You're listening to Strictly Business Podcast with Lindsay Williams. JSE has almost closed its doors for another day so it's time for Not the Five O'Clock Shadow with Viv Govender from the award-winning Randsuisse in Johannesburg. Now, Viv, I've got a whole list of things I want to talk to you about. David's not here, by the way, because he's travelling. Well, he says he's... No, he's celebrating. Sorry, he's not travelling. I want to talk about... Let's see which one I want to start with.
Let's talk about space, the final frontier. four astronauts would-be astronauts blasting from the NASA facility in America. And it's going to go, this rocket that they're in is going to go further than any man has gone into space before, etc. And you can talk about the tens of billions that have been spent on it. Is it worth it? Is what they're doing worth it, Viv? You're a scholar in these matters. Look, I mean, it's obviously a bit of a long shot, not a guaranteed shot.
But I mean, if you think about it, like right now, come like SpaceX, for instance, you look at a little dot of Earth and everything else that effectively belongs to SpaceX because they do the most of the travel out of it. That has to be worth something at some point in time. We are living in a very transformational time at the moment for whatever reason, AI, space and so on.
And at the moment, we're not at the point where we can do, for instance, the space mining that they talked about, which I think, quite frankly, is incredibly dangerous.
A company that can... do space mining effectively has more power than all the nuclear arsons in the world combined just just by definition because you have stuff you bring for space you just drop it in earth it's more powerful than nuclear bomb you know what i mean they're talking about they're talking about not intercepting an asteroid but but um grabbing onto some sort of asteroid and mining that that giant rock that's hurtling through the sky
and i don't quite understand the the physics of it obviously but the the sort of things that they're talking about is beyond me and I'll be dead by the time it happens if it ever does happen. But the general question is, is space worth exploring? Almost certainly. Look, I mean, the AI stuff, right? I mean, there comes a point if the AI thing really takes off in a big way with the next decade or two, where you don't have enough power on Earth.
And what you want to do is really put that power into space. And I think that might work because then you're not transferring physical stuff from space to Earth, which, like I said, becomes incredibly dangerous. Any company that can transport this mine equipment from space to earth effectively has a nuclear arsenal bigger than Russia or bigger than the US. Because you can translate a couple of hundred cages of rock, like of metal, dropped on a city.
It's like dropping a small bomb on the city, you know what I mean? A couple of tons or a hundred tons of rock on a city is like a nuclear weapon. That is the power of transporting, like mining. I don't think that is going to be allowed by any government or whatever. But if you put a data center in space, where you basically have your AI running on Space Data Center, which Elon Musk is talking about, and which Eric Schmidt talked about, that I think becomes viable.
If you think about the fact that this year alone, we are spending $650 billion on AI infrastructure, that is a use case that suddenly becomes a lot more attractive. I mean, if you can move to spend $650 billion on AI infrastructure this year, and people are expecting it to increase exponentially from here. then suddenly those kind of things, those space data centers and stuff, become viable into the future. Colonizing Mars, never going to happen.
I don't know anybody besides the worst losers on Earth who are going to basically go on a one-way trip to... I mean, nobody's successful, nobody with a family, nobody with a future is going to give up Earth and go away effectively forever to Mars. Because, I mean, the round trip is going to be two plus years, you know, at best. Yes, the city on Mars theory is out the window. I mean, that's just something that Elon Musk has been talking about and talking about him.
In a very different way, he has suddenly decided to list SpaceX. He's filed quietly, and that's the difference. He's filed very quietly the forms to have an IPO for SpaceX. I don't know why there's no fanfare. There's lots of trumpeters and him jumping around on a stage and dancing. But this time he's done it in a very discreet manner. What is that all about? Is it because he's a little bit sheepish about the AI story? Is it because the market is a little bit sort of dodgy at the moment?
What do you think? And is it a good IPO? Look, I mean, I think that, like I said, it may be a long shot, but the price is so large that you basically have to have, if SpaceX lists, you have to have a piece of SpaceX in your portfolio, because there's literally nothing like that in the world. It's an amazingly successful company.
You cannot think in all of like you know corporate history of a single company that had 90 plus percent share of the global market of any product that the world really wanted You know what I mean? 90 plus percent share of transporting stuff into space is done by SpaceX. That's an incredible market share. And so, therefore, that's something I think you have to get into. Whether or not you're really overpaid for XAI, I think you did.
Whether or not it's going to basically be diluted by some of the stuff happening with Tesla, probably. But it is a good thing. And I think most people are going to, most big investors are probably going to put some money into it. Now, the valuation they're coming out with is big. It's bigger than Saudi Aramco. You know what I mean? We're talking about maybe a couple trillion dollar IPO, which is huge. But as a punt that you have in your portfolio, I think it's good.
Whether or not it's probably going to be a long-term successful thing, I mean, on balance of probabilities, I don't think it's going to live up to valuation. But I think that the opportunity, the asymmetry in terms of the payoff profile is so large that you probably must have some of it in your portfolio. Okay, we've done space and SpaceX. Now we have to talk about Trump because he's really starting to mess with markets, not on a weekly basis or a monthly basis, on a daily basis.
He spoke to Reuters. What day is it today? Thursday. He spoke to Reuters on Wednesday in the morning, and he said that he thought he would be out of Iran quite quickly, but he'd go back. He'd pop back if necessary. And the markets thought this is great, and they rallied. We had a massive rally. quarter-end rally, 3.78%, I think it was, on the NASDAQ, whatever.
Then today we've had, or rather in the early hours, we've had Trump coming out and giving a speech to the nation and saying we're going to hit them in the next two to three weeks with hellfire like you've never seen before, whatever terminology he used. And the oil price shoots up and the indices are well down, over 1% at the moment as we speak in the United States. I mean, this is... this can't go on. Surely somebody has the guts at the SEC to say no and look into this.
Because it's not just disturbing because he's a maniac, but it's also affecting the lives of an awful lot of people. Yeah, I mean, look, unfortunately, the people that's going to be most affected are people that don't count, in inverted commas, in the world at the moment. When the food situation becomes, like, you know, really bad, which is going to happen this year. I mean, we're talking about the growing season for the northern hemisphere. It's now, and there's no fertilizer available.
You know, what does that mean? There's something like about 120 days of food in the world. Something like 90 to 120 days, somewhere around about three to four months of food in the world. As a backup, we have to replenish that stock every single quarter, effectively. This is the biggest quarter of the year happening right now, and we have not enough fertilizer in the world to basically do the proper fertilization and get the proper yields we need to get.
And the people who are going to suffer are the poorest people in the world, the people that spend 30, 40% of their income currently on food, that will be pushing up to maybe 50 or 60% of their income by the end of the year. The guy that spends 1% and goes to 1.2 or 1.3% of his income, that guy might have a bit of a problem with the price of eggs, but he's not going to really be in trouble. And I think that's the real issue. Unfortunately, those guys have no voice.
Those guys have gone for nothing. And in the U.S. right now, I mean, yes, the price of gas has gone up. Yes, we are seeing a bit of inflation coming through. But the US is so powerful and so large that they can get by with this being nothing more than a minor irritation at the moment. So I think he's probably going to lose the midterms in terms of his party. He might even lose the Senate. He might lose the Congress. He probably might lose the Senate. That's a bit of a harder thing.
And I think that might be the only thing that stops his kind of rampage. Because at that point in time... But let's say that between now and November, which I think is November the 5th or the 6th, when the midterms occur. If something happens and he regains or he manages to hang on to what he's got at the moment, then the danger is that in the next three years, it's bedlam, it's chaos.
And there could be things happening to a democratic society that America is that we've never ever seen before in the 250-year history of the country. And it's scary. Oh, you must be. What's up? The thing is that, I mean, he also happens to be, you know, president, not just at this point in time in history, but over the time when AI is taking off. It's quite possible next year that the U.S. economy grows like five, six, seven percent a year. You know what I mean? AI takes off in a way.
Look, Oracle cut 30,000 jobs this week. Why are they doing that? We are seeing job cuts from Amazon, job cuts from a number of different high-tech companies. We're seeing unemployment rising among young computer scientists. AI is taking off. And if that is the case, I do think that he could have an advantage. But the problem is that I think right now, the midterms I think are probably too soon for Mr. Ticket to change, and I think he's probably going to be in trouble. Okay, well, let's hope so.
That's my personal view. Oil is something that's been around since, what, the late 19th century, early 20th century? I don't know. But it is something that is, it's quite funny that you say that AI is this and AI is that, and this will be the influence and this is what it'll do. But we're still being held to ransom by an old fashioned oil price, a fossil fuel. It's ridiculous, isn't it? And a tiny 22 mile gap between two landmasses. that oil tankers go through.
It's ridiculous how pathetically prehistoric we are as human beings. I mean, the thing is that if you look at history, right, and human history from a very, very high vantage point, what you find is that it's the use of energy that defines the level of comfort, the living standards of a country. So if you look at, for instance, animals back in the day, people don't realize this.
But until we used oil and coal, pretty much the amount of work you could get done in the country was dependent on the amount of food you had in the country. The amount of actual construction effort and whatever, how much you could transport, what you could build, whatever, was literally dependent on how much food you had. Because you had to feed the animals, you had to feed the people that did the stuff.
Oil and coal, those things, those fossil fuels, basically changed that in a way that's very dramatic.
And you say it's primitive, but the amount of of like your work available for like see for a liter of petrol is insane okay it's like hundreds of hours for one liter petrol which now costs like 25 rounds okay so and there's nothing that replaces it very easily because yes you could have uh you know electric vehicles you're gonna have electric ships you're gonna have electric plates and so that's something i think that we we have to consider that even today as Protopost oil seems you don't have a
replacement for many industries. You can't do, for instance, renewable manufacturing of steel or renewable creation of cement because the energy density is just not great enough in renewables. You have to have nuclear or you have to have oil or some kind of fossil fuels. Yes, we have to. And that brings me to driverless taxis. Now, as a Luddite, I smiled a bit when I... turned on the BBC this morning because I saw there was a huge traffic jam somewhere.
I think it was Guangdong actually in China because the driverless taxi market had collapsed because of a technical glitch. This is the future. Someone will find out, find a way and it'll be like a Bond film villain. We'll find a way to scupper normal society every single day by turning off something. Viv, that's me being simple.
a simpleton but you saw the story about the taxes this morning surely well look i mean yes we are going to have these issues but it's about security i mean security for our mandatory system think about that if you can hack it to something anything just because it's digital you could hack into the banks you know what i mean and there is a way to get digital stuff reasonably secure i think we will get to that point The advantage of the driverless taxis and the autonomous vehicle market is just so
great. Once you have it, you basically eliminate traffic jams, you eliminate a lot of accidents. I mean, right now, Teslas, right? To see how safe it is. Forget about the Hyperon, Elon Musk or whatever. Insurance companies offer you a lower premium when you're driverless or when you're driven by the full stop driving as opposed to when the human is driving.
But the insurance companies already looked at the thing and say, you know, on average, the full-staff driving system is safer than the human driver. That's now, already. And this is improving over time. And in the next five to ten years, this is going to come to a point where it's going to be a no-brainer that you want to have the driverless taxi as opposed to the human-driven one, just because of the safety involved. And the problem is that the number of workers in these places is insane.
It's the number one job in most parts of the world, driver. Not the only job. But you don't look at all jobs like driver, forklift driver, taxi driver, bus driver, train driver, bulldozer driver. That's the only job in the world. You know what I mean? And a lot of people that make a reasonable, middle-class living from that is shocking. And what happens when they get replaced? That's what we're dealing with right now going forward.
This is the argument, you see, because the replacement factor is very important. You say that these jobs will be lost and... And someone like David and yourself will say, well, there's so many jobs being created. But you can't immediately say job vacancies and job losses, they can come together. Because the person that is losing his or her job doesn't have the skills to go into the new job created by AI. It's a whole new world out there.
Look, I would say it's going to be a job apocalypse, whatever you want to call it. It's going to be a disaster for jobs. And the other thing, people talk about the Industrial Revolution and say, oh, the Industrial Revolution and new jobs were created. The Industrial Revolution was primarily occurring in Europe. Europe exported many of the negative side effects of the job creation to places like India, Africa, and other parts of the world.
If you look at the impact globally of the Industrial Revolution, even though it took many years to occur, much slower than this current revolution. The negative impact was still pretty spectacular. It just wasn't occurring in places that had the factories. You know what I mean? And I think that's something to be looked at here as well. When the impact happens, places like Silicon Valley are going to be doing very well. Lagos, not so well. Lagos, what happens in Lagos?
What happens in Johannesburg? When the taxi driver has no job, when the delivery driver has no job, when the bulldozer driver has no job, the forklift driver. Like I said. The jobs for these people aren't good. There's social unrest. This is what I've been saying all the time. And I remember having a conversation with you and David and we talked the bigger picture. And I said, what about the future of society when there are squadrons of people that don't have jobs? That causes unrest.
You sit at home all day, you can watch as much Netflix and television and streaming and listen to as many podcasts as you like, but you get bored and you get, you feel dissatisfied and you go out and you cause trouble. That's what's happened. That's what's happened throughout history. So there will be societal unrest and there will be, as I've said before, chaos. But David just dismissed this. And also, I have to say, Viv, you did as well. You talked about something else.
I'm talking about the bigger picture of society. There will be 20, 30 percent unemployment globally and then there'll be madness. Look, I mean, unfortunately, there won't be madness. The reason for it is because the control. Look, I mean, this is the word.
of like the out there you know i go out there sometimes but this game for me is out there yeah the reason that we have democracy okay is two things it's number one it is guns number two it is the factory okay why because the guns and factory give power to the masses to basically withhold either you know or to put violence or to withhold their labor which affects countries that's why if you look at it initially you know when we had the french revolution and stuff this all happened
when guns became more prevalent allowing a bunch of people with guns let's trained to defeat them. well-trained soldiers. And then in the 20th century and 19th century, the whole democracy movement, the whole progressive movement moved to the unions. Why? Because the factory gave the worker the ability to withhold their labor, and that allowed them power in the society.
When you have drones that take away the power of an individual gun, when you have robots and automation that takes away the power of the person in the factory, the people, like you talk about, that didn't go and cause chaos. become powerless. And we've seen in human history what happens to powerless people. They're not treated well. You know what I mean? And I think that is the future we are seeing here. When it becomes a problem, what are you going to do?
Are you going to go in the streets and write when you have a space technician, when you have autonomous drones flying above you, when you have robots basically doing your job? What power would you have to affect the people in power? And the other question is, is who are the people in power and will they be able to be overthrown? Is it a government that is, you know, you can storm the Palace of Westminster or something in London by walking across Westminster Bridge.
But in the future, will there be that sort of, that building full of people, you know, debating every day, the House of Lords, the House of Commons, or you'll go to Capitol Hill, something like that. I don't think in the future they'll be there. So these peasants that are revolting, where will they go to revolt? And who are they revolting against?
And also, they won't be able to revolt because the one thing that saved the guy from Westminster, once he went and attacked Westminster, is the policeman is somebody that lives in his street and won't want to just shoot the granny or the teenager that's basically rioting outside Westminster. Right? That's the feedback mechanism. It's the fact that the people enforcing the laws are part of the people. What happens to the people enforcing the laws are actually the robots.
Or the law enforcement arm becomes the drones. What happens to the law enforcement arm becomes like, you know, some guy sitting on a turbo subway or some AI system that's running somewhere. They're not going to have the same level of hesitation when it comes to, you know, attacking civilian populations or whatever. Again, this is put out there. But the thing is that...
Recently they did war studies, or war game studies with the big LLMs, and LLMs are significantly more likely to resort to nuclear weapons than humans are. Like 95% of the time they resort to nuclear weapons when an LLM has control. The issue here is that... Again, from the very top level view, what happens is, forget about trying to attack people, you won't have the power to attack people because you don't have the ability to overcome the defences they will put up there.
And you won't have the ability to hold your labour to do anything. I mean, think of it right now. What a protest. You stop, you know, the trains from working by going on strike. You protest by blocking the streets. You basically, you know, mass movements on the streets. How does that affect? an autonomous AI economy. You're blocking the streets. They don't use the streets for their transport. It's meaningless. It's a gesture.
They'll look back at that, blocking the Westminster Bridge so the police can't get to the Palace of Westminster or whatever. And they'll look back at that as we look back at what happened in medieval times. It's that dramatic, I think. It's very depressing actually what you've just said. It'll be like basically the Walling Dervishes versus the Gatlinga. That's what it's going to be like. Exactly.
Talk about medicines first of all, rather lastly, because the Strait of Hormuz is blocked and we can't get fertilizer and we can't get oil. But you spoke in a message you sent to me about medicine and tablets, etc. What were you saying there? Yes. I mean... We look at, obviously, oil as the basis here. But remember, the Middle East has a lot of stuff coming out of it. It's a very important thing. And modern supply chains are more complicated than you think.
You know, like ASML, there's thousands of suppliers in total that supply that company to make that machine. If you look at things like medicine and so on, I don't know for certain, but I would suspect that there's a danger that some of the supply chains don't work as nicely as they did before. we've already seen, for instance, recently things like Zempik and the new GLP-1 drugs and so on. There's been shortages there. There have been shortages for other medicines in the past as well.
What we're doing right now, disrupting one of the key pathways for human trade, we don't know what the downstream effects of that are going to be. And I think that if you do, if you are dependent on any kind of chronic medication, it behooves you to go and get a month or two extra supply just to make sure that you don't get caught in other ways. If suddenly the medication your life depends on is not available for a few weeks, and I think that is a possibility.
I think that what's happening right now with chemicals, what's happening with trade, it's going to really have an impact on global supply chains, and you don't know exactly what's going to be the stuff that's going to break down. And it might just be the medicine that you need to live.
Do you think that this war that's been going on for four weeks now will extend, first of all, that's the first part of the question, and secondly, Do you think that the ramifications are more than four weeks or eight weeks or three months and will carry on because of the supply chain issues that you just spoke about? I mean, do you think that it'll take a long time, even if it's only a two month war, to unwind?
Look, I mean, the people say you've never been able to change the regime via, you know, air power alone. That being said, there's never been air power like this before. We don't even know who's running. the Iranian government at the moment. We haven't seen the guy who's technically in charge since basically he was put in charge. We've seen a number of deaths of race senior members of the Iranian regime.
It could be quite true that, you know, in a couple months' time, there is no Iran overarching government to look at. It could be warlords in different areas, which makes it much more difficult. Because at that point in time, who do you negotiate with? Who's keeping control of the country? Who's doing whatever? It becomes a lot more difficult to go and have a victory. You have somebody surrender when there's 100 people to surrender, okay? And I think that is the kind of downstream thing.
If not that, then there is an Iranian regime in power. That Iranian regime, quite frankly, is going to have a huge incentive to basically get nuclear weapons. And the U.S. knows that. And the U.S. knows that the only way to stop that is to actually go and seize that nuclear material, which means boots on the ground. And we've seen with Afghanistan, with Iraq, et cetera. That's not very easy in the modern world. And the example I give to you is this.
And the reason I say this is you can't go to war with somebody you're trying to save. You can't go and say, I'm trying to save the Iranian people and then go to war with the Iranian people. You know what I mean? That's one of the reasons that... Yeah, I'm looking for peace in the Middle East, but at the same time, I'm invading Iran. I mean, it just doesn't make sense, does it? Yeah, but you can't say, I'm trying to save the Iranians from the evil regime by going and invading Iran.
You know what I mean? Because the things that you need to do to win a war... Like what was done in Germany or Japan in World War II. That just doesn't, like, you know, muster when you say, I'm trying to save the German people when you're firebombing Dresden. I'm trying to save the Japanese people when you're, you know, bombing Hiroshima or Tokyo. You know what I mean? There's a limit to what you can do in warfare when that is your thing here.
And when you have a war that you basically started, which people don't think is a war of need, but a war of choice, you can't do the things that you need to do to really win that war in the world of commerce. And so, at least not quickly. So that basically becomes a quagmire for the US. So I don't see how this ends quickly because the Iranian regime... must know that if they make an agreement with America, they'll be bombed again in five years' time. Give me an investment idea.
Give us an investment idea, whether it be short-term, long-term, super long-term or for tomorrow. Is it sell? Is it as simple as sell? Is it buy oil? Is it stick with your AI portfolio as it is? Is it subscribe to the SpaceX IPO? What would you say? And I won't hold you to this or ran Swiss to this. Okay, I'm going for what's called a barbell strategy. So there's two parts to the investment. One part is the AI portfolio, is the SpaceX, is the high-risk, high-return kind of stuff.
It's the gold stocks, it's that kind of stuff. You put a certain portion of your money there. So if these things take off, you get the upside. But a larger part of money, of your money, your investment capital, you put in what's called capital-protected structures, where you basically protect your money against a downturn, against craziness, where you say, I want to accept a 12% US dollar return.
But with the benefit of not having all the money at risk or having maybe a third of the money protected against a downturn or whatever it may be, that is the strategy right now. We are pushing clients significantly towards structured products as well as, I mean, we still keep the AI portfolio. We still keep the high risk stuff because it's quite possible that AI gets into a recursive improvement loop at which point in time nothing else matters in the next two or three years.
And that becomes the new story of the world. But in the meantime, you need to eat, especially if you're retired, especially if you may be close to retirement or need that capital for something. And in that situation, you want a certain portion of your money, probably the larger portion of your money, in something that's going to give you more of a guaranteed return. But for that guaranteed return, you're also basically sacrificing upside.
You're not going to get the super returns, the market goes crazy, but you're basically giving yourself a bit more of a guarantee. It's a barbell approach. It's I think what's really suitable for this kind of weird point in time where we have massive risks. but also massive upside. You hardly ever have the risk and the upside at the same time. Okay, lots to think about. Goodness me, my head is swimming. Viv, thanks so much for your time as always.
Viv Govender is from RAND Swiss, the award-winning RAND Swiss, and that was not the 5 o'clock shadow. The views and opinions expressed in these podcasts are those of Lindsay Williams and various contributors and do not reflect the policy, position, or opinion of any other agency, organisation, employer, or company associated it. with strictlybusinesspodcast.com. Assumptions made on the analyses are not reflective of the position of any other entity other than the speaker or the author.
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