Like driving a Ferrari in Manhattan

Like driving a Ferrari in Manhattan

Where Innovation Meets Investing

For decades, America’s largest industry—real estate—has been run by a cartel.

I first wrote about this in 2019. I expressed hope a company would come along and disrupt the monopoly that allows realtors to charge sky-high 6% commissions in the US.

Good news…

  1. Last week, the National Association of Realtors (NAR) settled a wave of commission lawsuits brought by home sellers.

In short, it marks the end of the realtor cabal that artificially inflated fees.

Middlemen are always at high risk of disruption. Just ask stockbrokers. 

“Stockbroker” used to be a lucrative job. Then in 1975, The New York Stock Exchange abandoned its fixed-rate system. Commissions nosedived:

Source: National Bureau of Economic Research

Realtor commissions are next.

Innovators will jump into the market and compete on price.

Expect average realtors’ commissions to gradually fall to between 1% and 2%. The great ones will command more, of course.

Investors: Avoid stocks like Zillow (Z), which gets most of its revenues from realtors.

Everyone else: Insist on a lower commission if you’re buying or selling a home.

This is a great thing for America. The ending of the realtor cartel puts tens of billions of dollars back into the pockets of homeowners.

But I wouldn’t want to be a realtor today.

  1. Nvidia just revealed its latest AI chip on stage…

It’s 3X to 4X faster than the best chip on the market today, and up to 25X more efficient. Here’s CEO Jensen Huang holding the beast (left side):

Source: Nvidia

As you surely know by now, Nvidia (NVDA) is one of the best businesses in history.

It buys silicon wafers from Taiwan Semiconductor (TSM)—which makes the chips from 3 tablespoons of sand—for roughly $700 apiece. It then packages the chips and sells them to the likes of Google (GOOG) and Microsoft (MSFT) for $50,000!

It’s one of the biggest markups in history—greater than any Louis Vuitton bag or Rolex watch.

But Nvidia is moving too fast for its own good. Its AI chips are 100X faster than they were a decade ago.  

All the other parts that make up a data center—networking equipment that allows the chips to “talk” to each other and so on—have only gotten about 4X faster.

This creates a major bottleneck where Nvidia’s chips can only work 30% of the time. The other 70% of the time, these $50,000 chips sit idle… but still take up full power.

It’s like driving a Ferrari in Manhattan. You can only go so fast.

Nvidia will keep on winning. But I expect a lot of spending to shift toward the lagging parts of the data-center equation: cooling equipment, storage, next-gen fiber optic cables, and so on.

We took profits on Nvidia (again) inside Disruption Investor last month. It’s time to reinvest those profits into other AI infrastructure winners.

  1. When it comes to AI, don’t forget these 11 words...

This is the WORST artificial intelligence is ever going to be.

I wrote that when the debut of ChatGPT stunned everyone last year. The latest AI models already blow that old dog out of the water.

GPT-4 is 10X smarter than the “free” version of ChatGPT. It can “see” images… analyze videos… talk to you with a natural-sounding voice… and remember questions you previously asked it.

I’m shocked by how fast AI is advancing.

ChatGPT creator OpenAI had a big lead in AI. But in just the past month, two models that rival GPT-4 have been released.

French startup Mistral AI went from zero to creating a GPT-4-level model in just nine months. Amazing.

And last week, Anthropic released Claude 3, which beats GPT-4 on many tests.

I’ve enjoyed using the “Pi” app on my iPhone. It’s like an AI assistant you can talk to and ask questions on the go. Pi remembers our past conversations and always understands my thick Dublin accent.

Start using AI in your daily life—seriously. Soon, people who don’t know how to use AI will seem as ancient as folks who can’t turn on a computer.

If you’re on the “free” version of ChatGPT (GPT-3.5), upgrade to GPT-4. It knocks the socks off its predecessor.

GPT-4 and Claude both cost $20/month. Pick one and subscribe.

AIs don’t come with a “how to” manual. You just need to play around with them to learn how they can help.

Think of “jobs” that take up a lot of your time. Maybe it’s a mundane office task or helping your kids with their homework. See if AI can help.

A recent survey found only 5% of firms are using AI. To butcher an old Jeff Bezos quote, “Their laziness is our opportunity.”

Today, we have a small window to master this powerful new technology before the other 95% of the world wakes up.

What a time to be alive.

  1. Today’s dose of optimism…

New data from the UN shows the number of kids dying before their fifth birthday fell below 5 million for the first time in recorded history:

Source: World Development Indicators

This is great news, but we must keep climbing.

It makes me sick knowing 4.9 million children still die. When you dig into the data, the problem is clear.

The under-five mortality rate in poor countries is 13X higher than in rich nations.

To save kids’ lives, we must embrace capitalism and innovation, which have proven to be the greatest wealth creators in history—especially for people at the bottom globally.

Choose (real) capitalism.

Stephen McBride
Chief Analyst, RiskHedge

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