Mary Daly, extraordinary. The data that you now have to lean upon, trying to understand what's fact, what's fiction, what's utopia, what's sensationalism. Who do you go to feel your data on whether productivity is working?
I go to the businesses who are using the technology because you can always encounter enthusiasts or doomsayers, but it's really the people in the middle, as you said, who are using that technology, thinking about it. And I've seen tremendous interest in it last year, and now I am seeing tremendous investment in it, thinking about how do they train their workforces to be ready. How do they think about what I can do, not just in the back office, but in the front of operations? And we're seeing this in small businesses, medium and large, in global companies and more regional ones, and importantly in everything from agriculture to machining and building things to services. And I think that's really the place we haven't seen widespread productivity gains yet. The ROI is still to be developed, but I'm definitely seeing the enthusiasm and it's picked up tremendously in the last year.
We haven't seen the productivity gains yet. You know, you're being very clear on that. As you remember, I asked you over and over again for an hour, please show me the productivity gains. But in the economic data, whichever set of data you want to look at, do you see an impact from AI, negative or positive?
It's really hard to take. We have had productivity growth that's been outside of the historical norm, and I think that's a positive for the U.S. economy. Everyone wants to say that's AI. What I think of it is, sure, it's possible that businesses are looking for cost savings, and they hire fewer workers, and they do just as much because they're using an AI assistant to help. But we just haven't heard from businesses that they're seeing transformative ongoing productivity gains yet. And they want to always underscore 'yet'. And so they said, well, what's the time frame? And they said next year, year after year, because what we know is it isn't just about getting a model and using it for things or an agent. It's about transforming your business processes so that you really take advantage of things we don't even think about today. What can be done differently that will transform the economy? So that you can definitely find a single business or sectors who are using it and seeing the gains, but we haven't seen that across the economy going forward. But I'm pretty bullish. I see the possibilities and I'm hearing more and more that people are seeing early rewards and really recognizing that next year's the litmus test.
Bullish is an interesting turn of phrase today. Putting aside the slight dip in the market, the exuberance that we have seen in financial markets to want to back these companies, and we're about to get more public companies coming, more liquidity, more money. Is that in and of itself a financial stability issue? Are you worried about the markets riding so high?
You remember, you know who's doing most of this investment? The Magnificent Seven. Who's really there. This is actually something they can do and fund. And their enthusiasm is real. They see what's possible. But I don't think that we should think, oh, there's financial stability concern just because the market's going up. It could go up or down as it has in the past. But a financial stability issue would mean it spread to the banks and spread to consumers or businesses. Right now I'm not seeing evidence of that. We keep our eye on it for absolute sure. But what I am seeing is that companies other than the technology enthusiasts, companies outside of technology, are using AI to think about how to do their business better in real ways. I mean, I was just meeting with some machine tool makers. They make machines for a living. That's what they do. And they're thinking about, how do I scan in 50 years of plans of these machines I built for companies, and then use those plans and the model to generate innovative new ideas of things I can sell that will be faster, better, cheaper than things I've sold before. We toured a robotics company that builds things that help manufacturers do better in terms of shipping and distribution. These are real things that do have a capacity to change the economy. So I'm not... that's why that's the underlying part of my bullishness. It has less to do about the investments that tech companies are making and more about the investments that everyday regular companies that make things and provide services, the things they're doing.
President Daly, inflation is still the biggest risk. And you know those are not my words. We heard it, you know, all week long at the Bloomberg Credit Forum, for example. And one of the things that you and I have discussed in the past is the massive CapEx commitment build out of data centers in conjunction with a bottleneck in some core areas like memory. Inflationary, or is it disinflationary? You know, that's the thesis that like a utility or PG&E would argue disinflationary because the big guys are buying in aggregate. I still don't understand where we are with that.
It's a timing issue, in my judgment. You know, in the beginning, of course, when companies want to invest in big construction projects, a lot of electricity demand, then the companies that are providing those things or areas that are providing those things are going to see competition for the limited amount of services they have. But what they're building creates the infrastructure. The data centers create the infrastructure. Or if the big guys come in, as you just said, and help with electrical plants that help with electricity generation, that eventually can help with the prices of those things. Not here and now, but you just have to think about the timing. And one of the things that's really important in policymaking is that we not assume we know, we actually look for the evidence of what are we seeing in prices today. What are we seeing in what is the forecast of prices tomorrow? And then how do we think about policy. So right now I'm focused on, you know, other energy prices, oil prices and food prices are driving up the inflation. What we do know that down the road, these things could maybe compete for services and cost and raise costs, but we haven't seen real evidence that that's the limiting factor. The limiting factor seems it's hard to get generators. It's hard to get the infrastructure equipment you need. And so you see the big tech companies thinking about solutions they can provide for themselves.
The inflationary data must be fascinating here in San Francisco. When I think about all these companies potentially going public, what that means for the employee base, what that means for your house price, and the ability to be able to buy yet more real estate here, what it means for the cost of labor as well. Is there an inflationary pressure that you're seeing here in San Francisco?
I've lived through... so I moved to San Francisco in 1996, and then we had the dot-com boom. And I know what it feels like to not be able to rent a place that's affordable, because the people who are making any more are making orders of magnitude more. And I was, you know, in a position where that's manageable. But that's what's happening is people feel like they're getting crowded out because other things are happening, but that's more about the supply of housing than it is about the demand for housing. We want people to come and invest in this community. We want the city to thrive. We want regional activity to thrive and employment to grow. But as you said, you know, the more interest people have in living in a place, if you have limited supply of housing, then you're going to have a run up. So those are the things that not the Fed, but other policymakers, other federal policymakers and local policymakers like the mayor are working on. But it looks very, you know, you see the elements of 1996 already here where there's productivity growth, there's enthusiasm, etc. But the bubble is a risk that we're in that same... you know, the dot-com was very different than the AI boom. And so I just want to, you know, there's a lot there that's already being put into businesses. And it's very pervasive. It's not just the dot-com. So I don't jump to the conclusion that it has similarities to the 90s. It's going to be the 90s.
