Episode summary
You Think You're Diversified. AI Disagrees. | Prof G Markets
Prof G Markets
· · 57 min · Hosts: Ed Elson, Scott Galloway · Guests: Torsten Slok
Summary
Torsten Slok argues that the biggest macro risk is not a recession but sticky inflation layered on top of an economy that is already holding up well. He says AI spending, an industrial renaissance, and the coming fiscal boost from the “one big beautiful bill” are supporting growth, while the Iran shock mainly matters through oil prices and the persistence of the shock. In his view, if oil stays elevated, headline inflation can rise meaningfully and core inflation can still drift higher, which would push rates “higher for longer.”
He also pushes back on the idea that the labor market is on the verge of collapse from AI or geopolitics. Slok says there is no clear Fed-style model for AI, which is why markets react so sharply to scary frameworks, but he thinks the most extreme unemployment scenarios are very unlikely. Even if AI destroys some jobs, he expects firms, workers, and eventually policymakers to adapt.
On portfolio construction, Slok’s central warning is that AI has become a hidden concentration risk across assets. He says the same theme now shows up in equities, investment-grade credit, and even venture capital, so investors should diversify into assets and regions that are not tied to AI.
The discussion also covers the K-shaped U.S. economy: higher-income households are benefiting more from asset gains, wage growth, and lower inflation exposure, while lower-income households remain under pressure. Slok says the aggregate consumer still looks healthy, but the distribution underneath is increasingly uneven.
Key takeaways
- Slok says the Iran shock mainly matters if it keeps oil prices elevated long enough to keep inflation sticky and delay Fed cuts.
- He expects zero Fed cuts in 2026 and warns that higher-for-longer rates hit long-duration assets like software and life sciences hardest.
- Slok argues the AI labor-market panic is overstated because there is no robust framework yet, and he assigns a low probability to mass unemployment.
- He says AI is now embedded across equities, public credit, and venture capital, making “non-AI” exposure the real diversification trade.
- Slok says the U.S. consumer is still fine in aggregate, but wealth, wage, and inflation outcomes remain sharply K-shaped.
Notable quotes
“when you increase oil prices by $35 and you stuff that into the Fed's model of the US economy, that is going to lift headline inflation by 0.7%”
“we'll get zero cuts in 2026. And why is that important? Well, that's extremely important for financial markets”
“there is no one who has just one task in their job. We have like 20 30 40 different tasks”
“the main recommendation is everyone should today invest in nonAI”
“there is at the moment unfortunately a situation where low-income households are not in great shape”
How the episode opens
Today's number 40. That's the percentage of Americans who didn't read a single book last year. True story, Ed. I just read a book on the Dunning Krueger effect. Ask me anything. — I don't think you're a non-expert on book writing at this point. How many have you How many books have you written now?
I want to say I've written more books than I've read in the last 5 years. That that that would um reveal me for the pseudointellectual doucheb I actually am. Um, supposedly my publisher told me 1% of the populace buys 90% of the books, which I believe.
Wow. — Do you read a lot, Ed? — I try to. — As Yoda said, there's do or do not. There is no try. — All right. I guess in the lot in the past in the past two months, I have not been reading enough. But before that, I was reading very frequently. I'm going to have to get on to the writing the books game.
Little Miss Sunshine here once has an agent at CIA. He's pretty soon is going to have a book agent. Um, I don't like it when people aren't dependent upon me for their livelihood. Um, so Ed, what are you doing in Palm Springs?
Got a speaking gig. Just got here yesterday. First time in Palm Springs.
I'm shocked by how nice it is here. I had no idea. I mean, I showed up to the airport and there's literally a gigantic mountain range right in front of me.
Perfect weather, extremely pleasant, really nice airport, by the way. Uh, and then the drive was just incredible. It's like this beautiful mountainous desert with also palm trees dotted all over the place.
I'm just kind of shocked by how great Palm Springs is.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai inflation
- iran conflict
- wealth inequality
- commodities prices
- labor market risk
Companies and tickers mentioned
- Apollo
Watch the episode
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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