 2 (39:58):
So and he would come and these guys back then they
were kind of, yeah, his dad hadbeen one of the white Russian
generals, but he had gottengunfights in Moscow and come
back wounded and crap like that.
Speaker 1 (40:14):
That's the only city in the world that I'm
uncomfortable Moscow.
There's too much going on andit's too visible.
Yeah, if there's too much goingon and it's too visible, yeah,
it's okay.
So translate that into todaywith artificial intelligence,
and then let me bring inrobotics.
Now, okay, one of the guys thatwrites blogs for us.
(40:39):
His name is ed gordon, and he'swritten about 20 or 21
bestsellers on the new YorkTimes.
One of them was called FutureJobs, and his premise was that
by 2030, 50% of the Americanworkforce, which is about 90
million people, will not havethe skills to be employable.
You think that's true or false?
Speaker 2 (41:02):
I think actually it depends on how this shakes out,
but if you're going to have ajob.
This is why the economies thatcan be created with AI and also
having the ability to generateyour own energy in a local
(41:23):
market efficiently, like a mininuclear reactor or battery
storage or all the things thatare available today Once you do
that, you've got hydroponics,you can manufacture all your
building materials and you cansupply everything that you need.
And if you look at the aircraftcarriers today or the Air Force
(41:47):
, they're flying whole factoriesonto bases around the world and
aircraft carriers have a wholefloor of printing machines, so
any part that they need on anaircraft carrier can be printed.
Speaker 1 (42:01):
Yeah, my grandson's on one right now on the aircraft
carrier can be printed.
Yeah, my grandson's on one rightnow and there's, you know, a
football field and a half.
Yeah, 5,000 people, 200airplanes, and you know they
don't need to come back to shorefor three submarines, nuclear
(42:22):
submarines.
I mean this whole world, thatway has really changed.
And then you look at our supplychains.
You and I were.
We're into dealers, we're intomanufacturers, we're into
communications companies.
We're still using voicemail andwe're still having voicemail
answered in india right, that'sall going to end, of course.
Speaker 2 (42:46):
And also you have to look at elon musk everyone you
know I'm a big fan of elon musk,but when you look at what he's
done in factories, yeah, andalso his speed of manufacturing
used to be the manufacturing.
If you had a production line,you'd build it and you'd have to
, you know, use it for like 20years before you really got your
(43:07):
money back.
Yeah, it was fixed line.
Then in the I'd say it startedin the 80s where it began to
move to variable manufacturingso you could have, rather than
just one type of car, you couldhave multiple types of cars
going down the production line.
The same line, yep, and it'sthe same thing.
I was involved with springmanufacturing, wire form.
(43:31):
So to solve that, it came up, Ithought we could automate a
machine, which we did, and thenwe ended up getting into some
top secret projects where we'rebuilding airplane wings and
doing stuff like that withbasically a machine learning
(43:56):
capability, and so that hasprogressed.
Now you add AI to that and youcan optimize.
But just what we're doing byusing different technology, we
are able to sew a wing usingcarbon fiber, making a stronger
wing, more flexible, muchlighter, weighing about 40% of a
(44:21):
regular wing, and you can dothat with three people.
It took about two days versus21 people working.
Yes, it was actually 21 days.
Yeah, so that's just for a wingsection.
So I mean the automation andthe capabilities of this and the
(44:43):
lights out opportunities thatexist, both from running the
factory to security, to movementof goods, safety on the
highways, safety in the air allthese things are going to be
very beneficial.
But you still have, the economyrevolves around two people
(45:06):
exchanging goods and services,so people are going to have to
figure out what do they havethat someone else wants?
Speaker 1 (45:16):
Yeah, and again, that's something that's alien to
most of it, because of learningwithout scars and because of
what my daughter does in aschool district.
Every student in america has atest in grade four and grade
eight and many countries havethe same test on english and
arithmetic and in 2024, 70couldn't read at grade level and
(45:41):
72 could not performmathematics at grade level.
That's an indictment ofeducation.
That is so, and it's scaryactually because we're dependent
on those kids, those schools,to create work ready employees.
Speaker 2 (45:57):
But the schools have.
Unfortunately, with what'shappened with schools, it's
turned into a job in layers andlayers of mismanagement.
And, unfortunately, the youngteachers that come in
enthusiastic I wanna teach kids.
They have to go through thisgauntlet of seniority and it's
(46:21):
not based on talent, it's basedon a bunch of bullshit.
And you've got teachers and,having experienced this, I was
fortunate that, like for the AirForce Academy, I think I had 10
kids in my class.
Oh, that's magnificent.
And same thing at theUniversity of Chicago the
(46:41):
classes were just a handful ofkids, the school was small and
you can learn.
But these webinars, there arethese big groups.
Everyone's just sitting thereand if you can't track what the
guy is saying, you're out ofluck.
Speaker 1 (47:02):
My daughter teaches in middle school grades 6, 7,
and 8, and she has six classesevery day and maybe 50% 60% of
the students are English assecond language and her class
size is 40, on the small side,and you know, quite honestly,
you can't teach anything topeople with that many people in
(47:24):
the room.
Speaker 2 (47:25):
Not with kids They've got, they have too much energy
and if they don't have theenergy, you're going.
You got a bigger problem.
Speaker 1 (47:33):
Yeah, yeah, yeah, exactly.
So we come out half thepopulation is going to be
displaced.
What's society going to do tosupport those people?
Speaker 2 (47:50):
Well, I think that's where Fossey and these guys,
especially now that people arecoming out about the Comtrails
that are covering the US andother countries, as they're
dumping a bunch of this toxicstuff on top of the population,
but they have some expectationthat somehow, magically, the
(48:12):
population's going to be reducedand Good luck, good luck.
So I feel as if that, if youthink in terms of economic
viability there are.
What I think will emerge isthere'll be communities that
(48:33):
materialize, that are, you know,like the Amish or other groups
that materialize.
This is a way of life and wecan support each other, where
everyone has a meaningful job,from teaching to growing food,
to animal husbandry, tomanufacturing, and do that at
(48:56):
the local level.
And that local level could be aremote location up in Alaska,
it could be on Mars and it couldbe a two, four block area in a
city, but these economic systemswill emerge because of energy
and AI and optimizing theresources locally available to
(49:20):
feed, house and employ a viableeconomic community.
Speaker 1 (49:28):
Yeah, you mentioned the Amish.
The province of Saskatchewan inWestern Canada has serious
religious groups, no disrespect.
But 40,000 acres, 60,000 acres,and it's a family, it's
completely self-contained.
They grow their own food, theymake their own clothing, they
teach their children the wholething.
(49:48):
And one of the things that Ifound intriguing I'm working
with John Deere dealers up thereand the guys would come in and
they'd buy John Deere equipment.
John Deere had a test place upthere too, a town called
Rosetown, saskatchewan, south ofSaskatoon, and after the
(50:10):
planting season was over they'dtrade it back.
In Harvest season comes, I'dbuy a new business, trade it
back in, and so the Canadiandealer made a lot of money
because they could sell it inthe state's low hours, three
months old, get a hell of aprice.
You know it's pretty clever allthe way around.
My grandparents emigrated fromEngland to Alberta, in a place
you can't grow a rock, so I'mnot a good example, but it's
(50:36):
true.
We're going to example.
Nuclear energy and the power weneed to have to drive AI,
nuclear energy is going to berequired.
How many electricians are wegoing to need?
I mean, there's new jobs thatare going to be created.
Speaker 2 (50:49):
The job opportunities are going to be huge as this
all emerges, and it's not goingto be done all by robots.
Speaker 1 (50:59):
Oh no, the remedial stuff, the stuff that you know.
There's a lot of jobs thatexist, that it's a waste of
human talent.
Speaker 2 (51:08):
It is and it's not putting.
Humans have the ability tothink yeah, and their life thing
is that people, um, if you movein one direction, which it
(51:30):
seems like the canadians andeuropeans are going back to,
that which is, um, life isn'tvalued, but societies that
revolve around life, um, buildcommunities.
Yeah, yeah, but unfortunatelycommunication.
One of my sons did adocumentary in India looking at
remote villages and theintroduction of cable vision and
(51:51):
how it just destroyed culturesthat had been there for 5,000
years.
The kids ran to the citiesbecause they saw much bigger
opportunities.
So you lost the pattern of, asyou got older, you took care of
the children and then you hadyour whole social system all
(52:12):
structured and maintained, andthat all got destroyed in
literally a matter of a year ortwo at these villages as they
acclimated to sitting in frontof the television, transfixed
and then luring the kids away tojobs in the city.
Speaker 1 (52:34):
Yeah, I mentioned my grandson's in the Navy and he
wanted nuclear engineering.
He's doing nuclear engineering,astrophysics.
He's 19 years old and I'mchatting with him and saying
okay, what are you going to dowith this?
Say, you leave the Navy andit's 10 years from now and
you're 30, what are you going todo?
He said well, you know, fusionwill be commercially viable then
(52:55):
, where you'll have a deviceabout the size of a softball or
a hardball and that'll be allthe power you need for your
house.
So maybe I'll go work for theDepartment of Energy and Elon
Musk and space travel will besuch.
Maybe I'll go live on Mars andwork with him.
I mean, here's a kid who's 19years old and when I went to
(53:16):
university and I'm 16 years old,I didn't know whether I was
punched, board or shot out theback end, like, what are you
going to do for the rest of yourlife?
Don't ask me.
Speaker 2 (53:33):
You know I keep saying to people now I'm trying
to figure out what I want to dowhen I grow up.
There's some friends of one ofmy sons that there's these twin
brothers that they were mastersAt 12 years old.
They were chess masters andalso they were being picked up.
They were living in Manhattanat the time.
They'd be picked up in a limoto go down to Wall Street to
(53:54):
build black boxes for trading.
Yeah, and they're 12 years old.
So just when you're talkingabout that, ron, one of them
said oh yeah, he's going to getinto this whole space
opportunity.
Speaker 1 (54:13):
Sure enough, he's one of the key guys on Elon Musk's
space program.
So the moral of the story with.
Speaker 2 (54:21):
That is today.
Those kids are on social media.
They're wasting their time.
They've lost their.
It's just.
The day is being eaten up withthis more addictive behavior.
Speaker 1 (54:34):
Yeah, one of the things that happens to me, and I
get annoyed with it, is everymonth I get a summary every week
too of my my phone time.
You spend an hour and a halfmore this month than you did
last month, and you spent twohours less this month than last
month.
Good work, you know, you know.
And then then we pay insurancebased on how many miles we drive
(54:54):
, and there's so many, so manythings.
And so here comes dealers andhere comes artificial
intelligence and go back to yourpremise the transaction between
a buyer and a seller.
Our supply chain has too damnmany people in it, even still
today.
Speaker 2 (55:13):
Yes, All that's going to get.
All that double handling,triple handling, will be removed
, either with localmanufacturing, the last mile, or
just efficiency.
We had one company we work with.
They shipped 250 jobs over toChina to make, you know, cutting
(55:38):
tools and they built a plant.
And they built a plant andbrought the business back and
replaced those 250 people with20, producing four times the
amount.
Speaker 1 (55:54):
Yeah, well, the other thing you mentioned,
hydroponics, earlier on.
Transportation cost is about50% of the price of food and
spoilage Exactly.
So if I bring hydroponics in, Ican have vegetables and fruits
grown right where the populationcenter is.
Here we go.
Speaker 2 (56:15):
Healthy, without all the pesticides, and all the
chances for Yep.
Speaker 1 (56:21):
Yep, you know I'm a bit of a maniac on those types
of thing.
With microchondrial I want toget dna testing.
That's a little different thanthe average bear, but you know
it's.
There's so many things.
You know, I, with zentoro, whatyou do and winsby, what debbie
does and what we do withlearning.
(56:42):
You know I'm I.
The last couple of months Italked to a lot of salespeople
equipment salespeople, parts andservice sales managers what are
you going to sell next year?
You've heard me do this.
Yeah, they say oh, I got towait until the end of the year.
I said, really, Do you, do youhave a list of customers?
That you said, oh yeah.
Do you know the equipment theyhave in there?
Oh yeah, Do you know how muchthey buy in parts and service?
(57:05):
Oh yeah, you got life cyclestatistics from your
manufacturer.
Oh yeah.
Well, how come you don't knowthat Georgia's going to replace?
Speaker 2 (57:19):
that loader backhoe in April and you're already
talking to them now aboutgetting it on order.
Yeah, and Ron, also.
This is great about what we'vedone with Zentoro.
We can forecast 12 months outand we are off on equipment
sales, unit sales.
This last couple of years we'vebeen off maybe 1%.
Speaker 1 (57:34):
And think about that.
You and I have talked about it.
That's a good news.
Bad news, bear.
From my perspective, the reasonit can be so accurate is
because nothing changes.
Speaker 2 (57:42):
Nothing changes.
It's all predictable becausewhatever programs they put in or
opportunities or things thatthey pick up, statistically it's
almost foreordained.
And it's foreordained becausethe real driver of this whole
economy is customer retention,and that requires engagement.
(58:03):
Engagement requires two people.
And now we're back to theoriginal premise.
Right, and that's been true foras long as there's been an
economy, going back probably amillion years.
Speaker 1 (58:15):
Yeah, and I remember a Harvard business review
article in the eighties thatcustomer retention was the
single, single most importantelement on profitability.
And then you know the other oneand you go to dealers.
I can ask 100 dealers what'syour customer retention?
They haven't got a clue.
Speaker 2 (58:32):
I asked 150 of them does anyone in this room know
what their customer retention is?
And nobody spoke up.
Nobody knew.
They said does anybody know?
And somebody in the front rowgoes no.
Speaker 1 (58:50):
So we're going to have to end it there because
we're out of our, pretty closeto our time for people to be
able to stay with us.
So we'll do it again.
But you know, people need tostart evaluating their lives,
their jobs, the good and the bad, the likes and the dislikes,
(59:11):
and start getting serious aboutlife.
We just we become victims tothings much too easily.
In my opinion and you know Itease everybody only the good
die young.
So I'm here for a long time.
And you know I tease everybody,only the good die young.
So I'm here for a long time.
But you know, I'm only not goodbecause I challenge everything.
And the good news is I wasraised by my grandmother and she
(59:31):
never said no, so that's kindof cool, you know.
Thank you very much.
There's a couple of things inhere Two people buyer and a
seller, crypto spending andabout 20-year cycles.
Speaker 2 (59:51):
End of the war 1980, lbj Biden with his.
We're down to a seven-monthproduction cycle for
manufacturing.
Speaker 1 (59:57):
Really.
Speaker 2 (59:58):
Seven months now.
Yeah, from start to finish, youcan design a truck, a car,
whatever you want, and go intoproduction and have it road
ready.
You may have to run throughgovernment tests or something,
but actually performance capable, it can be done.
Speaker 1 (01:00:16):
And that's what's happening.
Let me leave it with that andthank you, steve, for this.
I think it's been aninteresting conversation.
I hope everybody who'slistening that this is provoking
some thinking.
I look forward to having youwith us at the next Candidate
Conversation, mahalo.
Aloha and welcome to another candid conversation.
We're going to go down adifferent path.
Today.
Our guest is Steve Clegg, who Ihave enormous respect for and
what he's done with business,with systems, with thinking.
So with that as a startingpoint, Stephen, welcome to
Chicago, to Hawaii.
(00:23):
Thanks, Rod.
Speaker 2 (00:24):
Stephen, welcome to Chicago, to Hawaii.
Speaker 1 (00:25):
Thanks, rod.
We started to get ready forthis and I said wait a second,
let's just get going.
Steve's always been of theopinion that the world depends
on the transaction between twohuman people beings, and he
doesn't see that changing, solet's use that as a starting
point.
You've used all kinds of AI inthe last number of years.
Speaker 2 (00:52):
Where are you at with this stuff?
We're automating a huge amountof the stuff that we're doing,
so it's following that pattern,but AI has made it possible to
more rapidly make this inversionthat we've talked about in the
past, which is that withartificial intelligence, you've
(01:15):
got the economy.
The human race has the abilityto, you know, invert what has
been a pyramid that has sat ontop of transactions, where you
have layers and layers of peoplesupposedly assisting you in the
exchange of goods and services,where the seller and the buyer
(01:40):
are really not seeing a greatamount of the benefit of that
transaction compared to thepyramid that sits on top.
But with artificialintelligence, what that does?
It allows you to go back to thetwo-people transaction, which
is the core of a viable economy.
There's no such thing asone-hand clapping.
(02:02):
It requires two peopleexchanging goods and services,
and AI allows for the capabilityof supporting that transaction,
so that sits on top of thepyramid, not at the bottom of
the pyramid.
And so rather than beingexploited by the pyramid, it's
(02:24):
being supported by theartificial intelligence.
Speaker 1 (02:28):
Let me pick on something that you mentioned.
Between the buyer and theseller, there's two pyramids of
people that are sucking someaspect of that transaction away,
whether it's freight, whetherit's customs, whether it's
duties, whether it's trade,whether it's customs, whether
it's duties, whether it'smarkups, whatever the heck it
might be.
But with ai, your premise isthat's going to shrink, if not
(02:54):
disappear altogether.
Speaker 2 (02:56):
Yes, and it.
It's been possible in the past,I mean when I first got into
the steel business.
It's been possible in the past.
I mean when I first got intothe steel business.
The steel mills back then hadmore people outside the plant
than they had inside the plantand we were able to take
Birmingham steel and make it thelow-cost producer in North
(03:16):
America for rebar and rod by,you know, having a
superintendent, twosuperintendents, a plant manager
and a salesman or two and oneadmin and everybody else was on
the line.
So basically, turning into thebeginning of an inversion which
allowed us to make rebar forabout under $200 a ton, where at
(03:43):
the time it was going for $600a ton.
So the technology or the desireto do it, has been there, but
there have been some bigstumbling blocks and one of them
has been just having the peoplecontent focused on the
transaction rather than all thethings that support it, and
(04:06):
artificial intelligence ismaking that happen.
And then the big breakthrough,also in addition to AI, has been
the crypto technology, becausenow you're taking out the what
has been a foreign exchangeproblem, a time differential
issue, so you've got localpricing wherever you're sourcing
(04:30):
from, local pricing from whereyou're selling, you've got the
exchange rate issue, interestrate issue for any time delay
and with crypto like an XRP orXLM, that all goes away.
With crypto like an XRP or XLM,that all goes away.
So you don't have to worryabout all of those layers that
(04:51):
are usually collecting anywherefrom.
In my experience, it's as muchas 20 to 30% of every
transaction is absorbed by them.
Speaker 1 (05:00):
So before we go much further, you opened up a whole
bunch of new topics and subjects.
First of all, our systems haveto be a hell of a lot better,
smarter, more capable, andthat's a lagging event.
There's not a lot of people inthe systems world that know the
(05:24):
clients that their systems arebuilt for.
They're more worried aboutmaking elegant systems and
procedures and processes thanthey are in helping the client.
And then you agree with that.
Speaker 2 (05:37):
Yeah, the programmers are myopic.
They aren't even looking at thebig picture there.
What do you want me to do?
So, AI is beginning to takecare of that type of mentality,
so you're going to be left witha very small percentage of
people that have the knowledgein the background to achieve
(06:00):
that.
Speaker 1 (06:01):
Yeah, and that takes me to some fundamentals.
Back and forth with thequestion what do you do?
And you ask people and most ofthem can tell us pretty easily
what they do.
Then the next question is howdo you do it?
Well, now there's a bit of astumble, but they get there.
And then the more tellingquestion is why do you do it?
(06:24):
And they really can't saybecause we're in a rut with work
.
You've got to work to get money.
You've got to have money to payyour bills.
You've got to have the abilityto pay your bills to have a
house and food and people aretrapped.
Speaker 2 (06:40):
They're trapped and also they get paid for doing the
same thing right over and overagain.
So that causes many people togravitate to these very mind
mindless jobs where they're notthinking they're just.
This is what I do and this isexperience I had with this guy
(07:01):
that was missing teeth, he hadwild hair and when we had this
plant in West Virginia and theyhad a problem unloading we were
making roofing materials,unloading the granules because
the chute would get clogged up.
So this guy would climb up intothe rafters with a bunch of of
(07:25):
uninsulated high voltage wiresand pull on this chain as the
granules are being unloaded.
So I'm walking through this andthis guy had been doing it for
his whole career.
That was his job.
So he's up there pulling on itand we're looking at him there,
with this guy that we're lookingat and go, why do you have the
(07:50):
chute bending at the end?
And no one ever asked thatquestion.
Because I said you know, ifyou've got a flow, you're going
to create a bottleneck.
Yeah, so we had him cut the endend of the shoot off, so it
just was a straight run.
Um, and for 40 years this guyhad been climbing up that ladder
(08:15):
, up into the up into theceiling, endangered life and
pulling on this stupid chain inorder to get the granules to
move through because someone hadput an end tip on the shoe.
Speaker 1 (08:31):
Yeah, that's the kind of obvious stuff that we're
confronted all the time, and thedilemma is, one of the
attributes that is missing in alot of people is curiosity.
You know why do we do that.
But then you bring up anotherpoint just blithely and say
crypto.
And all of a sudden we're in adifferent world, and this
(08:54):
morning on one of the businesschannels I was watching, they're
talking about that.
Christine Lagarde, who runs theEuropean Central Bank, now used
to be the, or the World Bankused to be the president of the
European Central Bank now usedto be the, or the World Bank
used to be the president of theEuropean Union.
She's the one that's settinginterest rates for the world,
not the United States.
And Jerome Powell this morningin Aspen or wherever the hell
(09:19):
they have this meeting made acomment about maybe loosening up
interest rates in September,and the Dow went up 900 points
like in about 30 minutes.
Speaker 2 (09:28):
So here comes crypto and that's nation independent
yes, and also the problem thatyou've got that when I went to
University of Chicago, I wrote apaper on this topic.
Speaker 1 (09:45):
Okay, just for grins.
What year was it that paper waswritten?
Speaker 2 (09:49):
I wrote it in 1974.
Speaker 1 (09:52):
Okay, so what is that ?
That's 50 years ago.
Yeah, okay, go ahead.
Speaker 2 (10:01):
So I'd been working in Poland.
I took a job as an assistantproject manager because the
western work crew had walked offand found that we were buying
stuff, you know, from hungary,from east germany, and we had
official exchange rates, blackmarket exchange rates, and we
(10:23):
that we're building this plantto ship to the US but we're
buying locally, where you know.
It was complicated and thechallenge was, you know, dealing
with all this.
I came back and wrote a paperby hand, since I couldn't type,
(10:47):
I could barely read what I wrote, and just laid out what the
problem was, which was thechallenge of local pricing
interest.
Know, how do you value this?
And how do you, if you putinvestment, of which they were,
(11:12):
the plant that I was a systemmanager on, that we're building,
was $100 million investment onthe Russian border.
So what are they gonna book that?
They gonna book that in USdollars, are they gonna book it
in, you know, zawadis, or withthe official rate, the
unofficial rate, rubles?
You know, god knows Right, godknows.
(11:34):
So because of all that you had,you know there's bank issues,
there's exchange rate interest,there's, because of the time,
delays, there's interest costs,carrying costs and what I felt
was because, at the timefloating exchange rates.
Interest rates were justemerging after the Britain Woods
(11:57):
Agreement collapsed, so we'rekind of unmoored at the time
without gold and we were justsitting on the fiat currency.
So I wrote the paper and saidthat the LIBOR market what
became the LIBOR market inLondon was setting the price
because of the dollar overhang,of what the value was and the
(12:20):
interest rates associated withthe US dollar, so freeze-frame
LIBOR.
Speaker 1 (12:24):
What's LIBOR?
Speaker 2 (12:27):
It was the rate that was traded in London that people
used as the primary interestrate.
For a lot of contracts it wasthe largest international broker
.
Speaker 1 (12:42):
The broken rate, yeah , okay.
Speaker 2 (12:45):
And so that was the center of the finance worldwide.
So I wrote this paper and I gotin some scream fest with some
idiot professor.
But then I got pulled in MiltonFriedman and all these guys
were teaching at that time there.
(13:06):
So anyway they grabbed me andactually had someone translate
it into something that waswritable they could read.
So anyway I got whizzed on thisbecause people hadn't really
thought about it that with adollar overhang the last
transaction determines theunderlying value of the assets.
(13:27):
That that's the key, the lasttransaction yeah, and I said,
you know, one little transactioncan set the value on the world
market of the underlying assetsyeah, and it.
Speaker 1 (13:39):
It really is amazing.
Now I don't know, maybe youwant to talk a little bit about
Milton Friedman, because I thinkhe's rather remarkable as an
economist and as a teacher.
Speaker 2 (13:50):
Yeah, he was great.
His view was we just dump allthe data in there and we just
crunch it.
Speaker 1 (13:55):
Yeah, and that's 50 years ago.
Speaker 2 (13:59):
That's 50 years ago.
So he was at that timedeveloping machine learning and
then Black and Scholes thoseguys.
I really went to Poland to makeenough money to buy a seat on
the Chicago Marketplace yeah,because there was beginning to
trade the exchange and so anyway, I ended't end up not doing
(14:25):
that but I wrote this stupidpaper, didn't think much of it.
It got quizzed by a bunch ofthe professors just
brainstorming this and then kindof went on my merry way with a
pissed off professor.
He didn't agree with anythingthat I said.
So I have a bunch of job offersin Chicago.
(14:49):
I have one job offer in NewYork and Jim Bray, who was
running BorgWarner at the time,goes you know, Steve, if you
could take a job in the Midwest,in Chicago, here it'll be worse
than the military.
It'll be worse in the military.
But if you go to New York theydon't care how many, whether you
have arms or legs or how oldyou are, it's all about talent.
(15:13):
He goes you need to go to NewYork, you'll hate Chicago.
Speaker 1 (15:17):
So anyway, I took the job as Peter Grace's assistant
at WR Grace and because I and inthose days, wr Grace, and
because I and in those days, wrGrace was an unbelievably
powerful and successful yeah, itwas one of the major, major
corporations.
Speaker 2 (15:32):
So, anyway, I find myself in the biggest office
I've ever had, up on the 46thfloor of the Grace building,
overlooking Manhattan, and theygot all this crap on.
There's a conference table,there's a conference table,
there's a big desk, and theygave me two secretaries and I'm
sitting there going what am Isupposed to do with all this
(15:52):
stuff?
Exactly, what are you thinking?
But anyway, they had no ideawhat they're doing.
They're actually, it turned out, they're hedging their
positions in the wrong direction, which seemed to be a common
problem with everybody in thosedays, everybody.
They didn't understand it.
Speaker 1 (16:11):
Yeah.
Speaker 2 (16:12):
So I built a model to manage that.
So I took over their foreignlending and their foreign
exchange in their foreignexchange and you have to
remember, I showed up with aplastic suit and cowboy boots
and they looked at me like I wasa Martian and dragged me off to
(16:34):
Brooks Brothers.
Speaker 1 (16:37):
Let me interject for a second.
One of the things that not manypeople know is Steve graduated
from the Air Force Academy, sothe cowboy boots and the plastic
suit, kind of fits.
Speaker 2 (16:48):
I mean, at the Air Force Academy, you really didn't
need anything but jeans and at-shirt other than your uniform.
Yeah, exactly.
So anyway, a couple of weeksinto being there, I get a cough
from this guy named Arthur Burns, and I don't know who he is.
He just says you know, mr Clegg, I read your paper.
I'm thinking what paper did youread?
(17:08):
I don't remember having a paperthat was.
You know anybody would read,but I didn't know who he was.
And he goes.
I want you to come to lunch atthe Bull and Bear at the Waldorf
and I want to have a discussionabout your paper with some of
my associates.
So no one had asked me to lunch.
I'd been there a couple ofweeks and thought, well, okay,
(17:31):
great, so I tell my-.
Speaker 1 (17:34):
And so anybody who doesn't know, Waldorf Astoria is
a very famous hotel in New Yorkthat's famous for all kinds of
meetings the Bull and Bear Bar,you know it's a place that
Sinatra went and had his oldtable in the corner.
I mean, you're talking about apower space, so keep on going.
Speaker 2 (17:54):
So, anyway, I go down the hall and ask the economist
who in the hell is Arthur Burns?
And he says he's chairman ofthe Fed.
You don't know that?
Go for it.
Speaker 1 (18:07):
That's the Federal Reserve.
This is Arthur Burns, who wasthe chairman of the Federal
Reserve before Paul Volcker.
Christ, we're going back a longway.
Speaker 2 (18:17):
So I show up there and he's got Paul Volcker, he's
got a bunch of the other Fedpresidents of the various banks
which I had no real appreciationfor, and it ended up being like
a four-hour lunch.
Speaker 1 (18:37):
How old were?
Speaker 2 (18:37):
you, then I was 24.
Speaker 1 (18:41):
Yeah, imagine that.
Okay, so let me translate thatforward.
You were basically paid to goand think and put that onto a
piece of paper that somebodyelse could look at and say, well
, it's no good or it's good orwhatever.
And if you bring it forward totoday, that's what Silicon
Valley has been doing the last15 years.
They bring people in, goWozniak and creating Apple with
(19:04):
Steve Jobs.
You know they're bright, brightpeople with no real Hewlett
Packard.
That's kind of the melting potof innovation in America and
everybody comes here to do it.
Speaker 2 (19:21):
Yeah, it's wonderful, absolutely, and what I found
was that for the people, thatare actual thinkers.
So, anyway, I went through andexplained to him and at the end
of this, arthur Byrne says to methat the purpose of the Fed is
to ensure that there's liquidityso the banks can open in the
morning.
Yes, that's what the Fed'spurview was At that time.
(19:47):
At that time, and that is areally important thing, because
there'd been financial collapsesas a result of not being able
to manage the liquidity in themarket.
Speaker 1 (19:58):
Okay, so let me attribute that to the fact that
we moved away from the goldstandard.
When we had the gold standard,there was much more stability in
the banking system.
Speaker 2 (20:08):
Yes, it's $34.
People knew what it was thedollar, even though they may
have been printing the dollar.
They could always be exchanged.
At the time I think it was $35or $34 or something.
But once Nixon went off of itbecause Johnson had done two
things, he got into the VietnamWar and printed money like
(20:29):
there's no tomorrow.
And then he started the GreatSociety and didn't realize he
had turned a tiger loose thatjust ate up money.
He stepped on growing ate upmoney.
So they started printing asfast as they could and so that
caused this massive amount ofunderlying inflation.
(20:50):
And they couldn't support thatwith gold because the Fort Knox
was getting emptied out veryquickly because people didn't
believe that the dollar wasworth $34, so they're
arbitraging it.
Speaker 1 (21:03):
Yep.
Speaker 2 (21:04):
And so that meant that they had to come up with a
solution and, to the credit of,at the time, arthur Burns, but
really Paul Volcker, whatemerged was the dollar tied
itself to a barrel of oil, andthat lasted up until December of
(21:27):
this year.
But from that meeting for 15years people at the Fed
contacted me because I ran WRGrace's foreign exchange.
And then Marshall, who wasrunning Avis at the time,
(21:47):
contacted me.
They had a mess on their hands,funding their fleets worldwide
and pricing, interest rates andall that.
So I took over that at Avis at,again, a very young age,
running and funding their fleetsworldwide, running and funding
their fleets worldwide.
So I got a huge amount ofexperience in looking at
(22:09):
sourcing automobiles from onecountry, investing in facilities
to provide, you know, at theairport or whatever, rental both
of cars and also trucks at theports and undercarriages, and it
was a really great education.
But a lot of people couldn'tget their mind around kind of a
(22:33):
three-problem issue, which wasinterest rates, exchange rates
and pricing.
Speaker 1 (22:42):
So let me try and put that into a little bit more
clarity this way.
If everybody in America went totheir bank and asked for cash
that represented what their bankbalances were, how much cash do
you think the banks would beable to give to people as a
(23:04):
percentage of the total bankaccount value it used?
Speaker 2 (23:08):
to be, they had to have assets and not necessarily
liquid assets.
Right yeah, one dollar forevery ten dollars that they had
out in circulation.
Speaker 1 (23:19):
So ten percent.
So if I went to the bank and Ihad a hundred dollars, all the
banks in America are required tobe able to give me $10 back.
Speaker 2 (23:28):
That used to be the case, but because of leverage
and forward contracts, thatleverage moved up to about 70
times and that's what caused thecollapse in 2008.
Right, right.
Speaker 1 (23:44):
And okay, stay with that one for a second.
What was the primary cause ofthe 2008 collapse?
Speaker 2 (24:01):
But what they were doing was they're using math to
calculate portfolios and they'retaking it out and selling it to
Secondary investors.
People that were unsophisticated, similar when interest rates
started floating.
This was pretty funny that evenwhen I was at WR Grace, the
(24:24):
Swiss came and wanted to makeloans they would give us.
I just remember this.
I can't remember which Swissbank it was, but these guys were
quite sharp.
He comes in and he says well,you need money, we will lend you
at the time, which was a lot ofmoney, a $100 million line and
(24:48):
we're only going to charge you1%.
And so I did.
The guy who wasn't thebrightest bulb comes to me and
says, yeah, this is a hell of adeal.
And I said you've got to be outof your mind.
Speaker 1 (25:06):
You're paying a million dollars for nothing.
Speaker 2 (25:10):
What they're going to do is, you know I said we won't
be able to pay it back.
We're in the midst of a massiveinflation and they're betting
that you know the dollar willdepreciate and they're going to
make a fortune relative towhatever their dollar holdings
are.
But because of that, they tookthat offer to pretty much every
(25:32):
fortune 500 company in the USand I think every one of them
fired their CFOs.
I quit in about two years.
It was just like I mean, yeah,america was total rubes.
Speaker 1 (25:51):
Yeah, we've had this thing forever, though, steve,
and money has been theunderlying transaction.
So I go back to the firstmanufacturer was a blacksmith
transaction.
So I go back to the firstmanufacturer was a blacksmith
(26:12):
and you had a horse and I'm aknight and I needed horseshoes.
So there's only one guy in townthat I could go to and he was a
big, strong son of a gun.
His attribute was muscles.
Today, the attribute is brains,and schools today have tried to
normalize everything.
They've dumbed it down andthey've been preaching the same
mantra for about 20, 30 years,when the world has changed now
the schools are so out of dateand exactly.
Speaker 2 (26:35):
It's really sad.
And the education, um, just thetools to be educated aren't?
They're not being taught it.
It's like learn this and thenthey burned it with.
You know kind of worthlessthings that aren't really adding
to their education orbroadening their scope of
understanding.
Speaker 1 (27:14):
It's kind of sad that people are so out of touch with
how these things are appliedand how do they fit within a
business or a community ordeveloping an economic viable
entity.
It's like the guy in WestVirginia that's gone up into the
rafters with his live wires andthere's a bend in the tube at
the bottom that you get rid ofit.
He's not needed up thereanymore.
Yeah, but I'll lose my job ifyou take it.
Yeah, yeah, yeah, you know it'sreally funny.
(27:35):
I guess that's an interestingmindset.
Everywhere I've been, I'veworked myself out of a job and
that allowed me to grow.
But most people look at theirjob as sustenance and you've
(27:56):
heard me say this.
Very few people look over thewall.
We're all on ruts.
So here comes crypto.
It's going to replace currencyeverywhere in the world.
It's just a matter of time, andthat neutralizes currency.
So one of the three legs ofyour paper from 1974 or whatever
it solved the whole problemPrecisely.
Speaker 2 (28:16):
Crypto solves the pricing issue, it solves the
time issue, it reduces thetransaction costs.
So you're not spending anywherefrom 20 to 30 percent of every
dollar that you do overseas justto make the transaction happen.
All that's gone, it'sinstantaneous, it's documented.
(28:39):
You know the money's going tobe there at the other end, so
letters of credit and things ofthis nature are not necessary.
Speaker 1 (28:46):
And that just stay there for a second.
I don't want to get political,but with Biden's administration
they didn't want to haveanything to do with crypto.
Here comes Trump and in thefirst six months, crypto's open.
Speaker 2 (28:59):
Well, they didn't want to have anything to do with
it, because you're going todestroy what people have been
doing arbitraging all this andthe politicians have been
participating in this bullshit.
Big time, big time.
So anytime money.
You know, this was interestingwhen george bush and George Bush
(29:22):
the father of the son dug intothis whole 9-11.
And they discovered that thetrades in the Chicago Exchange
were being I think it was shotover to Belgium or the
Netherlands and then shot backto the floor.
(29:42):
So there's this delay.
So it meant that Europe wasfront-running our market and
placing bids in front ofwhatever the transactions were.
Speaker 1 (29:56):
They were buying futures and they had inside
information to make money with.
Speaker 2 (29:59):
Yeah, and so they've been doing it and Bush makes a
mistake of announcing this andfeeling like he's discovered
something.
And of course, he quickly shuthis mouth because a lot of
people this was a big gravytrain for a lot of powerful
people yes, having hadoperations in Poland, I bought a
(30:24):
bunch of plants in Canada andelsewhere around the world is
that corruption is rampanteverywhere.
It's just part of every economy.
Speaker 1 (30:37):
Yeah, this has probably been true for 10,000
years with humankind, but it'sstill distressing the level of
corruption and the masses, thelevel of corruption and and
we're the masses, the unwashedbrethren we have.
No, we haven't got any chance.
We're not even at the table.
You're not at the table and.
Speaker 2 (30:53):
But also people don't appreciate it the mob.
You know whichever one badmouths the mob, but the mob's
role is been a facilitator toprotect their group from the
abuses of politicians and thepolice state.
So this is.
You know, you got checks andbalances in the US Constitution,
(31:14):
but the economy has a check andbalance also and.
But with crypto, a lot of thesethings will disappear, except
for movement.
So the mob usually controlstrucking rail.
But with crypto, a lot of thesethings will disappear, except
for movement.
So the mob usually controlstrucking rail.
Anything that has to be movedis an opportunity to put a toll
(31:37):
on it and demand rent.
Speaker 1 (31:38):
Yeah, it's kind of funny.
I don't mean this in a bad wayor a good way, it's just an
observation.
Japan very clean, safe, notmuch crime.
It's a joint venture betweenthe government and the mob.
Speaker 2 (31:52):
Yeah, my brother ran the home shopping network out of
Taiwan in China.
Oh, hello.
And he spent half of his timewith the triads in China and the
triads in Japan.
Otherwise you couldn't getgoods moved, you couldn't get
them into port, you couldn't getthem distributed.
Speaker 1 (32:11):
I don't remember what the excuse was, but I had to go
into St Louis.
And when the mob dissipated outof New York, bonanno went to
Vegas.
A lot of people went to KansasCity.
A lot of people went into StLouis, a lot of people went into
(32:32):
st louis and somebody said tome run, you know, it's cheaper
to get somebody killed here thanto break an arm.
They said come on, that'sridiculous.
Yeah, go to st louis, you knowyou don't have to get.
All of this leads to, from myperspective, is cleanliness of
(32:54):
any transaction, and it requires, then, talent.
You take all the noise away,all the influence peddling away.
Now it's up to your skills.
Speaker 2 (33:04):
Yes, it's two people exchanging goods and services on
the line and there will be somefriction to the extent that
there's movement, but it won'tbe from the pyramid that's been
sitting on top of the poorconsumer and often the abused
seller.
Speaker 1 (33:24):
So, prince, lead that into a little bit more common
things and let me frame it AfterWorld War II, trade in the
world was meant to preventanybody else from joining the
Soviet Union, so anybody who wasone of our allies.
We wanted to help themfinancially, we wanted to help
(33:45):
them economically.
We wanted to help themeconomically and we did it with
trade.
So we have all of these thingswhere India is 400% in tariffs
or that kind of stuff.
Here comes Trump and he'skicking the legs of that milking
stool and all of us are fallingon our ass and saying, wait a
second, you can't do that, don'tdo that milking stool and all
(34:05):
of us are falling on our ass andsaying wait a second, you can't
do that, don't do that Right,they've been living off this.
Speaker 2 (34:10):
It's like, yeah, the world's been on welfare.
It's the same thing as currency, isn't it?
Yeah?
So after World War II, whathappened is they printed all
this money to fund the war.
Yep, so Marshall, to his credit, came up with a brilliant guy,
brilliant, brilliant guy.
He came up with Like abrilliant guy, brilliant guy.
He came up with an idea that wehave this money.
The rest of the world has to beredeveloped.
(34:32):
We can continue producing andpush this money out there as the
world's currency to generatethe growth that's necessary to
replace everything that wasdestroyed during the war and
that worked up through Kennedy.
It began to shake when JFK tookposition to his demise,
(35:02):
actually, that the Fed wascontributing to had lost sight
of its true role, which was, asArthur Burns described, it's
just making liquidity availabletomorrow morning, and you had a
(35:26):
CIA that evolved from themilitary secret service, that
was no longer operating totallyto the benefit of the United
States, and so JFK startedthreatening it.
He wanted to get us out of theVietnam War, he wanted to
(35:50):
disband the CIA, and he alsowanted to disband the Fed.
So once he announced that hewas going to disband the Fed, he
was assassinated down in Dallastwo weeks later.
Speaker 1 (36:04):
Yeah, imagine that.
So, putting all this stufftogether, it's still money and
power that rules everything.
We don't give a hoot who's inpower.
Speaker 2 (36:12):
It doesn't matter.
I mean, in Illinois theDemocrats control it, but the
Republicans and Democrats cometogether, decide who's more
likely to win whatever election,and it's really a division of
contracts.
Yeah, who's going to get this,who's going to get that?
Yep, might as well be in a mobmeeting.
Speaker 1 (36:32):
It's yeah, yeah, and, and all of this stuff with the
Texas redistricting has exposed,you know, boston, I don't know
what this is Massachusetts, it'sConnecticut, it's pretty much
all.
Speaker 2 (36:46):
The Northeast has zero Republican representation.
Speaker 1 (36:49):
With 40 to 60% of the population voting for it.
Speaker 2 (36:52):
Yeah, and half the people are Republican.
It doesn't make any sense, andso they're talking about Texas.
I mean, they've opened upPantera's box, Illinois.
You've got more people votingOnce we actually get the real
count.
I live in Illinois, so I got 18ballots at our house that I
(37:13):
could have just walked in anddropped off without anyone
asking for 50 people, you know,for people that had lived here
over the last 50 years.
I'm sure some of them were dead, but in Illinois it doesn't
matter.
Speaker 1 (37:25):
Well, there's the In Hawaii.
I can see the place from whereI lived, my window.
There's a drop box.
It's at a bus terminus and theonly time there's people there
is when they're getting on oroff a bus.
So I can go to this drop box at10 o'clock at night.
There's nobody there butchickens and rats and put in
(37:47):
100,000 ballots.
I mean hell, what is this crap?
Speaker 2 (37:50):
And they're shipping them in.
I mean, all that was found, butthat's been going on.
If you read Carroll's book onLBJ books, I don't think he ever
won a fair election.
They always had boxes ofballots waiting in the wings to
make sure that if he didn't haveenough votes he could deliver.
Speaker 1 (38:08):
What's really interesting, though, steve, in
my naive little world is, slowlybut surely, all this stuff is
getting exposed, so more andmore people are able to think
about it, and people don'treally give themselves the
opportunity to think anymore,and people don't really give
themselves the opportunity tothink anymore.
Speaker 2 (38:27):
Now that's the reason .
After they figured out thatthey could brainwash people,
move them in a direction withtelevision programs, you had the
CIA.
I mean the government wasalways present at all the news
stations, but that was primarilybecause of World War II.
They didn't want anything todisclose, so they had a good
(38:54):
reason to start.
But then they stayed there andas that evolved more recently,
it kind of started with George WBush because of 9-11, but then
Obama unleashed the CIA, givingthem full reign to operate in
(39:16):
the US and do the same crap thatthey're doing overseas taking
down states.
So they applied all that to theUS.
I mean just my background asone of my majors at the Air
Force Academy was Soviet Studiesand the head of the, Colonel
Vassilov, was head of theRussian house for the military.
(39:39):
So anybody that was a defectoror whatever coming across would
come to the Air Force Academy,be put in base housing.
Oh, really, right after the war.
Oh, this is in.
I went there in 68.
Speaker 1 (39:53):
Oh my God, so it was there for 30, 40 years.
Yeah, I'll be damned.
Speaker 2 (39:58):
So and he would come and these guys back then they
were kind of, yeah, his dad hadbeen one of the white Russian
generals, but he had gottengunfights in Moscow and come
back wounded and crap like that.
Speaker 1 (40:14):
That's the only city in the world that I'm
uncomfortable Moscow.
There's too much going on andit's too visible.
Yeah, if there's too much goingon and it's too visible, yeah,
it's okay.
So translate that into todaywith artificial intelligence,
and then let me bring inrobotics.
Now, okay, one of the guys thatwrites blogs for us.
(40:39):
His name is ed gordon, and he'swritten about 20 or 21
bestsellers on the new YorkTimes.
One of them was called FutureJobs, and his premise was that
by 2030, 50% of the Americanworkforce, which is about 90
million people, will not havethe skills to be employable.
You think that's true or false?
Speaker 2 (41:02):
I think actually it depends on how this shakes out,
but if you're going to have ajob.
This is why the economies thatcan be created with AI and also
having the ability to generateyour own energy in a local
(41:23):
market efficiently, like a mininuclear reactor or battery
storage or all the things thatare available today Once you do
that, you've got hydroponics,you can manufacture all your
building materials and you cansupply everything that you need.
And if you look at the aircraftcarriers today or the Air Force
(41:47):
, they're flying whole factoriesonto bases around the world and
aircraft carriers have a wholefloor of printing machines, so
any part that they need on anaircraft carrier can be printed.
Speaker 1 (42:01):
Yeah, my grandson's on one right now on the aircraft
carrier can be printed.
Yeah, my grandson's on one rightnow and there's, you know, a
football field and a half.
Yeah, 5,000 people, 200airplanes, and you know they
don't need to come back to shorefor three submarines, nuclear
(42:22):
submarines.
I mean this whole world, thatway has really changed.
And then you look at our supplychains.
You and I were.
We're into dealers, we're intomanufacturers, we're into
communications companies.
We're still using voicemail andwe're still having voicemail
answered in india right, that'sall going to end, of course.
Speaker 2 (42:46):
And also you have to look at elon musk everyone you
know I'm a big fan of elon musk,but when you look at what he's
done in factories, yeah, andalso his speed of manufacturing
used to be the manufacturing.
If you had a production line,you'd build it and you'd have to
, you know, use it for like 20years before you really got your
(43:07):
money back.
Yeah, it was fixed line.
Then in the I'd say it startedin the 80s where it began to
move to variable manufacturingso you could have, rather than
just one type of car, you couldhave multiple types of cars
going down the production line.
The same line, yep, and it'sthe same thing.
I was involved with springmanufacturing, wire form.
(43:31):
So to solve that, it came up, Ithought we could automate a
machine, which we did, and thenwe ended up getting into some
top secret projects where we'rebuilding airplane wings and
doing stuff like that withbasically a machine learning
(43:56):
capability, and so that hasprogressed.
Now you add AI to that and youcan optimize.
But just what we're doing byusing different technology, we
are able to sew a wing usingcarbon fiber, making a stronger
wing, more flexible, muchlighter, weighing about 40% of a
(44:21):
regular wing, and you can dothat with three people.
It took about two days versus21 people working.
Yes, it was actually 21 days.
Yeah, so that's just for a wingsection.
So I mean the automation andthe capabilities of this and the
(44:43):
lights out opportunities thatexist, both from running the
factory to security, to movementof goods, safety on the
highways, safety in the air allthese things are going to be
very beneficial.
But you still have, the economyrevolves around two people
(45:06):
exchanging goods and services,so people are going to have to
figure out what do they havethat someone else wants?
Speaker 1 (45:16):
Yeah, and again, that's something that's alien to
most of it, because of learningwithout scars and because of
what my daughter does in aschool district.
Every student in america has atest in grade four and grade
eight and many countries havethe same test on english and
arithmetic and in 2024, 70couldn't read at grade level and
(45:41):
72 could not performmathematics at grade level.
That's an indictment ofeducation.
That is so, and it's scaryactually because we're dependent
on those kids, those schools,to create work ready employees.
Speaker 2 (45:57):
But the schools have.
Unfortunately, with what'shappened with schools, it's
turned into a job in layers andlayers of mismanagement.
And, unfortunately, the youngteachers that come in
enthusiastic I wanna teach kids.
They have to go through thisgauntlet of seniority and it's
(46:21):
not based on talent, it's basedon a bunch of bullshit.
And you've got teachers and,having experienced this, I was
fortunate that, like for the AirForce Academy, I think I had 10
kids in my class.
Oh, that's magnificent.
And same thing at theUniversity of Chicago the
(46:41):
classes were just a handful ofkids, the school was small and
you can learn.
But these webinars, there arethese big groups.
Everyone's just sitting thereand if you can't track what the
guy is saying, you're out ofluck.
Speaker 1 (47:02):
My daughter teaches in middle school grades 6, 7,
and 8, and she has six classesevery day and maybe 50% 60% of
the students are English assecond language and her class
size is 40, on the small side,and you know, quite honestly,
you can't teach anything topeople with that many people in
(47:24):
the room.
Speaker 2 (47:25):
Not with kids They've got, they have too much energy
and if they don't have theenergy, you're going.
You got a bigger problem.
Speaker 1 (47:33):
Yeah, yeah, yeah, exactly.
So we come out half thepopulation is going to be
displaced.
What's society going to do tosupport those people?
Speaker 2 (47:50):
Well, I think that's where Fossey and these guys,
especially now that people arecoming out about the Comtrails
that are covering the US andother countries, as they're
dumping a bunch of this toxicstuff on top of the population,
but they have some expectationthat somehow, magically, the
(48:12):
population's going to be reducedand Good luck, good luck.
So I feel as if that, if youthink in terms of economic
viability there are.
What I think will emerge isthere'll be communities that
(48:33):
materialize, that are, you know,like the Amish or other groups
that materialize.
This is a way of life and wecan support each other, where
everyone has a meaningful job,from teaching to growing food,
to animal husbandry, tomanufacturing, and do that at
(48:56):
the local level.
And that local level could be aremote location up in Alaska,
it could be on Mars and it couldbe a two, four block area in a
city, but these economic systemswill emerge because of energy
and AI and optimizing theresources locally available to
(49:20):
feed, house and employ a viableeconomic community.
Speaker 1 (49:28):
Yeah, you mentioned the Amish.
The province of Saskatchewan inWestern Canada has serious
religious groups, no disrespect.
But 40,000 acres, 60,000 acres,and it's a family, it's
completely self-contained.
They grow their own food, theymake their own clothing, they
teach their children the wholething.
(49:48):
And one of the things that Ifound intriguing I'm working
with John Deere dealers up thereand the guys would come in and
they'd buy John Deere equipment.
John Deere had a test place upthere too, a town called
Rosetown, saskatchewan, south ofSaskatoon, and after the
(50:10):
planting season was over they'dtrade it back.
In Harvest season comes, I'dbuy a new business, trade it
back in, and so the Canadiandealer made a lot of money
because they could sell it inthe state's low hours, three
months old, get a hell of aprice.
You know it's pretty clever allthe way around.
My grandparents emigrated fromEngland to Alberta, in a place
you can't grow a rock, so I'mnot a good example, but it's
(50:36):
true.
We're going to example.
Nuclear energy and the power weneed to have to drive AI,
nuclear energy is going to berequired.
How many electricians are wegoing to need?
I mean, there's new jobs thatare going to be created.
Speaker 2 (50:49):
The job opportunities are going to be huge as this
all emerges, and it's not goingto be done all by robots.
Speaker 1 (50:59):
Oh no, the remedial stuff, the stuff that you know.
There's a lot of jobs thatexist, that it's a waste of
human talent.
Speaker 2 (51:08):
It is and it's not putting.
Humans have the ability tothink yeah, and their life thing
is that people, um, if you movein one direction, which it
(51:30):
seems like the canadians andeuropeans are going back to,
that which is, um, life isn'tvalued, but societies that
revolve around life, um, buildcommunities.
Yeah, yeah, but unfortunatelycommunication.
One of my sons did adocumentary in India looking at
remote villages and theintroduction of cable vision and
(51:51):
how it just destroyed culturesthat had been there for 5,000
years.
The kids ran to the citiesbecause they saw much bigger
opportunities.
So you lost the pattern of, asyou got older, you took care of
the children and then you hadyour whole social system all
(52:12):
structured and maintained, andthat all got destroyed in
literally a matter of a year ortwo at these villages as they
acclimated to sitting in frontof the television, transfixed
and then luring the kids away tojobs in the city.
Speaker 1 (52:34):
Yeah, I mentioned my grandson's in the Navy and he
wanted nuclear engineering.
He's doing nuclear engineering,astrophysics.
He's 19 years old and I'mchatting with him and saying
okay, what are you going to dowith this?
Say, you leave the Navy andit's 10 years from now and
you're 30, what are you going todo?
He said well, you know, fusionwill be commercially viable then
(52:55):
, where you'll have a deviceabout the size of a softball or
a hardball and that'll be allthe power you need for your
house.
So maybe I'll go work for theDepartment of Energy and Elon
Musk and space travel will besuch.
Maybe I'll go live on Mars andwork with him.
I mean, here's a kid who's 19years old and when I went to
(53:16):
university and I'm 16 years old,I didn't know whether I was
punched, board or shot out theback end, like, what are you
going to do for the rest of yourlife?
Don't ask me.
Speaker 2 (53:33):
You know I keep saying to people now I'm trying
to figure out what I want to dowhen I grow up.
There's some friends of one ofmy sons that there's these twin
brothers that they were mastersAt 12 years old.
They were chess masters andalso they were being picked up.
They were living in Manhattanat the time.
They'd be picked up in a limoto go down to Wall Street to
(53:54):
build black boxes for trading.
Yeah, and they're 12 years old.
So just when you're talkingabout that, ron, one of them
said oh yeah, he's going to getinto this whole space
opportunity.
Speaker 1 (54:13):
Sure enough, he's one of the key guys on Elon Musk's
space program.
So the moral of the story with.
Speaker 2 (54:21):
That is today.
Those kids are on social media.
They're wasting their time.
They've lost their.
It's just.
The day is being eaten up withthis more addictive behavior.
Speaker 1 (54:34):
Yeah, one of the things that happens to me, and I
get annoyed with it, is everymonth I get a summary every week
too of my my phone time.
You spend an hour and a halfmore this month than you did
last month, and you spent twohours less this month than last
month.
Good work, you know, you know.
And then then we pay insurancebased on how many miles we drive
(54:54):
, and there's so many, so manythings.
And so here comes dealers andhere comes artificial
intelligence and go back to yourpremise the transaction between
a buyer and a seller.
Our supply chain has too damnmany people in it, even still
today.
Speaker 2 (55:13):
Yes, All that's going to get.
All that double handling,triple handling, will be removed
, either with localmanufacturing, the last mile, or
just efficiency.
We had one company we work with.
They shipped 250 jobs over toChina to make, you know, cutting
(55:38):
tools and they built a plant.
And they built a plant andbrought the business back and
replaced those 250 people with20, producing four times the
amount.
Speaker 1 (55:54):
Yeah, well, the other thing you mentioned,
hydroponics, earlier on.
Transportation cost is about50% of the price of food and
spoilage Exactly.
So if I bring hydroponics in, Ican have vegetables and fruits
grown right where the populationcenter is.
Here we go.
Speaker 2 (56:15):
Healthy, without all the pesticides, and all the
chances for Yep.
Speaker 1 (56:21):
Yep, you know I'm a bit of a maniac on those types
of thing.
With microchondrial I want toget dna testing.
That's a little different thanthe average bear, but you know
it's.
There's so many things.
You know, I, with zentoro, whatyou do and winsby, what debbie
does and what we do withlearning.
(56:42):
You know I'm I.
The last couple of months Italked to a lot of salespeople
equipment salespeople, parts andservice sales managers what are
you going to sell next year?
You've heard me do this.
Yeah, they say oh, I got towait until the end of the year.
I said, really, Do you, do youhave a list of customers?
That you said, oh yeah.
Do you know the equipment theyhave in there?
Oh yeah, Do you know how muchthey buy in parts and service?
(57:05):
Oh yeah, you got life cyclestatistics from your
manufacturer.
Oh yeah.
Well, how come you don't knowthat Georgia's going to replace?
Speaker 2 (57:19):
that loader backhoe in April and you're already
talking to them now aboutgetting it on order.
Yeah, and Ron, also.
This is great about what we'vedone with Zentoro.
We can forecast 12 months outand we are off on equipment
sales, unit sales.
This last couple of years we'vebeen off maybe 1%.
Speaker 1 (57:34):
And think about that.
You and I have talked about it.
That's a good news.
Bad news, bear.
From my perspective, the reasonit can be so accurate is
because nothing changes.
Speaker 2 (57:42):
Nothing changes.
It's all predictable becausewhatever programs they put in or
opportunities or things thatthey pick up, statistically it's
almost foreordained.
And it's foreordained becausethe real driver of this whole
economy is customer retention,and that requires engagement.
(58:03):
Engagement requires two people.
And now we're back to theoriginal premise.
Right, and that's been true foras long as there's been an
economy, going back probably amillion years.
Speaker 1 (58:15):
Yeah, and I remember a Harvard business review
article in the eighties thatcustomer retention was the
single, single most importantelement on profitability.
And then you know the other oneand you go to dealers.
I can ask 100 dealers what'syour customer retention?
They haven't got a clue.
Speaker 2 (58:32):
I asked 150 of them does anyone in this room know
what their customer retention is?
And nobody spoke up.
Nobody knew.
They said does anybody know?
And somebody in the front rowgoes no.
Speaker 1 (58:50):
So we're going to have to end it there because
we're out of our, pretty closeto our time for people to be
able to stay with us.
So we'll do it again.
But you know, people need tostart evaluating their lives,
their jobs, the good and the bad, the likes and the dislikes,
(59:11):
and start getting serious aboutlife.
We just we become victims tothings much too easily.
In my opinion and you know Itease everybody only the good
die young.
So I'm here for a long time.
And you know I tease everybody,only the good die young.
So I'm here for a long time.
But you know, I'm only not goodbecause I challenge everything.
And the good news is I wasraised by my grandmother and she
(59:31):
never said no, so that's kindof cool, you know.
Thank you very much.
There's a couple of things inhere Two people buyer and a
seller, crypto spending andabout 20-year cycles.
Speaker 2 (59:51):
End of the war 1980, lbj Biden with his.
We're down to a seven-monthproduction cycle for
manufacturing.
Speaker 1 (59:57):
Really.
Speaker 2 (59:58):
Seven months now.
Yeah, from start to finish, youcan design a truck, a car,
whatever you want, and go intoproduction and have it road
ready.
You may have to run throughgovernment tests or something,
but actually performance capable, it can be done.
Speaker 1 (01:00:16):
And that's what's happening.
Let me leave it with that andthank you, steve, for this.
I think it's been aninteresting conversation.
I hope everybody who'slistening that this is provoking
some thinking.
I look forward to having youwith us at the next Candidate
Conversation, mahalo.
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