AI Can Tell Us Something About Credit Market Weakness

Dan Wertman (0:02)

Bloomberg Audio Studios, Podcasts, Radio, News.

Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:22)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, there are just so many credit related things to talk about right now. All things credit.

Tracy Alloway (0:28)

I love it. I love it. Credit is interesting again.

Joe Weisenthal (0:31)

This might be one of the only credit episodes that we've ever done where I found the guest. Because I feel like when I think about all the credit episodes, it's usually someone you know. And randomly, I found someone who knows a little bit something about credit. She was like, oh, let me do it.

Tracy Alloway (0:44)

The stakes are high, Joe.

Joe Weisenthal (0:46)

I know, I was thinking about that, because you're like, oh, Joe, you picked someone who doesn't know anything. No, I don't think that. I think we have a very knowledgeable credit guest, but I'm a little stressed about this aspect.

Tracy Alloway (0:55)

I believe in you, Joe.

Joe Weisenthal (0:56)

You do?

Tracy Alloway (0:56)

I trust your judgment. But to your point, there's a lot going on. So obviously, there are concerns around private credit. We've had some idiosyncratic defaults and frauds in the market, and each one is special in their own way. But I think the worrying aspect is that they keep coming to light. And so you've seen people like Jamie Dimon using the Cockroach analogy, which is now famous. And at the same time, you have the connection with AI, which we have spoken about a little bit on the podcast with Paul Kedrosky, all these complex circular financing structures that are driving a lot of the credit boom or have been driving a lot of the credit boom. And then at the same time, you also have the impact of AI on credit itself.

Joe Weisenthal (1:43)

Yeah, that's right, because in theory, right, like we've talked about this, we did that episode with Joel Wertheimer, that was in a slightly different context, but we've done these episodes about, you know, just the incredible length of deal texts, et cetera. And perhaps if there's one area where maybe we could say with some high degree of confidence that large language models could be useful, it is can we break down this, you know, multi-hundred page agreement so that we don't have to have, you know, junior associates or junior lawyers or junior bankers up till four in the morning, making sure that every comma is in the right place, et cetera. In theory, this could be an area in which AI could be productively applied.

Tracy Alloway (2:23)

You know there was an actual case argued over a comma.

Joe Weisenthal (2:26)

Oh yeah.

Tracy Alloway (2:27)

I can't remember exactly what it was, but like you're absolutely right. The grammar, the specific words clearly matter in legal language. I would just add one of the things that's been driving, arguably driving private credit is the boom in creditor on creditor violence in public deals. So it was this idea that you could avoid that by having this private close relationship with your borrower where you are higher up in the waterfall of payment. So this is important.

Joe Weisenthal (2:53)

It would be really nice if you could upload a credit agreement to Chad GPT and just say, make sure there's nothing in here that would get me in trouble. Make sure there's nothing in here that five years later, I will regret the placement of a certain compound.

Tracy Alloway (3:05)

Make sure I don't lose money.

Joe Weisenthal (3:07)

Make sure I don't lose money in some technical way. Anyway, so there's just a lot going on. I feel like there's plenty of episodes to do on this. But we really do have the perfect guest, someone who literally sort of sits in the intersection of I think we identified three distinct trends here. We are going to be speaking with Dan Wertman. He is the co-founder of a company called Noetica AI, and it does exactly this. It sort of attempts to use AI to understand credit. There's a lot of understanding about deals and the text in them. He also just has a lot of understanding about AI, et cetera. So we can talk about all these things.

Dan, thank you so much for coming on the podcast.

Dan Wertman (3:42)

Thanks so much for having me. I'm a fan of the show.

Joe Weisenthal (3:45)

Love to hear it.

Dan Wertman (3:46)

You guys are kind of like celebrities for me. So it's kind of fitting that I'm here, because at least with folks at Bloomberg, because many people think about us at Noetica like the Bloomberg for deal terms.