So we have two organizations here that have been on the forefront of investment in infrastructure that the world is deploying for a number of years and are probably the two largest investors today in infrastructure. And one of the things I wanted to touch base on is that many of the financial problems that we've seen over the years have been related to a couple areas: one, mismatch of liabilities and assets in terms of the dramatic changes in interest rates and what occurred. We lost two great franchises, Silicon Valley Bank and Republic Bank, because they chose to make intermediate investments, seven-year debt in US governments or high-grade mortgages, and borrowed overnight. And what looked like a positive spread at 3% or two and three-quarters when they were paying five and a half percent overnight for money. Both of them are not independent companies today. But both Bruce and Larry have seen this occur time and time again over the last 30 years. And so I just wanted to start by giving you a feeling of the strength of these organizations. And when we talk about the risk of redemptions relative to the size of their organizations, Bruce, let's start with you. What percent of your assets that you manage are redeemable on a quarterly basis?
Okay. So everything you've read about this year about private credit and redemptions, less than 1% of assets. And Larry, what do you think?
It's certainly less than 1%.
Yeah, a fraction. And so we've defined an issue. Why did this occur? You could ask yourself, both of these organizations were built to identify long-term investors who could make long-term investments with themselves serving as the mediator. We're well aware that the banking system, that their capital structure is probably two years at best. And so the challenges they have, they have met the needs to help build the world, the US, our economy, by matching and being the intermediary between people that have long-term assets and people who need long-term investors from that standpoint. So Bruce, you're one of the couple largest institutional investors in the world, largest clean energy investor in the world, both fundamental elements in the roll out of AI. Is the opportunity to supply AI infrastructure as exciting as Brookfield has told us?
So I think if you step back, Mike, and there's a lot going on in this and it gets, it's exciting, but what's most important is that really what's happening is that we've been and we still are and for the next 10 years we will be rewiring the global economy to lay the networks that we laid before, which were highways, utilities, railways, and now we're laying cloud, artificial intelligence factories, and data centers. And that on the fundamental basis, that's what's happening. So there will be $10 trillion from power, AI, factories, data centers, and fiber buildout laid to basically rewire the world for the new economy that's coming. And it's been slowly coming, like literally, things happen and you think they're too much. But we're just rewiring the world. And that's probably the most fundamental thing that's going on in the world. It's going to be the most important thing for the next two years. So I think the important thing is don't think that this is too much hype. Yes, there's always too much hype in some different thing, but we're just rewiring the world and there's going to be enormous investment and it's not one year, two year, it's 10 and maybe it's 15 and maybe it's 20, but it's an enormous amount of capital going into these things.
So Larry, we're looking at the multi-trillion dollar build out across energy, AI, transportation, all of these elements. What are the real constraints on getting capital deployed? Capital itself, labor, regulation, or something else?
Well, Mike, it's good to be here, and thank everybody.
It took us 29 years to get you here. We went to the same high school. It's never too late, right?
We're both young, right? Let me just start with the conclusion. The United States is short power. We're short compute. We're short chips. And there are going to be shortages in all three and memory for things. I actually believe a new asset class will be buying futures of compute. We just don't have enough compute power right now. And you think about how many tokens you need to analyze, let's say, your cybersecurity, it is enormous. And we're reading all about the whole issues that's going on and that's just the huge opportunity, the amount of money that need to be going there. So we try to eliminate some of these shortages but I don't believe we're moving fast enough. There is not an AI bubble. There is the opposite. We have supply shortages. Demand is growing much faster than anyone has ever anticipated. And this is just a US phenomenon. We have not begun the whole concept of exploring the opportunities of AI around the world. And there's going to be some huge geopolitical questions as to who gets that technology. And so we, you know, the future is today. The AI phenomenon is happening faster than any of the programmers and the designers of this. The speed of intelligence is growing. The opportunity is very large. Yes, it's going to be disruptive, but it is also going to be very opportunistic and we have to talk about it. I believe as a country, as a world, we're not spending enough time working with government alongside the private sector to try to solve these very big issues. There was a slide of all the different capexes a second ago related to the railroads and all the other issues. The amount...
Bring that slide back up please.
The capital expenditures for this is as Bruce suggested, 10 trillion dollars. That's just for the US. And let me also though bring back the whole notion what's going on in the Middle East where there's going to be huge opportunities there. But now because of drone warfare, we have to relook at all forms of security and the need for rebuilding the GCC region to rebuild it so it's going to be in a position where it's not going to be obstructed by drone warfare. So a lot of many more things are going to have to be underground. But even here in the United States, if we're going to be building, let's say, these one gigawatt data centers, how do we make sure we're protecting those 50 billion, 75 billion dollar investments? But we have to relook at everything because of the role of drone warfare. Right now, we're looking at it internationally, but you know, one of my concerns is could it be domestic terrorism using a $3,000 drone? So all of these things are actually opportunities, not problems. It's going to require, as we said, trillions of dollars of capital. Governments cannot build these out alone. They don't have the wherewithal. And two, their deficits are starting to be mounting. And we spend too little time talking about the US deficits and other countries' deficits. So this is going to all be the role of private sector. And Mike, I was going to just add that when you think of what's going on in private markets, so we have a trillion two of assets. It's all private things. 50% of the things that we own today did not exist as an investable asset class 15 years ago. So, it's not that we don't build pipelines and we don't build rail and we don't own all those things, but the incremental money in the world is going into the fiber backbone, cloud backbone, and now AI backbone. And 10 years from today, I expect that 50% number will be 75. And it's just the world is transforming and the infrastructure of the world is dramatically transforming and that's so you need to look at what's next, what's coming next and this buildout is very, very significant.
I just want to identify one very simple fact today. It's impossible for your clinician, your doctor to give you the best advice. They want to give you the best advice, but it's impossible with a hundred new developments all over the world being released. So, since our phones, we can find you. Obviously, it won't be long before you're going to have your medical teammate who has all your clinical information, all your medical information, will have surveyed everything in the world that's gone on overnight while you were sleeping. And therefore, we have to think who's going to power billions of these. And the same thing's going to happen in education. But what we've seen here in this artificial intelligence, and here's a slide, four times the accuracy of a human doctor. So these should be available to every single person on the planet someday. And you can imagine now one of the exciting things Larry and Bruce, when we were financing the telecom and everything, we had a hard time finding an investment grade credit. Okay. It was new. It was risky. And so talk to me a little bit about who are your clients today that you're helping them build? Larry, you want to start with that? Who are your clients? I'm not speaking now of your investors, but who's knocking on your door every day?
Over 50% of our assets of the 14 plus trillion dollars we manage are retirement assets. And so our investors are somebody who awarded us $1,000 of their savings through our IRA account. We also have investors who have allocated over a hundred billion dollars of their balance sheet to us. And I wrote about this in my last CEO letter. I think our investors are going to be more and more of those people, families, individuals who historically kept their money in a bank account. And what we've seen over the last 30 years, wages have not kept up with the role of capital. And what we're seeing worldwide, more and more countries are looking to build out their own capital markets. And building out their own capital markets through offering a more self-directed retirement plan. Actually, we just been hired by the Kingdom of Saudi Arabia to help them navigate away from a government sponsored retirement system to a direct personal defined contribution plan. Our partnership in India with Reliance is really trying to democratize investing and growing with India and investing in India. These are going to be our investors of the future and more and more countries are focusing on how to build out their own domestic capital markets. If you think of the success of Japan and where the Japanese stock market has gone since October 2023, it's not a coincidence that then Prime Minister Kishida announced the doubling of the tax exemption of their self-directed retirement account called NISA. And from that point on, the Japanese stock market doubled in valuation. And so there's a confluence going on right now that more and more countries are trying to have more and more of their citizens getting back to their liability and their assets instead of having your liability which is your liability of life, your duration of your existence. Having your money in a bank account is one of the worst financial decisions of a lifetime. And so trying to get more and more people to grow with our country and to invest side by side, that is the only way we are going to broaden economic success. We are not going to be able to broaden economic success only by wages because wages in this AI world are not going to grow as fast as the potential of the AI growth and the potential how and capital that is going to be invested in these investments will outperform.
Thank you. So, Bruce, let's... We've talked about the advantages of being long-term investors. How does that mindset influence how you underwrite, allocate capital, and how does it shape the way you think about tradeoffs between public and private markets?
So the greatest miracle of investing, finance, in fact almost everything's compounding, of everything, compounding interest, compounding returns, compounding knowledge, compounding wealth. And if one can compound those things over long periods of time, it's a miracle. If you can earn north of 12, nothing else matters. So don't try to earn 35. It's good if you earn 35, but don't try to earn 35, earn 12 every year for very long periods of time. Just witness Berkshire Hathaway. And that's, I'd say, that's probably the most important thing in finance. So we're always trying to figure out, and what our clients are telling us increasingly, remember all we do is private assets. Yes, draw down funds are important and we have to have them and we do have them. But many of our investors want to have other things with us outside of draw down funds. They want to have continuity assets that are the great ones we shouldn't sell and that we can carry on with them for long periods of time because these funds, the large groups in the world which again are all just individuals, they're all either in some way it goes back to individuals but these funds are very, very significant. And 20 years ago they were 100 billion and that was a large pool of money and today it's trillion and there will be 30 funds north of a trillion soon and these are going to be five to 10 trillion dollar pools of capital and they can't churn assets all the time. Yes, some things they can churn but what they should do is own great businesses for long periods of time and compound capital. And that's actually the success of business. And the more we can do that for our clients, increasingly, that's what binds us to them for success. And small groups can do that for small individuals or people. We try to do it in large scale for large groups or large amounts of capital.
