Usually I don't do this, okay? But... you know, we appreciate that. I know you don't. Yeah. Yeah, so this is my respect to you and Steve.
Hello and welcome to this week's episode of Inside Blackstone. I'm Christine Anderson, Global Head of Corporate Affairs, and here's the lineup. First, Rodney Zemmel, Global Head of Blackstone's Operating Team, joins us for the Monday Morning Meeting. Then, Winfield Sickles is back with the Economic Weather Report. And next, the main event, my late-night conversation with legendary investor Masayoshi Son, Founder, Chairman, & CEO of SoftBank. Masa is renowned for making bold bets ahead of technological change. We discuss what he sees on the horizon and opportunities he believes the world is still underestimating. And finally, Blackstone Chairman, CEO, & Co-Founder, Steve Schwarzman, joins me for the Debrief.
All right, Rodney, thank you for joining us. Good to see you, Christine. Thank you for having me. All right, well you oversee our operating team. What that means is you go into our companies with your team and try to build value at these companies, try to improve them. So clearly AI, as we both know, driving the conversation and the question for all of us right now is can you implement AI at these companies at scale in a way that improves the value of these companies?
If you'd have asked me here a year ago, I think we would have talked about a lot of pilots and a lot of plans. One of my favorite probably overused jokes of the beginning of the year is: the biggest beneficiaries of AI in 2025 were dogs owned by software developers. So, every good software developer figured out how to use these tools before anyone else did, got their work done 45 minutes faster, and then could go home and walk the dog. So, you know, it's great for pet health, right? We're all for it. Not necessarily good for the bottom line. Exactly. Oh my goodness. Yep. That's not what our CFOs or what our investors want to see. Now, we've got a good number of companies we can point to where how that company works is feeling very different. It's still early days, but we very much see it beginning to have an impact on the performance of the portfolio.
So which industries are seeing the greatest value created from AI? Yes, so, all of them? And what surprised me was at the beginning, we started with a strong hypothesis around software and services, right? And of course we spent a lot of time there. What surprised me though, is in pretty much every other industry there is an AI story to be told, right? And, you know, whether it's in industrials, right? With, for example, our company Chamberlain, where we're helping them build a whole new digital access business that wouldn't have been possible without AI. Or whether in our healthcare businesses where you're thinking about everything they need to do from how they handle their data to how they interact with their customers that can be transformed. To real, to our consumer businesses, where the whole world of how consumers find information and make choices is changing dramatically and they really need to be on the forefront of it. And we're seeing that across industry after industry.
What does that lead you to believe from a productivity boom standpoint? Well, I think we're probably already in it. What's different though, from maybe what people thought a couple of years ago is, it's hard, right? So, every company needs to sort of climb over this activation barrier, right? Put real effort in, right? Before they can really... Start to... ...get the effort out. Yeah, it takes time. So what does that mean? That means, one, it will take a little longer. Two, not everybody will be able to pull it off. By the way, as investors, we like that, right? The fact that it's hard means that the value once it's created will be a little stickier, right? It won't all get competed away. And maybe, hopefully, we have some differential advantage in creating that value, right? That is what we're aiming for.
Finally, lessons for any CEOs or leaders that are listening about how they would think about AI implementation? I'll give you two. Number one, focus. It is not everything everywhere all at once. It's like pick one to two things. And number two, think very carefully about who you're putting in charge. I've never seen this turn into business impact if it is tech-led alone. It needs to be led by business and tech together, working in a super tight, iterative partnership. That's hard, and that takes the right business leaders and time from the CEO themselves. Well, fascinating insights. I'm hoping you'll agree to be a regular on the show as this all plays out. If you'll have me, I'd welcome that. Of course, we would love it. And now over to my conversation with Winfield Sickles and the Economic Weather Report.
Hey Winfield. Hey Christine. Welcome back. All right, a lot has happened in the three weeks since you've been here. Understatement. I mean, including the haircut. Maybe also not an understatement. Looks good! Thank you. All right, the single sentence Economic Weather Report this week, I'm gonna make you do it. Single sentence. One sentence. One sentence Economic Weather Report is: corporate borrowing costs are definitely higher and we're paying super close attention to it, but all the drivers of growth, which are born out of this AI infrastructure boom, and then the broadening of that to the rest of the economy is very much intact.
All right, you can go a little bit deeper now. I can talk more? Yeah, you can talk a little bit more about what's behind it. Okay so, Treasury yields, 10 year, through 5.3%. Highest level since 2002, right? Driven by growth, predominantly in our opinion. It's amazing to think that that's happened over six months. That's when yields bottomed and stocks are up almost 20%. Corporate borrowing costs have expanded a little bit, but generally speaking, they're contained. And from our point of view, it's this acceleration in business investment. It's CapEx broadening out in the economy. And then economic data for the most part. Jobs report was a little bit weak, the last one that came out. But, more broadly, the economic data keeps surprising to the top side. And when you look at Q3 GDP estimates, they're running around 3%, which is above trend for the US economy. Plus the AI infrastructure build-out, which is contributing to that story. A hundred percent. So do you think this can continue? I think so because of what you just said on the AI infrastructure build-out. And I think, also, when you look to the public markets and you look to the earnings trajectory there, Q2, we've had this huge hyperscaler spend, you know, upwards of $800 billion this year, probably over a trillion dollars next year. We're in the middle of Q3 earnings now. We'll see where they deliver. But last quarter, you saw cloud revenue up between 50 to 120% across those names. So it feels like the spend is starting to show up on the other side of the equation.
Okay, I always have to ask, any data you're seeing from our portfolio companies that tells you what's happening? I think you actually have the data from your great conversation with David Levine last week. We have all this AI infrastructure, but all of a sudden that's now impacting, for example, our logistics business and driving some of the growth that we're seeing there. So I think in terms of our proprietary data and how that broadening is coming to bear, that's a great example. That's great. Well, thank you for being here. And now we're gonna turn to my conversation with Masa Son from SoftBank.
Masa, welcome to Inside Blackstone. We're so thrilled to have you with us. Yes, thank you very much. It's 11:00 p.m. in New York, and you're joining us from Tokyo. I'm gonna quickly give our listeners just a little bit of your bio before we dive in. You were born in rural Japan to Korean parents. You moved yourself to California at age 16 and then sold your first technology, an electronic translator, while still a student at UC Berkeley. You used the proceeds to found SoftBank in 1981. Then over the next four decades, you developed a reputation for seeing technology shifts before other people. You backed some of the defining companies of the Internet era before making bold bets on the future of artificial intelligence, including massive infrastructure investments and the largest stake in OpenAI. But the reason I wanted to have you on doesn't have anything to do with your track record. It's because you have an almost unmatched willingness to keep betting on what's next. At 69, you've said that everything you've done up until this moment has been a warm-up for what's to come. So, I'd love to, I think that's the most astounding statement, so I wanted to start with that. You know, Alibaba, Yahoo, Arm, the Vision Fund. Is this all really just a warm-up?
Yeah, I truly think so. What's going to happen on AI is so remarkable, so big, okay? So it seems that everything that I did in the past was just, you know, tiny things. Tiny, tiny things.
Well, so when you talk about what's next, Steve Schwarzman, he said to me, you should really just ask Masa one thing, which is sort of, how do you see it? How do you get conviction around a big idea?
AI was my theme for many, many years. In fact, when I saw the first photograph of the microprocessor at the age of 17, you know, I was reading the magazine on the street and I start crying, truly. Physically, I start crying on the street, just reading Popular Electronics or something. I said, this is going to change the future of mankind. You know, the microprocessor eventually becomes so powerful, so smart, that it will be smarter than people's brain, eventually. It may take some number of years. And I predicted maybe 50 years, it's damn right, it's now 50 years. I was 17 years old, I'm 69, so you know, 50 years. Now the microprocessors, the power of brain in data centers. These are all happening and now it's gonna go into the brain of the robotics, okay? So it's not just, you know, on the virtual world, but also in the physical world, it's gonna start to happen.
You said you think that could be 10,000 times more intelligent than humans, and that could come within a decade. Has that timetable sped up?
No matter what, how you define, if the AI become 10,000 times smarter, there's no more debate. It becomes so smart that it will start to innovate new technology by itself, right? So, it's really happening.
So, paint a picture for me then. What does that world look like? You're obviously an optimist, right? About this AI-enabled future. What does it look like for humankind?
They will be happier if the human are happier. If the human is happier by curing our unsolvable disease, like cancer and so on. Right. And make sure we have no more accident on the street, make sure that all kinds of disaster, natural disaster coming, they forecast and they give us solutions. So, they become like our surrounding of the brain to help us become more productive, help us become happier, you know, and enjoy human, like, life.
What becomes of human progress? So much of life today, and what you and I probably get out of life is achievement and learning new things each day. What does the human experience become?
Well, I think it will be even more fun, okay? We don't have to do what we did not want to do. We can have more joy, more entertainment, more sports, more family engagement, more friends. So, more human, high-touch things, right? That we can do.
Very interesting, and yet there's been so much news lately about the risks associated with AI. Even OpenAI recently disclosed new incidents where AI systems had falsified data and hid mistakes and essentially acted without permission, much like the Hugging Face situation. You know, OpenAI itself says it doesn't believe the industry has solved the alignment and monitoring to a sufficient degree to continue reasonably scaling at maximum speed. Do you agree with that?
I'm on the side of not really slowing down. Technology development actually is the solution to those kinds of issues. If we are primitive, of course we need guidance, the rules, like when automotive society comes, okay? We create a rule that we cannot drink, right? When you are driving, you cannot have alcohol in your brain. You have to stop at the red light, okay? You have to run on one side of the road so that you don't have a crash, okay? You have to create the rules and the manners, the etiquette, for the better, you know, society of automotive. We have to do the same thing for the AI, okay? And cyberattack, we supposed not to do. We have to protect the cyberattack by the technology and we have to protect bad AI agent don't misbehave. Like a human supposed not to be misbehaved. We have to teach AI agent, these are the bad thing, okay? So, it's not just a capable AI agent. We have to create a good AI agent, good in heart. You know, make human happier. That's the goal AI agents supposed to have, okay? So then, you know, it will become smarter, smarter not to do silly stuff, not to do immoral stuff. Human society, to be, you know, respect the other society, other people, other family. Right. Right? We have to do the same thing on AI, not slowing down. The progress make the solution. So, we have to go full speed with the good intent.
So, build the good intent into the system... Yes. ...while moving at full speed? Yes. So, like Blackstone, SoftBank has made major AI infrastructure investments. You've essentially bet the farm in the sense that you're investing across, you know, the LLMs, the chips, the, you know, the data centers, et cetera. Why not pick just one of those areas?
No, I wouldn't pick just one, okay? This is the AI era starting, AI generation starting. The history is going to be created, okay? So, I don't have to run one company and be a CEO of one operating company. I can be investor. I create an ecosystem, ecosystem of group of companies that we invest. We invest, you know, not as a passive investor. We, you know, more involved with the growth of the company, bringing synergy among our portfolio company. Usually, we are largest shareholder of our portfolio company, like 20%, 30%, 80%, okay? So, we have more involvement with each of the CEO, but only focused AI-related.
