Karen Karniol-Tambour - Macro Headwinds vs. Tech Tailwinds

**Patrick O'Shaughnessy** (0:00)
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**SPEAKER_2** (1:51)
Patrick O'Shaughnessy is the CEO and founding partner of PositiveSum and the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of PositiveSum or O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of PositiveSum or O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (2:23)
Today's conversation was recorded during last week's Sohn Conference. I sat down with Karen Karniol-Tambour, co-CIO at Bridgewater Associates. I hosted Karen on this show two years ago and if you listen to that, you'll remember she has a rare skill for distilling and analyzing complex macro topics. Today's environment is strikingly different to the summer of 2021, so this is a timely conversation on the big macro variables that are on investors' minds today. Please enjoy my conversation with Karen and if you want to listen to the other fireside conversations with Sam Altman, Patrick Collison, and Stan Druckenmiller, I recommend watching them on YouTube through the link in the show notes.
Karen, it seems like every single time I talk to you, you get promoted, so if we keep doing this, you're going to be president in a few years or something like that. Congratulations on the new position.

**Karen Karniol-Tambour** (3:11)
Thanks. I'll keep talking to you no matter what happens. I promise that.

**Patrick O'Shaughnessy** (3:14)
I would say that the theme thus far today of the big conversations, the fireside chats like this one, has been this clash of what I'll call macro headwinds that Stan Druckenmiller just laid out for us and technology tailwinds, maybe the revolution that's going on in the world of artificial intelligence that Patrick Collison and Sam Altman started the day with this morning. I would love to hear your take on something like AI. Obviously, you're focused on the very big global picture of capital markets and all different asset classes.
And when you introduce a force like this into the field, I'm sure it's something that you've considered deeply. So what is your reaction to watching this technology unfold in just the last few months? And how do you think it affects the big picture?

**Karen Karniol-Tambour** (4:02)
You're completely right. I'm the last person you should listen to in terms of actually explaining the technology whatsoever.
But I think the bestest thing about it is an analogy to what's happened so far, which is when you have secular forces, they tend to be slow moving and affect a lot of things that matter for macro, but affect them over time and over decades.
And it might be we're kind of living right now with the after effects of having just been through a very long cycle where a few big macroeconomic forces really shaped our world and shaped it really broadly economically, socially, politically over a few decades. And if you start around the nineties or so, you get these big forces of globalization and automation that to simplify, obviously a lot has been written about this, take this section a bite, if you will, out of the US labor market and the US economy that was mostly manufacturing. And totally upends all these people, these manufacturing jobs, certain people in certain locations, and moves a lot of those jobs to cheaper countries, mostly China. So now you have all these jobs disappear. And then the rest of the ones that are left get massively more automated. So people who are left in the US doing manufacturing jobs are now highly, highly radically more productive than they used to be. So you have a productivity explosion in the manufacturing sector, requires a lot fewer employees. That's a huge change. It took a long time for that change to happen to probably, I don't know, 20 years. And the effects of it affected everything in macro gradually over that time period, meaning you had higher profits, really good for companies, they could get more productive, shift things abroad. It was really deflationary. That was a big part of what kind of allowed Federal Reserve to keep rates low and all that. It had big social consequences, inequality got bigger. And a lot of the populism we see and the political consequences, slow moving. But a lot of our conflict with China comes out of two decades with a slow train going through and making its way through our economy. And this happened all over the world.