0:00:03 Support for Prop G comes from BetterHelp Online Therapy.
0:00:05 We waste a lot of time worrying about what we haven’t done,
0:00:07 and this may sound a little corny,
0:00:09 but taking a second to appreciate your wins is important.
0:00:12 Personally, this year I am spending more time with my boys.
0:00:15 Good for me. If you’d like to celebrate your own wins
0:00:17 and make some adjustments for the rest of the year,
0:00:19 BetterHelp Online Therapy is a great place to start.
0:00:22 It’s entirely online, which makes it more convenient
0:00:24 and more affordable than traditional therapy.
0:00:27 Take a moment, visit BetterHelp.com/ProphecyToday
0:00:29 to get 10% off your first month.
0:00:33 That’s BetterHelp, H-E-L-P, dot-com, slash, Prop G.
0:00:37 Support for Prop G comes from Vanta.
0:00:39 Building a business, achieving SOC2,
0:00:43 where ISO 27001 compliance can help you in bigger deals,
0:00:45 enter new markets, and deepen trust with customers,
0:00:48 but can also cost you real time and money.
0:00:50 Vanta automates up to 90% of the work
0:00:52 for the most in-demand frameworks,
0:00:54 helping businesses get compliant quickly.
0:00:55 And with over 300 integrations,
0:00:57 you can easily monitor and secure the tools
0:00:59 your business relies on.
0:01:01 Join over 6,000 fast-growing companies
0:01:02 that use Vanta to manage risk,
0:01:04 improve security in real time.
0:01:09 Get $1,000 off Vanta by going to Vanta.com/Prophecy.
0:01:12 That’s V-A-N-T-A, dot-com, slash, Prop G.
0:01:16 – Scott, you recently wrote a post on your blog
0:01:19 No Mercy No Malice about the energy industry
0:01:22 and your predictions for what is going to happen
0:01:24 in terms of our energy consumption
0:01:25 and global energy demand.
0:01:29 Could you summarize what your thoughts are there?
0:01:33 – We always find a way to put energy to work.
0:01:35 And I think that essentially when you look at
0:01:39 the problems around carbon and global warming,
0:01:41 and then you couple that with so many nations developing
0:01:45 who are producing hundreds of millions of people
0:01:46 coming into the middle class,
0:01:48 and what happens when you come into the middle class?
0:01:50 You start getting a car,
0:01:52 your energy consumption goes up,
0:01:53 you start eating more beef.
0:01:56 All of these things that require a ton more energy.
0:01:59 The demand here isn’t satiable.
0:02:01 And so people who come up with whether it’s nuclear
0:02:04 or some sort of different renewable
0:02:09 or near self propulsion machines in the ocean,
0:02:14 whatever it is, that is gonna create a lot of billionaires
0:02:16 and maybe our first trillionaire.
0:02:18 (upbeat music)
0:02:23 – Welcome to First Time Founders.
0:02:26 Here’s a stat I learned recently.
0:02:29 A chat GPT request consumes 10 times more energy
0:02:31 than a Google search.
0:02:32 We’re in the early innings,
0:02:36 but AI is already using up more power than small nations
0:02:39 and that consumption is expected to triple
0:02:40 by the end of the decade,
0:02:42 which leaves us with an existential question
0:02:44 for our planet.
0:02:46 How are we going to keep the lights on?
0:02:50 My next guest is a pioneer in energy,
0:02:52 specifically energy storage.
0:02:55 After designing batteries for Elon Musk
0:02:57 as Tesla’s director of energy,
0:02:59 he decided to start his own company
0:03:02 to help us store energy cheaper and for longer.
0:03:07 Over six years, he raised $900 million in funding,
0:03:10 built a 1 million square foot battery factory
0:03:13 in West Virginia and will soon deploy
0:03:15 the biggest battery ever created.
0:03:18 There are a few individuals alive today
0:03:21 who have had a bigger impact on the energy industry
0:03:22 and its future.
0:03:25 This is my conversation with Matteo Haramio,
0:03:28 CEO and founder of FormEnergy.
0:03:31 Good to see you Matteo.
0:03:33 – Good to see you Ed, nice to be here.
0:03:34 – Let’s get right into it
0:03:37 ’cause I know that you don’t have all the time in the world.
0:03:40 So, we’ve been discussing energy a lot
0:03:42 on this podcast recently, more than usual,
0:03:46 and it’s been coming up a lot mostly because of AI.
0:03:49 Just a couple of stats that really grabbed our attention.
0:03:52 One is that energy demand for AI
0:03:55 is currently doubling every hundred days.
0:03:58 And two, partly as a result,
0:04:02 the total amount of energy consumed by data centers
0:04:04 is expected to triple in the next six years.
0:04:07 And for context, that would be enough energy
0:04:10 to power 40 million homes in America.
0:04:12 Now, I know there’s a lot more
0:04:14 to the energy conversation than AI,
0:04:17 but I would say that the key takeaway that we’re learning
0:04:18 is that basically in the next few years,
0:04:21 we’re gonna need a ton more energy,
0:04:24 far more than we produce today,
0:04:26 and we’re gonna need new innovative solutions
0:04:29 to generate, store, and distribute that energy,
0:04:30 which is exactly what you are doing
0:04:33 with your company, FormEnergy.
0:04:36 I’d like to start with some very basic stuff
0:04:39 before we get into you and Form.
0:04:44 Your mission is to, quote, transform the grid.
0:04:45 I hear that term a lot, the grid,
0:04:47 the electric grid, the power grid.
0:04:49 What actually is the grid?
0:04:51 The grid is perhaps the most complex machine
0:04:55 that humans have ever made, and also the largest.
0:04:58 In many ways, think of it as a single integrated entity
0:05:01 by continent, more or less,
0:05:03 where we are simultaneously producing
0:05:06 and consuming a commodity at the same time.
0:05:09 And in the case of the electric grid,
0:05:11 that is, of course, electricity.
0:05:14 And today, that’s happening on every continent
0:05:16 in slightly different ways,
0:05:18 but largely what we do is we generate electricity
0:05:21 in one location, and we move it to where it’s needed,
0:05:25 where the demand is, where what we call the load sits.
0:05:27 And so we have this reconciliation that’s happening
0:05:30 on a sub-second basis, in fact,
0:05:33 micro-second basis for production
0:05:34 and consumption of a good.
0:05:37 So that’s what we’re talking about when we say the grid.
0:05:40 It’s basically the electric system, the production,
0:05:43 the, or generation, as we say, the transmission,
0:05:44 the distribution, and then the consumption.
0:05:48 But you are an innovator in storage,
0:05:49 and I don’t think you mentioned that word
0:05:51 when you described the grid there.
0:05:54 I don’t think a lot of people understand or appreciate
0:05:56 what a significant industry that is,
0:05:59 let alone realize that it actually exists.
0:06:00 Give us a rundown on energy storage.
0:06:02 What is it?
0:06:03 What are the different types?
0:06:06 How does it play into this complex system
0:06:08 which you described, which is the grid?
0:06:09 – Yeah, and part of the reason I didn’t mention it
0:06:13 is because one of the reasons why the electric grid
0:06:15 is so impressive as a feat of engineering
0:06:18 is because it doesn’t use a lot of storage, in fact.
0:06:20 It’s sort of counterintuitive, at least not in the,
0:06:23 from the generation to the consumption side of things.
0:06:25 Think about any other very large industry.
0:06:27 It could be retail, refrigerated goods.
0:06:28 It could be data.
0:06:29 We have data warehouses.
0:06:33 It could be, you name it, there is a version of inventory
0:06:36 that sits somewhere between production and consumption
0:06:38 because it’s a natural thing to do, right?
0:06:40 That’s how we sort of move things around
0:06:42 and become efficient at that.
0:06:43 Whereas on the electric grid,
0:06:45 we’re doing all of that in real time, right?
0:06:46 Generation and consumption.
0:06:48 There’s upstream versions of storage.
0:06:51 We have liquid fuels or we have coal
0:06:52 or we have these kinds of things.
0:06:55 But in between the generation and consumption,
0:06:57 we don’t have a lot of storage.
0:06:59 So this is a growing area
0:07:02 because there is a growing need for storage
0:07:05 because now we have different kinds of generation.
0:07:07 We do not have those fuels in many cases
0:07:11 to just store and have sit around until we need them.
0:07:13 Yes, we still, of course, do some of that,
0:07:16 but increasingly in very large volumes,
0:07:19 the lowest cost version of electricity is the renewables.
0:07:24 And these are, by definition, weather driven renewables
0:07:25 and therefore intermittent, right?
0:07:27 They go away and they come back.
0:07:29 And so we need to think about the storage
0:07:33 that we need to reconcile these generation resources
0:07:35 at the scale that is really impacting
0:07:38 the entire electric system.
0:07:40 Now there has been electric storage on the grid
0:07:42 from the beginning because people did realize
0:07:45 some of this is a challenge and primarily it was water.
0:07:47 So you sort of had water up on a hill, more or less,
0:07:49 and you would run it through a turbine
0:07:50 going down the hill to generate electricity.
0:07:52 And then during periods of low cost,
0:07:53 you would pump it back up the hill.
0:07:56 And so that’s been sort of a known way
0:07:58 to use energy storage for a very long time.
0:08:01 And of course, we rely on nature’s natural mechanism
0:08:03 for that, which is snow in the mountains,
0:08:07 which very helpfully melts during the other half of the year
0:08:09 and sends water downstream that we sort of capture,
0:08:11 which we then put to productive use.
0:08:13 And so the question now is,
0:08:15 how do we bring more types of energy storage
0:08:18 onto the grid cost effectively and at scale,
0:08:20 such that we can incorporate even more
0:08:23 of these low cost, renewable,
0:08:25 but intermittent sources of electricity.
0:08:30 – So it sounds like then coal, oil,
0:08:33 those are both energy producers
0:08:35 and examples of energy storage.
0:08:37 That would be right.
0:08:38 – Exactly, in some ways, yes.
0:08:42 And I mentioned the use of energy storage
0:08:43 paired with renewables,
0:08:46 but in fact, they can also be very effectively paired
0:08:49 with those conventional resources as well.
0:08:51 So I mentioned sort of intermittent weather,
0:08:53 sun going down, some coming back,
0:08:57 but we also live in increasingly volatile weather environment
0:09:00 where we have these storms, extreme heat or extreme cold.
0:09:03 And that is also stressing the way
0:09:05 that we have generated electricity for a very long time.
0:09:07 So look at the winter storm, Yuri,
0:09:10 which was this storm that happened a few years back in Texas
0:09:12 and cost $60 billion worth of damage,
0:09:14 you know, this sort of unprecedented freeze
0:09:17 in the middle of February in Texas, right?
0:09:20 And one of the major reasons why the blackout lasted
0:09:23 as long as it did and was so impactful
0:09:25 was because the natural gas resources
0:09:26 were frozen in place more or less.
0:09:29 In other words, you couldn’t access the stored energy, right?
0:09:32 And so that’s another way that we’re looking to say,
0:09:37 well, what is a non-correlated way to store this energy
0:09:39 in such a way that we have just a really reliable,
0:09:42 robust system overall?
0:09:44 Because increasingly,
0:09:46 I’m sure we’ll talk about this on the AI front,
0:09:49 increasingly electricity is a requirement
0:09:51 to operate the modern society.
0:09:53 There’s a woman who runs a utility
0:09:56 called Portland Gas and Electric Maria Pope
0:09:58 and she’s a leader in the industry
0:10:00 and she’s fond of saying that electricity
0:10:04 may only be 2% of GDP in the United States,
0:10:06 but it’s the first 2%.
0:10:09 And, you know, everything else sort of relies on that 2%.
0:10:12 And so having different kinds of energy sort of show up
0:10:15 in ways that hasn’t been required to previously
0:10:17 becomes a really interesting and compelling
0:10:21 and fun, frankly, aspect of sort of where we are
0:10:22 in the electricity industry.
0:10:25 – So it’s almost like, I mean, just to put it very simply,
0:10:28 you know, wind turbine is generating the energy
0:10:31 from the wind, but it’s not necessarily storing it.
0:10:34 And as we increasingly rely on renewables,
0:10:37 we’re gonna need more ways to store that energy
0:10:39 in a way that, and I love that point you made that,
0:10:41 you know, the freezing weather conditions,
0:10:45 we couldn’t even access those more traditional forms
0:10:48 of energy storage, which brings us to batteries.
0:10:50 I think some people, maybe not everyone,
0:10:54 has heard of the lithium-ion battery.
0:10:57 I feel like there’s been this increased interest in lithium.
0:11:00 That’s what I understand to be the,
0:11:03 what do we wanna call it, blue chip battery
0:11:07 that we have been using for energy storage for however long.
0:11:11 You have a different battery called the iron-air battery.
0:11:16 What’s the difference between this traditional battery
0:11:18 we’ve been using for the past however many decades,
0:11:21 I actually don’t know, versus your battery,
0:11:22 the iron-air battery?
0:11:24 – Yeah, so lithium-ion has been around for some time.
0:11:28 It was sort of first discovered in the late ’70s, early ’80s.
0:11:30 There’s different variants of that battery.
0:11:33 So lithium-ion covers a class of different kinds
0:11:34 of those batteries.
0:11:37 And it was commercialized in the ’80s for camcorders.
0:11:39 So pre-cell phone, of course,
0:11:40 you had to have a dedicated device,
0:11:42 which was a shoulder-mounted camera,
0:11:45 you know, this huge bulky thing,
0:11:46 but was an enormous success commercially
0:11:49 because for the first time you were untethered,
0:11:50 you don’t have to keep this thing plugged in,
0:11:52 and you could walk around, you know,
0:11:56 your kid’s baseball game or a wedding or whatever it was,
0:11:58 and, you know, take video footage.
0:12:00 That’s why lithium-ion was commercialized.
0:12:03 And lithium-ion is a wonderful chemistry,
0:12:04 principally because of density.
0:12:06 So you can cram a lot of energy
0:12:08 in a very small amount of volume,
0:12:10 and it doesn’t weigh very much.
0:12:12 And so it enabled all these subsequent
0:12:14 consumer electronics applications,
0:12:15 the ones that we sort of take for granted today,
0:12:18 laptops and, you know, phones that fit in our pockets,
0:12:21 and they are literally right next to our existence.
0:12:23 We’re so reliant on them.
0:12:25 And so it’s no surprise that we’re also using
0:12:27 a lot of lithium-ion batteries for the electric grid
0:12:30 because it’s a proven technology.
0:12:31 It’s now being made at massive scale,
0:12:33 especially thanks to the automotive industry,
0:12:37 which is driving that scale and cost down.
0:12:40 And largely what they’re doing is helping to meet the peak
0:12:41 of the electric grid.
0:12:44 So think about the patterns of electricity consumption
0:12:46 that happened throughout the day.
0:12:48 They follow the patterns of human existence, right?
0:12:49 So very quiet at night,
0:12:51 and then they ramp up during the day,
0:12:52 and there’s a peak that you see,
0:12:54 which happens in the middle of the day,
0:12:56 when sort of activities at its greatest,
0:12:58 and then it comes down over the course of the night
0:13:00 and sort of goes to bed, if you will.
0:13:03 And historically, we’ve used coal or natural gas
0:13:05 or hydro to sort of match the cycles.
0:13:08 We turn things on and off or ramp them up or down,
0:13:10 and batteries being wonderful coming on
0:13:12 when we need them and going off when we don’t need them.
0:13:15 That’s the very first application for lithium-ion
0:13:17 on the grid as well, is to meet those peaks,
0:13:19 those relatively short duration peaks
0:13:21 that we have as an electric system.
0:13:23 Because again, we need to reconcile all of this
0:13:24 in real time, right?
0:13:26 Let’s use it or lose electricity.
0:13:29 And so having these batteries show up
0:13:31 instantaneously and provide that power
0:13:33 exactly when we need it for a few hours,
0:13:36 and then go away, that that’s a very helpful function
0:13:38 for electric storage.
0:13:42 One key feature of lithium-ion, or any direct battery really,
0:13:45 is that duration goes hand in hand with cost.
0:13:47 In other words, you can’t really separate
0:13:50 how long you discharge it from how much it costs to do that.
0:13:52 Because it all comes down to that.
0:13:57 And lithium-ion is great from an energy density standpoint
0:13:58 and from a cycle standpoint.
0:14:01 You can charge and recharge it many thousands of times now.
0:14:03 It is not so great, comparatively speaking,
0:14:04 from a cost standpoint.
0:14:07 And so for the purposes of the electric grid anyway,
0:14:10 phones and laptops and cars are quite different.
0:14:12 But from the electric grid standpoint,
0:14:15 it’s cost effective to only discharge it
0:14:16 for a few hours at a time.
0:14:17 In other words, generally between two
0:14:19 and four hours duration.
0:14:20 Anything longer than that,
0:14:22 it’s really just not cost competitive.
0:14:25 And so think about the landscape of the electric grid.
0:14:28 We have to solve all of the challenges of intermittency,
0:14:30 not just a few hours at a time.
0:14:33 We’ve got to solve for seasonal imbalances.
0:14:35 We have to solve for extreme weather
0:14:38 that sits around for a week or for four days
0:14:38 or whatever it might be.
0:14:41 And so to solve those problems,
0:14:45 we need to start to look to other types of energy storage
0:14:47 that really can be cost effective
0:14:49 over those much longer durations
0:14:51 than just a couple of hours at a time.
0:14:55 – Which brings us pretty nicely to the iron-air battery,
0:14:56 which from my understanding,
0:14:58 it lost several days in comparison.
0:15:00 – One of the reasons why we liked this technology
0:15:02 was it had been demonstrated.
0:15:05 You can rust and unrust iron reliably many times,
0:15:07 but it had never been commercialized
0:15:09 because it didn’t have a killer app.
0:15:13 It was first investigated in the 1970s in the United States
0:15:15 under actually a grant from the U.S. Department of Energy
0:15:18 to Westinghouse, which was one of the main electric entities
0:15:21 at the time, as well as a Swedish national lab
0:15:22 right around that same time as well.
0:15:25 But when they sort of dug into it,
0:15:28 iron-air batteries are not very suitable for vehicles
0:15:31 or for consumer electronics or for anything else, frankly.
0:15:33 And so it sat on the shelf relatively speaking
0:15:34 for about 50 years.
0:15:38 And when we were starting form about seven years ago,
0:15:40 we went looking for things that did exist,
0:15:41 but which had never been commercialized.
0:15:43 And we saw iron-air and we said,
0:15:46 this looks like now there is a killer app.
0:15:47 And that killer app is on the grid
0:15:49 for much longer duration
0:15:52 than any of the other technologies can go after.
0:15:55 And it’s, again, because of the cost, right?
0:15:57 If we need a certain duration to be much longer
0:15:59 to bridge those multiple days of interment,
0:16:01 say that we face where the weather volatility,
0:16:03 broadly speaking, then we have to come in
0:16:06 at a much lower cost to get that much longer duration, right?
0:16:09 That’s sort of the inevitable trade that you make.
0:16:11 And so that’s what we sort of picked up off the shelf
0:16:12 and dusted off and said,
0:16:15 now let’s apply 50 years of human knowledge
0:16:16 in electrochemistry, right?
0:16:18 Battery development, corrosion science,
0:16:19 knowledge of iron, right?
0:16:22 All these things and go commercialize that battery.
0:16:24 Not just prove that the science works,
0:16:27 but build a device at Scalva Manufacturing Facility
0:16:29 and keep the cost entitlement where it is
0:16:30 and drive performance further
0:16:33 than even what they thought they could get 50 years ago.
0:16:35 And so that’s what we’ve been doing.
0:16:37 That’s been the work of the company
0:16:41 is to really drive this commercialization of iron air
0:16:44 as a chemistry into the world for the first time.
0:16:47 – What has the demand for these batteries
0:16:50 looked like in the past couple of years?
0:16:53 It appears, I mean, especially based on the amount of funding
0:16:56 that you’ve secured that there is already
0:16:57 a serious need for these.
0:16:59 Is that what you’re experiencing on the sales end?
0:17:00 – Yeah, absolutely, and of course,
0:17:03 the picture changes quickly, relatively speaking.
0:17:05 So when we started the company, we said,
0:17:07 we’re gonna build a 100 hour battery
0:17:09 that’s one-tenth the cost of living mind.
0:17:11 And people said, a lot of people said,
0:17:14 oh, well, that’s not gonna be relevant for 20 or 30 years.
0:17:15 Good luck, right?
0:17:17 It’s gonna take forever for a market
0:17:19 to show up for that kind of thing.
0:17:22 And what very clearly fell out of that really detailed
0:17:25 analysis that we ended up doing with utilities, by the way,
0:17:29 was if you can have a 100 hour battery at the cost point,
0:17:31 ’cause those two things go together,
0:17:34 then you drive a whole new asset class
0:17:35 on the electric system,
0:17:37 and there’s a huge amount of value right now.
0:17:39 You don’t have to wait 20 or 30 years.
0:17:42 You can address pockets of that intermentancy
0:17:44 or reliability challenges or whatever else
0:17:45 they might be right now,
0:17:47 because it’s just another cost-effective asset.
0:17:49 Doesn’t even really matter.
0:17:52 And so that came out very, very clearly.
0:17:55 And we started working with these utilities.
0:17:57 So our customers are those utilities, right?
0:17:58 If you’re a customer of a utility,
0:18:00 it’s probably the name of the utility
0:18:02 that you send a bill to every month.
0:18:05 These are, this is Excel Energy in Colorado and Minnesota
0:18:07 or Georgia Power in the state of Georgia
0:18:10 or Pacific Gas and Electric, PG&E in California,
0:18:12 Dominion in Virginia, these kinds of entities
0:18:16 that are under the way the United States operates
0:18:19 these things, they’re essentially regulated monopolies.
0:18:20 So they have a natural monopoly, right?
0:18:21 They run the wires.
0:18:23 You’re not gonna have two companies
0:18:24 running wires to your house to compete.
0:18:27 So if you have blackouts, it’s their problem, right?
0:18:28 They’re their operator,
0:18:30 they’re responsible for it fundamentally,
0:18:33 and they have to keep costs under control, right?
0:18:35 It’s gotta be safe.
0:18:37 And increasingly, it has to be decarbonized.
0:18:40 And so this is sort of the challenge
0:18:42 of the last 10 years of the utility industry
0:18:44 is to figure out how to solve all of that
0:18:47 and now add on top of it, load growth,
0:18:49 which is another new challenge, relatively new challenge
0:18:51 that the industry is facing,
0:18:53 which it hasn’t had to face for the last 20 or 30 years,
0:18:54 right, load growth, right?
0:18:56 The amount of new demand for electricity
0:18:58 has been flat for the last 20 or 30 years.
0:19:00 Before that, it did grow very quickly.
0:19:03 We electrified the whole country in the United States
0:19:08 basically from zero, not basically from zero in the 1920s,
0:19:10 all the way to sort of the 1970s,
0:19:11 there was very quick load growth
0:19:13 and then sort of, you know, evened off.
0:19:16 So we have built a lot of electricity
0:19:18 sort of system capacity historically,
0:19:21 but we haven’t had to do that for the last 23 years.
0:19:23 So load growth on top is a challenge
0:19:26 that maybe the electric industry is not used to meeting.
0:19:28 It’s something that they did mean in the past,
0:19:29 but it’s a brand new challenge.
0:19:31 And you mix it in with these other ones
0:19:34 of reliability and cost and decarbonization.
0:19:35 And now it’s just, you know,
0:19:38 an even more complex set of challenges
0:19:40 that the utility needs to solve.
0:19:43 And into that mix, we’re introducing a new asset,
0:19:45 a new resource, right, a new tool, if you will,
0:19:48 for them to solve all these problems simultaneously.
0:19:51 – Yeah, I mean, this idea of energy consumption going up
0:19:55 and then being flat, and it’s just about to tick up again,
0:19:57 which I just find fascinating.
0:20:00 It seems like it’s just because of AI.
0:20:01 I did a little bit of research on this
0:20:02 in the past couple of weeks
0:20:05 and just sort of looked at per capita energy consumption
0:20:08 over the past 200 years, basically.
0:20:10 And it more or less is an exponential curve.
0:20:12 I mean, this is per capita.
0:20:14 It’s not that we have more people on earth.
0:20:16 People are consuming more energy.
0:20:20 Is that just going to continue into eternity?
0:20:23 Are humans just on a per capita basis
0:20:25 going to consume more and more and more?
0:20:26 – That’s a great question.
0:20:27 And part of the question is,
0:20:31 is that consumption being enabled by low costs, right?
0:20:33 You know, these things go hand in hand, right?
0:20:35 So if you build the highways wider,
0:20:37 do more people just show up, right?
0:20:39 ‘Cause they want to use the resource.
0:20:42 But all of human, like modern human civilization
0:20:46 is based on low cost, abundant energy.
0:20:48 That’s sort of a fundamental of the civilization
0:20:50 that we live in today.
0:20:52 And where that energy comes from, the mix of it
0:20:55 has shifted over the last 200 years.
0:20:58 So initially, of course, that energy was wood.
0:21:01 We literally burned through forests of Europe
0:21:04 that are just now essentially growing back in many ways.
0:21:06 And so we started to do fuel switching.
0:21:08 So we went from wood to coal,
0:21:10 and then from coal to more hydropower,
0:21:13 and then ultimately to other sources of hydrocarbons.
0:21:15 And we’ve been reliant on the hydrocarbons
0:21:16 for the last 100 years,
0:21:20 maybe mixing in some nuclear in there fairly recently.
0:21:22 And then now we’re pulling in more renewables.
0:21:25 So you do see a fuel switching and the numbers going up
0:21:28 because costs continue to go down, right?
0:21:31 That is a feature of the energy in the industry
0:21:34 more broadly is that despite all of that growth,
0:21:36 despite all of that demand costs, in fact,
0:21:38 continue to go down on a real basis.
0:21:42 We’ll be right back.
0:21:45 So you’ve arrived.
0:21:48 You head to the brasserie, then the terrace.
0:21:49 Cocktail?
0:21:52 Don’t mind if I do.
0:21:54 You raise your glass to another guest
0:21:58 because you both know the holidays just beginning.
0:22:01 And you’re only in Terminal 3.
0:22:04 Welcome to Virgin at the top.
0:22:06 Welcome to Virgin at the top.
0:22:08 Welcome to Virgin at the top.
0:22:11 And you’re only in Terminal 3.
0:22:13 Welcome to Virgin Atlantic’s
0:22:16 unique upper-class clubhouse experience
0:22:18 where you’ll feel like you’ve arrived
0:22:20 before you’ve taken off.
0:22:23 Virgin Atlantic, see the world differently.
0:22:29 Meet our summer collection of grillable faves
0:22:31 that come on sticks in spirals
0:22:35 with bite-sized bursts of flavor and more.
0:22:37 From pork belly bites full of barbecue flavor
0:22:39 to skewer sensations
0:22:41 that will keep the grill going for dessert.
0:22:44 Make this your best summer yet with PC.
0:22:51 It’s new, it’s blue, and it was made for you.
0:22:53 Introducing the thirst-quenching
0:22:55 summer berry Starbucks refreshers beverage
0:22:57 where natural berry flavors
0:23:00 meet juicy bursts of raspberry-flavored pearls.
0:23:02 It’s our most blutiful drink yet.
0:23:05 So try it while you can, only at Starbucks.
0:23:07 (upbeat music)
0:23:16 We’re back with First Time Founders.
0:23:19 I’d love to get an understanding
0:23:20 for how you arrived here,
0:23:24 and that is at Iron Air Battery Manufacturing,
0:23:26 one of the leading renewable energy storage
0:23:28 people in the world.
0:23:30 Just a little bit of your background.
0:23:32 You grew up in Salinas, California.
0:23:34 You went on to Harvard for undergrad.
0:23:36 You studied economics.
0:23:38 Then you made what I would consider
0:23:40 a very rare move in the world of tech,
0:23:41 which is you went to divinity school.
0:23:44 You went to Yale and you were studying
0:23:46 to become a theologian and from my understanding,
0:23:47 you wanted to be a priest.
0:23:49 Tell us about your childhood
0:23:51 and especially about that decision
0:23:52 to go to divinity school,
0:23:54 and perhaps how that may have translated
0:23:56 into your career in renewables.
0:23:58 – Yeah, so the town of Salinas,
0:23:59 where I grew up in California,
0:24:00 it’s an agricultural community.
0:24:02 So we go to lettuce, essentially.
0:24:04 That’s the primary good there.
0:24:08 And that community was totally transformed
0:24:10 when they figured out how to ship lettuce
0:24:12 from the west coast to the east coast.
0:24:13 In other words, refrigerated car,
0:24:15 or you wanna think about it, storage, right?
0:24:16 Energy storage.
0:24:19 And my parents were for public servants,
0:24:21 my dad a lawyer for farm workers,
0:24:22 my mom a teacher at public schools
0:24:25 for children of farm workers, essentially.
0:24:28 And so I saw also sort of the energy nexus, right?
0:24:31 The way that having access to low-cost energy
0:24:33 and that being a fundamental building block
0:24:34 of civilization,
0:24:38 how that intersects advantaged and disadvantaged communities
0:24:39 in some very important ways.
0:24:41 And so that has always been sort of a feature
0:24:43 of my thinking in general,
0:24:46 and went to Harvard and I studied energy economics largely.
0:24:48 And then I actually worked in the tech industry
0:24:48 for a few years after that.
0:24:50 This was the very first tech boom in Boston
0:24:52 in late ’90s, early 2000s,
0:24:57 and was largely disaffected with what I saw in that industry.
0:24:59 It seemed like it couldn’t be real,
0:25:00 and indeed that was the case.
0:25:03 And so I had a hunger to work on what I felt
0:25:05 to be more meaningful topics vocationally, professionally.
0:25:08 I like to work, I like to work hard.
0:25:10 I want that to mean something.
0:25:13 And so I also take my fifth seriously,
0:25:16 and I wanted to pursue sort of the intellectual aspects
0:25:20 of that and was open to becoming a ordained priest,
0:25:22 but found out very early on,
0:25:23 thanks to the curriculum at Yale,
0:25:27 that I’m wholly unfit to be a priest.
0:25:29 That should not be my job.
0:25:31 And so once I realized that that was just not gonna be
0:25:34 my vocation, I took those same skills
0:25:36 and tried to apply them to figure out
0:25:37 what did I want to do?
0:25:40 And energy, sort of having been a lifelong fascination
0:25:44 for me, I really sort of wanted to pursue that.
0:25:45 Now that’s a very broad topic,
0:25:47 and so I started to just do a lot of research,
0:25:50 and a lot of connections was one
0:25:52 of the wonderful parts of Harvard.
0:25:54 They used to have a book that you could literally open
0:25:56 and call people, alumni that were willing.
0:25:57 They were in the field of energy
0:25:59 that they were willing to take a call from.
0:26:00 – The manual LinkedIn.
0:26:03 – Exactly, I had to physically go to an office
0:26:07 to take down numbers and started to sort of piece together
0:26:10 a thesis, if you will, about what the energy landscape
0:26:12 was gonna look like, and even then,
0:26:15 you could see costs coming down on wind and solar.
0:26:17 They were very high compared to where they are today,
0:26:20 but the trend was definitely pointing
0:26:23 in the right direction and steep, right, steep down.
0:26:25 And so I sort of made a sector bet.
0:26:29 I basically just bet vocationally
0:26:31 that it would be an interesting field,
0:26:33 and it felt very relevant and needed
0:26:36 to have compelling types of energy storage
0:26:38 to take those renewable resources
0:26:39 that were coming down and cost so quickly.
0:26:41 Basically, I just said to myself,
0:26:43 I bet at some point batteries
0:26:45 will become relevant on the grid, and that’s what I did.
0:26:49 So I went to a company straight out of Divinity School
0:26:51 and we picked up my master’s in theology
0:26:53 and went to go work for a battery company,
0:26:55 and then that was in New York,
0:26:56 and then a few years after that,
0:26:58 I ended up at Tesla in 2009,
0:27:01 where I started what became the Tesla energy effort,
0:27:03 taking the lithium ion batteries out of the car,
0:27:05 and really, for the first time,
0:27:07 putting them on the electric grid.
0:27:09 – You worked closely with JB Straubel,
0:27:11 who was the co-founder of Tesla,
0:27:14 I believe you were working with Elon Musk too.
0:27:16 What were some of the learnings
0:27:19 from being on that rocket ship?
0:27:20 I mean, it sounds like,
0:27:22 I love you say you made the sector bet.
0:27:24 We often talk in this podcast about
0:27:25 riding the right wave,
0:27:28 picking the wave and then just riding through it.
0:27:29 You did that with that sector,
0:27:31 and you also did that with a company.
0:27:33 You went from a smallish startup
0:27:36 to one of the largest and most influential companies
0:27:37 in the world.
0:27:38 What was that experience like?
0:27:40 – Well, at the time in 2009,
0:27:42 it was definitely not one of the learnings,
0:27:44 in a most influential,
0:27:47 in fact, there was a Tesla death watch, right?
0:27:49 There was this website that was trying to predict
0:27:51 exactly when Tesla would fail,
0:27:54 because so many people were sure it was gonna fail.
0:27:57 So absolutely, it was a different moment for the company
0:28:00 and for the electric vehicle movement in general.
0:28:04 But it was, I could not think of a better place to go.
0:28:06 It was also that Tesla was like a shining light.
0:28:07 For folks who really wanted to work
0:28:11 on the hardest, most impactful problems,
0:28:12 Tesla just was like,
0:28:15 it was like moths to a flame for that place.
0:28:18 And so, Elon rightly deserves a lot of credit
0:28:21 for the vision that he set and the ambition of his goals,
0:28:24 which were just completely inspiring.
0:28:29 And the quality of the people that ended up showing up
0:28:31 is unparalleled, just spectacular.
0:28:33 And so, I got to work with JB
0:28:36 and I got to work with Elon and a bunch of other colleagues,
0:28:41 Drew, Beck Lino, and I could list many, many names there.
0:28:45 And some of the key learnings were go after hard problems,
0:28:47 you’ll get the best people to work on them, right?
0:28:48 It’s a little counterintuitive.
0:28:53 Like great people don’t want to work on mediocre challenges.
0:28:54 They want to work on hard problems.
0:28:57 They want to work on, in fact, the hardest problems.
0:29:00 And if you pick the right ones
0:29:02 and you set ambitious goals,
0:29:04 in some ways you end up with a self-fulfilling prophecy
0:29:06 on that in terms of the type of talent
0:29:08 you can bring into the company.
0:29:11 Now, getting high quality folks into the company
0:29:13 that’s step one, you’ve got to continue to motivate them
0:29:15 and drive them in the right way and everything else.
0:29:19 But absolutely, I saw that play out
0:29:21 to the company’s benefit time and time again
0:29:23 in those early days of Tesla.
0:29:24 As we went, from my time there,
0:29:28 from about 300 to 30,000 people, it was quite the sweep.
0:29:30 So that was certainly a key learning.
0:29:33 Go after the big stuff that matters, why not?
0:29:35 – But it wasn’t enough to keep you.
0:29:37 And then eventually you started your own company.
0:29:40 Why did you decide to do that?
0:29:42 – Well, as much as I saw that Lithium-Ine
0:29:44 very clearly back in 2009 when I joined Tesla
0:29:48 was going to be the next thing to come into the grid
0:29:50 in a meaningful way and have a big impact.
0:29:52 It also became clear over my time there
0:29:54 that Lithium-Ine was not the end all,
0:29:56 be all for energy storage on the grid.
0:29:59 And that was increasingly clear
0:30:01 as I talked to utility executives
0:30:04 while I was building up the Tesla energy business there.
0:30:06 They would describe these other challenges
0:30:09 that Lithium-Ine was just not gonna be able to meet.
0:30:12 Additionally, seven and a half years roughly
0:30:14 is enough time for me to spend at Tesla.
0:30:18 That’s a, you may have heard, it’s an intense place to work.
0:30:20 And so I love to work hard.
0:30:22 I love to work on what I feel matters.
0:30:24 And I’m also married and I got three kids.
0:30:27 And that was, I want to stay married
0:30:28 and be my kid’s life in the right way.
0:30:32 And so for me, that was enough.
0:30:34 And it was enough for me that it was enough.
0:30:37 I didn’t have to keep staying there.
0:30:39 And I also wanted to leave on good terms.
0:30:42 Everybody has a time at which it’s time
0:30:43 for them to leave Tesla.
0:30:45 And I saw a moment and I just said,
0:30:46 now’s a good time, right?
0:30:47 I did exactly what I wanted to do.
0:30:50 I started the Tesla energy effort and got it stood up.
0:30:53 And I’m super proud of the business that is today
0:30:56 and the role that I played early on.
0:30:57 It’s a great business.
0:31:00 And there were more things I still wanted to do,
0:31:01 specifically for energy storage,
0:31:04 precisely because I made a sector bet, not a company bet.
0:31:09 And so I saw more runway there and more opportunity
0:31:12 and frankly, more fun to go back to an earlier stage
0:31:13 and start something.
0:31:16 And I didn’t know that at the time when I left Tesla,
0:31:18 but that’s very quickly where my brain went to
0:31:20 ’cause I’ve been in the industry 20 years now.
0:31:22 It turns out I’m not very good at thinking about much else
0:31:25 other than energy storage for the electric grid.
0:31:29 So it was sort of a natural inevitability, I suppose.
0:31:33 And I also should say that I had never founded anything
0:31:36 when I became a co-founder of Form and before.
0:31:38 I had started a company just on my own
0:31:41 that ended up merging to become Form.
0:31:43 But at the same time, I was 40 years old,
0:31:45 I also knew exactly what needed to be done.
0:31:48 And so, I had zero doubt.
0:31:52 I needed some encouragement from close friends
0:31:54 and more importantly, my wife to take that step.
0:31:56 You do have to sort of take that very first step
0:31:58 and say I’m gonna be a founder on something,
0:32:02 do the incorporation and push a board,
0:32:05 make the mental commitment to go do that.
0:32:09 But I also had, once I did take that step with that support,
0:32:11 I also knew exactly what needed to be done.
0:32:13 And I still feel that way.
0:32:16 I see very clearly the path in front of the company.
0:32:19 And that’s because I’ve been doing this for a long time
0:32:21 and I’ve seen good, I’ve seen bad,
0:32:23 I’ve seen different ways to do things.
0:32:24 And I think I’ve got a pretty good sense now
0:32:27 for what works, not just for the industry,
0:32:30 how to go build a business, energy storage specifically,
0:32:31 but also for how to build an organization.
0:32:34 – You mentioned that you were a co-founder
0:32:35 and that the company merged.
0:32:36 It’s a very interesting story.
0:32:38 I mean, the original company you created
0:32:40 was a different company called Verse Energy.
0:32:43 And then you ended up combining it
0:32:45 with what I would call a competitor.
0:32:49 I mean, it was this research team out of MIT,
0:32:51 headed by this guy, Yetmit Chang,
0:32:53 who’s now your chief science officer.
0:32:55 I believe his whole team is pretty much
0:32:57 on your founding team.
0:33:00 Why did you decide to combine with someone else,
0:33:03 specifically someone who was working on the same problems
0:33:06 and thus competing with you?
0:33:10 – Yeah, this was maybe a benefit of the age
0:33:12 that I was when I started it.
0:33:15 At some point, you realize that sublimating the ego
0:33:17 is in your own benefit.
0:33:20 And I’d been before Tesla,
0:33:22 I’d been at a failed battery company.
0:33:25 We basically didn’t do anything after working hard
0:33:28 for almost five years at that entity.
0:33:30 And I wanted to make sure we gave ourselves
0:33:32 every possible chance to succeed.
0:33:35 And that included having multiple technical shots on goal
0:33:37 and having people around the table
0:33:38 from the very beginning
0:33:39 that had been through this before.
0:33:41 And so not just yet,
0:33:44 but my other co-founders, Marco, Ted and Billy,
0:33:45 we’ve all been in batteries before.
0:33:47 This was nobody’s first time around the block.
0:33:51 And so having the collected decades of knowledge
0:33:52 and wisdom and hard earned scars
0:33:56 was just too compelling to pass up.
0:33:58 And we had more than one technical shot on goal.
0:34:01 I had identified iron arrow on my own,
0:34:02 but we didn’t know at the time
0:34:05 that that was gonna succeed at all, right?
0:34:09 And so in the world, starting at this stage
0:34:12 that we did of novel R&D
0:34:14 and early stage commercialization,
0:34:17 inevitably there are several cars that you turn over
0:34:20 that’s either say, says, or it’s zeros.
0:34:23 And we’re lucky enough that on iron air,
0:34:24 we turned over enough of those early on to say,
0:34:26 yeah, this is the one that’s gonna be,
0:34:27 but you just never know.
0:34:29 As a friend of mine says,
0:34:32 sometimes the universe works the way that you want it to,
0:34:33 but you don’t know that going in, right?
0:34:36 And so bringing five co-founders,
0:34:40 which is an unusually large number of co-founders
0:34:42 made complete sense to us at the time
0:34:45 because we all got along very well, it turns out.
0:34:47 And we’re all still in the company.
0:34:50 We’re all still pulling hard on the company.
0:34:52 It’s now a huge advantage.
0:34:54 We’re 750 people and we have five founders
0:34:56 throughout all parts of the company
0:34:58 that represent the founder mentality
0:35:00 that are completely committed to the success of this company.
0:35:03 And so I can’t imagine doing it any other way,
0:35:06 being a sole founder in this kind of enterprise.
0:35:10 It’s just, it’s really, really hard.
0:35:11 None of it has been easy.
0:35:15 We’ve benefited from a ton of really hard work
0:35:18 and super smart people and some luck along the way.
0:35:21 None of it easy or given, frankly.
0:35:26 And so any company is sort of imprinted by its founders.
0:35:30 And I can’t imagine a better set of four co-founders
0:35:32 to be with on this journey from the very beginning.
0:35:35 – Yeah, I’ve heard you say elsewhere
0:35:37 that you don’t consider yourself
0:35:42 one of these kind of charismatic salesman visionary,
0:35:46 what I would call, say like an Elon Musk, Steve Jobs type.
0:35:48 And I personally, I find that refreshing
0:35:49 and the way that you describe it,
0:35:52 it sounds like from the very beginning,
0:35:55 what you’ve been leaning on is your expertise.
0:35:58 I mean, from your entire career in the industry
0:36:02 plus teaming up with four other experts in this.
0:36:04 I like it because I feel like there’s just,
0:36:05 there are a lot of leaders in tech right now
0:36:08 who I would say lean on the vision
0:36:11 which can kind of delve into blind confidence.
0:36:15 Which I think we have enough of.
0:36:17 So I’m just interested as a leader,
0:36:19 who do you look up to?
0:36:22 What, who are sort of some of your leaders
0:36:23 that are your role models?
0:36:26 Who do you try to model your behavior off of as a manager?
0:36:29 – Well, first of all, I heartily agree with your sentiment
0:36:34 that we over index to sort of the megafauna CEO founder type.
0:36:37 And I think that there’s just too many other styles
0:36:41 of effective leadership to over index on just one.
0:36:43 And so the one that I bring to the table
0:36:46 is perhaps a little bit more understated to be clear.
0:36:50 What I don’t compromise on is standard of excellence
0:36:51 that we have internally.
0:36:55 And you can drive that in a lot of different ways
0:36:56 to be clear.
0:36:58 And it doesn’t have to be, again,
0:37:00 sort of this megafauna type personality
0:37:03 that’s just hammering people from the down.
0:37:05 We hold each other to very rigorous standards.
0:37:08 And if there’s one sort of management approach
0:37:10 that I take first and foremost,
0:37:14 it’s a very immodest hoarding of talent.
0:37:16 I will completely admit to that.
0:37:20 You need to go after the absolute best people
0:37:23 for absolutely everything you possibly can.
0:37:24 And then hold them accountable, right?
0:37:26 Set the right vision and hold them accountable.
0:37:28 But I also am not a micromanager,
0:37:30 much less as Elon would say, a nanomanager.
0:37:34 I really do want to hire those great people
0:37:38 and then empower them to go do their best possible work.
0:37:43 That understated style comes from my parents,
0:37:44 to be perfectly honest.
0:37:48 I saw them be leaders in their respective fields
0:37:50 using that approach.
0:37:55 And so there perhaps is also an echo,
0:37:57 just a little bit of one,
0:38:00 from the vocation of people who are ordained
0:38:02 in the ministry, in other words,
0:38:05 how do you lead a group with humility,
0:38:07 but still with vision, right?
0:38:08 And still with the driving force.
0:38:12 We’ll be right back.
0:38:25 Looking to buy or sell a used vehicle?
0:38:27 Forget the selection and protection
0:38:29 of BCAA Auto Marketplace.
0:38:31 Try some random guy off the internet.
0:38:35 Yes, we offered zero security.
0:38:37 Plenty of questions.
0:38:41 And zero convenience.
0:38:47 BCAA Auto Marketplace helps you buy and sell vehicles.
0:38:51 Visit bcaa.com/marketplace and avoid
0:38:53 some random guy.
0:38:56 Pandora, be love.
0:38:59 What does be love mean to you?
0:39:01 I definitely would say my be love role model
0:39:03 is for sure my sister.
0:39:05 Unconditional, infinite love.
0:39:07 Something that is never ending,
0:39:09 that you know is always there.
0:39:09 Never questioned.
0:39:11 Never questioned.
0:39:14 No matter if you fall off a cliff,
0:39:16 she’s there to catch you, you know?
0:39:17 Be love.
0:39:20 Shop now at pandora.net.
0:39:22 (upbeat music)
0:39:25 At Best Western, when you stay three nights this summer,
0:39:28 you earn 10,000 bonus points.
0:39:29 And while you’re reliving
0:39:31 your summer childhood road trip memories,
0:39:33 they’re creating new ones.
0:39:36 So check into any one of our more than 2,300 hotels
0:39:39 and make more memories to look back on.
0:39:41 Here, we’ll set the scene.
0:39:44 ♪ Put the low right on me ♪
0:39:45 Life’s a trip.
0:39:48 Make the most of it at Best Western.
0:39:50 Visit bestwestern.com for terms and conditions.
0:40:00 We’re back with first time founders.
0:40:01 When we last spoke, there was this one line
0:40:04 that you mentioned to me, which I love,
0:40:05 which you said sort of guides you.
0:40:08 It’s this passage from Proverbs, quote,
0:40:11 “People will perish for lack of vision.”
0:40:12 What does that mean to you?
0:40:14 You know, it’s a stark reminder.
0:40:18 That was written at a time
0:40:20 when people were living in the desert.
0:40:24 And literally, if they didn’t all agree on the vision,
0:40:25 they would die, right?
0:40:28 And the imperative of a clear vision
0:40:30 is as relevant for the group
0:40:32 of the 750 people inside of form
0:40:35 as it was for the people, the Hebrew people
0:40:38 that first wrote that down.
0:40:40 And the company will go away.
0:40:43 It will perish if we don’t have the right vision.
0:40:45 People can go take different jobs.
0:40:46 People can go decide to do something
0:40:48 different with their life.
0:40:51 And if we don’t give them the right vision
0:40:55 and let them know today why they’re working on the thing
0:40:55 that they’re working on
0:40:58 and why it matters in a broader context,
0:40:59 the company will perish.
0:41:00 It’s as simple as that.
0:41:02 And so it’s a stark reminder
0:41:06 of sort of the existential requirement, in fact,
0:41:08 especially if you’re starting something brand new
0:41:11 from scratch, creating a category inside of an industry
0:41:13 that’s relatively nascent, right?
0:41:17 Not to mention a company doing something new
0:41:19 to provide that vision
0:41:22 and to be very clear about why we’re here
0:41:24 and why this group of humans gets together
0:41:25 on a regular basis.
0:41:30 In fact, on a daily basis to work on a common goal.
0:41:32 It’s also a reminder to be humble
0:41:35 in service of that vision, right?
0:41:36 It is not about me.
0:41:37 It’s not about the management team.
0:41:39 It’s about the vision that we’re setting as a company
0:41:41 and the impact that we hope to go have.
0:41:44 It almost goes beyond just the company
0:41:47 because one thing we haven’t mentioned yet is climate.
0:41:51 And, you know, this was one of the main reasons
0:41:53 I assume that you started this.
0:41:55 I mean, much of the upside in your company
0:41:57 is that it will address climate change.
0:42:00 I and our batteries are a way to store energy
0:42:02 without relying on fossil fuels.
0:42:06 And the data is just getting bad and scary.
0:42:08 I mean, one start I pulled here
0:42:13 is that NASA confirmed that 2023 was the warmest year ever.
0:42:18 So, to what extent is the existential threat of climate
0:42:21 also a motivating factor?
0:42:24 In addition to the possibility that your company
0:42:28 as with any company could perish if sales drop off.
0:42:30 – Yeah, that’s a different sort of level
0:42:32 of thinking about perishing, that’s for sure.
0:42:37 But it’s a huge motivator to be clear
0:42:41 and it’s also tied to something I said earlier
0:42:43 which is that cheap abundant energy
0:42:46 underpins human civilization broadly speaking today.
0:42:48 And that fact is not going away.
0:42:53 And so we need to figure out how we will drive
0:42:56 the energy industry forward in a way that solves
0:42:59 for everybody, right, in the end.
0:43:03 And yes, it absolutely means meeting the climate challenges
0:43:05 that we have and the decarbonization challenges
0:43:07 that we have and still providing reliable
0:43:10 low cost abundant energy, no matter what.
0:43:13 And that is not a switch we can flip overnight.
0:43:16 It’s not, nobody has a wand to sort of make things better
0:43:19 immediately, it will take innovation
0:43:21 and it will take innovation at scale
0:43:24 and it will take massive amounts of capital.
0:43:26 I don’t know if you saw this, but roughly
0:43:29 between a hundred and 150 trillion dollars of capital
0:43:33 will go into this broad change that will happen
0:43:35 over the next 40 or 50 years.
0:43:38 It’s a little incredible, like literally incredible, right?
0:43:40 It’s hard to imagine.
0:43:42 And so we need to be able to meet the scale
0:43:45 of that challenge in a lot of different ways.
0:43:48 And absolutely we see that this kind of storage
0:43:53 can be a critical tool to enabling that change to happen
0:43:55 in a way that solves for a lot of people,
0:43:58 meets the climate goals, meets the energy goals,
0:44:00 meets the reliability goals, right,
0:44:02 that we have for this stuff.
0:44:05 And so it’s a huge motivating factor
0:44:07 in the broader context of just the scope
0:44:10 and scale of this industry, this energy industry
0:44:12 and within that the electricity industry
0:44:13 that we happen to work on.
0:44:15 – If there’s one thing that you think
0:44:17 regular people should know about
0:44:18 the state of our climate today.
0:44:21 I mean, I just mentioned last year was very warm,
0:44:26 but I feel like these stats often don’t ring true for people.
0:44:29 I think it’s hard to feel that impending doom.
0:44:31 And I think there’s a lot of psychological research
0:44:34 on that issue, but if there’s one thing
0:44:36 you think people should know about climate today
0:44:39 and where we’re at right now, what would it be?
0:44:41 – Well, I guess I’ll say two things.
0:44:44 One, the volatility of the weather is also increasing.
0:44:46 So that if you look at the incidents,
0:44:50 this is from the NOAA, the National Oceanic
0:44:53 and Administrative Entity that tracks these things.
0:44:56 If you look at the number of multi-day,
0:44:59 highly volatile weather events that are driving
0:45:02 essentially dollars of damage in the United States,
0:45:05 they’re going up pretty significantly.
0:45:07 They don’t have a pithy stat to sort of give to you,
0:45:10 but I’ve seen the chart and it’s definitely open
0:45:11 to the right there.
0:45:14 That’s important to keep in mind.
0:45:16 A changing climate, it means a lot of things.
0:45:20 However, we experience it as weather in the end, right?
0:45:22 And that weather will be more volatile for us.
0:45:24 We’ll have to sort of think about that.
0:45:27 And specifically for a lot of people,
0:45:31 it means water volatility, either too much or too little.
0:45:36 And what that means to civilization is quite important.
0:45:40 Now, the other part of that is,
0:45:43 it’s important to have a sense of agency in this
0:45:46 because sometimes $150 billion or two degrees Celsius
0:45:47 or any of these other things,
0:45:51 they’re sort of so abstract as to be unrelatable.
0:45:53 And I think it’s important to understand
0:45:54 the scope of the challenge.
0:45:56 It seems really, really big.
0:45:57 And remember that humans,
0:45:59 whenever we decide to do something,
0:46:02 we pretty much do it collectively.
0:46:04 Look at every sort of energy transition age
0:46:05 that we’ve been through.
0:46:07 I mentioned the fuel substitution.
0:46:08 That has happened.
0:46:10 We have done it.
0:46:12 We have been in periods before when we said
0:46:13 surely we’re gonna run out of energy.
0:46:15 Surely we can’t keep going in this way.
0:46:17 And you run the numbers in a linear fashion
0:46:18 and that’s all true.
0:46:20 And innovation steps in.
0:46:24 And human will to succeed steps in.
0:46:26 And we’ve seen that pattern over and over and over again.
0:46:30 And so I have a ton of faith based on the evidence
0:46:33 that I see that that will continue to be true
0:46:36 and that we collectively as a civilization
0:46:38 will step up and meet the needs.
0:46:41 And we’ll do that because people from all walks of life
0:46:45 in all ways that they intersect energy broadly speaking
0:46:46 will want that to be true.
0:46:48 – If you had one piece of advice
0:46:50 that you had to give to your former self
0:46:53 when you were starting the company, what would it be?
0:46:54 – Go do it.
0:46:58 I really didn’t know that I was gonna start a company.
0:47:01 And it took me some months to decide whether or not
0:47:03 I mentioned good advice from friends
0:47:06 and support from my wife that were critical to do it.
0:47:09 And it has been harder than expected
0:47:14 to be perfectly honest and more fulfilling at the same time.
0:47:19 And I think you just really never know going into it
0:47:21 what the journey is gonna look like.
0:47:24 And sometimes you just still need that encouragement.
0:47:27 And you sort of would like to ask your future self,
0:47:28 is this gonna be worth it?
0:47:30 And I think the answer unequivocally is yes,
0:47:32 and in different ways than you expect, right?
0:47:33 So go do it.
0:47:36 It’s not that much risk in the end, right?
0:47:39 I think collectively people are probably too risk-averse,
0:47:41 especially when it comes to their vocations.
0:47:43 I’m fortunate I come from a stable family
0:47:47 and they always support me and love me.
0:47:50 But even still, I think professionally,
0:47:52 people take far too few risks.
0:47:55 – Matteo Haramio is the founder and CEO of Form Energy.
0:47:58 Matteo, I would love to talk for hours more,
0:48:00 but I know you need to go build some iron-air batteries.
0:48:01 So we’ll let you go.
0:48:02 – Thanks very much, Eddie.
0:48:03 It was great to chat.
0:48:06 (upbeat music)
0:48:09 – Our producer is Claire Miller.
0:48:11 Our associate producer is Allison Weiss.
0:48:13 And our engineer is Benjamin Spencer.
0:48:15 Jason Stavars and Catherine Dillon
0:48:17 are our executive producers.
0:48:19 Thank you for listening to First Time Founders
0:48:20 from the Vox Media Podcast Network.
0:48:23 Tune in tomorrow for Procure Markets.
0:48:25 (upbeat music)
0:48:28 (upbeat music)
0:48:31 (upbeat music)
0:48:33 (upbeat music)

0:00:02 Support for the show comes from AWS.
0:00:04 To support the future of AI,
0:00:05 Amazon Web Services is launching
0:00:07 their global generative AI accelerator,
0:00:10 part of a $230 million commitment
0:00:12 designed to accelerate the next generation
0:00:13 of generative AI startups.
0:00:15 Out of thousands of applicants,
0:00:17 AWS will select 80 of the most promising startups
0:00:20 to receive up to $1 million in AWS credits
0:00:23 and the resources they need to shape the future of AI.
0:00:26 Applications close on July 19th.
0:00:30 Learn more and apply now at startups.aws.
0:00:35 Hey, this is Sean Elling.
0:00:36 This week on the Gray Area,
0:00:37 I talked with John Gans
0:00:41 about the strange politics of the early 1990s
0:00:44 and how they laid the groundwork for our current dysfunction.
0:00:46 What the right-wing populist
0:00:50 or this mafia populism acknowledges about society
0:00:54 is like there are intrinsic tensions
0:00:56 and we’re just gonna fight and win.
0:00:58 That’s This Week on the Gray Area.
0:01:00 Available wherever you get your podcasts.
0:01:04 – Welcome to the PropG Pods Office Hours.
0:01:07 This is the part of the show where we answer questions
0:01:08 about business, big tech entrepreneurship
0:01:10 and whatever else is on your mind.
0:01:11 – Hey, Prof. G.
0:01:12 – Hey, Scott and team.
0:01:13 – Hey, Scott.
0:01:14 – Hi, Prof. G.
0:01:15 – Hey, Prof. G.
0:01:15 – Hey, Prof. G.
0:01:16 – Hi, Professor G.
0:01:18 – Now, the last week’s Office Hours,
0:01:21 we talked about Tesla, early career advice and mentorship.
0:01:24 – I’ve served on a bunch of boards.
0:01:27 The most difficult thing, hands down, is compensation.
0:01:30 Do your best to try and take the worst part
0:01:33 of other people’s jobs off their plates
0:01:34 such that you become indispensable to them
0:01:36 ’cause if you make the life easier,
0:01:38 you’re gonna be indispensable.
0:01:41 I never explicitly asked anyone to be my mentor.
0:01:43 What I did was I would call people or I would say,
0:01:44 can I take you out to coffee?
0:01:47 I’d love your advice on some stuff.
0:01:48 – Today, we’ll answer your questions
0:01:49 surrounding the defense industry,
0:01:52 why greatness is in the agency of others
0:01:55 and how to act if your partner makes more money than you.
0:01:58 I have not seen or heard these questions.
0:02:01 So with that, question number one.
0:02:04 – Hi, Scott.
0:02:06 In the Pentagon, where I work as an advisor,
0:02:09 there’s a lot of interest in defense tech these days.
0:02:11 Whether it’s autonomous robotic hardware,
0:02:13 software architectures for common control
0:02:16 of uncrewed platforms or AI sales pitches
0:02:19 on everything from smart weapons to mission planning aids,
0:02:22 tech is all over my conversations.
0:02:25 While some of the typical big tech players are active here,
0:02:27 there’s also increasingly a bespoke ecosystem
0:02:31 of defense tech venture seeding defense tech startups.
0:02:34 Yet duty is not a normal customer.
0:02:36 It can buy in weird and unpredictable ways.
0:02:38 It’s often asking for products
0:02:40 that have limited commercial application
0:02:42 and it can struggle in innovation investments
0:02:45 to get venture backed companies over the valley of death.
0:02:48 I’m curious what your sense of this market is
0:02:49 and how I can help leaders
0:02:51 that are understanding the business side
0:02:53 of the defense tech marketplace.
0:02:54 Thank you.
0:02:57 – Thanks for your question and your service,
0:02:58 working as an advisor.
0:02:59 I don’t know what that means.
0:03:02 I don’t know if you’re a lobbyist for general dynamics
0:03:07 or Northrop Grumman or if you’re a general.
0:03:11 Anyways, so in some, this is a great business
0:03:16 ’cause the world is an insecure, hostile, violent place
0:03:18 and military spending is reaching new highs
0:03:20 according to the Stockholm International
0:03:22 Peace Research Institute.
0:03:25 Countries spend a record total of 2.4 trillion
0:03:28 on defense in 2023.
0:03:29 In global military spending,
0:03:32 the US accounted for 37% over a third followed
0:03:36 by China with 12%, Russia with 4.5%
0:03:38 and India with 3.4%.
0:03:41 Why the increase in global military spending?
0:03:43 Experts say it’s due to evolving geopolitical risks,
0:03:47 including Russia’s invasion of Ukraine.
0:03:50 So as a result of the spike in military spending,
0:03:54 the defense industry is hiring a new financial times report
0:03:56 which includes a survey of nearly 20 US
0:03:59 and European companies in the military sector,
0:04:03 the defense sector reveals there’s a kind of a war on talent
0:04:04 to find defense industry workers.
0:04:07 It’s being called unprecedented.
0:04:08 Ooh, that’s a big word.
0:04:10 In fact, global defense companies are hiring
0:04:13 at their fastest pace since the end of the Cold War.
0:04:14 It’s a really good business.
0:04:16 And I think there’s a huge opportunity
0:04:21 because a lot of these companies, at least for a while,
0:04:23 I’ll think warming up to like to virtue signal
0:04:24 and pretend they’re more woke,
0:04:26 they’re left-wing than they are
0:04:28 and don’t wanna take shit from their employees
0:04:30 by working on the defense industry.
0:04:34 And the reality is, and I believe that the far right
0:04:36 wants to spend money on the military
0:04:38 no matter what without being very thoughtful about it,
0:04:43 including approving capital for a class of warships
0:04:44 that make apps of fucking literally no sense
0:04:47 because, in fact, it creates jobs in their district.
0:04:49 So there’s definitely some weaponization of weapons,
0:04:50 if you will.
0:04:52 And people on the far right
0:04:54 see voting on every single military contract
0:04:56 is showing their macho.
0:04:58 And then people on the far left
0:05:00 are totally unrealistic and naive about the fact
0:05:01 that there are a lot of people out there
0:05:04 that if and when they can take our Netflix and Espresso
0:05:07 from us and kill us, they will, in fact, do that.
0:05:12 So there is, I think, generally an increasing recognition
0:05:14 that the world is becoming,
0:05:16 it feels like increasingly insecure
0:05:19 and all of that leads to increased military spending.
0:05:21 I also think you’re gonna see Japan and Germany
0:05:23 dramatically increase their military spending.
0:05:27 So I would bet that this would be a fantastic place
0:05:30 to start a company and a fantastic place to work.
0:05:34 And these companies always tend to make more money every year.
0:05:37 They’re slow, boring companies that,
0:05:40 as military spending has consistently gone up,
0:05:41 these companies do really well.
0:05:44 Also, unfortunately, I think it favors incumbents.
0:05:45 I would imagine there’s some smart people
0:05:48 in the Pentagon looking for new technologies.
0:05:50 But this is a capital intensive business.
0:05:52 And also I would think that big tech
0:05:54 would be sort of out of central casting
0:05:56 because they know how to weaponize Washington.
0:05:59 And that is my understanding is getting a military contract
0:06:02 requires a tremendous amount of bureaucratic
0:06:05 or administrative hurdles to clear.
0:06:09 And it probably also helps to have your local Congressperson
0:06:12 leaning on people at the Pentagon to get you audience
0:06:14 with the right purchasing or procurement people.
0:06:17 You also, I think it would be a long sale cycle.
0:06:20 But once you’re in, you probably are in for a while.
0:06:24 All of that spells to me incumbents and big players.
0:06:27 So just as there are capital allocators
0:06:29 that have a certain amount of capital allocated
0:06:31 for new fund managers, I would hope that the Pentagon
0:06:34 has a certain amount of capital for new technologies
0:06:35 or smaller companies.
0:06:37 But I think this is a great business.
0:06:40 And in sum, I’m very bullish on it.
0:06:41 Appreciate the question.
0:06:43 – Question number two.
0:06:46 – Hey, Prof. G, this is Solomon from Chicago.
0:06:49 I want to start by expressing my deep gratitude.
0:06:51 Your podcast inspired me during a challenging period
0:06:54 when I was disillusioned with my life and career paths.
0:06:56 Your pod made business concepts so accessible
0:06:59 and showed how value creation could truly uplift communities.
0:07:00 Thanks to your influence,
0:07:02 I just graduated top of my class with an MBA
0:07:04 and a program associated with two
0:07:06 of the top business schools in the world.
0:07:08 Instead of pursuing consulting or investment banking,
0:07:11 I’ve chosen to start businesses on the south side of Chicago
0:07:13 to promote economic renewal.
0:07:15 My question revolves around your powerful statement,
0:07:17 greatness is in the agency of others.
0:07:19 Our first business has been well received
0:07:23 and I recognize a critical need to empower others to lead.
0:07:24 What are the top two principles you follow
0:07:26 when investing in your people,
0:07:28 ensuring both the success of your businesses
0:07:31 and the personal growth of your team members?
0:07:33 Also, how do you course correct
0:07:35 when things with an employee are not going well?
0:07:39 P.S. I’m 33 and a father of three young children.
0:07:41 Your wisdom on fatherhood and relationships
0:07:43 have profoundly impacted me as well.
0:07:44 Thank you for everything.
0:07:48 – That’s a really thoughtful and generous question/comment.
0:07:50 So thanks very much.
0:07:53 So, okay, greatness in the agency of others.
0:07:55 If you wanna be a solo practitioner
0:07:57 and not manage other people,
0:07:58 you can make a good living,
0:07:59 but you’re never gonna have real influence
0:08:01 or real economic security.
0:08:04 I’ve always thought my confidence is storytelling,
0:08:06 but my superpower is the ability
0:08:09 to attract and retain talented people
0:08:11 who bring scale to what we do here.
0:08:14 And whether it was my first consulting firm or L2
0:08:15 or this firm,
0:08:17 I could just point to several,
0:08:22 usually young people who are just so extraordinarily talented
0:08:24 and that I’m kind of the jockey,
0:08:25 I don’t know what the term is,
0:08:28 or the pilot flying fucking F-15
0:08:29 and they’re one person’s the engine,
0:08:31 the other person’s the avionics,
0:08:33 but they’re really the aircraft
0:08:36 and I’m just occasionally, I have control of the joystick.
0:08:38 But your question is all right.
0:08:40 So what are the two principles
0:08:42 you follow in investing in your people?
0:08:44 Okay, this is not aspirational.
0:08:46 One, at L2, we were very analytical
0:08:48 and we kind of evaluated the majority of the people
0:08:51 and we said who are the kind of the superstars
0:08:53 or the people who are in the top 10%.
0:08:56 I don’t have what I’d call an aspirational view of HR
0:08:58 where everyone can work out,
0:09:00 it’s about finding the right role for them
0:09:02 or getting them the right mentor.
0:09:05 First off, I just believe interviewing is not a waste
0:09:08 but nearly a waste and that references are everything.
0:09:10 So if somebody I trust calls me
0:09:14 and says this person is fantastic, you should hire them,
0:09:16 they could come in for an interview
0:09:17 and throw up on themselves
0:09:19 and I would probably hire them.
0:09:20 Why?
0:09:21 I get fooled all the time.
0:09:23 I find there’s almost no,
0:09:24 occasionally you meet someone who’s so outstanding
0:09:25 you think this person would be good
0:09:26 and occasionally you just think,
0:09:28 okay, this just isn’t gonna work.
0:09:30 But for the most part, interviews are,
0:09:32 I find a very difficult way to evaluate employees.
0:09:35 So I’m an entirely a reference hire person
0:09:37 and if it’s someone who we don’t have a reference on,
0:09:41 we will spend a lot of time diligence in that person
0:09:43 and maybe even asking them to do the work
0:09:45 on a contract basis before we hire them full time.
0:09:47 Because firing people is hard,
0:09:49 emotionally taxing and expensive.
0:09:51 And also it’s one of the keys
0:09:53 to building a strong organization.
0:09:55 And that is, I have never,
0:09:58 well actually twice I fired someone too soon
0:10:01 but in a small company, it is Vietnam.
0:10:03 It’s hand in combat and you don’t have the technology,
0:10:06 the resources or the bandwidth to solve problems.
0:10:08 And if people aren’t working out,
0:10:10 you need to move them along.
0:10:13 And I’ve always been very much, okay, this isn’t working.
0:10:16 Here are the metrics you need to hit.
0:10:19 And if it doesn’t work, we’re gonna have to let you go.
0:10:23 I let go of a lot of people over the course of my career.
0:10:25 And I find that it’s just as important as hiring
0:10:27 because everyone in your organization
0:10:29 should be able to look left, look right
0:10:30 and not necessarily like that person
0:10:32 but understand why they’re there.
0:10:34 And it’s demoralizing to people
0:10:36 when people are underperforming or just not very good.
0:10:38 And they get to enjoy employment
0:10:40 and most of the same benefits they’re enjoying.
0:10:43 So what’s the point of committing and being excellent?
0:10:47 Anyways, so a couple of just hacks.
0:10:50 I typically identify what I call the superstars
0:10:53 and I overcompensate them and try and give them,
0:10:55 make it very difficult for them to ever leave
0:10:58 ’cause my general rule and I’m being a little bit cynical
0:11:01 is that 10% of the employees at 120% of the value
0:11:03 and the other 90% are negative 20.
0:11:05 Now you can’t have all the players.
0:11:06 You’re going to have some people
0:11:07 that just help scale the company
0:11:10 and A players wanna get paid a lot and have a lot of equity
0:11:11 so it’s hard to build an organization
0:11:13 just around A players.
0:11:16 The other thing I try to do is,
0:11:18 I believe people come to work to develop economic security
0:11:19 for them and their families.
0:11:21 The other thing I try to do is make sure
0:11:24 they feel appreciated on what I call more psychic
0:11:26 or more of the softer stuff.
0:11:27 And that is you try to get to know them,
0:11:30 try to understand what you think their objectives are
0:11:33 personally and show that or demonstrate
0:11:35 that you are making an effort
0:11:37 to try and foot to those objectives
0:11:40 and also give them the sense that if you do well,
0:11:41 they’re gonna do really well.
0:11:44 So I, for example, we have a big podcast deal with Vox.
0:11:46 I have mutualized that deal
0:11:50 and I’m giving everyone in Prodigy Media a percentage of that.
0:11:52 Now, were they involved in the initial deal?
0:11:54 Do they work on my podcast at Vox?
0:11:56 Some do, some don’t.
0:11:57 But I want them to feel that one,
0:11:59 I am very good at what I do
0:12:01 and if that results in economic upside,
0:12:03 they will participate in it.
0:12:08 So one, holding people accountable, demonstrating excellence
0:12:11 and also empathy, saying I’m gonna get to know you,
0:12:12 I’m gonna understand you
0:12:15 and I’m gonna try and get you the economic security
0:12:17 such that at some point you can have
0:12:19 the same type of enjoyment and time with family
0:12:22 that I’ve registered and that we’re in this together.
0:12:24 If I’m successful, you’re gonna be successful.
0:12:29 But the key is finding and retaining the best employees
0:12:30 ’cause again, as you reference,
0:12:34 greatness is in the agency of others.
0:12:36 We have one quick break before our final question.
0:12:37 Stay with us.
0:12:43 Support for Prodigy comes from NetSuite.
0:12:46 Your business can’t succeed if cost spiral out of control.
0:12:47 But if you wanna actually grow,
0:12:49 you have to keep your eye on a lot more than that.
0:12:51 There’s a zillion tasks to keep track of
0:12:54 and to-do lists that are always changing.
0:12:57 It’s a headache, but there may be a solution out there.
0:12:59 NetSuite can help give you a bird’s-eye view
0:13:01 of everything your business needs to thrive.
0:13:03 NetSuite is a top-rated financial system
0:13:05 bringing accounting, financial management,
0:13:09 inventory, HR into one platform and one source of truth.
0:13:11 With NetSuite, you can reduce IT costs
0:13:13 because NetSuite lives in the cloud
0:13:17 with no hardware required, accessible from anywhere.
0:13:19 You can cut the cost of maintaining multiple systems
0:13:21 because you’ve got one unified business management suite.
0:13:25 Plus, NetSuite can help you improve efficiency
0:13:27 by bringing all your major business processes
0:13:30 into one platform slashing manual tasks and errors.
0:13:32 Over 37,000 companies
0:13:34 have already made the move to NetSuite.
0:13:36 By popular demand, NetSuite has extended
0:13:38 its one-of-a-kind flexible financing program
0:13:40 for a few more weeks.
0:13:45 Head to netsuite.com/prof, netsuite.com/prof,
0:13:48 netsuite.com/prof.
0:13:53 Support for the show comes from Mint Mobile.
0:13:54 Getting rid of your pricey phone bill
0:13:57 could free up a lot of room in your summer budget.
0:13:59 It could mean extra snacks for your road trip
0:14:02 or one of those splurgey overpriced martinis on a night out.
0:14:04 Whatever your plans this summer,
0:14:06 Mint Mobile could help you keep a bit more cash
0:14:08 in your pocket.
0:14:09 By switching to Mint Mobile,
0:14:11 you get three months of premium wireless service
0:14:13 for just 15 bucks a month.
0:14:15 All their plans come with high-speed data
0:14:17 and unlimited talk and text delivered
0:14:19 on the nation’s largest 5G network.
0:14:21 You can use your own phone with any Mint Mobile plan
0:14:22 and bring your phone number
0:14:25 along with all your existing contacts.
0:14:26 To get this new customer offer
0:14:29 and your new three-month premium wireless plan
0:14:31 for just 15 bucks a month,
0:14:33 go to mintmobile.com/profg.
0:14:35 That’s mintmobile.com/profg.
0:14:38 Cut your wireless bill to 15 bucks a month
0:14:41 at mintmobile.com/profg.
0:14:44 $45 up-from-payment required equivalent to $15 per month.
0:14:47 New customers on first three-month plan only.
0:14:50 Speeds slower above 40 gigabytes on unlimited plan.
0:14:53 Additional taxes, fees, and restrictions apply
0:14:55 to seeing Mint Mobile for details.
0:14:59 Support for PropG comes from Masterclass.
0:15:00 If you’re a creative who’s tired of staring
0:15:02 at that blinking cursor or a burgeoning chef
0:15:04 looking for better knife skills,
0:15:06 or maybe even an entrepreneur with a fresh idea
0:15:08 that just needs to be sharpened,
0:15:10 then you might want to try out Masterclass
0:15:12 for that jolt of inspiration.
0:15:14 Masterclass is the streaming platform
0:15:15 where you can learn and grow
0:15:18 with more than 200 of the world’s greatest minds and creators.
0:15:20 For just $10 a month,
0:15:21 an annual membership with Masterclass
0:15:24 gets you unlimited access to every instructor
0:15:26 so you can learn from the best to become your best.
0:15:28 Study filmmaking with Jody Foster,
0:15:30 songwriting with John Legend,
0:15:32 philosophy with Cornell West, photography
0:15:35 with Andy Leibovitz, and hundreds more.
0:15:37 I got a chance to check out Masterclass myself.
0:15:40 I listened to the Masterclass with Bob Iger,
0:15:41 and I enjoyed it.
0:15:42 I enjoyed learning about leadership
0:15:43 and managing creatives.
0:15:47 Right now, our listeners can get an additional 15% off
0:15:51 any annual membership at masterclass.com/profg.
0:15:55 That’s 15% off at masterclass.com/profg.
0:15:58 Masterclass.com/profg.
0:16:03 Welcome back, question number three.
0:16:04 – Hi, Scott.
0:16:06 My name is Brock, and I’m from New York City.
0:16:08 For your office hours podcast,
0:16:09 I have a question that might resonate
0:16:12 with many millennial men.
0:16:14 In an era where we celebrate equal pay
0:16:16 in women’s empowerment and the workforce,
0:16:18 some of us find ourselves earning less
0:16:20 than our female partners.
0:16:22 While I wholeheartedly support my partner,
0:16:23 there are moments when this reality
0:16:25 leaves me with a sense of falling short,
0:16:27 given the traditional expectations of men
0:16:30 tied to financial success in our culture.
0:16:32 My question to you is,
0:16:34 have you encountered such a situation in your life,
0:16:37 and what advice would you give young men like me
0:16:39 to be supportive partners without feeling insecure
0:16:41 about a financial standing?
0:16:43 Best regards, Brock.
0:16:46 – This is such a good question, Ian.
0:16:49 It’s a question on a lot of people’s minds, men and women,
0:16:52 and I appreciate that you have the confidence
0:16:52 to ask this question.
0:16:53 According to Pew Research,
0:16:55 29% of heterosexual marriages,
0:16:59 women and men, earn about the same, about 60,000 each.
0:17:01 In 55% of heterosexual marriages,
0:17:03 men are the primary breadwinners,
0:17:06 earning a median of $96,000 to their wives, $30,000.
0:17:08 In 16% of marriages,
0:17:11 wives out earn their husbands as the primary breadwinner,
0:17:15 earning a median of $88,000 to their husbands, $35,000.
0:17:17 50 years ago, in contrast,
0:17:20 husbands with a sole breadwinner and 49% of marriages today,
0:17:23 that share is just 23%.
0:17:26 So women’s contributions have grown,
0:17:28 but men are still seen and expected
0:17:29 to be the financial providers.
0:17:32 According to Pew, again, 71% of American adults
0:17:34 say it’s very important for a man
0:17:36 to be able to support a family financially,
0:17:38 to be a good husband partner,
0:17:40 whereas just 32% say the same thing about women.
0:17:43 And some men are expected to be providers,
0:17:46 regardless of how many subscriptions the Atlantic you have,
0:17:47 or how much you read The New York Times,
0:17:49 or whoever you listen to.
0:17:50 I also think that there are,
0:17:55 there’s some evidence that this has real impact on marriages.
0:17:57 There’s data showing that when the woman
0:18:00 in the relationship starts earning more than the man,
0:18:03 the man is more likely to use erectile dysfunction drugs.
0:18:05 They become much more likely to get divorced.
0:18:06 Now, some of that might not be
0:18:08 that the woman’s disappointed in the man,
0:18:11 it might be the man’s insecurities.
0:18:14 But we’re definitely in kind of not uncharted waters here,
0:18:16 but new waters, because I think a big part
0:18:20 of a man’s identity and self-worth comes not only from him,
0:18:23 but from the world perceiving him as a good provider.
0:18:26 I think you need alignment with your partner around finances
0:18:29 who’s responsible for making the money,
0:18:31 what’s our approach to spending.
0:18:33 In terms of women making more money than men,
0:18:35 it’s bound to happen.
0:18:40 One, more women are attending college now than men.
0:18:42 And two thirds of jobs now require a college degree.
0:18:45 The highest paying industry is generally want someone
0:18:48 with a college degree and you do acquire certain skills
0:18:49 and contacts in college.
0:18:52 So women quite frankly deserve to be making more money
0:18:55 than men in urban metros in the United States.
0:18:57 People under the age of 30, women are now,
0:19:00 in most of those cities making more money than the men
0:19:02 because they come more credentialed,
0:19:05 more single women owned homes than single men.
0:19:06 This is a good thing.
0:19:07 This is a good thing.
0:19:11 And what we need to acknowledge though,
0:19:13 is that this is gonna have a real impact
0:19:15 on household formation.
0:19:18 One, because men may associate economically
0:19:20 horizontally and down, women horizontally and up.
0:19:23 And when the pool of horizontal and up
0:19:25 gets smaller and smaller, it means more
0:19:27 or fewer and fewer young people
0:19:28 are going to find a partner.
0:19:31 They find economically and emotionally viable.
0:19:32 I women are gonna have a tougher time finding
0:19:35 economically and emotionally viable men.
0:19:36 And there’s gonna be less household formation,
0:19:39 lower birth rates, more loneliness.
0:19:41 I don’t have a silver bullet here.
0:19:45 What I do think we need are more and more
0:19:48 social programs and tax policy
0:19:51 that put more money in the pockets of young people.
0:19:53 As it relates to you, you’re obviously doing well.
0:19:56 The fact that your wife is earning more than you,
0:19:58 I think should be celebrated.
0:19:59 I think part of being a man
0:20:02 is taking economic responsibility for your household.
0:20:04 But part of that is recognizing
0:20:07 that your wife can be a great earner.
0:20:10 When my kids were born, I was working all the time.
0:20:13 And my wife was working at Goldman.
0:20:15 And then when her career started to take off,
0:20:18 I would make sure I could get home for bath time.
0:20:19 I was there for the nanny in the morning.
0:20:21 If the kids got sick, I stayed home
0:20:23 because my wife was a baller
0:20:25 and everybody needs a stage
0:20:27 on which other people applaud for them.
0:20:30 And I tried to be as supportive as possible.
0:20:33 What I do see is some men who can’t handle
0:20:36 or feel threatened by their wife’s professional success.
0:20:39 And meanwhile, they’re not as good professionally as they are.
0:20:42 That bullshit won’t haunt.
0:20:45 So look, I’m not suggesting that there’s a silver bullet here
0:20:48 other than to say the world is changing
0:20:51 and that your sense of masculinity
0:20:52 around being a provider, a protector,
0:20:55 and a procreator is still there.
0:20:56 I appreciate the question.
0:20:58 That’s all for this episode.
0:21:00 If you’d like to submit a question,
0:21:03 please email a voice recording to officehours@propertymedia.com.
0:21:06 Again, that’s officehours@propertymedia.com.
0:21:17 This episode was produced by Caroline Shagren.
0:21:20 Jennifer Sanchez is our associate producer
0:21:22 and Drew Burroughs is our technical director.
0:21:23 Thank you for listening to “The PropG Pod”
0:21:25 from the Box Media Podcast Network.
0:21:27 We will catch you on Saturday for “No Mercy, No Malice”
0:21:29 as read by George Hahn.
0:21:32 And please follow our “PropG Markets” pod.
0:21:35 Again, that’s the “PropG Markets” pod and subscribe
0:21:37 wherever you get your pods for new episodes
0:21:39 every Monday and Thursday.
0:21:41 You won’t get these episodes unless you subscribe
0:21:43 to the “PropG Markets” pod.

0:00:02 Support for the show comes from AWS.
0:00:04 To support the future of AI,
0:00:05 Amazon Web Services is launching
0:00:07 their global Generative AI Accelerator,
0:00:10 part of a $230 million commitment
0:00:12 designed to accelerate the next generation
0:00:13 of Generative AI startups.
0:00:15 Out of thousands of applicants,
0:00:17 AWS will select 80 of the most promising startups
0:00:20 to receive up to $1 million in AWS credits
0:00:23 and the resources they need to shape the future of AI.
0:00:26 Applications close on July 19th.
0:00:30 Learn more and apply now at startups.aws.
0:00:34 – So you’ve arrived.
0:00:37 You head to the Brasserie, then the terrace.
0:00:38 Cocktail?
0:00:41 Don’t mind if I do.
0:00:43 You raise your glass to another guest
0:00:47 because you both know the holidays just beginning.
0:00:50 And you’re only in terminal three.
0:00:52 Welcome to Virgin Atlantic’s
0:00:55 unique upper-class clubhouse experience
0:00:57 where you’ll feel like you’ve arrived
0:00:58 before you’ve taken off.
0:01:03 Virgin Atlantic, see the world differently.
0:01:07 – Today’s number, seven billion.
0:01:09 That’s how much US airlines collected
0:01:11 in baggage fees last year, true story.
0:01:13 Last week I was arrested at an airport.
0:01:16 I guess you’re not supposed to yell shotgun
0:01:18 before getting on a plane.
0:01:20 (upbeat music)
0:01:24 (singing in foreign language)
0:01:31 – That was the best I could come up with.
0:01:32 And that’s the best.
0:01:34 Do you know I have not, true story.
0:01:38 I have not checked in luggage in, I think 30 years.
0:01:39 I’m all carrying on.
0:01:42 I will go around the world for a month and not.
0:01:45 – No, no, this is because you fly private.
0:01:47 That’s very different, there’s a distinction here.
0:01:48 – No, even before private.
0:01:49 No, now that I fly private,
0:01:52 I have like Sherpas.
0:01:54 I’m literally like the queen of fucking England
0:01:56 pulling up to the plane with cases of shit.
0:01:59 But if I’m flying commercial, daddy doesn’t check luggage.
0:02:00 – That’s impressive.
0:02:02 – And I’m an outstanding packer.
0:02:07 I can, I’m literally like, I have my Ramoa thing,
0:02:11 a little carry-on, and I got my podcast case.
0:02:12 That’s one of my few competences.
0:02:13 This is on the parade.
0:02:14 – Yeah, where do you put the podcast on?
0:02:17 I’ve been struggling with that recently.
0:02:18 I know that I’m a famous podcast.
0:02:20 – Well, Drew, our tech guy is a genius.
0:02:23 He gave me this little bag or this little,
0:02:26 that’s actually a really cute little green or gray case.
0:02:27 And it’s got everything in there.
0:02:30 And it goes in my little duffel that’s outstanding.
0:02:33 – You’re bringing it to Greece next week, right?
0:02:36 – I am, and I’m gonna be on a boat
0:02:39 and I keep emailing our travel agent saying,
0:02:41 do we have Starlink, which is kind of a business story.
0:02:44 I think that’s gonna be the technology of 2025.
0:02:46 – Which we’ll discuss in this episode.
0:02:46 – That’s right, we will.
0:02:50 But I take my pod stuff literally everywhere.
0:02:50 – We’re in Greece.
0:02:52 – We take off from Bodrum
0:02:53 and then we go to all these different islands.
0:02:54 – Bodrum.
0:02:55 – Yeah, Bodrum and Turkey.
0:02:56 – Are you gonna hit the new Scorpios, though?
0:02:58 – There’s a Scorpios in Bodrum.
0:02:59 – They just opened one up.
0:03:00 – I didn’t know that.
0:03:01 – Yep, as of this year.
0:03:02 – Yeah, no, unlikely.
0:03:04 That place a little too young for me.
0:03:06 – It’s one year too young.
0:03:07 – Well, yeah, no, I like to go with those old men
0:03:09 and young Russian prostitutes.
0:03:12 I mean, when there’s people my age, people my age yet.
0:03:16 Okay, anyways.
0:03:17 You know how I tell if a woman’s a prostitute, right?
0:03:18 – How’s that?
0:03:20 – Sure it turns my eye contact.
0:03:23 Boom, that means there’s money involved.
0:03:25 That means that if they don’t like look away and fear,
0:03:27 like, oh my God, he’s looking at me.
0:03:28 That means pro.
0:03:29 That means pro.
0:03:31 Or at some point that person worked for me
0:03:32 and it’s like, oh, maybe I should be nice
0:03:34 ’cause I need another job.
0:03:34 – Prostitute.
0:03:36 – Yeah, I got a lot of those people out there.
0:03:37 – One and the same.
0:03:38 – Anyways, what’s going on today?
0:03:41 Oh wait, today we’re discussing Rivian’s partnership
0:03:44 with Volkswagen, People’s Car in German,
0:03:46 and J.P. Morgan’s tax strategy business.
0:03:50 Here with the news is ProfG analyst Ed Ellison.
0:03:52 Ed, what is the good word?
0:03:54 – Just wanna remind everyone to follow ProfG Markets
0:03:55 wherever you get your podcasts.
0:03:58 If you’re still listening to us on the ProfG pod feed,
0:04:01 you’re missing out on an additional episode every week.
0:04:03 Last week, we spoke with Ryan Holiday
0:04:05 about how Stoza’s makes us better investors.
0:04:07 The week before we spoke with Ray Dalio
0:04:10 and we’ve got some awesome new guests on the slate.
0:04:11 We’ve got Aswath Damodaran coming up
0:04:14 and also Anthony Scaramucci, the mooch.
0:04:17 So don’t miss it, go subscribe to ProfG Markets.
0:04:19 Let’s start with our monthly review of market vitals.
0:04:22 (upbeat music)
0:04:30 The S&P 500 rose nearly 4%, the dollar gained steadily,
0:04:32 Bitcoin fell about 8%
0:04:34 and the yield on 10-year treasuries dropped
0:04:35 as inflation cooled.
0:04:37 Shifting to the headlines.
0:04:39 YouTube is working on licensing deals
0:04:42 with record labels to train an AI song generator
0:04:43 on their artist’s content.
0:04:46 YouTube reportedly offered lump sums of cash to Warner,
0:04:49 Universal and Sony to encourage artists
0:04:51 to consent to the deals after only 10 artists
0:04:53 agreed to participate in the test phase
0:04:55 for its previous Gen AI tool.
0:04:58 The production studio A24 has closed a new funding round
0:05:01 led by Thrive Capital that values the company
0:05:03 at around $3.5 billion.
0:05:05 The investment from Josh Kushner’s firm
0:05:08 gives A24 a valuation that is 40% higher
0:05:10 than its previous funding round, which was two years ago.
0:05:13 And finally, SpaceX is rolling out a mini version
0:05:17 of its Starlink device for $599.
0:05:19 Service for the compact kits will cost consumers
0:05:20 an additional $150 a month.
0:05:23 SpaceX says it is looking to reduce the price of Starlink
0:05:25 to make it more accessible to people
0:05:27 without an internet connection.
0:05:28 Scott, your thoughts.
0:05:31 – YouTube, I think this is a really good idea.
0:05:34 What we’re seeing is a lot of content creators
0:05:38 are saying Sam Altman, distinct of your hushed tones
0:05:40 and foe concern about the world,
0:05:45 when it’s clear LLMs are returning or chatGPT is returning
0:05:48 when you say give me an overview of today’s business news
0:05:53 and it verbatim lifts two sentences from a story in Forbes.
0:05:57 There’s a problem and Forbes should be compensated.
0:05:58 And I think that the kind of worm
0:06:00 is turned against these guys.
0:06:02 And what they’re doing here, I think YouTube’s doing here
0:06:05 is they say, okay, we haven’t talked a lot about this.
0:06:10 AI might offer a great new age of music production,
0:06:12 but if it starts sounding a lot like Michael Stipe
0:06:14 and you’re not losing your religion,
0:06:17 but you’re losing your region according to the LLM,
0:06:18 they’re gonna get upset.
0:06:21 And so I think them trying to license full libraries
0:06:26 of content such that they know anything that spits back
0:06:27 is legit.
0:06:29 I think this just makes a ton of sense.
0:06:32 And I think it’s the right way to build these models
0:06:35 because from the get-go, these content creators
0:06:39 are getting compensated or they sign their rights away
0:06:40 to someone who’s getting compensated.
0:06:43 – And it’s legal and just some additional context.
0:06:47 Last week, Universal Warner and Sony all filed a lawsuit
0:06:49 against these two AI companies,
0:06:52 this company, UDO and this company, Suno,
0:06:56 for using their music to create this AI generator
0:06:59 and they’re seeking $150,000 per work in fringe.
0:07:02 So when you consider the number of songs
0:07:03 that these companies have probably crawled,
0:07:05 if they win this suit,
0:07:08 it could just flat out put these companies out of business.
0:07:09 And these are legit companies,
0:07:11 they’ve raised millions and millions of dollars.
0:07:14 So I feel like what we’re beginning to see here,
0:07:18 that lawsuit in conjunction with YouTube
0:07:20 beginning to make a licensing deal,
0:07:24 it does feel like the precedent is being set.
0:07:26 And that is if you’re an AI company
0:07:28 and you wanna build a generator model,
0:07:29 there’s basically no question now,
0:07:30 you’re gonna have to pay for it.
0:07:33 You can’t just build these things for free.
0:07:35 And we should remember that at one point
0:07:37 that there was debate over that question.
0:07:40 Like, the argument from a lot of these AI guys was,
0:07:42 oh, well, we’re crawling the internet
0:07:44 as the same way that anyone else would.
0:07:47 We don’t have to pay to use your content.
0:07:50 But I think what we’re beginning to see
0:07:51 as you talk about a lot,
0:07:54 I feel like the algebra of deterrence here is taking effect.
0:07:57 It seems as if these companies don’t wanna gamble
0:07:59 with these copyright lawsuits.
0:08:01 They’d rather just comply.
0:08:03 And I think that that’s a win for publishers,
0:08:05 it’s a win for creators, it’s a win for journalists,
0:08:07 all these different creators.
0:08:09 And if they can negotiate some good deals here,
0:08:11 this could be good for them.
0:08:13 – Let’s talk about 824.
0:08:15 This is Lauren Sanchez and a thong.
0:08:17 And instead of Bezos,
0:08:19 this is another guy having a midlife crisis.
0:08:21 And instead of Lauren Sanchez,
0:08:23 this is a movie and film production company.
0:08:26 And the best way to become a millionaire
0:08:27 is to get into media
0:08:30 when you don’t know what you’re doing as a billionaire.
0:08:33 And I think I knew a guy who ran a huge credit fund
0:08:35 and his partner bought a big film studio.
0:08:36 And he’s like, “Why is he doing this?”
0:08:38 He’s like, “He wants to go to the Academy Awards.”
0:08:40 I’m like, “Well, at least that’s honest.”
0:08:43 This generally, 824 is an amazing company.
0:08:45 They’re the best of a sorry lot.
0:08:46 This is a shitty business.
0:08:47 And a guy in venture capital
0:08:50 shouldn’t be investing in this business, in my view.
0:08:53 And I think he’s made, he’s probably,
0:08:55 I met him once, I did a meeting with him.
0:08:57 He’s such an impressive young man.
0:08:58 – Josh Kushner you’re talking about,
0:09:00 who’s the founder of Thrive Capital.
0:09:01 – Yeah, Josh.
0:09:02 He’s an incredibly impressive young man.
0:09:05 And my guess is he’s made a shit ton of money
0:09:06 and he wants to have a good time
0:09:08 and he’s convinced his limit is that I know what I’m doing.
0:09:11 We’re gonna make money and I’m gonna go,
0:09:12 you know, to the Academy Awards.
0:09:13 I’m gonna hang out, I’m gonna go to,
0:09:16 you watch within about six months,
0:09:19 he’s gonna be at the Cannes Film Festival.
0:09:20 And so I just see this again,
0:09:24 almost every non-economic or irrational decision made
0:09:27 in corporate America can be reverse engineered
0:09:29 to a dude either going through
0:09:31 or about to go through a midlife crisis.
0:09:34 This is the first evidence of the midlife crisis
0:09:36 of this Kushner kid.
0:09:39 But he should not be in this business.
0:09:40 This makes no fucking sense.
0:09:42 His, let me get this, his limited partners
0:09:45 and they think he should invest in software companies
0:09:47 or tech companies that have scale.
0:09:49 Instead, he’s investing in a really cool,
0:09:53 hot film production company that he’s overpaying for,
0:09:55 would be my guess.
0:09:59 And I just, this smells to me like, okay,
0:10:04 Doc, increase my testosterone and my Cialis prescription.
0:10:05 What do you think yet?
0:10:06 – I mean, the thing you have to remember
0:10:08 about Josh Kushner, everyone says
0:10:10 that he’s this very low key guy.
0:10:11 He lays pretty low.
0:10:13 He doesn’t really like the spotlight.
0:10:15 He doesn’t like the fame.
0:10:17 At the same time, he’s also married
0:10:19 to a Victoria’s Secret model.
0:10:21 His wife is Carly Claus.
0:10:24 So maybe he doesn’t like doing interviews,
0:10:29 but I can guarantee you he likes actresses, models
0:10:30 and celebrities.
0:10:31 So yeah, I’m with you.
0:10:32 I don’t think this was a normal investment.
0:10:34 I don’t think they care about the returns here.
0:10:37 This to me is his way of leveling up the friend group
0:10:41 from hanging out with his brother Jared
0:10:44 and kind of all of the lame, unfashionable Trumpy people
0:10:48 to yeah, Leo DiCaprio, Tobe McGuire.
0:10:50 Now he gets to go hang out in California
0:10:53 and I will say he deserves it.
0:10:56 I mean, he’s an incredibly successful investor.
0:11:00 They’ve gone from zero to $14 billion in AUM
0:11:02 and I think around a decade.
0:11:05 If there’s one thing a good investor deserves,
0:11:08 it’s an invite to after parties for the Oscars.
0:11:10 So good on him, mission accomplished.
0:11:12 – I agree, but his this notion that you said
0:11:13 he doesn’t like the limelight.
0:11:15 I’ll kind of, marrying someone or falling in love
0:11:18 with someone doesn’t necessarily mean,
0:11:19 you know, you like the limelight
0:11:20 or you don’t like the limelight.
0:11:21 He stayed out of the way.
0:11:22 He didn’t want to get involved
0:11:23 with the Trump administration
0:11:25 ’cause he probably said it went,
0:11:29 the brand of like fascist clown isn’t going to age well.
0:11:31 And so I’m going to create some distance.
0:11:32 He was smart enough to go,
0:11:34 I’m going to create some distance between me
0:11:35 and the insurrection.
0:11:37 I just, that’s probably that,
0:11:40 that brand is probably not going to age well.
0:11:42 But I mean, at the end of the day,
0:11:45 you know what kind of person likes models and actresses, Ed?
0:11:46 – Let’s go all the way.
0:11:50 – Men, men like models and actresses, Ed.
0:11:51 – Good for him, enjoy it.
0:11:53 But just be clear, the LP’s in that fund,
0:11:54 you may want to skip that fund
0:11:57 until they get back to the boring shit of making money.
0:11:59 There’s got, there needs to be an Academy Awards
0:12:03 for SaaS companies, like the adorables or something.
0:12:04 There needs to be.
0:12:05 – I think it’s called Khan Lions.
0:12:07 – Actually, it’s interesting you say that.
0:12:09 I, you know, I’m on the board and investor in OpenWeb
0:12:11 and they hosted a dinner.
0:12:14 And granted, they, their clients are media companies,
0:12:16 but I thought, a can is, a can used to be
0:12:18 where they give out awards for, you know,
0:12:21 the best co-commercial and now software companies
0:12:25 are hosting dinners and Yahoo and News Corp
0:12:27 and the Telegraph are all showing up for these dinners.
0:12:30 I thought, anyways, it’s all, it’s all changed.
0:12:31 Anyways, what else is next?
0:12:34 – Stalling, $599 for a mini stall link
0:12:35 you can put in your backpack.
0:12:38 – Every year we do a, a predictions deck.
0:12:41 Mia pulls together a deck and I roam the planet
0:12:44 talking about predictions for 2020, you know, name it.
0:12:47 And some we get right, some we get wrong.
0:12:49 And every year we predict a technology
0:12:51 for the following year that’ll be in the news a lot,
0:12:52 create a lot of shareholder value.
0:12:54 I think in 2021 it was voice.
0:12:57 Then we said our technology for ’23
0:12:58 that we’re predicting in ’22 was AI.
0:13:02 Then in ’23 we predicted 24 would be the year of GOP one.
0:13:04 It’s shaping up and I don’t want to commit to this,
0:13:06 but it’s shaping up that I believe
0:13:11 the technology of 2025 is going to be SpaceX’s Starlink.
0:13:14 And I told you I’m going on a boat next week.
0:13:15 And what’s interesting is a big purchase
0:13:18 I’m going with a family, maybe still a shit ton of money.
0:13:21 And I didn’t ask anything about the boat,
0:13:24 but I called the broker and I had one question.
0:13:26 Does it have Starlink?
0:13:28 And at that moment I thought, wow,
0:13:31 I am now making huge purchase considerations
0:13:33 based on this technology.
0:13:36 And I thought, okay, that means, I mean,
0:13:37 so quick lesson, right?
0:13:39 And this is the kind of first construct
0:13:40 in my brand strategy class.
0:13:44 All strategy comes down to clearing three hurdles.
0:13:45 And I call it the hurdle test.
0:13:47 The first is, is it truly differentiated?
0:13:49 I guess your product really different.
0:13:51 Is it really?
0:13:52 And that’s hard.
0:13:55 Brand is synonymous or shorthand for differentiated.
0:13:57 The second is, okay, that differentiation is irrelevant.
0:14:00 So at one point the high school of business
0:14:02 was considering calling itself the internet business school.
0:14:04 That would be highly differentiated.
0:14:06 Yes, it would be relevant, right?
0:14:07 Does anyone care?
0:14:09 And differentiation and relevance
0:14:11 are in constant combat with each other
0:14:15 because whereas Ferrari is highly differentiated,
0:14:16 it’s not that relevant.
0:14:17 Very few of us are in the market
0:14:20 for a $550,000 electric car.
0:14:22 Whereas Kleenex is highly relevant, we all need it,
0:14:24 but it’s hard to maintain that differentiation.
0:14:27 So these two things are in combat with each other.
0:14:30 But say you find something that is truly differentiated
0:14:33 and is relevant, well, Tesla seems to be differentiated
0:14:36 and it’s relevant, people are interested in EVs.
0:14:39 Okay, the third hurdle, is it sustainable?
0:14:40 Can we own it?
0:14:43 So back to Starlink, it’s differentiated.
0:14:46 I mean, you get a call on a plane on FaceTime Video,
0:14:48 it’s crystal clear.
0:14:49 Is it relevant?
0:14:53 Oh yeah, I mean, we’re gonna try and do these pods next week.
0:14:56 I need serious broadband, highly relevant.
0:14:57 And then is it differentiated?
0:14:59 And this is why I think this thing
0:15:01 is gonna be the technology of the year.
0:15:05 60% of all currently orbiting satellites belong to SpaceX.
0:15:09 Almost 2/3 of us, that’s just crazy.
0:15:12 So even if someone says this is an amazing business,
0:15:13 we gotta get into it, we’re Boeing,
0:15:17 whoever it is, we’re Amazon, we have deep pockets,
0:15:21 to figure out a way to get the Falcon X heavy rocket
0:15:24 or whatever it is, to the launch capacity
0:15:26 to get these satellites into space,
0:15:29 that is a moat the size of the Amazon.
0:15:32 Anyways, this latest version, 599,
0:15:37 this is a 10X better product at substantially lower price.
0:15:41 This is just, I’m intoxicated just thinking about it,
0:15:43 but I really wish it was you that had come up with this,
0:15:46 not this fucking weirdo that has 78 children now.
0:15:47 Anyways.
0:15:49 What did the yacht guy tell you?
0:15:50 He said, “Oh, we have outstanding,”
0:15:51 and it was the yacht broker,
0:15:53 they’re like, “We have outstanding internet.”
0:15:55 I’m like, “Okay, what does that mean, boss?”
0:15:56 To me, that sounds like you won’t have it
0:15:58 if he’s unwilling to tell you.
0:15:59 He’s dodging me?
0:16:01 Yeah, he’s not telling you the word stalling.
0:16:02 I’m being ghosted.
0:16:04 He’s treating me like every woman I’ve dated
0:16:06 in my 20s and 30s.
0:16:09 No, I’d really love to get together, but I’m busy.
0:16:10 That’s exactly what’s happening.
0:16:13 I’m super busy, but I’d love to get together.
0:16:14 By the way, I just want to credit stalling
0:16:16 for giving us the story of the year.
0:16:19 And that is, stalling was gifted last year.
0:16:22 It was delivered to this Amazonian tribe in Brazil
0:16:24 who had never had an internet connection before.
0:16:27 One of the last great remaining civilizations
0:16:30 without internet within nine months.
0:16:32 All the girls predicted social media,
0:16:35 a quote from Sainama Marubo, 73 years old.
0:16:36 She told the New York Times,
0:16:38 “When it arrived, everyone was happy,
0:16:39 but now things have gotten worse.
0:16:42 Young people have gotten lazy because of the internet.
0:16:44 They’re learning the ways of the white people.”
0:16:46 The last great community,
0:16:47 and we just had to come in there
0:16:48 and fuck it all up with a stalling.
0:16:50 It’s the story of the year, in my view.
0:16:53 Yeah, but they’re connecting the world, Ed.
0:16:54 (laughs)
0:16:56 (upbeat music)
0:16:58 We’ll be right back after the break
0:17:00 with a look at Rivian’s partnership with Volkswagen.
0:17:03 (upbeat music)
0:17:06 (upbeat music)
0:17:12 Support for the show comes from Betterment.
0:17:14 Even the most hardcore of us need to kick back
0:17:15 and chill every now and then.
0:17:16 But if you’re an investor,
0:17:18 chill is the last thing you want your money to be doing.
0:17:20 You want it to be pumping iron
0:17:21 and running marathons for you.
0:17:24 If you want your money performing at an Olympic level,
0:17:25 you might want to check out
0:17:27 Betterment’s Automated Investment and Savings app.
0:17:30 Betterment’s Automated Technology gives you advanced tools
0:17:32 that are built to help maximize returns.
0:17:34 Tools like diversified expert-built portfolios
0:17:37 of low-cost ETFs, high-yield cash accounts,
0:17:39 and Automated Investing Technology,
0:17:41 including Automated Rebalancing.
0:17:44 Plus, Betterment can help with tax-efficient investing.
0:17:47 Strategies including their Tax Loss Harvesting Plus
0:17:50 and Asset Location can help minimize your taxes
0:17:51 and maximize your returns.
0:17:53 So whether you’re saving or investing,
0:17:55 your money should be working as hard
0:17:56 as it possibly can for you.
0:17:59 Consider Betterment, the Automated Investing and Savings app
0:18:01 that makes your money hustle.
0:18:03 You can visit Betterment.com to get started.
0:18:05 You can learn more about high-yield cash accounts
0:18:06 at Betterment.com.
0:18:09 Investing involves risk, performance not guaranteed,
0:18:11 cash reserve offered through Betterment LLC
0:18:12 and Betterment Securities.
0:18:14 Betterment is not a bank.
0:18:22 Treats for every celebration, big or small.
0:18:24 Make it easy and breezy with our legendary lineup
0:18:28 of summer must-tries from the PC Insiders Report Summer Edition.
0:18:31 Like our new flakeouts, there are delicious twists
0:18:33 on the croissant donut with 24 layers
0:18:37 of croissant flakiness twisted with fancy donut fun.
0:18:39 Get ready to go all out for less.
0:18:46 At Best Western, when you stay three nights this summer,
0:18:48 you earn 10,000 bonus points.
0:18:51 And while you’re reliving your summer childhood
0:18:54 road trip memories, they’re creating new ones.
0:18:57 So check into any one of our more than 2,300 hotels
0:19:00 and make more memories to look back on.
0:19:02 Here, we’ll set the scene.
0:19:05 ♪ You put the low right on me ♪
0:19:06 Life’s a trip.
0:19:08 Make the most of it at Best Western.
0:19:11 Visit bestwestern.com for terms and conditions.
0:19:18 We’re back with ProfG Markets.
0:19:20 Volkswagen is investing up to $5 billion
0:19:22 in EV manufacturer Rivian.
0:19:24 It’s poised to be a mutually beneficial partnership.
0:19:27 Rivian lost $39,000 per car in the first quarter
0:19:29 and could use the cash.
0:19:31 It’ll also be able to leverage the manufacturing might
0:19:33 of the second largest car maker in the world.
0:19:35 Meanwhile, Volkswagen will gain access
0:19:37 to Rivian’s EV software to help it tap
0:19:39 into the electric market.
0:19:41 Shares of Rivian soared more than 50%
0:19:43 in after hours trading on news of the partnership.
0:19:46 While Volkswagen shares slipped about 3%.
0:19:49 Scott, what are your initial thoughts on this partnership?
0:19:50 – I think this is so interesting.
0:19:53 The first is, I think it’s a great idea.
0:19:55 They both bring something to the partnership.
0:19:57 Rivian is a really cool brand.
0:19:59 It’s a really beautifully designed car.
0:20:03 I imagine that’s some software and battery technology.
0:20:07 So they bring some IP call it and some brand equity
0:20:10 to Volkswagen who’s probably looking to get from letter E
0:20:13 to letter H as quickly as possible in EVs.
0:20:16 At the same time, there’s just no getting around it.
0:20:18 And the reason why I still believe Tesla’s gonna go down
0:20:21 50, 70, 80% automobile manufacturing
0:20:25 is a shitty low margin business of scale,
0:20:26 emphasis on scale.
0:20:28 Basically, what automobile companies do
0:20:30 is they come up with one kind of platform
0:20:33 and they figure out the tooling and the manufacturing
0:20:34 and the assembly line and the factory
0:20:35 and it’s really expensive.
0:20:39 It’s like a billion plus dollars to create this platform.
0:20:42 And then it’s about how many cars can you push
0:20:43 up through that platform.
0:20:48 So the SUV platform at Volkswagen produces the Torig,
0:20:49 which is a Volkswagen branded.
0:20:51 The Q7, which is Audi branded.
0:20:54 And the Cayenne, which is Porsche branded.
0:20:56 And the reason why Volkswagen works
0:20:59 is it can shove through all of this production,
0:21:00 different brands, different finishes,
0:21:04 different positioning through one SUV platform.
0:21:06 And those are the only guys that survive.
0:21:09 They can really push volume and scale to the platform.
0:21:10 The beginning of the 20th century,
0:21:13 there were 100 automobile brands by 1949.
0:21:15 Basically, it was the big three.
0:21:17 So this is consolidation.
0:21:20 And I would imagine this is date before we get married.
0:21:22 If this goes well and they like each other,
0:21:24 they’ll take an increasingly large stake.
0:21:26 But the insight, and again,
0:21:28 it goes back to the Kushner thing.
0:21:32 This is all about a guy in his 50s
0:21:34 and the decisions he’s making right in his 60s.
0:21:35 I think Bezos is actually older than me,
0:21:37 which makes me feel pretty good.
0:21:39 This is an incredibly disciplined
0:21:41 operator and business person.
0:21:45 And I think when Bezos bought the Washington Post,
0:21:47 I think the newsroom thought, we’re precious,
0:21:50 we’re doing important work, long form journalism,
0:21:54 someone should fund it just ’cause we’re so awesome.
0:21:57 And I think they were expecting him to fund it indefinitely
0:22:00 and just pay for them to play in journalism.
0:22:01 And I think he said, no,
0:22:03 you guys either figure out a way to make money
0:22:06 or we’re gonna start firing people.
0:22:09 Because he’s realized the moment you kind of say to your kids,
0:22:11 oh, you’re so cute, I’ll pay your rent,
0:22:13 now I’ll pay your mortgage,
0:22:16 now you end up with dependence the rest of your life.
0:22:20 And I think he said, the same thing at Rivian,
0:22:22 he’s like, okay, what’s our path to profitability here?
0:22:23 And they’re like, wow, we could–
0:22:26 – And I just wanna make it clear for all listeners.
0:22:30 So Bezos, he doesn’t directly own Rivian.
0:22:31 – It’s Amazon, right?
0:22:32 – Yeah, exactly.
0:22:35 So Amazon invested in Rivian back in 2019
0:22:36 and they bought around 20% of the company.
0:22:39 They’ve been diluted down to around 17%,
0:22:43 but that’s the basis for this, sorry, continue.
0:22:46 Usually you find in every board or in any organization,
0:22:49 there’s kind of one or two people making all the decisions.
0:22:53 I gotta think when Bezos has a view around Rivian,
0:22:56 they’re really inclined to do that.
0:22:58 And because he has so much credibility
0:23:01 and obviously controls a huge stake here,
0:23:02 I would bet he’s just kind of said,
0:23:04 as the deepest pocket, Amazon,
0:23:07 look, we’re not gonna continue to hemorrhage money like this.
0:23:10 I think they only had about nine months of capital left.
0:23:11 So they needed to find a solution
0:23:13 and there was probably two solutions.
0:23:17 One was named Jeff Bezos and the other was fillin’ the blank
0:23:19 and it ended up being Volkswagen.
0:23:20 And I think the same thing that’s happening
0:23:23 in the Washington Post was like, sorry, folks,
0:23:25 you’re either a company that works here
0:23:28 or makes me much sexier to the world.
0:23:30 You know, I think he was considering
0:23:32 even buying the Washington Commanders at some point
0:23:36 or he has now the third biggest three mass yacht in the world.
0:23:38 And the Washington Post doesn’t make me any sexier,
0:23:40 Rivian a little bit, but it’s not worth the money.
0:23:42 You guys either need to get profitable,
0:23:44 show me a path to profitability
0:23:46 or we’re gonna partner with Volkswagen.
0:23:50 I actually ordered a Rivian, I’m really excited about it.
0:23:52 I got it in foam green, I’m gonna be an Aspen,
0:23:54 I’m gonna put Leia, my Great Dane in the back,
0:23:58 I’m gonna cruise down into town and they will love me Ed.
0:23:59 They will love me.
0:24:00 I’m also gonna put a bike in the back
0:24:01 but then I will never ride
0:24:03 but I want people to think I’m outdoorsy.
0:24:04 – I’m just gonna make a prediction.
0:24:07 You keep saying you’re excited about this Rivian.
0:24:10 I think you’ve been saying that for maybe at least two years,
0:24:12 I wanna say, I don’t think this Rivian
0:24:14 is ever gonna arrive.
0:24:15 – You don’t think it’s ever gonna be delivered?
0:24:17 – No, I don’t think you’re ever gonna do
0:24:21 whatever paperwork is needed to have it arrive at your house.
0:24:23 I don’t think you care about getting a Rivian.
0:24:24 – I don’t know, for some reason
0:24:26 that hurts my feelings, I’m not sure why.
0:24:27 I was actually thinking of ordering it
0:24:29 and then auctioning it off for charity water
0:24:30 and then I thought, I’m not that generous,
0:24:32 I want the option to have the Rivian.
0:24:34 – That’s exact, I think something like that’s gonna happen.
0:24:35 You’re never actually gonna earn a Rivian
0:24:38 but you will continue to be excited about it.
0:24:40 – That’s my plan to wait for the ass cancer.
0:24:43 Anyways, the fact that they can’t make it,
0:24:44 that means this is it.
0:24:46 I mean, I think Fisker just went out of business.
0:24:48 I believe that Tesla’s gonna hit a wall
0:24:51 but I’ve been saying that since the stock was at 15
0:24:52 and it’s not 160 or something
0:24:56 but I would bet that Rivian becomes the next SUV
0:24:59 that’s shoved through the Volkswagen platform.
0:25:03 – Just to give some color to how far this company has fallen,
0:25:08 it was worth, when IPO’d, it was worth $130 billion.
0:25:08 – Jesus.
0:25:09 – I don’t know if you remember
0:25:11 but everyone was obsessed with this thing.
0:25:14 Everyone was saying it was like the best new car company,
0:25:15 it’s gonna compete with Tesla,
0:25:17 it’s gonna solve climate change.
0:25:20 It was actually more valuable than Volkswagen at one point.
0:25:22 We said many, many times
0:25:24 that this was ridiculously overvalued.
0:25:28 It’s now worth around $15 billion, it’s fallen 90%.
0:25:32 So I feel like we kind of won that prediction.
0:25:34 We also talked about the burn rate.
0:25:36 So let’s just go through the numbers here.
0:25:41 Operating cash outflows last quarter were $1.3 billion.
0:25:44 CapEx for the quarter was a quarter of a billion dollars.
0:25:47 So total cash burn of $1.5 billion,
0:25:50 losing roughly $40,000 per vehicle.
0:25:53 As you mentioned, at that burn rate,
0:25:55 the company would be out of business
0:25:56 by the beginning of next year.
0:25:58 They had nine months of runway left.
0:26:01 So it was in an extremely dire situation.
0:26:04 People are saying that this Volkswagen investment
0:26:05 was a lifeline.
0:26:06 I think that’s often hyperbole.
0:26:08 In this case, it’s completely true.
0:26:09 If no one had come in,
0:26:11 if Volkswagen hadn’t come in here,
0:26:13 this company would have died,
0:26:16 which makes me think,
0:26:18 why didn’t they just buy the company?
0:26:20 – Effectively, what they’ve done is they’ve peed
0:26:23 on this thing and no one else’s, that’s it.
0:26:25 No one else, any other dog
0:26:27 or choir is gonna go Volkswagen’s here.
0:26:28 – That’s really good.
0:26:31 – So what they’ve bought is essentially an option.
0:26:33 And that is rather than saying,
0:26:38 okay, for them, Volkswagen’s market cap is $58 billion.
0:26:39 This is one of the biggest,
0:26:43 best-run automobile companies in the world.
0:26:45 The fact that Rivian was at one point
0:26:46 where twice that gives you a sense
0:26:49 for just how batch of crazy it is.
0:26:51 Right now, what is Rivian’s market cap?
0:26:51 – It’s 12 billion.
0:26:53 – They would have to come in and offer
0:26:55 probably 13 or 14 billion to take the same private.
0:26:58 Instead, they come in at 1 billion.
0:26:59 If the stock goes way up,
0:27:00 good, they’ve made a bunch of money.
0:27:03 If it comes down, they buy the whole thing.
0:27:07 They couldn’t give 25% of their outstanding equity
0:27:09 to Rivian shareholders to buy something losing money.
0:27:11 So this is a chance to date,
0:27:13 get some technology, work together.
0:27:17 And if Rivian, the stock goes from it’s at 1458,
0:27:19 if it goes from 1458 to five,
0:27:21 they’ll step in and they’ll take the whole thing.
0:27:24 – Do you think that this is the beginning
0:27:26 of a huge run-up to Rivian?
0:27:29 Like, does this renew your excitement for this company
0:27:32 or is this just kind of like softens the landing?
0:27:33 – It happened, Rivian stock,
0:27:34 I was even looking at this thing.
0:27:39 Rivian stock popped about 20 or 30% in the last,
0:27:41 you know, few days.
0:27:43 It went up, it was trading at 12.
0:27:45 It went up to 16.
0:27:46 So what was that?
0:27:49 It was up 30 or 35%.
0:27:51 Now it’s down to 14 and a half.
0:27:53 I would be shocked if it wasn’t.
0:27:55 I mean, I guess you could say that some of that pricing,
0:28:00 you know, it was at 10 bucks, pretty recently,
0:28:03 was that fear about them coming into a cash crunch
0:28:04 and now that’s sort of been taken off the table
0:28:07 or at least they take the can down the road.
0:28:09 But this thing still has a, you know,
0:28:11 a $12 billion market cap for a company
0:28:13 that’s hemorrhaging money.
0:28:15 This is just, this is how fucked up this.
0:28:17 This company’s worth $12 billion.
0:28:19 Ford Motors were $12.3 billion.
0:28:20 – That’s crazy.
0:28:22 – And Ford is a profitable company
0:28:23 pushing out a ton of cars.
0:28:26 Any long-term predictions for the EV market?
0:28:28 You mentioned Fisker went out of business,
0:28:31 so did Lordstown Motors, so did Proterra,
0:28:33 three different EV companies that went bankrupt
0:28:35 in the last two years.
0:28:39 EV sales last quarter in the US also fell 7%.
0:28:42 Is this kind of the beginning of the end
0:28:45 for not EVs, but EV startups?
0:28:45 – That feels right.
0:28:49 I mean, what is it that curve or the Gartner curve,
0:28:49 I don’t know who invented it,
0:28:53 where there’s growth, excitement, froth, hysteria
0:28:58 and then disappointment, realization, valley of death
0:29:02 and then consolidation, the weaker players
0:29:05 get swept off the deck and then it comes back.
0:29:09 It feels like we’re entering the valley of death
0:29:12 and that is companies are either gonna go out of business
0:29:13 or need more capital.
0:29:16 I mean, there’s been a bunch of electric EV kind of
0:29:19 truck companies that have really struggled.
0:29:23 And I think that as a whole, I mean,
0:29:24 I think the market was only up three.
0:29:28 The market for EVs was only up 3% year on year,
0:29:29 but as the Chinese enter the market,
0:29:32 bring the prices down, as it becomes more accepted,
0:29:35 as the charging station infrastructure is built out,
0:29:36 it’s supposed to be one out of five.
0:29:38 Charging stations are working right now.
0:29:41 I think that this market, it just feels to me
0:29:43 like the whole world is headed this way.
0:29:45 – We’ll be right back after the break
0:29:46 with a look at tax harvesting.
0:29:49 (upbeat music)
0:29:59 – It’s new, it’s blue, and it was made for you.
0:30:02 Introducing the thirst quenching summer berries,
0:30:05 Starbucks refreshers beverage where natural berry flavors
0:30:08 meet juicy bursts of raspberry flavored pearls.
0:30:10 It’s our most blutiful drink yet.
0:30:13 So try it while you can, only at Starbucks.
0:30:18 Navigating, adulting isn’t always easy.
0:30:21 You’re not just working, you’re working late.
0:30:24 And dinner dates are all, what’s your five year plan?
0:30:26 And you’re thinking, paying off the bill
0:30:28 for this fancy pants meal, probably.
0:30:31 So when you need to break free from responsibility
0:30:33 and experience something that feels more you,
0:30:35 reach for Kraft Dinner.
0:30:36 Because when you’re starved for moments
0:30:38 that bring you back to who you really are
0:30:41 and what you really love, that’s when it’s gotta be KD.
0:30:44 When you gotta do you, it’s gotta be KD.
0:30:44 Shop now.
0:30:47 – Looking to buy or sell a used vehicle?
0:30:49 Forget the selection and protection
0:30:51 of BCAA Auto Marketplace.
0:30:53 Try some random guy off the internet.
0:30:55 ♪ Some random guy ♪
0:30:57 – Yes, we offered zero security.
0:30:59 ♪ I can pay in crypto ♪
0:31:00 – Plenty of questions.
0:31:02 ♪ Is it still available ♪
0:31:03 – And zero convenience.
0:31:07 ♪ 46 messages and I still make up ♪
0:31:10 – BCAA Auto Marketplace helps you buy and sell vehicles.
0:31:13 Visit bcaa.com/marketplace and avoid
0:31:16 ♪ Some random guy ♪
0:31:23 – We’re back with ProfG Markets.
0:31:25 JPMorgan Chase is on a mission to take
0:31:28 share of a growing business, tax strategy.
0:31:30 The bank has attracted more than $15 billion in assets
0:31:33 under management in its tax advantaged accounts
0:31:36 known as SMAs or separately managed accounts.
0:31:38 Unlike a regular account, these accounts
0:31:41 offer personalized tax management advisory.
0:31:42 And according to one JPMorgan banker,
0:31:44 quote, it might be the fastest growing piece
0:31:47 of asset management over the last 18 plus months.
0:31:49 The growth is not just at JPMorgan.
0:31:52 However, it’s industry wide assets
0:31:53 and separately managed accounts
0:31:56 have increased 30% year over year in 2023.
0:31:58 And asset managers say 45% of assets
0:32:00 are now subject to tax management.
0:32:04 That’s up from 33% in 2022.
0:32:08 So Scott, tax avoidance is becoming increasingly popular
0:32:08 from the numbers here.
0:32:11 And to be clear, this is different from tax evasion
0:32:14 which describes illegal tax strategies.
0:32:18 We are talking about legal tax strategies, tax avoidance.
0:32:23 So as someone who works quite a lot with tax lawyers,
0:32:26 could you describe what some of those tax avoidance strategies
0:32:28 actually are that wealthy people are using today?
0:32:31 – So first off, this is a key component
0:32:36 of obtaining and maintaining wealth is tax,
0:32:38 we call it tax minimization.
0:32:42 We have an entire chapter in the algebra of wealth on taxes.
0:32:46 If you don’t, it’s gonna be near impossible
0:32:49 for someone to become economically secure,
0:32:50 much less really wealthy
0:32:55 unless they have a pretty strong grasp of taxes.
0:33:00 To not, I mean, you’re driving towards economic security.
0:33:04 Do you wanna figure out which toll booth
0:33:07 is two bucks versus seven bucks?
0:33:09 You just gotta figure this shit out.
0:33:12 You gotta understand how to get through this toll booth
0:33:16 is inexpensively and as quickly as possible.
0:33:18 This is why I think young people need to talk about money.
0:33:20 You need to understand taxes.
0:33:24 I mean, I just did the math.
0:33:29 When I was living in New York in 2010,
0:33:32 I just had a couple of kids and I was doing the math
0:33:35 and I thought, okay, we make a lot of money
0:33:36 and I feel broke and I don’t like it.
0:33:38 And so we decided to move to Florida.
0:33:41 In addition to the lifestyle arbitrage
0:33:43 where the private school we sent our kids to
0:33:46 was no joke, $14,000 a year at that time
0:33:50 versus 58 at First Presbyterian.
0:33:52 And everything was cheaper.
0:33:55 I was gonna save, the income tax savings was 13%.
0:33:59 And I did the following and I was very disciplined about this.
0:34:00 I took the majority, not all,
0:34:02 but the majority of our lifestyle savings
0:34:04 and I took that 13%.
0:34:07 I did the math and said, every month,
0:34:11 I’m gonna take 13% of my top line income
0:34:13 and I’m gonna pay taxes to me
0:34:15 and that is I’m gonna invest it.
0:34:20 And it changed my life economically.
0:34:23 So thinking about taxes and how to minimize your taxes.
0:34:25 I mean, it’s like the guy Wayne Huizanga
0:34:27 who passed away was the founder of Blockbuster
0:34:28 and I think ended up owning the Miami Dolphins
0:34:29 for a hot minute.
0:34:32 When he was doing ads for Florida, he used to say,
0:34:34 it’s not what you make, it’s what you keep.
0:34:36 He’s right.
0:34:38 And what people don’t focus on enough,
0:34:40 they focus so much on how much they make,
0:34:41 they don’t focus on what they keep.
0:34:44 Anyways, tax minimization is about what you keep.
0:34:47 So there’s some very basic strategies.
0:34:49 The first is geographic arbitrage, right?
0:34:51 Moving to a low tax state
0:34:54 or how you get establishing residents in a low tax state.
0:34:57 The second is just being thoughtful about timing of sales.
0:35:00 And that is you really don’t want to be in any asset
0:35:04 less than a year because the top tax rate
0:35:06 for the short-term capital gains,
0:35:08 that’s assets you own for less than 12 months
0:35:12 is 37% versus I think it’s 22.8 for long-term capital gains.
0:35:16 So anything I buy, almost anything investment I make,
0:35:18 I assume I’m gonna hold longer than 12 months.
0:35:22 Now on the flip side, if there’s a loss at the end of the year
0:35:26 I think about taking those loss, I harvest losses.
0:35:29 – Could you just describe how tax loss harvesting
0:35:30 actually works?
0:35:32 – Yeah, you buy, you own Amazon,
0:35:34 what’s the stock that’s gone down?
0:35:36 I’m trying to think of what stock has gone down the most
0:35:38 over the last 12 months.
0:35:40 That would actually be interesting to see what,
0:35:44 so whatever the stock’s gone down 50%.
0:35:48 You sell it on December 30th, you paid $10,000 for it.
0:35:50 It’s worth $6,000.
0:35:51 You sell it at the end of the year,
0:35:54 you get a $4,000 tax deduction.
0:35:56 You recognize the loss.
0:35:58 And there’s now there’s funds
0:35:59 that whenever anything’s down,
0:36:00 they sell them right away
0:36:02 and have to wait a certain amount of time to buy back in
0:36:05 but they’re constantly harvesting losses
0:36:07 which induces the returns.
0:36:11 So being really thoughtful about tax minimization
0:36:12 is just hugely important.
0:36:15 So there’s, I mean, I’ll give you an example.
0:36:18 Vox is gonna owe me a lot of money.
0:36:21 I did this strategy or I did this agreement with Vox
0:36:22 who distributes this podcast
0:36:24 where they’re gonna give me a lump sum of money
0:36:27 in May of 2025.
0:36:30 And because that’s current income, which I hate,
0:36:33 37%, I’ll lose 37% of it right away.
0:36:34 I’m gonna do something
0:36:35 or we’re talking about doing something
0:36:37 called the installment method.
0:36:38 Now, what is that?
0:36:41 They can pay me over six years, which they like,
0:36:42 which ’cause it saves them cash flow
0:36:44 ’cause it’s a sizable amount of money.
0:36:49 We pick an interest rate, I don’t know, call it 7%.
0:36:52 And over six or seven years, they pay down.
0:36:54 I’m basically loaning them,
0:36:56 the money they were owing me, say it was $100,
0:36:58 I’m loaning them $100 and they pay it off
0:37:01 over six or seven years like a mortgage
0:37:02 and they pay me 7% on it.
0:37:04 But here’s the fun part.
0:37:07 Because they’re paying it off over seven years,
0:37:10 I’m getting 7% on the pre-tax income.
0:37:12 So for the first, whatever it is, three or six months,
0:37:15 I’m getting 7% on $100.
0:37:18 Whereas if I sold it all or I just recognized the gain
0:37:23 with a 37% tax rate, I’d end up with 63 cents
0:37:26 and I would need to get 10 or 12% on investment.
0:37:31 The biggest tax loophole that has increased my wealth
0:37:35 is our tax system really loves real estate
0:37:37 and it loves entrepreneurship.
0:37:40 So I would start small companies
0:37:43 and if they had less than 50 million in assets,
0:37:45 which any company I start does,
0:37:47 you can either invest in it or start it in the stock you get.
0:37:51 If you hold onto that stock for more than five years,
0:37:55 the first 10 million or whichever is greater,
0:37:59 the first 10 million or 10 times the initial investment
0:38:01 is tax-free.
0:38:05 So when I sold L2, the first 10 million was tax-free.
0:38:07 When I made an investment in a small company
0:38:08 that went up dramatically,
0:38:13 I got the first 10 times my initial investment was tax-free.
0:38:15 So that’s 1202.
0:38:18 Also in terms of entrepreneurship,
0:38:21 creating a company, you can run a lot.
0:38:26 If I’m going to LA and I see my dad in San Diego,
0:38:29 but I spent four to five days in LA
0:38:33 working on an original scripted drama on Big Tech
0:38:36 based on the book “The Four” written by Scott Galloway,
0:38:38 I can write off all of my expenses.
0:38:40 You can shove a lot of expenses through a small business
0:38:42 because you’ll find most of your life,
0:38:43 at least if you’re an entrepreneur,
0:38:46 is somewhat related to business.
0:38:49 Who really gets fucked is the person working at Goldman
0:38:52 or working in a law firm or working for an employer
0:38:54 where every year they just get all of this
0:38:57 reportable income that’s top-line
0:39:00 and then it’s all current income
0:39:02 and it gets taxed in a high-tax state.
0:39:04 Like you are now at a point, Ed,
0:39:08 where you’re gonna start paying 30, 35, 40% tax rates
0:39:11 because there’s really no hiding your income.
0:39:14 So the key to tax minimization
0:39:16 is to figure out a way to save enough money
0:39:19 as an earner such that you become an owner
0:39:21 because then you can get long-term capital.
0:39:23 Again, think of yourself as a stock
0:39:26 and that is every year the stock of Ed Elson goes up,
0:39:29 call it 150 grand in value.
0:39:32 Every year you have to pay 40% tax on that
0:39:35 whereas if you manage to save money
0:39:38 and you buy 150 grand worth of Amazon stock
0:39:40 over five or 10 years and it doubles,
0:39:42 it goes up 150 grand unless you sell it,
0:39:45 it is growing tax-deferred.
0:39:47 So at the end of the day the kind of the ultimate
0:39:50 rich person’s tax avoidance strategy is the following.
0:39:53 You have a lot of stock in Amazon
0:39:54 and you never sell it.
0:39:55 You just let it increase in value
0:39:58 and then you borrow against it
0:40:00 and you never recognize a capital gain
0:40:01 and you can even write off the interest
0:40:02 on the money you borrow.
0:40:04 Now at some point you gotta pay that back
0:40:05 so what do you do?
0:40:07 You pretend you wanna spend more time with your father
0:40:09 and you moved to Florida
0:40:11 and then when you sell that stock
0:40:13 it’s taxed at a much lower rate.
0:40:18 So it really is, you really wanna learn about taxes
0:40:19 and understand tax policy
0:40:23 because if I had been paying, again,
0:40:26 that 13% that I was disciplined enough
0:40:30 to reinvest every year in stocks that grow tax-deferred
0:40:32 changed my life economically
0:40:33 and these strategies are out there
0:40:34 and it’s important that you know them
0:40:38 and again, if it sounds like we’re fucking the young
0:40:39 and people who make all of their money
0:40:41 from current income from SWAT
0:40:43 who are earners as opposed to people
0:40:47 who own or invest or own real estate, trust your instincts.
0:40:49 It’s yet another transfer of wealth
0:40:51 from the entrance to the incumbents.
0:40:55 – I think that’s something that a lot of people
0:40:57 would criticize you for which is,
0:41:00 what we talk a lot about is the fact
0:41:02 that the ultra rich, generally speaking,
0:41:04 are not really paying taxes.
0:41:05 Wealthiest 400 families in the US
0:41:09 paid an average effective tax rate of 8% in the past decade.
0:41:12 You talked about the buy, borrow, die strategy
0:41:13 where you have huge asset base
0:41:16 and instead of selling and registering
0:41:18 and having to pay taxes on those sales,
0:41:21 you just borrow against it and you keep on doing that
0:41:23 and you can do that at an extremely low rate
0:41:25 because you’re so rich.
0:41:28 There are all these different strategies which you use
0:41:30 and so I think a lot of people would say
0:41:32 that you’re being hypocritical
0:41:35 because you’re arguing against this
0:41:38 and talking about how it does screw the young over
0:41:40 but at the same time you’re also doing it.
0:41:43 So what would your response be to that criticism?
0:41:44 – I understand the criticism.
0:41:47 The question is, is anyone out of my funeral gonna say
0:41:50 he paid more taxes than he was supposed to?
0:41:51 What a great guy.
0:41:55 Be clear, I am gonna vote for people
0:41:57 who restore a progressive tax structure.
0:41:58 – Why?
0:42:02 If your job in a capitalist society
0:42:05 is to make as much money as you can
0:42:08 and it’s your job to minimize your taxes,
0:42:11 to protect yourself, why would you vote for someone
0:42:12 who’s gonna increase your taxes?
0:42:14 – Because I want a healthy America
0:42:16 and I want an America that makes the same forward
0:42:18 leading investments in the middle class
0:42:21 that were made in the ’60s and ’70s and ’80s
0:42:23 that benefited me.
0:42:26 And so I wanna see the same opportunities
0:42:28 provided to people your age that were provided to me.
0:42:31 Having said that, I will absolutely,
0:42:33 I’m not gonna disarm unilaterally.
0:42:35 I will take advantage of every single tax loophole.
0:42:38 Now that I feel a little bit defensive,
0:42:40 I’ll say the following.
0:42:42 I recognize my privilege.
0:42:45 I got to a certain number and I decided anything above that,
0:42:47 I was either gonna spend or give away.
0:42:49 And my personal code around this
0:42:51 is I look at my spending every year
0:42:53 and I give away that or more every year
0:42:54 as a self-imposed tax.
0:42:56 Over the last four years,
0:42:59 I think I’ve given away approximately
0:43:02 somewhere between $17 and $20 million.
0:43:05 And I think a virus that infects America
0:43:07 is hoarding.
0:43:11 There is no reason to have more than $100 million.
0:43:14 I just can’t rationalize why any individual
0:43:16 would need more than $100 million.
0:43:18 Do you wanna build a dynasty?
0:43:18 Well, guess what?
0:43:21 Your kids are probably gonna be fucked up.
0:43:22 That’s not good for your kids.
0:43:23 I’m not saying it’s bad for them.
0:43:25 Make sure they have some money and they can buy a house.
0:43:26 But I have, there’s no evidence
0:43:30 of building dynasties as any good for anybody.
0:43:31 Once you have the nice house,
0:43:34 the second house can do amazing things.
0:43:35 Take care of your parents, take care of your kids,
0:43:36 give money away.
0:43:37 Why do you need more money?
0:43:39 You don’t.
0:43:41 And it’s a society telling you that your worth
0:43:43 is based on a number that keeps getting bigger and bigger.
0:43:46 You need to get off that treadmill.
0:43:47 So spend it.
0:43:49 I think it’s great and give it away.
0:43:50 And that’s what I do.
0:43:52 But be clear, along the way,
0:43:55 I’m going to minimize my taxes
0:43:56 and try and increase my wealth.
0:43:58 And above a certain point,
0:44:00 I’m going to either spend it or give it all away.
0:44:02 And that’s another tax loophole
0:44:04 as a donor advisor fund.
0:44:05 And that is a DAF.
0:44:10 If I think I’m going to give away $10 or $20 million,
0:44:13 I put it into a DAF and immediately, immediately,
0:44:15 or just stock, I’m going to give this away.
0:44:16 It’s been designated that I’m going to give it away.
0:44:18 And immediately I get the tax deduction
0:44:20 without giving it away right away.
0:44:22 And I can borrow money against it.
0:44:24 I mean, essentially for every dollar
0:44:26 that’s donated in philanthropy,
0:44:28 the government loses like 72 or 73 cents.
0:44:32 So really what we have here is kind of people,
0:44:34 rich people deciding what are our social priorities
0:44:37 and the government not gaining from it.
0:44:39 Not, it doesn’t replace government spending
0:44:40 because they don’t get the, you know,
0:44:42 it doesn’t help the government.
0:44:44 – But that argument doesn’t really work in your favor here
0:44:47 because that is something that you’re doing.
0:44:49 I think, and by the way, just want to be clear,
0:44:52 I’m with you, I would be doing the same thing.
0:44:56 But I just think the critics would say,
0:44:58 well, why are you deciding where that money goes?
0:44:59 Why are you spending all this time?
0:45:02 If you believe that you don’t need that much more money,
0:45:04 why not just hand it over to the government?
0:45:07 They need money, they need to build infrastructure.
0:45:10 Why are you deciding that it should go to this charity
0:45:13 and doing all this work to minimize the taxes
0:45:14 such that you don’t have to pay to the government?
0:45:16 – I understand the argument,
0:45:18 but the idea of just sending Uncle Sam,
0:45:20 first off, I don’t think they’d let you.
0:45:21 I mean, maybe they would.
0:45:26 It just would feel weird to send money to the treasury.
0:45:30 And what I do is I say, okay, I’m very,
0:45:33 my two big charities are Teen Depression
0:45:35 and right now vocational programming
0:45:37 for young men and women.
0:45:40 And those are two things I’m really passionate about.
0:45:41 I think those add social good.
0:45:44 I don’t create large organizations or offices.
0:45:45 I just signed them a check.
0:45:48 I inspired my Mackenzie Scott.
0:45:49 I don’t want my name on shit.
0:45:51 I gave a bunch of money to UCLA and Berkeley
0:45:52 for a vocational program.
0:45:53 They said, do you want to call it the Galloway thing?
0:45:55 I’m like, no.
0:45:56 In 20 years, they’re going to find out.
0:45:57 I said things that are upset.
0:45:59 I don’t want my kids to be embarrassed.
0:46:00 – Respect.
0:46:01 – I don’t just, I want it.
0:46:02 I just want it.
0:46:03 I don’t want my name on anything.
0:46:06 I think this is, I think it’s anyways.
0:46:10 So, but yeah, if the notion is
0:46:12 I should just send money to the government
0:46:15 that I don’t technically owe, no, I don’t do that.
0:46:18 But I do try to pay it forward
0:46:21 and impose a 100% consumption tax.
0:46:25 My big aha moment was my number,
0:46:27 if you will, kept getting bigger and bigger and bigger.
0:46:29 I thought, at one point I thought, when I sold L2,
0:46:32 I thought, well, I could start a private equity fund,
0:46:32 raise a shit ton of money,
0:46:35 and maybe in 10 or 15 years, I could be a billionaire.
0:46:36 And I just like the sound of that.
0:46:39 Scott Galloway billionaire.
0:46:40 That just felt sexy.
0:46:42 That just felt right.
0:46:44 And then I remember a moment, which is personal.
0:46:45 I won’t go into it.
0:46:48 I remember thinking, why the fuck do I need to be a billionaire?
0:46:50 Like, who am I trying to impress?
0:46:53 I need to impress the people who I love and love me.
0:46:56 And the way I do that is a set of shared experiences
0:46:58 and spending more time with them,
0:47:01 which is not gonna happen if I get on a hamster wheel
0:47:02 to try to get to a billion dollars.
0:47:04 And also, you have to take a lot of risks
0:47:07 with the money you have to get to a billion.
0:47:10 So I said, I just need to get off this fucking treadmill.
0:47:11 And it’s hard to get off it, Ed,
0:47:14 when your whole life, you’re trying to get
0:47:16 to a bigger number and you keep getting shot in the face
0:47:18 and going to zero and finally you’re back
0:47:20 and then you go down and you go up.
0:47:22 It’s just hard to get off that treadmill.
0:47:25 But be clear, no one’s gonna disarm unilaterally.
0:47:26 Rich people aren’t stupid.
0:47:29 They’re not gonna start cutting checks to the government.
0:47:31 What we need to do is elect people and I do this.
0:47:35 I spend money and I work and I canvass for people
0:47:38 who are going to restore a progressive tax structure,
0:47:41 have an alternative minimum tax on corporations
0:47:43 who have the lowest tax rate since 1939.
0:47:45 Their taxes used to be 1% of GDP,
0:47:48 excuse me, 2.5% of GDP, another 1%.
0:47:50 And also have an alternative minimum tax
0:47:52 on very, very wealthy people.
0:47:55 Such that no matter what loopholes they manage to invent,
0:47:59 they pay at least 20 or 30% of their income.
0:48:02 But tax strategy, the tax code’s gone from 400 pages
0:48:05 to 4,000 and those 3,600 pages aren’t there
0:48:08 to help out the middle class.
0:48:10 They’re there to fuck the middle class.
0:48:14 Not intentionally, but to say, to have thoughtful conversations
0:48:16 and do things like opportunity zones,
0:48:18 which by the way, I’ve invested in.
0:48:19 Here’s a good one.
0:48:22 Put a million dollars into an opportunity zone fund
0:48:24 and they’ve designated a bunch of low-income areas.
0:48:27 And if you invest in an opportunity zone,
0:48:29 and that is a warehouse in Reno
0:48:32 that Amazon just leased out, which I invested in,
0:48:36 I’ve invested, I think I invested $5 million,
0:48:38 $5 million tax deduction.
0:48:41 In seven years, I’ll have to pay that taxes on that,
0:48:43 but I get to invest with $5 million
0:48:46 in pre-tax income for seven years.
0:48:48 And any gains on it, if I hold onto it
0:48:50 for 10 years are tax-free.
0:48:53 And they couch it as helping low-income neighborhoods
0:48:54 or whatever, no, it’s not.
0:48:57 It’s a tax loophole for rich people.
0:48:59 These are everywhere, Ed.
0:49:00 These things are everywhere
0:49:04 and they’re even more present in real estate
0:49:06 and among corporations.
0:49:07 If you own commercial real estate,
0:49:11 you can depreciate the property two or 3% a year.
0:49:15 If you own Apple and it doubles, you can’t depreciate it.
0:49:18 You can actually depreciate commercial real estate.
0:49:23 If you own, I mean, if you own an asset in real estate
0:49:24 and it goes up, it doubles in value
0:49:26 from a million to 2 million, a commercial,
0:49:27 piece of commercial real estate,
0:49:29 you can do a 1031B exchange.
0:49:32 And as long as you roll it into a similar asset class,
0:49:34 you don’t trigger a capital gain.
0:49:39 If you sell Apple at $100 a share and you’ve made $50,
0:49:40 you get taxed on it.
0:49:43 So real estate, very effective lobby,
0:49:45 hugely tax-advantaged.
0:49:46 And what are we doing?
0:49:50 Trump raised the limit on trusts
0:49:53 where if I put money into a trust, it grows tax-free.
0:49:55 And then my kids inherit it.
0:49:58 I mean, she’s probably the thing that needs the most.
0:50:01 100%, we’re turning into dynastic wealth.
0:50:05 But so a lot of people, what they do is they go,
0:50:08 earn money, invest it, borrow against it, die.
0:50:10 And you never pay taxes on it.
0:50:11 It gets your kids get it.
0:50:16 And Trump, I think, increased the per-person trust limit
0:50:18 from 5 million to 13 million.
0:50:22 So if you’re a couple, you can put $26 million in a trust
0:50:25 that your kids will get and they’ll never have to pay the taxes
0:50:27 that you accrued while you were alive.
0:50:29 Yeah, but he’s fighting for the working people, so.
0:50:32 Yeah, so look, the tax code has been weaponized
0:50:34 by the rich and corporations.
0:50:37 I wanna be clear, I will fight hard to change it,
0:50:39 but no, I’m not gonna disarm unilaterally
0:50:41 and just cut a check to the government.
0:50:43 Just be clear about your position.
0:50:45 You want to get rid of the loopholes,
0:50:48 but so long as they exist, you will use them.
0:50:49 Yeah, 100%.
0:50:51 Which I think is a fair position.
0:50:54 The way I think of it, it’s a lot easier
0:50:58 to pay 20%, 30% taxes if so is everyone else.
0:51:00 But if you look around and these other rich guys
0:51:04 are paying 8% or nothing,
0:51:06 a lot of them are paying nothing,
0:51:07 it’s a lot harder to do that.
0:51:08 Let me just put it this way.
0:51:11 If Team England finally calls me up
0:51:14 in the finals against Germany and Berlin,
0:51:15 ’cause I actually have a pretty good foot.
0:51:17 I don’t know if you know this about me.
0:51:21 And I get fouled in the last minute of the game
0:51:23 or someone knocks me over in the penalty box.
0:51:27 I am so falling to the ground
0:51:31 and pretending I’ve torn my ACL and trying to win.
0:51:34 I am so flopping, I am going to try and win it.
0:51:38 And if that’s unethical, fine, I’m unethical,
0:51:40 but I’m going to play by the rules of the game
0:51:42 and do my best to win, full stop.
0:51:46 Let’s take a look at the week ahead.
0:51:48 We’ll see the unemployment rate for June
0:51:50 and the minutes from the Federal Reserve’s latest meeting.
0:51:51 Do you have any predictions?
0:51:53 – Well, that was my prediction,
0:51:55 was that Starlink is going to be the technology
0:51:59 from SpaceX, it’s going to be the technology of 2025.
0:52:01 – This episode was produced by Claire Miller
0:52:03 and engineered by Benjamin Spencer.
0:52:04 Our associate producer is Allison Weiss,
0:52:06 our executive producer is Jason Stivers and Catherine Dillon.
0:52:08 Mia Silvero is our research lead
0:52:10 and Drew Burroughs is our technical director.
0:52:12 Thank you for listening to Prof. G Markets
0:52:14 from the Vox Media Podcast Network.
0:52:17 We’ll be back with a fresh take on Markets on Monday.
0:52:23 ♪ Lifetimes ♪
0:52:30 ♪ You help me ♪
0:52:35 ♪ In kind reunion ♪
0:52:43 ♪ As the world turns ♪
0:52:47 ♪ And the dark flies ♪
0:52:50 ♪ In love ♪
0:52:52 you

0:00:03 Support for the show comes from Atlassian.
0:00:05 Atlassian software like Jira, Confluence, and Loom
0:00:07 help power the collaboration needed for teams
0:00:10 to accomplish what would otherwise be impossible alone.
0:00:11 Because individually, we’re great,
0:00:13 but together, we’re so much better.
0:00:15 That’s why millions of teams around the world,
0:00:17 including 75% of the Fortune 500,
0:00:18 trust Atlassian software for everything
0:00:21 from space exploration and green energy
0:00:22 to delivering pizzas and podcasts.
0:00:25 Whether you’re a team of two, 200, or two million,
0:00:28 Atlassian software is built to help keep you connected
0:00:29 and moving together as one.
0:00:31 Learn how to unleash the potential of your team
0:00:32 at Atlassian.com.
0:00:36 That’s A-T-L-A-S-S-I-A-N.com.
0:00:37 Atlassian.
0:00:45 – So you’ve arrived.
0:00:47 You head to the Brasserie, then the terrace.
0:00:48 Cocktail?
0:00:52 Don’t mind if I do.
0:00:54 You raise your glass to another guest
0:00:57 because you both know the holidays just beginning.
0:00:58 – Passengers, please proceed to game four.
0:01:01 – And you’re only in terminal three.
0:01:03 Welcome to Virgin Atlantic’s
0:01:06 unique upper-class clubhouse experience,
0:01:07 where you’ll feel like you’ve arrived
0:01:09 before you’ve taken off.
0:01:13 Virgin Atlantic, see the world differently.
0:01:21 – I’m Sky Galloway, and this is No Mercy, No Malice.
0:01:24 We’ve decided that children should not have access
0:01:29 to the military, alcohol, driving, pornography,
0:01:31 and many other things.
0:01:35 Social media, come one, come all.
0:01:37 Age-gating, as read by George Hahn.
0:01:44 – I’m in a dark place.
0:01:46 I just watched democracy collapsing
0:01:50 as a con man abused an old man.
0:01:52 I haven’t hit rock bottom yet,
0:01:55 so let’s discuss social media and age-gating.
0:01:59 Social media is unprecedented
0:02:02 in its reach and addictive potential,
0:02:06 a bottomless dopa bag that fits in your pocket.
0:02:09 For kids, it poses heightened risks.
0:02:13 The evidence is overwhelming and has been for a while.
0:02:17 It just took a beat to absorb how brazen the lies were.
0:02:19 We’re proud of our progress.
0:02:22 Social media can be dangerous.
0:02:24 That doesn’t make it net bad.
0:02:27 There’s plenty of good things about it.
0:02:31 But similar to automobiles, alcohol, and AK-47s,
0:02:34 it has a mixed impact on our lives.
0:02:36 It presents dangers.
0:02:39 And one of the things a healthy society does
0:02:42 is limit the availability of dangerous products
0:02:46 to children who lack the capacity to use them safely.
0:02:51 Yet two decades into the social media era,
0:02:54 we permit unlimited all-ages access
0:02:57 to this dangerous addictive product.
0:02:58 The reason?
0:03:00 Incentives.
0:03:04 Specifically, the platforms disincentivized
0:03:07 to age-gate their products throw sand in the gears
0:03:10 of any effort to limit access.
0:03:15 To change the outcome, we must change the incentives.
0:03:20 I’m a better person when I drink.
0:03:23 More interesting and more interested.
0:03:25 One of the reasons I work out so much
0:03:28 is so I can continue to drink.
0:03:31 Muscle absorbs alcohol better than fat does.
0:03:33 Kids are different.
0:03:35 And we’ve long been comfortable
0:03:37 treating them differently.
0:03:41 In 1838, Wisconsin forbid the selling of liquor to minors
0:03:43 without parental consent.
0:03:47 And by 1900, state laws setting minimum drinking ages
0:03:48 were common.
0:03:50 There’s a good case to be made
0:03:54 that the U.S. alcohol limit of 21 is too high.
0:03:56 But nobody would argue we should dispense
0:03:58 with age-gating booze altogether.
0:04:02 That trend has paralleled laws
0:04:05 restricting childhood access to other things.
0:04:08 The right to bear arms is enshrined in the Constitution,
0:04:10 yet courts don’t blink at keeping guns
0:04:12 out of the hands of children,
0:04:14 even as they dismantle every other limitation
0:04:16 on gun ownership.
0:04:17 If there’s a lobbying group trying
0:04:20 to give driver’s licenses to 13-year-olds,
0:04:21 I can’t find it.
0:04:25 Age of consent laws make sex with children a crime.
0:04:27 Minors are not permitted to enter into contracts.
0:04:30 We limit the hours and conditions in which they can work.
0:04:33 They cannot serve in the military or on juries,
0:04:36 nor are they allowed to vote.
0:04:38 That last one we may want to reconsider.
0:04:41 These are not trivial things.
0:04:44 On the contrary, we exclude children
0:04:47 from or substantially limit their participation
0:04:51 in many core activities of society.
0:04:55 The only time I have appeared on a late night TV
0:04:58 was when Jimmy Fallon mocked me,
0:05:00 showing a CNN video clip where I said,
0:05:03 “I would rather give my 14-year-old son
0:05:06 “a bottle of Jack Daniels in marijuana
0:05:08 “than an Instagram and a Snap account.”
0:05:12 4,000 likes and 265,000 views later,
0:05:14 it appears America agrees.
0:05:17 My now almost 17-year-old son has engaged
0:05:20 with all three substances.
0:05:23 Alcohol and Instagram make him feel worse afterward.
0:05:25 Not sure about weed.
0:05:27 However, he is restricted from carrying
0:05:29 a bottle of Jack in his pocket,
0:05:31 and his parents would ask for a word
0:05:34 if his face was hermetically sealed to a bong.
0:05:37 Note, spare me any bullshit parenting advice
0:05:40 from non-parents or therapists
0:05:42 whose kids don’t come home for the holidays.
0:05:47 He, we, and society restrict his access
0:05:49 to these substances,
0:05:51 and when he abstains from drinking or smoking,
0:05:54 he isn’t sequestered from all social contact
0:05:57 and the connective tissue of his peer group.
0:06:01 We freaked out when we found, as you will if you have boys,
0:06:04 porn on one of his devices.
0:06:06 But the research is clear.
0:06:07 We should be more alarmed
0:06:12 when we find Instagram, Snap, or TikTok on his phone.
0:06:14 Mark Zuckerberg and Sheryl Sandberg
0:06:17 are the pornographers of our global economy.
0:06:21 Actually, that’s unfair to pornographers.
0:06:25 Age-gating social media is hugely popular.
0:06:28 Over 80% of adults believe parental consent
0:06:30 should be required for social media
0:06:34 and almost 70% want platforms
0:06:37 to limit the time minors spend on them.
0:06:40 Those numbers are from last fall
0:06:43 before my NYU colleague, Jonathan Haidt,
0:06:46 published The Anxious Generation,
0:06:49 which builds on the work of Jean Twenge and others,
0:06:51 making the most forceful case yet
0:06:54 that social media is hurting our children.
0:06:59 Reviewing the shocking increase in depression, self-harm,
0:07:03 and general suffering our children are experiencing,
0:07:07 and the explanations offered by the platform apologists,
0:07:10 Professor Haidt highlights the twin specters
0:07:13 of social media and mobile devices
0:07:17 and the lasting damage they’re doing to a generation.
0:07:21 Unconstrained smartphone use, Haidt observes,
0:07:25 has been, quote, “The largest uncontrolled experiment
0:07:29 “humanity has ever performed on its own children,”
0:07:33 unquote, and the results are in.
0:07:36 Legislatures are responding.
0:07:39 States from California to Utah to Louisiana
0:07:41 have passed laws that limit access
0:07:43 to social media based on age.
0:07:45 If you haven’t noticed any change
0:07:47 in the behavior of the platforms, however,
0:07:51 that’s because courts have blocked nearly all of them.
0:07:54 A social media and digital commerce trade group
0:07:58 called NetChoice is quick to sue any state
0:08:00 that interferes with its members’ ability
0:08:03 to exploit children for maximum profit.
0:08:07 Judges are siding with the platforms,
0:08:10 and probably not because they enjoy seeing depressed teenagers
0:08:13 fed content glorifying self-harm
0:08:18 or teenage boys committing suicide after being sex-storted.
0:08:21 The platforms and other opponents of these laws,
0:08:25 such as the ACLU, make two main points.
0:08:29 First, they claim that verifying age online
0:08:32 is too complicated, requiring the collection
0:08:34 of all sorts of information about users
0:08:37 and won’t work in all cases.
0:08:41 Second, requiring users to collect this information
0:08:45 creates free speech, privacy, and security concerns.
0:08:48 The platforms also deny their products
0:08:50 are harmful to children.
0:08:54 On their face, these points are valid.
0:08:57 It is more difficult to confirm age online,
0:08:58 where there’s no clerk at the counter
0:09:00 who can ask to see your driver’s license
0:09:02 and reference her face.
0:09:05 And these platforms have proven reckless
0:09:06 with personal data.
0:09:09 It’s sort of a, they’re so irresponsible,
0:09:11 but we can’t take action dilemma.
0:09:15 But these objections are not about age verification,
0:09:19 children’s rights, free speech, or privacy.
0:09:24 They are concerns about the platform company’s capabilities.
0:09:27 Their arguments boil down to the assertion
0:09:30 that these multi-billion dollar organizations
0:09:33 who’ve assembled vast pools of human capital
0:09:35 that wield god-like technology
0:09:38 can’t figure out how to build effective, efficient,
0:09:41 constitutionally compliant age verification systems
0:09:43 to protect children.
0:09:49 If this sounds like bullshit, trust your instincts.
0:09:52 This isn’t a conversation regarding the realm
0:09:55 of the possible, but the profitable.
0:10:00 When you pay an industry not to understand something,
0:10:03 it will never figure it out.
0:10:05 Just look at the tobacco industry’s inability
0:10:07 to see a link with cancer.
0:10:10 What’s more challenging?
0:10:13 Figuring out if someone is younger than 16,
0:10:16 or building a global real-time communication network
0:10:19 that stores a near-infinite amount of text, video,
0:10:23 and audio retrievable by billions of simultaneous users
0:10:26 in milliseconds with 24/7 uptime.
0:10:30 The social media giants know where you are,
0:10:33 what you’re doing, how you’re feeling,
0:10:36 and if you’re experiencing suicidal ideation.
0:10:39 But they can’t figure out your age.
0:10:42 You can’t make this shit up.
0:10:45 The platforms could design technology
0:10:47 that reliably collects sufficient information
0:10:49 to confirm a user’s age,
0:10:53 then wipes the information from its servers.
0:10:56 They could create a private or public entity
0:11:00 that processes age verification anonymously.
0:11:02 Remember the blockchain?
0:11:05 Isn’t this exactly the kind of problem
0:11:06 it was supposed to solve?
0:11:11 They could deploy AI to estimate when a user
0:11:14 is likely underage based on their online behaviors
0:11:18 and seek age verification from at-risk people.
0:11:23 If device manufacturers, or just the device OS duopoly
0:11:28 of Apple and Alphabet, were properly incentivized,
0:11:30 they could implement age verification
0:11:32 on the device itself.
0:11:34 This is what Meta says it wants
0:11:38 when it isn’t fighting age verification requirements.
0:11:42 Or, crazy idea, they could stop glorifying suicide
0:11:45 and pushing pornography to everyone.
0:11:50 The reason Zuck and other access powers
0:11:53 haven’t built age verification into their platforms
0:11:56 is it will reduce their profits,
0:11:59 because they will serve fewer ads to kids,
0:12:02 which will suppress their stock prices,
0:12:05 and the job of a public company CEO
0:12:09 is to increase the stock price.
0:12:14 Period, full stop, end of strategic plan.
0:12:18 So long as the negative impact to the stock price
0:12:21 caused by the bad PR of teen suicide and depression
0:12:25 is less than the positive impact
0:12:27 of the incremental ad revenue obtained
0:12:30 through unrestricted algorithmic manipulation
0:12:32 of those teens.
0:12:36 The rational, shareholder-driven thing to do
0:12:40 is fight age verification requirements.
0:12:42 If we want the platforms
0:12:45 to make their products safe for children,
0:12:47 we need to change the incentives,
0:12:51 force them to bear the cost of their damage,
0:12:56 internalize the externalities in economists speak.
0:13:00 There are three forces powerful enough to do this,
0:13:05 the market, plaintiff lawyers, and the government.
0:13:09 The market solution would be to let consumers decide
0:13:12 if they want to be exploited and manipulated.
0:13:16 And by consumers, I mean teenagers.
0:13:18 One big shortcoming of this approach
0:13:22 is that teenagers are idiots.
0:13:26 I have proof here as I’m raising two and I used to be one.
0:13:30 My job as their dad is to be their prefrontal cortex
0:13:32 until it shows up.
0:13:36 I told my son on a Thursday it was Thursday
0:13:39 and he disagreed.
0:13:44 The next approach is to let the platforms do whatever they want,
0:13:46 but if they harm someone,
0:13:49 let that person sue them for damages.
0:13:51 This is how we police product safety
0:13:54 in almost all contexts.
0:13:57 Did your car’s airbag explode shrapnel into your neck?
0:14:00 Sue Takata.
0:14:02 Did talcum powder give you cancer?
0:14:04 Sue J&J.
0:14:07 Did your phone burn the skin off your leg?
0:14:10 Sue Samsung.
0:14:12 People don’t like plaintiff lawyers,
0:14:14 but lawsuits are a big part of the reason
0:14:18 that more products don’t give you cancer or scald you.
0:14:22 Nobody can successfully sue social media platforms,
0:14:27 however, because of a 28-year-old law known as Section 230,
0:14:32 which gives them blanket protection against litigation.
0:14:35 I’ve written about the need to limit Section 230 before
0:14:36 and whenever I do,
0:14:41 a zombie apocalypse of free speech absolutists is unleashed.
0:14:45 The proposition remains unchanged, however.
0:14:47 If social media platforms believe
0:14:49 they’ve done everything reasonable
0:14:53 to protect children from the dangers of their product,
0:14:55 then let them prove it in court.
0:14:58 Or better yet, let the fear of tobacco
0:15:01 or asbestos-shaped litigation gorging on their profits
0:15:06 and motivate them to agegate their products.
0:15:09 Finally, the government can go after companies
0:15:12 whose products harm consumers.
0:15:15 The Federal Trade Commission has fined meta $5 billion
0:15:19 over privacy violations to no apparent effect.
0:15:23 This was perfect, except it was missing a zero.
0:15:29 For these firms, $5 billion is a nuisance, not a deterrent.
0:15:32 There’s a bill in the Senate right now,
0:15:34 the Kids Online Safety Act,
0:15:39 which would give the FTC new authority to go after platforms
0:15:42 which fail to build guardrails for kids.
0:15:44 It’s not without risk.
0:15:46 Some right-wing groups are supporting it
0:15:49 because they believe it can be used to suppress LGBT content
0:15:53 or anything else the patriarchy deems undesirable.
0:15:57 But I have more faith in Congress’s ability to refine a law
0:16:00 than I do in the social platform’s willingness
0:16:02 to change without one.
0:16:06 Until we change the incentives
0:16:09 and put the costs of these platforms where they belong
0:16:13 on the platforms themselves, they will not change.
0:16:18 Legislators trying to design agegating systems
0:16:21 or craft detailed policies for platforms
0:16:24 are playing a fool’s game.
0:16:27 The social media companies can just shoot holes
0:16:30 in every piece of legislation, fund endless lawsuits,
0:16:34 and deploy their armies of lobbyists and faux heat shields,
0:16:38 lean in, all the while making their systems
0:16:41 ever more addictive and exploitative.
0:16:44 Or maybe we have it wrong
0:16:47 and we should let our kids drink, drive,
0:16:50 and join the military at 12.
0:16:52 After slitting their wrists,
0:16:55 survivors often get tattoos to cover the scars.
0:17:00 Maybe teens should skip social media and just get tattoos.
0:17:04 I warned you, dark.
0:17:09 Life is so rich.
0:17:13 (gentle music)
0:17:16 (gentle music)
0:17:18 (soft music)
0:17:28 [BLANK_AUDIO]

0:00:03 Support for the show comes from Schwab.
0:00:04 With Schwab Investing Themes,
0:00:07 it’s easy to invest in ideas you believe in,
0:00:10 like online music and videos, artificial intelligence,
0:00:12 electric vehicles, and more.
0:00:15 Schwab’s research process uncovers emerging trends,
0:00:18 then their technology curates relevant stocks into themes.
0:00:22 Choose from over 40 themes by all the stocks in a theme as is,
0:00:25 or customize to better fit your investing goals,
0:00:27 all in a few clicks.
0:00:29 Schwab Investing Themes is not intended
0:00:31 to be investment advice or a recommendation
0:00:34 of any stock or investment strategy.
0:00:37 Learn more at schwab.com/thematicinvesting.
0:00:41 Support for PropG comes from Hestens.
0:00:43 Since 1852 and over six generations,
0:00:46 Hestens’ beds have been renowned for their craftsmanship
0:00:47 and use of high-quality natural materials
0:00:49 to help ensure your body temperature stays regulated
0:00:51 while you sleep.
0:00:53 Hestens offers a range of firmness options
0:00:55 to suit different preferences and body types,
0:00:56 ensuring personalized comfort.
0:00:59 The team visited a Hestens sleep spa
0:01:01 for an in-person, immersive experience to trots and beds
0:01:04 and found them to be incredibly comfy.
0:01:05 You can visit one of their stores
0:01:08 or go to Hestens.com to book a personalized bed test
0:01:10 or order a catalog to learn more.
0:01:14 Episode 306, 06 is the air echo
0:01:16 belonging to the Canadian province of Saskatchewan.
0:01:20 In 1906, Finland became the first European country
0:01:22 to give women the right to vote.
0:01:25 I actually sexually identify as Canadian.
0:01:29 I’m asexual, got it?
0:01:30 Sort of threading the needle
0:01:32 between dad jokes and profanity.
0:01:36 Go, go, go!
0:01:47 Welcome to the 306th episode of the PropG pod.
0:01:49 In today’s episode, we speak with Jesse Itzler,
0:01:52 a serial entrepreneur, a New York Times bestselling author,
0:01:57 part owner of the Atlanta Hawks and an ultra marathon runner.
0:01:59 We discussed with Jesse his career journey,
0:02:00 his approach to entrepreneurship,
0:02:03 including how it aligns with his fitness journey
0:02:04 and the strategies he implements
0:02:06 to maintain balance in his life.
0:02:08 I’ve seen this guy everywhere on TikTok
0:02:11 ’cause he has sort of a nice vibe
0:02:16 that sort of melds his professional and personal life.
0:02:18 He’s kind of an attractive person.
0:02:20 You’re sort of drawn to him.
0:02:21 Okay, what’s happening?
0:02:24 I’m back in London after a week in the south of France.
0:02:28 That’s right, it is about 75 degrees.
0:02:31 By the way, there’s no air conditioning in the UK.
0:02:32 Did you know that?
0:02:33 They don’t believe in air conditioning.
0:02:35 We do have indoor plumbing, I’ll give them that.
0:02:37 There’s no fucking air conditioning.
0:02:38 I get up last night ’cause I’m hot
0:02:41 ’cause it’s gotten up to a sweltering 72 degrees here.
0:02:42 I’m like, I’m a little bit warm.
0:02:44 I’m gonna turn on the air conditioning.
0:02:45 I’m looking for the air conditioning.
0:02:46 And I was looking for a long time.
0:02:49 Why? Because there is no air conditioning.
0:02:50 What’s with that?
0:02:52 Anyways, moving on to some news.
0:02:54 Apple became the first US company
0:02:56 to be charged for violating the Digital Markets Act,
0:02:59 which EU regulators put in place back in 2022
0:03:02 to prevent online gatekeepers, error quotes,
0:03:04 from starching out competitors.
0:03:05 It’s really interesting in particular,
0:03:06 in this particular instance,
0:03:07 well, I think it’s interesting.
0:03:09 Maybe you don’t, maybe you don’t.
0:03:10 Maybe you’re asexual.
0:03:12 Anyways, in this particular instance,
0:03:14 the regulators determined that Apple makes it too hard
0:03:16 for app developers to steer consumers
0:03:17 to alternative offerings.
0:03:20 Well, you just figured that out under the Digital Marketing Act,
0:03:23 fines can be up to get this 10% of gross revenue.
0:03:25 For Apple, that would be up to 38 billion
0:03:27 based on last year’s revenue.
0:03:29 Okay, let me get this.
0:03:31 Apple makes $380 billion.
0:03:33 How is that even possible?
0:03:34 How is that even possible?
0:03:38 I sold my last company for 160 million.
0:03:40 It was doing 20 million in revenue.
0:03:43 It literally took an act of God
0:03:44 and me sacrificing my health
0:03:46 in every relationship I had
0:03:48 to get to 20 million in revenue.
0:03:51 These guys have gotten a $380 billion in revenue.
0:03:54 What are they doing selling like a baby’s kidney?
0:03:56 What on earth are they doing over there?
0:03:58 $380 million.
0:03:59 Anyways, because of this charge,
0:04:02 Apple says will not roll out Apple intelligence
0:04:03 in the EU this year.
0:04:05 Whoa!
0:04:08 They’re taking their Apple and they’re going home.
0:04:11 And that’s the problem with this type of regulation
0:04:14 across capitalist democratic societies
0:04:17 or G20 nations when we don’t have a collective action.
0:04:20 And it’s the same problem that haunts parents
0:04:22 with their teens with respect to depression
0:04:24 and social media.
0:04:25 People who say, well, can’t you just take away
0:04:27 the social media of the phone?
0:04:28 Clearly don’t have children.
0:04:31 And two, there’s a collective action problem.
0:04:33 And that is if your kid’s not on snap
0:04:36 and all the other eighth graders are on snap,
0:04:38 that kid actually is more depressed
0:04:41 because he or she is ostracized or feels isolated.
0:04:44 And it’s a bit of the same thing with regulation.
0:04:47 And that is it just strikes me is so crazy
0:04:49 that we wouldn’t get together with my idol,
0:04:51 Marguerite Vestillard.
0:04:52 By the way, quick story.
0:04:53 You’re a competitive commissioner.
0:04:55 You’re a competitiveness commissioner.
0:04:57 Was on a train from, I was on the Assela.
0:04:58 I never take the Assela.
0:05:01 I think it’s dramatically unimpressive.
0:05:02 I’m on a lot of trains in Europe.
0:05:05 And then I get on the Assela and I think,
0:05:06 well, maybe we are going to,
0:05:08 maybe it is the peak of our, I don’t know,
0:05:10 society or peak America.
0:05:12 Anyway, and I saw this woman knitting
0:05:14 and I’m like, that looks like Marguerite Vestillard.
0:05:16 And it was sitting there meeting
0:05:19 in between breaking up Apple and Big Tech.
0:05:20 And I went up to her and said, could I have a picture?
0:05:21 And she was so friendly.
0:05:24 I don’t think she has a lot of fans in the US,
0:05:25 but I like her.
0:05:28 I think she’s unafraid, super smart, does her homework.
0:05:31 Anyways, an example of a great regulator.
0:05:35 But they’re saying they’re not going to roll out intelligence.
0:05:36 So they’re going to take it home.
0:05:37 And the problem with not having collective action
0:05:42 or joint regulation is that these Big Tech companies
0:05:43 as a group have now become more powerful
0:05:46 than any specific country, maybe even the European Union.
0:05:47 We’ll see, we’ll see.
0:05:49 And they’re not afraid to say, no,
0:05:52 this is more than them saying, we don’t want to comply.
0:05:54 They’re saying, if you start regulating us,
0:05:57 we don’t want to play ball.
0:05:59 And I think that where we would be best served
0:06:03 is if we had some sort of multilateral cooperation
0:06:04 around these things.
0:06:05 Otherwise it’s just a race to the bottom.
0:06:07 And I wonder if this is sort of sets off a race
0:06:09 where a bunch of Big Tech companies
0:06:11 are not going to be afraid following Apple’s lead to say,
0:06:15 sorry, we’re not playing your super regulation concern
0:06:18 for the Commonwealth, you know, monopoly-powered games.
0:06:20 Microsoft is also facing charges
0:06:21 for anti-competitive behavior.
0:06:24 Regulators do not like that the firm bundles
0:06:26 its Teams app with the Office suite.
0:06:29 Microsoft hasn’t seen this type of antitrust
0:06:30 in more than a decade.
0:06:34 So, okay, what would be the biggest tax cut in history
0:06:37 if the US and China kissed and made up?
0:06:41 China has the world’s best supply chain still
0:06:44 India’s coming up, Vietnam, Mexico, all pretty strong.
0:06:47 China, the gangster supply chain, right?
0:06:50 Flexible, people work so hard, quick story, quick story.
0:06:52 I used to run a company called L2C above,
0:06:55 the company that I’m basically killed
0:06:58 and pillaged to get to 20 million in revenue for.
0:07:02 We did a decent amount of business in China.
0:07:03 We didn’t work for Chinese companies.
0:07:04 I found Chinese companies
0:07:07 don’t want to pay for anything, they’ll figure.
0:07:09 But American companies looking to get into China
0:07:11 would hire us to look at Chinese data
0:07:13 around their digital footprint.
0:07:15 And one of my clients, I think it was Estee Lauder China,
0:07:17 they made a big bet on China.
0:07:20 And I was doing a swing through China to do events.
0:07:23 And I get there like 11 p.m. on a Saturday night.
0:07:26 I don’t know, I’m so bass-acquards.
0:07:28 And I called the office of the head of,
0:07:30 I think it was Estee Lauder China.
0:07:33 And to tell him, I’ll see you Monday at 9 a.m.
0:07:35 It’s referred or forwarded to a cell phone.
0:07:37 He picks it up and I said, I’m so sorry.
0:07:39 It’s Saturday night, 11 p.m. I didn’t mean to wake you.
0:07:39 And he said, where are you?
0:07:40 And I said, I forgot what hotel I was on.
0:07:41 I think it was a higher range seat.
0:07:44 That’s a sky lobby that’s like 1,100 floors in the sky.
0:07:45 And he said, oh, you’re there?
0:07:46 He said, are you awake?
0:07:47 I’m like, yeah, I’m awake.
0:07:48 And he said, well, I’ll come over right now.
0:07:49 That’s fucking China.
0:07:50 That’s when I’m like, oh God,
0:07:53 these people take themselves pretty seriously.
0:07:55 You call the head of Estee Lauder China.
0:07:58 And he comes and meets you at 11 p.m. on Saturdays
0:08:00 so we can get a jump on his Monday morning.
0:08:01 Think about that.
0:08:05 Anyway, China takes themselves very seriously.
0:08:07 And the biggest tax cut in the world
0:08:10 would be if the supply chain and the innovation
0:08:13 and IP of the U.S. got back together.
0:08:14 What do we have?
0:08:14 We have an inflation problem.
0:08:15 What do they have?
0:08:17 An unemployment and growth problem, boom.
0:08:20 Let’s kiss and make up, ladies and gentlemen.
0:08:23 And the more we get along and the more people
0:08:25 who go back and forth between the China and the U.S.,
0:08:28 the less likely we are to go to war with each other.
0:08:30 The less likely they are, I believe, to invade Taiwan.
0:08:33 The less likely we are to start shooting
0:08:36 or entering into a hot war with their Navy
0:08:38 if and when they invade Taiwan
0:08:39 if we’re all making a lot of money
0:08:41 and interacting and speaking to each other.
0:08:43 The second biggest tax cut in history,
0:08:45 the second biggest tax cut,
0:08:49 would be if we invested 10, 20, $30 billion,
0:08:51 gave it to Lena Kahn and Jonathan Canter.
0:08:56 And basically, totally overfunded the DOJ and the FTC
0:09:00 and went on a breakup lullapalooza.
0:09:01 Why?
0:09:04 Everything from chicken to home renovations
0:09:09 to beef to cereal to confections to search engines
0:09:13 to social media is controlled by a small number of companies.
0:09:15 And what happens to an industry
0:09:16 when it becomes too concentrated,
0:09:18 they learn that they don’t have to make great products.
0:09:21 They can just raise prices and there aren’t that many options.
0:09:23 And then, boom, what happens?
0:09:23 Prices go up.
0:09:25 And the traditional means of establishing
0:09:28 anti-competitive behavior is to look at prices.
0:09:30 But how do you establish those metrics around companies
0:09:31 that offer their products for free?
0:09:35 Well, what happens is Amazon becomes a monopsony.
0:09:37 And that is if you want to be on the Amazon platform
0:09:40 and have access to 50 cents on the e-commerce dollar,
0:09:41 it’s probably more like 70,
0:09:43 if you take out groceries and gasoline,
0:09:44 you have to be on their platform.
0:09:45 And what do you know?
0:09:47 The fees they charge their retailers
0:09:50 on the third party platform have grown dramatically,
0:09:53 I think from something like 24 to 40% in the last decade.
0:09:54 Okay, that is monopoly abuse.
0:09:55 And what do you know?
0:09:56 What do you know?
0:09:58 How would you describe the Apple App Store?
0:09:59 Provide security, technology.
0:10:01 You know that the people on the other end
0:10:03 are gonna provide a service in exchange for money,
0:10:05 secure platform, communicate.
0:10:06 Oh, wait, it’s a credit card company.
0:10:07 What do we need?
0:10:08 What do we need?
0:10:10 We need that Apple App Store not to be charging 30%,
0:10:14 but to be charging two or 3% like every credit card company,
0:10:16 but they get away with 30%.
0:10:17 Why?
0:10:17 Why?
0:10:18 Because they have a monopoly
0:10:20 on essentially people who spend money online.
0:10:23 This would be like you own the train tracks
0:10:26 and you own the trains and you see
0:10:28 where apparel is being dropped off.
0:10:31 And you use that data to go into your own apparel business
0:10:33 and by the way, you don’t charge your own owned
0:10:36 and operated apparel company any transit fees
0:10:37 and they can charge lower fees
0:10:38 and no one can compete with them
0:10:41 because you start a line of athletic wear or yoga wear
0:10:44 and it costs half as much as Lululemon
0:10:46 and you get to see where Lululemon is selling
0:10:48 and you have your store called Apple Lemon
0:10:49 and you charge half the price
0:10:50 and you can still make money
0:10:52 and you just wait until Lululemon dies
0:10:55 and perhaps Lululemon’s yoga pants
0:10:56 don’t get there as quickly as yours do.
0:10:58 You see, you get my drift.
0:10:59 You get my drift.
0:11:04 So the fastest way to lower taxes on consumers globally
0:11:07 would be to go in to the three or four biggest companies
0:11:09 in every major category and break them up
0:11:11 and oxygenate the economy.
0:11:13 Similar to when we broke up AT&T,
0:11:14 what were the arguments?
0:11:16 Well, we need to be big so we can invest in,
0:11:18 in phone lines and capex.
0:11:19 Okay, we’ve heard that before.
0:11:21 We’re good people and it’s a good brand
0:11:23 and we’re gonna buy off a bunch of politicians.
0:11:25 Boom, they go in, they break it up.
0:11:27 Seven baby bells, each of those companies
0:11:30 worth more than the original AT&T within 10 or 12 years.
0:11:32 Oh, and by the way, what did we have?
0:11:33 We had at least tremendous innovation
0:11:34 ’cause guess what?
0:11:36 We had fiber, we had data,
0:11:39 we had optics, all lying fallow at Bell Labs
0:11:43 and they didn’t wanna compete with their own technology.
0:11:47 This would be the most dramatic tax cut in history,
0:11:48 second only to China.
0:11:51 And that is every company would begin competing
0:11:54 for consumers, lowering their rents
0:11:56 on companies, consumers and parents.
0:11:58 You’d have more innovation unlock.
0:11:59 Look what happened at Google.
0:12:00 Google basically invented AI
0:12:01 and what do you know?
0:12:04 They were sitting on AI until ChatGPT
0:12:06 or OpenAI or Microsoft AI came in
0:12:09 and said this is a real marketplace
0:12:10 and basically scared the shit out of Google
0:12:12 who was sitting on their hands, why?
0:12:15 ‘Cause they didn’t wanna challenge search.
0:12:17 So they kept it kind of on the low down.
0:12:19 They didn’t really go hard at it and that’s what happens.
0:12:21 There’s a ton of technologies and innovation
0:12:24 waiting to be unleashed if we break these companies up.
0:12:27 The EU is taking action ahead of us
0:12:29 recognizing they get the majority of the downside.
0:12:30 They get all the teen depression,
0:12:31 the weaponization of their elections,
0:12:34 the income inequality, the monopoly abuse
0:12:35 but they get a fraction of the upside.
0:12:37 There aren’t that many hospital wings
0:12:38 or universities named after Google
0:12:40 or Facebook billionaires like fuck that.
0:12:42 That’s stiff in their backbone
0:12:44 and they are starting to go gangster here
0:12:45 but if we don’t have collective action
0:12:47 and cross border cooperation,
0:12:48 it’s gonna be a race to the bottom
0:12:51 and we’re gonna end up in an even worse place
0:12:52 with more depressed kids.
0:12:55 A small number of people who make a shit ton of money
0:12:56 but a middle class that is struggling,
0:12:59 labor that continues to see their wages erode
0:13:02 and products that never recognize their full potential
0:13:03 ’cause they’re totally focused
0:13:07 on monopoly abuses of strategy as opposed to innovation.
0:13:09 Apple was already fined $2 billion back in March
0:13:11 for its domination in the music streaming market.
0:13:13 That’s fine and needs another zero.
0:13:14 These fines have become meaningless.
0:13:17 $2 billion is nothing, nothing for Apple.
0:13:21 Apple will lose or gain $2 billion in market cap
0:13:24 in the next 10 minutes in the marketplace.
0:13:26 We need to add a zero to all these fines.
0:13:29 We need to go on a breakup Lollapalooza.
0:13:32 We’ll be right back for our conversation
0:13:34 with Jesse Itzler.
0:13:39 Support for Prop G comes from Mint Mobile.
0:13:41 Have you ever given your house a good deep clean
0:13:42 and then thought to yourself,
0:13:44 wow, how have I been living like this?
0:13:46 That’s the same feeling you might get
0:13:48 when you switched to Mint Mobile
0:13:49 and you realize that you’ve been paying a fortune
0:13:52 for wireless, Mint Mobile has phone plans for $15 a month
0:13:55 after you purchase a three month plan.
0:13:57 You’ll look at your new bill and think, wow,
0:13:59 how was I ever affording this?
0:14:00 When you switch to Mint Mobile,
0:14:03 you can get unlimited talk, text and data for $15 a month.
0:14:05 That means saying goodbye to overpriced monthly bills
0:14:07 and unexpected overages.
0:14:09 All plans come with high speed data delivered
0:14:12 on the nation’s largest 5G network.
0:14:13 You can get this new customer offer
0:14:15 and your new three month unlimited wireless plan
0:14:17 for just 15 bucks a month.
0:14:20 Go to mintmobile.com/propg.
0:14:23 That’s mintmobile.com/propg.
0:14:25 Cut your wireless bill to 15 bucks a month
0:14:27 at mintmobile.com/propg.
0:14:30 $45 upfront payment required,
0:14:31 equivalent to $15 per month.
0:14:34 New customers on the first three month plan only.
0:14:37 Speed slower above 40 gigabytes on unlimited plan.
0:14:39 Additional taxes, fees and restrictions apply.
0:14:41 See Mint Mobile for details.
0:14:49 Support for the show comes from the Harvard Business Review.
0:14:50 If you’re a business owner,
0:14:53 a manager or a boss of any kind, congrats.
0:14:55 Must’ve done something right to get where you are,
0:14:57 but I’m guessing that you still have plenty of room
0:14:57 for improvement.
0:14:59 Maybe you need advice on how to navigate
0:15:01 a workplace conflict or maybe you’re wondering
0:15:03 if AI has a place in your business.
0:15:05 The Harvard Business Review is the place
0:15:07 to find rigorous insight on strategy, leadership
0:15:09 and innovation that any professional can benefit from.
0:15:11 Since launching its flagship magazine,
0:15:13 the Harvard Business Review has become a top source
0:15:16 for rigorous insight and best management practices.
0:15:19 And you can find the same level of expertise on hbr.org.
0:15:21 And for just $10 a month,
0:15:23 you can unlock unlimited access to case studies,
0:15:25 podcasts, video series, newsletters
0:15:27 and articles updated daily.
0:15:29 For me, HBR is about planes.
0:15:31 Whenever I have a long trip, I buy an HBR.
0:15:34 And I typically find an article in there
0:15:35 where I start underlying stuff
0:15:37 and it kind of informs my management thinking,
0:15:40 especially around HR and how to create the right incentives
0:15:42 around a culture anyways.
0:15:43 While much of Harvard Business Review’s content
0:15:46 is available for free after signing up at their site,
0:15:47 subscriptions to unlimited content
0:15:49 start at only $10 a month.
0:15:52 Go to hbr.org/subscriptions
0:15:54 and enter promo code PROFG right now
0:15:56 to get 10% off your subscription.
0:15:59 Again, to save 10% off your HBR subscription,
0:16:01 go to hbr.org/subscriptions
0:16:04 and enter promo code PROFG.
0:16:10 Support for PROFG comes from Fundrise.
0:16:13 You know the adage, buy low, sell high.
0:16:15 It’s easy to say, hard to do.
0:16:17 For example, high interest rates
0:16:19 are crushing the real estate market right now.
0:16:21 Demand is dropping and prices are falling
0:16:22 even for many of the best assets.
0:16:25 It’s no wonder the Fundrise flagship fund
0:16:26 plans to go on a buying spree
0:16:28 expanding its billion dollar real estate portfolio
0:16:29 over the next few months.
0:16:31 You’re gonna add the Fundrise flagship fund
0:16:33 to your portfolio in just minutes
0:16:34 and with as little as $10
0:16:37 by visiting fundrise.com/proppg.
0:16:39 Carefully consider the investment objectives,
0:16:41 risks, charges, and expenses
0:16:43 of the Fundrise flagship fund before investing.
0:16:45 This and other information can be found
0:16:48 in the fund’s prospectus at fundrise.com/flagship.
0:16:50 This is a paid advertisement.
0:16:58 (upbeat music)
0:17:05 – Welcome back.
0:17:07 Here’s our conversation with Jesse Itzler,
0:17:09 a serial entrepreneur, bestselling author,
0:17:10 and ultra marathon runner.
0:17:14 Jesse, where does this podcast find you?
0:17:16 – Atlanta, Georgia, where I live.
0:17:18 – Atlanta, nice.
0:17:20 So let’s bust right into it.
0:17:22 Give us your kind of origin story, Jesse.
0:17:25 Walk us through your background
0:17:27 and how you ended up doing what you’ve done.
0:17:30 – I’ve had a very unconventional journey
0:17:31 and worn a lot of different hats.
0:17:34 I started out in the music business
0:17:35 right out of college.
0:17:37 I went to school in DC at American University.
0:17:40 I was signed to a record label called Delicious Final.
0:17:43 And that didn’t go great for me.
0:17:45 I ended up getting dropped from the label
0:17:47 and I started doing theme songs for sports teams
0:17:51 like the NYX theme song, which is called Go New York Go.
0:17:52 Bunch of other teams.
0:17:55 And ultimately started a music marketing company
0:17:57 that I sold to a public company.
0:18:00 And then I’m a big runner.
0:18:03 I’ve done a lot of long distance ultra races.
0:18:05 And when I was training for a 100 mile race,
0:18:10 I discovered coconut water in 2006, 2007.
0:18:13 I ended up partnering with a coconut water company
0:18:17 called Zico, which we sold to Coke, Coca Cola.
0:18:20 And then just had a bunch of wrote a book, had four kids,
0:18:24 got married, moved from New York to Atlanta,
0:18:26 and really just followed things that I love to do
0:18:28 and launched a bunch of businesses.
0:18:29 Some worked and some didn’t.
0:18:31 And here I am.
0:18:33 – So let’s go through the businesses.
0:18:36 What was sort of your approach to starting businesses?
0:18:38 Which ones worked, which ones didn’t?
0:18:40 And if you could draw a line through
0:18:42 or try and find signal from the noise
0:18:44 in terms of why companies worked or didn’t work,
0:18:46 what would that signal be?
0:18:48 – Well, jumping right to that point,
0:18:49 I think at the end of the day,
0:18:52 usually for me, it’s come down to management.
0:18:55 And that’s not hiring people that could take my idea
0:18:57 and bring it to fruition.
0:18:59 I think the best idea is that they don’t have good leaders
0:19:02 and good managers will struggle.
0:19:06 And, you know, Scott, I really enjoyed my 20s, man.
0:19:09 I tried a lot of different things.
0:19:13 I slept on 18 different couches from 18 to 22.
0:19:14 Different friends putting me up,
0:19:16 going couch to couch, trying different businesses.
0:19:20 I sold carrot and celery sticks door to door.
0:19:21 I was a kiddie pool attendant.
0:19:23 I cleaned pools.
0:19:25 I sold meat, chicken, door to door.
0:19:27 I just tried so many different things.
0:19:31 When I was 28 years old, I was a guest on a private jet.
0:19:33 And when I walked onto the private jet,
0:19:35 it was like the scene in the Wizard of Oz
0:19:38 when everything in life goes from black and light to color.
0:19:42 And I was like, people fly like this, this is insane.
0:19:43 I wanna fly like this.
0:19:45 And that’s how we got the idea
0:19:47 to start this company called Marquis Jet.
0:19:50 I think a lot of the businesses that I’ve been involved with,
0:19:54 some which worked, many more which didn’t work,
0:19:55 entrepreneurs can do two things.
0:19:59 They can make something better or they create something new.
0:20:02 And all the businesses that I’ve been involved with
0:20:05 were a function of just identifying things
0:20:07 that fit one of those two categories.
0:20:09 You’re like, wow, like I’m a runner.
0:20:11 I would love, what’s the natural healthy way to get a lecture?
0:20:15 Like coconut water emerged through necessity and need.
0:20:17 And just keeping my eyes open
0:20:22 for things that would make my life easier or better.
0:20:25 And that’s how those ideas popped into my head.
0:20:27 – So talk about Marquis Jet.
0:20:29 What gave you the vision?
0:20:32 I mean, it’s not easy to start a, explain the concept,
0:20:34 how it differentiated from other fractional companies
0:20:35 who are owning a plane.
0:20:37 And what was your niche in the marketplace?
0:20:39 Marquis, who kind of what happened there?
0:20:42 – Yeah, well, at the time that we started this company,
0:20:46 which was around the year 2000, 99, 2000,
0:20:50 there were really only three ways to fly privately.
0:20:51 You could buy your own airplane,
0:20:53 which was incredibly expensive.
0:20:57 You could charter a plane with a lot of inconsistencies.
0:20:58 Who’s flying the airplane?
0:20:59 How old is the airplane?
0:21:01 Who’s managing the airplane?
0:21:03 Or you could buy a fraction of an airplane,
0:21:06 which also is a long-term commitment and a lot of money.
0:21:08 That’s what NetJets was doing and Flex Jet
0:21:11 and other fractional jet companies.
0:21:14 And I couldn’t afford any of those options.
0:21:15 And they weren’t realistic for me.
0:21:17 I wanted to take two or three flights a year
0:21:21 with some friends, treat my parents, maybe a business trip.
0:21:24 So our idea was a 25 hour, basically debit card.
0:21:28 You prepaid for 25 hours, put like 50 or 100 grand down
0:21:29 for 25 hours.
0:21:32 And if you fly too, you have 23 hours left.
0:21:33 You don’t have to own the airplane.
0:21:36 The plane was available on short notice.
0:21:39 And you’re right, we had no aviation experience
0:21:42 and we had no airplanes and we had no money.
0:21:45 But we went to the 800 pound gorilla, NetJets,
0:21:49 which had 650 planes, the largest private jet fleet
0:21:51 in the world and owned by Warren Buffet.
0:21:56 And we pitched them this idea of a 25 hour jet card.
0:21:58 And ’cause we needed airplanes.
0:22:01 And the CEO would say, “I’m truly through my partner
0:22:03 and I out of that meeting in 12 minutes.”
0:22:05 And literally said, “If you think I’m giving
0:22:08 two 28 year old kids who probably didn’t break 1,000
0:22:10 on their SATs access to my planes,
0:22:12 that’s not gonna happen.”
0:22:13 And kicked us out.
0:22:16 And the president grabbed us and said,
0:22:18 “Wait a second, I think there’s something here.
0:22:21 I want you guys to come back and repitch this next week.
0:22:22 I’m gonna set up a follow up meeting.
0:22:24 I want to hear more.”
0:22:28 We came back a week later and we brought
0:22:30 in our own focus group.
0:22:33 And we literally set up eight chairs in the board room
0:22:35 and one by one, eight people,
0:22:38 a powerful real estate mogul from New York,
0:22:39 a sports agent.
0:22:41 They stood up and said they would never buy a fraction,
0:22:44 but they would buy a 25 hour jet card.
0:22:48 And ultimately we got a deal to use their planes
0:22:51 and put our program under the NetJet fleet.
0:22:56 So our niche was catering to an audience
0:22:59 that couldn’t afford to buy their own plane.
0:23:03 We made private aviation more affordable to the masses
0:23:04 and it worked.
0:23:06 – NetJets, I would think would want to do it
0:23:08 in hopes that they could get people addicted to this
0:23:10 and then move them up to fractional.
0:23:11 Is that accurate?
0:23:13 – That’s 100% accurate.
0:23:14 We were a marketing arm and yes,
0:23:19 we were a farm system for their larger fractional program.
0:23:22 – And so tell me about the industry now
0:23:24 in terms of fractional, how would you differentiate
0:23:26 between kind of give us a layer of the land
0:23:28 and how the market, that business has evolved
0:23:31 and eventually Berksha slash NetJets
0:23:33 bought you out, correct?
0:23:36 – Yeah, so I’ve been at it for almost 13 years now.
0:23:38 So I don’t follow the industry super close.
0:23:40 I’m just a customer.
0:23:41 But I know a lot, it’s really,
0:23:45 it’s a really difficult capital intensive business, Scott.
0:23:48 I think when we started, there were like 50 companies
0:23:50 that put a flag in the ground that said
0:23:51 they were in the private jet space
0:23:53 and like two were profitable.
0:23:56 It’s a really hard business to survive in.
0:24:01 NetJets had the luxury of being backed by Berkshire.
0:24:04 So they built an incredible infrastructure.
0:24:09 But now, 13 years later, I’m not 100% sure how it’s evolved,
0:24:11 but it’s a lot of the same.
0:24:14 It’s still packed by your own plane,
0:24:16 by a fraction of a plane charter
0:24:19 or some kind of card or one-off program.
0:24:23 – And give us the journey around coconut water.
0:24:25 – So my model’s, I’m not a great operator.
0:24:28 I know what my weakness is, I’m a terrible operator,
0:24:31 a much better marketer, idea guy.
0:24:34 And following piggybacking off of that model,
0:24:36 we’re like, wow, I can come up with an idea
0:24:40 and partner with a company that has an expertise
0:24:42 and I could just be a marketing arm for them.
0:24:46 I went to Coca-Cola with this idea for coconut water
0:24:48 and a PowerPoint.
0:24:51 And so I wanna get to the coconut water business.
0:24:56 At this time, it was a very, very small category and beverage.
0:25:00 And they said, we see this as an evolving area,
0:25:03 but we don’t buy PowerPoints.
0:25:06 But if you find an existing company out there
0:25:09 that’s proven that they can source the product,
0:25:12 sell the product, they’re on the shelves, et cetera,
0:25:14 and you come in to help market it,
0:25:16 we’d love to be in business with you.
0:25:19 So we went to a company called Zico Coconut Water
0:25:21 that was doing about $2 or $3 million,
0:25:24 maybe a little bit more in sales at the time.
0:25:25 And we did a three-way deal.
0:25:30 My group, my company, Zico, which existed in Coca-Cola,
0:25:33 and Coke had an option to buy 100% of the company
0:25:34 down the road.
0:25:37 And two years later, they executed that option.
0:25:40 So we got it really hot, really fast.
0:25:43 And we did that through PR,
0:25:47 through we had a lot of celebrity investors.
0:25:50 The old model in beverage was,
0:25:51 we’re gonna pay people as endorsers,
0:25:55 but the customer’s consumer’s pretty smart now.
0:25:56 And they see that.
0:25:58 Our model was, write us a check,
0:26:01 be an investor, Mr. and Mrs. Celebrity,
0:26:06 and help us promote it as an owner of the company.
0:26:07 And that model worked.
0:26:10 And now a lot of companies have followed suit
0:26:12 off of that model.
0:26:13 – I like the way that you define
0:26:15 or you view success and luck.
0:26:17 What has been your approach to putting yourself
0:26:20 in situations where luck can find you?
0:26:22 – Well, I think as an entrepreneur,
0:26:24 a big part of it is luck.
0:26:26 And I’ve been super lucky
0:26:29 and probably way more lucky than good.
0:26:31 But I put myself in situations
0:26:33 where I can attract that luck.
0:26:35 I used to come home, Scott, from like,
0:26:37 I walk into Marquis Jet and I’d be like,
0:26:38 I got a sale last night.
0:26:40 We had a bell, I would ring the bell.
0:26:41 They’d be like, what do you mean?
0:26:44 You had the bar, same bar I was at.
0:26:46 I’m like, yeah, but you left it 11 o’clock.
0:26:50 I stayed till two and I got the sale.
0:26:50 Oh, you’re so lucky.
0:26:53 The guy came, I was, I’m not lucky.
0:26:55 I put myself in that situation.
0:26:57 You know, luck doesn’t happen Sunday night
0:27:00 watching the Kardashians on your couch.
0:27:02 It happens when you put yourself in an environment
0:27:06 where the universe can reward you for being there.
0:27:07 And then you have to be good at what you do
0:27:09 and take advantage of it.
0:27:13 So my 20s and 30s were built around
0:27:16 putting myself in environments where I could get lucky.
0:27:19 – So you do these ultra-man competitions
0:27:22 which are incredible feats of endurance.
0:27:26 And I rode crew and I think one of the things
0:27:30 that’s put me in a position of success is that,
0:27:32 you know, as I’m sure, I can’t even,
0:27:33 I can’t even imagine what it’s like to run
0:27:35 these distances or swim these distances.
0:27:39 But in crew, it’s basically who can endure the most pain.
0:27:41 I mean, there’s some technique, there’s some strength,
0:27:43 there’s some fitness, but it’s mostly an exercise
0:27:46 and who’s willing to endure the most pain.
0:27:47 And I’ve always thought that’s an enormous advantage
0:27:50 for an entrepreneur that when you think things
0:27:53 couldn’t get any worse and you just can’t handle it anymore,
0:27:56 what you learn, I would imagine in the ultra-man
0:27:58 and what I learned at crew is that when you think that,
0:28:00 it means you’re about a third of the way to your limit.
0:28:03 And it always gave me a sense of comfort and confidence
0:28:04 that I could keep going.
0:28:07 I’m curious what you think the relationship is
0:28:09 between kind of what I’ll call extreme fitness
0:28:11 or extreme sports in entrepreneurship.
0:28:16 – In 2006, I ran my first 100 mile race.
0:28:18 And when I came back after that race,
0:28:20 I got my office together and I said,
0:28:21 “Double the business plan.”
0:28:25 The correlation, I mean, when you do something like that,
0:28:28 you realize that the limits that we put on ourself
0:28:31 are pretty much self-imposed.
0:28:34 And we have so much more in the tank than we thought we could.
0:28:37 I mean, I started out running two miles, that was my goal.
0:28:40 And nothing changed on my body.
0:28:44 I’m still the same leg, same build.
0:28:46 I’m not super strong, nothing changed.
0:28:48 The only thing that changed is,
0:28:50 I saw someone run a 100 mile race.
0:28:54 I went to watch a 100 mile race in 2006.
0:28:56 And there weren’t a bunch of supermen
0:28:58 that started at the starting line.
0:29:01 People, in fact, weren’t even that physically impressive.
0:29:04 But what happened was they didn’t stop.
0:29:07 They just didn’t stop.
0:29:11 And I was like, oh, wow, this is a test of will.
0:29:12 This is just will.
0:29:13 Sign me up for this race
0:29:16 and let me see how much will I have.
0:29:18 And when I did the first 100 mile race,
0:29:21 it changed everything in my life
0:29:23 as it relates to entrepreneurship.
0:29:27 Now, for starters, we talked about Marquis Jet briefly,
0:29:28 but if they would have said to me,
0:29:30 I was a kiddie pool attendant
0:29:32 five years before I started Marquis Jet.
0:29:35 I worked at a freaking kiddie pool, man.
0:29:37 And five years later,
0:29:40 we had this company that’s doing five billion in sales.
0:29:42 And if they would have said to me,
0:29:43 when I started Marquis Jet,
0:29:45 you need Department of Transportation approval.
0:29:47 You can need FAA approval.
0:29:49 You can build a sales team, raise money.
0:29:51 I would have been like, well, I said,
0:29:52 what’s the first thing, Scott?
0:29:54 You said I needed Department of Transportation approval.
0:29:57 There’s gotta be a lawyer that does that.
0:29:58 Let me find that guy.
0:30:00 Okay, we got, what’s the second thing I need?
0:30:01 FAA approval.
0:30:04 And I broke it down into digestible bites.
0:30:08 It’s the same thing with 100 mile race or the Ultraman,
0:30:10 or even I’m sure when you race crew,
0:30:14 going like flagpole to flagpole or tree to tree,
0:30:16 you know, you break it down into digestible bites.
0:30:18 So there’s a lot of similarities
0:30:22 between how you approach a race like that
0:30:24 and how you approach a startup business,
0:30:27 especially if you have no entrepreneurial experience,
0:30:29 my dad owned the plumbing supply house.
0:30:31 We never talked about business.
0:30:32 There was no, you know,
0:30:33 I had to kind of help figure it out
0:30:36 and navigate it on my own,
0:30:38 which actually became a blessing
0:30:40 because it meant that I would do things differently
0:30:40 than other people.
0:30:43 We’ll be right back.
0:30:50 Support for Prop G comes from Greenlight.
0:30:51 When you give your kid an allowance,
0:30:53 you hope they spend it on enriching things
0:30:56 like a new hobby or better yet, save it.
0:30:58 And you pray they’re not following their last dollar
0:30:59 and to say video game skins,
0:31:02 but no matter what, kids will never truly learn
0:31:03 the value of the dollar
0:31:06 until they have some cash to manage on their own.
0:31:07 Greenlight is a debit card and money app
0:31:09 to help them do just that.
0:31:10 It’s made for families.
0:31:11 Parents can send money to their kids
0:31:14 and keep an eye on kids spending and saving,
0:31:16 while kids and teens build money confidence
0:31:18 and lifelong financial literacy skills.
0:31:21 The Greenlight app also has fun, accessible games
0:31:24 that teach your kids how to save, invest and spend wisely.
0:31:25 And I mean, if they’re gonna game,
0:31:27 they might as well learn financial wisdom
0:31:28 while they’re at it.
0:31:30 Greenlight is an easy, convenient way
0:31:31 for parents to raise financially smart kids
0:31:33 and families to navigate life.
0:31:35 Together, I’ve used it myself.
0:31:38 The best endorsement I can give for Greenlight
0:31:39 is that we are a Greenlight family
0:31:41 and have been using Greenlight
0:31:43 since well before they became a sponsor of Prop G.
0:31:45 Sign up for Greenlight today
0:31:46 and get your first month free
0:31:49 when you go to greenlight.com/scott.
0:31:52 Now it’s greenlight.com/scott to try Greenlight for free,
0:31:54 greenlight.com/scott.
0:32:02 Support for Prop G comes from LinkedIn Jobs.
0:32:04 Finding a great new hire is impossible
0:32:05 if you’re searching in the wrong place.
0:32:07 Traditional job boards might have been
0:32:09 the only game attempt for a while,
0:32:11 but today’s business owners need a platform
0:32:13 with more robust features and a broader reach,
0:32:16 a platform like LinkedIn Jobs.
0:32:18 We recently posted an opening to LinkedIn Jobs
0:32:20 and we got a bunch of candidates.
0:32:24 Some even felt fairly qualified, which is good news
0:32:25 and it’s not that expensive.
0:32:27 With LinkedIn Jobs, you can connect
0:32:28 with qualified professionals.
0:32:29 You won’t find anywhere else.
0:32:32 And according to LinkedIn, 86% of small businesses
0:32:35 find a qualified candidate within just 24 hours of posting.
0:32:38 So if you’re not looking for your next hire on LinkedIn,
0:32:40 you might be looking in the wrong place.
0:32:44 Hire professionals like a professional on LinkedIn.
0:32:47 Post your job for free on LinkedIn.com/prof.
0:32:50 That’s LinkedIn.com/prof to post your job for free.
0:32:52 Terms and conditions apply.
0:32:56 Support for this show comes from AWS.
0:33:00 We all know that AI is here and isn’t going away anytime soon.
0:33:02 And companies now are looking to break new ground in this space.
0:33:05 It’s the reason why AWS is doubling down
0:33:08 on their investment in generative AI startups.
0:33:11 By committing $230 million to accelerate AI startups
0:33:15 and launching their new generative AI accelerator program,
0:33:18 AWS is helping startups turn groundbreaking ideas
0:33:20 into the future of technology.
0:33:22 More than 80% of unicorn companies
0:33:25 are already customers of Amazon web services,
0:33:28 companies that are valued over a billion dollars.
0:33:30 The goal of this program is to enable startups
0:33:31 with generative AI applications
0:33:34 that change nearly every industry.
0:33:35 This program will look to accelerate the development
0:33:38 of emerging generative AI startups from around the world.
0:33:40 Out of thousands of applicants,
0:33:42 AWS will select 80 of the most promising startups
0:33:45 to receive up to one million in AWS credits
0:33:48 and the resources they need to shape the future of AI.
0:33:54 Learn more and apply before July 19th at startups.aws.
0:33:58 – You talk about the buckets of rich that you believe in,
0:34:00 and I love that term, buckets of rich,
0:34:02 time rich, socially rich, spiritually rich,
0:34:03 intellectually rich, purposefully rich,
0:34:05 physically rich, and adventure rich.
0:34:07 Can you walk us through those?
0:34:10 – Yeah, there’s an old acronym that they use
0:34:12 as my parents were getting older.
0:34:15 I did a lot of research around senior facilities.
0:34:18 I’m going to send my parents to a senior facility
0:34:20 and I stumbled upon an acronym
0:34:23 that one of the centers used
0:34:25 called SIPs, and it stands for
0:34:30 Social, Intellectual, Physical, Purposeful, and Spiritual.
0:34:32 And what struck me is so interesting about that
0:34:35 is that they didn’t talk about Instagram followers.
0:34:36 How many do you have?
0:34:39 A watch, the watch you wear.
0:34:42 But financial wasn’t even a category.
0:34:44 And they’re grading your overall,
0:34:47 the most important thing, your health,
0:34:49 your wellness, your happiness.
0:34:52 So I started to think about
0:34:57 my own circle of friends and people
0:35:01 that are wealthy and even myself.
0:35:06 I’m like, what are those buckets that I value the most?
0:35:09 And they’re the ones that you just said.
0:35:10 You can have all the money in the world,
0:35:12 but if you’re not time rich,
0:35:16 having the freedom to do what you wanna do,
0:35:18 or spiritually rich,
0:35:21 then there’s an emptiness to your wealth.
0:35:24 So that’s sort of how I started to think about it.
0:35:28 I invest a lot in how I spend my time,
0:35:31 how I plan, how I think about time.
0:35:33 Being as good as I can be in the buckets
0:35:36 that matter the most to me,
0:35:41 is a really good way for me to measure my success.
0:35:44 My family, I have four kids, my friends,
0:35:47 my relations, my business, my wellness, et cetera.
0:35:49 How am I doing in those buckets?
0:35:51 What do you think about, I’ve always,
0:35:53 I like to say you can have it all,
0:35:54 you just can’t have it all at once,
0:35:56 because the time bucket,
0:35:58 I have found, or at least I’ve found,
0:36:02 that if I wanted to have the money bucket full at some point,
0:36:04 I’d have to sacrifice the time bucket,
0:36:06 that I’d have to pretty much go all in on work
0:36:08 for a certain amount of time.
0:36:09 That certain buckets,
0:36:11 we’re just gonna know what the term is,
0:36:13 run especially full or especially empty.
0:36:18 I was never able to really strike a balance
0:36:21 as a younger man and achieve any level of success.
0:36:22 I know those people existed.
0:36:23 I wasn’t one of them.
0:36:26 I found I had to go all in on something,
0:36:27 or it just didn’t work.
0:36:29 And it came at a price.
0:36:31 It came at a price of my relationships,
0:36:33 I wasn’t always worked out,
0:36:35 but I probably wasn’t as fit as I could have been
0:36:37 or healthy as I could have been.
0:36:39 But now I have a lot of that balance.
0:36:41 I have a thesis and that is young people
0:36:42 think they can have it all.
0:36:44 And I just don’t think that’s true.
0:36:47 What are your thoughts about trying to manage balance
0:36:50 at a young age and all of these different buckets
0:36:54 that sometimes are in opposition with each other?
0:36:56 – Well, it’s an individual decision.
0:36:59 I think it varies depending,
0:37:01 in my opinion, based on your age.
0:37:04 So I think that I believe
0:37:06 it was important to have your 20s.
0:37:09 So a lot of my friends go from 20 to 50 like that
0:37:11 because they were working on Wall Street
0:37:13 in front of a computer all day.
0:37:17 They were sacrificing life, they gave up their 20s.
0:37:19 You know, that your 20s are a time
0:37:21 to try as many things as you can
0:37:24 and see what you like to do and see what you’re good at.
0:37:24 And then, you know,
0:37:27 and then master it in your 30s and get rich in your 40s.
0:37:30 You’re gonna make five to 10 times as much money,
0:37:32 most people in their 40s and 50s
0:37:33 than you will in your 20s.
0:37:35 There’s exceptions to that pool,
0:37:36 but because you’re gonna be smarter,
0:37:38 you’re gonna know more people,
0:37:39 you’re gonna be better at what you do.
0:37:43 And I think a lot of people see on social media,
0:37:46 people getting wealthy quickly and think like,
0:37:49 well, that’s their story, you know,
0:37:51 and you can’t compare yourself to that.
0:37:52 There are people that do that.
0:37:55 But I remember going to Coca-Cola in my 20s
0:37:58 on the Ziko meeting and the president of Coke said to me,
0:38:00 it’s gonna take eight years to build this brand.
0:38:03 It takes eight years to build a brand in this country.
0:38:05 I always remembered that
0:38:07 and it’s gotten sped up a little now
0:38:10 with the internet and everything, but it takes time.
0:38:14 So I think, look, balance is tough.
0:38:16 You always go, I wasn’t in balance
0:38:19 when I ran my ultra marathon, I was training.
0:38:21 You go in and out of balance,
0:38:24 but that sacrifice and what you’re willing to give up
0:38:25 is important to remember.
0:38:27 You don’t get your 20s back, you don’t get your 30s back,
0:38:30 you don’t get your kids growing up back.
0:38:34 I have four kids now that are all under the age of 14.
0:38:36 So I’m going through this right now.
0:38:37 How much time do I want to spend at work
0:38:40 and how much time do I want to spend with my kids?
0:38:43 What do you, do you have any sort of guideposts as a dad
0:38:46 to try and make sure that you,
0:38:47 I mean, ’cause I’m telling you those,
0:38:50 your kids, you’re in the golden decade right now,
0:38:53 you’re in the midst, those are literally the best years
0:38:55 and everybody says that they’re all great,
0:38:56 but I don’t buy that.
0:38:58 I think some years are better than others
0:38:59 and you’re in what I’d call the golden decade,
0:39:01 sort of four to 14.
0:39:03 And I sort of knew it, I mostly knew it,
0:39:05 but I wish I’d known it more
0:39:07 and it imposed more rules on myself.
0:39:09 Do you impose any sort of rules
0:39:11 other than trying to spend time with them?
0:39:14 – Yeah, I have a rule, I’m never too tired for my kids.
0:39:16 So if my kids want, if I come home
0:39:18 and my kids might have a baseball catch
0:39:22 and I’m exhausted, I’m still having the baseball catch.
0:39:25 ‘Cause if I’m too tired, when my kids want me,
0:39:27 then my work life balance is way out of whack.
0:39:30 So rule number one for me is I’m never too tired
0:39:31 for my kids.
0:39:33 I have a lot of rules.
0:39:36 I mean, a new one that I just did is nothing to do with time,
0:39:38 but when my kids come into my room,
0:39:41 if I’m on my phone, this is my office.
0:39:42 My phone is my office.
0:39:45 I don’t go to an office, this is my office.
0:39:48 So when my kids come in, if I’m on my phone,
0:39:50 I would, the old me would say,
0:39:53 I would say, give me one second guys,
0:39:54 let me just finish this up.
0:39:56 The new me puts my phone down,
0:40:00 so my kids know that they’re more important than my phone.
0:40:02 So that’s been a big switch.
0:40:06 I have a lot of hard rails around when I use my phone,
0:40:08 so phone time at home.
0:40:13 And all that said, my kids also know that mommy comes first.
0:40:16 Like I’ve been told my whole life,
0:40:19 your kids come first, they don’t.
0:40:22 Like mommy and daddy have to be right or nothing’s right.
0:40:26 So, it’s important for Sarah, my wife and I,
0:40:30 for our kids to know mommy and daddy come first.
0:40:33 And then I’m a big show, don’t tell.
0:40:34 Like I include my kids.
0:40:38 We have family dinners as much as we can.
0:40:40 We don’t say we’re gonna do it four times a week.
0:40:43 As often as we humanly possibly can,
0:40:45 we have family dinners.
0:40:47 And we talk about a lot of things.
0:40:49 So we try to expose our kids to a lot of things.
0:40:51 And we ask them to share a lot of things.
0:40:53 We have family meetings once a week.
0:40:58 So we invest a lot in the family unit.
0:41:01 – Can you describe if it’s not too personal?
0:41:03 I love the idea of a family meeting,
0:41:07 but I’m not entirely sure what’s supposed to happen.
0:41:08 I’m just curious, give us a sense
0:41:10 of what happens in your family meeting.
0:41:15 – Yeah, so we get together and on Sundays and it’s short.
0:41:17 And we just talk about something like one thing
0:41:19 that happened to us this week.
0:41:21 So I said, you know, in school, I failed at this,
0:41:23 I did this, I succeeded in this.
0:41:26 If we have anything that we wanna talk about,
0:41:29 like summer plans or goals or whatever, we’ll bring it up.
0:41:31 It’s a chance for everybody to kind of share,
0:41:35 get up to speed and like communicate
0:41:38 in a group setting.
0:41:40 Sometimes you can vote if it’s like,
0:41:41 hey, you know, we’re thinking about going on a trip
0:41:45 this year with, you know, that kind of stuff gets discussed.
0:41:46 You know what it does, Scott?
0:41:48 It allows everybody to be heard.
0:41:51 I actually like it.
0:41:52 And I’m not a great communicator.
0:41:55 So for me, it’s not, it’s kind of challenging,
0:41:58 but the other rule that we have is when we have guests
0:42:01 at our dinner table, each of the kids has to ask
0:42:04 the guests a question about them.
0:42:08 So it gives them a chance to practice there.
0:42:10 What I think is the most important thing,
0:42:13 which is communication and public speaking.
0:42:15 So that’s another kind of rule that we have.
0:42:17 – So we’ve talked a little bit about fathering.
0:42:19 What advice would you give to a young man
0:42:21 who’s just entering into a relationship
0:42:23 and thinking about getting married?
0:42:26 What do you know now that you wish you’d known
0:42:28 earlier in your marriage?
0:42:30 – Well, in my marriage, before I got married,
0:42:34 we never talked about, what do you wanna feed our kids?
0:42:36 We want our kids to go to a temple or a church
0:42:39 or a religion, like, where does religion come into play?
0:42:43 And, you know, where do we want our kids to go to school?
0:42:44 Private school, public school?
0:42:48 How are we going to, you know, discipline our kids?
0:42:49 What’s our philosophy on discipline?
0:42:54 Like, that never crossed my mind to talk to Sarah about
0:42:56 until we had kids.
0:42:57 You have to eat.
0:42:59 I eat super healthy.
0:43:02 Sarah eats like the other end of the spectrum.
0:43:04 How do you wanna raise our kids?
0:43:07 So, like, we never had those conversations.
0:43:09 And so that’s just something to think about
0:43:10 if you’re getting married, like,
0:43:13 how aligned are you on certain things
0:43:16 and definitely how aligned are you on your values
0:43:17 or whatever.
0:43:18 As far as parenting, you know,
0:43:22 we try to praise the effort as much as we can
0:43:24 and not the result.
0:43:28 So, Charlie, you know, not, oh, you scored three touchdowns.
0:43:31 Like, I love watching how hard you work on the field.
0:43:34 Like, it’s just, I love how much, you know,
0:43:36 how you hustle today.
0:43:40 Praising the effort is a big thing.
0:43:45 We try to expose our kids to as many life experiences,
0:43:49 different people as we can.
0:43:52 – And so it sounds like you have a healthy relationship
0:43:54 with your partner, good kids.
0:43:57 You’ve obviously checked a lot of boxes in entrepreneur.
0:43:59 What’s left for you?
0:44:02 Like, what are you working on if you look out 10 years?
0:44:04 And you think this is really what I’ve liked
0:44:06 to have done or accomplished
0:44:08 that I haven’t done or accomplished already.
0:44:11 What is that or those things?
0:44:13 – Feel like I’m finally at 55.
0:44:17 I’m turning 56 in August in the right lane.
0:44:20 I do a lot of Indian coaching and I like it.
0:44:22 I feel like I’m good at it.
0:44:25 I have a lot of experiences to share
0:44:28 and I just share my experiences in business
0:44:30 and being a dad, all that stuff.
0:44:33 But I also feel like I haven’t,
0:44:34 I’m not really even talked about this,
0:44:37 but I feel like I haven’t really figured out
0:44:42 exactly like what, like that big thing I’m so,
0:44:43 I’ve done big things,
0:44:45 but the big thing I’m supposed to do
0:44:48 to really contribute like to the world,
0:44:49 I don’t think I’ve even hit that yet.
0:44:51 So my eyes are always open for it.
0:44:53 I just don’t, I don’t know.
0:44:57 I lost my dad, my mom and my sister in the last two years.
0:44:59 So it’s changed my perspective a lot
0:45:03 on a lot of different things, you know?
0:45:06 Like what, just like what matters the most to me.
0:45:09 When my mom, my mom died a month ago
0:45:12 and the night she, my sister had been living with my mom
0:45:15 because my dad, when my dad died,
0:45:16 my sister moved into her house where,
0:45:19 and she would walk her to bed every night.
0:45:23 And the night of Mother’s Day on the way to going to bed,
0:45:26 at like 11 o’clock, my sister, my mom stopped my sister
0:45:29 and said, her name’s Jana, my sister.
0:45:34 So Jana, get the nicest glass, glassware that we have,
0:45:37 and get a bottle of champagne.
0:45:39 So my sister got the glass, you know,
0:45:41 like the nicest glasses in my mom’s house,
0:45:43 they poured a glass of champagne,
0:45:44 and they made, my mother’s even drank,
0:45:47 they made a toast and she never woke up.
0:45:52 So like she like basically toasted her life
0:45:56 on the last night of her life, which is amazing.
0:45:59 But I think like, when I think back to that,
0:46:02 like to live a life that you can toast,
0:46:04 I don’t know what I’m gonna do in 10 years.
0:46:06 I have no idea.
0:46:09 But if I had the last glass of champagne tonight,
0:46:13 I mean, I’m toasting to an insanely amazing life already.
0:46:17 So, you know, it can only get better, I think.
0:46:19 But I don’t know what that looks like for me.
0:46:20 – So that’s where to go.
0:46:25 It’s unusual, it’s as if your mother knew that that was it.
0:46:27 – Yeah, it was unreal.
0:46:30 – And having experienced that kind of loss
0:46:33 in such a short concentrated time period, as it,
0:46:35 I mean, obviously it’s gotta impact you emotionally,
0:46:37 but has it impacted you in terms of how you approach
0:46:40 relationships or what you’re thinking about professionally
0:46:42 or how you spend your time?
0:46:44 – Yeah, I mean, I’ve always been good with spending my time.
0:46:47 Like I said, I invest a lot in planning,
0:46:50 for like, I plan most of my year in advance.
0:46:52 I have this big calendar I put
0:46:55 as much as the things that I want to do in advance.
0:46:58 Before I plan my work, I plan my life.
0:47:00 Trips, races, blah, blah, blah, blah,
0:47:01 one-on-one trips with my kids.
0:47:04 So like, and then I just kind of follow the script.
0:47:08 But I think that what’s changed is just a lot
0:47:12 of the small things that I used to like really spend
0:47:16 a lot of energy on, or just bounce off me.
0:47:19 – And if you could give your 25 year old self,
0:47:23 you know, say you had maybe 15 or 30 seconds with them,
0:47:24 right?
0:47:25 You find the time machine, that’s the good news.
0:47:28 The bad news is you only have 15 or 30 seconds
0:47:29 with your 25 year old self.
0:47:31 What would you say to him?
0:47:35 – I would probably say a quote that Gandhi had
0:47:40 that I lived by, which is, “Learn like you’ll live forever
0:47:44 “and live like you’ll die tomorrow.”
0:47:46 I would tell my 25 year old self to like,
0:47:49 learn, experience as much as you can,
0:47:51 do as many things as you can,
0:47:53 with the hope that those experiences
0:47:56 will help you all the way down the line,
0:47:59 but also live like you’ll die tomorrow.
0:48:01 – Jesse Itzler is a serial entrepreneur,
0:48:03 a New York Times bestselling author,
0:48:06 part owner of the Atlanta Hawks and an ultra marathon runner.
0:48:08 Most notably, Jesse sold his private jet company,
0:48:11 Marquis Jet, to Berkshire Hathaway,
0:48:14 and his Ziko coconut water brand, the Coca-Cola.
0:48:17 His bestselling books include “Living with a Seal”
0:48:18 and “Living with Monks.”
0:48:22 He joins us from his home in Atlanta.
0:48:24 By the way, how did Atlanta happen?
0:48:26 I, we didn’t go there, Jesse.
0:48:28 – Well, I was a New Yorker for 25 years.
0:48:30 I met my wife.
0:48:33 My wife was a customer of mine at Marquis Jet.
0:48:34 That’s where we met.
0:48:37 And when we got engaged and we’re dating,
0:48:40 her business, Spanx, was based in Atlanta.
0:48:44 And we were splitting our time and then we had a kid
0:48:45 and we’re like, we got a pick.
0:48:48 And Spanx was way more important
0:48:50 than what I was doing and I moved down to Atlanta.
0:48:52 We never moved back.
0:48:53 – I always say around big decisions.
0:48:55 I’m an influencer, not a decision maker
0:48:57 and influencers being generous.
0:48:59 Anyways, Jesse, I really enjoyed this conversation.
0:49:00 Best to you and yours.
0:49:02 (upbeat music)
0:49:04 This episode was produced by Caroline Shagren.
0:49:07 Jennifer Sanchez is our associate producer
0:49:09 and Drew Burroughs is our technical director.
0:49:11 Thank you for listening to “The Prop G-Pod”
0:49:12 from the Box Media Podcast Network.
0:49:15 We will catch you on Saturday for “No Mercy, No Malice”
0:49:16 as read by George Hahn.
0:49:19 And please follow our “Prop G-Markets” pod.
0:49:23 Again, that’s the “Prop G-Markets” pod and subscribe.
0:49:25 Wherever you get your pods for new episodes
0:49:26 every Monday and Thursday.
0:49:28 You won’t get these episodes unless you subscribe
0:49:30 to the “Prop G-Markets” pod.
0:49:33 (upbeat music)
0:49:38 Woohoo!
0:49:48 [BLANK_AUDIO]