Chris Aliotta: [00:00:00] Banks are going to become more of the wholesale broker on the back end of things, where it’s, we’re looking for loans of these types, and if you have them, we’ll buy them from you. I think it’s going to become a lot more wholesale in nature. It has to become more service-focused. In other words, you need to be where your customer is, not have your customer come to you.

[00:01:00] ​

Josh DeTar: [00:02:00] Welcome to another episode of the Digital Banking Podcast. My guest today is Chris Aliotta, President and CEO of Quantalytix. Chris and I are both current parents of toddlers, so we know this statement to be all too true. If you tell a toddler, no, they only want to do it that much more. And that’s actually a big part of the fascinating story that brought Chris to where he is now in life.

Chris grew up in a medical family. His dad was a surgeon. And he remembers back to when he was three, sitting on his dad’s lap while he wrote research papers, absolutely captivated by the mouse moving on the screen, even admitting that at that age, he thought it was an actual mouse, but that started a lifelong interest in computers and technology.

Coupled with an extremely inquisitive mind and a desire to build and improve, Chris looked for ways to [00:03:00] combine tech and engineering to create solutions to problems. Even if the problem is just that he needs a new cabinet and can’t find what he’s looking for. So he has to design his own in CAD and then watch YouTube videos on how to build cabinets to make his own custom one.

So how does a guy like Chris end up in the banking industry? Great question. See, Chris also learned early on that to create innovative solutions, you have to deeply understand the domain. You’re trying to solve problems in always fascinated by finance in the stock market. Chris saw even back then a technology revolution was coming to banking, and it could have a real meaningful impact either positively or negatively to people, and he wanted to influence it for the positive.

So he got into banking to be in the trenches learning about the area he wanted to impact. So when you take a kid who grew up in a medical family that is many times slow and methodical and put him in an industry like banking that can also be slow and methodical but you [00:04:00] douse him in the quick burning high octane fuel that is the pace of technology innovation you get something pretty special.

Chris has been talking about it for a while. A storm is brewing between traditional banking and the new age of tech. This is going to be a fascinating episode. 

Chris, welcome to the podcast, man.

Chris: Alright, thanks Josh. I really appreciate you having me on. That was one heck of an intro, so thank you.

Josh:  Now you have to live up to it.

Chris:  I’ll try my best.

Josh: Before we jump into the topic of the podcast, I feel like you have to tell the story because you like you gave me the start of it and you didn’t bother to tell me probably the punchline of it. And you were talking about how,  for you, you’re like, I just, I have to learn how to do things.

And I always want to pick up a new project. And sometimes that includes staining a fence and you’re like, but just don’t get up on a ladder and fall and break your leg. True story. So, so 

Chris: Oh, God. 

Josh: this.

Chris: Yeah,  this is when, like, [00:05:00] curiosity and energy towards doing things by yourself  bites you in the butt. It’s  a standard story of just doing something I shouldn’t have been doing. I was standing on a stool precariously balancing on top of it while I was trying to reach the top of my fence and, for the listeners and viewers here, I’m not a very tall guy.

So,  I need all the help I can get. And, it just so happened I lost balance and the three feet I fell,  normally I’d be fine, but I just landed on this chair, broke my fibula. Never broke a bone before. But I found myself army crawling to my garage to get my phone so I could call my wife to bring me to the doctor’s office.

So, yeah, that was, that was, quite a learning experience. And,  ever since then, my wife has always been cautious when I pick up a new hobby or try to do something on my own because she just doesn’t want to be left, having to deal with two small children and an immobile husband for a couple of a couple months.

So,

Josh: I feel like there’s a lot of similarities between [00:06:00] you and I. I’m the same. I’m like, can I do this myself? 

A lot of times it’s my wife coming in as the voice of reason. And she’s like, look, there’s a difference between can you and should you, can you do this? Probably. Is this going to end up with your dumb ass up on a ladder, like up on top of our fence and inevitably like for whatever reason, I don’t know what my problem is.

It’s going to take some bad experiences for me to learn. But I love to do these kinds of crazy projects and flip for whatever reason. I don’t know why, but she’s always like, what do you do? You’re like standing up on top of the house and flip flops. She’s like, I know how this ends and it isn’t pretty.

Okay.

Chris: Funny you say flip flops. I was wearing a pair of Crocs that were barely on, so, yeah. Yeah. So proper footwear is a must. I agree with your wife on that. So yeah. Yeah, if only I had a camera on the watch. ’cause  in retrospect it was pretty funny ’cause I was like rolling around in the backyard, like screaming for help expecting someone was gonna come and having to pep talk myself [00:07:00] to Army Crawl.

So again, Yeah, sometimes the wives are right.

Josh: I know dude, it was not that long ago. Similar. We have these really high ceilings in the garage. I have Costco shelves that mount to the ceiling that you can put a stuff up on. And I’m up on the ladder and I’m maybe like, like you said, like three feet off the ground and I was moving some things around and  you  reach that point in life where, don’t know, there’s like a tipping point for certain types of activities where you have the realization before you do it that I shouldn’t do this. The realization in the moment that I shouldn’t be doing this or the realization after the fact that you shouldn’t be doing this. This is one of those ones I should have had before and had it after.

And I was just, I was moving some things around and I was precariously up on this ladder and I was like, I don’t want to take, it’s one of those little giants that you can ratchet up and make taller. I don’t want the time to make it a little bit taller. Like I should, I’m just going to be on my tippy toes and I’m pulling something and I fall [00:08:00] backwards, pull things back with me.

And what’s on top of it are a bunch of metal ammo cans.

Chris: Oh!

Josh: I fall back straight on my back on the concrete and all I see are all these metal ammo cans falling at me like a cartoon. 

Chris: Oh, God. 

Josh: Same thing. I wish there was a camera in my garage to catch this because I swear it outlined my body perfectly and I didn’t get hit by a single one.

But I’m laying there at that moment as these things are falling towards me. I was like, man, is this how I go? Like, This is going to be it. Like, 

Chris: Yeah, right? 

Josh: Tell a better story than 

Chris: Oh, man, that is 

Josh: But I was goodness gracious. Like, yes, I, a thousand percent my wife as I was getting ready to do that task was like, are you sure that’s how you want to do it?

But 

Chris: Those little giant ladders, man, I’ll tell you. So,

Josh: Yeah, I know those are probably the deaths of more men than, I don’t know. There’s, that’s a statistic. I want somebody to pull the data on how [00:09:00] many of 

Chris: yeah, right? Right? 

Josh: died on little giant ladders,

Chris: They make the convenience seem reasonable at the risk of extreme personal injury, that’s for sure.

So, I’ve been there before. I, I totally understand where you’re coming from.

Josh: Yeah, I think there’s a reason why, like, OSHA requires you to be harnessed at like three feet on a ladder or something silly.

Chris: Very true.

Very true. 

Josh: Yeah, I’m pretty sure you and I could just in like the five minutes we’ve gotten to know each other can probably agree we could probably both be poster children for OSHA’s like what not to do’s.

Chris: Oh, 100 percent without question and probably become some viral video on TikTok or LinkedIn or not LinkedIn, but what’s it called Instagram where people are laughing at just the idiocy. So that’s for sure.

Josh:  I don’t know how we got on that, but, no,  ? 

Chris: for me. 

Josh: Yeah. Yeah. Oh man. But, okay, so back to the topic at hand. I always love you even calling it out when we were, when we were just [00:10:00] getting started. You’re like,  there’s the clickbait titles and they always get even you excited.

And you made a comment to me like a storm’s a Bruin. I’m like, that’s a fantastically clickbait title. But you gotta dive a little bit deeper into that. So what do you mean when you think there’s a storm? A Bruin?

Chris: Oh, yeah.  Again, I think it’s one thing that,  hopefully most people have heard at least at this point or are starting to feel and see. And if you’re in the finance space, certainly this is a topic that’s been talked about,  ad nauseum. And,  I think it’s the economic reality that things move in cycles. We are due probably for another cycle in terms of recession or a prolonged period of, not optimal growth. Just to be hedgy here. But the big thing that I’m trying to bring back or mention with this is that we’ve got a lot of indicators right now. We’ve got some good heads up.

There are canaries in the proverbial sense of canaries in the coal mine, [00:11:00] right that are starting to show up dead. Starting to pass out. And I think we need to really be paying attention to what those are. And really thinking about those indicators that are presenting themselves in a significant way.

And so one of the things that you and I were talking about before we started here was, my area of expertise, which is, the yield curve, and in corporate finance, mainly in the treasury capacity within banking. And when I started my career in banking, it was right before the Great Recession.

I got to see banking in its, I guess, I wouldn’t even call it its heyday. I would call it the end of its heyday, where you’d go on trips with the Lehman Brothers, and they would pay for your food, and you’d go ski trips, and all sorts of stuff. Seeing what happened and living through that has given me a different perspective on evaluating risk, in the market.

And one thing that jumped out at me early in my career was an article, written by a Wharton professor, called Don’t Sweat the Yield Curve, why you shouldn’t sweat the [00:12:00] inverted yield curve. For those who may not be familiar with what a yield curve is or what that means, a yield curve is a representation of the different interest rates that you can get over time.

So if I were to lend you money overnight, what is the interest rate that I would be willing to accept in order to take that risk? So 30 years from now, 10 years from now, one year from now. And that process of establishing those rates. It happens every day, and it happens by way of thousands and hundreds of thousands of people participating in a market that eventually, for lack of better words, zeroes in on what the average rate would be that would satisfy the most number of people participating in that exchange. And so what happens is, when you think about it from a logical perspective, if I’m going to lend to you in the long term, right, let’s say 30 years. versus lending overnight. What would your gut tell you? What, what would you want? Would you want a [00:13:00] higher rate of return for something longer or would you want a lower rate of return?

And I want to ask you this, Josh, like, what’s your gut tell you?

Josh: Yeah, what you just said. I would say I would probably want a little bit higher return for something longer ’cause it’s a little bit more speculative.

Chris: Right, right.

So, there’s a natural tendency for yield curves if you think about it. If you look at all the different we call them tenors, but there are dates in the future, in which these things would mature or would be done or would have to be paid back. There’s all these different tenor points with different interest rates, and as you go out longer, which would mean further out in the lending curve, you would expect what we call a gradually sloping upward yield curve, right? It fits, right? Logically, if you’re gonna wait for 30 years, there’s so much uncertainty, so many things can happen between now and then, that you’re gonna want to be compensated for that risk. What’s interesting is that in the present state, at least last I checked, and,  who knows where things are right now. We had what is called an inverted yield curve, which in [00:14:00] my personal opinion is, it is something that can happen and it does happen, and you may or may not know this, but every big period of economic decline or recession has always been preceded by inverted yield curve.

So what that means is people are saying, hey, no, I’m going to lend to you overnight, but I’m going to, I want a higher interest rate to lend to you shorter term than longer term. And there’s a whole bunch of theory around that and why that happens. But it’s in a, in a logical and perfect world, that should be very rare.

Because again, it defies, what, it defies  the risk aspects of risk return why we’re doing what we’re doing. And there’s market expectations theory. There’s all sorts of different theories behind why the yield curve will shift and change shape. But the key thing that I want the listeners to know is that when this happens, I don’t think there’s been an instance where the economy hasn’t turned upside down.

And maybe I’m wrong in that, but I’m pretty sure [00:15:00] in almost every presentation I’ve seen, there’s always a period of economic decline. And why does the yield curve have that negative shape? It’s because investors expect either short term interest rates to have to be cut. And again, remember, short term interest rates are controlled by normally a, in this case, it would be the Fed, but by a Central Bank, okay? So, if you were to remove the Central Bank from the equation, shorter rates, short term rates would probably be a lot lower. So typically, what we’re seeing here is that people expect the central banks to have to cut interest rates. And the reason why they would cut interest rates is because they want to encourage economic growth. And we saw that during the financial crisis rates were brought all the way down to zero. In nominal terms or close to nominal terms, and in fact, in real terms, they actually went negative, which was mind blowing for most people, and you say,  how can you have a negative interest rate? For that to happen, it’s pretty simple.

We could set you up with a non-interest bearing account [00:16:00] in your bank account, but charge you a fee. You’re coming out with less money, you’re not getting any interest on that. What does that equate to? Basically, a negative rate. And that’s what we saw a lot happening throughout the financial crisis and in certain events like that, as liquidity became a little less stretched.

So why I say a storm’s a brewing is because the yield curve has been inverted for quite some time. And my expectation is it, none of these, none of these prophecies are good unless you put a time period on it. But within the next year, my expectation is for there to be a market moving event that can put capital at risk. And hopefully I’m wrong. I really, truly do hope I’m wrong, but I’ve learned, I’ve learned from the past and I’ve learned that, when you see these things, you need to take them very seriously. And, there was an article that was run in Forbes and it was like the everlasting nothingness of an inverted yield curve, which hearkened back to that early article that I [00:17:00] read, which said,  don’t sweat the inverted yield curve. Which brought me to actually writing a piece for American Banker, saying why you should. And there’s a lot of things right now where I think in singular, there, they could be impactful, but I think what’s going to end up happening is in the perfect storms that we usually see, it’s a bunch of things going wrong all at the same time. So it’s a, there’s a stacking or a domino effect. And so, I thought talking about that might be interesting today, and again, I’ll digress and let you get a question in here or two, Josh.

Josh: No, no. It’s just so, this is not my area of expertise, but even as you’re just  explaining it to a dummy like me, it’s math for me, right? Like if you think about it, I use this analogy a lot in just even day to day stuff, right? Not finance. But the analogy if you look at the stock market, right?

If you look at the stock market in a day, it’s [00:18:00] terrifying. It’s all over the place, right? If you look at the stock market over 50 years, it’s up right. And so when you’re talking about an inverted yield curve is essentially signaling that people are more scared of the short term than the long term.

Chris: Mm hmm. Mm

Josh: So that’s saying like, Hey, I know at some point this thing’s going to level out, but right now I’m a little freaked out and I don’t know what tomorrow is going to hold. So therefore we’re going to see this change in behavior, right? So I don’t know, at least for me, like that  math, but I think you also make a really interesting point in that.

Especially in today’s day and age, like we have so much information available to us. And I’m just gonna tee this up, but I don’t want you to go around the rabbit hole just yet, but especially if you look at something like having access, like public access to crazy, intelligent, large language models like ChatGPT.

Right? [00:19:00] Like I can plug into ChatGPT and probably just in the time period while you’re talking, I could probably go get some fascinating statistics to tell me every single outcome of every single time the U. S. economy has faced an inverted yield curve, right? And I probably get fascinating information instantly from ChatGPT with great data, right?

So we have more data and easier access to just understanding of history than we have ever had. And the ability for lots of people to have access to it, right? Like, even if you look back 10, 20 years ago, yeah, you look at somebody like Warren Buffett, right? Like he’s probably got an incredible army of people and data to help him make intelligent decisions.

But you and I didn’t have that data. Now we do, right? Like now I can, like I said, literally just go query chat GPT and probably get a pretty darn good answer to that. So all of a sudden. We have all of this  history and knowledge available to us, but at the same time, we still [00:20:00] somehow make the same mistakes twice.

And so when you’re looking at your predictions for what’s going to happen in the next year, based on where we are today. I think the important point you’re making is that one singular. Like we’re in a place where one singular thing probably won’t send Humpty Dumpty over the wall.

Right. But like if enough things stack up, like he’s going over. So what are some of the factors that you see that are going to either push him one way or the other?

Chris: Yeah, no, that’s a great question. And again, I apologize if I break up at all. Something’s going on here with my internet connection where it’s getting a little wonky. But I think what’s going to end up happening is that ultimately what will drive the economic issue is always going to be the banks.

It will always be the banks because that is the oil to the engine, right? And if the engine’s going to seize up, it’s going to be because it overheats and there’s not enough,  call it lubricant or connectivity or gearing to make things work. So, [00:21:00] why do I think there’s going to be some issues within the banks?

 I think we are coming out of a period of low interest rates, which was both a great thing for the consumer, but not so, not so much of a great thing for the banks, right? Banks make their money by lending long. So if we talk about the yield curve, this is why it’s important. They like to lend for a long, like 5, 10 years, 30 years. And then they borrow short, which is usually your deposits or from the Fed, where they’ll pay you an interest rate and they basically take the spread. It’s a carry trade. Some people say arbitrage. It’s not arbitrage. There’s a risk involved. So just always remember that. It’s a carry trade, and what they’ll do, and that’s how they make their money.

So the problem is when short term rates move, well that spread starts to compress, right? And it can actually go negative. where the bank’s cost of funds is higher than what they’re lending out at. Now, the reason I mention that is I don’t think that there’s going to be what would have been a 1980s, [00:22:00] 1990s crisis with interest rates here.

I think what’s going to happen is there’s going to be a situation where there is a loss or there is a credit event that triggers these banks that have to become more liquid. In other words, having to liquidate some of their investment securities, having to sell some of their portfolios so that they have enough cash on hand to maintain their capital requirements. And so they can pay out their depositors when the money needs to flow out. So a good example of this would be Silicon Valley Bank. This is what I think is going to play out potentially is Silicon Valley Bank, by and large, for the most part. I’m going to be very careful saying this, from a risk perspective, we won’t say from an interest rate risk perspective, but from a risk perspective, they weren’t doing crazy lending. They weren’t doing anything that at the surface was going to cause any type of credit issues, which is something that we have definitely overcorrected for. But what they were doing was putting [00:23:00] on investment securities onto their balance sheet that were longer dated and more sensitive to interest rates.

So as interest rates went up, the value of those securities go down. And so in the debt market, there’s an inverse relationship between interest rates. If the required rate of return goes up, the value of that, asset goes down. And so they had a lot of these securities that they bought when interest rates were really low, and then interest rates started to go very high.

And now those securities aren’t worth what they paid for it. Okay, and so they had to go and sell it, and they sold those securities at a loss. And, we all know how it played out, right? I believe that what will end up happening or something similar that could happen is there could be an event where a commercial credit blows up, where we see,  the office space, we see a weakness in the, what would be the commercial, real estate environment, that facilitates cash outflows, right, that, that requires cash to have to leave [00:24:00] the bank’s balance sheet, right? That then requires the banks to either have to sell securities or think, or assets that may not be securities, that’ll definitely be underwater. I think the dirty, dirty little secret is that if you look at most banks’ mortgage books, if you had to mark them to market today, I guarantee, or at least I can say with conviction, that a good number of them are under the water.

And it’s not because they’re bad loans, they’re all performing. But it’s just that within today’s current economic regime, those things aren’t worth what they paid for originally. And there are certain risk practices, there are certain things banks can do to mitigate that. But I don’t believe all banks are doing that.

And I do believe that there’s an inherent risk there that needs to be addressed. Now sometimes, and I think at this point it’s a little too late for that because those were things that needed to be done as they were doing that lending, in order to have a hedge against what I’m talking about. The other component of this, which I, I think is often [00:25:00] overlooked, is the money supply. So, coming into COVID, or coming out of COVID, there’s this thing called the M2 money supply, and that’s the dollars that are currently in circulation in the U. S. economy. And again, for the economists that are listening, there’s probably a better explanation than that. But I would just like to say that if you were to pull that curve or pull that graph, you can get it from, I think the New York, it’s the Fred, a New York Federal, anyway, the New York Fed website or something. It’s called Fred. That’s their, their, their data system. You’ll see that it’s always been increasing. It’s always been increasing. And then when you get to the start of COVID, you see it spike, you see it just jump up. And that was the Fed, that was our, our government’s flooding the market with what I call helicopter money. And that’s, again, another economics saying that you don’t hear very often, and I’ll explain where that came from.

But basically we flooded the market with liquidity and cash to keep it going, to keep it moving. If you look at that [00:26:00] chart today, you’ll see that it’s actually coming down. They’re pulling real dollars out of circulation. As far as I know, that has never happened. The money supply has never shrunk in the way that it is shrinking right now. At least in my lifetime and probably everyone else’s lifetime. That’s, here on this planet. That means that banks have less money and less dollars in deposits. That means that liquidity is going to get tighter. And again, the reasoning and the rationale behind why all that is happening is because We are trying to fight the inflation that came with that sudden surge of dollars.

Josh:  Chris, now, after we finished recording, I really want to go back and listen to some of the episodes because we  started this podcast, in the early days of the pandemic, right? And, I want to go back and listen to you. I’m curious what some of my comments and my guests’ comments were in those early days, but whether I set them on the podcast or just to myself [00:27:00] or to friends and family things.

In the moment of that, there was definitely some conversation of, yeah, this feels like something that’s a band aid today that’s going to blow up in our face later. And it’s just, it’s even just a basic understanding of U. S. economy and just the financial services industry here in the States, right?

But,  what you were talking about,  if you look at just the really, really simple, like major element that we talk about of how financial institutions generate revenue to be a business, right, it’s net interest margin, what you were talking 

Chris: hmm. 

Josh: And that is just one component of their entire balance sheet.

And,  so then you start talking about non-interest margin types of revenue sources. And so, this gets [00:28:00] really complicated really quickly. And I think that’s what you were  alluding to is that there’s so many factors involved, but at the end of the day, there’s still this, there may be a hundred factors and net interest margin may only be one factor, but it’s a really big factor.

Chris: And we’re like flirting with gasoline right now. Is that fair to say, based on what you were alluding to? Yeah. I think banks are managing their NIMS appropriately. I think it’s going to be how they handle a liquidity crisis when they do not have enough money to fund the loans that they’ve lent out. And that is usually what controls around that.

What that looks like is usually controlled by the FDIC, the office, the OCC. And so, the Federal Reserve. So a lot of that I think is what is going to spin things or what’s the word I’m looking for here? Or the saying I’m trying to go with here. I think that can knock things off the rails, and I think it’s just gonna be a compounded optimization issue. [00:29:00] I don’t believe that NIM is going to be the driver of that. I think it’s going to be capital and I think it’s going to be liquidity around the funding of the balance sheets. And what happens when they have to start to dial things back and take, and bring some cash back onto the balance sheet, so.

Josh: So if you think about just from your perspective, like what would be maybe the top five things that you’re  keeping an eye on, depending on how these levers all move, like this could create the perfect storm that you’re talking about.

Chris: I think it’s going to be looking at the commercial real estate market and seeing who’s taking the losses on those properties when they come due. Because again, all those are, mostly debt financed by way of these regional community banks, commercial banks, I should call them, super regionals. I think watching and seeing what happens there, looking at the vacancies,within that space, looking at new builds, I think a lot of that is going to be fairly telling. I think paying [00:30:00] attention to the earnings reports, when, if there’s any mention of, working out new terms for these loans,  what I suspect is there’s going to be a lot of loan modification. I suspect that there’s going to be extensions to current contracts, maybe at lower than market rates, just so that these properties can cash flow or at least,  the current owners of the paper don’t have to take a loss or walk away from it. So I think that’ll be an interesting story.

I think that’s something to pay attention to. I think,  again, any type of, anything that would cause the banks in general to have to sell assets would be something that I would, I would, look at, with extreme concern.

Josh: Talking about the commercial side of things, that is definitely one that is really interesting, that is, is totally pandemic fuel, right? Like, this is one that I don’t think was on any of our bingo cards. I don’t think any of us had our bingo [00:31:00] card. Like, we’re going to go through a period where it is unsafe for humans to be around other humans.

So we’re going to separate the humans from each other. And we’re going to take out that whole social element and just what that did to our economy, right? And, I’ll just use two very, very easy examples. But I’m curious to get your thoughts on it . One, you look at what happens in restaurants, right?

And I was actually just talking to a buddy of mine and he was talking about a friend in the Dallas area who owned a sushi restaurant that was like this really high end sushi restaurant, was in a really premium part of like downtown Dallas, super, super high rent had just done a massive build out with the building owner for the sushi restaurant pandemic hits, right?

He has no restaurant. And so he went to the building owner and was like, Hey man, we gotta renegotiate our [00:32:00] terms, otherwise I’m going to go out of business. I’m going to have to pull. And they were, like, tough. Like the terms, figure out how to pay it or bounce. And  the end of the story is that they ultimately came to terms because the building owner realized how hard it was going to be to get somebody else in and they were probably going to have to do a whole nother build out.

It was going to cost them a ton of money. And so they might as well just,  a bird in the hand is, is,  worth two in the bush type of thing. 

Chris: Right. 

Josh: So it’s interesting to see how we went through like that period where, and I’m using restaurants as a very specific example where they went down to nothing and then  figured out how to do something.

And now for all intents and purposes are back to normal, right? I would say even if you just look at the Portland market, like we’re starting to see businesses or like restaurant businesses start to come back. Some of the places that closed are starting to reopen, maybe in different locations. For some of those same reasons, maybe they did or did not have good relationships with their landlords, [00:33:00] but then you look at it like commercial office space.

And I actually just referenced this on the last podcast that I recorded, with Donovan from DBSI, they do branch builds, right? And we were just talking about the number of locations opening in relation to other businesses and how they were maybe looking at building branches where there were other businesses as a part of it to help subsidize the cost of a branch build and things like that.

But, I referenced this same stat on that podcast where a friend also recently sent me a map of Portland where I live. And it showed all the available commercial real estate in downtown Portland. January of 2020 versus today, like July of 2024. And Chris, it’s like mind boggling, right? In January of 2020, there’s like a couple of pins.

On the page and today you [00:34:00] can’t even see the map of Portland. It’s just solid red dots, right? 

Chris: Oh, yeah. 

Josh: So you can’t tell me that’s not going to have an impact.

Chris: It absolutely will. And  again, it was such an interesting time. Now, I had mentioned something called helicopter money earlier on, right? And so I want to unpack that. I think that this is a good time to talk about that. So, for some of the listeners, they may remember Hurricane Andrew. Early nineties, mid nineties. Hurricane Andrew ripped up the east coast of the United States to tremendous amounts of damage. I think Bill Clinton was president at the time. I was, I was young. I remember it. I wasn’t there. I was in Buffalo, New York, so I was far from it. But one of the things that occurred, I believe, was that in the midst of all the chaos, people were coming in from out of state and were charging what was thought to be exorbitant prices for basic needs, water, food, whatever.

And a lot of governors stepped in and said,  we are not going to allow our people to be taken advantage of during this time of crisis. And so we’re going to [00:35:00] impose price limits on what you can charge. What ended up happening was everyone who was bringing these much needed resources stopped coming. And so now there was no water. And so, I forget which economist it was, but he coined this, this phrase, calling it helicopter money. He says in a time of crisis, it’s best just to get in a helicopter and start throwing money out on the area affected because so now they have the dollars and at least they’re going to attract what would be the people willing to sell the goods and services needed to keep that economy or keep that area moving.

So it was said in jest, but I think there was a lot of truth to that. And I think going through COVID, exactly what the government did is basically a buy now pay later. They threw helicopter money out the door. They just threw money out there and they just said, hey, look, this is to keep things moving.

This is to attract the people that would. In other words, keep the economy going and afloat. We’re going to keep them moving by giving them dollars to spend. And, most of [00:36:00] GDP, I think,  GDP is calculated, I believe, by, at least on the domestic side, on dollars spent, I think. Don’t quote me on that. 

Josh: of money, dollars spent, dollars in circulation. It’s like some 

Chris: Exactly. So, imagine, and let’s, everyone get a bailout, right? The consumer got a bailout, they got an extra check, I mean just look at all the vacationers that you probably saw coming out of COVID, the big, the business owners most certainly got a payout, because some people,  let’s be real here, what was it called?

Not TARP, that was for the banks, but, oh goodness, what was, that program called

Josh: PPP loans. 

Chris: PPP loans. Yeah. The rules around that money was, there are no rules, and I say that jokingly, okay? It was that you’re gonna use, you’re gonna allocate that money towards the office and keeping people on your books. But if you’ve got revenues that are already locked in contractually, you still can get this money. All you had to have was a fear of [00:37:00] loss, have a fair belief that that wasn’t going to materialize. So I’m sure there’s people out there who took advantage of it to buy homes, lake homes, boats.

 Josh: A dude that got busted, like, buying like five Lamborghinis or something 

Chris:  Yeah, it was ridiculous because I think it was like 3X your payroll, which for everyone payroll is the most expensive line item on their income statement. Yeah, it was basically a payout for the rich to buy things and I don’t want to say for the rich, for the business owners to buy things and keep the people employed. And those that did it to keep the people employed great. They keep the lights on great, but I think the dirty, again, I said the dirty little secret is I don’t think the government really just meant for that.

I think they knew that people were going to go out and they were going to spend things that were going to keep these businesses alive. And so now the genie’s out of the bottle and we got to start bringing that money back, right?

So that’s why interest rates are so high. That’s why the Fed is taking money out of circulation. Hey, if we’re going to get inflation under [00:38:00] control because there’s more dollars out there asking for the same number of goods, we have to shrink that money supply. So going back to the real estate issue here, which was one of, that was largely propped up by PPP through the crisis, but the whole work from home movement began.

And I think a lot of people realize like, I’m just as productive working from home, if not more than working in the office. And so, one of the biggest gripes I hear today is this,  Hey, we’re being required to return back to the office. That’s a loss leader. That’s because these companies are spending the money.

They’re in their leases. They can’t break it. They’re just trying to justify the loss. And they know darn well that when the time comes, they’re going to be dialing back their square foot, that they’re going to be asking for. And so again, I think, I think this is starting to play out.

I’m not sure. I’m not a commercial real estate guy. I can’t speak to that exactly. but I think, again, we live in a [00:39:00] new world where it’s been proven now that remote work is viable. and that it’s now come to be expected. My office is entirely remote.  We have an office just as I call it a hotel.

Like, you come in and you’ll set up. Bu, by no means are you required to be here. So anyway, I think with that shift in mindset, with the change in the generational expectation of things, it’s going to be really interesting to see what is out there and how that’s going to be transformed. And I do want to say one more thing with respect to the restaurant example that you provided, which is, and not to get political. I’ll just, I’m going to be very careful here. There is a lot of trepidation amongst business owners, especially in metropolitan areas around having a presence where either their businesses can be destroyed with no compunction and loss of control. And there’s also a certain degree of trepidation around that in terms of the operational risks that are associated when you’re told you cannot leave your [00:40:00] house. And so I think that really resonates for a lot of business owners, which is, if you’ve ever been at risk of losing everything, you’re going to do everything and anything in your, in your purview to prevent it from happening again.

So, I think it’s not only just the remote work, I think it’s just the chaos and the feelings and sentiments of what happened during that time, coupled with just  some of the unmovable aspects of some of the contracts that people are in right now. That has created a really interesting situation that I think you’re really hit on with the restaurateur.

Josh: Yeah,  hey, I’m willing to get a little frisky with you on this one. I think you bring up a really good point, right? And this is where I think you were going with this too, is we are in like a whole new world, right? It’s  like we have all this data available to us. Like I was saying, you could run a ChatGPT query to tell me all about the history when we’ve been in a scenario like this, what happens.

I think [00:41:00] there’s also an element of like the rule book got thrown out too. And I think a lot of the old rules don’t actually apply anymore for so many reasons. I think technology is a huge part of that and we should touch on that. Right. But two, like I said, I think even just using that restaurant example that you just gave that got thrown out of the book.

Right. And so you look at Portland. Right. And Portland, I hate to say it, like I love my city, but we were one of those cities that was all over the news for some of that stuff. Right. I have a lot of friends who own businesses in downtown Portland. I can tell you within my friend group, every single one of them, 100 percent has moved out of downtown Portland since then, right?

And I made the comments about how a lot of restaurants that are reopening, albeit in new locations. And that was  me alluding to, you what’s been fascinating is, so I live like way outside of downtown, right? This office window that you can’t see, but like that looks at farm fields, right?

[00:42:00] I’m way outside of the city and the one bummer for us living out here is while it’s a little bit more quiet and peaceful and I don’t have as much of the traffic and that  stuff. I don’t get the good restaurants, and so we have to go downtown to get ’em. That’s changed, man.

Now all those super cool restaurants that everybody would come into Portland to go to, they’re actually like where I am, they’re moving outside of the city. Right. And I think a lot of that is what you were  referencing like, you’ve already lost everything once because of something so far outside of your control.

Right. Like, like I said, like none of us had on our bingo card, global pandemic, like it happened. Right. But they’re like, Hey, The fact that my business is no longer protected and safe and the area is clean and people want to come to it, that isn’t my control and I can just move out of that area. So we’re seeing that and I think at the same time with what you were talking about with remote work, we’re also [00:43:00] seeing the same thing.

So we’re seeing like this double whammy of urban sprawl. And you’re seeing people move all across the country, even not just within their cities, right? You look at the massive influx of people to no state income tax states, right? Why? Because I can work remote and don’t get me wrong, Chris, like, I’m on that list of I’m thinking it’s time to get out of Oregon just from the standpoint that my job is exactly the same and I get paid exactly the same whether I live in Portland or whether I live in say Texas.

The only difference is I get 11 percent of my income back if I moved to a no state income tax state. Right? So you’re seeing this massive shift of people. You’re seeing this huge shift in how even just businesses are done. And again, if we go back to GDP, right? Like American small business is actually the capstone of our GDP 

Chris: Oh, it’s 

Josh: money movement, right?

So all of a sudden we’re seeing this huge shift in that. 

Chris: hmm. 

Josh: I don’t know. That’s where I’d love to get  your thoughts [00:44:00] on too. Just so yeah, we have all this history and like you’re saying, like, Oh, never before has an inverted yield curve, brought anything other than a recession or a negative, but could it actually be true that because of so many of these other crazy factors that just were not in our traditional rule book, that that may not actually be true or it just may take different factors happening differently to get a similar or different outcome.

Hmm.

Chris: I think it would be pretty cool if this was the exception to the rule, because it would throw everything to the wind, and  you see a lot of these guys, they’ll come on MSNBC, and some of them are professors, and they’ll just say,  this has always happened.  This is the harbinger,  and that’s all they have to say about it. I want to believe that, but I can’t, because knowing the fixed income markets, and believing in this implied market efficiency, [00:45:00] I think the real rate of short term rates is a lot lower, and I think it has to be a lot lower. And I think what’s going to happen is we’re going to see an over tightening, that’s going to really affect, this plays through Main Street. By the way, just so you know. Short term rates really impact Main Street, and I’ll connect that dot in a moment, But it’s going to, it’s going to come full circle and roost, and there’s other indicators CPI. Everyone overlooks energy and food, but that is the most important, largest expense for almost every American. When you see people on instagram and TikTok showing their grocery cart what it was two years ago versus today with the same amount of money and it’s halved or quartered.

That’s a pretty big deal from a consumption perspective. so I know I’m getting off the rails here. And I have to apologize. Part of what you were saying earlier cut out a little bit. So I was trying to extrapolate from our interpolate from where it picked up and where it left off. But you had mentioned  the reverse flight from the city back [00:46:00] into the suburbs or into the country. I think that’s actually a really fascinating point you make, which is, up until Covid it seemed to be the other way around. You saw a lot of people, especially my generation trying to move back into the cities.

They wanted to revitalize these areas. And again,  not to be political, but I think,  when you disrupt the status quo and people, you put people’s livelihoods at risk,  hard decisions have to be made. And I’ll tell you a personal story. I’m in Birmingham, Alabama, and we didn’t really have it all that bad.

Okay. So, yeah, we were the number one COVID. It’s COVID incident state, blah, blah, blah, all that. But the reality was, if you look at these things,  there, there, I’m not going to go there. I was going to get into some biology things, but my sister would kill me. She’s very opinionated on this. My thought process is this, is that when it comes to pandemic, when it [00:47:00] comes to these things, we’ve done simulations, we’ve seen things where you have to basically let it play out and you’ve got to let it burn through, right? And, my, I’m probably wrong in this assumption, but my assumption is that these viruses or whatever it may be, they have a bias towards survival, and if they’re killing off their hosts faster than they can survive, then there’s going to be a natural abatement or at least lessening of the influence of the disease.

So anyway, I don’t want to get into that because I’m sure I’ll create all sorts of issues. But, throughout COVID, though,  again, Alabama was an outlier with Florida and all these other states. But we did have our share of what I would call a civil strife and no, not without reason. But my office was located downtown and we had our windows smashed and while nothing happened per se to my particular area of the office, cause I work in a shared, big office complex with different the thought crossed my mind of, what if my office had been broken into and what if, you [00:48:00] know. The hard drive had been stolen or important documents that had, we’ll call it confidential information had been removed. That creates a significant risk for me. I could lose my business if information like that got out. My assumption is that we’re in a law-abiding area and that there’s always going to be some response to this to prevent that from happening. But during COVID, that proved not to be the case, at least for a short window of time. So that really was an eye opener, at least from my perspective as a business owner of the risks that I now have to contend with. And, I’d be remiss to say that others didn’t have that. So, again, going back to your point of, we’re seeing them move into areas where it’s harder to get to. It’s a little bit more spread out. You’re not going to have a concentration of people going block to block, quickly destroying things, right?

Just for the sake of destroying things in some cases. Sorry if I got a little bit on the tangent there, but yeah, I think the world is different. And,  [00:49:00] I’ll  go a different route here real quick. You’d mentioned AI, you’d mentioned that changing the playbook of things. Both.

Josh: I have one thought that I’d like you to maybe  round out some of your thoughts on this of just, yeah, like the world is changing, but you’re like the world is changing, but and I’m putting words in your mouth. So you validate that the world is changing, but not necessarily enough because if this happens, this always happens, even though there’s some changes like it’s still probably gonna happen that way.

I’m gonna, I’m an analogy guy. Like I need to really dumb it down for my poor little And as you were talking, I’m thinking like, okay, so if we say that, 100 percent of the time an inverted yield curve turns into an economic hardship time, it’s almost like saying, 100 percent of the time, if you jump out of an airplane without a parachute, like you’re going to [00:50:00] die.

And look at it and you go, but yes, but statistically that was, we’ve only have data that says when it was sunny, but it’s raining. So the rain is going to help slow your fall. And you’re like, no, no, you’re still going to die. Like I get it that the world’s different, but you’re still going to die.

You jumped out of an airplane without a parachute. Right? So like, is that what you’re trying to allude to is like, yes, things are different, but just because they’re different, we can’t really bury our heads in the sand and say, Oh yeah, but this time will be different. And we’re, there’s not going to be any ramifications from this.

Chris: Yeah, I think that’s a fair,fair representation of what I’m trying to get at, which is, I don’t think that some of the market truisms or fundamentals have shifted. I think basic economics is going to play through, and again, I wish I could say with 100 percent certainty that that was going to happen, and in fact, I’d rather take the opposite end of it.

But again, my gut, my gut and experience tells me that when you see things like this, you have to take it seriously.

And,  maybe it won’t happen in a [00:51:00] year, maybe it’ll take another 24 months to play out. Who knows? Maybe we’ll kick the can down the road. but I think things are going to become really interesting. and, and, and, and, I hope I’m wrong.

Josh: It’s a nice delicate way of putting it. They’re really interesting. Okay. So yeah, so I think that perfectly leads into what you were just going to talk about. So I think at least in my, again, dumb head here, like the one crazy wild card is technology. Like that’s the one like a weird little wild card that I feel like could somehow throw a big enough monkey wrench into this whole thing.

That could actually change some things, right? so, what are your thoughts on just the state of technology and  pace of innovation and technology and how it’s, how it’s being applied in financial services? Like, what do you think the impacts of that are going to be?

Chris: Okay, yeah, I’m going to start pretty broad and then I’m going to bring it in, okay? And I want to talk about the topic that everyone is interested in right now [00:52:00] at the moment, which is artificial intelligence. And these large language models that you had alluded to earlier on. And I’m going to say this, and I genuinely mean this, which is, there are very few moments in my life where I’ve seen technological advancement that is absolutely, for the lack of better words, surprised and terrified me at the same token. I don’t think people truly understand how pivotal the AI advancement has become, not pivotal, but like the milestone we’ve hit. It’s like the web browser coming into existence in the early 90s. How impactful that has been to today. We’ve just observed and we’ve just lived through what I think is going to be a turning point in technology.

Which is a turning point in technology. But more, in a more serious way than people even know. and what do I mean by that? Everyone’s always worried about AI coming and killing us. [00:53:00] And they think Skynet from Terminator. No, no, no, no, no. The worry is that now what used to be safe jobs like white collar profession jobs, being a lawyer, working in finance, whatever it may be, even a programmer. There are some real possibilities for labor market disruptions with this technology. Whereas we were able to export our we’ll call it operational, mechanical, whatever you want to call it. We’ll call it blue collar jobs overseas and get the benefit of the cheap labor.  Now in the knowledge market that we have, we can be, we can use AI to augment and enhance.

But we can also, from an out, offshoring and outsourcing perspective, we can also move those things around. So, I believe that there is some real risk in the professions that my children are, potentially could take that I would be very concerned with. and I say this as a technologist. I say this as a significant warning that we will need to learn how to do [00:54:00] things differently in the AI space.

Which is, we need to become thinkers. We need to become less doers and more thinkers, if that makes sense. In other words, we’ve trained ourselves to be doers. We’ve gone to school to learn things in order to do those things. But now people start to, they need to be able to think. Because what AI models can do really well is they can think and they can draw abstractions together, but they don’t have direction. And direction is something that we, as I would call it, the human in the loop, needs to be very good at providing. So leadership, forward vision,  a lot of the things that we’ve  gotten rid of in our curriculums, those things need to come back. because now, with this new tool we have, it’s a multiplier, it’s a force multiplier. And if you’re not able to translate your skills to use these tools and to be a force multiplier, they’re going to replace you. So you think about automation in the automotive industry, right, driving rivets in the [00:55:00] things. We got rid of line workers, who would be doing that, and replace them with machinery.

Very similar things are going to happen in these white collar jobs. And a recent instance of this, which is used to downplay this, but I think it’s, I think it’s smoke, was an attorney used AI to create a deposition or some  case. And the AI referenced case law that didn’t exist.

And they all, all the attorneys had their laugh at it, like, oh, look at this dumb guy. He used AI. And AI’s can never replace an attorney. I can tell you this right now. AI will replace attorneys, a hundred percent, a hundred percent.

Josh:  I just used that example, I think recently to Chris of,  one of the big things that I use ChatGPT for is when I need simple contracts, it’s actually phenomenal at mining legal language. Right. And something I had to write up a simple contract recently that is now granted, like if I’m going to write up a Tyfone’s Master Services Agreement, like I’m still going to use our [00:56:00] corporate attorney for that one.

But like if I need some simple contracts and things, Man, ChatGPT can get me 99.9 with a real long repeat on that close and doesn’t 

Chris: And think about what you just said. You just reinforced the human in the loop, right? So, you’ve had this AI agent that probably saved some low level or intermediary attorney from having to copy a document they had already written and modify and bill you for 10 hours of work or whatever it is, and then you get another guy to bill on top of that. You’ve cut him out. You’ve gotten rid of that low level attorney and what you’ve done is you’ve taken someone who has experience, presumably to review what this model has done to check it, right? So in effect,  you’ve pulled out the bottom end of that early market, which is, again, I can’t speak to how that’s going to ripple out over time, right?

Because if I’m an attorney and now I don’t need to bring on a new partner to do X, Y, and Z, what does that mean? I’m going to be looking for more skilled people, right? But [00:57:00] if I’m not, if people aren’t hiring. Call it the juniors. There will be a shortage of skilled people and again, we can get into some circuitous logic here, chicken and egg type stuff, but I, I want to go back to why I really do believe that attorneys are at risk is because the language of law is one of logic and these models can do logic very well. They can program, which is another language of logic, right? And then when you incorporate that with a corpus of literature, right, which is all law is, it’s case law, it’s documents, it’s books. Where this thing can correlate disparate ideas and make it work, you’ve got a very powerful engine here, and probably better than any attorney that’s out there,  with the exception of the experience, right?

How do you go in and present this in front of a jury, right? There is an element of art to it, right? I do understand that, you’re never going to get rid of that, but I do think that as these things get smarter, you’re just going to see that market get all the more, condensed [00:58:00] and hyper specific in terms of what the human agent is going to be doing.

Josh: Man, I couldn’t agree more. I think this is something that’s always fascinated me. Our CEO, Siva, can articulate this exponentially better than I can, but  you look at the laws of computing power. And it’s exponential, right? And so for a lot of people who don’t live in technology, we  woke up one day and we’re like, oh my gosh, AI is here, right?

But in all reality, like it’s been coming for a very, very long time. It’s been learning. It’s been evolving. it’s been taking in data, right? For a very, very long time. And what I think is really interesting is for a lot of folks where we just  woke up one day and we’re like, oh my gosh, AI is here.

We’re trying to figure out what to do with it. Right. And it’s, you were  alluding to this, but it, it’s a tool. And so it needs someone to actually wield it [00:59:00] in a way to actually provide value. Right. Again, like ChatGPT could write a great contract, but without an input of what do you need a contract for?

What is this trying to accomplish? And does this actually accomplish what we’re setting out for without good inputs, it’s going to give me garbage. Right. And so, so there is that element of, like you say, like the, the human in the loop, but it’s going to take out a lot of this menial task, but the point I’m trying to make is that it’s not also going to just solve everything you need to have an understanding of what is the tool, what are the things that it can solve and what are the applications that I need to apply it to, to solve those problems.

And where those problems get solved is where you’re going to see disintermediation. Yeah.

Chris: These models do not have intent. You have to program or [01:00:00] specify the intent when you’re making the request. So, hey, I want a contract that’s going to help do X, Y, and Z. Or, hey, please review this contract.

I’m concerned about the intent that may be buried within this. Is there a, are there possibilities for,  X, Y, and Z? So you have to be very specific. You have to think, you have to be forward thinking. and that’s not to say that these AI models will never get there. I don’t think we should build them to get there.

I think when you start to incorporate intent, you’re bringing in human elements to these things that should be considered tools.  so, again, to your point, they are tools. And if you think about it, think about the computer, right? When the computer started, the personal computer started to become mainstream, I’m sure there were a lot of conversations about how that was going to replace people and  how there were going to be issues there.

But one thing, and I remember reading this somewhere, is that technology very, very rarely replaces people, it just allows them to move on to other things. So in other words, maybe I was stamping envelopes, but now that has freed me up,  this [01:01:00] piece of technology has allowed me to do X, Y, and Z and I can do it ten times faster now. Very rarely do you see people get fired because new technology has been implemented. Now, I say that, and there are a lot of cases from a, from a blue collar perspective,  so that may not hold true in the white collar context anymore, but most of the time these are tools that are used as a force multiplier, and it’s just making sure that your current staff and the current people are trained in how to use these things in order to, to get that return, so.

Josh: So bringing that  all the way back around and pulling this all into one thread, do you think the current state of just the actual like tangible economic affairs plus the current state plus the speculative state of what technology and will do, what do you think that holds for the financial services industry?

Chris: So, I think, okay, from a [01:02:00] technological perspective, and we’ll step aside from the AI discussion here, I think that the banking space as we know it is in for a radical change, in the next decade or two. And I believe it’s already here. And you may have heard of the term open banking. And that means a variety of different things to a variety of different people.

So I’ll be very specific when I talk about open banking. But it’s this banking as a service, it’s this, hey I can create a company that plugs into a bank that does this type of lending or I can provide this type of service to my customer which may be a point of sales type financing or things like that. Things that would ultimately replace the consumer having to go to a branch or go to the bank website to transact business. My thought process here is that banking is going to become more of a liquidity provider for what these financial technology companies are going to be doing. I think it’s going to introduce a new area of [01:03:00] risk within our economy, but also new areas of opportunity. I think right now, what I’ve been seeing is the rise of non banks, non bank lending. It’s this idea that certain organizations, certain companies can lend, using their own capital. to their customer base and generate return on it. because they’re non depository institutions, they don’t have to comply with FDIC, OCC type regulations and rules. but it also means that their capital is at significant hazard. I think we’re going to see a lot more of that. I don’t think it’s a bad thing. I don’t think it’s a good thing either if we’re not careful about it. I think that, again,  

Chris Aliotta: Banks are going to become more of the wholesale broker on the back end of things, where it’s, we’re looking for loans of these types, and if you have them, we’ll buy them from you. I think it’s going to become a lot more wholesale in nature. And I think it’s going to become more service-focused. In other words, you need to be where your customer is, not have your customer come to [01:04:00] you. 

Chris: And I think the traditional banking model is one of your customers comes to you because they need a loan. Not, hey, I’m at this place right now and what would be really good is if I could get a line of credit because I’ve got a contract coming through and I want to be able to make payroll or something like that. It’s being able to be tactical with your customer. It’s being able to be there when they’re thinking about buying their house or they want to finance something that’s expensive.

Maybe it’s a new air conditioner. Maybe it’s a new roof or some  home improvement, whereas if the guy is giving them the quote, they have the ability to say, okay, yeah, I’ll do that. And I’ll, I’ll lock in this loan with you. So that’s what I think is going to change in banking.

It’s already here. Anyone in banking, we’re already starting, we’ve already started to see this for a long time. But I think it’s going to manifest itself even more so, especially going forward.

Josh: Yeah, I know. I think whether the average American actually realizes it or not, right. Cash flow is a [01:05:00] huge element of our lives. Right. And I think what you’re also seeing with just an influx one, just like park the whole economic state aside. Right. And you made the comment about, yeah, you see all the Instagram posts and things that people that were like, This is what 400 bucks bought me at Walmart three years ago.

This is what it buys today and groceries like park that aside even, and just talking about the advent of some of the technology elements, some of the different access to funds and capital, some of the different investment types of opportunities coupled with the speed at which money can move today.

Like all of those factors, if you can actually be extremely intelligent at just your cash flow with not actually increasing the amount of money that you make or decreasing the amount of money that you spend, just in the ways that you actually manage that [01:06:00] cashflow can actually set your financial position better.

Right. and so I think that’s one of the areas too, just going back to what we were talking about, like where technology can really actually solve some of that. And so being able to understand your consumers so incredibly well to say, like, Hey, Chris,  I don’t know, this is probably a far shot, but like we know you’re going to need a new AC, we know you’re going to get paid at this time, but you’ll actually get a deal if you buy it now because it’s winter, so we’re going to front you the money for that and even though you’re going to pay some interest on that, you’re going to save in the long run because you’re not going to pay the summer.

It’s 110 and everybody’s trying to get an AC surge price. Yes. That’s probably a little bit ridiculous but  you get the point, right? Like helping people understand and manage cash flow or even, Hey, if you actually,  hold off on paying your bills until the last bit or second and [01:07:00] you use the cash for this, that’s going to, right.

So there’s so much cash flow optimization that I think is going to be more mainstream available to people than has ever been. at a time where cash flow is more important than I think it’s ever Is that fair?

Chris: Yes, I think it’s a fair statement. I think broadly speaking, that’s going to be true in a lot of different areas. What you’ve done, especially,  I want to go back to the AI statement and there’s one point I didn’t make before, which is I did not expect AI to be at the level of quality and precision that it is today. I knew that it was coming, but I expected it to be at this level 10 years from now. So the rate at which this technology has emerged and the. The abilities of it have far outpaced what most people in technology originally thought was even possible. And I want to bring that back to why this is so important, because it only is going to get [01:08:00] better and faster from here.

And knowing the rate at which we’ve moved with technology and having that actually surprise someone like myself, who eats, sleeps, and dreams this stuff, and I’ve even heard Elon Musk say the same thing, so I know I’m not alone in this. It is a reason why we’ve got to pay a lot of attention to it, from a practical standpoint.

And you’ve, you’ve mentioned cash flows and this information and being able to optimize for personal finances and, and if we bring that into the banking space, being able to optimize for lending,  this math has existed for a long time. It’s just recently that we’ve been able to have the computational power and again, the corpus of data to train these things.

We’ve always had the math to do this. The technology, the stuff that we’re doing today,  is thought of, I think, in like the 60s and 70s. And now, granted, the transformers and all that is a relatively new,  thought on, spin on these things. But again, we’ve, we’ve had this ability to do this.

It’s just we’ve lacked the materials to do it. And [01:09:00] now we have the materials. So, to your point, yes.  the fact of the matter, and you just said this earlier on with ChatGPT and your legal contract. Think about that.  You have basically removed a friction point in your business where you now can go to something that has a ton of information and a ton of intelligence and have it do it for you. I use these tools to help me program. When I, there’s a task that I think is menial and I just don’t want to write it. I’ll ask them to do it for me,  and it’s great and it does a phenomenal job. And if it doesn’t do it right, it at least has templated something out that I can, I can modify and I can make work so. Yeah, I think, I think we’re closer to the days of, I don’t know if you ever watched Star Trek, but having the computer that you can prompt and say, computer, tell me about X, Y, and Z, and it’d give you everything you need to know and more.

Josh: Yeah, I think,  and that  goes back to what I was referencing earlier, like just the speed at which computing power increases, [01:10:00] right? Like these are actually mathematical laws that can tell you at which the speed computing power will increase, right? And those laws are actually broken and there’s new laws written for special purpose computers like what we’re seeing powering ChatGPT, right?

So, yeah, to your point, if we apply old logic and say,  this is the pace technology is going to go, that doesn’t even apply anymore, right? It’s an all new set of laws that’s actually exponentially faster than the, even the original exponential pace of technology.

Chris: Yeah, and it’s funny because, like one of the laws you’re referring to is Moore’s Law, right, which is the price and speed of processors will continue to double or something like that, some exponential growth.

And there was a time where we thought we were reaching the limit of that. And everyone’s like,  we’re getting so small with the, how small we can make a transistor that we can’t get any smaller, we can’t get any faster. Well then what ends up happening [01:11:00] is instead of having one core on a CPU, we now have like 64.

So now instead of scaling vertically in terms of speed, we’re scaling horizontally. And we’re doing these things that are massively parallel that’s, again, massively parallel. Keeping up with the theory, if you will, or  the conjecture that computing power is going to increase continually for exponentially for ad infinitum.

And it may just be because we can’t think of what that next technology is going to be yet. That’s going to unlock that next level. so multi core processing,  as simple as that seems now, when the first CPU came out, I don’t know if they were even thinking about that, you know?

So, 

Josh: Yeah, I know. It definitely makes for, this has been absolutely fascinating, man. I love chatting with you because it is such a cool intersection of just thinking about a very traditional space and even just looking at the crazy challenges that we face in a very traditional space in a very traditional way, right?

Like,  economy that goes. [01:12:00] back as far back as people, right? And just what that looks like and how that shapes and then layering the technology side into it. Just, it makes it like a compoundingly fascinating subject. So, 

Chris: Oh, for sure. sure. I’ve enjoyed this conversation too. And, and again, there’s just so much to unpack with all these things that you can talk for hours about any number of the things that we’ve, we’ve just mentioned. And again, I think there’s, I think it’s, I don’t want to call it a curse, but, if someone tells you, may you live in interesting times, I believe that’s a curse.

It’s one of those things where like, it’s, it’s. But I do think that we are on the precipice of some interesting times, and for good and bad. And again, for the listeners today, just be careful. When I say be careful, just be mindful of how you’re spending your money, where you’re spending it, where it’s being located, and just take some precautions.

If you feel like you’re at risk, try to [01:13:00] do things proactively now. And if you’re wrong, great,  you’ve bottled a little bit of insurance if you’re buying puts against the market or whatever it may be. Better to be safe than sorry is how I think.

Josh: Yeah, no, that’s great advice. Chris, it’s been a blast chatting with you, but before I let you go, I got two final questions for you. So obviously this is an area you are well researched in, sir. So where do you go to get information? Yeah,

Chris: But there’s no better source of information than the source itself. So if you can find the person who’s generating the information and ask them, whether it’s a researcher or it’s your customer, That is your best location for information. And then of course, there’s all sorts of online aggregators, that if you, I like to go to the extremes and then  average them out, if you will. Depending on what I’m looking for. So [01:14:00] yeah, again, if I’m being hyper specific, there’s certain websites for technology. If I’m being specific amongst economic stuff, it’s going to be multiple things. I’m sorry. But my, my opinion is talk to, talk to people on Main Street. Talk to, talk to people who are in the area of interest.

Josh: That’s a good answer. I like that. It  goes back to the way we introduced you as well. Right. It’s like, if you want to, if you want to solve a problem first, you got to understand the space in which you’re starting to solve the problem. Right. 

Chris: That’s right. That’s right. 

Josh:  If people want to connect with you and have conversations with you or learn more about what you’re doing and what Quantalytix does, how can they do that?

Chris: Sure. I think the most direct way to do that is to send me a message on LinkedIn. Definitely reference this podcast, LinkedIn has become a lot of spam lately and I want to make sure that if you are trying to reach out to me, you’ve got questions, I know you’re not just one of their in mail spam offers. So that’s a great way. And [01:15:00]  by way of that I’ll provide more contact information. But also through our website, quantalytix.com, we have a contact us form, you can fill that out. I’m more than happy to reach out to people who have got questions and again, I think,  those are probably the best two ways to reach me. So, again, I appreciate you having me on today.

Josh: Awesome. Yeah, no, I really, really appreciated the conversation. I feel like I learned a ton through this. I hope others did as well. And, I don’t know if I’ve ever said this to a guest. But I think what you said was so incredibly intelligent and I hope you’re totally wrong. So, there’s that.

That’s an interesting one. I think that’s, you could check mark that as a podcast 

Chris: Yep, got it. 

Josh: Yeah,  Hey, seriously, Chris, it’s been an absolute pleasure. Thanks for coming and being a guest on the Digital Banking Podcast.

Chris: Alright, thanks Josh. You have a great one.

Josh: You too.

​[01:16:00]