What the AI Scare Gets Wrong

Support for the show comes from VCX, the public ticker for private tech.

The US stock market started history's greatest wave of wealth creation.

From factory workers in Detroit to farmers in Omaha,

anyone could own a piece of the great American companies.

But today, our most innovative companies are saying private longer,

which means every day Americans are missing out until now.

Introducing VCX, a public ticker for private tech.

Visit GetVCX.com for more info.

That's GetVCX.com.

Carefully consider the investment materials before investing,

including objectives, risk, charges, and expenses.

This, another information can be found in the funds perspective at GetVCX.com.

This is a paid sponsorship.

So for for today's show comes from Dark Trace.

Dark Trace is a cybersecurity defenders deserve and the one they need to defend beyond.

Dark Trace is AI cybersecurity that can stop novel threats before they become breaches

across email, clouds, networks, and more.

With the power to see across an entire attack surface,

cyber defenders, including IT decision makers, CISOs,

and cybersecurity professionals now have the ability to stop zero days before day zero.

The world needs defenders, defenders need Dark Trace.

Visit darktrace.com slash defenders for more information.

This episode is brought to you by Nespresso.

Introducing Virtua Up, the latest and a long line of innovation from Nespresso.

It's innovation you can touch, sense, and taste in every single cup.

With a three-second start, easy open lever, and dedicated brew over ice button,

it's even easier to enjoy your coffee your way.

Zip for yourself.

Shop Virtua Up exclusively at nespresso.com.

Today's number 57.

That's the percentage of American dating app users who are men at True Story.

I was furious when I found my wife had a profile on Raya.

That line, bitch, isn't fun to be around.

I like the Ronald McDonald approach to dating.

Quarter pounder.

Ooh, that's where Claire's got her hands over her eyes.

She's got her hands over her eyes.

At least it's clever.

How are you?

I'm doing very well.

Back in New York, good to be here.

Oh, you did make it home.

I made it home.

I made it home.

The blizzard was a real problem.

So Ed is like an amateur traveler, like a little snowstorm,

and he's stuck in London for three days.

He's like, oh no, I missed a flight.

I have to be here until the winter solstice

and go on the Queen Mary.

He's here so amateur.

You know, I also left a sweater on the plane,

so I'm now having to deal with that.

So you are right, I am an amateur.

I'm sorry, okay, okay.

Dude, do you realize how much shit?

The fact you even brought that up.

I know, I should just go get myself a new one, right?

But it's my favorite sweater.

I looked online, tried to find it,

couldn't find it in the right color.

And so yeah, I put the complaint in.

For a sweater, I've lost computers

and passports and Panerai watches on planes.

And this is what you do.

Oh, I need a new computer, Panerai, or passport.

You're never getting it back.

Well, how do you think these flight attendants

look so good when they're not working?

You think they've ever returned anything?

I will check back with you.

I'm gonna get that sweater back.

You can get your sweater back, yeah.

How are you?

I'm doing really well.

I've done a lunch podcast.

I'm trying to figure out what to do with resistance.

I'm subscribing to March.

Do I do Meta March?

I'm doing this event next Sunday in Minneapolis.

My youngest got a shadow day at a high school

we were applying to, so I'm taking him to the US.

And then I might go to the zero bond opening party in Vegas.

So, a little bit of chocolate and peanut butter there.

Do you have to go to the zero bond opening party?

No, the correct question is,

do I have to go to the fucking shadow day

for my kids high school?

Daddy needs to head to Vegas.

I love that.

Vegas, Vegas, baby.

You wanna come with me?

Yeah, now I'm taking Claire.

I think Claire's dirtier than you.

I don't think she minds me getting fucked up.

I think Claire wants to go.

I think Claire wants to go.

I think she should take Claire.

He'll judge me.

You seem, you seem surprisingly uncomfortable

where my joke's that bad today.

I do.

You seem very uneasy.

Is it because you don't have your favorite sweater?

Do we need Claire?

Do we need to get Ed a plushie?

Yeah, he needs a stuffed animal.

Do we need to get Ed a plushie?

That's what you decide to talk about on the podcast

you left a sweater on a flight.

I live a boring life.

These things are important.

You have a very exciting life.

I'm not going to the zero bond opening party in Vegas.

Yeah, but the problem is,

you're gonna get more action in South by Southwest.

Everyone's gonna be like,

can you introduce me to Ed?

Well, speaking of South by Southwest, quick shout out.

We are returning to the Vox media podcast stage

at South by Southwest on Saturday, March 14th.

I'm very excited about it.

Scott, I think, is very excited about it.

So join me and Scott at 10 a.m.

for a live taping of Profty Markets.

Last year was honestly pretty epic.

We filled out that auditorium

and we had a great time.

The year before that was our very first time doing a live show.

Less epic, but still pretty fun.

But I think this year's gonna be the greatest ever.

Is it another thing?

Are we doing a sponsor?

Are we doing it at some corporate headquarters?

Are we doing the actually at South by Southwest?

We're doing it at South by Southwest

on the Vox media podcast stage, on the main stage.

We're taking, I think 16 of us are going, aren't we?

It's like a bunch of us.

You guys stay at a shitty hotel

and daddy stays at the Austin proper

because daddy's daddy.

But I love it there.

I think it's so much fun.

I think it's, and please try to be sincere,

which isn't easy for me.

But please come up and say hi.

Especially, Ed's a little like pretentious

and little arrogant thinks he's better than everyone else.

I am, Claire and I are down with the Digirati.

That's South by.

All right, well, before we move on here,

I'd love for you to really genuinely

and passionately read the info

about our special discount on theVoxMedia.com website.

Could you?

Great that the discount is all right.

That's a good sign.

For more info and a special discount,

visit voxmedia.com slash SXSW.

That's voxmedia.com slash SXSW.

We'll see you there.

Oh, that's compelling copy.

That's compelling copy.

You can feel the excitement.

It's palpable.

Okay, let's move on.

A blog post about AI from Citrini Research

stirred up some market chaos last week.

After a drop, the Dow fell as much as 2%

and software stocks fell 5%.

We've seen markets react to AI commentary before,

but this time there was a twist.

This piece wasn't really an analysis.

This piece was actually fiction.

Titled the 2028 Global Intelligence Crisis,

the blog imagines a scenario

where AI drives unemployment to 10%,

where consumer spending collapses,

where markets plunge and the entire economy

is fundamentally reshaped.

So Scott, we discussed this a little bit with Josh Brown

during the week last week.

He had some interesting thoughts.

We also got a lot of feedback from our audience.

A lot of people are very shaken by this article.

Again, it doesn't really tell us anything.

We didn't already know,

but it does imagine a potential scenario

where AI is so powerful,

it's so productive,

that actually it just completely rewrites

the script of our economy

and actually puts the S&P,

puts all markets into the red,

and takes the consumer economy down with it.

So let's just start with your initial reaction

to the Satrini Research article, the blog post,

and also how the market's reacted.

I think the best thing about that paper,

that paper inspired an enormous drawdown in the market,

and it's inspired me to start buying stocks

in Apollo, TPG, and Blue Al.

Because, I mean, just to summarize,

and I bet everybody's already heard this,

but the basic notion is that,

okay, these white collar work gets kicked in the nuts, right?

And that unemployment basically doubles,

and then there's, because of all these big spenders

who have good jobs get fired,

they cut their consumer spending

and consumer companies are forced to look for places

to save money to maintain their EBITDA margins,

they turn to AI and it just kind of inspires us

and so on and so on and this downward loop.

That's not an original concept.

I mean, the idea that we've gone from 90% of us

in agriculture to 2%,

you would have thought that people being laid off,

spend less money, spend less money on food,

and technically, it's not a new concept.

What's different here is the speed and they think

the severity, but where I head with this,

is it effectively what you have,

now the companies I'm looking at,

I've been doing a lot of selling and buying.

I've been selling down Apple and Amazon

for kind of resisting unsubscribed,

and I'm reallocating it into SaaS companies

and also I think the new opportunity

is in these PE private credit

or what they call business development firms.

So just to look at them,

Apollo is trading at 14 times earnings

while maintaining double-digit earnings and AUM growth

and that's how they make money as they deploy AUM

and they collect two and 20 on it.

So it's trading below market multiple

of the S&P despite higher growth.

CPG is trading at about a third below

kind of fair value estimate relative to its peers.

It's got incredible fundraising

and it's expanding its fee earnings.

And essentially, these prices reflect pessimism

more than growth trajectory and then blue owl,

which was kind of the ground zero for this,

has a 70% dividend yield and the market appears

to be, in my opinion, over inflating

the fears around private credit

or put another way, I think the opportunity here,

and I want to get your thoughts,

is that there's a growth versus valuation mismatch

and that is all three of those companies

are growing AUM and recurring fee revenue

and sector multiples compress due

to kind of private credit or liquidity fears.

So I would argue kind of to summarize,

compress multiples plus durable fee growth

plus strong fundraising,

all adds up to what I think is undervalued stocks

relative to the broader market.

All those companies you mentioned,

they've gotten really, they got really hit hard

after the Zalscal came out.

Some other names that have gotten really hit hard,

again, because of this AI narrative,

Visa, MasterCard, American Express, DoorDash,

a lot of the big software names.

And you ask yourself like, okay,

what are all of these companies,

what are all of these stocks having common?

If you look at their fundamental businesses,

they do not have a lot in common.

They're very different businesses,

pursuing very, very different objectives.

The thing that all of those companies having common

is they were all mentioned by name in the blog post,

which tells you that these draw downs

have absolutely nothing to do with fundamentals.

Nothing to do with what we're actually seeing

with their businesses on the ground,

nothing to do with their earnings.

It's all about the vibes.

It's all about the fact that they were included

in the big bucket of stocks that this guy

who wrote this interesting,

and as we've discussed, very well-written article

that was really creative and really fun to read.

I think that's an important underlook aspect of this.

And they were all mentioned by name.

And because of that, you saw this gigantic drawdown

literally in a single day on all of these stocks

because they were included in that article.

And that is like the most obvious perfect example

of narrative running away from fundamentals,

narrative becoming untied and untethered from the numbers.

And so I think you're right with your instincts

to just go in and be like,

I'm probably gonna have to buy these things

because it is such a clear indication

of such a level of panic and confusion in the markets.

I mean, imagine you are an asset manager

and you've been invested in, let's say,

DoorDash for a number of years.

And you've done pretty well if you were an early investor.

And imagine this article comes out

because your friend's friend sent it to you

over DM on Twitter and you read it

and you see the name DoorDash

and the guy who wrote the article says

the DoorDash is gonna be the poster child

of the AI apocalypse.

And then you see people retweeting it

and people commenting about it.

And then you start to look at the markets,

maybe you see a little bit of a drawdown beginning to occur.

And then suddenly you say,

oh my gosh, all bets are off.

I'm panic selling right now.

That is such a crazy thing to do.

And what I would love to know is like,

who is actually selling right now?

I mean, we could talk about the macro themes

in this blog post.

I think there's a lot in there

that is very interesting

and that we should take seriously.

But the selling pressure that we're seeing

after these blog posts come out,

we it's sort of the same thing

and the other blog the other week,

something big is happening.

Another dude writing a think piece,

it's a creative writing project,

not telling us anything new,

telling us all the same things that we already know,

but reframing it in a creative

and slightly doomerish way.

And then suddenly we're deciding

to just re-rate everything based on that

interesting and creative think piece.

I mean, it really doesn't make a lot of sense.

So I think that your instincts are correct on that.

On the blog itself,

I mean, some of its conclusions,

I think are fair and worthy of discussion.

I think that there is a real unemployment risk here

with AI that is worth talking about.

I think that the way that the article kind of ties in

all of the different elements and pieces

in the ecosystem and how there could be a chain reaction

that is triggered by AI,

I don't agree with the fact that the idea

that it's gonna bring down the markets by 40%,

I think that's way over the top.

But the fact that all of these things are interconnected,

I think that is a worthwhile statement.

But it's the conclusions that are being drawn

and the actions that are being taken

after these things come out,

which just makes me think like, where is your conviction?

I mean, if you were invested in these companies

for the past 10, 15 years,

and then suddenly some guy writes something,

and you decide, this is it, now I'm gonna sell.

It's like, well, then I don't really,

I don't really agree with your prize in the first place

if this is what it took.

Some article that some guy wrote online

that was kind of interesting

and spurred some imaginative thoughts.

So we should turn a guest to some of his economic predictions.

Well, what were the biggest assumptions around

some of the macro factors he's assuming here?

The central stat is, again, he's writing this

as if it's 2028, and we're looking at what's happening

in the headlines, quote,

the unemployment rate printed 10.2%,

and the cumulative drawdown in the S&P

was down to 38% from October, 2026 highs.

And the central thesis is that AI adoption

is going to cause this mass unemployment,

which is going to reduce wages

and reduce earnings across the board,

and it's going to put the economy into this downward spiral.

And there's this idea that he brings up

called, which he calls ghost GDP.

And I'll just read you the quote.

It says, when cracks began appearing in the consumer economy,

economic pundits popularized the phrase ghost GDP,

output that shows up in the national accounts

but never circulates through the real economy.

And this is really the central idea of this AI thesis

that there's going to be a lot of value that is created,

but none of us are really ever going to sit.

And I think that that is arguably fair only up to a point.

And the trouble is, it gets into this level of humorism

that just is really unrealistic,

where there's this idea that actually,

we're not going to be able to get paid anything

because AI is going to completely replace us,

which is going to completely eviscerate incomes,

completely eviscerate wages.

And meanwhile, as that is happening,

consumption of the AI products is going to keep growing

and growing and growing.

And this is the part that doesn't really make sense

because how is it that you're going to have people

who don't have enough money to pay for anything

or to consume anything,

and yet consumption continues to go up?

And this is the part where he's very descriptive

on the value destruction that we might see,

but then completely ignores the value creation

and what we might do with all of that productivity.

And I think this is the thing that a lot of people

are taking issue with.

It's something that I take issue with as well.

I think that there's not enough analysis of what's going to happen

on the other side of those accounts.

I mean, if you've got consumption going up,

then that necessarily assumes that people have money

to pay for things.

But he doesn't really acknowledge that side of the equation.

He only focuses on the downside,

which when you read it is kind of interesting.

But when you start to logically think it through,

it doesn't really make much sense.

Well, you've done,

and I want to use it as a jumping out point.

You've been talking a lot about,

what does AI mean for your career?

And I've been thinking a lot about,

okay, on a meta level,

how should you be thinking about not only how you allocate

your financial capital and we talk a lot about

where we think things are oversold and there's opportunity

as we do in the South space.

And now the private credit space

or the business development space,

in terms of your own human capital,

the way I would try and frame it is the following.

My mom was a secretary.

She oversaw the secretary of poll

at the Southwestern University School of Law

in downtown LA,

by the way I worked in the mailroom.

And that's gone away.

Word processing, you know,

there's no more secretaries, they're gone.

But my mom had good EQ

and went upstream and became an executive assistant.

Another example,

we have every piece,

every contract I had with an advertiser,

with an employee,

I used to, if I got investment document,

if I'm negotiating with Vox,

I'd send to our lawyers.

And some mid-level, not even a partner attorney,

would review it, come back with some thoughts,

I'd jump on the call,

cost me $13,000, $5,000.

Every agreement sent it to a lawyer.

Now I say to Claude who's working with us,

no, you're smart, have AI look at it,

give the prompt on what you're worried about it,

get a feedback and you're now the in-house counsel.

At the same time,

so being a quote unquote fairly mid-level attorney,

that's not a good place to be.

At the same time,

I'm spending more money than ever

on a woman named Lucy Lee,

who's this partner at a firm called Citron,

around things like corporate structure,

ensuring that the types of compensation strategies

for you guys that give you the opportunity

to sell shares at some point, long-term capital gain,

structuring the company such that any capital I put in,

if we hold onto it for five years,

might qualify for 1202.

I am spending probably more on legal this year,

but it's moving upstream

from reviewing simple advertising agreements

to okay corporate structure and tax efficiency,

which is Latin for tax avoidance.

So the question everyone should be asking in their job

is of all the things I do here,

what is most complicated?

And generally most of them come down

to a lot of them come down to sort of EQ or complexity.

What do I do that's harder complex?

What involves relationships?

And will I have an opportunity to move upstream

or downstream?

Because a lot of that stuff will be taken out.

I think this is a really important point.

You imagine you're pulling back

on a certain type of legal service

and you're spending a lot less money on that

because you've got this AI tool that is helpful

and you've hired someone who's gonna consolidate that work,

but then you're spending more on the corporate restructuring

over here.

And that is a dynamic that I think a lot of people

are not really recognizing,

which is sure some money might move out of this ecosystem.

But then where is it gonna go?

That's the question that people aren't really asking enough

and that the Satrini research on school

actually refuses to acknowledge at all.

They spend a lot of time saying,

here's where the money's gonna move away from.

It's gonna pull out of here and here and here and here.

And then I don't know.

And they just offer no other alternatives.

I think one of the, in my view, one of the silliest predictions

is the idea that friction goes to zero.

This is a big thesis that we see in the article.

The idea that all forms of friction in business

and in daily life when you're trying to book something

and it takes time and it's annoying.

All of these things that often involve

some level of middle management or human relationships.

All of that is going to go to zero

because AI agents can do them for us.

Therefore, friction on which a lot of the economy is built

is going to be entirely eliminated.

That's the way they describe it.

It's just gone now.

That again is the wrong characterization

because what's happening,

it's not that the friction is suddenly eliminated

is that we now have a technology in a set of companies

that are just handling the friction better

than the old companies,

which is the same thing we always see with technology.

If you look at VISA, which was brought up in the article

from MasterCard, someone might make the argument

that when they came up with the credit card,

they eliminated the friction with a check or paying with cash.

And so therefore, friction is gone.

No, the friction has just been handled by someone else.

And now the value in the money is occurring

to a different player.

The same thing is going to happen with these AI agents.

And the same thing is going to happen for, as you say,

you're taking the money away from here.

And now I'm going to spend it on something

that is also worth my time.

And so the money's going to go to someone.

The only real concern, if this, I mean,

if the Doomsday scenario actually plays out,

would be that all of the value is sucked up

and literally hoarded with no redistribution mechanism

whatsoever into the hands of literally just like

the few people that own the AI companies.

Now that's not a totally ridiculous statement

because we're already seeing how that's kind of playing out

in our current economy.

But it's not going to go to the extent

that I think that this article assumes,

you're going to need some level of consumption

in the regular economy for the value to go up

and for the value to accrue somewhere.

And that's the part that the article

doesn't really acknowledge enough.

I do want to say one more point.

This was a YouTube comment that I read this morning

that was responding to Josh's view

that I think is kind of similar to us

that this article is a little bit out there

and it's not, it's fiction, it's not going to happen.

So I just want to get your reactions to this YouTube comment.

This guy says, okay, Josh.

But what happens when AI renders my kids $250,000

finance undergraduate degree useless

because he can't get an entry-level analyst job

because the jobs have all been assimilated

under some AI chatbot.

Or if their law degree is useless

because they can't get an associate job

because the partners have discovered

AI can get rid of 80% of their associates and paralegals.

When this hits white collar the way automation

has hit blue collar jobs, then what?

Are we all communists for advocating for UBI?

Or do they all pivot to just deliver for Uber Eats?

Oh wait, they can't.

All the cars are autonomous

because of a robotic delivery driver.

This was a popular comment on the YouTube.

I just want to see if you have any thoughts

or responses to that.

I think that comment is a function of dissatisfaction

with our economy where two few people

are enjoying the spoils.

And I don't even think,

the sum of that is a function of technology

but what we hate to admit is we keep voting in people.

Bernie and Senator Sanders and Senator Warren

have been bitching and moaning about inequality

for 30 years while they've been in the Senate,

including when they controlled all three houses.

We have purposely chosen Democrats

and Republicans income inequality.

So yeah, technology has been played a part in it

but be clear, we have decided

we want income inequality in the US

because we all believe at some point

that will be a millionaire.

And just wait to see how we treat the bottom 99%.

We're in the top 1%.

Now is that a breaking point

where it's at the same,

the gene coefficient is at the same levels

of France during the French Revolution?

Absolutely.

But what Josh has said that really struck me

you need to ask yourself what could go right?

I love that.

So what does your kid do?

First off, in terms of this narrative

that your college degree isn't worth,

that's effectively what he's saying is that

the college degree at Stern or at EVA

is not worth three to $500,000.

Okay, I get it in theory but guess what?

Applications hit record houses here to law school.

If there's a place you would think

people would not be applying to school

or would have no pricing power,

you would think it'd be law schools.

No evidence of that.

People are still doubling down on law school.

I would argue that probably it's because EQ

and being a well-rounded person

better immunizes you against whatever change comes down

from this technology or others than anything else you can do.

In addition, when people ask me what's the difference?

When I speak here in the UK,

what's the difference between the UK and the US?

I say the same thing.

You're the ones that stayed.

The word risk defines our success.

We're more willing to take risks on capital.

We're more willing to start crazy stupid businesses.

People are much more promiscuous with their own capital,

thinking maybe someday I'm investing in the right Google.

People are much more risk aggressive,

giving up a good job and moving to San Francisco

and taking a lower salary and more equity in a startup.

And just along the lines of risk,

the number of new business permits

or new business applications in 2004,

not that long ago,

was 150,000 new business applications.

This year or last year, it was half a million.

Triple the number of people have decided to try

and start their businesses.

Some of that might be because they've fed up

in the corporate world or they don't have any choice,

but whatever it is,

it's striking how many people are starting businesses.

When I graduated from business school in 2002,

92, there were only two entrepreneurs in my entire class.

And my co-founder was the second.

There were no one was starting businesses.

Just to be the optimist here,

there is a really solid case here around what could go right.

The American ethos of risk taking,

and understanding of technology,

every innovation and technology

has over the medium and the long-term created more jobs.

The market responds with good government policy.

It tries to fill in the gaps.

Unfortunately, the V might be more severe here in America.

We are not good at taking care of the people

or retraining them who are on the wrong side of this trade,

but not to sound too much like,

I don't know, a polyanna here.

I think it's a pretty interesting time

to be coming out of college

and looking at different opportunities.

If that else was coming out of Princeton

and you had two co-founders,

I granted you're white and privileged

and a little bit snooty.

But okay, you come out Ohio State

or you come out of Michigan State,

which are both really good schools.

And you are outstanding at leveraging AI

and you're gonna start a seniors,

some sort of, you're gonna help people

find the right seniors facility for pop up or Nana.

And you're gonna charge them 200 bucks

instead of the consultants to charge 5,000.

And then you're gonna negotiate using AI agents

the best deal possible.

I think that's a really cool little bit.

I just made that up in 30 seconds.

I think it's a really cool little business

and people are gonna fill out sorts of niches

and be able to find capital

and do really cool, interesting businesses.

If I was coming out of school right now,

I'd be saying, I'd wanna learn AI

and I'd wanna understand healthcare

and I'd wanna cut a swath

through the middle of those two things.

Anyways, long-winded way of saying,

I think it's important to ask what could go right.

I think the thing that a lot of people

feeling right now is there's this incredible

cognitive dissonance because the argument

for what could go right, as you say,

is actually very, very strong.

And we've heard it from you, we've heard it from me

and we've heard it from many others.

At the same time, the argument for what could go wrong

is also quite strong

because this technology is incredibly powerful

and we don't know what's going to happen.

We are at such a time of incredible uncertainty

that having a position on either side,

both of them are very reasonable.

And that's why I think a lot of people would maybe

listen to us right now and say,

oh, they're talking out of both sides of their mouth.

It's like, yeah, because there are different futures here

and there are different probabilities

to those different futures.

And that's what we're trying to pass out right now.

What is the probability of it going right?

What's the probability of it going wrong?

They're both decent probabilities.

Now a framework that I would add onto this,

I think, going forward.

I think it is the investor's job

to ask what could go right.

Because as you say, if you are an investor

and you spend all your time thinking what could go wrong,

you're going to get absolutely destroyed.

If you never put your capital to work,

if you never take risks,

if you always think that tomorrow's gonna be Tuesday,

you're just never gonna get rich.

That's just the reality.

So that's why we're asking this question.

This is an investing show.

This is a market show.

If you want a chance of getting rich,

sorry, you must ask yourself what could go right.

You have no other choice.

If you want to just sit and stay,

never increase your income, never increase your assets,

then okay, go for it.

And just always ask what could go wrong.

Having said that, I also think that it is the government's job

to ask what could go wrong.

It's the regulators job to be asking that question.

What could AI do to job displacement?

How many jobs could it theoretically get rid of?

If that happens, what is going to be our response to that?

How do we regulate this technology

such that we don't walk into an economic disaster?

And the thing that I am noticing right now

is that the investors right now seem to be obsessed

with the question of what could go wrong,

which is a bad idea.

And the government seems to be obsessed

with the question of what could go right.

The government seems to think everything's gonna be fine.

Don't worry about it, hands off, everything's gonna be great.

We're not even gonna include any policies.

In fact, we're gonna create policies

that make sure that no one else creates any policies.

And that is a very, very stupid idea

because we should be asking that question.

It is a legitimate possibility.

We should be thinking about things like UBI.

We should be thinking about a worker reinvestment fund.

We should be thinking about what would happen

if the unemployment rate actually was 10%.

Not if you're an investor.

I don't think that's a very wise move to assume that.

But if you're in government, if you're a regulator,

I think these are good things to assume.

You should be earring on the side of caution.

And what we're seeing in government is not that at all.

The fact that we're talking about this

means it convinces me this is not gonna happen

as it's played out because it's the issue

you're not expecting to get to.

There are a few people other than a really intelligentsia

I analyst was thinking, oh, a bunch of young men

from Saudi Arabia are gonna hijack planes

and slam them into buildings.

That just wasn't something we were worried about.

That took down the economy for a brief time.

The sub-prime crisis, Michael Burysop,

but not many people saw that,

including the smartest financial people in the world

were layering on layering and all their risk models

did not turn this up.

We did not see a virus shutting down the economy

and taking GDP down 31%.

It's the shit you're not worried about.

You're too young to remember this.

We spent a year masturbating over Greek sovereign bonds.

We were convinced that Greece was gonna take down

the EU and the global economy.

You know, 2% of the GDP of Europe

and we just sat here obsessing over it.

There's a phenomenon when you worry about something a lot,

it doesn't happen because you start to prepare for it.

So I just don't think, by virtue of the fact

that we've done so much catastrophizing around this,

we don't worry about it.

The thing that is actually a bigger issue

in the markets right now is the following.

AI and the CapEx and the incredible opportunity of AI

and the excitement around these things,

which I think is probably overhyped as well to the upside,

has created real economic growth,

CapEx and buoyed the market, right?

But a sclerotic industrial policy that makes Europe

look more competitive and more decisive

where we have an administration saying,

andthropic, you gotta do what we want.

Even though you're a private company,

you've gotta do what we want.

We're not putting in place laws around guardrails

around how companies should behave.

We're just gonna do one ops based on

this guy's blood sugar level.

Oh, the administration is gonna get to decide

who gets to acquire whom.

And oh, we're taking a stake in one chip company

and not others.

Oh, we know how to run a steel company

when the deepest pools of capital become more shallow

because foreign investors don't know

who the fuck they're waking up to next

because there's different laws that might be imposed on them.

What has happened in the last 12 months,

despite the massive investment and success

of these tech companies,

the American market has underperformed every major market.

Why?

Because the dollar's gotten much weaker

because people have less faith in the full credit

and faith of the United States government,

our ability to pay back in stocks

because of fiscal irresponsibility.

And the entire world is rerouting

their supply chain around us,

including the capital they invest in these companies.

And one of the reasons that people were willing

to invest so much capital in the US

is because there was a rule of fair play.

And we have lost that.

And people are rotating out of US stocks.

That is, in my opinion, a much bigger threat to our economy

when we have decided that with a third of the world's GDP,

we can control it.

Whereas we used to be the operating system

through cooperation rule of law and standards

and consistency where we were the operating system

for two thirds of the world's economy.

And everybody wanted to invest in the US.

Do you think big Canadian pension funds

are thinking how do we invest more in the US right now?

Fuck you, I'll invest in Alibaba,

or I'll invest in Mistral,

or whatever it is, or Solonis in Germany.

They're like, we need to diversify away from this asshole.

And you're seeing that show up in our valuations in our market.

That is a, in my view,

that is the existential threat here

to a decline in our prosperity.

Is the price of products go up

when people either ban our products

or stop buying our products,

shrinking our markets for exports,

they impose reciprocal tariffs.

Human capital stops coming here,

which reduces the quality of our teams.

And institutions don't want to invest in everything we do here,

taking the PE down of everything

reducing or increasing our cost of capital,

making us less competitive

because of absolutely head up your ass,

sclerotic, lurching, irrational, industrial policy

from our government.

In my opinion, it's not the terminator

that it's going to kill us.

It's a fucking clown called the president.

We'll be right back after the break.

And if you're enjoying the show so far,

send it to a friend and please follow us

if you haven't already.

Support for the show comes from Delete Me.

Delete Me makes it easy, quick, and safe

to remove your personal data online

at a time when surveillance and data preachers

are common enough to make everyone vulnerable.

This is not a one and done service.

Delete Me sends you regular personalized privacy reports,

showing what info they found, where they found it,

and what they remove.

Our producer, Jennifer Sanchez, tried Delete Me.

She was surprised to find out

how much personal information was actually

already out there about her

and Delete Me made it easy to clean it up.

She said, take control of your data

and keep your private life private

by signing up for Delete Me.

Now at a special discount for our listeners,

get 20% off your Delete Me plan

when you go to joindeleteMe.com slash profG

and use promo code profG at checkout.

The only way to get 20% off is to go

to joindeleteMe.com slash profG

and enter code profG at checkout.

Let's joindeleteMe.com slash profG code profG.

Support for the show comes from VCX,

the public ticker for private tech.

For generations, American companies

have moved the world forward

to their ingenuity and determination.

And for generations, everyday Americans

could be part of that journey

through perhaps the greatest innovation of all,

the US stock market.

It didn't matter whether you were a factory work in Detroit

or a farmer in Omaha.

Anyone could own a piece of the great American companies.

But now that's changed.

Today, our most innovative companies

are staying private rather than going public.

The result is that everyday Americans

are excluded from investing

and getting left further behind

while I'll select few reap all the benefits until now.

Introducing VCX, the public ticker for private tech.

VCX by Funrise gives everyone the opportunity

to invest in the next generation of innovation,

including the company's leading AI revolution,

space exploration, defense tech, and more.

Visit getvcx.com for more info.

That's getvcx.com.

Carefully consider the investment material before investing,

including objectives, charges, and expenses.

This and other information can be found in the funsperspectice

at getvcx.com.

This is a paid sponsorship.

Support for the show comes from LinkedIn.

It's a shame when the best B2B marketing

gets wasted on the wrong audience.

Like imagine running an ad for cataract surgery

on Saturday morning cartoon.

So we're running a promo for this show.

On a video about roadblocks or something,

no offense to our gen alpha listeners,

but that would be a waste of anyone's ad budget.

So when you wanna reach the right professionals,

you can use LinkedIn ads.

LinkedIn has grown to a network of over one billion professionals

and 130 million decision makers according to their data.

That's where it stands apart from other ad buys.

You can target buyers by job title,

industry company, rural seniority skills, company revenue,

all suit and stop wasting budget on the wrong audience.

That's why LinkedIn ads boasts

one of the highest B2B return on ad spend

of all online ad networks.

Seriously, all of them.

Spend $250 on your first campaign on LinkedIn ads

and get a free $250 credit for the next one.

Just go to LinkedIn.com slash Scott.

That's LinkedIn.com slash Scott,

terms and conditions apply.

We're back with Prof. G. Markets.

President Trump used his 107 minute state of the union

to paint an optimistic picture of the country

declaring what he called a quote,

turn around for the ages.

He touched on everything from inflation and immigration

to healthcare and voter fraud,

but not everyone feels so positive about it.

So let's move past the rhetoric

and let's dig into the numbers.

We're going to take a look at the data on inflation,

on markets on GDP and employment,

and we are going to reach a consensus

on the real state of the union.

So Scott, I think maybe we should just start

with some of the untruths that we witnessed

in this state of the union

just so that we're all on the same page here

about how America is doing and what's true and what isn't.

So I think the first big lie that we need to just

dispel immediately is that we secured $18 trillion

of foreign investment in 12 months.

I have no idea where Trump has gotten this number from.

That is literally more than half of our current GDP.

His own website says that the number is 9.7 trillion,

which is also a made up number.

This is based on nothing, as we've said.

None of these are actual deals.

They're just verbal commitments

and then they explode the numbers by 100% to the upside

and the downside depending on the day.

I mean, that number is totally bogus.

So that's the first thing.

The other thing he said is that foreign countries

are paying the tariffs, not true.

Multiple studies have been done 90 to 96% of the tariff burden

is falling on US firms and US customers.

He said the prices are plummeting downward,

not true, prices have risen nearly 3%.

Inflation is going up.

Gases below $2.30 in most states, $1.99 in some,

also not true.

No state had an average below $2.37

and only two states average below $2.50.

Those were sort of the big lies.

So now that we agree, hopefully, that those are not true.

Let's start with your reactions to the state of the union.

I thought it was mostly nothing burger.

I thought if I try to cleanse my biases,

I thought it came across as robust.

You didn't say a lot.

I didn't think it was that.

I mean, it felt like not much to me.

I was waiting for some sort of announcement.

There was no new policies.

He teased tax cuts.

We didn't see that.

It was 75 minutes.

There was 20 standing ovation.

There was 80 applause breaks.

I feel like these, you know,

I feel like Congress burns more calories clapping

than actually legislating.

Totally agree.

Hands.

OK, so unemployment, to be fair, unemployment is pretty low.

Inflation is down from its peak,

but it's still above where it was when Biden left office.

GDP growth is positive,

but it's especially concentrated around

a small number of companies.

He's sort of asking everyone to stare at AI

and big company cat-backs and then take off your glasses

when you're looking at your grocery receipts, right?

So I don't know.

I feel like it was a masterclass in cherry picking.

I have trouble getting through the whole thing.

So I didn't, I actually thought the democratic response

from Abigail Spamberger's, I don't know him.

I thought that was really strong.

Actually, I have an idea there that I want to pitch you,

but like the data, the data was sort of real.

The spin was much realer.

And again, I just don't think we're dealing

with the real issues here.

And that is the deficit.

I think at some point we're getting an adult in the room

that says, okay, folks, you know, Democrats,

we're gonna have to cut spending.

Republicans, we're gonna have to raise taxes.

Let's get to it, you know, who are the adults in this room?

Is anyone actually ready to address it?

Oh, and we need a billion doses of GDP of one drugs

to try and bring the average cost of healthcare

from 13,000 per person down by $400 a year

for the next 10 years and address the deficit

because all roads lead to entitlement,

switch lead to healthcare.

Anyway, no, I feel like I would love to just write this speech

and just look at all of them and say, okay, who's ready?

Is there anyone in the middle here

who are ready to actually address these issues?

So, you know, I have trouble watching it at this point.

I just think it's so insane.

And at one point, I think he said that we brought

an 18 trillion dollars in investment, right?

Where the fuck is even getting these numbers?

It's like, so it felt like it's an earnings call

whereas investors are the Republicans and there's no SEC.

He can't get in trouble.

You can just throw out numbers.

It's a great analogy.

It'd be like if Jensen Huang said,

our earnings were up 11 million percent.

There's the greatest earnings, quarter in history

and our backlog, we're gonna grow.

We grew our revenues 440 fold.

It's honestly a great point.

There should be legal implications for lying

about the numbers of the economy during the state

of the Union interest.

If we have legal implications for Jensen Huang

saying the wrong thing, shouldn't that exist

for the president?

It's a really good point.

That's an interesting statement on America

and that is we're much more protective

and value investors more than we do citizenry.

Right.

So, oh my God, that was the most insightful thing

we've ever said.

That was a come see us at South by Southwest.

It's a really good point.

I hadn't thought of that.

Let me just bring it down a bit.

Quarter pounder.

Sorry about that.

His, I mean, just to run with this analogy

between the state of the Union address

and an earnings report, I think that's exactly right.

There's a level of spin here on cherry picking,

which was actually quite deft.

And I think you actually have to give credit

to whoever wrote that speech

for navigating all of these issues pretty well.

But to your point, he's asking America

to believe that everything is going really great

for Americans and that gas prices are coming down

and that food prices and grocery bills are coming down.

He's asking everyone to believe that

when that is simply not true

and consumer sentiment among Americans right now

is absolutely tanking most Americans,

two thirds of Americans agree

that he has completely bungled these tariffs.

I think most Americans are realizing

what tariffs are doing to consumer prices,

what they are doing to their grocery bills.

That is they're making their grocery bills go up

because as we've discussed,

the tariffs are being passed through

under the consumer and so it's consumers

that are paying the cost of the tariffs.

They're also saying that a lot of Americans are saying

we just don't agree with them.

We don't approve of how he is handling the economy.

And yet he's asking in this state of the union

for us to just say things are going well.

Look at this number over here.

Look at this number over here.

Look at the fact that our GDP has grown.

Look at the fact that our quote economy

is roaring like never before.

And then as you kind of point out,

not acknowledging that the reason that is happening

is because AI is adding a full half percentage

point to GDP growth right now

because America is essentially becoming

a giant bet on AI.

The reason that we're probably going to see

some more growth in the next year is,

as you say, because of this unbelievable deficit spending

which is going to reach $2 trillion next year,

that's a level that we've only reached

during recessions and during pandemics.

So the underlying situation and picture isn't great.

And he's asking us to believe it is great.

But the most important point is the one

you brought up in the previous section,

which is that you look at the stock price.

We are underperforming every major index,

every major international market right now

by a pretty significant margin.

And you look at last year where yes, the S&P rose 16%,

which was good, but you look at the all-country world index

minus the US, which rose 29%,

which has almost doubled the return of the US.

Not even dollar adjusted.

What was our big prediction?

The end of 24, rotation out of US stocks and two.

Rotation out of US.

And then the big question was,

is this going to continue in 2026

or was all of the juice squeezed out of that trade in 2025?

It is continuing.

Year-to-date S&P is flat.

Year-to-date MSCI world minus USA index is up 10%.

So all of these are the stock markets.

I mean, they are outperforming.

And you can go up there on the stage

and you can say, look at the stock market we're doing well,

but as we all know, the all of the stuff is relative.

When you compare us to the rest of the world,

we're actually not doing so well,

which is surprising because you would think that

if we own all of the AI companies, which we do,

why aren't things going well?

I think it's to your point,

the capital flows are adjusting.

People are rotating out.

People are looking for an excuse

to sell these companies and to get into something else.

And that's a real problem for him and for Americans.

But again, it doesn't matter how great the barbecue is

if it's raining outside,

like the atmospheric in the context matter.

And there's some amazing companies in Latin America

that have grown their revenues and profits

every year for the last 10, 20 years

and all of them are flat or down

because you can't outrun flows.

And the flows out of Latin America

have been one way to other markets until last year.

So great companies, maybe with the exception

of Mercado Libre, I just went down.

You can't market dynamics Trump individual performance

in what we're seeing now because again,

of a lack of faith in our current administration

industrial policy and a degradation of the rule of law,

I think you're seeing flows out.

And with respect to the state of the union,

I loved what, I think it was Jonathan Hyde,

I forget who said this about Mark Zuckerberg and Metta.

You know, they would say, all right,

what's happening with teen depression?

And they would, they would cite a bunch of false data

or a lies or they would,

it would clear that they were hiding data,

their own data about how much mental impacting

which it was creating on young people, especially girls.

And this one person said something that really struck me.

It was Francis Hagen and that is,

when all the mistakes are in your favor,

they're not mistakes, they're lies.

And I constantly use that quote when I check out of hotels,

I never check my bill, but whenever I do, I find mistakes.

The mistakes are never in my favor.

It's always, oh, wait, didn't you check in a day?

No, I didn't check in on Wednesday.

I checked in on Thursday.

Oh, it says here you had, you know, six gingrials.

No, I didn't touch them.

There's never a mistake where they forget to charge you.

And I would say this, I'm like,

when all the mistakes are in your favor,

they're not mistakes, they're lies.

And every single mistake in his state of the,

I mean, the lying has gotten so out of control

that it's been normalized, that it's been okay.

We've just given up on fact checking.

And the North Korean or the Soviet polypuro Duma here

will just stand, I mean, the thing that reminded me of,

is in North Korea and in Iraq under,

who's saying when they'd have these meetings

or state of the unions, you got the very real sense

that if they were not seen jumping up and applauding,

there was a chance they might be strapped

to a canon and executed the next day.

And that's not much of an exaggeration.

That's how it felt.

It's like, okay, I don't care if you're Republican or not.

You're smart people, you do math.

They didn't bring $18 trillion back to the US

and new investment.

These tariffs aren't, are making America.

I mean, these guys know this is fucking bullshit,

but they're also scared.

I just can't figure out what is so amazing

about being an elected leader.

Cause I do think he has the power to primary people,

but is it just that awesome to be in Congress?

Like what, what is so incredible about being in Congress

that you're willing just to prostrate yourself like this?

But yeah, it was, it was a series of meetings

and it was my ideas the following.

Did you see the Democratic response from Abigail Stamberger?

Okay, so Abigail Stamberger, 46, former,

I believe she was either in the NSA of the CIA,

just former intelligence officer,

just such an incredibly impressive person,

exactly who you want in government

and she's the 75th governor of Virginia.

She did the response.

This is my idea.

I called and I called a Democratic senator

who's running for president,

so he has to take my calls

cause he thinks I'm gonna get him a lot of money.

But I'll text him and say, I have an idea.

And he's like, oh my God.

Name drop him in ruin his campaign.

He calls me right away.

He's four guys, they have to listen to me.

It is awful.

Anyways, so I'm like, I got an idea for the next,

so 30 years ago, the halftime show was irrelevant.

Every woman took a break, no one cared.

No one really cared about Michael Jackson or whoever.

Well, I remember my favorite was they had a Disney

halftime show once.

Well, all your favorite Disney characters.

And now the halftime show is more important than the game.

I would make a real effort over the next two years

to make the halftime make the Democratic response

more important than the Republican response.

I'd rent an amazing venue.

I would hire Jay-Z's rock nation,

give me a huge budget,

10,000 rabid, hot young Democrats,

have fucking amazing music lead up to it.

Her speech was so awesome and I'd have lights and sex

because the moment it comes after the majesty

and the sex appeal of the rotunda, it just feels flat.

Sex it up, sex it up, make it super cool, super overproduced

and turn it into the halftime show that's more important.

Because the contrast, if you read her speech,

it was outstanding.

It was fact-checked.

It was really solid.

She went right for the jugular and everything she said

was on point.

They did her a disservice by not wrapping it.

It was all chip no salsa, all substance.

They need to sex it up.

Anyways, that was my big idea.

We'll be right back.

And for even more markets insights, sign up for a newsletter

at proftumarchids.com slash subscribe.

So,

support for this podcast and the following message

is brought to you by E-Trade from Oregon Stanley.

Simplify your finances and discover the convenience

of investing in banking all in one place

with E-Trade from Oregon Stanley.

Choose from a wide range of investment choices

and award-winning banking solutions together

in one platform.

Plus, get up to $1,500 when you open a brokerage account

with a qualifying deposit today.

Learn more at eTrade.com slash offer.

Banking products and services are provided

by Morgan Stanley Private Bank,

National Association member FDIC.

Terms and other fees apply, investing involves risks.

Morgan Stanley, Smith Barney, LLC, member SIPC.

This episode is brought to you

by SoFi, small business loan marketplace.

You know SoFi, the one that helps you get your money

right with student loans and high yield savings.

Now they're helping small businesses find fast funding.

If you run a small business,

you're probably dealing with cash flow,

trying to find capital for new opportunities

or thinking about other ways to expand.

With SoFi, small business loan marketplace

you can get fast digital solutions.

That's SoFi, small business loan marketplace.

In one single simple search, SoFi matches you

with vetted providers for your business in just minutes.

You'll get matched with loan options and meet your goals.

And if you find a loan that works for you,

you can receive funds as soon as the same day you're approved.

You can also explore business bank accounts

and business credit cards.

Visit SoFi.com slash ProfG

and see your loan options in minutes,

haul with no impact to your credit score.

The SoFi marketplace website is owned

by SoFi Lending Corp.

Terms, conditions and state restrictions apply,

CFL6054612, NMLS1121636.

So good, so good, so good.

New mark downs up to 70% of the

are at Nordstrom Rack stores now.

And that means so many new reasons to rack.

Because I always find something amazing.

There's so many good brands.

Because there's always something new.

Join the Nordic Club to unlock exclusive discounts.

Shop new arrivals first and more.

Plus buy online and pick up

at your favorite rack store for free. Great brands, great prices. That's why you rack.

We're back with Profty Markets. Netflix has dropped out of the Warner Brothers discovery

bidding war. That clears the path for paramounts to make the acquisition just days after submitting

a revised $111 billion offer. Warner Brothers gave Netflix four days to counter with the company

decline, saying the deal was, quote, no longer financially attractive. The transaction will still

need regulatory approval, but for now, paramount has come out on top on the news. Warner Brothers

stock fell 3% paramount climbed 7% and Netflix popped 10%. Scott Paramount, David Ellison,

the son of Larry Ellison, they all the winners are going to be the winners pending regulatory

approval initial reactions to paramount beating Netflix. Well, it depends what you mean by winners.

So let's talk about winners and losers here. And the top of the list in terms of winners is Warner

Brothers discovery shareholders. And that is David Zazlov. I think he was a pretty, I don't know,

mediocre operator. He's an outstanding investment banker. I mean, they literally got,

if either the Ellison's or Cerando's ever thought, you're going to bid more than 25 bucks to share

for this, you know, six months ago, they could have said no fucking way. That come is not worth it.

This is a company that's gone from a low seven bucks to share to 31. With no change,

arguably the business has gotten worse over that period. So he was he put on a master class

and his bankers and how to get testosterone involved in competitive dynamics. And literally the

every possible sent on the table has gone to Warner Brothers discovery shareholders. So they're

the biggest winners. A close second in terms of winners is Netflix shareholders. Because what this

shows or Ted's around us specifically, what this shows is Ted is a disciplined operator. He can

put out a press release saying we have an obligation to shareholders at some point. No deal makes

sense. He was able to show he could do a deal. He handled it well. I think he acquitted himself well

and they're doing a good operators do. And that is they walk away when no longer every deal makes

sense at some price and no deal makes any sense at a certain price. So him walking away

from from this deal, they say, but I think the total consideration was approximately $120

billion. And then and we predicted this, the stock is up 10% Netflix on the news. So with a

$350 billion valuation, they they got a they get $36 billion for walking away and increase market

cap. They're going to get another two and a half billion in cash for the breakup fee. So if you

look at the total consideration to say $120 billion plus the kind of $40 billion free gift with

purchase in terms of stock appreciation and the breakup fee, Netflix got $160 billion technically

for not doing this deal. And I mean, we're getting to the point where Netflix could take the money

that they're registering from not buying Warner Brothers and the increase in their stock price.

And now they're in striking distance of potentially buying Disney. Disney's got about a $200

billion market cap. So for, you know, close second in terms of winners, Tets around us and Netflix

from showing discipline and walking from a deal that made no sense. In addition, if I were them

and I were more Mac of Alien, I would start firing up my lobbyists and start questioning the

lawsuits everywhere. And I would try and if not scuttle the steel, but the lay it,

and it's going to put most of Hollywood into a sense of stasis. And that is I have a I have a

deal with Netflix during this period. It was sort of I don't say on hold, but there was a lot

of insecurity around what they were going to do. Supposedly CBS and Paramount are in a bit of like

flux right now for a lot of different reasons. So the insecurity here is going to be pretty

dramatic. Meanwhile, Tets around us can say to his creative team, just for shits and giggles,

what could we do? What else could we do at $120 billion? Could we own sports? Could we become

the biggest sports network in history and go out and buy a bunch of rights, Olympics NFL?

Could we decide that we're going to be the most dominant streaming media platform and all of

Southeast Asia, Latin America and Africa over the next decade? I mean, they're just,

they've got a lot of firepower now that they weren't going to shoot at this. So Netflix,

the second biggest, second biggest winner here. Let's talk about and then I think you'd have to

say Paramount because this was an existential must-do for Paramount. If Paramount hadn't gotten

this deal and gotten some scale, they would have been in the company that paid overpaid for a sub-scale

Paramount. So their only way out here is scale. Now, can they ever show dad a return on this

investment? I don't know, that remains to be seen, but at least now they are a scaled player

in Hollywood, whether they decide to use AI, but they now have the requisite scale to compete

with the bigger players. I agree up to a point that Netflix is coming out of when here because

that that price is totally ridiculous for the company. As you point out, this is a company that

was trading at seven to ten dollars a share as recently as a year ago and now a company's coming

and decided to buy it for $31 a share. That is ridiculous. And the reason that they're willing to

do that is because it's the son of Larry Ellison, who's the founder of Oracle, who is a multi-multi-multi-billionaire.

And that's the only reason that this is even possible in the first place is you've got a guy

who doesn't really know what to do with his tens of billions of dollars. And that's how he's

putting up the money for this deal, which is why he's willing to pay such an irrational price for it.

And it would be done for Netflix to pay that much money. And they said that. They said

this is an irrational. This is a ridiculous price. We're not going to pay it. Having said that though,

we should also acknowledge that since this all unfolded Netflix stock is still down. It's up

since in the past month or so. But remember, this all started to go down before that. This

started to go down in December from the time that Netflix was announced as or revealed as one

of the potential buyers of Warner Brothers. The stock has slid from 100 to around 85. And they

have lost almost $200 billion in market cap since that moment. Now, is that purely because of

the Warner Brothers deal? I'm not so sure. I think there are probably some other forces that play

that too. But it's hard for me to position Netflix as a total winner coming out of this,

considering the fact that before Netflix and Warner Brothers were even in the same sentence,

Netflix was trading at above $100 a share. Right. So depending on when you time,

sort of the deal was revealed, whether it was before Netflix ended the fair, they are off kind

of 20 plus percent. But it just as press release that they're walking the stocks of 10%

in the pre-market. They're the winner of the week or the month, for sure. I think we're in

agreement here. And that is as soon as the market looked at this deal, the market said, they're over

paying. And one of Netflix's advantages is similar to Apple. And that is their culture is so

strong internally. And they built such an incredible machine. They aren't very inquisitive because

as demotorant points out, two-thirds of acquisitions don't succeed. One, because testosterone gets

involved and they overpay and it becomes about winning and losing. And two,

the acquire overestimate synergies and underestimate the difficulty of integration.

So, I mean, this would have been all hands on deck of the most talented people or managers

and Netflix trying to figure out how to incorporate, how to like, how to get Frankenstein to move

into your house and get along with your three kids who are, you know, Frank is different. And

he's going to be a big presence here. And if it doesn't work, the whole house is going to come down.

So, at the parents, you know, the babysitters, the grandparents, everybody was going to be focused on

wrong metaphor here on how to integrate Frank. And now, it's just going to be a lot of fun to say

to Bella Bajaria, who's arguably one of the better content minds in Olive Hollywood. We just got,

we just freed up a lot of money. What are your ideas here? So, let's go through, let's go through

the losers. I think first and foremost, the biggest loser is the creative community.

This combined company, they have paid so much for these two companies. When I say they, the

Ellison's for Paramount and I want to brothers, there's no vision that's going to increase revenues

to the extent to justify this, these prices they paid. They are going to have to focus on the

expense side. Larry Ellison is one of the biggest players in AI. I think I use the analogy

in the first Star Wars. Obi-Wan Kenobi is on the Millennium Falcon. It has to sit down because

it fills the disturbance in the force. And that disturbance is that millions of people

died in an instant when Darth Vader orders the Death Star to destroy the planet Alderaan.

And you said he hears a scream and then nothing. I think, last night, when this deal,

when Netflix walked, I think you heard a scream from millions in the creative community

that they're just the unions WGA and Saga After are literally too fucking stupid to realize

what just happened. The image of Ted Zoranda is feeling a disturbance in the force.

Taking a seat, having a breath.

Ted was a Jedi. So say what you want. Hollywood bitch is about Netflix having too much power.

But Ted likes Hollywood. I was at the BAFTA Awards. He shows up with a bow tie. He likes

creatives. The guy ran video store chains. He was the manager of a video rental chain. He likes

movies. He likes the creative community. Netflix may have outsourced much of their production

to overseas arbitrage geographically. But he believes in big production, make-up artists,

gaffers, editors, actors. He is part of the community. Do you think Ellison gives a shit

about? I think he's going to literally say to his son, all right. Okay. This has been a lot

of fun. Giffy. I'm glad it's your legacy. This company is trading at a crazy multiple VBTA.

You got to grow revenues, high single digits. You got to cut expenses 10 to 20% within 24 months.

Where are those? Well, how are we going to do that, Dad? Without dramatically reducing the

top line, we're going to use AI. And instead of putting out 30 movies at 150 million each,

we're going to put out 50 movies at 30 million each using this new cool thing called AI.

And I'm not saying it's going to work. It might be a bunch of AI slop. But that all roads lead

to the following. Sag aftra and WGA. Grab your fucking ankles. You are about to see so many people

in your unions get so roads so hard and put away wet. You're going to see a destruction and human

capital. It's going to make it's going to make Jack Dorsey's announcement yesterday. Look,

soft and cuddly. The other losers, I do think that the American public and this would have been

true of whether Netflix or Paramount one, I think this consolidation and concentration

is not good for America. Whether it's Netflix owning Warner Brothers, I compared it to like

Walmart owning LVMH or with Paramount, we're going to have CBS, CNN, Paramount and TikTok in the

hands of one entity. I don't think that's good. I'm Warner Brothers and HBO and HBO Max and TNT

and Discovery and MTV and Comedy Central. Like the list is quite insane. Fair points.

The people at CNN this morning, it's like a wake over there right now. They're so freaked out.

Having said that, I'm not as worried. People have made these existential trends about free speech

in America. I find, I said the security, I'm like, if the Washington Post and CNN go away,

America's going to be just fine because I think what you find is the two things between us and

what I would call more fascism are one midterm elections and two, what I refer to as distributed

media in that is a lot of people, Jake Tapper, Anderson Cooper, Dana Bash, Michael Smirconish,

they're all incredibly talented. If they need to, they're just going to go start their own media

companies, go to work for Puck, Axios, their own podcast. It's not as if their voices are going to

be silenced and the means of production here has gotten so expensive and inefficient. I pulled up,

I did an analysis of our listenership in the core demographic versus CNN,

CNBC and Fox. I can show that more people, more people in the core demographic listen to

profiting markets than listen to any CNBC show. We do it at a fraction of the cost. This is,

you're going to see, there'll be some high profile exits from CNN. They'll write out their

contracts because, quite frankly, they're overpaid from an old day, days gone by where people would

pay $80,000 for a 30-second spot to convince you that opioid-induced constipation. Those days are

gone, but I don't think it's what, CNN, at least the morale there, that's a loser, but I don't

think it's the existential threat to media, you think. It's a really interesting point because

I think that aligns with the way Hollywood sees Paramount and the Ellison family at this point,

and also the way the journalistic institutions like CNN and all of the legacy journalists

view David Ellison and the Ellison family, that is they don't like them. I mean, the pushback

against CBS and his decision to bring in Barry Weiss and then leading to Anderson Cooper,

leading 60 minutes. I mean, more and more, it seems as though the predominantly more liberal

community that is entrenched in these institutions, they do not like David Ellison. We just saw

that photo that went viral of David Ellison hanging out with Lindsey Graham before the state of

the Union, and now he's going to own all of Hollywood, and what does it mean if all of Hollywood

decides they hate their new boss? Does that mean that they just don't want to work with them anymore?

What does it mean if all of Hollywood realizes that their new boss is going to try to fire 50 to

60 to 70 percent of them? What does that mean for the remaining 30 or 40 percent left over? Are

they going to say screw this? We don't want to work with you. We don't want to be on your team.

Does that mean that they're going to all shift over to Netflix, which, as you say,

actually has become entrenched in Hollywood in a way where I think Hollywood respects and likes

Netflix. In a lot of ways, it was kind of the saving grace of Hollywood over the past decade.

And I think that is something that is probably going to be an underrated force in the markets,

and that is just how unpopular David Ellison is becoming among the very community that he is

trying to be a part of. He wants to be in the Sunset Boulevard Hollywood club. He wants to be

in the newsrooms at CNN. He wants to be working with these people. And they're all probably going to

say screw this guy. We don't like him. The Ellison's brought in about the free press. Basically,

it was an aquahire for Barry and Barry Weiss and her team. I actually think and they hate her.

And the creative community hates her because she's again, there's a bit of a bias there. She's a

Republican. I think they've been a little unfair. I think I think the free press is actually very

innovative and did a great job. However, Barry has created his score just a series of own goals,

whether it was spiking a CBS story. You know, there's she's come across a little bit as a

propping end of vehicle or doing the president's bidding. And a central laugh creative community

hates that. There has been a series of unforced errors on the part of the Ellison's vis-a-vis

Barry Weiss that have have basically died their hat black and kind of confirmed the creative

community's worst fears. The idea of it'll be really interesting to see if they say Barry Weiss

is now in charge of CNN because that's when I do think you see a hair on fire now. The notion

that they're all going to walk out tomorrow is just kind of is just sort of a fantasy because

and I'm not exaggerating. If you were to name 10 of the top TV journalist anchors,

I have probably had offline substance of conversations with half a dozen of them and it goes

something like this. I realize that this ship is sinking and I'm thinking about doing a podcast

or starting, you know, they're all like want to figure out the next thing. And I have an open

conversation. I'm like, okay, how much money you're making? And they're like this. I'm like,

how long should contract? I'm like, don't go fucking anywhere. You're overpaid. Yeah, what are the numbers?

For my Googling around, it's something like like high, high single digit millions. Yeah,

the tier two ones and I won't name them because they'll get upset, get one to three million.

The tier ones get five to 10 and there's quite a few that make between 10 and 20 million a year.

Like Sean Hannity makes the most and like 25. Yeah, so they all have these visions that they like,

I love the idea of being in control of my own content and starting a sub-stack and a podcast

and a YouTube channel. I'm like, yeah, you'll make 60 grand. And in five or six years,

if you work your ass off or work harder than you're working now and some of them do work hard,

most down, you're going to get to a half a million or a million bucks a year because you're

very talented and people like what you do, but be clear, don't go anywhere. You're going to take it,

you're going to get, so the notion that somehow they're going to break their contracts and leave

where they're getting paid two to three million dollars to show up at 4 p.m. and work to 8 p.m.

and host a show that's got 200 or 300,000 viewers. It's like they're hoping you leave.

The question becomes how long can they remain overpaid? And I think that is something that

daddy Ellison's going to come in and say, this is fucking ridiculous. Why are you paying this

talking head 10 to 20 million dollars a year? Cut it. Well, there's only a few of those,

but I'll give you an example. Chris Wallace, who was at CNN, he was making seven million dollars a

year. And CNN said, I would imagine the conversation with something like this. Chris, you're a legend.

We're love you. We want to keep you. We're going to take it from seven to one million.

And Chris goes, wait, I'm Chris Wallace. And he leaves. I heard from Chris Wallace the last 12

months. So nobody ever thinks they're overpaid. I've never had anyone say to me in a bonus meeting.

I've had them say, wow, thank you. This is great. Or that's generous, but they've never said,

you know what? The moons have lined up and let's be honest, I'm overcompensated right now.

You always anchor off. This is your natural tendency. You look at the year you made the most money

and you think, oh, that's how much I'm worth. No, it's not you were overpaid.

And almost every one of them is making a lot less money than they were a couple of years ago,

right? And then they go to New Media and some do it really well. Like Don Lemon and Chris Cuomo

have really made an effective transition to New Media. But I bet they're making a third

of what they made in the heyday of cable news. They're making good money and they're building

enterprises that they own and I think they'll make more. But I bet I bet a guy I bet guys like

Don and Chris were making five to 10 million bucks a year and they are making substantially less

than that now. And they are the most successful of the ones who got off the island. They've built really

really interesting little media companies that are growing. Or they're participating in kind of

this new media ecosystem. But this industry, it's going to be, I think it's going to be chaos

in the next 12 to 24 months. Okay, let's take a look at the weekend. We'll see the unemployment

report for February. We'll also see earnings from ASD space mobile target and Broadcom.

Scott, do you have any predictions? Yeah, I made it. I think there's real opportunity. I don't

know, you call these business development private capital hedge funds Apollo 14 to 70 times earnings,

double digit earnings growth plus AUM growth. And trading it, what feels like or trading it

a multi year low TPG is trading at a third below kind of fair value estimates. Unbelievable fun

raising. I know some people who work there, they are just a jargonaut in terms of their fun

raising, which is the kind of the raw capital for what they make money on. I think the current

pricing reflects pessimism more than growth trajectory. Even blue out, I'm doing a basket of

these things. It's got a 70% dividend yield. In some, the market is discounting private credit

fears. And I think there's a growth versus valuation mismatch. All three are growing AUM and

recurring fee revenue. The sector multiples have compressed due to private credit liquidity

fears that I think are overblown and market pricing. The market's basically pricing risk more

aggressively than current earnings trends justify. And on my thesis and the reason I'm starting to

buy these things is that compress multiples plus durable fee growth plus strong fundamentals

equals potential upside relative to the broader market. So anyways, my prediction is that a basket

of blackstone, blue out TPG and Apollo is going to perform the market.

This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer

Our video editor is Jorge Carti. Our research team is Daniela and Isabella Kencil-Kristin O'Donor here

and Measel Vario. Jake McPherson is our social producer. Drew Burrows is our technical director

and Catherine Dillon is our executive producer. Thank you for listening to Prof.G Markets

from Prof.G Media. If you liked what you heard, give us a follow and join us for a fresh take on

Markets on Monday.

Okay, well, I think you guys are doing a bang up job.

Super excited to hang out in South by Southwest. We should definitely do a Zoom while we're all

down there. Definitely do a Zoom. I'm really excited to see you guys.