Kurt Dupuis:
Welcome to The Whole Truth, where two wholesalers help financial professionals build great practices and thrive in a rapidly changing industry. We'll bring you the stories and voices from those on the front lines of this change, and we'll have some fun along the way.
Steve Seid:
We're building a community of financial professionals who are growing, forward-thinking and want to get better. Thanks for listening and contributing to the discussion.
Disclosure:
The views expressed herein are those of the participants and not those of Touchstone Investments. We are joined by Thomas Trentman, CFA, Sr. Portfolio Manager of Sands Capital Management, LLC a sub-adviser of Touchstone Securities, Inc.
Steve Seid:
And welcome, everybody, to The Whole Truth. From the Bay Area, California, I am Steve Seid.
Kurt Dupuis:
And from Atlanta, Georgia, I am Kurt Dupuis.
Steve Seid:
All right, so we got a really interesting episode today.
Kurt Dupuis:
I think so.
Steve Seid:
Yeah. It's a good one, at least to investment, and probably technology nerds, just nerds of multiple different-
Kurt Dupuis:
Yeah.
Steve Seid:
You know.
Kurt Dupuis:
Anybody that has not been living under a rock this year.
Steve Seid:
Yeah.
Kurt Dupuis:
How about that?
Steve Seid:
Absolutely. Well, I mean, this AI1 thing, it seems to have come out of nowhere. We heard about it for years and years and years. AI's coming, AI's coming. But it seems to have just kind of exploded this year in 2023. As we talked to our guest today, which I'll introduce in a second, he was saying it really was ChatGPT. Once that was released, once the AIPRM2 application came out, all of a sudden it seems like the-
Kurt Dupuis:
Dam broke.
Steve Seid:
Yeah, the floodgates are opening. So let me introduce our guest here. So Tom Trentman from Sands Capital, so let me first introduce Sands, then I'll introduce Tom. And then we'll get going on the interview.
So Sands Capital, one of our sub-advisers, one most prominent sub-advisers. They've been around since 1992. They are growth only investors. That is all they do. So they've got a deep team that's focused exclusively, 100%, on growth only. So that puts them, I think, in a really unique position to be able to evaluate AI, to talk about the investment implications. So that's about Sands Capital.
Tom Trentman, many of you may have heard him because he's been on the show before. He's a Senior Portfolio Manager at Sands. He's been at the firm since 2005. Just a really great guy, knows a ton about the subject.
Kurt Dupuis:
Yeah. It's a unique prism, right? It's not just, oh, AI for the general population. It's from an investment lens. And that was one of the comments I remember being very stark, that the Sands team made a while back, was that when you think about something like crypto, what businesses, especially investible businesses, have really popped up out of that? Almost none, right?
Steve Seid:
Yeah.
Kurt Dupuis:
Cool technology, some people are super into it, some are not. This is different. ChatGPT, AI, the productivity gains, the level to which large corporations are going to be integrating this into various aspects of their business, the ancillary businesses that will pop up because of this, they're pretty optimistic about. There seems to be some evidence, and at least some sentiment, that this is here to stay and that real businesses will form around them.
Steve Seid:
I don't want to hear about any business called Skynet popping up. I feel like we're headed towards the Terminators in a quick fashion. I hope I'm wrong. I actually, I think I asked Tom that question. I don't know if I said, "Will there be Terminators?" But something like that. Well, let's transition to our interview with Tom Trentman from Sands Capital.
And welcome to our discussion with Tom Trentman, Senior Portfolio Manager from Sands. He's also a research analyst. And you've been with Sands, what, since 2005? Do I have that right?
Tom Trentman:
That's correct. Yep.
Steve Seid:
And you're back on the show. You're like a veteran of The Whole Truth, so welcome back. We're happy to have you back.
Tom Trentman:
Happy to be here. Excited.
Steve Seid:
With much better headphones. He's got these, well, how would you describe them, Kurt? Big, space headphones?
Kurt Dupuis:
They're pilot headphones.
Steve Seid:
A pilot.
Kurt Dupuis:
So my brand is the guy with the biggest headphones on these podcasts. Tom's just completely dunking on me. Well, he's got the microphone.
Steve Seid:
Two times. Two times the size. Yeah.
Kurt Dupuis:
He could fly internationally on commercial jets with these things.
Tom Trentman:
I think they weigh about three pounds. Yeah.
Kurt Dupuis:
If your neck gets sore during the recording, just let us know. We'll take a break.
Steve Seid:
I think the first time we had you on, we talked about the boom and bust cycles in growth investing. And at that point, growth had kind of gone through this incredible period of interest rates rising, asset values getting crushed. It was pretty good timing. Since then, I mean, it's been a nice little run. Well, we have a really, really fascinating topic to talk about today, which is AI, artificial intelligence. It seems to be a topic that to me kind of came out of the blue. There was a lot of talk of it over the years, but all of a sudden now this is something that is thrust into the mainstream.
What was it that thrust it into the mainstream? Was it just ChatGPT? Was there something else that was happening? I'd love your perspective on that.
Tom Trentman:
Yes. I mean, it's referred to as the iPhone moment for AI right now. But yeah, it was ChatGPT. You know, AI work's been going on a long time. It was actually sort of a wilderness field where a lot of the work that's being used today actually was done decades ago, and it sort of became a dead end for a lot of academics.
And then really, with some of the improved parallel processing and the advancement of chips, all of a sudden some of these things that just seemed like they were never going to go anywhere started being useful. And we've seen this. Recommendation engines is a good one that you'd see as a consumer, whether it's your Netflix recommendations or the content you're seeing on social media, that's machine learning. That's part of AI.
The transformer was really the invention that brought about the large language models that came out of Google. They published an academic paper, I want to say it was in 2017. So this isn't brand new. But what really captured the imagination was seeing it easily accessible to any person, and just seeing, like, holy cow, it can do what? The answers that are being produced, just you never thought a computer could interact with a human that way, with understanding, with emotion. And so, that was really what took it from something that was happening in the background to something that became top of mind for pretty much every organization today.
Steve Seid:
I can think of no better firm to help us make sense of AI, and really future trends in investing, broadly than you guys, because that's a big part of what you do is to understand these long-term trends and innovation, et cetera. How long have you been evaluating AI? When did it first hit your radar, if you remember that?
Tom Trentman:
Yeah. So we've been keeping an eye on it for multiple years, but it actually did mostly seem like it was fits and starts. And it was technology that would be incorporated into existing products, like the recommendation engines I talked about. And there would be some iterations, but they would be more modest then it would be mostly in the background.
But it's definitely was something we've been paying attention as a potential unlock of value creation and innovation. But really, it wasn't until you could see just how it could be used for the understanding of human language, that you really saw the, okay, this is going from fraud detection models and recommendation engines into I could see how this could change every way in which I interact with the world and computing, and other products and companies.
And that's really because, you know, the way we think about the major change is it is going from a Windows, a graphical user interface, to a human interface. So just like going from DOS command prompts to Windows was a pretty big change, this is going from dropdown menus and where is this feature, and I can't find it, to I'll just tell the computer what to do and it will do what I want.
Kurt Dupuis:
It's funny, I've used that analogy, talking about our practice consulting, saying, "We are your smart speaker. Tell us what you're doing in your business, where you're trying to get better at." You speak it into existence and we help make it happen for you.
But anyway, so we also heard a quote from Frank Sands, so one of your principals, not too long ago. And he said, "AI will not replace your job, but a person using AI will replace your job." So can you give a sense of how disruptive you think AI is going to be with the job market and the labor force?
Tom Trentman:
Yeah. This is an area where there's a lot of concerns and fears, and what if we automate everyone, and we all end up being like the fat blobs floating around in Wall-e or something. But I think the reality is that if you think about almost all innovations, people use them to get more done. And there's no shortage of things that could be done in this world. And so you'll just become more productive and spend your time on the higher value added pieces of it.
And that's not to say there's going to be no change or disruption, and some industries will fare better than others. But by and large, it's not like when you, I mean, mechanizing agriculture put a lot more people out of work, and I'm sure you ended up with some challenges in the industrial revolution, and the factory jobs ended up at. By and large, we're all a lot better off than we were with subsistence farmers.
And so, I think again, there can be some change, but the power will make us better. If we rewound 70 years and we were working, you think about the support staff for each person. You have stenographers, you've got people who write your letters, who mail your mail, who move stuff around the office. This is all crazy to us. That's because we got to do all that stuff ourselves.
And we've got Outlook, and I got to be keeping track of my own calendar, remembering when to show up, and I'm not the best at that. And the AI assistant, and you can hire a person to do that for you, and that's expensive. But you can also just, all of a sudden, we'll get all of the assistance that we lost when people got too expensive and we'll get it back. So you'll have someone reminding you when something's going to happen, for looking and letting you know how to schedule something, drafting emails, when you're available for meetings.
So you think about how many meetings are you doing versus how much time are you spending on administrative tasks, you're going to get more of it into your work. And the people who make those changes and become more productive, they'll win, compared to their competitors who are still spending a lot of time on back office things rather than pushing their business forward.
Steve Seid:
There's also a group of people that are saying, "No, no, this is different." You're of the perspective that it's not different, that it's just similar to those same leaps forward in technology?
Tom Trentman:
Yeah, that's my bias. Now, I'm an optimist. I'm a tech investor, so maybe I'm biased. But I think the more pragmatic way to look at it too is you can't really keep a genie like this in a bottle. It's going to happen.
Think about where, deploying it, making it useful. And if you see bad externalities, you can address them over time. But if you just sort of try to stop the adoption of it out of total fear, then I think you're going to lose any of the potential upside, which there's a lot of potential to make things much, much better with this technology. And I think we can manage those downsides.
And the reality is there's no way the world takes a homogenous view on this. So one country can decide we're not going to do it, and if it works and it drives upside, not downside, that's going to be like the Ottoman Empire banned books. I mean, that didn't get them very far. Right?
Steve Seid:
Right.
Tom Trentman:
I don't think you want to just sort of turn your back on the future because you're happy with the little status quo of where you are. I think that's very dangerous for a society.
So there's my own belief of what's going to happen, but I think history would also suggest that there is no undoing this. It will happen, and you're better off embracing and adapting and dealing with the externalities.
Kurt Dupuis:
Let's talk about AI and its effect on markets thus far. So we've already seen a pretty good bit of price appreciation and growth, largely because of AI. Is this run up been rational? Is this speculative?
Tom Trentman:
Yeah. So I think the starting point was pretty extreme negativity, coming off of the fastest rise in interest rates in history from the lowest level in history. So pretty big changes there caused a lot of reactions, a lot of fear of how this would cascade into the worst of economic times.
So we came into 2023 with a really negative market backdrop and environment, and then a few things have happened to climb that wall of worry and have the markets do better. So the first is AI, as you mentioned. And the second is, so far things haven't collapsed. So it's actually turning out better in 2023, so far than expected.
But if we think of AI particularly, it also, if you think about where the benefits are, a lot of the benefits are going to be driven by the Information Tech industry. So you're creating optimism around growth rates, investments, the future, that is suggesting that results aren't going to keep getting worse. And you've sort of seen the worst of the consolidation results, and they're likely to get better because all the companies have to react to AI.
All that said, I mean, yes, you've had some wobbles in the narrative. It went from the market didn't care to thinking about who's a winner and who's a loser. And then a lot of companies have ended up in sort of the winners category, and the narrative is pretty good, and it's a backdrop, a tailwind of the market. And ultimately, we expect to move from a narrative discussion to where are the revenues showing up, where are the results coming through, which companies are truly benefiting?
And we think that's an environment where selectivity will help us, and we look forward to that. But right now, I'd say, yeah, it's a broad tailwind, but you're starting from a really negative point, so it's not nearly as extreme as it looks when you look at year-to-date results.
Kurt Dupuis:
Speaking of some specific companies, can you talk about a few different companies, how they might be using AI? I mean, everyone seems to talk about Microsoft, so you're welcome to jump in there. Or are there any other companies that you guys follow that kind of have an interesting story or use case for AI?
Tom Trentman:
Yeah. So I could talk about a handful, but if we think about the investing in AI and the companies that benefit, when you've got these paradigm shifts, you see a couple of different phases. So the first is you got to deploy the technology, which is really around the infrastructure and the hardware that enables it. So that's the first set of companies that are benefiting. We think they're roughly in three categories.
So you have the semiconductor manufacturing supply chain that makes all these advanced chips. You've got Nvidia, which is the architectural leader. Think Intel Inside, but for the AI age. And then you've got the public clouds, the Azures, the Amazons, where all of this processing is going to happen. So right now, in order to do anything first, you've got to deploy this tech. So that's early on, in a paradigm shift, that's where the most money and results shows up.
Over time, the deployment of the tech will slow and you'll move to companies that are advancing the technology. And if we think about, in mobile phones, we transitioned from Qualcomm who benefited a lot as the mobile phones took off, to Arm, which had the chip designs for these phones and kept adding more components to the chip designs, even as mobile phone units started to plateau.
And then ultimately, using this new technology to do new things is the biggest and largest opportunity. And we think about that today, I mean, we can look at incumbents transitioning and trying to adapt the technology, but a lot of interesting companies probably haven't even been founded yet. You think about, you know, you go back to the internet. First, you have all the websites proliferate, they needed a search engine. And then it turned out that, I think the top search engine in 1996 was AltaVista. And Google, you know, they don't even exist today. So you've got this uncertainty around these new users.
Or you take companies like Uber and DoorDash, they weren't even founded until multiple years after the iPhone was launched. So that emerging disruptors, as we call them, the companies that rise up in the new era, do something totally different, they don't even exist today. And so we're looking for them, and we're trying to figure out where they'll come. But the reality is most of our investments are in earlier in those steps down the hardware infrastructure layer, and then we're evaluating the incumbents that will have to make the transition.
So that's sort of a setup to how we're looking at that backdrop. And then, you take Microsoft specifically, one of the earlier is you are seeing productizing of AI, is that they've pioneered the term, the Copilot. They started with GitHub, which is helping engineers draft computer code, and now they're rolling out that more broadly in the Office suite.
And that's where, you know, could it check your letters? Could it draft your letters? Could it add transitions to PowerPoint? There's all sorts of things that the AI Copilot could do to make you more effective in your basic white collar job of being an office worker. And they've announced pretty significant pricing uplift for those features. And if you think about how much time and money they save, it's significant.
So even after the discounting, we think it still stand to double the price per user of anyone who adopts these features. So they've got a specific product they're offering. They've set a price point. They're going to be selling it. It looks like it should be pretty broadly useful. That's a pretty good backdrop to benefit.
But what's powerful about Microsoft is it's not just that. They also have Azure, which is where all this computing is going to happen. So if companies are trying to figure out, well, how do I build my own Copilot? Or how do I use my own proprietary data? Or how do I do something that's specific to my organization? The first step is going to be getting the public cloud, and Azure is going to benefit from that.
And then the last piece is, because Microsoft's so broad, they really have an opportunity where when XYZ Corp comes and says, "Hey, we want to get to AI," they will hold their hand and say, "Well, first, you buy the Azure and you buy the Office Copilots. And then you got to buy all the security tools and our analytics tools and our storage. This and that. And we'll build all these pieces." And then you'll have everything in the Microsoft ecosystem. So, they're going to sell a whole bunch of stuff that isn't directly related to AI, but it's that part of that ecosystem to get you on that path to being able to do enterprise AI.
So it's really those three key pieces. They have a product they're putting a price on. They're going to launch, monetize. They have one of the fundamental building blocks in the public cloud, and then this whole broad ecosystem.
I didn't mention Meta, but Meta is a company that pretty much all of their business benefits from AI, where they get better content recommendations to people, they can better surface content, they better ad targeting, they've got better ad creative. It just makes their business better in every way, but they're using their own technology. But then they're also open sourcing it in order to try and get the tech better, so they can use it for their application. But they'll let other companies use it for different applications.
Steve Seid:
Got it. So in summary, this seems to be a very real phenomenon with material implications for investors, for companies, et cetera. So I think it's important to also talk about what it's not.
So maybe talk about the differences and how you see this relative to something like crypto, which was a very interesting technology but doesn't appear to be secular or changing things in a major way. Am I reading that wrong? How do you guys see that?
Tom Trentman:
Yeah. So when we think about these paradigm changes, it's really something that fundamentally changes computer architecture and how that computing is done. So if you think about going from a PC to a smartphone, that's a pretty big obvious change in how people are interacting with computing.
On the backend side, you go from every client, like your PC's connected to a server that's in your building, to moving it to centralized, and then moving it to scalable, interchangeable, so the fundamentals of cloud computing, where you just scale it up, scale it down, instead of buying big giant servers that have to get bigger and bigger every year. And I think that really is where it's clearest, where blockchain and crypto is not a paradigm shift, is what it fundamentally is a distributed database that is more expensive to run. But the key value is that you don't have to trust a centralized authority in order to have the transactions and logs.
So I think, the estimates I've seen, it's about a million times more expensive to do a contract in Ethereum than do that same transaction just purely in AWS3.
Steve Seid:
Wow.
Tom Trentman:
So the reason you'd pay a million times more is because you don't trust whoever's holding that data, and that they might not fake it or cheat it or mess it up. But we have a long history of things like clearing houses and trusted authorities that have the oversight required, that they aren't just sort of robbing you blindly.
And so I think what you find is that there aren't many applications where a distributed database, that costs way more money, is valuable because you can't trust the central authority managing it. So I think that's the clearest thing. That it's an architectural difference, it's just not widely applicable. Whereas, AI seems clearly widely applicable.
Steve Seid:
It's clear that you're finding opportunities, and you mentioned a few of the companies. But you guys typically look for companies with dominant market share, competitive positions, those types of things, like clear leaders. Do you see really still those dominant leaders emerging in the same way you did with other types of technology?
Tom Trentman:
I think what you're going to see is, how do companies incorporate that and get differentiation? And one of the things we saw with cloud computing was that, because you turn the cost structure into this cloud backend, you could actually move to a rateable revenue and have better cost matching and risk sharing with your customers.
And so salesforce.com, for example, pioneered a subscription approach. Well, it wasn't like Oracle and others didn't have access to cloud computing, but even if they went that direction, they had to cannibalize their upfront license-based business model to do it. So that's I think more example of where you see the biggest changes when you put incumbents at sort of a innovator's dilemma, or they feel like they are kind of in a lose-lose situation, and they decide not to follow and just keep doing what they're doing because that's worked well and is so profitable for them.
If we think about the key pieces of, you know, the soup you need in order to build anything, you need data, you need talent, and you need a lot of money to do all the investments and training of these models, and deployment and running of these models. And there's a pretty good argument for that, largely favoring incumbents, because they already have data from their existing businesses. They often have talent, especially some of the largest organizations really have a lot of talent. And they certainly have the money.
So I think you're seeing a lot of movement to incorporate these products into the existing large tech companies. So we mentioned Microsoft, but you're seeing it at ServiceNow, you're seeing it at Meta, you're seeing it at many of the other companies. So the incumbents do have an advantage, but I'm sure we'll see the DoorDash equivalents over time, the Google to the PC era over time. They're just not as apparent yet.
Steve Seid:
That's really interesting. Do you see a lot more of the winners these days being private versus public? It does seem like more companies are staying private longer. Uber, for many years, was a great example of this. Give us a sense of that landscape today.
Tom Trentman:
I mean, yeah, the private markets are very vibrant and they support companies for much longer than they used to. So that seems like it's been a long trend. There's extra costs of going public. There's certainly the volatility in your share prices in the daily market to market that can make management tough. So I don't think that trend, I mean, there seems to be nothing that would change that trend.
But ultimately, you need the liquidity of public markets over time. And so, eventually, that does push companies to go public, but later than they used to. So I would expect, if we go to that emerging disruptor category and we think about what could be done with AI that could never be imagined today, where's the Uber, the DoorDash? Or another good example is something like Shopify.
Shopify is a second order effect winner on mobile, because Facebook ads were so good at finding product market fit, it enabled a whole generation of startup direct-to-consumer companies, and Shopify managed and allowed them to run all their businesses.
Maybe that second order effect like Facebook, rather than taking advantage directly that technology, like a DoorDash, but they'll be there, and they're going to be incubated in the public markets. I mean, sorry, the private markets. So I'm excited.
We got a team that's focused on that, that we get to talk to whenever we want, that is chasing down all those opportunities and evaluating them, and helping us get smarter long before they become public and investible for us.
Kurt Dupuis:
So let's talk about geography as it pertains to AI. Is this a US phenomenon or developed phenomenon? Is it going to be global?
Tom Trentman:
Yeah. So you have two really strong centers of it, US and China, and that kind of gets us caught in the geopolitical mix.
If you look at, you know, we've done some work looking at where the talent pools are, and the reality is a huge concentration of, there aren't very many really experienced, talented, trained AI engineers in the world. They're in the thousands, probably the low thousands. And most of them are in the San Francisco Bay Area. That's where they live.
Steve Seid:
Yeah.
Tom Trentman:
That's where you've got the significant concentration. And that's a challenge for companies to access talent wherever they are.
The reality is, the other place you've got a lot of really high quality, strong work being done is China. And that's where you've had some of the export controls trying to limit access to some of the chips, and slow down China's progress. And you get into all the geopolitics.
Look at ByteDance, which owns Dalian and then TikTok as their international product. I mean, they're clearly, clearly top-notch in the machine learning. They've been able to do the AI, they've been able to infuse in their products. The way they've been able to find content that'll get you to watch ten-second videos for two hours or three hours a day, which I think is their average time per user.
Steve Seid:
Wow.
Tom Trentman:
It's just hard to imagine. So I would expect those are your two big talent centers.
Steve Seid:
Yeah. I'm going to digress for a second, because we're allowed to. It's a podcast, and we can go down some paths we didn't intend to.
But in that, Kurt mentioned that Frank spoke to us, Frank Sands Jr. spoke to us at our last sales meeting, covered a few topics. One of them was China. And it seems to me that you guys have gotten a lot more bearish on China. Is that a Frank thing? Is that a company thing?
Tom Trentman:
It's hard to look at it rationally from the outside and not say it's gotten more complicated to navigate China, especially as a foreigner. And you look at the regulatory crackdowns of some of the big tech companies, you had the whole Jack Ma stuff with Alibaba. So it has clearly gotten harder to navigate, and I think that's what the debate is around, well, then it could get better to navigate, or the natural order of these things is they go in one direction until they reach end game. The reality is, none of us know, right? So we have to look at the world as it is, not as we wish it to be. We've got to think about what risks we're willing to take and what we don't want to take. Objectively, it has become harder to navigate. That's a fact. I think we're cautious on the ability to structurally turn it, especially as foreign investors.
Steve Seid:
Got it.
Kurt Dupuis:
So one of the things that's unique about you guys is your view of the markets tend to be longer than the market's view of markets. How do you guys think about that or what does the market have wrong with thinking about AI, given that - your long view of the world?
Tom Trentman:
Yeah. So I think it's a quote attributed to Bill Gates, "People always overestimate what can happen in the short term and underestimate what can happen in the long term." So you think change will be faster or larger on a two-year timeframe, and then your wildest ambitions on the 10-year timeframe are way too cautious.
So I think that's likely to happen here. It does really seem that with the computers getting smarter, with them being able to interact with humans, we're going to see pretty profound change in the services available to us and what's possible. But I don't know if I'd bet on that on a one-year timeframe. So I think it's one where you can easily have over-hype, over-excitement, on a near term, but when you look out larger, the magnitude of this will get larger and larger.
So we're looking for the opportunities where you can get both in your favor. So if it's a five-year opportunity, not a one-year opportunity, and the market's really excited about it, hey, we'll be patient.
Steve Seid:
Final question. On what questions are left to be answered, so you brought up a few of them in my mind, like who's going to be some of the winners, the innovators that are going to come through the market, things like that. You also mentioned potential guardrails. We'll implement this, we'll see what needs to come in the future. Are there any other questions that need to be answered on AI from your perspective?
Tom Trentman:
We are just getting started and exploring the capabilities of this. So what we've seen typically with technology is that the capabilities grow dramatically, and the cost of deploying those capabilities shrink dramatically. You know, orders of magnitude. And what happens is then you just do more than you ever thought was possible.
So if you think about what a computer was capable of in 1990 versus what it became capable by 2000 or now, I mean, it's just sort of like, wow. You think about how much information you had, your floppy disc versus the gigabytes on your hard drive that you don't even think twice about, these are just like you're playing a totally different game. So I think how that shows up in this time, and what innovations are capable and what this is truly capable of, we're just getting started with.
So like I mentioned, writing computer code, it can do that. It can be helpful, it can be minor, it can be good for error checking, and some of the stuff that's kind of not that fun and exciting versus the creating of something. But is that all it can do? Is that all we're going to have in five years? Or is it going to be much, much more capable of adding value and figuring things out? And then what do you do with that?
So I think the unanswered questions are really around trying to imagine, when we're kind of right at the beginning, where things will be three, five, 10 years from now, when it's most likely a non-linear path and we don't know exactly what the breakthroughs will be. Again, I don't think you would've said, when the phone comes out, you would've been like, "Oh, wow. I'll surf the web. I'll book flights." You can figure out some of that stuff, but you wouldn't have thought like, "Oh, now I'll be able to order food because my location will be there and people will be bring it up my door."
Or, "Oh, wow. This will actually make advertising so effective that it will cut out the middleman," and we’ll have this explosion in direct-to-consumer startups that are, you know. Who knew we needed more sock companies in the world? Or who knew there was this opportunity for specialized everything?
And it's amazing as a consumer, because all of these things that were too niche to serve are businesses now. And all of us have some hobby or whatever that's a little esoteric, and now it's like, "Wow, I can really get amazing stuff for this now."
Kurt Dupuis:
Are you into socks, Tom? Is that your thing?
Tom Trentman:
I've got a lot of esoteric hobbies. Socks is not one of them.
Kurt Dupuis:
Oh, okay.
Tom Trentman:
But we could go down some rabbit holes on beekeeping or something sometime, but…
Kurt Dupuis:
Next time.
Steve Seid:
I would like to hear that. Yeah.
Tom Trentman:
Yeah. Although that one ended in a hospital trip.
Kurt Dupuis:
Ooh!
Tom Trentman:
So if you want to know the dangers of keeping bees.
Steve Seid:
Okay. All right.
Kurt Dupuis:
A cliffhanger.
Steve Seid:
Timeout, Tom. Now you're going to have to tell us the story. So you started keeping bees and ended up in the hospital. Do I have that right?
Tom Trentman:
Yeah. So you know how they say with peanut allergies, it was like, "Oh, don't eat a peanut before you're three." And now it's like, "Oh, you should start having it regularly because the trace amounts of exposure can make you allergic." Well, apparently, that's how bee venom works in a lot of adults.
Steve Seid:
Oh my God.
Tom Trentman:
So 1% of people are born allergic, and about 10% of professional beekeeper's kids are allergic because they're around it all the time and don't get stung. And so, a hobbyist beekeeper's kind of like that. So I got stung five times over three years, and the sixth one sent me to the hospital.
And it was funny, that was the end of it because my wife was also about a week out from the due date of my first child. And there we are in the hospital with nothing to do with her. So that was like, all right, maybe I should rethink this. So, yeah. You get into beekeeping, get stung regularly, is the moral of the story.
Kurt Dupuis:
I love that.
Steve Seid:
Unbelievable. That is an esoteric hobby, though. You were not lying about that.
Tom Trentman:
Yeah. Well, actually this was not created by the AI internet world. But you can order bees through the US mail. Bet you didn't know that.
Steve Seid:
Can you really?
Tom Trentman:
They ship them, they drop off on your front porch and you got 10,000 bees in a little box.
Kurt Dupuis:
Do they come via Pony Express still?
Tom Trentman:
The US mail, poor mail carriers have to carry that around. But anyways, you'd probably get all kinds of amazing specialized equipment, that you would've had to drive 10 hours to get some weird mail order catalog. But sorry, that was a bit of a rabbit hole there.
Steve Seid:
No, we enjoy rabbit holes. We like that.
But I mean, back to just the concept and the discussion in general about AI in the future. Man, isn't growth investing fun? It really is. It's about exploring the possibilities and picking out the winners, and trying to predict a few. I mean, it really is. I don't know. It seems pretty darn fun to me.
Tom Trentman:
Oh, for sure. I mean, I think there's many ways you could be successful in the market, and I think one of the most important things is finding something that you get excited about, and you really believe in and you're going to stick with.
And if you are one of those people who there's nothing they love more than a good sale, you could be a pretty successful value investor. But if you are like me, and you like thinking about how the world will change, and then exploring new technologies and thinking about all these questions we've been talking about on the podcast today, there's nothing, no job I could imagine that would be more fun than being a growth investor.
Steve Seid:
Well, thank you, Tom. Our returning champion from Sands Capital, our expert on AI, and apparently our person who's-
Kurt Dupuis:
Our resident beekeeper.
Steve Seid:
... an expert on beekeeping, and bee venom. He's got-
Kurt Dupuis:
Former.
Steve Seid:
He's multifaceted.
Kurt Dupuis:
Former expert beekeeper.
Tom Trentman:
Yeah.
Steve Seid:
Former beekeeper.
Tom Trentman:
So the career got cut short long before I became an expert, but yeah.
Steve Seid:
Fair enough.
Kurt Dupuis:
Yes it was.
Steve Seid:
Well, thanks for your time today. We're going to transition to our Costanza corner. This is The Whole Truth. Stick with us.
And welcome back to our Costanza Corner where we like to leave on a high note. And I think, are you going directly with Costanza today? Is this one of those?
Kurt Dupuis:
I am.
Steve Seid:
Oh, yeah. Buckle up.
Kurt Dupuis:
Well, it just gives me so much joy. Literally, just Google George Costanza quotes. If you're in a bad mood, just do that and it will immediately turn your day upside down. So, a quick story and then I'll get into my Costanza quote.
So, was here in Atlanta this week. There was a regional conference here, which meant there were a lot of financial professionals. And being an extrovert, I find myself among a lot of people-
Steve Seid:
Of course you do.
Kurt Dupuis:
... at the bar, a little late, which means the next day was a little bit rougher than I'd prefer. So this quote made me laugh doubly hard.
"I love a good nap. Sometimes, it's the only thing getting me out of bed in the morning." I could definitely relate to that at some points this week.
Steve Seid:
I have no response. Just terrific George Costanza quotes, which I think all these must have been written by Larry David before the end, obviously. Right? Or do you think that Jerry too was writing for George? Probably it's all Larry, right?
Kurt Dupuis:
I'm sure over the years he was able to seep into Larry David's consciousness, for whatever those last two or three that Larry David wasn't on the show. But-
Steve Seid:
Pretty-
Kurt Dupuis:
... Larry David's pretty iconic.
Steve Seid:
Yeah. Right. Thanks everyone for listening. We'll see you next time.
Kurt Dupuis:
Thanks, you all.
You can find the whole truth and subscribe for free on Apple Podcast, Spotify or your favorite podcast app. We'd love it if you took the time to rate and review the show on Apple Podcast. It helps others find the show.
And for more episodes of The Whole Truth, go to www.touchstoneinvestments.com/thewholetruth. That's touchstoneinvestments.com/thewholetruth, all one word.
As of June 30, 2023, Amazon.com, Inc made up 7.22%, DoorDash Inc made up 2.35%, Meta Platforms Inc made up 4.12%, Microsoft Corp made up 8.36%, NetFlix Inc made up 3.86%, Nvidia Corp made up 6.67%, ServiceNow Inc made up 7.29%, Shopify Inc made up 3.18% and Uber Technologies Inc made up 3.20% of the Touchstone Sands Select Growth Fund. These holdings are current as of the date of the production date of the show recording. Current and future portfolio holdings are subject to change.
1 AI is an acronym for Artificial Intelligence
2 AIPRM is an acronym for Artificial Intelligence-Powered Response Manager
3 AWS is an acronym for Amazon Web Services
Disclosure:
Growth investing risk – Growth stocks may be more volatile than investing in other stocks and may underperform when value investing is in favor.
U.S. trading events risk – Events in the U.S. and global financial markets, including actions taken to stimulate or stabilize economic growth may at times result in unusually high market volatility, which could negatively impact Fund performance and cause it to experience illiquidity, shareholder redemptions, or other potentially adverse effects.
Emerging markets and foreign investing risk - Foreign, emerging and frontier markets securities, and depositary receipts, such as American Depositary Receipts, Global Depositary Receipts, and European Depositary Receipts, carry the associated risks of economic and political instability, market liquidity, currency volatility and accounting standards that differ from those of U.S. markets and may offer less protection to investors. The risks associated with investing in foreign markets are magnified in emerging markets, and in frontier markets due to their smaller and less developed economies.
Sector risk – Investing in certain sectors may involve additional risks and may not be appropriate for all investors.
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