Hello and welcome to another episode of the Odd Lots podcast. I'm Tracy Alloway.
Joe, it is the holiday season. I am very much looking forward to it. One reason I'm looking forward to it is because we always do an annual Ask Us Anything show.
Yeah. You know, I think I like that in the podcast, you know, it's really not about us. I mean, the show is about what we're interested in, but it really is about the perfect guests. But every once in a while, I suppose it's nice to sort of have the microphone turned in the other direction, so to speak.
Yeah. The other thing I would say is we're already pretty accessible. Like there's a whole Thoughts Discord that we're on. There's Twitter obviously, there's instant messages on IB, and mostly we respond depending how busy we are. So feel free to contact us there too. But we did get some pretty interesting questions from a bunch of listeners.
Yeah. And I like the fact that we can put in many cases listeners' voices on the air, bring back some of the old-time radio call-in shows, the likes of which I used to listen to when I was a young kid riding in the car with my dad.
The call-in shows are definitely Lindy.
All right, shall we start?
Yeah, let's take a listen to some.
John Lazaro, age 63, Berkeley, California. Sometimes when you finish recording an episode, do you look at each other and say, 'This doesn't meet our standards,' and kill the episode? Or is it more like skiing? Once you commit to riding the chairlift, you commit to skiing down the mountain. [laughter]
Um, well, I can't ski. I'm the only Austrian in the world possibly who cannot ski. Um, so we have killed episodes in the past. Um, in fact, there's kind of a funny story where we did an episode, it really wasn't going very well. Um, the guest seemed very nervous and just sort of like not at his top performance. And in the end after we recorded, we told him, you know, we're just going to kill this episode.
And he was actually really happy about that because he felt he hadn't done his best work either. And then the other thing I would say is I actually think journalists should kill a lot more stories. We should be more selective. And if you think about the German word for editor, Redakteur, it sounds a lot like redact, right? Which gives you, you know, some sense of what editors are supposed to be doing, which is taking away as opposed to adding.
Yeah, it is very rare. Um, we have, I mean, the number of episodes that we've fully recorded that we actually did not release, I think it's less than you could count on one hand, right? It's not that many, but there have been a few just for whatever reason, the guest was not on their game or whatever, it didn't work. And I agree. I agree with Tracy. I think we should do more in general. I mean, I think journalists as a whole should do more. It's like just release the good stuff, you know? Just release ones you're genuinely proud of. I don't want to release anything anywhere when I can't say I'm really proud of this work. And normally we are proud, but occasionally it's like, you know what, this is not awesome. All right, let's go on to the next one.
Thanks, Joe. Thanks, Tracy. I was really inspired by Joe's tweets on Moby Dick. So, this question is for him. What did you read after Moby Dick? Thanks, guys.
Thanks for listening. Um, that's a very easy one because I was in such a mood to keep, after reading Moby Dick, I didn't want to read anything besides Moby Dick. I sort of just thought about rereading it again, and I probably will sometime the next year or two. But because I was in that mood, I read a book by the historian writer C.L.R. James, who wrote a book about Moby Dick. It's a book called Mariners, Renegades, and Castaways by C.L.R. James. And it basically made the argument that Herman Melville with the Ahab character specifically anticipated many of the pathologies of the 20th century, the rise of fascism, dictators, and so forth. All of the crises of sort of Western civilization that we experienced in the 20th century. Fantastic book, almost as good as Moby Dick itself.
Also, I've been recommending two books to you. One of them is The Heart of the Sea, which is about the whale ship Essex, which is the ship that actually inspired Moby Dick. And then there's another one I'm reading just now called A Marriage at Sea, and it's about a couple who are out, you know, sailing around the world and their ship gets destroyed by a whale and they have to survive on like a little raft. I actually don't know if they survive yet, so I guess we'll find out.
I promise I will read both of those.
Both of them are excellent.
I promise I'll read both.
Let's hear the next question.
Hi gang, longtime listener here. My name is Sturm. I'm 32 and I live in Puerto Rico and I have a question for Joe. I know you're an efficient markets guy, but if EMH is true, how have portfolio managers accumulated such vast wealth?
Uh, that's a really good question. I wonder about why the financial system overall exists. Why are people putting targets on prices and why are there pundits on TV and why is there financial TV and why is there trading and so forth? I still don't really know the answer of why anyone has made any money. But my guess is that there are other services that people in finance provide other than high-quality security selection, that whether it's like, okay, I don't really know how to manage risk or whatever it is, or I'm anxious about the thought of investing, all kinds of things. I guess, you know, there probably are people who are able to obtain information that maybe counts as alpha. It probably exists. I don't know. I remain unsatisfied. I've asked this question myself. I don't fully know the answer, but my best guess intuitively is that within this world that we call finance there are things that produce value other than sort of, you know, making good trades and so forth that maybe are harder to articulate and so forth, and thus they are providing a valuable service on that front. But I...
You're counseling your customers.
You're counseling something, I don't know.
But I mean, I would think, Tracy, I would just add on to that, like it seems just on the EMH stuff. Um, it seems on a simplistic level, if EMH was real, you would never get a bubble, right?
And in fact, one of my favorite moments on the podcast was when we interviewed Eugene Fama, the father of the EMH idea. And I think I got him to say that like bubbles exist, right? Which I was surprised.
Yeah, I know. They really, they hate, like they really wrestle with, like this is their one thing, they hate this phenomenon. So they come up with all this stuff. But yeah, we will continue asking the question of why do we exist? Why does financial media and coverage and pundits and all this stuff exist? We'll continue answering this question in 2026. Maybe we'll have an answer.
Only the big questions. Why are we here?
All right, let's listen to the next question.
Hi, I'm Max Netherman. I'm 19 and I live in San Francisco. Supposing that AI does end up being as transformative as people claim, where do you think the value that that creates will accrue? From their valuations and how people talk about it, at least in SF, it seems people expect the labs to capture a massive chunk of that value. On the other hand, the labs have never been profitable. And even then, hardware companies like Nvidia and TSMC seem to trade at lower multiples despite being near monopolies with very good margins. So my question is this. When all things are said and done, which parts of the supply chain will be commoditized and which will capture all the value?
Yeah, I think that's a very fair question. Um, and I think, you know, it's difficult to predict if tech at some point is going to produce or invent the proverbial AI god, like this thing that solves all of our problems. I would be a little bit skeptical of that. It seems to me like it's going to be a productivity improvement kind of at the margin for now. So maybe you use it instead of Google search. You can use it to explain certain terms much more quickly. Some industries are probably going to use it to design new products. I know there's a lot of excitement around medicine. But where the value will accrue...
I mean, some of the big tech companies are so expensive right now in the US. I keep describing this as the coffee pod theory of AI, which is some tech companies are choosing to basically produce the world's most expensive sophisticated cappuccino machine and they're saying that, you know, it produces the best coffee that you've ever had. And crucially, what they're doing is targeting a market for this machine. Let's say it costs like $2,000. That's basically the entire world and I'm not sure that approach works. And then, you know, some other companies are taking a very different strategy and they're producing something that's relatively cheap and standardized, sort of like a coffee pod coffee maker, and it's much cheaper and again targeting the total market of the world. And, you know, if you think about it that way, I kind of have a sense of where it's going.
I really have no idea. You know, the one thing I'll say is I think there is this view that, okay, AI can replace human labor and therefore lots of workers are very vulnerable and therefore there is going to be this tremendous, like it will be this very, a force of inequality so to speak, right? So it's going to be, there's going to be the model makers and I think in this vision that you're asking about, these model makers and they're going to make a fortune and the rest of us are going to have to like get by on UBI or whatever because they've put us all, the models have put us all out of work. And look, I think that's possible. The one thing I'll say though is that like the tech as a force for like financial inequality, that's already been the story. We don't even need to talk about AI. With the existing tech giants that we've seen that have built over the last 15, 20 years out of San Francisco, we've already seen this incredible rush of sort of wealth and income etc. to this fairly like small, you know, this one industry, this very like, you know, very small, fairly small concentration of software engineers and executives and VCs and so forth. And as such, I do wonder like could it be that somehow it's like totally the opposite, that it goes in the other trajectory and that really it's sort of like a force for equality or something and that it ends up being a situation in which people, where like capital itself is not as valuable as it used to be. I don't know. I just think we should possibly consider the idea that what people are predicting that will happen with AI is literally just an extension of what we've already seen and that to the extent that AI is something new, maybe that'll put us on a new trajectory.
All right, let's take another question. Hi Tracy and Joe. This is Jennifer, 30, calling from Seattle. Long time, first time. This question is for Joe. Joe, what drew you to your interest in Chinese history, particularly its modern era? Have you ever considered going more back in time? I ask because I'm Chinese American with parents who said very little about their lives during the Cultural Revolution and the '80s when the country started opening up. So, I often learned through Joe's tweets and book recommendations. But I had also noticed in my last trip to China that the one historical figure cities pay the most homage to is not Mao or Deng Xiaoping but actually Sun Yat-sen, who is the precursor to these leaders. Thanks. Love the show as always.
So obviously we do a lot of contemporary China episodes and it sort of seemed like, you know, I should probably understand a little bit more about the history. I started with the ancient stuff. I was like, oh, I'm just going to go back and I'm going to read about the old dynasties and then I'll get to the present. And I sort of like, I found it a little bit hard. It wasn't grabbing my attention, the ancient stuff. But then I remembered a couple years ago we did an episode with Adam Posen at the Peterson Institute a couple years ago at Jackson Hole and he had just sort of mentioned offhand that he had read Ezra Vogel's biography of Deng Xiaoping and I was like, 'Oh, maybe I'll just start there. That seems like more recent and tractable and I could sort of slot that into my head into something.' And I read that and I found it very, very compelling as Adam suggested and I think that sort of set off, like, I think reading 20th century Chinese history helps me to some extent understand the present day. I've never read a Sun Yat-sen biography, but I'm very interested in him. One of the rare figures who is sort of revered in both Taiwan and mainland and so therefore someone who is an inspiration to both the nationalists and the communists, which is kind of weird. And he was like sort of a, you know, an early pioneer of land reform and so forth. So I think maybe that'll be another thing I aim to read in 2026, a good Sun Yat-sen biography.
I really like the older Chinese history. I read a really good book, I can't remember the title now, but it was all about the Chinese bureaucracy and government system, how it used to be, and, you know, one of the most rigorous systems in the world arguably. You had to take this insane test to get the position. And I remember I also did a bunch of research around the sort of late 1800s, early 1900s, the fall of the imperial family and what it means for debt markets. That was a really fun story.
Yeah, I should go back and read the ancient stuff as well. Um, I'm going to add that to the 2026 list.
Okay, let's take another question.
Hi Joe and Tracy, my name is Daniel Best. I'm 26 years old and currently based in New York where I'm doing my master's at Columbia in Financial Economics. I'm a huge fan of the pod and Spotify told me in the last year I was in the top half percent of listeners and maybe now a first-time caller as well. My question is this. You have such a wide range of guests with very different backgrounds and you cover an enormous amount of information. How much of that are you able to retain and naturally call back in everyday conversations or when you do follow-up episodes? And how much do you rely on note-taking or revisiting past episodes to connect your ideas over time?
This is a really good question. This is a sort of journalistic process question. By the way, thank you for being in the top percentage of OddLots listeners. We appreciate that.
Let's get coffee sometime.
