AI transcript
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0:00:10 Don’t forget to give yourself some thanks by investing in your well-being.
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0:01:52 Today’s number, $20,000. That’s how much Russia has found Google for blocking its news channels
0:01:59 on YouTube. A sexual predator, a racist, and a Russian spy walk into a bar, Ed. The bartender
0:02:16 says, “What can I get you, President Trump?” Boom, a little election humor there. We’re going to
0:02:21 have us election. We’ll count some votes, says James Carvel. That guy’s got to be like 110.
0:02:25 DLSM. That guy’s, that guy, I like him. Do you like him? Do you like James Carvel?
0:02:29 I think I prefer your impression of him. I think that’s sort of my highlight so far.
0:02:34 I appreciate that. It must be bonus season. Someone’s kissing someone’s ass. Hello,
0:02:41 plucker up, you little podcast co-host bitch. Today, we’re discussing earnings from Google,
0:02:48 Microsoft, and Meta. But first, here with the news is PropG analyst Ed Elson. Ed,
0:02:50 what is the good word? How are you? I’m doing very well.
0:02:57 I didn’t know that 20 decillion was a number, but I looked into it. It’s 20 trillion times a
0:03:04 trillion times a billion, and the global GDP is 100 trillion. So, I should put it into perspective.
0:03:08 It just shows you the Russians have their head screwed on straight. That’s what I’ll say about
0:03:12 that. That’s actually what our producer, Claire, requested as a bonus for managing
0:03:15 young irresponsible podcasters. That’s right.
0:03:20 We can’t quite get there. This is a profitable business, but no. I had never heard the term
0:03:24 “decillion” either. Where are you at? Are you in New York? I’m in New York, as always.
0:03:29 We’re past Halloween. I need more banter, pretend I’m interested in your life. What are you doing
0:03:33 for Thanksgiving? I haven’t made a Thanksgiving plan yet. I know what that’s like. It’s okay,
0:03:37 those soldiers. Things will get better. I could go back to London, but it’s kind of weird to
0:03:42 celebrate Thanksgiving in London. It’s not really… Yeah, they don’t have Thanksgiving. We left them.
0:03:46 Yeah, exactly. What are you doing with Thanksgiving? Are you going to celebrate now you live in
0:03:51 London? No, I’m doing my world tour. I’m back. I got back to London yesterday, and in two weeks,
0:03:59 I had to New York for a speaking gig, then to Los Cabos for Baja Summit, where I’m speaking,
0:04:03 and talking about vertical farming, and doing mushroom chocolate at night, and listening to
0:04:09 some DJ who supposedly is hot. Then I got to Vegas, or I got LA for another writer’s room,
0:04:14 because I don’t know if you’ve heard them working on an original scripted drama for Netflix.
0:04:21 So, what do you do in the writer’s room? Do you shout over them at things they’re doing wrong,
0:04:26 or how does it work? No, it’s the guy, the showrunner, and the lead writer will say, “Well,
0:04:31 what do you think, Scott?” And I’ll say, “No, they would never say that, even though I’m not listening.
0:04:36 I just pretend that what they’re saying is unrealistic.” Okay, so I’m kind of on the right
0:04:40 track. I’m supposed to be the person that puts you in the room that makes it feel authentic,
0:04:45 and I’m supposed to be the person that understands these people, which is kind of comical.
0:04:49 But yeah, it’s fun. It sounds very fun. You don’t actually have to do the writing,
0:04:55 you just kind of like opine on what’s happening. You know me, I don’t like to actually work.
0:05:03 There’s no real work involved in this whole Prop G enterprise for the Prop G. It’s actually a lot
0:05:08 of fun. I get to envision scenes, and I’m working with this really talented guy named Scott Burns,
0:05:15 and Meteoraz, and all these super talented people. So far, we’re in the honeymoon period. We’ll see.
0:05:17 Sounds like the best job ever.
0:05:19 All right, enough of that shit. Ed, stop delaying. Get to the news.
0:05:23 Well, before we get started, just a quick reminder to subscribe to Prop G Markets
0:05:27 on its dedicated feed. Type in “Prop G Markets.” Wherever you get your podcasts,
0:05:33 hit follow, and tune in to our interview with Anthony Scaramucci on Thursday. That interview
0:05:37 will only be available on the dedicated feed. And now let’s start with our weekly review of
0:05:50 market vitals. The S&P 500 declined, the dollar fell, Bitcoin rose, and the yield on 10-year
0:05:56 treasuries increased, shifting to the headlines. US GDP grew 2.8% in the third quarter. That was
0:06:01 slightly slower than the previous quarter, and just below expectations. However, economists
0:06:06 were largely encouraged by the growth, driven by strong consumer spending on goods.
0:06:08 Reddit turned a profit for the first time ever,
0:06:13 with revenue reaching almost $350 million in the third quarter. That’s up 68%
0:06:18 from a year earlier. The company also reached nearly 100 million daily users,
0:06:24 and those strong earnings sent shares up more than 40%. Shares and drugmaker Eli Lilly fell
0:06:29 more than 6% after its third quarter profit and revenue missed analyst expectations.
0:06:34 The company also reported disappointing sales of its weight loss and diabetes drugs.
0:06:40 And finally, Elon Musk’s artificial intelligence startup XAI is in talks for a funding round
0:06:45 that would value the company at $40 billion. That’s nearly doubled the valuation from its
0:06:51 previous round. Your thoughts, starting with this national economic data GDP growth in America,
0:06:58 2.8% in Q3. A GDP number doesn’t mean a lot unless it has a benchmark. So just some benchmarks
0:07:05 there. Japan’s annual GDP growth was up 0.3%. So we’re growing nine times faster than Japan.
0:07:13 France up 1.1% and Canada up 1.3%. I mean, this is just the economy here. It’s just really striking
0:07:17 to listen to these kind of person on the street interviews about how people feel about the economy.
0:07:23 It’s so obvious that there’s kind of a vibe session, as Kyle Scanlon called it, or people,
0:07:27 again, have this habit of crediting their character and their grip for the raises and blaming
0:07:32 everyone else or blaming the government for whatever price hikes there are. But our growth is
0:07:39 impressive. And 2.8% may not seem a lot, but what that means is about every 25 or 27 years,
0:07:45 the size of the American economy would double. In addition, we have this new inflation data that
0:07:52 just came out. It’s down to 2.1%. In other words, inflation has officially been dealt with. Meanwhile,
0:07:56 you look at other developed nations that have struggled with not only higher inflation than we
0:08:02 had, but also longer inflation. So it sort of makes the case, or not sort of, it does make
0:08:07 the case for Kamala Harris. If you believe that Kamala Harris is just a continuation of the current
0:08:13 administration, and if you care about the economy, then this is a big reason to vote for Kamala Harris.
0:08:20 But if you’ve made this point before, she should be making a way stronger argument about how she’s
0:08:25 sort of the economy vote. If you care about the economy, you should be voting for Kamala Harris.
0:08:30 It hasn’t really resonated. But for those of us that care about statistics, that care about
0:08:34 data, what the data is actually telling us. And when you look at the U.S. compared to other
0:08:41 nations that have struggled with problems way worse than ours, the answer is pretty clear.
0:08:44 Statistically speaking, Kamala Harris should be your answer.
0:08:48 I so badly want to be head of comms for like 11 days for the Harris campaign.
0:08:50 I’ve heard people saying you should be, by the way.
0:08:53 I just think she should have in her back pocket. Every time someone starts complaining about the
0:08:59 economy, saying the economy is saying, okay, Sean Hannity, there’s 190 sovereign nations,
0:09:03 you’re an intelligent guy. What economy globally is stronger than ours right now?
0:09:09 Name it. Instead, they always go to this democratic self-hate of,
0:09:12 I know things are tough out there and we have work to do. It should be,
0:09:16 bitch, we are on fucking fire. Get your head out of your ass.
0:09:21 Anyways, okay, Reddit, why don’t I listen to my own advice? I bought some stock here,
0:09:28 but not enough. I believe the stock is now at about triple where it priced in its IPO about
0:09:32 two months ago. Can I ask how much you bought? You can ask. May you answer.
0:09:39 I think I bought about $3 million for the stock, but I paired some of it, so I don’t own nearly as
0:09:44 much as I’d hoped, but I’ve done very well. But it pops so big the first day, I trimmed some of my
0:09:50 holdings and I just didn’t listen to myself. I knew this thing. I still think it has more room to run.
0:09:57 Anyways, its revenue up 68% year on year. Daily users is up 47%. They’re going global. They’re
0:10:02 being really smart. They’ve translated their posts via AI in the French, Spanish, Portuguese,
0:10:05 and German and its international daily active unique visitors increased 44%.
0:10:11 Which was huge and it’s just such a simple innovation. It’s such a great use case for AI,
0:10:19 just simply translating the language of your content, but it’s so, so effective. It essentially
0:10:24 just 10X is your total addressable market. And that is what we’re doing, or at least we’re trying
0:10:31 to do it. We’re using AI to translate this podcast into Spanish and Portuguese at the moment.
0:10:49 But I think this is something that everyone in content should be looking at. How can we figure
0:10:55 out a way to just overnight flip a switch and make this all available to the 8 billion people
0:11:01 across the entire globe? It’s just a really quick and nice way to just skyrocket your total
0:11:06 addressable market. So that would be the first thing that I would commend Reddit on.
0:11:11 The second key driver of their growth actually was not intentional, but it’s very interesting.
0:11:18 And that is Google recently changed the way it ranks search results. So they made this update
0:11:24 called the hidden gems update. And what they’ve done with the algorithm is they’re now preferencing
0:11:29 what they call authentic content, which is the content that is generated by users content you
0:11:35 find on forums and on chat rooms. And so as a result, you will find that Reddit is showing up
0:11:41 more and more when you search things on Google. It’s also appearing higher in your rankings.
0:11:47 And here’s a great stat. Reddit is now the sixth most Googled word in the US. So it’s this great
0:11:53 combination of, you know, this intentional play with AI, but also the market dynamics are shifting
0:11:58 to Reddit’s benefit. And it’s just, it’s just translated to this explosion
0:12:02 in the business and in the stock. So incredible quarter for Reddit.
0:12:07 But when you were talking about flipping a switch and accessing a global market using AI,
0:12:12 and again, the operative term there was flip a switch and go global. You sound like me and our
0:12:18 all hands last week, where at that point, the person who runs the company, Catherine Dillon said,
0:12:22 “Bitch, you translate this shit into Farsi and try and find the equivalent of Zip Recruiter in
0:12:28 Iran to advertise.” I think it’s not quite flipping a switch is what the pushback I got.
0:12:33 It’s flipping a million switches. Yeah. It’s, and someone actually has to build
0:12:38 the switch and manage it while I just, you know, the podcast hosts say, “Flip a switch and let’s go
0:12:42 global.” This is strategy versus operations. Yeah. This is the difference between being front
0:12:48 of front of house and back of house, right? So I interviewed the CEO at their annual advertiser
0:12:54 event and they had big, they had big advertisers in the room. I saw the CMO of Mars, they had the
0:13:00 biggest media agencies there. It feels to me a little bit like kind of, I don’t know, meta or
0:13:05 Pinterest or Snap in the early days. One of the reasons I’m going to kind of kiss the ass to the
0:13:09 CEO, other than he seems like a nice man is I bet my prediction is they’re going to have an
0:13:14 amazing party at Cannes in the next one or two years. They’re going to decide we need to be,
0:13:20 you know, stroking the hair of people who we are putting out of business and bring them to some
0:13:27 great party and get Dua Lipa or Bad Bunny or somebody. Anyways, we’re going to the Red
0:13:31 and Beach party. That’s what I take away from all of this. I can’t wait. I’m waiting for my
0:13:38 invite. Let’s move on to Eli Lilly, as many of our listeners probably know. Eli Lilly sells Zep
0:13:45 bound and Munjaro, which are these GLP1 drugs. They are the alternatives to Ozempic and Wagovi,
0:13:49 and it’s not selling as much as people had thought, or at least that Wall Street had thought,
0:13:54 and the obvious question is, of course, why? What is going wrong? Now, what’s interesting is that
0:14:00 the CEO’s answer to that question was that there isn’t a problem with demand, but there is a problem
0:14:07 with supply. So supposedly the suppliers of the inventory for these drugs, those suppliers cut
0:14:14 down on their stock and it affected Eli Lilly’s ability to get the drugs out. But as a Barclays
0:14:21 analyst pointed out, if that’s true, that could only have accounted for around 20% of that drop
0:14:27 off in revenue. In other words, there must be something else afoot here, something else is
0:14:36 going wrong in the Eli Lilly GLP1 drug story. And it can’t just be this sort of chokehold on
0:14:42 inventory, and certainly Wall Street doesn’t believe that story either. So I have a few
0:14:46 thoughts of my own as to what might be going on, but I will throw it back to you. What do you think
0:14:53 could be the problem at Eli Lilly that the CEO did a bad job of explaining or at least won’t tell us?
0:14:59 I wonder if we keep hearing about all these compounded GLP1 producers being able to sell,
0:15:04 I don’t know if you call it off market, but there’s a bit of a glitch in the matrix or a loophole
0:15:09 where if a product is sold out, you can build almost like a generic version of it that costs
0:15:16 much less. I got to think that that’s denting demand a little bit. And I would think that in
0:15:22 not only that, you have a lot of these kind of upstarts are sort of scrappy and maybe don’t
0:15:27 take as institutional approach, but are great marketers and understand new mediums. So I wonder
0:15:33 if it’s some of the new guys or these compounded GLP1 producers maybe slowed their growth. What
0:15:37 are your thoughts? I was thinking that too. And if you look at Hymns, which we have discussed
0:15:43 before, they have been getting into the GLP1 game. Yes, the compounded version, their revenue
0:15:49 increased 52% last quarter. And a large part of that was their weight loss drug business.
0:15:53 And there are several other companies that are offering these compound alternatives.
0:15:58 It’s sort of becoming a growing space. And I think it is possible that this
0:16:05 duopoly that we’ve seen on semi-glutide that has been owned by Novo Nordisk and by Eli Lilly,
0:16:10 it could be a little more fragile than we think. The other thing I think is worth mentioning, which
0:16:16 one of our team members, Jessica Lang, points it out. And it’s a simple but important point is
0:16:23 when you think of GLP1s, Manjaro and Zep bound do not come to mind. The two names that come to
0:16:30 mind are Osempic and Wagovi. And so it could be just a simple brand recognition problem that these
0:16:35 products just aren’t present in the public discourse enough. If you’ve been watching the
0:16:42 World Series recently, you will likely have seen this Wagovi ad over and over this new Wagovi jingle
0:16:46 that is probably stuck in a lot of people’s heads right now. So I think the other explanation here
0:16:51 could be a very simple issue. It’s just a marketing problem and a brand awareness problem.
0:16:55 We know what Zep bound and Manjaro is because we study this stuff for a living,
0:16:59 but for the average American, you just think Osempic and Wagovi and you probably don’t even
0:17:04 know what GLP1 is either. It’s interesting. I agree with you. I usually don’t like the idea of
0:17:09 typically when I walk into a brand and they say they want to show me a brand campaign and they’re
0:17:13 going to spend money on advertising. I usually say, well, if you’re spending a lot of money on
0:17:17 advertising, usually you have somebody who wants to hang out with really cool, interesting people,
0:17:22 which ad agency people are, or you’re out of ideas because the companies are the best products,
0:17:26 don’t need a lot of brand marketing. In this case, I think an awareness campaign,
0:17:32 exactly how you said around Zep bound and Manjaro. Awesome. Manjaro is awesome. If I came back and
0:17:38 in my next life as an MMA fighter, I want to be called Manjaro. I think that’s a badass name.
0:17:42 It’s a really cool name, Manjaro. Anyway, but I agree with you. I think they need fire up the
0:17:47 ad budgets. Yeah, it gets some awareness out of that. There’s so much money on the line here.
0:17:54 Also, supposedly there’s a lack of scarcity that finally there’s enough production here to meet
0:17:59 demand. I wonder what’s going to happen though when it reaches into the markets it should be in.
0:18:04 I’m just such a huge fan of this technology. Speaking of which, let’s bring this back to me,
0:18:08 Ed. I’m doing this NAD treatment. Have you heard of this? Only from you mentioning it last week.
0:18:15 Ed, that’s it. I’m fine. I’ll leave. No desilient dollar bonus for you.
0:18:18 I’ll make my way out. Just Claire’s getting a desilient dollars.
0:18:25 Anyways, this NAD stuff is really, really powerful, but I wonder if it has a similar compound,
0:18:34 this GLP-1, because I have noticed. I’m losing my taste for the sauce. I’m going to fit right
0:18:38 into Baja Summit. I told you about Summit last year. They all take drugs, but they don’t drink.
0:18:43 I would bet, going back to Eli Lilly, I apologize, I’m all over the place. This fucking NAD is
0:18:49 supposed to give me focus. Maybe it isn’t working. I think this is probably a buying opportunity.
0:18:56 I think anyone in this market with two great brands, or one great brand, Monjato, and ZepBound,
0:19:02 that’s a terrible, you’re bound for Zep. Is that bound? That sounds awful. That’s like some
0:19:07 rock climbers started some bad ropes company or something. I think other than the CEO making
0:19:16 lame excuses, I’d say on this one, buy the debt. Our final headline is XAI, which Elon, this is
0:19:25 Elon’s AI company, which he is supposedly trying to raise around at a $40 billion valuation.
0:19:31 Just a reminder of what this company is. People may remember the premise of this company was to
0:19:39 create a competitor to chat GPT that was “more truth seeking.” For a while, Elon was calling it
0:19:47 kind of jokingly “truth GPT.” He saw how successful chat GPT had become, and he wanted to make
0:19:54 a competitor that was also less woke pretty much. XAI did build that product, and the product is
0:20:01 called GROC. Many people may have heard of it, and it’s available to all paid users of the X
0:20:06 platform, formerly known as Twitter. I’ve used it. It’s fine. There was a period where it tried to
0:20:14 be anti-woke and funny, and it felt like a not very funny guy who’s trying to just crack jokes
0:20:19 at every second. It wasn’t a great product. Yeah, it’s the Tony Hengecliffe of LLMs.
0:20:25 It’s exactly right, and they fall flat. I’ll get your reactions to XAI in this
0:20:29 funding round. There are a few more details we can go into, but what are your thoughts on this
0:20:37 round? I think this is Musk’s next opportunity to turn $40 billion into 10. My sense is this
0:20:44 is now a distant fourth or fifth in the LLM market. He did some sleight of hand trying to give,
0:20:51 take the rights to the data I think of Twitter and spin out XAI, and he got a disproportionate
0:20:54 amount of the firm. I would have gone apeshit crazy if I was a shareholder in Twitter,
0:21:01 but it’ll GROC right now is a distant fourth, fifth, or sixth, trying to trade at the same
0:21:07 valuation as Anthropic, and that’s the analog here. I would imagine that Anthropic has dramatically
0:21:15 more traffic, revenues, better technology, etc. And what they keep leaking is that Jensen Huang did
0:21:21 say that it’s easily the fastest supercomputer on the planet. XAI has built its own data center,
0:21:25 but I’m not, I’m not sure if that ends up being much of a competitive advantage.
0:21:30 Anyways, I think that’s an important point is, is that a competitive advantage? And
0:21:36 when I look at XAI, it’s like there are three main differences that make it different from other
0:21:42 AI companies. The first is that Elon Musk is leading. So that’s a big deal. It means you can
0:21:48 raise a bunch of money. The second is, as you said, they’re building their own data centers,
0:21:54 and that’s what sets it apart from open AI. Open AI does not own any data centers. Instead,
0:21:59 they essentially rent their compute from Microsoft, and that’s why they have that partnership.
0:22:06 And then the third big difference is that XAI is building its own frontier models. And that’s
0:22:12 where it’s similar to open AI, but not similar to a company like Perplexity, which is building
0:22:17 models on top of the models that are built by other companies like open AI. So in other words,
0:22:22 their sort of strategic differentiation is that they want to own everything that they create.
0:22:28 They want to be a truly independent AI company, which is a little rare these days because it’s
0:22:33 developed into this massive supply chain where you have the chip manufacturers
0:22:38 selling to the data centers and the data centers selling the compute to the model makers and the
0:22:44 model makers selling their models to the app makers. It’s a big supply chain. And XAI has decided
0:22:48 we’re just going to own all of it ourselves. I just don’t know if XAI is going to have the
0:22:52 capital. They’re starting from less than zero versus everybody else, and they want to raise
0:22:59 it the same valuation as the number two or the number three player anthropic. So I have a bias
0:23:03 because I’m not a fan of Musk, but on just a straight valuation standpoint, this feels to me
0:23:10 like a bad deal. Yeah. I mean, it sounds like the Elon Musk premium, but it’s why he still deserves
0:23:16 a premium like this to me is beyond me. The fact that he’s destroyed 80% of the market value of
0:23:23 Twitter, that was his last venture. I mean, it’s crazy. It’s loco. He’s gone mungado on us.
0:23:30 We’ll be right back after the break with a look at big tech earnings. If you’re enjoying the show
0:23:35 so far, be sure to give Prof2Markets a follow wherever you get your podcasts.
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0:24:43 You’ve always wanted to be part of something bigger than yourself.
0:24:54 You live for experience and lead by example. You want the most out of life and realize what you’re
0:25:04 looking for is already in you. This is for you. The Canadian Armed Forces, a message from the
0:25:17 government of Canada. We’re back with Prof. G. Mockets. Most of the magnificent seven reported
0:25:22 earnings last week bringing AI demand and spending into sharper focus. Google and Microsoft both
0:25:29 reported cloud revenue growth above 30% beating expectations. But while Google stock rose,
0:25:34 Microsoft’s fell as the company advised its overall revenue growth would slow in the
0:25:40 current quarter. Meanwhile, Metastock also fell after the company missed expectations on user growth
0:25:48 and warned that its AI expenditures would continue to increase in 2025. So I think let’s just start
0:25:53 here. A lot of tech earnings telling slightly different stories. Let’s just start with what
0:26:00 Wall Street thought about these earnings. So for Google, Wall Street was very happy. Revenue grew
0:26:07 15%. Cloud revenue skyrocketed and the stock rose 4%. I think the main story with Google is there
0:26:12 was nothing that you could really fault the company for in that earnings report. Everything was going
0:26:18 well. Microsoft and Meta on the other hand, Wall Street was not so happy with. It’s a very
0:26:23 similar story that we’ve seen before in tech, which is the top and bottom lines were very
0:26:31 strong. They beat expectations at both companies. But there was just one tiny little pimple on the
0:26:36 earnings report for both of them. And for Microsoft, it was that their guidance was a little bit soft,
0:26:42 not as strong as Wall Street wanted. And for Meta, the user growth was slightly weaker than
0:26:50 expected. 3.29 billion active users versus 3.31 billion expected. I should remind you that’s
0:26:55 daily active users. So it’s still pretty incredible. As a result, Microsoft stock fell 4%
0:27:02 and Meta stock fell 3%. So I think the summary with these earnings here is that it’s very strong
0:27:08 overall. But again, incredibly high expectations for these companies. Let’s just start with your
0:27:12 headline reactions to the tech earnings that have come in this week. What you said
0:27:19 was really prescient and insightful a few months ago. And that is the expectations are now that
0:27:26 you’re going to blow away expectations. So Meta actually, the revenue earnings beat expectations,
0:27:32 increasing 19 and 35% respectively. But investors were disappointed by weaker than expected daily
0:27:38 active user growth. And also, I think the thing that freaked everybody out is when Zuckerberg
0:27:43 wasn’t threatening to spend tens of billions of dollars and mixed reality headsets. He was
0:27:50 promising and he did it. And he kept spending well beyond any evidence that this was working.
0:27:55 And when Zuckerberg says, “No, we’re going in on AI and get ready, folks, hold on to your hats,”
0:28:02 it kind of spooked, I think as investors a little bit, just because relative to the earnings and
0:28:08 the revenue beat, the revenue and earnings were amazing here. And at the same time,
0:28:13 let’s go to the other end of the spectrum. Everyone’s sort of waiting and anticipating
0:28:21 Snap to start a death rattle. And even though their sales jumped 15%, not as much as the other guys,
0:28:30 their stock was up 10% because the expectation, when people listen to a Meta call, they’re waiting
0:28:35 to see just how amazing it is. When people listen to a Snap earnings call, they’re kind of a little
0:28:41 nervous. Like, is this the quarter that Snap announces that Meta is just putting them out of
0:28:47 business? And the expectations here have gotten so crazy. And I know I’m jumping around a lot,
0:28:52 but let’s talk a little bit about Microsoft. They also beat revenue and earnings expectations.
0:28:59 The stock was off 4%. And after hours trading on weaker guidance, good CEOs, sandbag guidance.
0:29:04 You always want, in my opinion, under promise and over deliver. And when you start getting desperate
0:29:08 or you’re worried about losing your job, you start over promising and under delivering their total
0:29:16 revenue increase. Get this at 16% off a huge number. That means that they have, they found
0:29:20 another eight or $10 billion per quarter in incremental revenue. And also the revenue mix
0:29:28 is getting more solid because their cloud offering Azure revenues were up 33%. And that is a business
0:29:36 with incredible margins. And 12 points of growth came from AI services. So in sum, this was just,
0:29:44 this was just striking. And the only wrinkle here, the thing I would offer that I noticed,
0:29:50 and we’ve been talking about this a lot, is that if I were to ask you, what comes to mind when
0:29:56 I think of the, when I ask you, who is the leader in the streaming market? Who comes to mind?
0:30:01 Well, you know, you know my real answer, but I think the average person would say Netflix.
0:30:09 That’s right. And yeah, but, but it isn’t right. It’s YouTube. And YouTube’s combined ad and
0:30:15 subscription revenue over the past four quarters has surpassed $50 billion. So Netflix is at $37
0:30:22 billion over the same period over the last four quarters. So, so YouTube is a bigger streaming
0:30:26 network, bigger revenue. I’d be curious what the growth rate is there. I’m not sure they break it
0:30:32 out. But if you applied the same multiple to YouTube, you’d have a half a trillion dollar
0:30:36 market cap company. And I wonder if there’s opportunity for Alphabet to cut a deal with
0:30:42 the DOJ and among other things in their remedy trial, say, look, what if we spin YouTube? But
0:30:48 across all of these folks, you know, whether it was Reddit, which looks like it’s becoming a truly
0:30:55 big tech company, Meta, all of them, Snap, showing it, we’re still here. Snap’s like,
0:31:00 hey, don’t forget us. We’re still here. We’re still growing. We’re still doing really well.
0:31:05 And the other guys, the big guys, the Alphabets, the Metas of the world are just,
0:31:11 you know, still on fire. Yeah, a lot, a lot there. We’ll start with YouTube. I just want to
0:31:18 reemphasize that number. You said $50 billion in revenue in the past four quarters compared to
0:31:27 Netflix at $37 billion. With the same multiple, YouTube would be a half a trillion dollar company
0:31:32 in market cap. It would probably be higher given the margins and given the growth rate.
0:31:37 But if it were broken up into its own company, which you have just suggested,
0:31:41 just want to point out, it would be one of the top 20 most valuable companies in the world.
0:31:46 It would be more valuable than Oracle. It would be more valuable than Mastercard. It would be
0:31:52 more valuable than Johnson Johnson. And yes, of course, it would be more valuable than Netflix.
0:32:00 So I mean, we’ve discussed why we believe YouTube is basically the most underrated asset in the
0:32:04 market right now. I think this should really drive it home for people. It’s something that
0:32:09 people don’t seem to talk about that much. And I think to your point, it’s a little bit of the
0:32:14 conglomerate tax. It sort of gets lost in the noise because of all of the other things that
0:32:20 Google is doing. But this is just a juggernaut in the entertainment space. I am just fascinated
0:32:25 by this business of YouTube and they continue to crush it. One of the other things you pointed
0:32:35 out there is the idea that Meta, they spent really big on the Metaverse and it freaked everyone out.
0:32:40 And now they’re spending really big on AI. And so the numbers are,
0:32:47 Meta is raising its Carpex forecast for 2024 to between $38 billion and $40 billion. And that is
0:32:53 slightly freaking the market out. They don’t love how much that expense line is going to grow.
0:32:59 Having said that, though, all the other tech companies are doing it. So over at Google,
0:33:06 their Carpex rose 62% from a year ago to $13 billion. Microsoft is doing it too.
0:33:12 Microsoft’s Carpex doubled from last year to $20 billion. And this is just for the quarter.
0:33:16 The ultimate business strategy has become capital as a weapon. Mark Zuckerberg goes,
0:33:21 we have access to cheap capital, so I’m going to outspend you. I mean, there’s kind of three or
0:33:28 four. No one can keep up with these guys except each other. The biggest companies in the world
0:33:33 that aren’t big tech can’t make these types of investments any longer. They’re spending more
0:33:38 money on GPUs and exxon spent on oil exploration at their peak.
0:33:44 I mean, so just some data here. Microsoft, Meta and Alphabet will spend more than $150
0:33:53 billion on Carpex in 2024. And more importantly, Microsoft, Meta, Alphabet and Amazon account for
0:34:01 roughly 40% of NVIDIA sales. So what we’re seeing here is a dynamic where NVIDIA is pretty much
0:34:08 propping up the stock market. We’ve all kind of identified that. And NVIDIA’s entire top line
0:34:14 is being propped up by the Carpex spend of Microsoft, Meta, Alphabet and Amazon. So in a way,
0:34:21 that Carpex number is the most important number in the entire global stock market right now. We
0:34:28 should all care a lot about how much they’re spending. But as you mentioned, the competitive
0:34:34 aspects to this, the idea that they’re all ramping up spending, I wonder to what extent this is
0:34:41 becoming a little bit of a big dick contest. Where if you’re if you’re Mark Zuckerberg and you’re
0:34:47 seeing, you know, you’re seeing Sundar Pichai invest billions and billions into this space and you’ve
0:34:52 decided to get into the space too. I wonder to what extent they’re just going to start outbidding
0:34:57 each other, not because it necessarily makes sense for the business, but because they don’t want to be
0:35:02 caught out and they don’t want to look to the world like the loser or like the coward who wasn’t
0:35:08 down to double down on AI. And, you know, maybe I’m not giving them enough credit,
0:35:13 but I could certainly see if I were in their position, how I could get caught in that dynamic.
0:35:17 Google’s doing it, Microsoft is doing it, so we better do it too.
0:35:25 Well, I think correctly, in hindsight, it looks like the stimulus plan during COVID that the Fed
0:35:29 and the White House overdid it. They spent more money than was needed.
0:35:34 And Janet Yellen, when faced with that question, did you overdo it? She said, we decided. She said,
0:35:40 yeah, we probably did. But at the time, the analysis was it’s much riskier to underdo it than
0:35:47 overdo it. And I think that’s how these guys are approaching AI. And that is, if they overdo it,
0:35:53 they spend too much. That’s not the same risk as being the company, one of the big tech companies
0:35:59 that had all of the assets, all of the IP, all the customer interface, but got bested and saw
0:36:03 their stock lag everyone else’s because they underinvested in what appears to be the most
0:36:09 seminal technology trend of the last 20 years. So, I got to imagine that they’re like, okay,
0:36:15 we need 10 billion. The range of requisite capex to meet our plans is somewhere between,
0:36:21 I don’t know, call it 20 and 30 billion. You got to think the CEO says, with a stock at an all-time
0:36:28 high with access to cheap capital, I’m not going to be the CEO that missed on AI. You say 20 to
0:36:34 30 billion, here’s 32. We’ll be right back. And if you’re enjoying the show so far, hit follow and
0:36:53 leave us a review on ProfG Markets. This episode is brought to you by A Real Pain. From Searchlight
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0:38:33 We’re back with Prof2Markets. Meta’s revenue jumped 19% to $40.6 billion. That’s its record revenue.
0:38:37 Staggering number. And you mentioned earlier about revenue mix.
0:38:44 The point that Microsoft has done a really good job of diversifying its revenue, which makes it
0:38:49 that revenue a little bit more stable. They’re able to weather a storm. It’s a great reason
0:38:55 to diversify your revenue. Just want to point out this one start about Meta. 96% of their revenue
0:39:05 still comes from advertising. So they’re not in a very strong position from a longevity perspective,
0:39:12 but it sort of highlights just what a juggernaut this advertising business is. The fact that
0:39:17 this company is one of the top 10 most valuable companies in the world, and it’s all just from
0:39:21 all of that advertising, you talked about how they’ve been getting into AI, which has been
0:39:27 massively increasing their ability to accumulate users and also monetize
0:39:32 those users. I’m just amazed that Meta is worth this much and making this much money,
0:39:36 and it’s still just a pure play ad business. I just thought that was quite fascinating.
0:39:42 I mean, these companies combined probably have ad driven revenue growth of somewhere between,
0:39:49 I don’t know, $20 billion and $40 billion in incremental ad growth. I had dinner the other
0:39:57 a week ago with this iconic broadcast anchor, and this is someone who likely,
0:40:00 I don’t know what this person makes, but I imagine it’s tens of millions of dollars,
0:40:04 household name, outstanding or what they do. You have to tell us.
0:40:08 Now, I can’t in this instance because we’re good, good friends and I don’t like to
0:40:13 prostitute my relationships. I’m imagining it’s Anderson Cooper and I’ll just let you not comment.
0:40:17 What I will say is it wasn’t Anderson Cooper. I have a second friend. I have a second friend
0:40:21 now in the media ecosystem. Anyways. Oh, Tucker Coulson. Got it. Okay.
0:40:28 Me and Tucky. Yeah, we fisted each other and we were screaming out the ghost of Rick Santorum.
0:40:34 I don’t know where I got that name. That’s an image. That’s an image. Anyways,
0:40:39 and he said that every contract renewal that’s coming up across the biggest anchors,
0:40:44 the biggest stars in broadcast television, the conversations are going something like
0:40:49 this. As you know, it’s a stressed ecosystem. We know you are making 10 million a year. Now,
0:40:55 we’re going to pay you three and a half and it’s directly correlated to these earnings
0:41:01 because the economy is growing 3% a year and all of these companies are growing 18%.
0:41:07 Ad spending is not up 18%. This has become a bit of a zero-sum game and that is,
0:41:12 say ad spending is up because it’s a strong economy. Say, okay, fine, it’s up 5%.
0:41:18 Ad spending is an up 15. So that incremental 10% is coming from somewhere else and I can tell you
0:41:22 where it’s coming from. It’s coming from, generally speaking, ad-supported media that
0:41:30 isn’t one of these guys. Whereas if you hosted the ultimate morning show program,
0:41:37 and they were just printing money, they could pay Hoda 7 or 10 million a year and now they’re like,
0:41:43 Hoda, we love you, but revenues are down 30%, profits are down 60%. We’re going to pay a
0:41:48 two-man and it’s like, fuck that, I’ll just go drink white wine all day. Also, just more generally
0:41:55 speaking, I have spoken to two individuals. I like to think I’m trying to be good about my
0:42:00 word and I’m coaching young men. I’ve heard I’ve had two men reach out to me and ask to speak to
0:42:06 me and they’ve both been men who are my age, who are both very successful in the media market
0:42:10 and they’ve either quit or been laid off and they have no idea what to do right now.
0:42:16 Because the motion picture and television market in Los Angeles and generally speaking,
0:42:21 the media market is really strained if you’re not working for one of a handful of companies that
0:42:28 are just killing it. And it strikes me that these folks haven’t connected the dots. There is real
0:42:34 pain on the other side of these revenue numbers and that is it is a terrible time to be a CBS
0:42:42 or an MTV. Does anyone even remember what MTV is? Newspaper revenue is off 80% in the last 30 years.
0:42:50 Billboard’s drive time, if it wasn’t for the election, local news stations would be just gone.
0:42:55 Yeah, that’s a great point. And you think about the other beneficiaries of that revenue growth,
0:43:01 where is that advertising going? It’s going to the people who are creating content on Instagram
0:43:06 and on TikTok and on YouTube. Those are the beneficiaries. Granted, they’re not getting
0:43:11 multi-million dollar contracts, but the reason you’re seeing those millions getting shaved off
0:43:16 of the Anderson Coopers of the world is because frankly, it’s going to the Scott Galloway’s of
0:43:21 the world and people are a lot less famous than you. People who are creating content on Instagram,
0:43:26 who are making videos, who are commentating on things in the news. There are thousands,
0:43:32 probably millions of these people out there who are making a living and who are making real money
0:43:38 by creating on the digital platforms. And what I just can’t wrap my head around is how those
0:43:44 people continue to not be taken seriously by the mainstream media. It’s been almost like
0:43:49 mainstream media just sort of covers their eyes and pretends like they’re still in their heyday.
0:43:55 Well, what’s happening is we’re seeing the social media companies having this explosion in growth
0:43:58 and meanwhile, legacy media is completely drying up.
0:44:02 Well, it’s really interesting. So election night, and I’m bragging right now, but I was
0:44:09 asked to appear on a variety of cable networks. They go for 12 hours straight. They have a lot
0:44:14 of time to fill. So they’re like, “Oh, bring in the guy on young men. Just tell him not to tell
0:44:19 dick jokes.” So almost every network called and said, “Do you want to come on and election
0:44:25 night?” And the one I chose, I’ve been going on Amazon with Brian Williams. And that’s kind of
0:44:30 telling, right? It used to be going on CNN or Fox or CBS or ABC because those are the high
0:44:35 prestige. Now I’m like, “No, I’m going with the new guy.” And today on Pivot, we interviewed Margaret
0:44:41 Brennan, who I just think is so talented and sober. And as I was listening to Margaret, I thought,
0:44:48 she’s going to get hired by YouTuber Amazon and she’s going to be positioned with the right
0:44:53 technology in the right format in one of these mediums. And she’s going to drive so much more
0:45:00 economic value for the parent company and herself. And even our little podcast, we just started
0:45:06 posting our videos on YouTube. We’re now making $40,000 or $50,000 a month in incremental ads
0:45:12 from YouTube just by putting our stuff on YouTube. Not to mention all the stuff that’s
0:45:18 happening on Instagram where you’ll post an Instagram reel and it’ll go viral and then you’ll
0:45:24 get speaking engagement requests. I mean, the flywheel is up and running in social media.
0:45:29 One of the things I’ve learned over the last 10 years, we’re in an attention-based economy,
0:45:34 full stop. If you can command attention, you can get revenue. Otherwise, the person running the
0:45:40 firm should be let go. And what you want to find is companies where there’s a delta between the
0:45:44 two. So newspapers used to get 30% of the advertising and they were getting 10% of the
0:45:50 attention. You knew they were in trouble. And the web was getting 30% of time and had 8% advertising.
0:45:57 You knew those two were going to true up. Right now, the greatest delta in terms of attention
0:46:06 to revenues is podcasting. Total consumption is up 15 or 20%. And revenues are solid and growing,
0:46:11 but they’re nowhere near the attention. And in addition, I think if you collapse that with
0:46:19 the following, and that is, there are very few ways or increasingly fewer ways for an advertiser
0:46:25 to reach you. You’re the great white rhino for advertisers. And that is at the age of 26,
0:46:32 you’re what I would actually refer to as stupid. And that is you’re in your mating year. So you’ll
0:46:39 spend 150 bucks on that stupid crew net shirt you’re wearing. You’ll join Soho House. You’ll
0:46:44 spend $7 on coffee. You on the other hand would never do any of these things. No, no, I’m much
0:46:48 more down to earth. I’m much more down. By the way, did I tell you about the global express? I flew
0:46:56 back here from Miami. Anyways, I’m not nearly as superficial as you are. Anyways, but advertisers
0:47:00 love young people because they’re stupid. And they’re in their mating years. So they will spend
0:47:06 a ton of money on high margin products trying to attract a mate. They are the ultimate target.
0:47:13 And the problem is MSNBC’s average viewer is aged 70. MTV is like 52 or 54.
0:47:19 And you or in your cohort is listening to podcasts. So you not only have growth and attention,
0:47:26 but you have growth and attention across a group that is increasingly difficult for advertisers
0:47:32 to reach. So I think you’re going to see, in one of my predictions, I’m doing predictions that
0:47:37 I think the podcast revenue is going to grow faster than every digital platform’s revenues,
0:47:40 maybe with the exception of TikTok who align claim their numbers are lower. But I think you’re
0:47:48 going to see next year revenues, ad revenues grow 25% plus. I think 2025 is going to be the
0:47:55 year a podcast busted open by these election or candidate interviews, attention, and advertisers
0:48:03 are figuring out the media landscape is dramatically shifting under our feet. Let’s take a look at the
0:48:08 week ahead. We’ll see the Fed’s interest rate decision for November. We’ll also see earnings
0:48:14 from Palantir, Nova Nordisk, Airbnb, and Paramount. I doubt we will care about any of that
0:48:19 because we’ll have bigger fish to fry tomorrow. Scott, your predictions.
0:48:24 Well, like it’s the election, Ed. I’m predicting that Vice President Harris is going to win the
0:48:32 election. The gambling markets say that it’s two to one in favor of Trump. You correctly pointed
0:48:38 out that that might be skewed because of these markets overindex young men who are much more
0:48:42 biased towards Trump. A lot of people think these markets are being manipulated to send a signal
0:48:48 of confidence around the Trump campaign. I also want to recognize I have huge confirmation bias
0:48:54 here. I’m very emotionally caught up in this. I could not get over. I was happy to get back to
0:48:58 London. I don’t know if you’ve noticed it, and maybe you don’t notice it when you’re in boiling
0:49:06 water, but I cannot get over how tense things are. I wonder, and again, confirmation bias here,
0:49:13 that people are just fucking exhausted and think, “How can I take some of this temperature down
0:49:20 and distinct of the policies, distinct of whether perfect is not on the menu?” I think a lot of
0:49:26 people are going to go, “You know, I just rather not go back to that shit.” Anyways, my prediction
0:49:33 simply put is that it’s not only going to be a Harris win, but I think it’s going to be a decisive
0:49:39 win. All of the odds and all of the data say that that’s unlikely. Anyways, in some, I’m predicting
0:49:43 that in January of 2025, we’re going to inaugurate Vice President Harris.
0:49:49 People forget how much it sucked, not from a policy perspective, but from just a day-to-day
0:49:55 discourse perspective. Having that guy plastered over the news, people freaking out about him,
0:50:03 24/7, every single conversation is about politics and about how the U.S. is in decline. And whether
0:50:11 or not you believe any of that is true, are you really down for that to just dominate your life
0:50:20 all day, every day for the next four years? That to me is just, that was the big nightmare of the
0:50:27 Trump presidency is how I just, we could never escape him. We had four nice years of some kind
0:50:32 of boring politics, and I really hope that we can have four more of them.
0:50:36 My favorite thing about Senator Bennett, I did a fundraiser at my place for him,
0:50:40 and he said, they said, “What would you be like as president?” Someone asked me,
0:50:43 he’s like, “I’m going to be the president you never hear about.” And I thought,
0:50:47 Jesus Christ, wouldn’t that be refreshing? I absolutely love that.
0:50:51 He said, “I want to be the president you don’t think about. I’m going to do the job.
0:50:55 I’m not going to say incendiary things. I’m not as charismatic as some of these other people.
0:50:59 I’m just going to be the guy that gets the job done.” Anyways, I hope that the guy that gets the
0:51:06 job done is a she, and I really hope that when I move back to the U.S., it feels less tense,
0:51:12 less anxious that we keep this economy going, that young men recognize that their default
0:51:17 operating system should be one of protection, and that I genuinely do believe that women are
0:51:25 under threat here, and that men don’t recognize how much this could affect us. So I’m hoping,
0:51:32 I’m hoping and trusting that some of these things enter people’s brains as they enter
0:51:35 the voting booth. And I’d also just like to highlight, I acknowledge that a lot of people
0:51:40 don’t come to this podcast for politics. I endorse Harris, my newsletter, No Mercy, No Mouse.
0:51:44 We have the greatest number of unsubscribes we’ve ever received, and as I’ve said before,
0:51:48 there’s no point in having economic security and people who love you unconditionally if you
0:51:53 can’t speak your mind. And also to all the people who unsubscribe, I just want to tell you a full
0:51:58 refund is coming your way. Why don’t you read us out, Ed? This episode was produced by Claire Miller
0:52:02 and engineered by Benjamin Spencer. Our associate producer is Allison Weiss. Mr. Vario is our research
0:52:07 lead. Jessica Lange is our research associate, Drew Burroughs is our technical director, and
0:52:11 Catherine Dillon is our executive producer. Thank you for listening to ProfG Markets from
0:52:16 the Vox Media Podcast Network. Join us on Thursday for our unpack on the election with
0:52:31 Anthony Scaramucci, only on the ProfG Markets field.
0:52:57 [Music]
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0:01:52 Today’s number, $20,000. That’s how much Russia has found Google for blocking its news channels
0:01:59 on YouTube. A sexual predator, a racist, and a Russian spy walk into a bar, Ed. The bartender
0:02:16 says, “What can I get you, President Trump?” Boom, a little election humor there. We’re going to
0:02:21 have us election. We’ll count some votes, says James Carvel. That guy’s got to be like 110.
0:02:25 DLSM. That guy’s, that guy, I like him. Do you like him? Do you like James Carvel?
0:02:29 I think I prefer your impression of him. I think that’s sort of my highlight so far.
0:02:34 I appreciate that. It must be bonus season. Someone’s kissing someone’s ass. Hello,
0:02:41 plucker up, you little podcast co-host bitch. Today, we’re discussing earnings from Google,
0:02:48 Microsoft, and Meta. But first, here with the news is PropG analyst Ed Elson. Ed,
0:02:50 what is the good word? How are you? I’m doing very well.
0:02:57 I didn’t know that 20 decillion was a number, but I looked into it. It’s 20 trillion times a
0:03:04 trillion times a billion, and the global GDP is 100 trillion. So, I should put it into perspective.
0:03:08 It just shows you the Russians have their head screwed on straight. That’s what I’ll say about
0:03:12 that. That’s actually what our producer, Claire, requested as a bonus for managing
0:03:15 young irresponsible podcasters. That’s right.
0:03:20 We can’t quite get there. This is a profitable business, but no. I had never heard the term
0:03:24 “decillion” either. Where are you at? Are you in New York? I’m in New York, as always.
0:03:29 We’re past Halloween. I need more banter, pretend I’m interested in your life. What are you doing
0:03:33 for Thanksgiving? I haven’t made a Thanksgiving plan yet. I know what that’s like. It’s okay,
0:03:37 those soldiers. Things will get better. I could go back to London, but it’s kind of weird to
0:03:42 celebrate Thanksgiving in London. It’s not really… Yeah, they don’t have Thanksgiving. We left them.
0:03:46 Yeah, exactly. What are you doing with Thanksgiving? Are you going to celebrate now you live in
0:03:51 London? No, I’m doing my world tour. I’m back. I got back to London yesterday, and in two weeks,
0:03:59 I had to New York for a speaking gig, then to Los Cabos for Baja Summit, where I’m speaking,
0:04:03 and talking about vertical farming, and doing mushroom chocolate at night, and listening to
0:04:09 some DJ who supposedly is hot. Then I got to Vegas, or I got LA for another writer’s room,
0:04:14 because I don’t know if you’ve heard them working on an original scripted drama for Netflix.
0:04:21 So, what do you do in the writer’s room? Do you shout over them at things they’re doing wrong,
0:04:26 or how does it work? No, it’s the guy, the showrunner, and the lead writer will say, “Well,
0:04:31 what do you think, Scott?” And I’ll say, “No, they would never say that, even though I’m not listening.
0:04:36 I just pretend that what they’re saying is unrealistic.” Okay, so I’m kind of on the right
0:04:40 track. I’m supposed to be the person that puts you in the room that makes it feel authentic,
0:04:45 and I’m supposed to be the person that understands these people, which is kind of comical.
0:04:49 But yeah, it’s fun. It sounds very fun. You don’t actually have to do the writing,
0:04:55 you just kind of like opine on what’s happening. You know me, I don’t like to actually work.
0:05:03 There’s no real work involved in this whole Prop G enterprise for the Prop G. It’s actually a lot
0:05:08 of fun. I get to envision scenes, and I’m working with this really talented guy named Scott Burns,
0:05:15 and Meteoraz, and all these super talented people. So far, we’re in the honeymoon period. We’ll see.
0:05:17 Sounds like the best job ever.
0:05:19 All right, enough of that shit. Ed, stop delaying. Get to the news.
0:05:23 Well, before we get started, just a quick reminder to subscribe to Prop G Markets
0:05:27 on its dedicated feed. Type in “Prop G Markets.” Wherever you get your podcasts,
0:05:33 hit follow, and tune in to our interview with Anthony Scaramucci on Thursday. That interview
0:05:37 will only be available on the dedicated feed. And now let’s start with our weekly review of
0:05:50 market vitals. The S&P 500 declined, the dollar fell, Bitcoin rose, and the yield on 10-year
0:05:56 treasuries increased, shifting to the headlines. US GDP grew 2.8% in the third quarter. That was
0:06:01 slightly slower than the previous quarter, and just below expectations. However, economists
0:06:06 were largely encouraged by the growth, driven by strong consumer spending on goods.
0:06:08 Reddit turned a profit for the first time ever,
0:06:13 with revenue reaching almost $350 million in the third quarter. That’s up 68%
0:06:18 from a year earlier. The company also reached nearly 100 million daily users,
0:06:24 and those strong earnings sent shares up more than 40%. Shares and drugmaker Eli Lilly fell
0:06:29 more than 6% after its third quarter profit and revenue missed analyst expectations.
0:06:34 The company also reported disappointing sales of its weight loss and diabetes drugs.
0:06:40 And finally, Elon Musk’s artificial intelligence startup XAI is in talks for a funding round
0:06:45 that would value the company at $40 billion. That’s nearly doubled the valuation from its
0:06:51 previous round. Your thoughts, starting with this national economic data GDP growth in America,
0:06:58 2.8% in Q3. A GDP number doesn’t mean a lot unless it has a benchmark. So just some benchmarks
0:07:05 there. Japan’s annual GDP growth was up 0.3%. So we’re growing nine times faster than Japan.
0:07:13 France up 1.1% and Canada up 1.3%. I mean, this is just the economy here. It’s just really striking
0:07:17 to listen to these kind of person on the street interviews about how people feel about the economy.
0:07:23 It’s so obvious that there’s kind of a vibe session, as Kyle Scanlon called it, or people,
0:07:27 again, have this habit of crediting their character and their grip for the raises and blaming
0:07:32 everyone else or blaming the government for whatever price hikes there are. But our growth is
0:07:39 impressive. And 2.8% may not seem a lot, but what that means is about every 25 or 27 years,
0:07:45 the size of the American economy would double. In addition, we have this new inflation data that
0:07:52 just came out. It’s down to 2.1%. In other words, inflation has officially been dealt with. Meanwhile,
0:07:56 you look at other developed nations that have struggled with not only higher inflation than we
0:08:02 had, but also longer inflation. So it sort of makes the case, or not sort of, it does make
0:08:07 the case for Kamala Harris. If you believe that Kamala Harris is just a continuation of the current
0:08:13 administration, and if you care about the economy, then this is a big reason to vote for Kamala Harris.
0:08:20 But if you’ve made this point before, she should be making a way stronger argument about how she’s
0:08:25 sort of the economy vote. If you care about the economy, you should be voting for Kamala Harris.
0:08:30 It hasn’t really resonated. But for those of us that care about statistics, that care about
0:08:34 data, what the data is actually telling us. And when you look at the U.S. compared to other
0:08:41 nations that have struggled with problems way worse than ours, the answer is pretty clear.
0:08:44 Statistically speaking, Kamala Harris should be your answer.
0:08:48 I so badly want to be head of comms for like 11 days for the Harris campaign.
0:08:50 I’ve heard people saying you should be, by the way.
0:08:53 I just think she should have in her back pocket. Every time someone starts complaining about the
0:08:59 economy, saying the economy is saying, okay, Sean Hannity, there’s 190 sovereign nations,
0:09:03 you’re an intelligent guy. What economy globally is stronger than ours right now?
0:09:09 Name it. Instead, they always go to this democratic self-hate of,
0:09:12 I know things are tough out there and we have work to do. It should be,
0:09:16 bitch, we are on fucking fire. Get your head out of your ass.
0:09:21 Anyways, okay, Reddit, why don’t I listen to my own advice? I bought some stock here,
0:09:28 but not enough. I believe the stock is now at about triple where it priced in its IPO about
0:09:32 two months ago. Can I ask how much you bought? You can ask. May you answer.
0:09:39 I think I bought about $3 million for the stock, but I paired some of it, so I don’t own nearly as
0:09:44 much as I’d hoped, but I’ve done very well. But it pops so big the first day, I trimmed some of my
0:09:50 holdings and I just didn’t listen to myself. I knew this thing. I still think it has more room to run.
0:09:57 Anyways, its revenue up 68% year on year. Daily users is up 47%. They’re going global. They’re
0:10:02 being really smart. They’ve translated their posts via AI in the French, Spanish, Portuguese,
0:10:05 and German and its international daily active unique visitors increased 44%.
0:10:11 Which was huge and it’s just such a simple innovation. It’s such a great use case for AI,
0:10:19 just simply translating the language of your content, but it’s so, so effective. It essentially
0:10:24 just 10X is your total addressable market. And that is what we’re doing, or at least we’re trying
0:10:31 to do it. We’re using AI to translate this podcast into Spanish and Portuguese at the moment.
0:10:49 But I think this is something that everyone in content should be looking at. How can we figure
0:10:55 out a way to just overnight flip a switch and make this all available to the 8 billion people
0:11:01 across the entire globe? It’s just a really quick and nice way to just skyrocket your total
0:11:06 addressable market. So that would be the first thing that I would commend Reddit on.
0:11:11 The second key driver of their growth actually was not intentional, but it’s very interesting.
0:11:18 And that is Google recently changed the way it ranks search results. So they made this update
0:11:24 called the hidden gems update. And what they’ve done with the algorithm is they’re now preferencing
0:11:29 what they call authentic content, which is the content that is generated by users content you
0:11:35 find on forums and on chat rooms. And so as a result, you will find that Reddit is showing up
0:11:41 more and more when you search things on Google. It’s also appearing higher in your rankings.
0:11:47 And here’s a great stat. Reddit is now the sixth most Googled word in the US. So it’s this great
0:11:53 combination of, you know, this intentional play with AI, but also the market dynamics are shifting
0:11:58 to Reddit’s benefit. And it’s just, it’s just translated to this explosion
0:12:02 in the business and in the stock. So incredible quarter for Reddit.
0:12:07 But when you were talking about flipping a switch and accessing a global market using AI,
0:12:12 and again, the operative term there was flip a switch and go global. You sound like me and our
0:12:18 all hands last week, where at that point, the person who runs the company, Catherine Dillon said,
0:12:22 “Bitch, you translate this shit into Farsi and try and find the equivalent of Zip Recruiter in
0:12:28 Iran to advertise.” I think it’s not quite flipping a switch is what the pushback I got.
0:12:33 It’s flipping a million switches. Yeah. It’s, and someone actually has to build
0:12:38 the switch and manage it while I just, you know, the podcast hosts say, “Flip a switch and let’s go
0:12:42 global.” This is strategy versus operations. Yeah. This is the difference between being front
0:12:48 of front of house and back of house, right? So I interviewed the CEO at their annual advertiser
0:12:54 event and they had big, they had big advertisers in the room. I saw the CMO of Mars, they had the
0:13:00 biggest media agencies there. It feels to me a little bit like kind of, I don’t know, meta or
0:13:05 Pinterest or Snap in the early days. One of the reasons I’m going to kind of kiss the ass to the
0:13:09 CEO, other than he seems like a nice man is I bet my prediction is they’re going to have an
0:13:14 amazing party at Cannes in the next one or two years. They’re going to decide we need to be,
0:13:20 you know, stroking the hair of people who we are putting out of business and bring them to some
0:13:27 great party and get Dua Lipa or Bad Bunny or somebody. Anyways, we’re going to the Red
0:13:31 and Beach party. That’s what I take away from all of this. I can’t wait. I’m waiting for my
0:13:38 invite. Let’s move on to Eli Lilly, as many of our listeners probably know. Eli Lilly sells Zep
0:13:45 bound and Munjaro, which are these GLP1 drugs. They are the alternatives to Ozempic and Wagovi,
0:13:49 and it’s not selling as much as people had thought, or at least that Wall Street had thought,
0:13:54 and the obvious question is, of course, why? What is going wrong? Now, what’s interesting is that
0:14:00 the CEO’s answer to that question was that there isn’t a problem with demand, but there is a problem
0:14:07 with supply. So supposedly the suppliers of the inventory for these drugs, those suppliers cut
0:14:14 down on their stock and it affected Eli Lilly’s ability to get the drugs out. But as a Barclays
0:14:21 analyst pointed out, if that’s true, that could only have accounted for around 20% of that drop
0:14:27 off in revenue. In other words, there must be something else afoot here, something else is
0:14:36 going wrong in the Eli Lilly GLP1 drug story. And it can’t just be this sort of chokehold on
0:14:42 inventory, and certainly Wall Street doesn’t believe that story either. So I have a few
0:14:46 thoughts of my own as to what might be going on, but I will throw it back to you. What do you think
0:14:53 could be the problem at Eli Lilly that the CEO did a bad job of explaining or at least won’t tell us?
0:14:59 I wonder if we keep hearing about all these compounded GLP1 producers being able to sell,
0:15:04 I don’t know if you call it off market, but there’s a bit of a glitch in the matrix or a loophole
0:15:09 where if a product is sold out, you can build almost like a generic version of it that costs
0:15:16 much less. I got to think that that’s denting demand a little bit. And I would think that in
0:15:22 not only that, you have a lot of these kind of upstarts are sort of scrappy and maybe don’t
0:15:27 take as institutional approach, but are great marketers and understand new mediums. So I wonder
0:15:33 if it’s some of the new guys or these compounded GLP1 producers maybe slowed their growth. What
0:15:37 are your thoughts? I was thinking that too. And if you look at Hymns, which we have discussed
0:15:43 before, they have been getting into the GLP1 game. Yes, the compounded version, their revenue
0:15:49 increased 52% last quarter. And a large part of that was their weight loss drug business.
0:15:53 And there are several other companies that are offering these compound alternatives.
0:15:58 It’s sort of becoming a growing space. And I think it is possible that this
0:16:05 duopoly that we’ve seen on semi-glutide that has been owned by Novo Nordisk and by Eli Lilly,
0:16:10 it could be a little more fragile than we think. The other thing I think is worth mentioning, which
0:16:16 one of our team members, Jessica Lang, points it out. And it’s a simple but important point is
0:16:23 when you think of GLP1s, Manjaro and Zep bound do not come to mind. The two names that come to
0:16:30 mind are Osempic and Wagovi. And so it could be just a simple brand recognition problem that these
0:16:35 products just aren’t present in the public discourse enough. If you’ve been watching the
0:16:42 World Series recently, you will likely have seen this Wagovi ad over and over this new Wagovi jingle
0:16:46 that is probably stuck in a lot of people’s heads right now. So I think the other explanation here
0:16:51 could be a very simple issue. It’s just a marketing problem and a brand awareness problem.
0:16:55 We know what Zep bound and Manjaro is because we study this stuff for a living,
0:16:59 but for the average American, you just think Osempic and Wagovi and you probably don’t even
0:17:04 know what GLP1 is either. It’s interesting. I agree with you. I usually don’t like the idea of
0:17:09 typically when I walk into a brand and they say they want to show me a brand campaign and they’re
0:17:13 going to spend money on advertising. I usually say, well, if you’re spending a lot of money on
0:17:17 advertising, usually you have somebody who wants to hang out with really cool, interesting people,
0:17:22 which ad agency people are, or you’re out of ideas because the companies are the best products,
0:17:26 don’t need a lot of brand marketing. In this case, I think an awareness campaign,
0:17:32 exactly how you said around Zep bound and Manjaro. Awesome. Manjaro is awesome. If I came back and
0:17:38 in my next life as an MMA fighter, I want to be called Manjaro. I think that’s a badass name.
0:17:42 It’s a really cool name, Manjaro. Anyway, but I agree with you. I think they need fire up the
0:17:47 ad budgets. Yeah, it gets some awareness out of that. There’s so much money on the line here.
0:17:54 Also, supposedly there’s a lack of scarcity that finally there’s enough production here to meet
0:17:59 demand. I wonder what’s going to happen though when it reaches into the markets it should be in.
0:18:04 I’m just such a huge fan of this technology. Speaking of which, let’s bring this back to me,
0:18:08 Ed. I’m doing this NAD treatment. Have you heard of this? Only from you mentioning it last week.
0:18:15 Ed, that’s it. I’m fine. I’ll leave. No desilient dollar bonus for you.
0:18:18 I’ll make my way out. Just Claire’s getting a desilient dollars.
0:18:25 Anyways, this NAD stuff is really, really powerful, but I wonder if it has a similar compound,
0:18:34 this GLP-1, because I have noticed. I’m losing my taste for the sauce. I’m going to fit right
0:18:38 into Baja Summit. I told you about Summit last year. They all take drugs, but they don’t drink.
0:18:43 I would bet, going back to Eli Lilly, I apologize, I’m all over the place. This fucking NAD is
0:18:49 supposed to give me focus. Maybe it isn’t working. I think this is probably a buying opportunity.
0:18:56 I think anyone in this market with two great brands, or one great brand, Monjato, and ZepBound,
0:19:02 that’s a terrible, you’re bound for Zep. Is that bound? That sounds awful. That’s like some
0:19:07 rock climbers started some bad ropes company or something. I think other than the CEO making
0:19:16 lame excuses, I’d say on this one, buy the debt. Our final headline is XAI, which Elon, this is
0:19:25 Elon’s AI company, which he is supposedly trying to raise around at a $40 billion valuation.
0:19:31 Just a reminder of what this company is. People may remember the premise of this company was to
0:19:39 create a competitor to chat GPT that was “more truth seeking.” For a while, Elon was calling it
0:19:47 kind of jokingly “truth GPT.” He saw how successful chat GPT had become, and he wanted to make
0:19:54 a competitor that was also less woke pretty much. XAI did build that product, and the product is
0:20:01 called GROC. Many people may have heard of it, and it’s available to all paid users of the X
0:20:06 platform, formerly known as Twitter. I’ve used it. It’s fine. There was a period where it tried to
0:20:14 be anti-woke and funny, and it felt like a not very funny guy who’s trying to just crack jokes
0:20:19 at every second. It wasn’t a great product. Yeah, it’s the Tony Hengecliffe of LLMs.
0:20:25 It’s exactly right, and they fall flat. I’ll get your reactions to XAI in this
0:20:29 funding round. There are a few more details we can go into, but what are your thoughts on this
0:20:37 round? I think this is Musk’s next opportunity to turn $40 billion into 10. My sense is this
0:20:44 is now a distant fourth or fifth in the LLM market. He did some sleight of hand trying to give,
0:20:51 take the rights to the data I think of Twitter and spin out XAI, and he got a disproportionate
0:20:54 amount of the firm. I would have gone apeshit crazy if I was a shareholder in Twitter,
0:21:01 but it’ll GROC right now is a distant fourth, fifth, or sixth, trying to trade at the same
0:21:07 valuation as Anthropic, and that’s the analog here. I would imagine that Anthropic has dramatically
0:21:15 more traffic, revenues, better technology, etc. And what they keep leaking is that Jensen Huang did
0:21:21 say that it’s easily the fastest supercomputer on the planet. XAI has built its own data center,
0:21:25 but I’m not, I’m not sure if that ends up being much of a competitive advantage.
0:21:30 Anyways, I think that’s an important point is, is that a competitive advantage? And
0:21:36 when I look at XAI, it’s like there are three main differences that make it different from other
0:21:42 AI companies. The first is that Elon Musk is leading. So that’s a big deal. It means you can
0:21:48 raise a bunch of money. The second is, as you said, they’re building their own data centers,
0:21:54 and that’s what sets it apart from open AI. Open AI does not own any data centers. Instead,
0:21:59 they essentially rent their compute from Microsoft, and that’s why they have that partnership.
0:22:06 And then the third big difference is that XAI is building its own frontier models. And that’s
0:22:12 where it’s similar to open AI, but not similar to a company like Perplexity, which is building
0:22:17 models on top of the models that are built by other companies like open AI. So in other words,
0:22:22 their sort of strategic differentiation is that they want to own everything that they create.
0:22:28 They want to be a truly independent AI company, which is a little rare these days because it’s
0:22:33 developed into this massive supply chain where you have the chip manufacturers
0:22:38 selling to the data centers and the data centers selling the compute to the model makers and the
0:22:44 model makers selling their models to the app makers. It’s a big supply chain. And XAI has decided
0:22:48 we’re just going to own all of it ourselves. I just don’t know if XAI is going to have the
0:22:52 capital. They’re starting from less than zero versus everybody else, and they want to raise
0:22:59 it the same valuation as the number two or the number three player anthropic. So I have a bias
0:23:03 because I’m not a fan of Musk, but on just a straight valuation standpoint, this feels to me
0:23:10 like a bad deal. Yeah. I mean, it sounds like the Elon Musk premium, but it’s why he still deserves
0:23:16 a premium like this to me is beyond me. The fact that he’s destroyed 80% of the market value of
0:23:23 Twitter, that was his last venture. I mean, it’s crazy. It’s loco. He’s gone mungado on us.
0:23:30 We’ll be right back after the break with a look at big tech earnings. If you’re enjoying the show
0:23:35 so far, be sure to give Prof2Markets a follow wherever you get your podcasts.
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0:24:43 You’ve always wanted to be part of something bigger than yourself.
0:24:54 You live for experience and lead by example. You want the most out of life and realize what you’re
0:25:04 looking for is already in you. This is for you. The Canadian Armed Forces, a message from the
0:25:17 government of Canada. We’re back with Prof. G. Mockets. Most of the magnificent seven reported
0:25:22 earnings last week bringing AI demand and spending into sharper focus. Google and Microsoft both
0:25:29 reported cloud revenue growth above 30% beating expectations. But while Google stock rose,
0:25:34 Microsoft’s fell as the company advised its overall revenue growth would slow in the
0:25:40 current quarter. Meanwhile, Metastock also fell after the company missed expectations on user growth
0:25:48 and warned that its AI expenditures would continue to increase in 2025. So I think let’s just start
0:25:53 here. A lot of tech earnings telling slightly different stories. Let’s just start with what
0:26:00 Wall Street thought about these earnings. So for Google, Wall Street was very happy. Revenue grew
0:26:07 15%. Cloud revenue skyrocketed and the stock rose 4%. I think the main story with Google is there
0:26:12 was nothing that you could really fault the company for in that earnings report. Everything was going
0:26:18 well. Microsoft and Meta on the other hand, Wall Street was not so happy with. It’s a very
0:26:23 similar story that we’ve seen before in tech, which is the top and bottom lines were very
0:26:31 strong. They beat expectations at both companies. But there was just one tiny little pimple on the
0:26:36 earnings report for both of them. And for Microsoft, it was that their guidance was a little bit soft,
0:26:42 not as strong as Wall Street wanted. And for Meta, the user growth was slightly weaker than
0:26:50 expected. 3.29 billion active users versus 3.31 billion expected. I should remind you that’s
0:26:55 daily active users. So it’s still pretty incredible. As a result, Microsoft stock fell 4%
0:27:02 and Meta stock fell 3%. So I think the summary with these earnings here is that it’s very strong
0:27:08 overall. But again, incredibly high expectations for these companies. Let’s just start with your
0:27:12 headline reactions to the tech earnings that have come in this week. What you said
0:27:19 was really prescient and insightful a few months ago. And that is the expectations are now that
0:27:26 you’re going to blow away expectations. So Meta actually, the revenue earnings beat expectations,
0:27:32 increasing 19 and 35% respectively. But investors were disappointed by weaker than expected daily
0:27:38 active user growth. And also, I think the thing that freaked everybody out is when Zuckerberg
0:27:43 wasn’t threatening to spend tens of billions of dollars and mixed reality headsets. He was
0:27:50 promising and he did it. And he kept spending well beyond any evidence that this was working.
0:27:55 And when Zuckerberg says, “No, we’re going in on AI and get ready, folks, hold on to your hats,”
0:28:02 it kind of spooked, I think as investors a little bit, just because relative to the earnings and
0:28:08 the revenue beat, the revenue and earnings were amazing here. And at the same time,
0:28:13 let’s go to the other end of the spectrum. Everyone’s sort of waiting and anticipating
0:28:21 Snap to start a death rattle. And even though their sales jumped 15%, not as much as the other guys,
0:28:30 their stock was up 10% because the expectation, when people listen to a Meta call, they’re waiting
0:28:35 to see just how amazing it is. When people listen to a Snap earnings call, they’re kind of a little
0:28:41 nervous. Like, is this the quarter that Snap announces that Meta is just putting them out of
0:28:47 business? And the expectations here have gotten so crazy. And I know I’m jumping around a lot,
0:28:52 but let’s talk a little bit about Microsoft. They also beat revenue and earnings expectations.
0:28:59 The stock was off 4%. And after hours trading on weaker guidance, good CEOs, sandbag guidance.
0:29:04 You always want, in my opinion, under promise and over deliver. And when you start getting desperate
0:29:08 or you’re worried about losing your job, you start over promising and under delivering their total
0:29:16 revenue increase. Get this at 16% off a huge number. That means that they have, they found
0:29:20 another eight or $10 billion per quarter in incremental revenue. And also the revenue mix
0:29:28 is getting more solid because their cloud offering Azure revenues were up 33%. And that is a business
0:29:36 with incredible margins. And 12 points of growth came from AI services. So in sum, this was just,
0:29:44 this was just striking. And the only wrinkle here, the thing I would offer that I noticed,
0:29:50 and we’ve been talking about this a lot, is that if I were to ask you, what comes to mind when
0:29:56 I think of the, when I ask you, who is the leader in the streaming market? Who comes to mind?
0:30:01 Well, you know, you know my real answer, but I think the average person would say Netflix.
0:30:09 That’s right. And yeah, but, but it isn’t right. It’s YouTube. And YouTube’s combined ad and
0:30:15 subscription revenue over the past four quarters has surpassed $50 billion. So Netflix is at $37
0:30:22 billion over the same period over the last four quarters. So, so YouTube is a bigger streaming
0:30:26 network, bigger revenue. I’d be curious what the growth rate is there. I’m not sure they break it
0:30:32 out. But if you applied the same multiple to YouTube, you’d have a half a trillion dollar
0:30:36 market cap company. And I wonder if there’s opportunity for Alphabet to cut a deal with
0:30:42 the DOJ and among other things in their remedy trial, say, look, what if we spin YouTube? But
0:30:48 across all of these folks, you know, whether it was Reddit, which looks like it’s becoming a truly
0:30:55 big tech company, Meta, all of them, Snap, showing it, we’re still here. Snap’s like,
0:31:00 hey, don’t forget us. We’re still here. We’re still growing. We’re still doing really well.
0:31:05 And the other guys, the big guys, the Alphabets, the Metas of the world are just,
0:31:11 you know, still on fire. Yeah, a lot, a lot there. We’ll start with YouTube. I just want to
0:31:18 reemphasize that number. You said $50 billion in revenue in the past four quarters compared to
0:31:27 Netflix at $37 billion. With the same multiple, YouTube would be a half a trillion dollar company
0:31:32 in market cap. It would probably be higher given the margins and given the growth rate.
0:31:37 But if it were broken up into its own company, which you have just suggested,
0:31:41 just want to point out, it would be one of the top 20 most valuable companies in the world.
0:31:46 It would be more valuable than Oracle. It would be more valuable than Mastercard. It would be
0:31:52 more valuable than Johnson Johnson. And yes, of course, it would be more valuable than Netflix.
0:32:00 So I mean, we’ve discussed why we believe YouTube is basically the most underrated asset in the
0:32:04 market right now. I think this should really drive it home for people. It’s something that
0:32:09 people don’t seem to talk about that much. And I think to your point, it’s a little bit of the
0:32:14 conglomerate tax. It sort of gets lost in the noise because of all of the other things that
0:32:20 Google is doing. But this is just a juggernaut in the entertainment space. I am just fascinated
0:32:25 by this business of YouTube and they continue to crush it. One of the other things you pointed
0:32:35 out there is the idea that Meta, they spent really big on the Metaverse and it freaked everyone out.
0:32:40 And now they’re spending really big on AI. And so the numbers are,
0:32:47 Meta is raising its Carpex forecast for 2024 to between $38 billion and $40 billion. And that is
0:32:53 slightly freaking the market out. They don’t love how much that expense line is going to grow.
0:32:59 Having said that, though, all the other tech companies are doing it. So over at Google,
0:33:06 their Carpex rose 62% from a year ago to $13 billion. Microsoft is doing it too.
0:33:12 Microsoft’s Carpex doubled from last year to $20 billion. And this is just for the quarter.
0:33:16 The ultimate business strategy has become capital as a weapon. Mark Zuckerberg goes,
0:33:21 we have access to cheap capital, so I’m going to outspend you. I mean, there’s kind of three or
0:33:28 four. No one can keep up with these guys except each other. The biggest companies in the world
0:33:33 that aren’t big tech can’t make these types of investments any longer. They’re spending more
0:33:38 money on GPUs and exxon spent on oil exploration at their peak.
0:33:44 I mean, so just some data here. Microsoft, Meta and Alphabet will spend more than $150
0:33:53 billion on Carpex in 2024. And more importantly, Microsoft, Meta, Alphabet and Amazon account for
0:34:01 roughly 40% of NVIDIA sales. So what we’re seeing here is a dynamic where NVIDIA is pretty much
0:34:08 propping up the stock market. We’ve all kind of identified that. And NVIDIA’s entire top line
0:34:14 is being propped up by the Carpex spend of Microsoft, Meta, Alphabet and Amazon. So in a way,
0:34:21 that Carpex number is the most important number in the entire global stock market right now. We
0:34:28 should all care a lot about how much they’re spending. But as you mentioned, the competitive
0:34:34 aspects to this, the idea that they’re all ramping up spending, I wonder to what extent this is
0:34:41 becoming a little bit of a big dick contest. Where if you’re if you’re Mark Zuckerberg and you’re
0:34:47 seeing, you know, you’re seeing Sundar Pichai invest billions and billions into this space and you’ve
0:34:52 decided to get into the space too. I wonder to what extent they’re just going to start outbidding
0:34:57 each other, not because it necessarily makes sense for the business, but because they don’t want to be
0:35:02 caught out and they don’t want to look to the world like the loser or like the coward who wasn’t
0:35:08 down to double down on AI. And, you know, maybe I’m not giving them enough credit,
0:35:13 but I could certainly see if I were in their position, how I could get caught in that dynamic.
0:35:17 Google’s doing it, Microsoft is doing it, so we better do it too.
0:35:25 Well, I think correctly, in hindsight, it looks like the stimulus plan during COVID that the Fed
0:35:29 and the White House overdid it. They spent more money than was needed.
0:35:34 And Janet Yellen, when faced with that question, did you overdo it? She said, we decided. She said,
0:35:40 yeah, we probably did. But at the time, the analysis was it’s much riskier to underdo it than
0:35:47 overdo it. And I think that’s how these guys are approaching AI. And that is, if they overdo it,
0:35:53 they spend too much. That’s not the same risk as being the company, one of the big tech companies
0:35:59 that had all of the assets, all of the IP, all the customer interface, but got bested and saw
0:36:03 their stock lag everyone else’s because they underinvested in what appears to be the most
0:36:09 seminal technology trend of the last 20 years. So, I got to imagine that they’re like, okay,
0:36:15 we need 10 billion. The range of requisite capex to meet our plans is somewhere between,
0:36:21 I don’t know, call it 20 and 30 billion. You got to think the CEO says, with a stock at an all-time
0:36:28 high with access to cheap capital, I’m not going to be the CEO that missed on AI. You say 20 to
0:36:34 30 billion, here’s 32. We’ll be right back. And if you’re enjoying the show so far, hit follow and
0:36:53 leave us a review on ProfG Markets. This episode is brought to you by A Real Pain. From Searchlight
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0:38:33 We’re back with Prof2Markets. Meta’s revenue jumped 19% to $40.6 billion. That’s its record revenue.
0:38:37 Staggering number. And you mentioned earlier about revenue mix.
0:38:44 The point that Microsoft has done a really good job of diversifying its revenue, which makes it
0:38:49 that revenue a little bit more stable. They’re able to weather a storm. It’s a great reason
0:38:55 to diversify your revenue. Just want to point out this one start about Meta. 96% of their revenue
0:39:05 still comes from advertising. So they’re not in a very strong position from a longevity perspective,
0:39:12 but it sort of highlights just what a juggernaut this advertising business is. The fact that
0:39:17 this company is one of the top 10 most valuable companies in the world, and it’s all just from
0:39:21 all of that advertising, you talked about how they’ve been getting into AI, which has been
0:39:27 massively increasing their ability to accumulate users and also monetize
0:39:32 those users. I’m just amazed that Meta is worth this much and making this much money,
0:39:36 and it’s still just a pure play ad business. I just thought that was quite fascinating.
0:39:42 I mean, these companies combined probably have ad driven revenue growth of somewhere between,
0:39:49 I don’t know, $20 billion and $40 billion in incremental ad growth. I had dinner the other
0:39:57 a week ago with this iconic broadcast anchor, and this is someone who likely,
0:40:00 I don’t know what this person makes, but I imagine it’s tens of millions of dollars,
0:40:04 household name, outstanding or what they do. You have to tell us.
0:40:08 Now, I can’t in this instance because we’re good, good friends and I don’t like to
0:40:13 prostitute my relationships. I’m imagining it’s Anderson Cooper and I’ll just let you not comment.
0:40:17 What I will say is it wasn’t Anderson Cooper. I have a second friend. I have a second friend
0:40:21 now in the media ecosystem. Anyways. Oh, Tucker Coulson. Got it. Okay.
0:40:28 Me and Tucky. Yeah, we fisted each other and we were screaming out the ghost of Rick Santorum.
0:40:34 I don’t know where I got that name. That’s an image. That’s an image. Anyways,
0:40:39 and he said that every contract renewal that’s coming up across the biggest anchors,
0:40:44 the biggest stars in broadcast television, the conversations are going something like
0:40:49 this. As you know, it’s a stressed ecosystem. We know you are making 10 million a year. Now,
0:40:55 we’re going to pay you three and a half and it’s directly correlated to these earnings
0:41:01 because the economy is growing 3% a year and all of these companies are growing 18%.
0:41:07 Ad spending is not up 18%. This has become a bit of a zero-sum game and that is,
0:41:12 say ad spending is up because it’s a strong economy. Say, okay, fine, it’s up 5%.
0:41:18 Ad spending is an up 15. So that incremental 10% is coming from somewhere else and I can tell you
0:41:22 where it’s coming from. It’s coming from, generally speaking, ad-supported media that
0:41:30 isn’t one of these guys. Whereas if you hosted the ultimate morning show program,
0:41:37 and they were just printing money, they could pay Hoda 7 or 10 million a year and now they’re like,
0:41:43 Hoda, we love you, but revenues are down 30%, profits are down 60%. We’re going to pay a
0:41:48 two-man and it’s like, fuck that, I’ll just go drink white wine all day. Also, just more generally
0:41:55 speaking, I have spoken to two individuals. I like to think I’m trying to be good about my
0:42:00 word and I’m coaching young men. I’ve heard I’ve had two men reach out to me and ask to speak to
0:42:06 me and they’ve both been men who are my age, who are both very successful in the media market
0:42:10 and they’ve either quit or been laid off and they have no idea what to do right now.
0:42:16 Because the motion picture and television market in Los Angeles and generally speaking,
0:42:21 the media market is really strained if you’re not working for one of a handful of companies that
0:42:28 are just killing it. And it strikes me that these folks haven’t connected the dots. There is real
0:42:34 pain on the other side of these revenue numbers and that is it is a terrible time to be a CBS
0:42:42 or an MTV. Does anyone even remember what MTV is? Newspaper revenue is off 80% in the last 30 years.
0:42:50 Billboard’s drive time, if it wasn’t for the election, local news stations would be just gone.
0:42:55 Yeah, that’s a great point. And you think about the other beneficiaries of that revenue growth,
0:43:01 where is that advertising going? It’s going to the people who are creating content on Instagram
0:43:06 and on TikTok and on YouTube. Those are the beneficiaries. Granted, they’re not getting
0:43:11 multi-million dollar contracts, but the reason you’re seeing those millions getting shaved off
0:43:16 of the Anderson Coopers of the world is because frankly, it’s going to the Scott Galloway’s of
0:43:21 the world and people are a lot less famous than you. People who are creating content on Instagram,
0:43:26 who are making videos, who are commentating on things in the news. There are thousands,
0:43:32 probably millions of these people out there who are making a living and who are making real money
0:43:38 by creating on the digital platforms. And what I just can’t wrap my head around is how those
0:43:44 people continue to not be taken seriously by the mainstream media. It’s been almost like
0:43:49 mainstream media just sort of covers their eyes and pretends like they’re still in their heyday.
0:43:55 Well, what’s happening is we’re seeing the social media companies having this explosion in growth
0:43:58 and meanwhile, legacy media is completely drying up.
0:44:02 Well, it’s really interesting. So election night, and I’m bragging right now, but I was
0:44:09 asked to appear on a variety of cable networks. They go for 12 hours straight. They have a lot
0:44:14 of time to fill. So they’re like, “Oh, bring in the guy on young men. Just tell him not to tell
0:44:19 dick jokes.” So almost every network called and said, “Do you want to come on and election
0:44:25 night?” And the one I chose, I’ve been going on Amazon with Brian Williams. And that’s kind of
0:44:30 telling, right? It used to be going on CNN or Fox or CBS or ABC because those are the high
0:44:35 prestige. Now I’m like, “No, I’m going with the new guy.” And today on Pivot, we interviewed Margaret
0:44:41 Brennan, who I just think is so talented and sober. And as I was listening to Margaret, I thought,
0:44:48 she’s going to get hired by YouTuber Amazon and she’s going to be positioned with the right
0:44:53 technology in the right format in one of these mediums. And she’s going to drive so much more
0:45:00 economic value for the parent company and herself. And even our little podcast, we just started
0:45:06 posting our videos on YouTube. We’re now making $40,000 or $50,000 a month in incremental ads
0:45:12 from YouTube just by putting our stuff on YouTube. Not to mention all the stuff that’s
0:45:18 happening on Instagram where you’ll post an Instagram reel and it’ll go viral and then you’ll
0:45:24 get speaking engagement requests. I mean, the flywheel is up and running in social media.
0:45:29 One of the things I’ve learned over the last 10 years, we’re in an attention-based economy,
0:45:34 full stop. If you can command attention, you can get revenue. Otherwise, the person running the
0:45:40 firm should be let go. And what you want to find is companies where there’s a delta between the
0:45:44 two. So newspapers used to get 30% of the advertising and they were getting 10% of the
0:45:50 attention. You knew they were in trouble. And the web was getting 30% of time and had 8% advertising.
0:45:57 You knew those two were going to true up. Right now, the greatest delta in terms of attention
0:46:06 to revenues is podcasting. Total consumption is up 15 or 20%. And revenues are solid and growing,
0:46:11 but they’re nowhere near the attention. And in addition, I think if you collapse that with
0:46:19 the following, and that is, there are very few ways or increasingly fewer ways for an advertiser
0:46:25 to reach you. You’re the great white rhino for advertisers. And that is at the age of 26,
0:46:32 you’re what I would actually refer to as stupid. And that is you’re in your mating year. So you’ll
0:46:39 spend 150 bucks on that stupid crew net shirt you’re wearing. You’ll join Soho House. You’ll
0:46:44 spend $7 on coffee. You on the other hand would never do any of these things. No, no, I’m much
0:46:48 more down to earth. I’m much more down. By the way, did I tell you about the global express? I flew
0:46:56 back here from Miami. Anyways, I’m not nearly as superficial as you are. Anyways, but advertisers
0:47:00 love young people because they’re stupid. And they’re in their mating years. So they will spend
0:47:06 a ton of money on high margin products trying to attract a mate. They are the ultimate target.
0:47:13 And the problem is MSNBC’s average viewer is aged 70. MTV is like 52 or 54.
0:47:19 And you or in your cohort is listening to podcasts. So you not only have growth and attention,
0:47:26 but you have growth and attention across a group that is increasingly difficult for advertisers
0:47:32 to reach. So I think you’re going to see, in one of my predictions, I’m doing predictions that
0:47:37 I think the podcast revenue is going to grow faster than every digital platform’s revenues,
0:47:40 maybe with the exception of TikTok who align claim their numbers are lower. But I think you’re
0:47:48 going to see next year revenues, ad revenues grow 25% plus. I think 2025 is going to be the
0:47:55 year a podcast busted open by these election or candidate interviews, attention, and advertisers
0:48:03 are figuring out the media landscape is dramatically shifting under our feet. Let’s take a look at the
0:48:08 week ahead. We’ll see the Fed’s interest rate decision for November. We’ll also see earnings
0:48:14 from Palantir, Nova Nordisk, Airbnb, and Paramount. I doubt we will care about any of that
0:48:19 because we’ll have bigger fish to fry tomorrow. Scott, your predictions.
0:48:24 Well, like it’s the election, Ed. I’m predicting that Vice President Harris is going to win the
0:48:32 election. The gambling markets say that it’s two to one in favor of Trump. You correctly pointed
0:48:38 out that that might be skewed because of these markets overindex young men who are much more
0:48:42 biased towards Trump. A lot of people think these markets are being manipulated to send a signal
0:48:48 of confidence around the Trump campaign. I also want to recognize I have huge confirmation bias
0:48:54 here. I’m very emotionally caught up in this. I could not get over. I was happy to get back to
0:48:58 London. I don’t know if you’ve noticed it, and maybe you don’t notice it when you’re in boiling
0:49:06 water, but I cannot get over how tense things are. I wonder, and again, confirmation bias here,
0:49:13 that people are just fucking exhausted and think, “How can I take some of this temperature down
0:49:20 and distinct of the policies, distinct of whether perfect is not on the menu?” I think a lot of
0:49:26 people are going to go, “You know, I just rather not go back to that shit.” Anyways, my prediction
0:49:33 simply put is that it’s not only going to be a Harris win, but I think it’s going to be a decisive
0:49:39 win. All of the odds and all of the data say that that’s unlikely. Anyways, in some, I’m predicting
0:49:43 that in January of 2025, we’re going to inaugurate Vice President Harris.
0:49:49 People forget how much it sucked, not from a policy perspective, but from just a day-to-day
0:49:55 discourse perspective. Having that guy plastered over the news, people freaking out about him,
0:50:03 24/7, every single conversation is about politics and about how the U.S. is in decline. And whether
0:50:11 or not you believe any of that is true, are you really down for that to just dominate your life
0:50:20 all day, every day for the next four years? That to me is just, that was the big nightmare of the
0:50:27 Trump presidency is how I just, we could never escape him. We had four nice years of some kind
0:50:32 of boring politics, and I really hope that we can have four more of them.
0:50:36 My favorite thing about Senator Bennett, I did a fundraiser at my place for him,
0:50:40 and he said, they said, “What would you be like as president?” Someone asked me,
0:50:43 he’s like, “I’m going to be the president you never hear about.” And I thought,
0:50:47 Jesus Christ, wouldn’t that be refreshing? I absolutely love that.
0:50:51 He said, “I want to be the president you don’t think about. I’m going to do the job.
0:50:55 I’m not going to say incendiary things. I’m not as charismatic as some of these other people.
0:50:59 I’m just going to be the guy that gets the job done.” Anyways, I hope that the guy that gets the
0:51:06 job done is a she, and I really hope that when I move back to the U.S., it feels less tense,
0:51:12 less anxious that we keep this economy going, that young men recognize that their default
0:51:17 operating system should be one of protection, and that I genuinely do believe that women are
0:51:25 under threat here, and that men don’t recognize how much this could affect us. So I’m hoping,
0:51:32 I’m hoping and trusting that some of these things enter people’s brains as they enter
0:51:35 the voting booth. And I’d also just like to highlight, I acknowledge that a lot of people
0:51:40 don’t come to this podcast for politics. I endorse Harris, my newsletter, No Mercy, No Mouse.
0:51:44 We have the greatest number of unsubscribes we’ve ever received, and as I’ve said before,
0:51:48 there’s no point in having economic security and people who love you unconditionally if you
0:51:53 can’t speak your mind. And also to all the people who unsubscribe, I just want to tell you a full
0:51:58 refund is coming your way. Why don’t you read us out, Ed? This episode was produced by Claire Miller
0:52:02 and engineered by Benjamin Spencer. Our associate producer is Allison Weiss. Mr. Vario is our research
0:52:07 lead. Jessica Lange is our research associate, Drew Burroughs is our technical director, and
0:52:11 Catherine Dillon is our executive producer. Thank you for listening to ProfG Markets from
0:52:16 the Vox Media Podcast Network. Join us on Thursday for our unpack on the election with
0:52:31 Anthony Scaramucci, only on the ProfG Markets field.
0:52:57 [Music]
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Scott and Ed open the show by discussing the U.S.’s GDP growth, Reddit’s earnings, Eli Lilly’s third quarter drug sales, and xAI’s new funding round. Then Scott and Ed break down big tech’s earnings and discuss how the tech companies are using capital as a weapon. They also examine the shifting media landscape and explain why advertisers have been cutting their spending on legacy media. Finally, Scott offers his prediction for the Presidential election.
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