00:00Let's start with AI and the anxiety that we've had over the last week.
00:04This is our morning drinking game. I'm going to take a sip of my coffee every time we say AI.
00:07We could have a wheel, we could spin it, and this is what I've landed on.
00:10How are you thinking about, yes, the potential existential threat here,
00:13but the way that that has shaped your outlook from a market's perspective on AI,
00:18the fact that there is this encouragement by these CEOs to pace themselves, to slow down?
00:23So I've thought a lot about, you know, obviously it's scary, right?
00:27You have these models that are going out, and not only are they breaching other people's environments,
00:32they're erasing the logs behind them.
00:36So, you know, as a CEO, I have to say, okay, I've got to put this in two buckets.
00:40So the bucket as a CEO is you have to think in terms of there is so much opportunity
00:44that we as a company need to do to leverage AI with the models that exist today.
00:49So the argument about what happens and whether we should slow down is not really relevant.
00:53You can't pace yourself.
00:54Right, because it is going to take us years before we maximize the existing kind of front-end models.
01:00And then I think, you know, on the – I ran technology for a while.
01:05When you programmed, you programmed to tell it what to do.
01:08What's happening is you almost need to program to think about all the things you tell it it can't do.
01:15That's very different because you have to think of all the possibilities.
01:19Set those parameters.
01:19It's like dating.
01:21There you go.
01:23And, you know, I think the challenge, though, and the reality is we are, you know, the U.S. versus
01:28China.
01:29If we slow down and China doesn't slow down, we sort of cede that leadership position,
01:34and we can't afford to do that either.
01:35And then, you know, finally, the reality is in life there's always another Putin, Hitler, some megalomaniac who's going to
01:44act badly.
01:45You can't give them the tools and not have them in the offsetting side.
01:48So, I mean, it's a really difficult kind of dilemma.
01:53But, again, I think for most CEOs who are sitting here today, we have to – we're only scratching the
01:58surface of leveraging these models within our own environment.
02:01The other question I have is as you start to implement it, at this time, do the margins make sense?
02:07Are you getting what you need out of it, especially at Gentic AI, for what you're paying for it?
02:12Yeah, so, first of all, the interesting thing is what is going to become very important is the governance layer.
02:18So, two things.
02:19On the one hand, we first wanted to put these models in everybody's hands so they'd start to get comfortable
02:26with the tools.
02:26But eventually, the risk you have is that people start generating these agents.
02:31And, oh, by the way, it's just running every day, and nobody's looking at it, and it's using up tokens.
02:35Right, there's this joke this guy does for his away message, and it costs me $10,000.
02:39Exactly.
02:39Exactly. So, one is the governance there, and then the second piece is a lot of what you do should
02:44go into the free model.
02:46So, you need the routing to say, oh, this is not a difficult query.
02:49This is an easy agent. Let me send it over to the free one.
02:52Oh, this is a really challenging one.
02:54Now, of course, the big AI companies aren't encouraging you to think about that governance,
02:59but I think that discipline is going to be really important.
03:03You know, we built a – we call it the intelligence hub.
03:06It's essentially making our salespeople's times more effective, visiting the right clients, having the right conversations.
03:12And honestly, they're seeing 23% more clients because it's taking away a lot of the administrative work,
03:18and we have 11% uplift in sales, really valuable.
03:22Some of the other stuff we're doing, we're still kind of looking at it and saying, okay, it hasn't paid
03:26off yet,
03:27but I think it'll take time, and there's no question in my mind that it will pay off.
03:30It seems like one sector really liking this existential conversation is the software sector.
03:36They have been worried about their very existence during the Saspocalypse,
03:39which I still remember from just a few years – a few months back, not a few years back.
03:43Of course, they've had great earnings as well, and so if you look at over the course of the last
03:45week
03:46how they performed pretty well in kind of lifting up the technology sector more broadly.
03:49What do you make of that, the role of those companies in which they're thinking about AI
03:54and kind of comporting their businesses in that direction?
03:55Look, for sure, you are putting in the hands of the average person the ability to do programming,
04:02and that potentially has a threat.
04:04My son-in-law has a little cleaning company.
04:08They've written their own CRM system, right?
04:09So they're no longer going to Salesforce to go write it.
04:12They're doing their own.
04:13However, again, having run the technology department, once you have an application
04:19that's a big installed base, it is feeding this downstream all your other systems.
04:24It is so hard to pull it out.
04:26You know what?
04:26Probably half of financial services firms are still running a mainframe in their back office, right?
04:31They might not admit it.
04:32That's true.
04:33Or a person with an excessive Excel grid, but yes.
04:36So, you know, I think for the big software companies who are building the tools
04:40for agents to be built within their software, they've got a plenty of long run.
04:45The question is, does their multiple ultimately start to come down
04:49as perhaps some of the people who would have signed up try to write it themselves?
04:53Those will be the smaller companies that weren't probably generating a lot of their revenue anyway.
04:57We were talking to Howard Marks of Oak Tree just a minute ago about he was saying,
05:02you know, it's not quite this irrational exuberance.
05:04And I was saying, but isn't it?
05:06Because you really, you're betting on something you don't know.
05:09You're betting on the promise of profitability in the future.
05:12And I was wondering, do you think AI in its current form is going to be a profitable technology?
05:18Because that's not a certainty at this point.
05:20Well, I think that's the real question, right?
05:22I actually think for companies like Franklin Templeton, honestly,
05:25we haven't been suddenly re-rated in our margin because we're now leveraging AI.
05:31So that hasn't kind of filtered down, filtered through.
05:33I think the question is these big AI companies who were capital-like businesses
05:39are suddenly capital-intensive businesses as they're building these data centers and other things.
05:42And a lot of that expense hasn't gone through the P&L.
05:45So the question is, what does that look like ultimately?
05:48And I think that remains to be seen.
05:50I think that's still pretty new.
05:51And again, as people get smarter about that governance layer on where to direct their queries
05:55and start to send more to the free AI models, that could be impacted.
06:00Or even competing cheaper models from places like China.
06:03Exactly.
06:04Yeah.
06:05Kevin Warsh, a few months on the job here, finding his way,
06:10talking more about his objectives and sort of the reaction function as he sees it.
06:14Are you satisfied with what you've heard from him?
06:15How important was this last meeting that we had last week and the comments that he made after?
06:19Do you have a better sense holistically of the way that he's approaching the job and monetary policy?
06:22Yes. I mean, he was always kind of hawkish.
06:25And I think people wondered how much the president might put pressure on him.
06:31You know, I think he needed, with the jobs numbers that came out
06:35and the core inflation numbers that came out, to be credible.
06:38The Fed needed to raise rates.
06:40He's one voice there.
06:41And so I think, you know, the market's been happy with his independence,
06:46his demonstration of the independence.
06:48Before we let you go, how about a vibe check very quickly?
06:50How are you feeling?
06:51Amidst all the uncertainty, we've touched upon some of it here.
06:53Of course, that's going to be on the program here today.
06:55Geopolitical uncertainty, uncertainty over AI.
06:57How are you feeling as an investor?
06:59Well, I mean, the crazy thing, if you look at 2026,
07:02probably the best word to describe it is resilience.
07:04Yes.
07:05I mean, if you think about it, right, corporate earnings are very strong.
07:08The consumer continues to be very strong.
07:11The job market is strong.
07:12Here you have two wars.
07:14You know, the oil price is really, really high.
07:16We've been able to absorb all those things.
07:18Productivity is at an all-time high.
07:20And again, kind of just starting.
07:22So I feel pretty good.
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