Real Investor Radio Podcast

Craig (00:00)
Hey, welcome back to Real Investor Radio. Jack and I are today are talking about a bunch of stuff. The first thing on the list, Jack, that I have is the paper that motivated the markets, Jack. This was a report that came out from Citrini and it was entitled the 2028 Global Intelligence Crisis. And basically this research firm called Citrini Research dropped a paper called the 2028 Global Intelligence Crisis on February 22nd.

Jack BeVier (00:16)
Thank

So, thank you.

Craig (00:29)
second and within 48 hours Jack this thing went viral. Fortune, CNBC, Yahoo Finance, Seeking Alpha, they all covered it. And then there was a few companies that came out with rebuttals, specifically Citadel. So let me just tell you a few things about it Jack and then we can go one by one here. So the model basically predicted that the S &P would crash to 3500 by

June of 2028. That's a 38 % drop. Not because AI failed, Jack, but because it succeeded too well. basically it's, you know, the progression is companies start using AI, companies, fire workers, profits spike, and then, you know, the fire workers stop spending, right? Like they're not making any money. And so that was sort of the gist of the report. It went into several different scenarios.

Jack BeVier (01:00)
. .

Craig (01:21)
you know, one in particular, you've got a, let's say you've got a guy out and it's making 195 grand a year, Jack is a senior data engineer. And, uh, you know, what's his job look like three or four years from now, Jack, when there are no more data engineers needed. I mean, how many people are saying that these guys, that, that all programming is going to be done by AI within the next year or two years, three years. And so my question is, or the, or we can talk about this is,

I'm a real estate investor. I've got a bunch of rentals in Austin, you know, and Silicon Valley and places where there's a bunch of white collar workers and they're all paying rent.

Jack BeVier (01:52)
Thank

of

the network.

Craig (02:03)
What happens when they stop paying rent, Jack? What happens when all of these people are displaced and there's and there's no rent to be paid? There's I think there's two opportunities here. One, that's not a great thing when the guy stops paying rent. But I think in terms of and I hate to say it, but like if a lot of people are displaced, there's going to be a lot of a lot of foreclosures, a lot of houses on the market. And that that is a buying opportunity. So I don't.

Jack BeVier (02:28)
Is that your perspective?

Is that what you think is going to happen?

Craig (02:30)
My perspective is that is that the world is going to become very productive. like production is going to go up. Right. But I think that there is going to be a lot of people displaced by the AI that's now producing. And I think that and I don't want to put words in your mouth but I feel like your perspective is is that hey look if you learn to use these tools now you bring value to the companies that you're that you work for.

and you'll probably be the last to be let go, but at least you'll have some job security and that you know how to use the tools to the best.

Jack BeVier (03:05)
I'm my, my opinion on this issue is evolving and, so let's dig in there because there were what I'm finding or the fallacy that I think that is going into a lot of the analysis. And I'm not sure about the, the, the, particular video, but we'll, we'll, let's, we'll, let's flesh it out. But the idea that the amount of, I guess, you know, AI work,

software, you know, software creation and you know, whether you're putting I think the biggest use case for AI so far is not putting an LLL, an LLM in the loop and replacing humans, but rather allowing us to write software and write, you know, write software and write tools and create automations that

we couldn't afford to before as small businesses. And so I think that we're going to see a decrease in operating expenses for the companies that adopt AI first because they'll automate when other people aren't. And so they'll have outsized profits. But then as more people realize more companies realize how cheap it is to build these, to be able to build these tools.

we're going to see money being spent and people actually being hired to take the existing platform that exists and turn it into something that AI can plug into. so I wonder, I think it's the case that, you know, I was thinking about this, like we have this over the course of the past year, we've created at Dominion, this technology capacity, like ability to create stuff that didn't literally didn't exist for the first 20.

four years of the company. And so all of sudden, I'm hiring people, but I'm hiring people to do that tech stuff. And I think that because the unit economics of writing lines of code have just become so incredibly favorable, right? Like you couldn't afford to have a tech team unless you had, you know, 100, 150 people minimal, right? Like,

You know, there are no plumbing companies that have a tech team and in-house tech team. And I think that 10 years from now, I think that 10 years from now, every plumbing company is gonna have a tech team. So actually...

Craig (05:26)
Well, yeah,

and it'll be a team of AI agents.

Jack BeVier (05:30)
And but there's good but there's got to be people behind that they that understand the plumbing business that are going to be deploying these agents, right? Like, I think I think that we're going to actually see operating expenses go down. But technology as a percentage of operating expenses go up. Does that make sense? Because now everyone's going to have people who are writing code for them. I mean, we're just we're a frickin hard money lender, a frickin hard money lender who's like writing it who's writing code like what for like

Craig (05:57)
Let me see. Let

me see. Let me see if I can say it in a different way. And we'll take the plumbing company as an example. You have this plumbing guy and he's a smart guy. But he and he's doing well. But he doesn't have the money to go out and hire a tech team. Even if it was five people paid it, you know, one hundred one hundred thousand dollars each. He's not going to go out and hire them. However, he could go hire a guy who's a subject matter expert on his industry. And that guy's really smart.

And that guy can stand up, you know, a army of bots that will then do everything tech related that they need. Jack, if I can do it and I can do it in my sleep, you know, what kind of guy who's a subject matter expert?

Jack BeVier (06:39)
Yeah, I just think that and I think that every plumbing company is going to hire one of those guys and they're going to they're going to bring it in house like everyone's going to have like because you have to be the subject matter expert. You have to understand the nuances of that particular business and that particular businesses systems and then the owner has ideas and they want to see those ideas put into place in the most efficient way and I think that every company is going to have a couple guys who do this who do this work and this is like.

huge new job description that is already very much in demand and everyone's just like winging it. No one's actually qualified currently, Because this stuff's only a couple months old, so anybody with curiosity is qualified. ⁓

Craig (07:13)
Yes.

creativity

and curiosity is everything. So like you take that guy who's the senior data engineer who really understands how to structure, you know, tech, the stack, how to give it the right prompt to make it work. You know, but the problem is they become more in demand only if they're subject matter experts in the industry in which they're trying to consult them, right? Like that's kind of your best consultant.

Jack BeVier (07:37)
They become more in demand. They become more in demand. That's what I think.

I think they're two different job descriptions, right? There's the subject matter expert who knows how to use AI and then there's the senior data engineer who is at the large regional plumbing company keeping tabs on all of the thousand bots that have been created over the years and managing that back end. I think the pie gets bigger for everybody. I don't think anyone gets laid off. well, I mean, some people get re-skilled.

Some people get re skilled for sure and you can't just be sticking your head in the sand on it. But I think that there's gonna be I think there's gonna be it's gonna be one of those like there's a shortage. There's a humongous shortage and demand for this set of skills and the wages are gonna go up like I'm like dude everyone who's a subject matter expert who leans into this is going to get paid more. Nobody else gets raises. Those guys definitely get raises right like

Craig (08:41)
I you're,

yeah, I think there's a, I think one of the things that we talked about several weeks ago in the podcast was, you know, Dominion has spent a lot of money on building AI intelligence into all of our loan products. The problem that you saw initially was, is that the AI was good, but the people who were using it didn't necessarily believe in it. And so they were kind of doubling up on their work. I think, are we past that yet?

Jack BeVier (09:08)
just, yes, just.

Craig (09:10)
All right.

OK, so there's that sort of I got to believe in it part. But I think as the tools get better and you can one shot these things better, it's kind of like walking into the grocery store, Jack, like 15 years ago. And you're like, I'm not using that. I think self check out. came in here and paid for my groceries so that somebody else could check my out. And it was a slow adoption that now I check. won't walk into a checkout line where there's a human. Right. And I think there's just going to be this thing that that

The adoption of AI just happens kind of slowly like that. And the subject matter experts and the people that use the tools now, yes, they will get paid. I do not believe that people are not going to get displaced. I think there's going to be a major displacement of labor. And I think a lot of that is going to start with the white collar labor. I think you're already seeing it with lot of the announcements that have been made.

Jack BeVier (10:00)
Yeah, I hear you. just I don't think it's hard enough, right? Like if you're like, hey, you're going to get laid off unless you learn how to do this stuff. I just think that you like you do. You're going to learn how to do it. Like maybe there's probably an age. There's probably an age level, right? Where you're just like if you're if you're 55, you're just like, dude, I just don't want to write like I'm not going to go like I'm not. I just don't want to go through this learning curve.

And I can ride out the next 10 years bouncing around between companies that are themselves the ones that are getting out competed and slowly going out of business themselves. the but businesses existing businesses have long tails, right? Like the yellow pages even 10 years ago, the yellow pages had a huge enterprise value because people still used it because old people still used it. And as a result, you know,

dry cleaners still bought ads in the yellow pages, right? There was still revenue there. And so there's probably like a 10 year ramp off of any, you know, of any change in business. And I bet that people who were like 55 and older will disproportionately be like, screw it. I just don't want to learn this thing. I'm gonna, I'm just gonna ride the ramp out until I, until I retire and I'm not gonna retool, but everyone less than 55.

has a humongous incentive because they're so because the people with these tools are so much more valuable. They have a humongous incentive to learn them and I don't think they're hard enough to like keep people out like they're it's it's you tell me I need to go learn Python code and JavaScript and I have to go learn new languages literally. Yeah that's a barrier to entry like some people can't do that but.

This is just like concepts, man. We're coding in English and it's just like teach people the concepts of software development and all of sudden they're like crazy, you know, crazy and all of a sudden, sorry, forget how much more productive they are and they can get a 30 % raise if they just go learn this tool. I just think you're gonna have schools popping up and courses popping up to like bring it to, you know, to bring these tools to the people and we're all just gonna go through a massive retooling.

Craig (12:13)
me ask you this. What do you say to my son who is in his sophomore year at WV right now? WVU right now? Not necessarily, you know, Jack, a top tier school for Wall Street coming hunting for kids with finance degrees. What do you say to my son who's taking finance and real estate at WVU? He's going to graduate in two years. They're not really teaching a whole lot of AI there. So he's going to have to learn that on his own. Like

Jack BeVier (12:13)
⁓

Craig (12:38)
Does he walk into a small developer Jack, a guy like maybe Wicc and Den or, you know, some small about, can he walk into and provide value day one for a company like that with his degree and no AI experience? Does that kid get hired? Does that kid get hired as like a junior analyst with any company or in two years? Well, they have figured out how to AI the junior analyst role with no problem whatsoever.

Jack BeVier (12:55)
and no AI experience.

Yeah, the thing is though that like so I guess my statement would be the same thing that I would have said 20 years ago, which is like pick something that you love to do and. Pick picks in which you love to do and learn the tools necessary to apply these right so like you're going to get a job and work for cheap just like you did 1015 years ago and learn the business from the ground up and the same value that I had as a 22 year old because I was good at Excel.

right is like the is going to be this. This is just the new Excel right like it's just the new set. It's just the new tool that you need to use in order to be a practitioner. You still don't know about the world at 22. Right. So you still need to go learn how the world works which means you're going to go work for beer money somewhere. But you're but if you're the kid who knows how to learn Excel and you're there and you're there to work and you're you know you're eager then.

Craig (13:39)
Thank you.

True.

Jack BeVier (13:59)
know, after five years, you'll be dangerous, right? You'll be worth you'll be actually worth paying. So I still I think it's, which is which is really just the same thing as it was 15 years ago, right? Like

Craig (14:03)
Man, I think.

Yeah,

if it works out like that. I don't know that it's going to work out like that. I'm not. I don't. I look I think the kids are already having a hard time finding jobs in this in this economy. Talk to him every day. And I think two years from now there are some smart guy that's running a small development company right now who probably has like maybe two or three junior analysts, you know, whatever they do. And I think he's going to figure out how to AI the out of that thing and save himself three, four, you know, three hundred grand a year.

or whatever he pays his.

Jack BeVier (14:38)
I

think he's gonna have the same real estate analysts. They're gonna know how to do these tools and he's going to evaluate 10 times as many properties with those three guys.

Craig (14:47)
⁓

yes. OK, well, I'll agree with you there. I will not disagree with you there. It'll be definitely more easier ways. I was talking to a kid the other night and we can go move on. Talking to the other night that works for a top tier self storage company, Jack, and all he does all day is just search Google for Google and Loopnet and Crexie, I guess, and CoStar for

land that might be developable in the United in certain parts of the United States. And he just like it's like a needle in a haystack. Right. He's like kind of gritting it out and then searching. Can you imagine how easy his job would be if he just applied some objective tools to it? Like, I'm like, dude, go. You want to bring real value to that company? Put put in some A.I. into your job. And I swear to you, you'll be 10 times more valuable to the company if you could, because you'll be able to evaluate 10 times more property.

Jack BeVier (15:23)
Yeah, right, yeah.

Yeah, yeah, thousand percent. I mean, we were doing the same kind of thing. Like, I feel like this there's echoes to me at the beginning of my career here, like in that I feel like I feel like when I was 22, I was just a smart kid who like knew how to do tools and worked real hard. And I'd be like, so tell me about how you do your business. And then someone would teach me about how they did their business. And I'm like, and you do that. And so you you are what I know there used to be like MLS books, right? Like

Craig (16:06)
Yeah, yeah.

Jack BeVier (16:06)
And so

you like you go through, you you scroll through, like you scroll through six listings at a time and then you page to the next page and you scroll through and that's what you do. And I'd export, you know, this 473 records to Excel and then append some data and sort it. And then I'd be like, these are the only 17 that we need to pay attention to. And we'd go and we'd go look at those 17 houses and we'd make offers. And like my hit rate was real high on those, right? Like that's just the same.

I was just smart 22 year old who knew how to use some tools. And I'm like, that's what these kids should do. That's what everybody should do.

Craig (16:43)
Yeah. All right. Well, let's get back to we're talking about the Siderini report, which was the 2028 global intelligence crisis report that went viral. Jack, so let's let's for a minute assume that sort of the doomsday scenario in the report is right. And one of the things that it speaks about is that and this gets back to real estate. There are 13 trillion dollars in U.S. mortgages right now. And every one of them, Jack, is underwritten, assuming that the borrower keeps their job for 30 years.

What do we say to what do we if we believe the report and there's going to be, you know, seven to 10 percent of the people displaced with by by twenty twenty eight out of their jobs. How does that affect the mortgage industry in the United States?

Jack BeVier (17:30)
They all have so much equity though, you know, like they all have so much equity. That's what's different today than, ever before. And so like, and it's going to take, you know, so long to foreclose the loss mitigation efforts are, much better than they were before. And these people are all going to, all this houses are going to sell and they're going to get checks at the table, you know, when the, when the, when the property sells. like, I don't, I don't see like a decrease in, well,

Unless your point, your point is those that like, but they don't have incomes, right? Yeah. That's where that's one of our premises here is that they're like, yeah. So like there's no buyers.

Craig (18:01)
That's kind of why they stop paying their mortgages,

Come on,

Jack BeVier (18:06)
No, man, you've given me a premise that I don't love though, right? Like you're giving me this premise that like the pie is gonna, the pie is gonna stay the same size. And I'm like, no, man, the pie is gonna get so much bigger.

Craig (18:09)
No one. No one loves it.

No one loves that. No one loves it, Jack. But I think not. I think just to say, no, my scenario is right and this one has to be wrong. I don't know. I think that might be kind of like putting your head in the sand. And I don't know. Do you look, let's say let's say it's 2026 now 2027. This scenario is playing out. We're seeing layoffs left and right. mean, do we start underwriting differently?

Do our note buyers tighten the box? Like, what are your feelings there?

Jack BeVier (18:42)
I mean, so the people that if you wanted to take the bear case and that no one's going to learn this stuff and everyone's just going to stick their heads in the sand, right? So like if we're like, hey, there's widespread sand, you know, sticking your head in the sand, then those the, you know, the middle income property, right? Is, you know, these people live in $300,000 houses, you know, like two to

You know, to two to four hundred thousand dollar houses is where the entry level, you know, white collar labor market lives. And they have the alternative of picking up a rent, you picking up a wrench. Right. And so you could see, you know, if people start to there's a basically a migration from white collar labor to blue collar labor. Right. It's an unwinding of the college story. Right. Like we were told to like

go get a college degree and everything would work out fine for us. And if we didn't, then we would be like, you know, twisting a hand, twisting a wrench. And now we're basically unwinding that. And we're like, yeah, that, that like, you know, that, that entry level white collar degree wasn't worth the college education, wasn't worth the debt. And so people are picking up a, picking up wrenches and there's more blue collar labor. mean, currently you can, it'd be, it'd probably be a pay increase for most of those folks, right? Like already.

Craig (19:43)
Mm-hmm.

It would.

Jack BeVier (20:03)
right? Like that's already like it would be would lead to pay increases.

Craig (20:06)
surprised you didn't

tell me to call my son and tell him to become an electrician rather than a finance major.

Jack BeVier (20:10)
Go to VOTEC. Yeah, drop out of that.

Yeah, drop out of college and go to VOTEC. We all should have just stayed in shop class. And then you would see that would be like downward pressure.

Craig (20:21)
It worked out. It worked out all right.

It worked out all right for you,

Jack BeVier (20:26)
That would be downward pressure on the cost of renovating houses, cost of building houses, if we're putting an influx of blue collar labor into the market. And so you would argue that there's going to be very little inflation then as a result, right? Like big productivity increases on the white collar labor side shifts labor to the blue collar sector keeps

Craig (20:46)
anything there's

there could be deflation you know yeah right yeah all right well that's the Siderini report you guys can find more about it on my LinkedIn page I did a carousel on it go check it out hope you enjoyed this one Jack that was a nice debate I totally disagree with everything you're you're Rosie out look on everything we'll see we'll see how it plays out see you on the next one

Jack BeVier (20:49)
Right, you get a deflation, yeah. That'd be interesting.

I love it. That's great. That's great.