Money For Nothing And Your Chips For Free with Imran Khan
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Welcome to the Risk Reversal Podcast. I'm Dan Nathan. I am joined by my good friend Imran Khan. He is the founder and CIO of Pro-Am Asset Management. Welcome back to the podcast, Imran. Thank you. It's always fun to be here. All right. So you were speaking earlier in the week at iConnections. Yes, sir. And you've been...

A really interesting add to that conference because you were there also in January down in Miami. And it's interesting because I feel like you are the quintessential long, short equity guy, the sort of folks that the hedge fund business blew up on. And you know what I mean? Like you do a lot of deep research and you get to know these companies really well and you can take bullish and bearish views. Is that fair to say? That's kind of you to say that. I don't know.

I don't know. No, I mean, like, but you're the sort of guy I love to have a podcast with. I appreciate that. This is the sort of conversation that you and I will have over dinner or sitting around. I thought you'd like to have me because you like me. Now, just kidding. I do like you, but I just like talking stocks and I like talking macro. I love talking about stocks. All right. And then just really quickly, a plug. You started a podcast. Yes, sir. You're so enamored with me podcasting. All right. Tell everybody what your podcast is. So it's a conversation with Imran Khan, a conversation with KHA.

Yeah, it's been great. You know, I'm trying to, you know, I was growing up, I was very, really liked Larry King show. And he would bring lots of different kinds of people and was just curious and ask questions. So, you know, many way I'm trying to replicate that, you know, we're getting really interesting people. Last night we recorded Scott McNally, who is the founder and CEO of Sun Microsystem. We have Evan Spiegel, founder of Snap coming in in two weeks.

We had Andrew Dudum, who is the founder and CEO of Himsonhearts. So we get really interesting people. We also had this Pulitzer Prize winner journalist who is expert of China talk about the trade policy. So we get really interesting people. And I'm just curious. It's a great way for me to learn and democratize what I'm learning to the rest of the world.

By the way, I mean, you are one of the most connected guys I know in tech and obviously in markets. And you started out, we went through this on one of the earlier podcasts. You started out as a research analyst, then investment banker, then an operator. You were basically running Snap, took them through the IPO and the like here. So now you're managing money.

Great history there. And by the way, that list of folks that you just mentioned, Scott McNeely and Evan Spiegel, they both spoke at your conference, K-A-H-N, back in October in Dallas. And they were both really fascinating conversations. Really quickly, before we get – we're going to do macro. We're going to do –

MagSat, we got to talk about the major techs and some of the themes in AI, how you're thinking about it. And then we'll obviously kind of break down some of the names that you're involved in, some of the stuff that interests you in this environment. But really quickly on Scott McNeely. So just for the young listeners out there, he was the CEO of Sun Microsystem. Not too different than some of the stuff that's going on. The servers that they made were powering a lot of the internet expansion in the late 90s. And this was one of the...

it wasn't the NVIDIA of the day, but it was up there. It was a really important company. Like, did you guys have anything to talk about, like kind of some of the similarities between now? Scott is a really interesting guy. You know, I think a lot of people don't know, younger people don't know him because he basically, you know, got married, you know, later at his life and had four kids and he wanted to focus on his children because growing up, his parents, his dad was not around. So he never wanted to be the CEO. And so, yeah,

So when he got married and then had kids, his wife had kids, and he decided to basically leave the business. But, you know, he founded Sun Microsystem with Vinod Khosla, Bill Joy, you know, some legendary people. And he talked about it, you know, how they created Java, you know, how the Java was created. But then he also talked about his failure of not, you know, recognizing Linux or creating the...

building the cloud business like AWS. They could have a three-year head start. They had the infrastructure to do it. They had the infrastructure, yeah. So it was a fascinating podcast. It's coming up in a couple of days, so please listen. Awesome. We'll link to the podcast in the show notes, so go check it out, follow it. And I'm really, really interested in hearing that conversation. And he sold to Oracle, right?

He sold it to Oracle. Yeah, Oracle bought it for SQL. Yeah. Are you following, Oracle reported last night, we're recording this on Thursday morning and the stock is up about 12% in the aftermarket and, or actually today in the market. And, you know, part of that strength in the quarter was their cloud business. And, you know, obviously some of these big

cloud providers are kind of offloading some of the compute or the workloads that they have from their customers over to Oracle. Is that a name that's interesting to you at all or no? - No, I think, you know, like everything is interesting to me. So I think the most interesting thing is this, you know, this AI trade, right?

And there's a significant demand for AI infrastructure, right? The demand is growing so really fast. I think I saw somewhere that OpenAI is now run rate revenue of 10 billion, right? So this incredible demand growth in AI infrastructure, a lot of these companies are being benefited by that. I guess the big question is how long this will last. Yeah, we're going to get to all that.

And I want to at some point, I want to also ask you about open AI and valuation and the revenue run rate versus let's say a palantir in the public markets, similar sort of value. No, not similar valuation, similar market cap, if you can call a market cap in the private markets relative to something in the in the public markets. Well, we'll hit that in a second.

Let's talk the macro. Yesterday, the big news of the day was that the trade negotiations in London between us and the Chinese, they reached some sort of framework of a deal. Since you've been on last, a lot of hell broke loose, right? And it seemed like almost self-inflicted. And let's talk a little bit about trade. You obviously know lots of folks in China. And you just mentioned somebody that you had a conversation with on the podcast.

What is your take about what's gone on, the reasons for essentially launching a trade war that started with some of our biggest trading partners who are our allies, the lack of deals that we have with our allies, but then this sort of framework that we supposedly have with China? And I'm just curious, what is your thought process of that? And we can kind of bring it back to the economy and the markets. Yeah, listen, I think...

So let's look at facts, right? So why do you need trade restrictions? You need trade restrictions because one, it's taking jobs away from America. Number two reasons you need trade restrictions because you are depending on some other countries if they're adversarial, that might create some shockwave.

Those would be the two big reasons. And then the third would be that, you know, U.S. is losing manufacturing ability. But here are the facts, right? So if you look at U.S., it's actually still a manufacturing superpower in the world. We are second largest. You know, third largest is significantly behind us. Yes, China is bigger than us and they are bigger.

exceeded us, but we are still a manufacturing powerhouse. It's not like the US is not producing that. The second question you need to ask, are we really losing a lot of jobs?

I think the number I saw that over the last decade, the US manufacturing lost roughly 2 million jobs. So it sounds a lot, but in any given month, we're creating 200,000 jobs. And that 2 million jobs that lost, that doesn't count into consideration that creating this open trade, it also created a lot of new jobs in the US market.

And then going back to that, that we are losing to China and that's why we need to have trade restrictions. And the World Trade Organization joining really impacted us. That also doesn't hold truth because if you look at US has been losing manufacturing market share way before WTO, China joining WTO. And the...

I think the reason this whole trade thing gets a lot of attention, if you look at what that all these jobs that got shipped out of the U.S., that really happened in states like Ohio, Pennsylvania, and there happened to be the battleground state.

So on a disproportionately, it get much more political attention than economic attention is needed. Now, saying that, I completely agree that there are areas like if it's pharmaceutical or it's

important for our national security that we do need to bring it to the US. But really getting into a trade war with countries that can't afford to buy American product

I don't know if that does any good to us. But that's such a good point. It's like, okay, so there's a country that they're 30% of manufacturing for the world. They don't have a consumption sort of model like we do. They have a 40% savings rate versus our 4%. It's essentially planned economy, right? You're talking about China? Yeah. And so it's like apples to oranges, if you think about it. Yeah, listen, I think China, I understand the risk of China. It is by far probably the

single biggest threat to American hegemony in the world. So we do have to be careful about China. There's no doubt about it.

But I think the issue is, again, do we really care if China makes my socks or not? I don't think that's relevant, you know, because we rather be focused on how can we be more progress on AI, create more new jobs around that and things like that. But anything that impacts our national security, pharmaceuticals, healthcare, yeah, I think we should try to figure out how we diversify our risk strategy.

But I think one of the things that I thought was really interesting on this trade war, that really going after countries that are very poor countries, and they can't afford American car, right? Like, you can never have economic balances with those people. So that, I thought, was a little bit misguided. Yeah.

Yeah, so I think execution could have been better with this whole thing. Let's go back to like the national security implications of this. And so we all agree and COVID showed us this, like the dependence on supply chains from China and some other folks like in other places was a real problem. And you have some sort of disruption and then all of a sudden you see like, holy shit, like we were relying on that sort of stuff.

But when you think about, let's say, rare earth materials, that's not something you can reshore, right? They own that, you know, they own the rare earth. They own the processes, right? And they have a lot of leverage over us. And so does that sort of

scenario make it that you know we're going to actually have to export some of our best technology to them to make sure that we access you know that sort of i mean listen those are like the building blocks of um some of the stuff that's really important to our ev business to autos in general and some other industries

And so I thought all of this started where we didn't want them to get access to our best technology because it's going to find their way into their defense and intelligence apparatus. Isn't that like a big part of this? And then if we have this sort of framework where we're going to go back to exporting that and they're going to go back to exporting to us, aren't we right where we were on April 1st? Yeah, we'll see how that plays out. No, I think you make some good points, you know.

Definitely makes some good points. And I think the world is so connected right now. It's really hard to disconnect the entire world. Do you think there's a way, and folks don't really kind of talk about this too much, to find some sort of middle ground? Like, yes, you just said they're the biggest threat to our hegemony, right? And I think we can all agree. And then I think going forward, it really is going to be a battle for AI and the like. But when you think about it, you know, like we see this war going on in Russia and Ukraine, you know, it's being fought regularly.

largely by drones like there's folks on the ground but all of our drones all these components come from china yeah and that's why we need to build them in in the u.s or nations that are friendly to us yeah all right agreed on that all right so let's talk about um you know what we're likely to see let's just say trade goes on the back burner let's say we get canada we get mexico we get eu and then some of japan you know some of these other important sort of allies and trading partners let's just say that goes on the back burner let's say um you know uh

tariffs end up being a bit higher than they were just six months ago or something like that. What do you think it means for the US economy relative to the global economy? We had the World Bank come out earlier in the week talking about like talking down growth expectations here in the US. We had the OECD do that last week. What's interesting to me is that the assumptions by both of them, and I don't know if they're good forecasters or not, is that all of this is going to weigh heavily on our economy relative to the global economy. And you would think it would have been in the other way around.

I think forecasting is so hard, but there are a lot of puts and takes, right? So I think what's going on, as you pointed out, tariffs are going to be a little bit higher. That's inflationary. But at the same time, assuming this doesn't... I saw the look of this morning that, you know, things are not going that well with Iran. But assuming there is a Middle East war doesn't break out, you know...

We have seen the oil prices has coming down, the shelter prices has coming down. So that's actually created deflationary pressure on the CPI. I think we still expect to see a lot of deregulations. So that's going to be a deflationary pressures. The consumers are still very, very strong. Like all the data we see, unemployment numbers still pretty low. Our economists think that probably we're not going to see a rate cut in June and July.

So I think there's a lot of puts and takes. Everything being equal, yeah, I think if tariffs are a little higher, that's inflationary, but there's a bunch of other things going on. So I think my view on this thing is that I have an open mind, look at the data and look

what data is telling you at any given time, because there's so many different things going on at the same time. Yeah. And just on the macro and we'll kind of close it here and we'll kind of talk about some themes in the stock market. But, you know, you have a situation where, yeah, you just mentioned the CPI is coming down. The Fed is not likely to cut interest rates until September. You would think that the 10 year at 4.5

three seven or something like that relative to four and a half just you know a week ago or something like that would be good and a tailwind I guess for the economy and for the markets but you also have a U.S dollar that's breaking down it's trading at levels that we haven't seen since uh early 2022. yeah and which is inflationary all right so so

Let's just talk really quickly about the dollar and what it means as you think about investing primarily here in the U.S. market. Like, you know, do you have a lot of exposure to U.S. multinationals? Do you mind, you know, like you must like the fact that a dollar is coming down if you do? Yeah.

Yeah, you know, like, again, you know, yes, it's incrementally positive for a lot of the large U.S. companies. It's also interest positive probably for, like, Latin American companies that report in the U.S. dollars or trade in the U.S. market. It's also probably fine for a lot of European companies, you know. Yes, I think it's incrementally positive, you know, but, you know, dollar, you know,

It might give you a trade, but it's not necessarily a step function improvement to get really excited about the stock. Yeah. What you just mentioned, though, with dollar going down, yields going down, it is inflationary. You put some geopolitical stuff in there. You just mentioned Iran. Crude oil is at $67.5. It was $55 a month ago. You know what I mean? So there's a lot of potential for, obviously, Trump is out there again trying to pressure Powell.

to lower interest rates. If you were to do that, I mean, you could see inflation, which we just saw in the markets like the 2.4% print in the CPI, and they're trying to get to their 2% target. This is the Fed, but there's no indication that they are dying to cut rates right now. And that's kind of the pressure. You know what I mean? Like we have to wait a few months to see whether that happens or not. All right, let's talk about the big theme here.

And you and I have talked about this a bunch, generative AI. This is something that you are not a Johnny come lately too. This is something that you've been focused on for years. How are you thinking about like where we are? Let's, we can think about it through the lens of the mag seven. You know, obviously Nvidia was the way to play this for three plus years. And I know that, uh,

you know, without getting in the weeds, this is something that you've had exposure to Microsoft in the open AI relationship. It's back towards its all time highs. Microsoft, you think about that, what are some of the, but then there's losers. You know, Google has been something that folks have not felt particularly good about as it relates to the performance of their models, the integration of them across their platforms and the like. What's sticking out to you right now? You know, we had these two years, 25% plus gains in the S&P. And now here we are, we're basically have an S&P,

that's up 2.5% and NASDAQ that's up about 3% or 4% on the year. How are you feeling about this? Is it likely to continue to power the sort of gains going forward that we've seen the last couple of years? So I actually thinking the world a little differently now.

and taking a little bit longer term view. I know it's really hard when, like it's funny when hedge fund manager come talk, I'm taking a long term view. But I am actually because I think it's such an interesting time, right? You were seeing...

Yeah, there's a lot of geopolitical things going on that will make day-to-day you have to concern about the risk and all these things. But I also think for the first time that I look forward to next five to 10 years, the amount of innovation that's happening, it's going to be incredible how we live our life on a day-to-day and that will create significant amount of value creation and value destruction. Why do I say that? So this is the third step.

a platform shift I have seen in my life. So when I first graduated from college, you know, people were building internet website, you know. And if we look at internet website, which companies, you know, now that we have 30 years of history of the first commercialization of internet in 1994, 1995, you know, which companies created the most value? The companies that created the most value at that time, if I had a time, you know, time machine and go back 30 years, you

You know, it's not like the companies that created ISPs or the companies that create, sold optical infrastructure for internet routers, you know.

The companies over the last 30 years created the most value that took an existing boring industry and fundamentally create massive productivity gain out of that, right? Because ultimately you have to drive GDP. So what is this? You were, you know, when I was to travel in 96, 97, I had to go to a travel agent, you know, online travel created like massive amount of wealth or I had to move

drive somewhere or look for something, I had to go to Yellow Pages. Google, the information, bringing information to you, created tremendous amount of value. I used to go to DVD rental for Blockbuster. I'm that old these days. But you had Netflix. So those created the value. So the second platform shift really came from apps, right? Steve Jobs, I remember buying the iPhone on the very first day and I was blown away. And then, obviously, after Steve

jobs, you know, at first he resisted, but later Apple opened it up to other apps. And if you look at it, who created the most value at this whole entire, obviously Apple as an app ecosystem owner, but the other guys that who created the biggest value is, again, disrupt the existing industry. I used to call when I was an investment bank analyst to order food. Now I use DoorDash, used to call taxi. Now you call Uber, used to cut

talk to people on the phone, then we start using Snapchat, you know. So what you really, so I think about, I look at AI, you know, people always talk about AI. To me, AI is the wrapper, like the apps or internet. The question is, who will take the AI and fundamentally really, really going to change the world? And I'm looking at the five different really, really large categories that I think ultimately over the next decade, we need to find companies like that.

So one is digital workforce. How we work together is dramatically changed. This digital workforce like agentic AI, robotics, that's going to be pretty, very big. Second, transportation. I think how we commute is fundamentally going to change. And that's a huge opportunity.

Third, space, you know. And, you know, we talked about drone. You cannot shoot down drone with missile. You need laser, you know. So the defense and space is going to be a very, very, you know, fintech. You know, I think these big banks, you know, have been protected by the government because of regulations.

So that's, I think, another big area. And then the healthcare services, right? Because the way, you know, a lot of people, like my dad passed away two years ago of cancer because of non-diagnosis. People didn't diagnose him. You know, there's so many people die because not of the disease, but because of the disease.

We don't catch it early. So how we can bring, and on many places, like I was talking to somebody in Boston who worked for a big mutual fund, and she was telling me getting a doctor's appointment in Boston takes six months. So we fundamentally need to change healthcare delivery system, you know, screening and things like that. And that's where AI going to play a big role. So I am actually really for the first time, you know, in probably decade, I'm like, there are some really, really big category. And that is where I think I'm trying to focus on. I love that.

I love all of it. Where are you going to find the opportunities, let's call it, on the application layer, right, on top of this technology? Is it going to be with these large incumbents? Obviously, there's the smartest people in the world are either working at some of these biggest tech companies here and in China, obviously. But also, you know, they're gone to the private sector.

sector, right? They're trying to build companies from scratch. Where do you think a lot of that innovation across those five different verticals comes from? Yeah. I'm going to be trying to be a little controversial. Yeah. Love it. And only time will say. But I think when there is a big disruption, the big guys not always win. Some will win, but not everybody always win. So if I have to put a betting dollar in, we're not going to see same kind of innovation out of the all big seven names. Yeah.

And the reason is the big companies have couple of problems. Number one, as you're big and fat, you move slowly. And these companies are just not, they're not fit. They still have too many people's decision-making is slow.

Second, when you have too much money, you try to solve all your problem with money. Look, I didn't love what Meta did with Scale.ai. Literally $24 billion to buy 50% of a company that just do data labeling just so that you can get the CEO. So to me, it sounds like a smell desperation.

All right, but let me ask you really quickly on that. So they have a lot of money, $15, $20 billion, whatever it was. That used to be like a large acquisition. This is just to get 50% of the company. It's an acqui-hire. Does it matter if they just wrote that off in a year, like if it goes away or is it something more of a systematic that you- No, it's the mentality, right? I think a lot of people, a lot of,

companies, and I tell that a lot of startups also, and nobody listens to me, that's fine, that a lot of companies die not because they don't have money, but because they have too much money. Because when you have a lot of money and you throw money to solve a problem, you know, you

you are not innovating. You think that you can solve, it's like you're trying to buy love with money. That's not the way you can get love. Money is great, don't take me wrong, I'm a hedge fund guy, I like money, I'm not gonna say this, but money doesn't solve every problem. And when companies start throwing money at it, you have to start asking questions, do they really are understanding the problem?

Like, listen, again, I don't know if it's going to work or not work. I don't like those kind of fact patterns. Yeah. You know, but I would say that with the caveat, Mark Zuckerberg has been brilliant acquisition person, has done really great acquisition. But when I start seeing people throw money like left and right, it kind of worries me. Yeah.

Yeah, you can go back and look. There's probably very few tech companies that have had a successful M&A, Instagram, WhatsApp, Oculus. Am I missing any other big ones there? Yeah, I don't know how great Oculus was, to be honest. But it was $2 billion. It's $2 billion. But listen, past success is never an indication of the future success. And the key thing is that I've been very fortunate.

about working with a lot of great founders over the last 25 years. You know, incredibly blessed, you know. But I think one of the biggest thing you really have to understand, and I understand, is that

When you are young, you are much more connected to the business. As you become big and big, you are less and less connected to the business. So your instinct is not as grounded, you know? And that's why a lot of the companies fail. And so, again, I'm not saying market's not like that, you know? But the key thing is, I think a lot of these companies are too big. They're trying to hire too many people. Again, they're trying to hire a lot of people. They're throwing a lot of money to these AI engineers, you know?

I also see that, you know, like I was talking to a founder friend of mine, you know, he told me that, you know, a while ago that he had to fire 10 out of the 15 people that he started his business with. Oh, wow. And I was like, why? He's like, these guys made way too much money. They were not working. And all they did is talking about their house and their cars, you know. So when you pay people a lot of money, you know, and...

are they all motivated? Again, I really hesitate when people try to solve problems with money. I think innovation doesn't come from money because innovation comes from really deep passion about solving a problem. Yeah. It's funny. I met one of the Wiz founders a couple of weeks ago and this guy, he looks like one of the engineers, you know what I mean, that's walking out of any of these startups. He's just

grinding, you know, he looks like the money doesn't even matter to them. I mean, you think about it, they just got acquired or they're hoping to get acquired for $32 billion. These guys are going to be billionaires and they're acting still like they're just kind of grinding. It's such a competitive business. And I talk about my business, right? The moment I'm not paying attention to. Yeah.

I will lose money, right? You got to be on top of your work because it's highly, highly competitive. And I'm not saying these guys are not there, but I think the key thing, so answer your question is, are these big guys going to win? The answer is they are well positioned to win, but if history teaches us anything, when the platform shift happens, then you see disruption, you see dislocation, and there are newer players win out. That's always the case. And let's look at the app industry.

you know, revolution. Yeah, Meta completely, incredibly transitioned to it. Kudos to Mark Zuckerberg. You know, Google did really, really well. But we saw other companies coming to this. Like we had Uber became a hundred billion dollar company. You know, we had DoorDash, you know, we had newer businesses. Same thing happened with online, you know, Walmart off

course very very survived but you know but then Amazon came along and took a lot of other companies out you know so so I don't think you know the new platform means that the old guy is going to go away but I also know it's going to create new opportunity for new players.

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All right. So those five sort of verticals that you're focused on, where you think the most innovation is going to happen, you just mentioned, let's talk about space. Let's talk about transportation, as you just mentioned. And then let's throw innovation in and around compute and the like. You know, one of the things that what I'm looking at is that companies, you know, I love to look at businesses. I always like to, I coined the term called a

other people might use it, but AI arbitrage. So what is AI arbitrage? AI arbitrage is, in my mind, are companies that have the components that need to be very successful in AI business. So what are those? You have a lot of data. You have big distribution. So you already have a big customer base. And then the third, you have a very technology savvy CEO.

You know, I think if you look at, you know, app revolution, a lot of the CEOs are not engineers, you know, and you didn't need to be, you know. But now I think if you look at in AI, you have to have a strong, deep domain technological leadership. Otherwise, you know, you just can't solve, like I can't go hire a bunch of,

PMs to, you know, and put out performance. If you're a hedge fund manager, you have to good at picking a stock, right? Otherwise, you know, you just can't outsource the core component of the business. You need to know, you know, I always tell people that you need to know the core function of your business. If you don't know, how do you hold people accountable? Right. I want to get to how you pick stocks because I think that's a really interesting conversation, but I want to kind of wrap this kind of AI conversation up with the incumbent. So exhibit A right now is Apple.

- Okay, and just everything that you just said, okay, like how these companies need to be run, what's in their DNA, how they think about these big platform shifts, and this is obviously a company that defined that mobile social, you know what I mean, platform shift. You just talked about applications and what that meant for kind of this whole ecosystem.

How do you make sense of a company that over the last couple of years has not seen their main product growing, right? iPhones are flat. There's really no reason other than shinier screens or better batteries to upgrade right now. It's become a utility and a very expensive utility, a staple.

And how they just miss this. Do you think they can play catch up? And I guess, you know, you could say, okay, well, Android, it's not that sleek as far as the integration that they've done with AI. I'm just curious, like how you think about this because

If one of the big stories to justify the multiple that this company is trading at when it's not growing anymore is that this service layer, this service is going to be a big driver of the valuation going forward and the re-accelerating growth. How do you think about Apple right here? One of the things that I was hoping out of Apple is really articulate from Tim Cook what does Apple look like in an AI world?

I don't know. Maybe I missed it. I haven't seen it anywhere. So, no, I think this is probably another company that is very cautious. And listen, I always like 10 years ago, I told somebody that there is a work time CEO and there's a peace time CEO. Over the last decade, I think

Tim Cook probably did a better job than Steve Jobs in terms of creating shareholder value for Apple. But now, you know, you can potentially argue that we are in a wartime, you know. And I think, you know, I don't want to point out Tim Cook, you know, but I think in general, you have to look at every company that when there is a significant dislocation is happening, do each of the companies, if you're on the board, do you have the right kind of CEO to, you know, to...

you know, right kind of pilot to navigate you through this choppy water. Yeah. And exhibit A might be Satya Nadella coming in after Balmer and some of the things that he did in around this kind of incredible execution. Right. Azure and stuff like that. I mean, Apple's has an existential threat.

right here, in my opinion, about getting this kind of platform? Not any near term, but because you need to have a platform shift for how we communicate. So I don't think we're there yet, because they are the monopoly on that business. But yeah, but a company that is such a well-positioned, you would like to probably see more innovation. Apple was the bedrock of innovation, right? And for some reason, hopefully this is not controversial, I don't know what's the last great thing they innovated.

AirPods. Yeah. AirPods. I mean, that's it. Yeah. I just think watching that WWDC thing, it was so cringy. And you look at- Less and less people talk about it these days. It's not like you talk about- It was so cringy and federated. I mean, it was just so cheesy and it was so bad. And there was really kind of a bore. Let's go to Google.

because this is one where it feels like, yeah, they have Gemini and maybe like the model and the way they're going to integrate it across these different platforms is going to be great in the future, but it's not great now. And so when you think about these chat GPT models, you know what I mean? Like folks are going there, you're getting an answer, you trust it more and more, it gets better and how you're interacting with it. You're not clicking through the citation, right? It's a real problem for Google and SEO models are getting

absolutely destroyed i keep hearing one after another of traffic down 50 year over year see this is interesting because uh i i'm like my wife runs a small like very very small software company you know and i was talking to my wife and she told me that

She gets, you know, when she gets customers, reaches out to her and people, she asks, you know, where do you get the customers from? And a lot of the customers are saying, you know, we're getting it from ChatGPT, you know, and she was very puzzled by that. And I think the ChatGPT is actually getting a lot of data from the SEO. Mm-hmm.

So I don't know. You might see less traffic data coming out of the Google SEO, but a lot of the chat GPT traffic that's picking up, chat GPT is probably learning it from the SEO. So I don't know. It's something to worth thinking about. I'm not a technical guy. That is interesting. I mean, it's not something that I've heard, but I keep hearing from folks that they're just getting much, much less traffic direct to it. And then I keep hearing more and more that original content is going to kind of be the answer if you give folks...

a reason why they should go to your website. It's kind of like a better top of the funnel than just paying Google to have your links, you know what I mean? You know, press up higher on the page. Anything else is that you want to talk about as far as well? I'd love to get your take really quickly on Microsoft and the open relationship

and how you think that's playing out because Microsoft right here, Azure just saw re-acceleration of growth. They're pointing to non-AI workloads there, which obviously is great for them because they saw deceleration and there was a lot of hope that AI was gonna be the thing. What about monetization, about co-pilots and agents? We haven't really even seen that yet. Is this a name that you think has been innovative

or are they leveraging off of like this installed base, the infrastructure that they built with Azure and the like? I'm just curious how you think about that. - I think

They have a very large install base, you know, and the security is becoming such an important factor for all these enterprise companies these days that they will continue to have a very strong foothold. And I think the Satyas, personally, I kind of like how he has been focused on, you know, balancing investment with, you know, ROI.

You know, and rather than, you know, like making large, big announcement, you know, doing things. And so I think, you know, I wouldn't write, like I've been like very impressed over the years how he operated and how he made acquisitions. Like, look, LinkedIn acquisition was a home run acquisitions, you know. So, so, yeah.

uh, and with their install base, I, you know, I think he's very grounded CEO, which I really like about that. Yeah. All right. Let's go to your stock picking because I think over the last couple of years, you probably could have thrown a dart at stuff in technology and made money, right? If you think of the sort of returns that we had, and I'm looking at like the mag seven, it's a very different year right now. You know, you have Nvidia, it's only up 7% of the year. You have Apple that's down 20% of the year. Um, other than, uh,

Microsoft's up double digits, Meta's up, but the rest of them are down on the year. And you're seeing the trade kind of broaden out as far as tech is concerned. I think a lot of folks are looking for other ways to kind of play the theme, but a lot of that is gonna be more sizzled in stake possibly, right? So how are you thinking about picking stocks in this environment

and give us maybe some example. Here's a great example. So coming out of this 2021, 2022 period, let's use FinTech as an example, okay? And I know you joined the board, I wanna say a couple years ago, of a company called Dave. And the reason why I'm bringing that up is because I know a lot of folks who are in similar businesses in the private market,

and they had a really hard time because the way in which they raised money in 2020 and 21 when fintech was all the rage 2022 when the s p was down what 23 or something a lot of those names were down 70 80 or so and you know this is a name one of the best performing stocks that i see in the market it's a small cap

Stock, how did you look at a company like that, have the interest enough to join the board, you know what I mean? And then see this kind of follow through, because I have a feeling in this space there's going to be M&A. We've already saw a little bit of it. So how are you thinking about that? And has your thesis changed in fintech broadly? Yeah, no, no. We talked about fintech as one of the big themes.

But I think the way I look at the stock, whether it's a small cap, mid cap, or big cap, I look for some attributions that we think can potentially re-rate the business. And what are some of the things, right? So I love when the company's gross margins get better.

I love it. Because if you look at pull the streets, $4,000 billion plus companies, I bet less than 1% of the time street is modeling 100 basis point plus gross margin expansion. And the thing is that it's very hard to improve gross margins. If I go become a CFO of a company and if you have to improve your sales and marketing, it's kind of easy. You increase the sales target, you...

tell people to stay cheaper hotel, all these kind of things. If you GNA, cut the office space, all this kind of stuff. But your cost of revenue is cost of revenue. And when there's a fundamental improvement in the cost of revenue, that's I mean not 10 basis point, 100, 150, 200 basis point gross margin expansion, that means you are getting some sort of either better pricing power or you are getting some sort of step function improvement. And those are, I love those stocks when the word

when we think the gross margins will improve or things like that. You know, look at Nvidia, right? Nvidia last two years improved gross margins. This year, their gross margins went down and the stock has been a lousy stock. So that's one thing we love. We like when the companies have a new product upgrade cycle. This is, you know, what I learned in last 25 years.

Street always either overestimate or underestimate a product upgrade cycle. So if you can do real work and really understand the importance of a new product upgrade cycle and the impact that may have,

That is a great way to buy stock. That's like one of the second thing I look at it. I love, you know, one of the things that I like, you know, is the company's pricing power, what's happening with the pricing power, competitive landscape. So we look at all these kind of different things, you know, that really inform my opinion, what I, you know,

When I look at the sector that what I really get excited, like three years ago, we got really started looking at all the companies that went public via SPAC and they blew up. And then we started looking at, okay, what are the companies that are improving margins, improving competitions and things like that. So I think those, but I really encourage everybody to pay attention to the gross margins. I don't hear much about that.

The second thing that I don't hear much about from a lot of investors, you know, people always talk about the company and the idea. And that's great, right? Like, listen, you need idea and you need, you know, but I always say that if, you know, I lived in LA, everybody in LA has like a movie script in their pocket. But, you know, Forrest Gump, you know, which is my favorite movie, get made once in a decade, right? Because to build a great movie, you need great actor, great producer, great directors, you need a team, you know? So execution has not been, you know,

People like, you know, good thing you and I talked about execution this morning so much. You know, execution means a lot. You know, a good idea means nothing without great execution.

So let's talk about the return environment right here and maybe where you see opportunities. Because if you're looking, you have a framework of how you look at stocks. It doesn't really matter what industry it's in for the most part. How do you do some of that screening? And again, I know that you don't pay a lot of attention to what the sell side is saying about the stock market. How do you find ideas? Our listener is generally...

really interested in themes. And then they want to look at ways in which to play it through individual stocks. And we try to hit as many stocks. We try to have a lot of smart people like you on there to tell us your process and the like. So what's interesting to you right now? Let's assume we had that macro conversation. Let's assume the balance of 2025 is just going to be banging around here. Maybe we're up 5%. Maybe we're down 5%. And there's some sectors acting really well, that sort of thing. How are you focused on finding good ideas right now?

Yeah. So first of all, I start with thinking like, you know, there's two ways you lose money, permanent loss or temporary loss. So first, try to avoid permanent loss. So what does that mean? Don't invest in a crappy management team. Don't invest in businesses that the industry is in a very, very dire shape. If I look at my biggest mistakes I made as an investor by focusing too much on valuation without understanding the business is worth anything.

So valuation only matters if there is a business fundamental that's going to get better or there is some sort of asset that nobody understands the value of it. So avoid the permanent loss. So like those are a bunch of check marks. And then really the best way to manage money and invest over the last 25 years, what I learned is invest in a sector that's going to grow.

And then if that's growth, rising water raise, water raise every boat. And then you've got to figure out, okay, who are the best price taker? Who is improving gross margins? Who run the business operatively? Who runs the business most capital efficiency ways? Who runs the business better ROI for their CapEx and things like that? So all those kind of different metrics, we look at it and then we...

try to find the business. But I think the best way to answer your question, I think the big caps, this is the year it kind of feels like 2018 that you've got to find idiosyncratic ideas to make money as opposed to buying really big cap names because the big cap names are also as incredibly...

Every mega cap names has their own problems, right? So for Nvidia case, you have a China restriction. For Google case, as you pointed out, the competition on search. For Apple case, again, we pointed out what's the next iPhone is not growing. So you can go through meta, seems like the Lama thing didn't really work out, at least what I read on the press. And so they had to go hire a new CEO, right? So every company seems like has their own challenges, right?

So I think you've got to find, if that's the case, it's harder. And they're also very exposed to macro, right? Because they're so big. If you're big, you're exposed. So I think you've got to go find idiosyncratic ideas that's less focused on macro, but has improving fundamentals.

and they're exposed to a category that you think gonna grow next five to 10 years. - All right, that's a great segue, and this is the last thing we'll hit. I know we gotta get out of here. So you're talking about idiosyncratic ideas. You laid out the sort of five sectors that you think are gonna be most impacted in a positive way, right? Or disrupted, if you will, by generative AI, and you're looking out, let's say, three, five, 10 years, that sort of thing.

Do you stray far from tech? Because if you just mentioned like healthcare services, for instance, is that an area where you are trying to actively find, you know, companies that will actually take this technology and they're going to have those step functions that you talked about? And it's going to take a little while, though.

to be maybe appreciated in the markets. Do you go far from tech? And do you also believe that at least in the stock markets, one thing to say that these industries, and then there's companies that are going to benefit from this, you know, this paradigm shift, but

How do you think about it in the stock market? Are there ways to, like a UNH, you know, this company's had a lot of problems, obviously, and has been cut in half or more so, you know, some big issues. But will they be able to harness this technology and, you know, take the issues out? Yeah, no. So I'm looking at companies that, you know, so I'm sticking with tech, you know, the companies who, because I think, you know,

That's my area of expertise. So I don't move away from where I know the last 25 years, the only thing I did is tech. So why try to do something that I don't know? So I'm trying to looking for tech enablement. The businesses that are

disrupting this category through technology and they have a lot of access to a lot of data. They have a technology team that can leverage those data and they have distribution. Because I think one of the biggest thing also people underestimate how difficult it is to acquire customers.

So if you have this, so we're going deep diving on those five categories, trying to find interesting idiosyncratic ideas. But I think, you know, my view, this is going to be the next five to 10 years play, you know. So, you know, obviously we're going to own the, you know,

names that everybody is aware of, but we're trying to find names that not a lot of people talking about, but are going to be significantly leveraged by this five big mega trend that I'm seeing. All right. You talked to some of the smartest people in tech. I know that for a fact, not me, but what do you think of crypto?

in general, you know, I mean, it's been this thing, it's become like a multi-trillion dollar thing. A lot of smart people that you and I know, and I'm not suggesting like that you just really broad strokes. I mean, is it something that you think is going to have some legs? Are there interesting, you know, applications that are being built on top of blockchain? Because, you know,

we went through this Web3 thing a few years ago. It was just like a lot of other crap that was going crazy back then. It obviously got absolutely destroyed. I'm just thinking from a technology standpoint, is it something that interests you at all? So, you know, shame on me for missing the crypto early on. You know, I remember in 2015,

You know, my friend who is the president of Avalab, he said, hey, you should look into Bitcoin. And I was so busy running Snap, I had no time. I never looked at crypto. No, I think crypto is real. You know, obviously, you know, any business that's, you know, growing really and disrupting, there'll be a lot of, you know,

winners and a lot of losers, but crypto as an industry is going to be around and the technology is going to be around, the blockchain technology is going to be around. I think stablecoin is a huge opportunity. It's going to have a pretty significant, profound impact. And again, it's part of one of my five big mega trends, right? The FinTech. I put crypto as a part of the FinTech. So yeah, no, I'm very, very curious. This is the area that I'm doing a lot of work, looking at a lot of different businesses.

No, I encourage everybody to do work in blockchain and crypto. And I think there'll be a lot of innovation that are going to continue to come out of it. And I think, you know, listen, I think...

The big banks only pay attention to very rich customers. They don't really cater to the people, the small, average American. They just don't. And I saw that with Dave.

I sit on the board, that people go to companies like Dave because they don't get the lending they need from the bigger bank, or if they get, they charge so much money. So I think fintech is an area that is needed because so many people in this world and in the US, it's surprising that it's still massively underserved. And the regulatory burden that has been created, so there's a big deregulation.

I think, you know, fintech industry is going to thrive very well. All right, my man, I appreciate you coming in here. You know, you always have a seat in front of a mic here. If you guys want more of Imran Khan, go to the conversations. It's K-H-A-N, not the C-O-N, the normal kind here. So I really appreciate you being here. We're going to put that in the show notes. Go follow the pod. I hope you come back soon. Thank you. I appreciate it.