The Great Sloppification of OpenAI

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0:01:03 Today’s number, $30,000.
0:01:05 That’s how much Bay Area consultants charge
0:01:08 to help parents name their babies.
0:01:08 Ed, true story.
0:01:11 When my partner was giving birth,
0:01:13 she was screaming at me saying,
0:01:14 oh my God, this is so painful.
0:01:16 And I said, hey, look,
0:01:18 I wanted to put it in your ass,
0:01:19 and you said it would be too painful.
0:01:21 Now look at you.
0:01:27 Is this the bridge too far, Ed?
0:01:29 Is this the red line?
0:01:32 I don’t think this is the red line.
0:01:36 Is there a line for just strangeness and weirdness?
0:01:37 Is there a line for that?
0:01:38 Economically independent.
0:01:41 I’m the largest shareholder here.
0:01:42 I’m not sure I can be canceled.
0:01:44 I’m not sure I can be canceled.
0:01:46 Independent media.
0:01:47 This is what we get
0:01:50 for trying to break away from the mainstream.
0:02:01 How are you, Ed?
0:02:02 I’m doing very well.
0:02:03 How are you?
0:02:03 Why is that?
0:02:04 What’s going on?
0:02:05 Why am I doing very well?
0:02:06 Yeah, what?
0:02:06 What’s going on?
0:02:08 What’s going on?
0:02:09 What’s going on?
0:02:10 I don’t know.
0:02:12 I had my coffee.
0:02:13 I had a good night’s rest.
0:02:17 I actually got a party I’m going to tonight
0:02:19 hosted by the one and only Mooch,
0:02:20 which I’m pretty excited about.
0:02:21 The Mooch.
0:02:23 He’s celebrating his book,
0:02:26 the 15-year anniversary of his book,
0:02:28 Goodbye, Gordon Gekko.
0:02:29 I’m sorry.
0:02:32 They have parties to celebrate anniversaries for books now?
0:02:33 Which I respect
0:02:36 because he’s figuring out ways to bring people together
0:02:39 and to rent out a nice place.
0:02:41 I mean, I think it’s good stuff.
0:02:43 I know you’re going to shit on it,
0:02:45 but I just want to get my opinion out there first.
0:02:46 I didn’t get invited,
0:02:48 so I’m not a fan of this party.
0:02:51 How’s things on the home front?
0:02:52 Are you living with your girlfriend yet?
0:02:53 I’ve been living with her for a while.
0:02:54 I knew that.
0:02:55 How’s it going?
0:02:57 And how’s it going?
0:02:59 Have you guys got a dog yet?
0:02:59 No.
0:03:01 I think I’ve told you this before.
0:03:02 I’m not the biggest dog person.
0:03:04 Okay, so all you need to do to fix that
0:03:07 is to get a dog or get another dog.
0:03:08 Your dog sounded awful.
0:03:10 Occasionally get a bad dog.
0:03:11 That’s good.
0:03:12 You remember I had a bad dog.
0:03:13 Public service announcement,
0:03:15 and I’ll link this back to our show,
0:03:16 The Markets.
0:03:19 We talked about how sales of Hamburger Helper
0:03:21 and Rice-A-Roni are up,
0:03:22 which is a negative forward-looking indicator
0:03:23 for the economy.
0:03:25 Another negative forward-looking indicator
0:03:28 is that people surrendering their pets
0:03:30 to shelters has spiked.
0:03:32 All these people who thought it’d be a good idea
0:03:34 during COVID to get a pet,
0:03:35 and now they’re struggling economically,
0:03:37 turning their dogs back in.
0:03:39 There are so many amazing dogs
0:03:41 at shelters right now.
0:03:42 If you just go to Google and type in
0:03:43 or go on Instagram,
0:03:44 type in Brooklyn Shelter.
0:03:48 And I’ve had mutts and I’ve had purebreds.
0:03:49 Actually, I’ve only had one purebred,
0:03:51 and she’s a total neurotic bitch.
0:03:54 But the mutts you get at shelters
0:03:56 are just amazing.
0:03:57 Are they not a little crazy themselves?
0:03:59 I mean, you’re kind of signing up
0:04:01 for an emotionally damaged animal, no?
0:04:02 No.
0:04:04 Dogs out of shelters, mutts are,
0:04:06 I mean, first off, it kind of makes sense.
0:04:07 Purebreds are literally like,
0:04:11 the Norwegian family monarchy in the 18th century.
0:04:13 Like, half of them are, you know,
0:04:15 have three legs and are, you know,
0:04:18 no teeth because there’s so much inbreeding.
0:04:20 When a dog gets popular,
0:04:21 they become shitty dogs
0:04:22 because they get overbred.
0:04:26 Mutts are absolutely the way to go.
0:04:27 They’re outstanding.
0:04:30 Do I have to go for a rescue dog?
0:04:33 I mean, that’s really what I’m zeroing in on here.
0:04:36 Someone who’s sort of abandoned their dog
0:04:37 and then the dog is definitely
0:04:38 very damaged and very upset.
0:04:40 It’s probably going to be a little weird.
0:04:42 Like, I’m looking for something very simple.
0:04:44 I want to basically not have to deal
0:04:45 with my dog very much
0:04:46 if I’m getting a dog,
0:04:47 which I’m not going to.
0:04:49 The premise of your question
0:04:50 is factually incorrect
0:04:51 because the dogs,
0:04:52 dogs are surrendered
0:04:54 because usually for economic reasons
0:04:55 or people are moving
0:04:58 or people get a job
0:04:59 and they can’t be at home.
0:05:00 but mutts,
0:05:02 it’s almost as if they know,
0:05:02 especially,
0:05:05 I got my last dog from a shelter.
0:05:06 It’s almost as if they know
0:05:07 you’ve saved their life
0:05:09 and they’re really grateful.
0:05:11 Whereas my Great Dane
0:05:12 is a total expectant bitch.
0:05:14 She expects to fly business class,
0:05:16 wants jewelry on her birthday.
0:05:17 I mean,
0:05:18 and this is a Great Dane.
0:05:20 Whereas the rescue pup
0:05:21 that I picked up,
0:05:23 our Puerto Rican rescue hound.
0:05:24 She’s writing thank you notes
0:05:26 when you take her on the net jets.
0:05:27 I’m pretty sure she’s a sewer rat.
0:05:29 I’m not even sure she’s an actual dog,
0:05:31 but she’s,
0:05:32 or she,
0:05:33 he is,
0:05:34 and he’s awesome.
0:05:35 He tries to hump everything.
0:05:36 He’s awesome.
0:05:38 He’s,
0:05:39 he’s really,
0:05:41 I’m telling you,
0:05:41 rescue,
0:05:43 or dogs from shelters
0:05:45 are absolutely the best dogs.
0:05:46 One,
0:05:48 they’re usually already spayed or neutered.
0:05:49 Two,
0:05:50 they’re already trained
0:05:52 and they’re,
0:05:52 and you’re,
0:05:52 you know,
0:05:54 you’re saving a dog’s life
0:05:54 and they’re just,
0:05:55 they’re fantastic.
0:05:57 I’ve had such good luck
0:05:58 with dogs from shelters
0:05:59 and you can go down
0:06:00 and right now
0:06:02 you can find
0:06:04 so many amazing dogs at shelters
0:06:05 because they’re just brimming.
0:06:06 There’s just too many dogs.
0:06:07 Anyways,
0:06:09 and one,
0:06:09 Annette,
0:06:10 I think you need this.
0:06:11 They’re very good for your mental health.
0:06:14 They’re very calming
0:06:16 and I’d say next to working out,
0:06:18 it’s been my antidepressant.
0:06:18 They’ve been my dogs.
0:06:19 My kids come home
0:06:20 and then,
0:06:20 you know,
0:06:21 really bum me out,
0:06:22 but then I hang out with the dogs
0:06:22 and I’m fine.
0:06:27 And then they’re a fantastic security system.
0:06:31 So all the surveys of incarcerated people
0:06:34 who commit crimes
0:06:37 say the one thing that always turns them off
0:06:39 is they never go into homes with dogs.
0:06:41 So it’s an incredible security system.
0:06:42 They teach your kids,
0:06:44 which you will eventually have.
0:06:46 I’m convinced you’re on the verge of procreation.
0:06:51 They teach your kids about loss and responsibility,
0:06:55 and they make you more interesting.
0:06:55 Like,
0:06:56 you’re a little rough around the edges.
0:06:59 You’re a little rough around the edges.
0:07:00 That’s what I need.
0:07:02 I need to be more interesting to people.
0:07:04 They soften the ed.
0:07:05 They soften the ed.
0:07:06 Seriously.
0:07:08 It’s a great way to meet people.
0:07:09 I go out in the park
0:07:09 and people come up
0:07:10 and just start talking to you
0:07:11 because they have a dog.
0:07:12 It’s really nice.
0:07:13 So basically,
0:07:15 basically,
0:07:16 the,
0:07:16 like,
0:07:18 the steps of
0:07:20 mating are,
0:07:20 you know,
0:07:22 you stop using condoms
0:07:23 after you both get STI tests.
0:07:25 That’s a big moment in a relationship.
0:07:27 You meet her parents.
0:07:30 That was an awkward transition.
0:07:32 That was an awkward transition.
0:07:34 You meet her parents.
0:07:36 You start kind of co-mingling money
0:07:37 like you don’t keep track of it
0:07:39 or you do keep track of it.
0:07:39 I don’t know.
0:07:40 I don’t know.
0:07:41 I never did that.
0:07:43 You move in together,
0:07:44 and then the next step
0:07:45 is you get a dog
0:07:45 because pretty soon
0:07:48 her ovaries
0:07:49 are going to start blinking.
0:07:51 Notice how I’ve been silent
0:07:53 for maybe six minutes.
0:07:55 I’ve just let you dig yourself
0:07:55 further and further
0:07:56 into this hole.
0:07:57 And by the way,
0:07:59 the thing I still cannot get over,
0:08:00 I’m still,
0:08:01 I’m still getting over the fact
0:08:03 that the thing that is awesome
0:08:04 about your dog,
0:08:05 the thing that you love,
0:08:06 the first thing you reference
0:08:08 is that he tries to hump everything.
0:08:09 Everything.
0:08:11 Even though we chopped
0:08:12 those nads off a while ago.
0:08:14 No one told him.
0:08:15 That’s what Scott loves
0:08:16 about his dog.
0:08:16 That,
0:08:18 and it’s a good security device.
0:08:19 He breaks in
0:08:21 every visitor and pillow
0:08:22 with a little,
0:08:23 a little hello
0:08:25 in the form of a tiny dog
0:08:26 going at it.
0:08:27 but what I was going to say
0:08:28 is the dog
0:08:29 is the way
0:08:30 to put off
0:08:31 the baby
0:08:33 for 12 to 24 months.
0:08:34 It doesn’t solve the problem
0:08:36 but it’s how you practice.
0:08:37 Why do you want to do,
0:08:38 why do you want to put off the baby?
0:08:39 I mean,
0:08:39 I like the idea
0:08:41 of getting some practice in.
0:08:42 You don’t want to have kids.
0:08:42 You’re a dude.
0:08:44 It’s like getting married.
0:08:45 No dude wants to get married
0:08:47 and I secretly believe
0:08:47 deep down
0:08:48 no dude really wants
0:08:49 to have kids.
0:08:51 It’s so wrong.
0:08:52 We get forced into this shit.
0:08:53 It’s so wrong.
0:08:54 Ed, wake up.
0:08:56 Wake up.
0:09:00 Just totally,
0:09:02 totally off base.
0:09:07 Dudes love children.
0:09:08 Yeah, once they have them
0:09:10 because this instinct kicks in
0:09:11 and they look, smell,
0:09:12 and feel like you
0:09:12 so all of a sudden
0:09:13 they start getting less.
0:09:14 I wouldn’t say
0:09:15 you love them.
0:09:17 They get less awful every day.
0:09:18 But yeah,
0:09:19 you do wake up at some point
0:09:20 and think,
0:09:21 okay, this isn’t that bad.
0:09:22 This isn’t that bad.
0:09:23 A lot of wisdom
0:09:24 first six minutes
0:09:25 of this podcast.
0:09:26 Just make sure
0:09:27 you’re taking notes, everyone.
0:09:29 Little soulful dad advice.
0:09:30 Sorry, dad.
0:09:30 Let’s get to the headlines.
0:09:32 Let’s talk about the stuff
0:09:32 that you’re actually
0:09:33 an expert in.
0:09:34 Let’s talk about business.
0:09:39 Now is the time to buy.
0:09:41 I hope you have
0:09:43 plenty of the well at all.
0:09:45 Open AI just unveiled
0:09:46 Sora 2.
0:09:47 That is its latest
0:09:49 audio and video generator.
0:09:50 The tool lets users
0:09:51 create digital cameos
0:09:52 of themselves and others
0:09:53 in videos
0:09:55 and even generates speech.
0:09:56 Alongside it,
0:09:57 they launched a new
0:09:58 social platform
0:10:00 for sharing and discovering
0:10:01 these AI-made videos.
0:10:03 They’re trying to position itself
0:10:05 as a competitor to TikTok.
0:10:06 Meanwhile,
0:10:08 Meta is rolling out
0:10:08 its own version
0:10:10 of these short-form
0:10:12 AI clips
0:10:13 and it is called
0:10:14 Vibes.
0:10:15 This is going to be
0:10:16 essentially like TikTok
0:10:16 as well.
0:10:18 So what we have here
0:10:21 is two big AI companies,
0:10:22 two of the biggest players
0:10:22 in AI,
0:10:24 both getting into
0:10:25 the same game
0:10:26 and that is
0:10:27 they’re getting into
0:10:29 AI-generated videos
0:10:30 in a feed
0:10:31 that will look
0:10:32 almost exactly like
0:10:33 TikTok.
0:10:34 Now,
0:10:35 some people have been
0:10:36 very excited about this,
0:10:37 especially Sora 2,
0:10:38 which,
0:10:38 I don’t know
0:10:39 if you’ve seen
0:10:39 these videos,
0:10:42 but it’s pretty incredible
0:10:43 how realistic
0:10:44 these videos are.
0:10:45 You basically just type
0:10:45 in your name,
0:10:47 Ed and Scott
0:10:47 riding a dragon
0:10:48 and you will get it
0:10:49 and it will look
0:10:50 pretty spectacular.
0:10:51 So some people
0:10:52 are very excited about it.
0:10:54 Others are less excited
0:10:54 about it
0:10:55 and the reason
0:10:56 that people are less
0:10:57 excited about it
0:10:57 is because
0:10:59 what we are beginning
0:10:59 to see
0:11:01 is this
0:11:04 massive inflow
0:11:04 of what people
0:11:05 are calling
0:11:06 AI-slop.
0:11:08 What is AI-slop?
0:11:08 I’ll just read you
0:11:09 the Wikipedia definition,
0:11:10 which I think
0:11:11 is a pretty good definition.
0:11:13 AI-slop is a term
0:11:14 for low-quality media
0:11:16 made with generative
0:11:17 artificial intelligence.
0:11:18 It is characterized
0:11:19 by an inherent
0:11:20 lack of effort
0:11:21 and is currently
0:11:22 being generated
0:11:23 at an overwhelming
0:11:24 volume.
0:11:25 So that is
0:11:27 sort of the downside
0:11:28 of these two
0:11:29 potential social media
0:11:30 platforms,
0:11:30 vibes,
0:11:31 and also SORA.
0:11:33 Scott,
0:11:34 I’ll stop there.
0:11:35 Let’s get your reactions.
0:11:36 Claiming this is going
0:11:37 to be some sort
0:11:38 of internal
0:11:40 social media thing
0:11:41 and he used the word,
0:11:42 oh, we want to
0:11:42 connect people,
0:11:43 that’s nothing but
0:11:44 a false flag
0:11:45 and a head fake
0:11:45 from what they’re
0:11:46 really trying to do
0:11:48 and that is
0:11:49 show every movie
0:11:49 producer
0:11:51 and executive
0:11:51 at a studio
0:11:52 that think about
0:11:53 what you can do
0:11:54 and for how much
0:11:55 less you can do it
0:11:57 using this technology.
0:11:58 that there’s
0:11:59 just not going
0:12:00 to be a,
0:12:01 you know,
0:12:02 an intra-network
0:12:04 TikTok for families.
0:12:04 That’s not where
0:12:05 they’re headed.
0:12:06 When I first saw it,
0:12:06 I thought,
0:12:06 okay,
0:12:06 they’re trying
0:12:07 to be the
0:12:07 everything app.
0:12:08 They’re announcing
0:12:08 they’re getting
0:12:09 into shopping.
0:12:10 They’re announcing
0:12:10 they’re getting
0:12:11 into content
0:12:11 generation
0:12:12 or video content
0:12:13 generation.
0:12:14 Fine.
0:12:15 They have to say
0:12:16 at least give people
0:12:17 the perspective
0:12:18 that at some point,
0:12:19 as Justin Wolfers,
0:12:20 the economist,
0:12:20 said,
0:12:22 the leading AI
0:12:23 company might be
0:12:24 able to skim off.
0:12:24 It might be almost
0:12:25 like a credit card.
0:12:26 if everyone
0:12:26 in the world
0:12:27 had a credit card
0:12:28 and every transaction
0:12:29 they ever made
0:12:29 for anything
0:12:31 was through that
0:12:31 credit card
0:12:32 and they could
0:12:32 take 2% or 3%,
0:12:33 that company
0:12:34 would be the most
0:12:34 valuable company
0:12:35 in the world.
0:12:36 And so what
0:12:37 they’re saying is,
0:12:37 hey,
0:12:37 we might be in
0:12:38 shopping,
0:12:38 we might be in
0:12:39 content creation,
0:12:40 but what they’re
0:12:41 essentially saying
0:12:41 to the world
0:12:43 or the content
0:12:43 creation or the
0:12:44 movie studio world
0:12:45 is like,
0:12:46 imagine what you
0:12:46 can do if you
0:12:47 learn these skills
0:12:48 and imagine
0:12:50 how less expensive
0:12:50 it’ll be.
0:12:51 And I don’t know
0:12:52 if you saw,
0:12:53 but they’ve,
0:12:53 and also they’ve
0:12:54 announced,
0:12:54 and this is just
0:12:55 fucking ridiculous,
0:12:56 that you’re going
0:12:57 to have to opt out
0:12:58 if you don’t want
0:12:59 them to steal your IP.
0:13:00 So Sam,
0:13:02 use this as official
0:13:02 notice.
0:13:04 I am opting out.
0:13:05 I do not use my shit
0:13:06 without my permission
0:13:07 or paying me.
0:13:09 And this was,
0:13:11 so this I think
0:13:12 was just an attempt,
0:13:12 I think it was a
0:13:13 branding event
0:13:13 to say,
0:13:14 wow,
0:13:16 studio executives
0:13:17 and commercial
0:13:17 producers,
0:13:18 you know,
0:13:19 and advertising
0:13:19 agencies,
0:13:20 get your greed
0:13:20 glance.
0:13:20 Gentlemen,
0:13:21 start your greed
0:13:22 glance.
0:13:23 Because if we
0:13:24 can do this
0:13:25 fairly easily
0:13:26 for cents
0:13:27 or just a couple
0:13:28 hours of time
0:13:29 and show family
0:13:30 guy talking to
0:13:31 Wednesday,
0:13:33 and it looks
0:13:34 real and it’s
0:13:34 kind of cool,
0:13:35 imagine what
0:13:35 you’re going to
0:13:36 be able to do
0:13:36 for how little
0:13:37 money.
0:13:38 What they’re
0:13:38 clearly doing
0:13:39 is already
0:13:39 illegal and
0:13:40 a violation
0:13:40 of all sorts
0:13:41 of IP laws.
0:13:42 But what they’re
0:13:42 doing is they’re
0:13:43 taking a note
0:13:44 out of the
0:13:45 big tech
0:13:46 playbook and
0:13:47 that is why
0:13:48 go through
0:13:48 the hassle
0:13:50 of establishing
0:13:51 business licenses
0:13:53 and standards
0:13:54 if you’re
0:13:54 launching a
0:13:55 ride-hailing
0:13:55 app in
0:13:56 Argentina.
0:13:57 Just sign
0:13:57 up people,
0:13:58 start giving
0:13:58 rides,
0:14:00 and the
0:14:00 fines are
0:14:01 much less
0:14:01 than the
0:14:02 market cap
0:14:02 accretion
0:14:03 when you
0:14:03 continue to
0:14:04 demonstrate
0:14:05 growth and
0:14:06 momentum.
0:14:08 And essentially
0:14:09 open AI has
0:14:10 probably put a
0:14:10 billion dollars
0:14:10 aside.
0:14:11 They will
0:14:11 eventually
0:14:11 lose the
0:14:12 case.
0:14:12 You are
0:14:12 not allowed
0:14:13 to use
0:14:13 people’s
0:14:14 likeness
0:14:14 like this.
0:14:14 Eventually
0:14:15 it will
0:14:15 work its
0:14:15 way through
0:14:16 the
0:14:16 courts.
0:14:16 But
0:14:17 meanwhile,
0:14:18 they’ll
0:14:18 keep
0:14:18 violating
0:14:19 people’s
0:14:20 IP and
0:14:20 the increase
0:14:21 in stock
0:14:21 price will
0:14:21 go up.
0:14:22 And the
0:14:22 analogy I
0:14:22 always use
0:14:23 is that if
0:14:23 you had a
0:14:24 parking meter
0:14:24 in front of
0:14:24 your house
0:14:25 that cost
0:14:25 $100 an
0:14:26 hour but
0:14:26 the ticket
0:14:27 was 50
0:14:27 cents,
0:14:28 you too
0:14:28 would make
0:14:29 a conscious
0:14:29 decision to
0:14:30 break the
0:14:30 law.
0:14:32 So I’m
0:14:32 I’m
0:14:33 increasingly
0:14:33 believing
0:14:34 that Hollywood
0:14:37 that the
0:14:37 panzer
0:14:38 tanks with
0:14:39 David
0:14:39 Ellison
0:14:40 helming
0:14:40 them are
0:14:41 rolling over
0:14:41 the
0:14:41 Sepulveda
0:14:42 Pass
0:14:43 into over
0:14:44 the Hollywood
0:14:45 Hills and
0:14:46 have the
0:14:46 Beverly Hills
0:14:47 Hotel and
0:14:47 the Waldorf
0:14:48 Astoria in
0:14:48 their sights
0:14:50 or Burbank.
0:14:50 I don’t know
0:14:50 what the right
0:14:51 analogy is.
0:14:52 They’re coming
0:14:53 for Hollywood
0:14:53 and ad
0:14:54 agencies and
0:14:54 content creation
0:14:55 because some
0:14:55 of these things
0:14:56 are just
0:14:56 remarkable and
0:14:57 they don’t
0:14:58 cost very much.
0:14:59 Yeah I think
0:15:00 the real
0:15:01 opportunity is
0:15:01 in the
0:15:02 technology and
0:15:02 what it can
0:15:03 use be how
0:15:04 it can be used
0:15:04 for the
0:15:04 entertainment
0:15:05 business so
0:15:06 for those big
0:15:07 production studios
0:15:07 I think for
0:15:08 ad agencies as
0:15:08 well.
0:15:09 What is
0:15:10 interesting though
0:15:10 is the way
0:15:11 that they are
0:15:12 presenting this
0:15:14 product I
0:15:14 mean they
0:15:15 released the
0:15:15 technology they
0:15:16 put out this
0:15:17 incredible video
0:15:18 where you can
0:15:19 see how it
0:15:20 works and I
0:15:20 mean let’s be
0:15:21 real it was a
0:15:23 great ad for
0:15:23 the product and
0:15:24 for the technology
0:15:25 but I’m just
0:15:27 fascinated by the
0:15:27 fact that they
0:15:28 are so dialed
0:15:29 into this idea
0:15:29 that it has
0:15:30 to be a
0:15:30 social media
0:15:31 app and we
0:15:32 saw the same
0:15:32 thing with
0:15:33 Meta.
0:15:34 Meta is
0:15:34 putting these
0:15:35 AI generated
0:15:35 videos and
0:15:36 they’re calling
0:15:36 it Vibes
0:15:38 AI and it’s
0:15:38 its own
0:15:39 TikTok feed
0:15:40 that’s going
0:15:41 to be social
0:15:42 media and
0:15:43 just to read
0:15:43 you some of
0:15:44 the quotes
0:15:45 from OpenAI
0:15:46 so in the
0:15:48 release statement
0:15:49 for SoR2
0:15:49 they said
0:15:50 quote we see
0:15:51 this as the
0:15:51 beginning of a
0:15:52 completely new
0:15:53 era for
0:15:54 co-creative
0:15:55 experiences.
0:15:55 They said
0:15:56 quote a lot
0:15:57 of social media
0:15:57 has moved
0:15:58 away from
0:15:58 the idea
0:15:59 of friends
0:16:00 and family
0:16:00 connections
0:16:01 we believe
0:16:02 that SoR can
0:16:03 lean into
0:16:03 this because
0:16:04 it’s just so
0:16:05 easy to create.
0:16:06 So they have
0:16:08 this strange
0:16:08 obsession
0:16:10 I think it’s
0:16:11 strange at least
0:16:12 with making
0:16:14 this about
0:16:15 socializing with
0:16:15 other people
0:16:16 and creating
0:16:17 stuff with your
0:16:18 friends and
0:16:19 I’m gonna
0:16:19 you know
0:16:20 oh Scott
0:16:21 I’m gonna make
0:16:22 a video of you
0:16:22 I’m gonna send
0:16:23 it to you
0:16:23 and then we’re
0:16:23 gonna make
0:16:24 stuff together
0:16:25 strengthen our
0:16:25 relationship
0:16:26 strengthen our
0:16:26 relationship
0:16:28 and this to
0:16:29 me is a
0:16:30 it’s just
0:16:31 sort of not
0:16:32 really on the
0:16:32 right track of
0:16:33 what they’re
0:16:33 supposed to be
0:16:34 doing as an
0:16:35 AI company
0:16:36 which is
0:16:36 they’re supposed
0:16:37 to be selling
0:16:38 the technology
0:16:40 for the actual
0:16:41 creators the
0:16:42 entertainment studios
0:16:44 to entertain us
0:16:44 but instead
0:16:45 they’re taking
0:16:46 this social
0:16:47 media route
0:16:48 and same
0:16:48 with meta
0:16:49 and I wonder
0:16:50 if these
0:16:52 these CEOs
0:16:53 and the management
0:16:53 team behind
0:16:54 these companies
0:16:55 I wonder if
0:16:56 they’re too
0:16:56 obsessed
0:16:57 with this idea
0:16:58 that we have
0:16:59 to be
0:17:00 social media
0:17:01 we have to
0:17:01 put it in
0:17:02 some short
0:17:03 form content
0:17:04 form
0:17:05 and
0:17:06 ultimately
0:17:06 I don’t think
0:17:07 that’s gonna
0:17:07 work
0:17:08 I’m already
0:17:08 seeing the
0:17:09 backlash
0:17:09 where people
0:17:10 are correctly
0:17:10 saying
0:17:11 this is just
0:17:11 an endless
0:17:12 stream of
0:17:12 slop
0:17:13 and I love
0:17:14 that word
0:17:14 slop
0:17:14 it really does
0:17:15 describe these
0:17:16 videos quite
0:17:16 well
0:17:17 they’re
0:17:17 photorealistic
0:17:18 they look
0:17:19 pretty amazing
0:17:19 but then
0:17:20 after about
0:17:21 two seconds
0:17:21 you’re like
0:17:22 okay I’ve
0:17:22 seen enough
0:17:23 videos of
0:17:24 dragons
0:17:26 flying through
0:17:26 the air
0:17:27 or AI
0:17:28 cats
0:17:29 wearing
0:17:30 tuxedos
0:17:30 I mean
0:17:31 at a certain
0:17:31 point it
0:17:32 becomes very
0:17:33 boring
0:17:34 anyway I just
0:17:34 want to get
0:17:35 your views on
0:17:36 this social
0:17:36 media angle
0:17:37 that both
0:17:38 companies are
0:17:39 really driving
0:17:39 towards
0:17:40 so I actually
0:17:41 think they’re
0:17:41 doing the
0:17:42 right thing
0:17:43 they’re just
0:17:44 lying about
0:17:44 it
0:17:45 I don’t think
0:17:45 they’re headed
0:17:46 down social
0:17:47 look at
0:17:48 so this
0:17:48 is what
0:17:48 open AI
0:17:49 wrote of
0:17:50 Sora 1
0:17:51 open quote
0:17:51 Sora is
0:17:52 becoming
0:17:53 available to
0:17:53 a number of
0:17:54 visual artists
0:17:55 designers and
0:17:55 filmmakers to
0:17:56 gain feedback on
0:17:57 how to advance
0:17:58 the model to
0:17:58 be most
0:17:59 helpful for
0:17:59 creative
0:18:00 professionals
0:18:01 which is
0:18:02 Latin for
0:18:02 you can make
0:18:03 a movie or
0:18:03 a commercial
0:18:05 for 90%
0:18:05 fewer people
0:18:07 I think
0:18:07 what their
0:18:08 objective is
0:18:08 is when
0:18:09 putting these
0:18:10 things out
0:18:11 is studios
0:18:13 are and
0:18:13 again
0:18:14 agency executives
0:18:15 are the
0:18:15 regalans
0:18:16 are going
0:18:17 but I
0:18:17 don’t think
0:18:18 Sam wants
0:18:18 to freak
0:18:19 out the
0:18:19 creative
0:18:19 community
0:18:20 and get
0:18:20 a ton of
0:18:21 pushback
0:18:21 I don’t
0:18:22 think he
0:18:23 I think
0:18:23 the more
0:18:24 honest thing
0:18:24 would be to
0:18:24 say hey
0:18:25 SAG-AFTRA
0:18:26 and the WGA
0:18:27 we’re coming
0:18:27 for your
0:18:28 bitch asses
0:18:29 your
0:18:30 you know
0:18:31 your member
0:18:32 your membership
0:18:33 to San Vicente
0:18:33 bungalows
0:18:34 and your
0:18:34 BMW
0:18:36 and your
0:18:37 vacations in
0:18:38 Cabo
0:18:38 are my
0:18:39 opportunity
0:18:40 you’re
0:18:41 you’re
0:18:41 not going
0:18:42 this industry
0:18:43 is ripe
0:18:44 with fat
0:18:45 waste
0:18:45 or
0:18:47 they’re
0:18:47 coming
0:18:48 for them
0:18:48 and I
0:18:48 think what
0:18:49 they’re doing
0:18:49 is saying
0:18:50 effectively
0:18:51 putting out
0:18:51 an ad
0:18:53 that will
0:18:53 accomplish
0:18:54 what they
0:18:54 want and
0:18:54 that is
0:18:55 demonstrate
0:18:55 what can
0:18:56 be done
0:18:56 while
0:18:57 pretending
0:18:57 it’s about
0:18:58 connecting
0:18:58 people
0:18:59 if that
0:18:59 is the
0:18:59 case
0:19:00 I think
0:19:00 that’s
0:19:00 the right
0:19:00 decision
0:19:01 from a
0:19:02 business
0:19:02 perspective
0:19:04 I mean
0:19:05 you look
0:19:06 at like
0:19:06 image
0:19:07 AI image
0:19:08 generation
0:19:08 just as an
0:19:09 example
0:19:10 where
0:19:10 I mean
0:19:11 you might
0:19:11 remember
0:19:12 when
0:19:13 chatGBT’s
0:19:13 image
0:19:14 generator
0:19:14 came out
0:19:15 and everyone
0:19:16 went absolutely
0:19:17 crazy about
0:19:17 this thing
0:19:19 because it was
0:19:19 pretty remarkable
0:19:20 and you looked
0:19:21 at these images
0:19:21 and I’d type
0:19:22 in you know
0:19:23 Scott and Ed
0:19:25 recording a podcast
0:19:26 in the style
0:19:27 of Studio Ghibli
0:19:27 that Studio Ghibli
0:19:28 trend was like
0:19:30 the huge trend
0:19:32 everyone was
0:19:32 playing with this
0:19:32 thing
0:19:34 and it seemed
0:19:34 like everyone
0:19:34 was going to
0:19:35 be a creator
0:19:35 but then
0:19:36 eventually
0:19:37 within about
0:19:39 a few weeks
0:19:40 three
0:19:40 four weeks
0:19:41 suddenly
0:19:42 no one was
0:19:42 really generating
0:19:43 these images
0:19:43 anymore
0:19:44 and then we
0:19:45 actually looked
0:19:45 into the data
0:19:46 here and actually
0:19:47 ever since that
0:19:48 image generator
0:19:48 was released
0:19:50 search interest
0:19:51 for AI image
0:19:52 generation has
0:19:53 fallen by nearly
0:19:53 80 percent
0:19:54 you have another
0:19:55 study showing
0:19:56 that all of
0:19:57 this AI art
0:19:58 that exploded
0:19:58 online suddenly
0:19:59 that’s plummeted
0:20:00 as well
0:20:01 searches for
0:20:02 mid-journey
0:20:02 that was a big
0:20:03 name as well
0:20:04 in the AI
0:20:05 image generation
0:20:06 community
0:20:06 that’s also
0:20:07 fallen off
0:20:08 fun fact
0:20:08 at one point
0:20:09 last year
0:20:10 searches for
0:20:11 Scott Galloway
0:20:12 almost overtook
0:20:13 searches for
0:20:14 mid-journey
0:20:16 and this was
0:20:17 an illustration
0:20:18 of this theme
0:20:19 where
0:20:21 it’s not
0:20:21 really
0:20:22 it might seem
0:20:23 as though
0:20:24 everyone’s going
0:20:25 to be a creator
0:20:26 and that’s
0:20:26 that might be
0:20:27 the way you
0:20:27 think about
0:20:28 things at first
0:20:29 but ultimately
0:20:31 these platforms
0:20:32 are for the
0:20:33 consumer
0:20:35 and we’re not
0:20:36 interested in
0:20:37 using the
0:20:37 product because
0:20:38 we want to be
0:20:39 creating content
0:20:39 ourselves
0:20:40 some of us
0:20:41 might be
0:20:41 interested in
0:20:42 creating content
0:20:43 but ultimately
0:20:44 the vast majority
0:20:45 of us who are
0:20:46 using the platform
0:20:47 we’re there to
0:20:47 consume
0:20:49 we want you
0:20:50 to do the work
0:20:51 you being the
0:20:51 company or the
0:20:52 production studio
0:20:53 or the content
0:20:53 creator
0:20:55 and we’re going
0:20:55 to do the
0:20:55 consumption
0:20:57 and Ben Thompson
0:20:58 talked a little bit
0:20:58 about this in
0:20:59 in Stratechery
0:21:01 there’s this old
0:21:01 internet adage
0:21:03 called the 1% rule
0:21:04 which is basically
0:21:05 this rule that
0:21:06 it’s only 1%
0:21:07 of the users
0:21:07 who actually
0:21:08 create stuff
0:21:09 the other 99%
0:21:10 of the users
0:21:11 consume
0:21:13 point being
0:21:14 if it is the case
0:21:15 that this social
0:21:16 media angle
0:21:17 is just a
0:21:19 basically an
0:21:19 advertisement
0:21:21 or a distraction
0:21:22 from what the
0:21:23 real goal is
0:21:24 I think that is
0:21:25 actually the right
0:21:26 direction
0:21:26 because the real
0:21:27 goal here
0:21:28 shouldn’t be
0:21:28 trying to get
0:21:29 everyone to
0:21:29 create
0:21:30 AI videos
0:21:30 it should
0:21:31 be trying
0:21:31 to sell
0:21:32 the AI
0:21:32 video
0:21:33 technology
0:21:33 to the
0:21:34 companies
0:21:35 who are going
0:21:35 to create
0:21:35 the AI
0:21:36 videos
0:21:36 which are going
0:21:37 to be
0:21:37 distributed
0:21:38 to all of
0:21:39 us users
0:21:39 that’s where
0:21:40 they should
0:21:40 really be
0:21:41 headed with
0:21:41 this
0:21:42 well there
0:21:42 is a
0:21:42 non-zero
0:21:43 probability
0:21:44 that the
0:21:44 anodyne
0:21:45 nature
0:21:45 of what
0:21:46 these
0:21:48 what these
0:21:48 LLMs
0:21:48 produce
0:21:49 work for
0:21:50 data
0:21:50 maybe even
0:21:51 more for
0:21:51 narrative
0:21:52 but don’t
0:21:52 work as well
0:21:53 for creative
0:21:54 and that
0:21:55 is
0:21:55 if you
0:21:56 look at
0:21:58 design
0:21:58 mid-journey
0:22:00 you would
0:22:00 have thought
0:22:01 initially a
0:22:02 year ago
0:22:02 we were
0:22:02 saying oh
0:22:03 poor design
0:22:04 firms and
0:22:04 poor designers
0:22:05 they’re the
0:22:06 first to go
0:22:07 what you’ve
0:22:07 seen happen
0:22:08 at tech
0:22:08 companies
0:22:09 is the
0:22:10 ratio of
0:22:11 designers to
0:22:11 programmers
0:22:12 has actually
0:22:12 gone up
0:22:14 because as
0:22:15 coding and
0:22:16 the architecture
0:22:16 of a site
0:22:18 become less
0:22:19 differentiated
0:22:19 because they
0:22:19 can all be
0:22:20 reverse engineered
0:22:21 and everyone’s
0:22:22 using ai to
0:22:22 build their
0:22:23 sites and
0:22:24 reduce the
0:22:24 amount of
0:22:25 code the
0:22:26 one way you
0:22:26 can differentiate
0:22:27 is with
0:22:29 great um
0:22:30 great ux and
0:22:30 great design
0:22:31 which still
0:22:32 requires humans
0:22:33 so actually
0:22:35 design um
0:22:36 you know
0:22:37 these companies
0:22:38 open ai is
0:22:38 hiring a ton of
0:22:39 designers open ai
0:22:41 paid so
0:22:42 fucking stupid
0:22:42 five or seven
0:22:43 billion dollars for
0:22:44 johnny ive to
0:22:45 cosplay his
0:22:46 younger self
0:22:48 meet sam
0:22:48 outman for
0:22:49 coffee on
0:22:50 camera i’m
0:22:50 just a
0:22:51 billionaire
0:22:51 looking at
0:22:52 another
0:22:52 billionaire
0:22:53 asking him
0:22:53 to make
0:22:53 me a
0:22:54 trillionaire
0:22:55 sam is a
0:22:56 revolutionary
0:22:57 good god
0:22:58 just get a
0:22:59 room um
0:23:02 anyway but
0:23:02 so far
0:23:04 designers have
0:23:05 not only not
0:23:05 been replaced
0:23:07 their role in
0:23:07 all of this
0:23:08 they’re the
0:23:09 salsa on the
0:23:10 chip of ai
0:23:11 which is highly
0:23:12 anodyne feels
0:23:13 you watch it and
0:23:14 you just feel
0:23:16 like it’s like
0:23:16 what’s the
0:23:17 opposite of
0:23:18 horny you’re
0:23:18 just like
0:23:20 depressed
0:23:21 yeah you
0:23:21 just feel
0:23:22 kind of
0:23:22 and you
0:23:23 know it’s
0:23:23 ai that’s
0:23:24 the other
0:23:24 thing that’s
0:23:25 so interesting
0:23:25 everyone thought
0:23:26 that we
0:23:26 wouldn’t be
0:23:26 able to
0:23:27 tell you
0:23:28 just always
0:23:28 know there
0:23:29 are all
0:23:29 these little
0:23:30 signals because
0:23:31 as you say
0:23:32 yes it is so
0:23:32 anodyne in a
0:23:33 way that reality
0:23:35 somehow isn’t
0:23:36 but i feel that
0:23:37 way with these
0:23:38 superhero films so
0:23:40 much cgi and
0:23:41 shit that i feel
0:23:41 like agreed ai
0:23:42 could make those
0:23:43 movies all these
0:23:44 things lead to
0:23:45 one really one
0:23:46 place and
0:23:46 that is you
0:23:46 should go to
0:23:47 a shelter and
0:23:48 adopt a rescue
0:23:49 pit and name
0:23:50 it mid-journey
0:23:52 your new dog
0:23:53 mid-journey
0:23:53 but just going
0:23:54 back to open
0:23:55 ai as a
0:23:56 business i mean i
0:23:57 look at this
0:23:58 sorra social
0:24:00 media feed and
0:24:01 i think you
0:24:02 guys are kind of
0:24:02 focusing on the
0:24:04 wrong thing i
0:24:06 mean if what
0:24:06 you say your
0:24:07 theory is true
0:24:08 that this is a
0:24:08 distraction and
0:24:09 mostly they are
0:24:11 focusing on the
0:24:12 b2b and going to
0:24:12 the production
0:24:13 studios and the
0:24:14 tv networks and
0:24:14 the ad agencies
0:24:16 good all for
0:24:17 it that’s a
0:24:18 revenue driver but
0:24:19 i think the thing
0:24:20 that open ai
0:24:21 needs to think
0:24:22 about is they
0:24:23 need to start
0:24:25 making money like
0:24:26 they’ve got millions
0:24:27 and millions of
0:24:28 users everyone
0:24:29 knows about chat
0:24:30 gpt they figured
0:24:31 out all of the
0:24:32 marketing they
0:24:33 figured out how
0:24:34 to become a
0:24:35 household name now
0:24:37 is step two now
0:24:37 you need to start
0:24:38 becoming profitable
0:24:40 especially if you’re
0:24:40 going to spend
0:24:40 hundreds of
0:24:41 billions of
0:24:42 dollars over the
0:24:43 next several years
0:24:43 especially if you’re
0:24:44 going to have to
0:24:45 raise hundreds of
0:24:47 millions excuse me
0:24:47 hundreds of
0:24:49 billions in debt
0:24:50 and you don’t want
0:24:51 to get you know a
0:24:51 shitty interest rate
0:24:53 you need to start
0:24:54 getting profitable and
0:24:56 that means monetizing
0:24:58 the product so go to
0:24:59 the production studios
0:25:00 and sell the ai
0:25:01 technology but there
0:25:02 are other things that
0:25:02 they should be
0:25:04 focusing on as an
0:25:05 example they just
0:25:06 released the shopping
0:25:07 feature instant
0:25:08 checkout which will
0:25:09 allow you to buy
0:25:10 products directly on
0:25:11 the platform that’s a
0:25:12 good idea i think we
0:25:13 should be seeing more
0:25:14 emphasis on that but
0:25:15 the other thing that
0:25:16 i think we should
0:25:17 really be seeing more
0:25:18 emphasis from from
0:25:19 open ai on is
0:25:21 turning on the ad
0:25:22 switch now we’ve
0:25:23 talked about this
0:25:24 several times that’s
0:25:24 the way they’re going
0:25:26 to do it but we’ve
0:25:28 seen no indication
0:25:29 that they’re doing
0:25:31 anything to build
0:25:32 their ad network and
0:25:34 to build a solid ad
0:25:37 stack and if that’s i
0:25:37 mean that’s the way
0:25:38 they’re going to have
0:25:39 to make money here i
0:25:39 don’t see any other
0:25:40 way they’re going to
0:25:41 do it and thus
0:25:41 they’re going to
0:25:42 go crazy with the
0:25:45 subscriptions but it
0:25:46 seems to me that
0:25:46 that’s where they
0:25:47 should be putting all
0:25:48 of their creative
0:25:49 energy go go do
0:25:51 what google did where
0:25:52 google bought double
0:25:54 click which was their
0:25:54 most expensive
0:25:55 acquisition ever and
0:25:56 it was just a giant
0:25:58 ad network and that’s
0:25:59 what really took google
0:26:00 into light speed so i
0:26:01 feel like that’s where
0:26:02 open ai should be
0:26:03 taking this business if
0:26:04 they want to start
0:26:04 getting profitable
0:26:08 um but what what do
0:26:09 you think is the right
0:26:10 strategy ahead for
0:26:12 open ai i agree with
0:26:13 you they’re likely to
0:26:14 go shopping and make
0:26:15 some tuck-in acquisitions
0:26:16 and maybe a couple
0:26:18 major acquisitions now
0:26:18 that they have this
0:26:19 currency worth half a
0:26:20 trillion dollars and
0:26:22 any when you’re trading
0:26:23 it whatever it is 40
0:26:24 times revenues any
0:26:25 acquisition you make is
0:26:25 a creative it increases
0:26:26 your earnings per share
0:26:28 where i disagree is
0:26:29 they need to get
0:26:31 profitable if i were on
0:26:32 the board of open ai i
0:26:33 would be saying we need
0:26:35 to show growth massive
0:26:36 growth massive customer
0:26:40 acquisition and um you
0:26:41 know disruption of
0:26:42 certain certain
0:26:43 industries if you will
0:26:45 but no no no no we
0:26:45 don’t want to be
0:26:47 profitable we we just
0:26:48 want to show massive
0:26:50 top-line growth i don’t
0:26:51 think this company quite
0:26:51 frankly i don’t think
0:26:52 this company needs to be
0:26:53 profitable for five or
0:26:56 ten years because uh it
0:26:57 took i forget how long
0:26:59 it took amazon 15 or 20
0:27:01 years the the playbook is
0:27:03 disruption and growth not
0:27:05 profitability and this does
0:27:08 there is an argument that
0:27:11 the best ai that there
0:27:12 can only be one that
0:27:13 there’s going to be one ai
0:27:15 kind of running everything
0:27:16 and so leadership and
0:27:17 growth and raising massive
0:27:19 amounts of capital are
0:27:20 kind of the whole game
0:27:21 here i would put
0:27:23 profitability way down on
0:27:24 the totem pole so i
0:27:27 don’t think because all of
0:27:28 the margins if you look at
0:27:29 the gross margins on the
0:27:30 things they do they’re
0:27:32 usually 99 there are no
0:27:33 costs here once you’ve
0:27:34 set up there’s tons of
0:27:37 capex massive capex but
0:27:39 the processing power is
0:27:40 what the energy costs to
0:27:42 power these these data
0:27:44 centers but the gross
0:27:45 margins are just near near
0:27:47 100 essentially ai has
0:27:49 become the you know has
0:27:50 become the mother of all
0:27:52 capital wars like who can
0:27:53 they don’t they don’t want
0:27:55 to spend stupidly but as
0:27:57 long as they can grow show
0:27:58 that type of top line
0:28:00 growth i mean just the
0:28:01 numbers here are just
0:28:02 staggering because they
0:28:03 realize i think they
0:28:05 realize whoever’s number
0:28:07 one is going to trade at
0:28:09 10 to 30x what the number
0:28:11 two player is do you want
0:28:11 to do you want to hear my
0:28:13 moral dilemma that fits into
0:28:14 all of this please yeah
0:28:17 have you used um my my
0:28:18 google labs profile yet
0:28:20 uh no i haven’t well
0:28:21 thank you ed it’s nice to
0:28:22 see you’re investing in
0:28:24 this relationship so just
0:28:26 some headline news here
0:28:27 i get a lot of emails
0:28:28 from young men looking
0:28:29 for advice usually
0:28:30 professional advice
0:28:31 sometimes advice about
0:28:33 investing and i can’t
0:28:34 answer them all and so
0:28:35 about 18 months ago the
0:28:37 team here at prop g built
0:28:38 a thin layer of innovation
0:28:39 on top of an llm and
0:28:41 built prof ai and we were
0:28:42 getting two three hundred
0:28:44 queries a day uh google
0:28:45 labs approached us
0:28:46 specifically i had a
0:28:47 graduate student
0:28:49 instructor or fancy word
0:28:51 for ta who’s just a
0:28:52 super impressive woman who
0:28:53 now works at google
0:28:54 approached me and say we
0:28:55 can do much better we’re
0:28:56 working with a bunch of
0:28:58 thought leaders and do
0:28:59 you want us to do you
0:29:00 want to be one of them i
0:29:00 said great i would love
0:29:02 to do that they spent a
0:29:03 lot of time on this thing
0:29:04 and it launched last night
0:29:06 and in the last three
0:29:07 months i have become
0:29:08 increasingly uncomfortable
0:29:11 with character ai’s and
0:29:13 synthetic relationships now
0:29:14 the upside is a lot of
0:29:15 young people who don’t
0:29:17 have access to my content
0:29:18 and have a specific
0:29:20 question can get access
0:29:21 with this thing and i’ve
0:29:22 tested it and it’s
0:29:24 actually pretty good i’d
0:29:25 say it gets 70 to 90
0:29:26 percent of what i would
0:29:26 say in the tone i would
0:29:28 say it in the last several
0:29:29 months there’s been some
0:29:31 really ugly instances of
0:29:34 suicide and people having
0:29:35 psychotic breaks because they
0:29:35 thought they were in
0:29:37 relationships with these
0:29:39 synthetic character ai’s in
0:29:42 addition i hate the idea of a
0:29:43 young man slowly but surely
0:29:44 spending less time or taking
0:29:46 less risk to try and establish
0:29:48 his own mentorships and
0:29:51 friendships in real life and
0:29:52 so this thing launched
0:29:53 yesterday and i said well
0:29:55 anyways i’ll stop there what
0:29:56 would you suggest if you were
0:29:58 me would you leave it up or
0:29:59 would you take it down or
0:30:01 what would you do i don’t
0:30:02 think that it’s actually that
0:30:05 valuable to have an ai giving
0:30:06 you the answers to things and
0:30:08 i think a lot of the idea the
0:30:10 thing that that is inspiring to
0:30:11 people when they ask you
0:30:13 questions isn’t just the answer
0:30:14 that you give it’s the fact
0:30:15 that they actually connected
0:30:18 with you i mean that that to
0:30:19 me is a big piece of reaching
0:30:21 out to people and getting
0:30:25 advice i mean the content of the
0:30:26 answer itself is only one part of
0:30:28 the equation here a lot of this
0:30:29 is about the actual connection with
0:30:31 the individual and realizing that
0:30:34 this person thought about it
0:30:36 thought about my situation
0:30:40 recognized me as a person and gave
0:30:44 me a response as a human so i don’t
0:30:46 know about taking it down but my
0:30:51 view on these ai avatars is i just
0:30:52 don’t think they’re that valuable i
0:30:55 mean i think google is a if you want
0:30:56 the answer to something and you don’t
0:30:57 even care about connecting with the
0:31:01 person just go on google and like see
0:31:03 what google has to say about it i
0:31:04 don’t think that means you need to
0:31:06 take it down i don’t think it means
0:31:08 that you need to delete the thing but i
0:31:10 just i i struggle with the value of
0:31:12 these things from the get-go i think
0:31:14 that’s a really thoughtful answer um
0:31:18 and uh yeah you summarize a lot of
0:31:19 the way i’m feeling i feel like the
0:31:20 ground has shifted beneath us the last
0:31:24 six months and i’m really freaked out
0:31:26 about the idea of young men
0:31:29 establishing synthetic relationships
0:31:31 and using them as a replacement for
0:31:33 organic relationships anyways long
0:31:35 story short i pulled it down uh oh you
0:31:39 did yeah i i just something naval said
0:31:41 that twitter philosopher i don’t know
0:31:42 you know what he does but i think i’m a
0:31:46 philosopher vc they’re all vcs he’s a vc
0:31:50 yeah oh god angel investor he’s he’s
0:31:51 started companies as well all right
0:31:53 anyways he says something that really
0:31:55 struck with me and that is if you’re if
0:31:57 you’re spending a lot of time trying to
0:31:59 decide something the answer is almost
0:32:03 always no and i thought yeah there’s
0:32:05 there might be some missed opportunity
0:32:07 to get good advice but i’m like they can
0:32:09 read a book they can dial into office
0:32:10 hours they can read one of my
0:32:13 newsletters but i just hate anything
0:32:16 that reduces a young man’s fire to go
0:32:20 up to a teacher a boss a potential boss or
0:32:23 whoever or email me and try and make some
0:32:24 sort of personal connection
0:32:29 we’ll be right back after the break if
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0:32:36 it easy for you thank you and stay
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0:35:43 we’re back with prof g markets deal making surged in the third quarter with global m&a topping one
0:35:49 trillion dollars for the second time ever the main standout was ea’s 55 billion dollar buyout which we
0:35:55 covered on the daily show but beyond that there were also 13 mega deals that surpassed 10 billion
0:36:00 dollars each what is also surprising is how the landscape has shifted the scale of the deals is
0:36:07 getting bigger but the total number of deals hasn’t budged total deal value jumped 27 year over year
0:36:15 even as deal volume stayed flat so scott uh you actually predicted that m&a would be the business
0:36:21 trend of 2025 you also predicted that we’d see the largest take private ever uh let’s play the clip of your
0:36:28 prediction corporations have record profits uh they’re running out of growth and if they’re in
0:36:34 challenged industries they want to bulk up you’re just going to see tons of m&a here there’s been
0:36:41 m&a has been largely moribund because the biden administration was enacting more ftc and doj reviews
0:36:46 which by the way i think was the right thing to do but you’re going to have a much more m&a friendly
0:36:52 head of the fdc and the doj now and these companies have so much money on their balance sheets
0:36:58 they’re just going to go shopping so we have got trillion dollars in m&a in the third quarter and
0:37:06 three trillion so far this year that total number is up 35 percent year over year uh crashed it on that
0:37:11 prediction what was the incentive or what was the impetus for that prediction so the way i would describe
0:37:21 it is for for a small set of companies everything’s 50 or 80 off and that is if you’re if you’re palantir
0:37:30 technologies and you’re worth 440 billion dollars and just five years ago right you were worth
0:37:42 20 billion everything is on sale for 95 off because when you buy a company you issue shares to buy it
0:37:51 so let me put it another way like when i raise your salary from 10 bucks an hour to 20 bucks an hour
0:37:57 technically your rent gets cut in half as a percent of what would be required for you to sacrifice
0:38:04 so when open ai goes from being worth 20 billion to 440 billion in five years
0:38:11 the universe of potential acquisitions goes up a thousand fold in addition when they’re trading
0:38:19 at 50 times revenues or whatever it is any acquisition they make is technically accretive
0:38:26 that increases their earnings per share so when a banker you know bankers meet with carp every
0:38:32 few weeks and they’re really smart people they look at different channels distribution strategy
0:38:35 understand your strategy wouldn’t this be a great tuck in strategy because they’re trying to figure out
0:38:43 a way to generate fees the book of potential strategic options now in terms of acquisitions has gone from
0:38:51 two pages to 200 and so what are we going to see here i think so the prediction was we’d see the biggest take
0:38:59 private that’s happened what we’re going to probably see in the next six months is the biggest merger or
0:39:06 acquisition in history because if you’re nvidia and you’re trading at a four and a half trillion dollar
0:39:12 market cap you can go buy a hundred billion dollar company for a two and a half percent bet you can bet
0:39:19 the bankers are working overtime and the selection set and the opportunity to go buy a company worth
0:39:25 50 100 or 200 billion that wasn’t even thinkable before it all spells one thing
0:39:32 uh we have not seen anything yet we are going to see some just titanic deals in addition
0:39:41 you layer on top of the fact that essentially uh the doj and the fdc have somewhat been anesthetized
0:39:47 you know they’re just under they’re just not awake right now so all of these moons are lining up to
0:39:53 where this is banker lalapalooza you’re going to see the largest banking fee ever registered on a deal
0:39:59 in the next six months it’ll be because the wonderful thing about mna i when i was working
0:40:05 at morgan stanley it’s all perspective the deal doesn’t close you get zero but if the deal closes
0:40:11 the fees are outrageous because if someone is pitching open ai and says all right gardner stock
0:40:17 is down they have some good ip around technology you should just acquire them and they’re worth 12
0:40:21 billion you can acquire i don’t know you can acquire them for 15 billion they’re not going to argue
0:40:28 over whether the fee is 140 million or 170 they brought us the deal they have to rally 40 people
0:40:34 to work day and night for 90 days to close this thing so your margins are just extraordinary there’s
0:40:39 no there’s very little pricing pressure in mna the lawyers rack up their bills you know inflate their
0:40:44 bills everyone just makes a shit ton of money because there’s you know it’s like it’s almost like the
0:40:51 real estate business that is an incredibly inefficient business where you know your friend marge who’s very
0:40:59 friendly and you know went to junior college and is he knows everybody can get five percent or split
0:41:04 with another person five percent of your the value of your home by figuring out a transaction and it’s all
0:41:11 based on relationships anyways we’re going to see more of this in my opinion it’s only getting started
0:41:16 yeah and that’s the the bank earnings when earnings season comes up will be so interesting
0:41:22 but if you’re wondering why is jp morgan up 30 percent year today why is goldman up 37 percent year today
0:41:28 why is citigroup up 41 percent yesterday why are all the bank stocks absolutely ripping in 2025
0:41:36 this is the answer it is mna banks have generated 95 billion dollars in investment banking fees this
0:41:43 year and that is the second highest in this time frame ever so these banks are absolutely printing
0:41:51 money on these gigantic deals and we’ve seen a ton of these mega deals we saw uh i mentioned the ea take
0:41:57 private 55 billion dollars we saw palo alto networks buying cyborg for 25 billion anglo-american buying tech
0:42:03 for 50 billion we’re seeing these gigantic deals now the one thing that i find very interesting i’d like
0:42:14 to get your reaction to record mna market in terms of dollar value deal size but not a record mna market
0:42:20 in terms of deal count the actual actual number of deals that are happening so what is actually
0:42:25 happening here when you dig into the numbers basically what’s happening is you’re seeing a ton of deal
0:42:33 making among really big companies large caps and then the opposite is happening among small cap
0:42:40 companies so just the numbers here deals worth less than half a billion dollars are down 18 percent this
0:42:48 year deals worth less than two billion dollars are down 25 percent this year deals worth more than 10
0:42:57 billion dollars are up 26 percent this year so what you have is the the gigantic companies are getting
0:43:03 acquired and no one’s really touching the small companies and this reminds me very much of the
0:43:08 discussion that we’ve been having when we look at the gdp data and we look at the underlying economic data
0:43:28 market market market and we’re seeing it as well in mna the small the small small companies are not really
0:43:44 being touched when it comes to these these big acquisitions your reactions so first off the two
0:43:49 thirds of acquisitions fail people get excited about them they have to pay a premium integration is always
0:43:57 more costly and time when you thought two thirds of them end up not working and also you know integrating
0:44:03 a billion dollar acquisition isn’t much easier than integrating you know a 20 billion dollar acquisition so
0:44:11 you have and then the companies making smaller acquisitions are the s&p 490 right meanwhile the big
0:44:17 guys have made so much freaking money and it goes back to what we’re talking about before the opportunity set
0:44:22 market or target market has expanded exponentially because now they can afford to buy almost anyone
0:44:24 so it would just make sense that
0:44:31 the s&p 490 who have not registered the same returns don’t feel as flush or as rich and are by the way usually
0:44:35 dodging incoming projectiles in the form of tariffs and all this other nonsense
0:44:40 are not out shopping because they don’t feel like their stocks are inflated they don’t feel like they have their preloaded
0:44:46 credit card whereas the big guys are like yeah fuck i could go buy ford motor right now i’d pitch it to me
0:44:53 i mean or whatever whatever the company is so it would make sense that it’s it’s the big game
0:44:59 if you saw a run-up in the russell uh that tracks small business you know or or small caps
0:45:05 you would see and oftentimes small caps traditionally small caps about performing the big guys because
0:45:08 they’re supposed to be more nimble that dynamics entirely changed the last couple decades
0:45:15 of the 500 companies that were unacquirable because they were so big like you know
0:45:20 no one would have thought of buying chevron they would kind of merge with them but they couldn’t buy them
0:45:28 now it’s it’s acquirable there’s companies out there there are pools of capital and there are
0:45:35 companies with market caps that now make these companies acquirable so i just think it’s just a
0:45:39 function of the haves and the have-nots the haves have preloaded credit cards the likes of which
0:45:44 they’ve never had before the have-nots the mediums and the smaller cap guys are kind of licking their
0:45:50 wounds waiting to see if their tariffs on brazil is going to go to 100 based on the blood sugar level
0:45:56 of the president i just find it remarkable how every story we dig into on this show
0:46:02 the more you keep digging ultimately there is one trend that just runs through all of it
0:46:12 and it’s inequality like we see it in the consumer economy uh we see it in the stock market
0:46:20 i mean the fact that the mag 7 now makes up 35 percent of the entire market cap of the s&p right now
0:46:27 and you look just a few years ago 2019 it was it was 19 percent so you’ve gone from a fifth to a third
0:46:34 in just about five years and the downstream effects of that inequality are spreading out everywhere
0:46:42 including m&a of all markets i mean the fact that if you want to get bought as a company you need to
0:46:48 hope that you are worth at least 10 billion dollars otherwise the chances of you getting getting acquired
0:46:53 are actually lower than they were a year or two years ago and then what is even more interesting
0:46:59 is the fact that because the dollar amounts are so big on those big deals it distorts all of the data
0:47:05 and it makes you think oh this is this giant m&a market everyone’s making deals and then if you’re a small
0:47:09 company you’re like well why isn’t it why isn’t it happening to me and the reality is you’re not an
0:47:15 exception actually you and the rest of the other small cap companies are not getting acquired it’s just the
0:47:21 big dogs at the top and we see this everywhere i think the the other interesting question that we
0:47:27 have to go to then is what does that mean i mean what are the implications of that what does that mean
0:47:34 for uh smaller companies what does it mean for a company like us like prof g media we’re not a large
0:47:40 cap we’re not a mid cap we are a small startup what does it also mean for entrepreneurs and founders
0:47:45 who are probably going to realize that there is just simply not a lot of exit opportunity
0:47:55 unless you are a 10 20 25 30 billion dollar company what you have is is a situation where a small
0:48:01 number of companies are going to garner the majority of the spoils and the 99 of the rest of us and
0:48:07 companies are going to have the oxygen sucked out of the room what do you do or what does it mean it means
0:48:12 it’s a winner take all economy which plays into an unfortunate or double-edged sword of american
0:48:17 society and that is our superpowers our optimism we all believe that our kid is that one percent or that
0:48:23 our company is going to be the big winner and the downside is we don’t recognize that it is getting
0:48:27 harder and harder to break through the spoils are greater if you break through but it’s getting
0:48:35 harder and harder so i think where we’re headed is the following civil unrest or just you know unrest of the
0:48:44 ballot box and i do think the opportunity is really ripe for massive antitrust that comes in and says
0:48:50 okay apple you’re not apple you’re five companies why does the app store have to live with you oh google
0:48:57 why on earth do you own the largest streaming video service and the largest autonomous automobile company
0:49:01 and you share you coordinate and cooperate with each other making it hard for smaller companies to break
0:49:07 through so i think you’re going to see i’m hopeful that at some point then it’s not going to happen in
0:49:13 this administration but in the next administration i think you’re going to see a lot of mojo and
0:49:21 justification to go in and oxygenate the economy with a massive breakup of um the big guys the winners
0:49:26 because some of these companies you just how do you compete with them and i think there’s the question
0:49:31 of when people are going to wake up to the fact that this administration lied to them about all of this
0:49:37 i think the funniest lie that we saw was at the beginning when scott besson said it’s main street’s
0:49:43 turn it’s not about wall street anymore it’s about main street i’ll just point you right back to the what
0:49:49 we said at the beginning jp morgan up 30 percent garban up 37 percent city group up 41 percent 95 billion
0:49:56 in investment banking fees this year the second highest in the history of wall street the fact that
0:50:04 the mag 7 is ripping right now i mean this is the same thing again it’s just the the only difference
0:50:11 with this administration is that we were promised something completely different to your point the big
0:50:17 guys right up 30 to 40 percent off of huge market caps i just typed in regional bank index and there’s
0:50:23 something called the ksw nasdaq regional banking index it’s up one and a half percent this year it’s flat
0:50:33 so it’s pretty simple how are you doing are you small or you big and anyways there’s there needs to be
0:50:39 i believe what vice president mike pence said you know he and i run at the same atlantic festival
0:50:46 together um oh wow yeah me and mike me and vice president pence so he said the best economy is a
0:50:52 referee capitalism and right now there’s we’ve never had bigger meaner players on the field the
0:50:59 referees nowhere to be found we’ll be right back after the break and for more markets content
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0:54:44 Last week, Charlie Javis was sentenced to seven years in prison for defrauding J.P. Morgan.
0:54:50 Back in 2021, she convinced the bank to pay $175 million for her startup, claiming it had 4 million users.
0:54:55 In reality, the platform never had more than 300,000 users.
0:55:05 So this case raises a bigger question, a question we’ve asked on the podcast before, and that is, where is the line between visionary storytelling and outright fraud?
0:55:12 And we’ve seen this question before when it came to Elizabeth Holmes, when it came to Sam Bagman-Fried.
0:55:33 And we might even be seeing it today in AI, where many investors are worried about these creative accounting issues, where, I mean, one of the biggest things we’re seeing is this ARR accounting magic, where companies are signing these one-off contracts, and then they’re annualizing those numbers as ARR to make it seem like they’re making more money than they actually are.
0:55:35 That’s probably another talk track.
0:55:46 But the point being, we have here yet another example of a founder who flew too close to the sun, crossed that line, it was storytelling, and then it was fraud, and now she’s in prison.
0:55:48 So, Scott, you’ve spoken about this before.
0:55:49 You’ve built many companies.
0:55:56 Your reaction to this news and your thoughts on where do you draw that line as a salesman, as a storyteller, and as a founder?
0:56:03 Well, I empathize with her because in college, when I’d go on a date, I would borrow my mom’s Acura legend, and I would say it was mine.
0:56:14 Because no woman can resist the Acura legend, the smooth, clean lines, and the mellow acceleration of the premium brand from Honda.
0:56:20 Look, there’s—she committed outright fraud.
0:56:32 If you’re in due diligence and you’re asked to put into the data room a list of your clients and you work—I guess she was working with some academic who figured out a way to manufacture, like, sort of accounts that look sort of real, that’s fraud.
0:56:34 You should probably go to prison.
0:56:58 There is a fine line, though, and this was not a fine line, but really being out there and embellishing the prospects of your company and their performance and recategorizing what’s ARR and what isn’t regular revenues, what is services revenue, what is technology revenue, to try and increase.
0:57:01 Remember that company we called out and eventually went bankrupt?
0:57:03 I think we were one of the first ones.
0:57:05 A bunch of my buddies invested in L.A. and called me and got angry.
0:57:11 Remember that credit card that was claiming to—it was claiming to solve the climate crisis, and it was just a fucking credit card?
0:57:12 Aspiration.
0:57:19 You can say that you’re raising the consciousness of the planet, and it’s buyer beware.
0:57:25 But if you start lying about specifically financial results, that’s when you get into trouble.
0:57:46 What—there is some political and brand issues, though, and that is, I think the difference between Elizabeth Holmes and Adam Neumann is that Adam Neumann’s board wanted to save face and gave him—no one has ever gotten a $10 billion commission on losing—or a billion dollar commission on losing $11 billion of other people’s money.
0:57:50 And I think the board—if his board had been angrier, I think he would have been a world of hurt.
0:58:02 Elizabeth Holmes, Theranos’s board was angry, and I always thought it was just sort of uncomfortable that the first person that got sentenced to a decade-long prison membership happened to have ovaries.
0:58:06 Two percent of unicorn founders are female, and the most famous one got stuck in prison.
0:58:09 There was some misinformation around that.
0:58:10 No one ever got a false diagnosis.
0:58:17 What she did was she lied about the capabilities of the machine, and she did lie about some of the order volume, I believe.
0:58:19 But it wasn’t people saying, well, it’s different.
0:58:20 It’s health.
0:58:25 No one was getting, like, HIV-negative results when they were HIV-positive from these machines.
0:58:28 She was exaggerating the capability of the machines.
0:58:37 Anyway, I think that there is a fine line between—well, let me go.
0:58:59 I think when you say, I’m taking the company private for $420 a share and funding is secured, funding secured, and you’re like, wow, the stock goes to $400, but it’s going to be at $420, so you buy in at $400, and then you find out that the guy was either on ketamine or lying, and the stock plummets.
0:59:01 This is Elon a few years ago, yeah.
0:59:04 You’re lying about finance.
0:59:06 You’re lying about numbers.
0:59:11 There’s an objective truth around what he said, and that was not it.
0:59:12 That was a lie.
0:59:23 So, yeah, look, the whole thing is a cautionary tale that if you’re the CEO of a startup, you have to be able to spin a narrative that gets people’s greed glands going.
0:59:35 And sometimes there’s a thin line between exaggeration and downright lying, but what you should never, ever lie about is the numbers or number of customer accounts, the revenues.
0:59:43 They all play with, like, categorizing or recategorizing revenues as a certain type of revenues or pulling revenues forward, all that bullshit.
0:59:44 Public companies do it all the time.
0:59:52 I think AI is going to serve a really valuable role in terms of issuing sort of a diligence or a good housekeeping seal of approval.
0:59:55 Now, projecting the future is not lying.
0:59:56 You can just be wrong.
1:00:04 But this is, I think it’s a real cautionary tale, and she’s going to spend the majority of her younger years in prison now.
1:00:08 It’s a real tragedy for her, for the firm.
1:00:17 But she picked the wrong company to fuck with, because if it had been a smaller company that just wanted to ignore it and not be embarrassed, they might have just let the whole thing go.
1:00:27 Yeah, I think the thing that’s a shame is that it’s, I mean, your point about Elizabeth Holmes and perhaps the justice system and the world was too harsh on her.
1:00:32 It’s almost like, on the way up, when the stock’s up, you’re a visionary.
1:00:36 When the stock’s down, you’re a fraudster.
1:00:48 And that’s the part that is, I think, a little bit unfair, is why is it that we’re down to accept the lying when things look like they’re going well?
1:00:52 It’s because we’re all down to buy into the lie because there’s the prospect of making money on it.
1:00:54 And the perfect example of that is Elon.
1:01:03 I mean, Elon is committing, as you say, fraud when he says, you know, funding’s secured, $420 or $410 a share.
1:01:07 He’s kind of committing fraud, again, sort of blurring the line.
1:01:22 But when he says that we’re going to have a million robotaxes on the road by next year and then 10 years later they have two, I mean, that’s another form of lying that, you know, is something we should look down upon.
1:01:28 But the reason that we don’t, or the reason that we turn a blind eye, is because we look at the stock price, and the stock price is up.
1:01:32 And so people decide, oh, whatever, it doesn’t matter, he’s a visionary.
1:01:41 But as soon as that stock comes crashing back down, suddenly people get very sensitive about the difference between fraud and lying and exaggeration.
1:01:43 Same thing happened with Sandbagman Freed.
1:01:47 Everyone was down for it while that FTT token was going up.
1:01:55 As soon as it came crashing down, suddenly everyone got their investigative hats on and they decided that they were investigating fraud.
1:02:05 But it’s like, okay, well, where was that energy when he was out raising money from Sequoia and all these other big VCs and, you know, making billions of dollars on this FTT token?
1:02:12 And by the way, I think the perfect example of this, which we talked about in one of the episodes, you know, what is the next aspiration?
1:02:14 What is the next WeWork, in my view?
1:02:18 It’s this company, Fermi America, which just went public last week.
1:02:27 And, you know, one of the things I predicted on the episode is that we would see a big pop in the stock because it would have this AI feel to it.
1:02:29 It’s sort of got this meme stocky potential.
1:02:30 That is indeed what happened.
1:02:33 Shares closed up 54% on their first day of trading.
1:02:36 It’s at a $15 billion valuation right now.
1:02:41 But, I mean, this is a company that has zero revenue.
1:02:56 And they say that they’re going to revolutionize AI because they are building a power grid and they’re going to have nuclear power plants and they’re going to bring 11 gigawatts of energy to AI companies, which is five times greater than the output of the Hoover Dam.
1:03:01 It’s two and a half times greater than the amount of energy consumed by all of Manhattan.
1:03:06 I mean, they’re pumping this story and yet they have zero revenue.
1:03:08 They also don’t even own any infrastructure.
1:03:16 All they have is a contract to have some gas turbines that are currently sitting disassembled all around the world.
1:03:18 And so, again, perfect example.
1:03:22 In my view, this company comes crashing down the same way as Aspiration.
1:03:24 That’s my prediction on Fermi America.
1:03:26 But the stock’s up, so people don’t care.
1:03:27 I love this.
1:03:29 By the way, it’s on 7% today.
1:03:43 When I remember right in 99 after I’d sold profit, I came to New York and I said, I’m going to be the idea labs in New York, one tech team, one engineering team, one office space, one legal team, one corp dev team.
1:03:45 And I’m going to punch up e-commerce concepts.
1:03:49 And I raised $15 million at a pre-money of $35 million.
1:03:52 So, me and a PowerPoint presentation were worth $35 million.
1:03:55 And I remember thinking, this feels wrong.
1:03:57 I’m going to call my lawyer.
1:03:58 I’m like, can I get in trouble now?
1:03:59 No, these are credit investors.
1:04:00 They’re smart people.
1:04:01 Goldman invested.
1:04:02 JP Morgan invested.
1:04:10 Anyway, this is essentially, this company right now has a $14 billion market cap.
1:04:15 This is a company with a management team and a business plan that is worth $14 billion.
1:04:20 And, I mean, unfortunately, they’re not trading options yet.
1:04:22 I think something has to be out for 30 or 60 days.
1:04:25 This company, it’s at $30.
1:04:29 This thing’s going to be single digits in 30 days.
1:04:33 I mean, this company at $18 billion?
1:04:34 You’re right.
1:04:36 This is, look out below.
1:04:38 Look out below.
1:04:41 Let’s take a look at the week ahead.
1:04:44 We’ll see earnings from Constellation Brands.
1:04:46 That’s the distributor of beers like Modelo and Corona.
1:04:49 We’ll also see earnings from Pepsi and Delta.
1:04:54 We likely won’t get any of the scheduled economic data because of the shutdown.
1:04:58 However, we should still see the minutes from the Federal Reserve’s September meeting.
1:05:02 And we’ll be watching that release for signals of the Fed’s path forward.
1:05:03 Scott, any predictions?
1:05:07 Well, it goes along the lines of the biggest M&A and mergers in history.
1:05:09 All the moons are lining up.
1:05:16 And this is one that is a little bit out there, but I see the industrial logic behind it.
1:05:26 And that is, I think Netflix, with a $440 billion market cap, is likely to make a tectonic acquisition.
1:05:34 And my thinking is that there are a lot of existential threats right now around Netflix.
1:05:42 Specifically, I think we’re raising a generation of consumers who can’t sit still for 90 minutes or 60 minutes.
1:05:49 I think the TV screen is getting turned on so little that it’s going to start impacting their business.
1:05:50 I don’t know about you.
1:05:51 It’s really strange.
1:05:54 In the last six months, I’ve stopped turning on the TV.
1:05:55 I don’t watch TV anymore.
1:05:56 It’s really weird.
1:05:57 I used to watch.
1:05:58 It used to be appointment viewing.
1:05:59 It used to be just always on.
1:06:01 Then I went to appointment viewing.
1:06:06 Now, my TV is never on unless occasionally I have a Premier League game on.
1:06:09 And my kids never have the TV on.
1:06:14 In addition, when you look at what AI is doing around content creation, it could work for Netflix.
1:06:15 It might not.
1:06:20 And it’s trading at a market cap of $490 billion.
1:06:24 $490 billion and a P.E. of 50.
1:06:29 So my favorite is, and they wouldn’t call it an acquisition.
1:06:30 They’d call it a merger.
1:06:38 But I think if Netflix were to merge with and or acquire Disney, it would make all sorts of industrial logic.
1:06:39 Why?
1:06:43 Disney has a management and succession problem.
1:06:49 Right now, the person running Disney could best be described as Neville Chamberlain in a cashmere sweater minus the dignity.
1:06:56 He’s a 73-year-old man who has fucked up and shown incredibly poor judgment around some key decisions.
1:07:03 The person who was supposed to be a successor or one of his successors has gotten caught up in this Jimmy Kimmel nonsense.
1:07:10 Netflix has an enormously talented management team.
1:07:11 The co-CEO, who you never hear about.
1:07:18 You hear about Ted Sarandos, who probably demonstrates more aplomb than any media executive in history.
1:07:22 It’s just hard not to like a guy who’s built a half a trillion dollar company.
1:07:27 Actually, you’d say, well, the vision of Reed Hastings, who started working in video stores, right?
1:07:31 His co-CEO is extraordinarily talented.
1:07:34 They have two great CEOs and an unbelievable bench there.
1:07:36 So that solves the management problem.
1:07:42 In addition, if Netflix faces these existential threats of being totally focused on this one business called streaming,
1:07:51 Disney has this singular business, parks and cruises, place-based entertainment, nothing like it.
1:07:56 Their Broadway shows of The Lion King, their parks, just singular.
1:08:11 Open AI and whoever it is, Snap or a name, you know, name of NVIDIA, they can’t, these companies can’t replicate Disneyland and Disney cruises and Disney Broadway theaters.
1:08:20 Where they’re getting a little bit long in the tooth is the IP in those parks, Darth Vader, Cinderella, you know, the Muppets.
1:08:22 This shit’s getting a little tired.
1:08:23 What does Netflix have?
1:08:27 Oh my gosh, the Stranger Things ride at Disneyland?
1:08:30 Can you imagine the weight for that shit?
1:08:35 The Squid Games competition, the Wednesday Broadway show.
1:08:42 The two of these together, the IP in the parks, accreted from a management standpoint,
1:08:49 and then you have one streaming platform that is Netflix, Disney, and Hulu.
1:08:50 It’s game over and streaming.
1:08:57 Now, this merger should not be allowed to happen because it would be so fucking dominant.
1:09:01 It would create the first $1 trillion true kind of old Hollywood media company.
1:09:08 But it could get through now because, again, see above the DOJ and the FTC are asleep at the switch.
1:09:21 So Netflix has a stock that is so fully valued, I think their bankers are probably getting some reception from the management team thinking, how are we going to grow Netflix to justify this position given some of the threats on the horizon?
1:09:30 We have this amazing company where the C-suite, you know, there is five years past their expiration date.
1:09:31 And we have a huge management team.
1:09:42 We have all this IP we could monetize downstream, which we aren’t monetizing right now in the form of place-based entertainment, which is much more enduring than the streaming war.
1:09:49 I think that Netflix is going to make a tectonic acquisition, and my favorite candidate is Disney.
1:09:51 I really like that prediction.
1:09:53 I just want to add on to it.
1:09:54 You know, I agree with you.
1:09:59 They need to do something to justify this valuation, half a trillion dollars, 50 times earnings.
1:10:03 If they don’t, the stock’s coming down.
1:10:06 And this is all to say I’m very bearish on Netflix.
1:10:09 I really don’t think it has any business trading in half a trillion dollars.
1:10:15 So we’ll see what happens in terms of M&A, but I’ll just add my prediction on bearish Netflix.
1:10:17 Perhaps we should dig into that next week.
1:10:18 Let’s do it.
1:10:25 This episode was produced by Claire Miller and engineered by Benjamin Spencer.
1:10:27 Our associate producer is Alison Weiss.
1:10:28 Mia Silverio is our research lead.
1:10:32 Our research associates are Isabella Kinsel, Dan Chalon, and Kristen O’Donoghue.
1:10:35 Drew Burrows is our technical director, and Catherine Dillon is our executive producer.
1:10:38 Thank you for listening to Prof G Markets from Prof G Media.
1:10:41 Tune in tomorrow for a fresh take on the markets.
1:11:13 Thank you for listening to Prof G Markets from Prof G Markets.