THE Q FACTOR
Welcome to The Q Factor, where host Gregg Fisher, Founder and Portfolio Manager of Quent Capital, leads listeners through the rapidly evolving landscape of data-driven leadership and innovation. This award-winning podcast series dives deep into the profound impact of data on every facet of life in the 21st century, navigating the intricate intersection of data and humanity.
In every episode, Fisher engages with business luminaries and thought leaders to explore the delicate balance between the quantifiable and the intangible. THE Q FACTOR unpacks the complexities of our modern age, highlighting the indispensable role of human insight in an increasingly data-driven world.
THE Q FACTOR
BARUCH LEV: THE END OF ACCOUNTING
How accurate is a company's balance sheet in assessing its value? Not accurate at all, says Prof. Baruch Lev, who joins host Gregg Fisher for an eye-opening conversation about the critical value of intangibles. The importance of modern accounting pales in comparison to the importance of understanding a company's intangibles. Prof. Lev is perhaps the leading voice on the subject, having authored two seminal works on the subject, INTANGIBLES and THE END OF ACCOUNTING.
It's common for a company to become obsolete. It's slightly more rare for an entire product to become obsolete. But what's truly rare is for an entire field to become obsolete. My guest today isn't just critical of the practice of accounting. He says good old-fashioned accounting is literally over and that the factors that truly drive a company's value often don't appear on a company's balance sheet at all. The end of accounting and the rise of intangibles, that's today on The Q Factor. Welcome back to The Q Factor. I'm Greg Fischer. Today, we're going to talk about intangibles, not the obvious measurements of a company's success, the statistics on a company balance sheet. I'm talking about the harder to measure factors, intangible assets like human capital, innovation, and employee satisfaction. In business and finance, these intangible assets can often be the most valuable factors of all. In my work as a portfolio manager at Quint Capital, I'm constantly looking for the most important ingredients that drive successful companies. And more and more, I find myself looking beyond the balance sheet, beyond the P&L statements, and into the murky but mission-critical world of intangibles. In my quest to learn more about intangibles, my guest today is more than just a fellow traveler. He's a genuine luminary in the field. Dr. Baruch Lev is the Philip Bardas Professor of Accounting and Finance at NYU Stern School of Business. He literally wrote the book on intangibles in 2001 with his superb book, Intangibles, Management, Measurement, and Reporting. And in 2016, he wrote the groundbreaking work, The End of Accounting and the Path Forward for Investors and Managers with his co-author, Feng Gu. which shone a powerful spotlight on all that is deficient, if not totally absent, in modern accounting. I'm grateful to call Dr. Lev a mentor and a friend. Here's our conversation. Dr. Lev, thank you so much for joining us today. In the interest of introducing you to our audience with a bit of a bang, Why don't we start with the 1956 Suez Crisis, when you were an 18-year-old Israeli soldier fighting the Egyptians. Can you tell us the story of the bazooka attack that led to your receiving a Medal of Valor?
SPEAKER_02:Greg, that's really opening with a big bang. The Suez Canal used to be an international waterway. It was managed by several countries. In 1956, the then Egyptian president nationalized the canal. And this caused a huge uproar. But in addition to nationalizing the canal, he completely blocked all transportation to and from Israel, which was an economic chokehold. All oil, Most foods to Israel came from the Suez Canal. For Israel, this was a disaster. For other countries, it was maybe inconvenience, higher prices. So Israel went to war. Funny, at the time, I was playing basketball because I was a basketball star. I had a little basic training, but then they recruited me to the army team. So I practiced basketball. And one afternoon, a car came with a couple of officers. They said, everyone goes back to their unit. So we all went back to our unit. Mine was near. near what is now the Gaza Strip. And for the next day, we started the attack on the Gaza Strip. So this was a crucial battle and came about three o'clock in the morning. There, huge fire from both sides. And I had a bazooka. I never fired a bazooka because the rockets are very expensive. at the time. So I was standing there in the middle of the fire. So to an outsider, it seems like incredible bravery, but it was not. I was just completely shot by fire and explosions and I didn't know what to do. So all of a sudden, I see my plateau leader running by and he gave a serious curse and said, why isn't there anybody to silence this? There was a huge fortified position How old were you then? Fresh off high school.
SPEAKER_01:So you're 18. You go through this incredible experience that sounds difficult in many ways. And somehow from there, you got into accounting and finance. And how did your military service or your combat experience or that point in your life influence you to go down this path of accounting and finance?
SPEAKER_02:It first had two big lessons on me. The first lesson that followed me all my life was about leadership. We now hear a lot about leadership and it's all this PC nonsense. A leader has to create a shared vision. A leader has to ensure alignment. A leader has to create positive culture. Now, my platoon leader was a leader. None of this nonsense. What he exhibited there, which led me to my action was, first of all, being in the place of the problem. You don't lead from behind like some administrations in the United States. You are there. He was in the middle of the fire. The second thing is he sees quickly the situation. incredibly quickly what's going on here. He chose the appropriate action. He knew that the bazooka is the only thing that is effective against such fortified positions. And he assigned it to the right people to do. This, to me, always signified leadership. The second lesson, which I think is very important, is that enemies can become friends. Once an enemy, this doesn't doom you for life. And now Israel and Egypt are very close, really. So
SPEAKER_01:fast forward, it's now 2001 and you publish a book on intangibles. Can you just summarize for our listeners the main thrust of that book and how that really remains relevant today?
SPEAKER_02:Today, everyone is an expert on intangibles. 20 years ago, this was hardly known. So the main three things that I tried to establish in the book was, one, the magnitude of intangibles. At the time, I didn't have direct measures, except for R&D, which has to be reported. All the rest is buried in accounting. But I looked at the market-to-book ratio, assuming that investors somehow see, grasp the truth, and what is on the balance sheet. And at that time, the market to book ratio average was 2.53. This really shocked people that market values of companies, about two thirds of the values missing from the balance sheet. So this magnitude had a huge impact on people. We are not talking about small things here. We are talking about humongous. The second thing that I emphasize in the book, and this was a message for managers, is that intangibles are very difficult to manage. And the management of intangibles is very different than management of tangibles. If you are an executive of American Airlines, you don't lose sleep that someone will steal your airplanes at night. But if your main assets are patents, you should lose sleep if you don't protect patents against infringement. So the fact that there are no markets in intangibles They are not comfortable. Very hazy property rights and basically no information at all. I talked about the challenge to managers. How can they manage this huge thing under these circumstances? And the third thing, of course, I talked about something that is close to my heart, and that's the absurd accounting standards. And I think those three things, the magnitude, managerial challenges and financial reporting as relevant today as they were 20 years ago.
SPEAKER_01:You talked about how everyone's an expert in this today, but back in 2001, it was not so widely discussed, which I agree. But only just a few years ago, I was invited to talk on CNBC. And I was describing my use of intangibles in some of the work I was doing. And I actually cited Lakhanashak's research from the late 90s and some other things. And one of the hosts just looked at me like I had three heads and had no idea what I was talking about. This was only three or four years ago. He said, wait, I don't get it. Intangibles, they're intangible. You can't measure them. meaning like you just have to ignore them. So just a few short years ago, it seemed like it wasn't in the conversation, although it does feel a little more out there today than it had. Are there any in particular like intangibles that you think are more powerful or maybe less powerful in terms of predicting company performance? If we define performance as stock market performance, do you think there are a few of these intangibles investors should pay more attention to than others?
SPEAKER_02:Let's think about the main intangibles. So R&D is a major intangible. The focus was always on the R&D input, on how much money you put into R&D. Much of R&D is waste. Lou Gerstner, when he became CEO of IBM in 1993, in a year, year and a half, he cut IBM's R&D by a third. I remember Burns at the time blaming him that he does it in order to increase profits. It was just a waste. IBM didn't lose anything by cutting. So if you talk about R&D, look more to the R&D outputs. What do you mean? you are cited by subsequent patents, it means that your patent is very valuable. It really created knowledge, emphasis on new products, emphasis on customers, things like that. So you should go beyond the cost of this thing. The cost is basically just important to adjust the crooked accounting. But you should look at consequence. In some cases, you can even measure return on investment in intangibles. Think about what's known as subscription-based companies. These companies provide you with customer acquisition costs. So you have the cost of customer acquisition. You have new customers. You have gross margin of new customer. You can actually measure return on customer acquisition.
SPEAKER_01:That's really like a new concept, right? We didn't have that kind of information in the past. I mean, we all know that keeping customers, getting new customers in any business, that's the magic formula, but it was probably very hard to measure and maybe still is, but it seems like we have better information on this today than we did.
SPEAKER_02:We have definitely better information. Most of these companies provide you with customer acquisition costs, with the churn rate, with new customers. You can do a lot In addition to just looking at how much did the company spend on intangibles, this is all history.
SPEAKER_01:In 2013, Amazon at that moment was trading at some absurd price to earnings ratio that if you were a value investor, you would never have looked at it. Some very large price to book ratio relative to the market or its comparables. And every ratio looked like completely off the charts. But in that same year in 2013, they filed a patent for, I think what was called predictive shipping. Now today, we all know what predictive shipping is. I get home, I did order something, but just as I ran out of my coffee, it showed up for me. And clearly, that was almost 10 years ago, and that was a home run. But how would someone have valued something like that? How would you have found it? Where do they disclose things like that? Because today, I think we're all trying to figure out how to understand those investments that companies are making that are long-term or short-term. And just one last thing. If I'm the CFO or CEO of a big public company, I know every quarter I got to report my earnings. What's my incentive to make an investment that's going to pay off when I retire? I won't even be here. How does this all add up for you?
SPEAKER_02:Well, to answer the first question, you're perfectly right. It's very difficult to understand strategies of companies. There was a law changed many years ago, which now requires the patent office to to make the entire patent application public 18 months after applying for a patent. It used to be that the patent application was released by the patent office upon grant, which is like three and a half, four years now on average. Now it's very early. Every Thursday, the patent office reveals the 18 months applications And it turned out that some investors pay attention to this. So you can get an early glimpse about the direction of the company from looking at the patents. They are actually just working on them. You mentioned Amazon. The patent that drew my attention was, since I played basketball, was a robot that would pick up some kind of a parcel and would throw it like a hookshot, would throw it into the box.
SPEAKER_01:Like an old, like a newspaper delivery boy from a person.
SPEAKER_02:Exactly like this. At the time, my wife bought an iPad and it had the nick on it. And I told her, that's the robot. You know, he missed the box. Blame the robot for this. But you can get a pretty good idea of where the company is going from this early announcement that some investors are doing.
SPEAKER_01:With natural language processing these days, the technology to read text, if I were reading a 20-page document as an investor, what would I be looking for?
SPEAKER_02:You mainly should look for the value created by either the tenants or intangibles in general. There is a very simple measure of the value of the customers you currently have. If you take the churn rate, churn rate is the percentage of customers you lose per month. One over the churn rate is the average length of customers staying with the company. So last time I looked at SiriusXM, that's about close to 60 months on average customer stay with it. So you take one over the churn rate times the gross margin from customer, which they give you, up you, times number of customers, you get the value of current customers. Without growth, but at least the value of current customers. What we learned over the last 20, 25 years is to go well beyond just looking at the input of intangibles. They say something, but you can be much more precise than that.
SPEAKER_01:Patents are a good example, R&D, the things we're talking about. I think these days, there's so much work that we're hearing about around the way you treat your customers, the way you treat your employees. We talked earlier about leadership or diversity and inclusion. Do you see a change in the kinds of intangibles today that might be valuable versus those things we were looking at 20 or 30 years ago?
SPEAKER_02:The big changes are the following. R&D is a very old thing. The first patent law was enacted in the United States 230 years ago. But for a long time, R&D was done only by pharmaceutical companies, chemical companies, and some by oil companies. Now R&D, as of course, almost every company does some R&D. But then the second wave of intangibles came around what's known, the economists call them organization capital. which means unique ways of doing business that create huge value and your customers are not doing it. Like online banking, online insurance, recommendation algorithm. All of this is grouped under organization capital. And most recently, it's all official intelligence, machine learning, big data. That's the big thing now.
SPEAKER_01:Yeah, this idea of big data, they refer to data as the new oil. Like the more data you have, the better your predictions can be. I was reading that someone defined intelligence as your ability to predict. So you're more intelligent if you have a better ability to predict and the input for prediction is data. Does that make sense to you?
SPEAKER_02:Yes, yes. I'll tell you very briefly what we're doing in this research. Insurance companies, the greatest predictor of all, they basically fold their financial report You get, let's say, the entire annual car premium from the customer. But then you have a long tail. You have obligations, which sometimes stretch over 10 years in this case. Someone comes, you know, three years later and said, I was injured. Now I have headaches. I have this, seizures, things like that. So when they measure earnings, they have to predict future liability. on the premium they collected this year. This is by far the largest cost item. We got data from a huge number of insurance companies, like 15 years of predictions and then actual. You have that. That's cool. You track it over 10 years. You have how much they actually paid on it. So we had experts, which means managers' predictions, And then we had machine learning prediction. Dumb machines just feeding everything to the machine. And amazingly, the machines are outperforming managers. I mean, by much, not by little, but by much. One of the reasons is that machines use data much more systematically than managers. And machines, whatever you can say about them, they don't try to cheat you. Managers, you know, manipulate earnings and this with their predictions. I'm not sure in all cases, but in many cases where you have big data, it can improve the prediction significantly.
SPEAKER_01:This feels like a good moment to bring up your really phenomenal recent work in your book, The End of Accounting. Why don't we begin by introducing your colleague and a very close friend and advisor of mine, University of Buffalo professor Feng Gu, where I went to school. Tell us a little bit about that book and what was the inspiration for this end of accounting. And I will say the end of accounting, that's a great title. Tell us a little bit about that.
SPEAKER_02:Let me say a word about Feng himself. I met him like a quarter century ago. I gave a paper at Harvard Business School. at that time he was at boston university and then they they invite people from area universities so he came and at the end he approached me that's the first time i saw him and uh he said of course he enjoyed the presentation and then he said you know i i have database on uh royalty income of companies from patents. At that time, the databases like Kotb started that didn't have a line item for royalty income. He collected it and he said, can we do joint research? I said, of course, you know, this is incredible. And they started by far the most important collaboration that I had Fang has two unique qualities. First of all, he's an incredible researcher.
SPEAKER_01:Yes.
SPEAKER_02:And most of my co-authors, and I have dozens of co-authors, given that I'm usually the senior person, at least in age. They regard themselves as research assistants. I mean, they wait for me to say, you know, run this regression, add this variable, run this, run this. Fang is a thinker. He is the best, the best manipulator of data, manipulator in the good sense. Yes. I mean, they're bringing together databases and things like that that I know. But he thinks. He always comes back and says, Baruch, this doesn't work. He says, let think why it doesn't work and what should we change and this and that.
SPEAKER_01:He is terrific. He's been extremely helpful to me as well and a good friend.
SPEAKER_02:And I want to add one more thing, which I value a lot. He's a very good human being. And I'll give you one example which made a huge impression on me. In academia, at least in the social sciences, the authors go alphabetically. So in all our papers, it's Feng Gu and Baruch Lev. The book, The End of Accounting, when we came close to printing, the editor said, Baruch, Feng Gu will be first. You are much more known than he is. It will hurt the sales of the book because in many cases, our research shows that people look at the first author and that's it. So the editor said, you must change it to Baruch Lev and Feng Gu. I agonized on this for weeks. For weeks. How to break it to him that I would like him to be second. I spoke with my wife. I spoke with my daughter. I couldn't bring myself. And then one day I called him. I said, listen, there is something I must tell you. The editor wants me first. You know what his reaction was? What? Of course you should be the first, he said. Of course, you are the senior author. You came with the idea. I have absolutely no problem with this. I thought that he would fight me and said, no, you know, people would think that my contribution is marginal. I mean, it's incredible. He's a very, very giving. Which I thought would take an hour, took less than a minute. He said, absolutely fine with me. by that. A really, really unique human being.
SPEAKER_01:He really is, and I'm thankful he's put us in touch
SPEAKER_02:with each other. This was with me from the 80s. I was in Berkeley at the time. I was a partner in a large consulting firm. I did valuations of the first cellular phone companies, the first biotech companies, and I always started in valuations. Usually ended up in court, I always started with financial reports. And it was clear to me the financial reports are completely useless, sometimes even misleading. You mentioned accountants. Surprisingly, I didn't get any pushback from accountants.
SPEAKER_01:That is surprising.
SPEAKER_02:Yeah,
SPEAKER_01:they are not
SPEAKER_02:dumb. They know there is a serious problem with accounting, which is not particularly the income statement, which is really not relevant. So I had long discussions with three out of the four big accounting firms after my book came out. And with Ernst& Young, we actually tried to develop a new accounting system.
SPEAKER_01:You said earlier, the income statement is largely irrelevant. I think about this and it's a little bit of the inspiration around some of the work I'm doing these days. But so many people, when they make investment decisions, the first thing they do is go to earnings, put price in the numerator, put earnings in the denominator. We all learn how to study the income statement and look at cash flows. And this stuff doesn't seem to be working very well. And in your book, what really caught my attention in there, you did some work where you showed over the last three or four decades, the power of that signal, price to book, price to earnings. really deteriorated. You know, it used to be maybe 30, 40 years ago, you sort of look at a bunch of securities, put price in the numerator, earnings or book value in the denominator, organize them all, have a little more of the ones with low price to book, have a little less with the ones with high price to book, and you did great. But decade after decade, it just doesn't seem to work anymore. Can you just tell us a little bit about that?
SPEAKER_02:Accounting is definitely obsolete. I mean, the accounting regulators in the United States, the Financial Accounting Standards Board, they're not a big fan of mine. Just before COVID, I gave a talk at the American Accounting Association to a large group of people, and I cited the research, not my research, by two leading finance scholars of how many people download the annual financial report when it's submitted to the SEC. The result of this research is mind-boggling. The average balance Download is 28.4. Can you imagine only 28 people even download? We all know that download doesn't mean that you read it. We download things and then forget about them. But 28 on average, when you have millions of investors on the day in which it was made public by the SEC and the following day. I mean, no one is interested in that. It's really, accounting is really obsolete.
SPEAKER_01:It doesn't seem to matter anyway, because it doesn't do a good job predicting stock market returns. So maybe, do we just ignore the income statement? Just forget it altogether? Well,
SPEAKER_02:at the first stage, you can adjust it. I have a paper with Anup Rastava on what killed value investing. And there we show that if you make a simple adjustment for the capitalization of intangibles, you at least double the return Yeah,
SPEAKER_01:that idea that if you take growth companies and sort of add back some of these more subjective assets in some way, that a lot of them look like value companies. So maybe value investing isn't dead. Maybe we're just valuing things differently today than we used to.
SPEAKER_02:You're perfectly right. When we run the usual Farmer French value investing, the 30 highest market to book, the 30 lowest market to book, when we adjust book value, 40% of the companies, both at the top and the bottom, change their ranking. They get out of the top, out of the bottom, and new companies come in. It's a complete reshuffle of the whole thing.
SPEAKER_01:You gave this example in something else I had read, but I think it's very relevant today, Pfizer. So you sort of roll back seven, eight, nine, 10 years to Pfizer and its investment in R&D. And now here we are today, obviously, you know, COVID and the world that we're living in and the Pfizer and the miraculous thing they did. Could you just tell us a little bit about how that might relate to intangibles and their profits today and their expenses of yesterday? Sure.
SPEAKER_02:This really relates to something we talked about a few minutes ago. That's a considerable amount of investment in intangibles. They are glorified. IT, everyone stands in attention. A considerable amount is just waste. And you see that some companies, new management comes in. I mentioned IBM before, but that's the case of Pfizer. They cut R&D significantly. And then you look at the stream of patents, you look at the stream of innovation, nothing happened. So I'm not alarmed. I'm really not alarmed when responsible managers, not just to show I am quarterly earning, but the responsible managers are cutting some intangibles and maybe shifting the money to other intangibles are doing that. Like any other cost items, you should be very careful to weed out the waste. There is a lot of waste there.
SPEAKER_01:When I think about the expenses that Pfizer had several years ago for the R&D for developing the vaccine we now use and how that might have impacted its earnings at that time. But then here we are today where I'm guessing they're looking quite profitable because of the investments they made 10 years ago. And I think that's a bit about what we're talking about. But how would you have known 10 years ago that would have paid off in the way it did?
SPEAKER_02:Yeah, there is huge risk in intangibles. Clearly, intangibles are riskier than tangibles. There's usually no exit market for intangibles. You have rental property. Even if it's not very successful, someone will buy the house. At the price, it's not a total loss. In intangibles, often cases, it's a total loss. The large companies are moving with a huge portfolio of drugs. They may have over 100 drugs that they are working on. So even if two, three, four, five don't pan out, others are doing the job. The big risk is with respect to small companies that have one or two projects, if they fail, the whole company is in this case. The big one, I'm not concerned about it. They will withstand failure.
SPEAKER_01:So I had a small company, entrepreneur, an asset management business. I grew it over 25 years. I invested substantial sums of money in my brand, marketing, intellectual property, research, technology, my people. And it always reduced my profits and made my company look sort of not as profitable. And there was nothing on my balance sheet for any of these things, but I spent an enormous amount and realized they were valuable. Then I sold my business to a public company. And when the public company bought my business, it got a chance to evaluate all of that and put it on their financial statement as goodwill. And I realized that there was like this financial engineering that went on where it made more sense for some companies to buy and acquire growth as opposed to build it organically on their own. That like it looked more advantageous from an accounting point of view to buy growth versus build growth. And I wonder what your thoughts are on that.
SPEAKER_02:This issue is very important because most capabilities that you buy in a mergers and acquisitions can be developed internally. Managers, in many cases, are quickly going for the news. The big bang is an acquisition. Teva, which is an Israeli company, the largest generic drug company in the world, they were almost destroyed by such an acquisition of another generic drug when the whole market was going down, borrowing like$40 billion on it. So this issue of internal development versus acquisition is a very important issue. And I always admire managers who then don't go for the big thing. I'm writing with Feng another book now, and that's on mergers and acquisitions. And we have a chapter on this, to build or acquire. And we have a huge sample, like 36,000 acquisitions. The return on internal development is substantially higher than the return on acquisitions. Most acquisitions fail.
SPEAKER_01:I also think about strategic partnerships and alliances. And I'm wondering if you have any way to identify those things. Because I know as an entrepreneur myself, generally... Small companies with long-term growthy mindsets, we're all a little cheap and we don't like to necessarily buy growth. We're finding ways to create a strategic partnership or get this little thing on the cheap. And I think about how to look through public companies for companies that do more joint ventures and strategic partnerships versus acquisitions. Have you ever looked at that?
SPEAKER_02:I looked at that, but not long because there is no data. That's the problem. That's the problem. I mean, that's another aspect of how outdated accounting is. Years ago, I was on a panel with the CFO of Merck, and she was talking about their alliances and joint ventures. And she said that a substantial amount of revenues come from alliances and joint ventures. And I said, Judy, how much? 20%, 30% said, no, we don't disclose it because this is not GAAP. We are not required to disclose. So you don't have anything. You don't have investment in alliances. Companies are doing big investments and joint ventures. You don't have the income. You cannot compute return on equity. It's just mind-boggling accounting. that on such an important thing, you basically have zero information. Large companies I know from my consulting have hundreds, if not thousands of alliances and joint ventures, and they are very problematic.
SPEAKER_01:If you were the CEO or founder of a small public company today. You're one of these new sort of startup, new media, new tech, software as a service, a future of work, and all this cool stuff we're hearing about. And you're a CEO founder, and you want the market to like you, but you also want to take a long-term view. You're in it for the long game. What might be some kinds of things, intangibles or not, that you'd advise that founder CEO to do with their reporting and or decisions that the market might look at favorably, given all that we're now talking about?
SPEAKER_02:The main thing I would advise, and this will come as a big surprise, is don't do what others do. The market is full with imitators. How many companies try to imitate Uber? And all they achieve is reducing the gross margin for all of them. Do a new thing. Think about something new. So when I mentioned Uber, I recently thought that the large car renters like Avis, Enterprise, they have huge car fleets. It must be that at any point in time, about half the cars are not rented, are just sitting there. Now, suppose they will now be competing against Uber But with a different model, they will give cars to drivers. So drivers don't have to come with their own cars and pay for insurance and all this. All of this will be provided by Hertz. You just have to drive it and then drop it somewhere. And this is it. Maybe it won't work. But this at least is some kind of a new idea. Just another Uber is not going to work.
SPEAKER_01:We have this tradition. We call this the three Qs. These are three questions we ask every guest at the close of every interview, no matter what their background or expertise is. So the first question is, in what field or sector do you see big data having the biggest positive impact on the world over the next 10 years? And it could be anything, science, manufacturing, investing, philanthropy, healthcare, climate change, you name it. Over the next decade, Where and how will big data help the world the most?
SPEAKER_02:Definitely healthcare. There is no doubt about this. Three, four months ago, I visited the doctor and he sent me to do some tests. And all of a sudden, they found some kind of a murmur in my PKG, in the heart. They panicked. They said, okay, I'll go and I'll go to my cardiologist. He said, no, you are not leaving this building. They put me into ER and I was 10 hours in ER because they didn't have my records there. They had the records there. They saw that this is the same EKG that I had three months ago. I was 10 hours there because they didn't have it. So good big data, machine learning, artificial intelligence on healthcare, it would do wonders.
SPEAKER_01:On the flip side of that, What aspect of the world do you see as being the most threatened by big data over the next 10 years?
SPEAKER_02:It's privacy, which leads to identity theft. This is a nightmare. This is a nightmare. I pay lots of money for identity theft protection. Nevertheless, every few days I get an email, we found your social security number in the dark web. This is a complete nightmare. I'm an old man. I remember the good old days. You didn't have to worry about these things.
SPEAKER_01:Well, last question, artificial intelligence. Is it our friend or is it a foe?
SPEAKER_02:I would say beware of such friends because I'm an old person. I remember the good old days without identity theft, without solicitations, without public exposure of everything. I always thought about what's the reason that God gave people the ability of hiding their thoughts and their plans, even from their spouses. You don't have to blurt out everything. You can hide it. There is an incredibly good reason for that because it maintains sanity. Secrets are good. Secrets are good in my world. That's great. So I'm really alarmed by this constant encroachment on privacy, on everything. All your history has to be known. It's really too much.
SPEAKER_01:Thank you so much for doing this with us, for being here with me, for being a friend. Thanks for all this time. That was my conversation with Professor Baruch Lev. As always, if you enjoyed this episode, I'd appreciate it if you could give us a good rating or review. We'll be back in a few weeks with another episode of The Q Factor. I'm Greg Fisher. Thanks for listening.
SPEAKER_00:Thank you.