AI transcript
0:00:03 I’m Anusa Bramunyan from Vox Media.
0:00:04 While I see them all around the city,
0:00:07 I’ve never ridden in an autonomous vehicle myself.
0:00:09 I do have some questions about the tech.
0:00:10 You may as well.
0:00:13 – Hello, from Waymo.
0:00:15 This experience may feel futuristic.
0:00:16 – This is so cool.
0:00:20 – Vox and Waymo teamed up for an in-depth study
0:00:21 about AV perception.
0:00:22 And what they found was that,
0:00:24 as people learned more about Waymo,
0:00:26 their interest in choosing one
0:00:29 over a human-driven vehicle almost doubled.
0:00:30 – Person approaching.
0:00:34 Waymo can see 360 degrees and up to 300 meters away,
0:00:36 which helps it obey traffic laws
0:00:38 and get you where you’re going safely.
0:00:41 Swiss Re found that compared to human drivers,
0:00:44 Waymo reported 100% fewer injury claims
0:00:47 and 76% fewer property damage claims.
0:00:49 And speaking of safety,
0:00:52 folks identifying as LGBTQIA and non-binary
0:00:54 showed the highest interest in AVs
0:00:56 and women showed the greatest increase in interest
0:00:57 after learning more.
0:01:02 – Arriving shortly at your destination.
0:01:05 – So that actually felt totally normal.
0:01:06 AVs are here, and the more you know,
0:01:09 the more exciting this tech becomes.
0:01:11 You can learn more about Waymo,
0:01:13 the world’s most experienced driver,
0:01:14 by heading to Waymo.com.
0:01:20 – Support for the show comes from Into the Mix,
0:01:22 a Ben and Jerry’s podcast about joy and justice
0:01:24 produced with Vox Creative.
0:01:28 Ainez Bordeaux is a self-described hellraiser,
0:01:29 and she became an activist
0:01:32 after being caught up in the criminal legal system
0:01:34 when she couldn’t afford her bond.
0:01:36 And without a trial,
0:01:38 Ainez was sent to a St. Louis detention facility
0:01:41 known as the Workhouse,
0:01:43 notorious for its poor living conditions.
0:01:45 Here how she and other advocates
0:01:48 fought to shut it down and won
0:01:50 on the first episode of this special three-part series
0:01:51 out now.
0:01:54 Subscribe to Into the Mix, a Ben and Jerry’s podcast.
0:01:59 Today’s numbers, 180,000 and 200,000.
0:02:00 That’s how many people attended
0:02:03 the White Dudes for Harris fundraising event,
0:02:05 and white women answered the call,
0:02:08 which was the largest Zoom meeting in history.
0:02:10 Let’s turn this back to me.
0:02:12 I asked a hero of mine, no joke,
0:02:14 on the Zoom to say the following.
0:02:15 – I’m Luke Skywalker,
0:02:18 and I’m here to rescue you, Mr. Galloway.
0:02:20 (upbeat music)
0:02:24 (singing in foreign language)
0:02:31 – Welcome to Prop G Markets.
0:02:33 Today, we’re discussing Microsoft
0:02:37 and Meta earnings, Bill Ackman’s failed IPO, Ed.
0:02:39 That’s right, the farm boy from Tatooine,
0:02:42 who went on to be one of the most powerful Jedi Knights,
0:02:44 battling the Sith.
0:02:47 That’s right, he gave a shout out to me, Ed.
0:02:47 Jealous?
0:02:48 Jealous?
0:02:49 Do you even know what Star Wars is?
0:02:52 – I just watched like Ariana Grande or Bridgerton.
0:02:53 – No, what is Star Wars?
0:02:55 (laughs)
0:02:57 – My first sort of date, I was 13,
0:03:02 and I took Paula Cumnock to the Star Wars premiere
0:03:04 at the Abco Cinema in Westwood.
0:03:07 If that was back when, I’m not exaggerating,
0:03:09 I used to see movie, I used to see two movies a week,
0:03:12 and I would see some movies five or seven times
0:03:13 in the theater.
0:03:15 – Wow, that’s awesome.
0:03:16 – Well, I’m glad you’ve enjoyed
0:03:17 this walk down memory lane, Ed.
0:03:20 (laughs)
0:03:23 – I can see the enthusiasm in your voice.
0:03:25 – Yeah, yeah, it’s brimming, right?
0:03:29 This white dude’s Vaharis thing that you joined.
0:03:31 Have you been getting much shit from Fox people?
0:03:32 ‘Cause I’ve been seeing,
0:03:33 all I’ve been seeing on Fox News,
0:03:35 you know that’s my favorite news program.
0:03:37 All I’ve been seeing is people shitting
0:03:38 on white dudes Vaharis.
0:03:40 – No, I actually, I get more shit.
0:03:43 Fox in the far right is giving up on me.
0:03:45 I get shit from either the far lift
0:03:48 or I’m convinced it’s bots from people who hate me
0:03:51 or see me in the diametrically opposed to their economics.
0:03:53 – By the way, that’s one of my favorite biases of yours.
0:03:55 Is there any time that there’s a negative comment
0:03:58 about prof G, you have a theory that it’s a Russian bot
0:03:59 invasion?
0:04:01 – See, I believe what you just said was inspired
0:04:04 by some sort of the GRU or the CCP.
0:04:06 I don’t really think you feel that way about the dog.
0:04:07 – Yeah, the CCP has put me up here.
0:04:09 – It’s you, it’s you’re clearly been weaponized
0:04:11 by foreign adversaries.
0:04:13 Hey, just ’cause I’m paranoid doesn’t mean I’m wrong.
0:04:14 And by the way, when you get to my age,
0:04:15 you’re allowed to be a little bit paranoid.
0:04:16 – I agree, I like it.
0:04:19 – Fox is saying essentially that it was very identity,
0:04:22 it was the same identity politics that we always fall into
0:04:25 and that if Trump tried to do it, he’d get criticized.
0:04:26 – They did not like the name.
0:04:27 – Yeah, he would get criticized,
0:04:30 but he would basically say this is a thinly veiled
0:04:33 KKK meaning to inspire the crazies.
0:04:37 And when we did it, it was meant to sort of,
0:04:38 and it was a nice vibe kind of poke fun
0:04:43 at the identity politics that the left is guilty of sometimes.
0:04:46 But we weren’t there to represent white guys interests.
0:04:48 No one, I listened to all the speeches,
0:04:50 no one was talking about the power of white dudes
0:04:52 or why we’re not represented.
0:04:53 It wasn’t anything like that.
0:04:56 It was really, I was really, I don’t know
0:04:58 if you, how much time you spent up,
0:04:59 but it was a really nice vibe.
0:05:01 And we raised more than four million bucks.
0:05:04 I shouldn’t say we, it was this really talented guy.
0:05:06 He pulled off something so impressive so fast.
0:05:09 And if you think about every presidential election
0:05:11 usually has a technology at the core of it
0:05:16 or media, FDR was radio, JFK was TV, Trump was Twitter.
0:05:20 People say it was with Obama, it was Google.
0:05:21 And I used to think that this one
0:05:22 would be short form video.
0:05:25 This would be kind of the TikTok election.
0:05:27 But now I’m wondering if it’s gonna be the Zoom election.
0:05:29 All of these Zoom, have you been,
0:05:31 I assume almost everyone’s been invited
0:05:33 to a Zoom call something for Harris or something.
0:05:35 My bank account isn’t big enough for that.
0:05:39 No, like young men looking for love, Zoom for Harris.
0:05:41 Luckiest podcaster in the world,
0:05:44 drafting off the heels of someone much more talented
0:05:49 for Harris Zoom, do you haven’t got that call yet?
0:05:50 You haven’t got that call yet?
0:05:51 But we can keep going.
0:05:53 We should keep going with these ideas anymore.
0:05:55 Yeah, yeah.
0:05:56 You’re getting fed up.
0:05:56 You used to laugh at my jokes.
0:05:59 Now you realize, now you feel some power.
0:06:01 Now you’re like, oh.
0:06:02 Oh, come on.
0:06:04 So the big news, everyone comes up to me.
0:06:06 I had someone come up to me and asked me yesterday
0:06:08 and say, oh, we love your content.
0:06:13 Ed has a girlfriend, so this news has traveled
0:06:16 all the way to Picken County, Ed.
0:06:19 This is very exciting, very exciting.
0:06:20 So exciting.
0:06:22 Yeah, clearly you’re looking to move on.
0:06:25 Okay, let’s start with our monthly review of market vitals.
0:06:28 (upbeat music)
0:06:34 The S&P 500 had its worst July in a decade,
0:06:36 advancing about 1%.
0:06:39 The dollar fell, Bitcoin rose marginally,
0:06:41 and the yield on tenure treasuries declined,
0:06:43 shifting to the headlines.
0:06:45 The Federal Reserve held interest rates steady,
0:06:47 but acknowledged recent progress on inflation
0:06:49 could allow them to cut rates soon.
0:06:52 Second quarter revenue at Starbucks missed expectations
0:06:55 as total same-store sales declined 3%.
0:06:57 That metric was especially painful in China,
0:06:59 the company’s second largest market,
0:07:02 where same-store sales fell 14%.
0:07:05 And finally, Delta’s CEO revealed
0:07:07 that the CrowdStrike technology outage
0:07:09 cost the company half a billion dollars.
0:07:12 It took Delta longer than many other airlines
0:07:13 to recover from the outage,
0:07:16 and they ultimately had to cancel 5,000 flights
0:07:17 over several days.
0:07:20 The airline notified both CrowdStrike and Microsoft
0:07:22 to prepare for litigation.
0:07:26 Scott, your thoughts starting with the Fed meeting.
0:07:28 All right, so look, this continues to be
0:07:30 the kind of Goldilocks economy.
0:07:33 There’s 195 nations in the world, 194.
0:07:34 I wish they were the same nation,
0:07:37 and that is the US, at least economically.
0:07:39 Even though the current Fed funds rate
0:07:42 is at a 5.3% or two-decade high,
0:07:44 that historically is not that high.
0:07:48 US GDP rose at almost, I think it was about 2.8% annualized
0:07:49 in the second quarter,
0:07:53 which is higher than economists had forecasted.
0:07:55 And the unemployment rate’s about 4%,
0:07:57 which is still like historically low.
0:07:59 That’s basically full employment.
0:08:01 And the S&P and NASDAQ both had their best days
0:08:03 since February, following the announcement.
0:08:06 S&P up 1.6% of the NASDAQ up 2.6,
0:08:09 although I think it’s down today.
0:08:11 I just can’t get over how bad the Democrats are messaging.
0:08:15 The American public feels like Bidenomics didn’t work.
0:08:19 The economy here is, there is no nation in the world
0:08:21 that has an economy like ours right now.
0:08:23 And it just amazes me that we’ve done,
0:08:27 when I say we Democrats have done such a shitty job
0:08:30 communicating that I’m curious,
0:08:32 do you have any thoughts on why
0:08:34 Americans feel so bad about the economy?
0:08:36 – Well, we’ve talked a little bit about this
0:08:38 and we talked about it with Kyla Scanlon,
0:08:39 this idea of the vibe session.
0:08:43 But the data that we’ve seen is that,
0:08:45 generally speaking, consumer sentiment
0:08:48 doesn’t have anything to do with the economy.
0:08:50 All it has to do with is politics.
0:08:54 I mean, if you look at consumer sentiment by party,
0:08:57 Republicans were feeling good about the economy
0:08:58 until Biden took over.
0:09:02 And the same is true, or vice versa, for Democrats.
0:09:06 So I think the takeaway from this Fed meeting,
0:09:09 you know, this is probably the most decisive statement
0:09:11 we’ve heard from Jerome Powell
0:09:13 since we’ve started talking about this.
0:09:15 He was still a little bit cryptic,
0:09:16 but he did give us a timeline
0:09:19 and he was pretty confident and clear
0:09:20 about the direction of inflation.
0:09:24 And most importantly, he mentioned the word September.
0:09:27 He said, quote, a reduction in the policy rate
0:09:28 could be on the table as soon as September.
0:09:31 So I think we can be pretty confident at this point.
0:09:34 Rates will be cut at the next Fed meeting.
0:09:37 The cutting cycle is about to begin,
0:09:38 which will be good for the stock market.
0:09:40 It’ll also be really good for us
0:09:45 because for the first time in my career as a podcaster,
0:09:47 maybe I’ll get to stop talking
0:09:48 about Fed meetings every month.
0:09:50 – Yeah, or maybe buying a house at some point.
0:09:51 – Yeah, that too.
0:09:53 – So really interesting story,
0:09:56 Starbucks specifically, Elliot is gonna take a mistake.
0:09:58 You could go through the S&P 500 and say,
0:10:01 who has made the biggest bet is the most exposed to China.
0:10:02 And those stocks are probably
0:10:05 some of the worst reforming stocks in the S&P.
0:10:06 And that is China,
0:10:09 just as everyone uses the term AI and every earnings call,
0:10:11 if you go back seven, eight years,
0:10:13 it was the same except everyone just repeated
0:10:15 the word China over and over.
0:10:18 And Starbucks kind of went all in on China.
0:10:20 In the last five years, it’s nearly doubled.
0:10:21 Think about this.
0:10:23 It doubled its stores in the region,
0:10:27 but sales over that same timeframe are down 0.4%.
0:10:28 About one in five of their stores
0:10:30 are now located in China.
0:10:33 In addition to the lackluster spending,
0:10:36 Starbucks faces competition from Chinese coffee chain.
0:10:38 I think it’s called Lucan,
0:10:41 whose beverages get this ad cost a third of Starbucks.
0:10:44 And Elliot shows up, it’s an amazing brand.
0:10:47 Its stock price, I think is,
0:10:49 I don’t know if it’s down or flat over the last five years,
0:10:52 but it’s been a pretty significant underperformer.
0:10:53 I think they’re gonna take a page
0:10:58 out of the playbook from their activist intervention
0:10:59 at Salesforce.
0:11:01 And I think they’re gonna say,
0:11:03 stop the hallucination around growth and spending.
0:11:04 You need to cut costs here.
0:11:07 And so for example,
0:11:09 Starbucks is saying they plan to open an average
0:11:12 of eight new stores every day through 2030.
0:11:14 I think they’re gonna ask them to revise that.
0:11:15 I mean, these stores used to have
0:11:17 like an incredibly short payback period.
0:11:19 And so you just keep opening more stores.
0:11:22 And I think the juice has been squeezed from that lemon.
0:11:23 We’ve seen same store sales decline
0:11:24 for two straight quarters.
0:11:27 So there might be over stored in some regions.
0:11:29 They’ll probably urge them to invest more
0:11:31 in their expanding higher margin pickup delivery
0:11:32 and drive through businesses
0:11:36 while shutting down struggling brick and mortar locations.
0:11:39 But this feels like a classic sort of Elliot come in,
0:11:40 hi, we’re here to help,
0:11:44 meaning you need to cut costs or do the following things.
0:11:46 And we’ll go away quietly if the stock pops,
0:11:47 which I might hear.
0:11:50 And if it doesn’t, we’ll go gangstron you.
0:11:52 But Elliot typically likes to go after the ones
0:11:54 I’ve seen, big brands, big companies
0:11:58 where they have liquidity such that they can deploy AUM.
0:12:00 I also wonder if it’s sort of the last,
0:12:03 we’ll call it the last battle of Howard Schultz.
0:12:04 But Howard sort of left and come back.
0:12:06 He’s kind of the thing that wouldn’t leave in the sense
0:12:11 he’s always announcing his retirement and then coming back.
0:12:14 And so I’ll be curious if they get along here
0:12:18 like the kind of Benioff, Elliot love affair.
0:12:20 Again, this is all gonna come down to the male ego,
0:12:23 but starting or finishing where I started,
0:12:27 China has become the anchor around everyone’s neck.
0:12:28 If you’re exposed to China,
0:12:30 you’re just kind of hating life right now.
0:12:33 – Going back to Howard Schultz.
0:12:37 So this is the former CEO of the company.
0:12:38 He took up the job in 1986.
0:12:40 He sort of turned Starbucks
0:12:42 into the global iconic brand today.
0:12:46 He’s no longer the CEO, he’s no longer on the board,
0:12:49 but he has been publicly criticizing Starbucks
0:12:52 and its management for the poor performance
0:12:53 in the past few weeks.
0:12:54 – That’s helpful.
0:12:55 – Right?
0:12:57 – Thanks, thanks for that.
0:12:58 – This was a quote he said,
0:13:02 “The company has not executed the way I think it should have.
0:13:04 Senior leaders need to spend more time
0:13:06 with those who wear the green apron.”
0:13:08 He went and said this on LinkedIn.
0:13:11 He also went on a podcast and started talking about it.
0:13:13 And this is the guy, as you mentioned,
0:13:15 who’s been the CEO three times.
0:13:18 He came back to Starbucks in 2022.
0:13:20 And his job when he came back as the interim
0:13:24 was to facilitate a clean transition to the current CEO.
0:13:25 And now he’s going out to media outlets
0:13:29 and he’s shitposting the CEO and the rest of the board.
0:13:31 And the thing I find ugliest about this
0:13:33 is that Howard Schultz,
0:13:35 as I said, this is a holistic problem with Starbucks.
0:13:39 Howard Schultz is responsible for many of the problems
0:13:41 that they’re dealing with right now.
0:13:43 We mentioned China as an example.
0:13:45 This whole China investment thing,
0:13:47 this was all Howard Schultz’s idea.
0:13:49 He was the one who was pro-China
0:13:50 and who wanted to go and invest.
0:13:52 And I think the status that they wanted
0:13:56 to open up a store in China every nine hours.
0:13:59 And now it’s obviously backfiring on the company
0:14:00 and he’s shitposting them.
0:14:01 So I’d like to get your take
0:14:03 because this is a guy who’s sort of
0:14:05 the iconic American CEO.
0:14:09 He is known as sort of an impeccable businessman.
0:14:10 But I look at what he’s doing now
0:14:13 and I’m kind of like this behavior is pretty childish.
0:14:16 – Well, so just some disclosure.
0:14:18 Howard Schultz and his VC firm, Maveron,
0:14:22 run by this really wonderful thoughtful guy named Dan Levitan
0:14:26 invested in my e-commerce incubator in ’99
0:14:28 where I closed on my first round of funding
0:14:30 along with Goldman Sachs, J.B. Morgan.
0:14:32 So we closed on around in December ’99,
0:14:35 the concept was to punch out retail e-commerce companies.
0:14:37 And as you can imagine, six months later,
0:14:40 it just didn’t work ’cause the entire market imploded.
0:14:41 Which by the way is a good thing.
0:14:42 I’ve always said that fast failure
0:14:43 is the next best thing to success.
0:14:45 But so I have a little bit of bias here.
0:14:47 I do think that like Howard will go down
0:14:49 as one of the great consumer CEOs of all time.
0:14:50 He’s created a tremendous amount of value.
0:14:53 He’s legitimately and deserves to be a billionaire.
0:14:57 It’s just really bad form to shitpost the company.
0:14:58 Is that fair?
0:14:58 Have I done that?
0:14:59 I don’t think I’ve done that.
0:15:00 Well, maybe I have.
0:15:01 Well, shit, I don’t know.
0:15:02 But I’m a megalomaniac too.
0:15:06 So anyways, yeah, what he’s doing is not helpful.
0:15:07 What it signals to me is he’s planning
0:15:10 to be the CEO the fourth time
0:15:13 that he’s making a play to come back.
0:15:14 Can we get a hard prediction?
0:15:16 Will Howard Schultz return again?
0:15:17 I don’t know if the, enough dynamics there.
0:15:18 Let me go this way.
0:15:20 We have not heard it.
0:15:23 I’m almost entirely confident predicting Howard Schultz
0:15:25 is not gonna be quiet around this issue.
0:15:28 Let’s move on to Delta and CrowdStrike.
0:15:31 Your thoughts on Delta’s comments and the lawsuit.
0:15:33 I think the bigger learning here is that Lena Khan
0:15:35 has never been more important to our economy.
0:15:37 And she’s the FTC chair.
0:15:40 The concentration in the tech industry is just too great.
0:15:41 And what that means is,
0:15:43 is that the entire fucking airline industry
0:15:45 can be shut down or most of it,
0:15:48 except for the ones that had really rudimentary technology
0:15:51 Southwest, they were due for a break.
0:15:53 You basically can have the airline industry
0:15:56 in the largest economy nearly shut down
0:15:57 because these companies are dependent
0:16:00 upon a small number of technology vendors.
0:16:04 Since the outage CrowdStrike has declined nearly 25%.
0:16:06 I thought it was gonna give up 10% and then go back.
0:16:08 It’s not, it’s gone down further.
0:16:11 Still think it’s probably a buying opportunity.
0:16:14 But this is, this to me says more about the concentration
0:16:17 of power and how it can impact consumers and the economy.
0:16:21 The insurance, the settlement itself, they’ll figure it out.
0:16:22 They’ll come to some sort of,
0:16:24 they’ll come to some sort of accommodation
0:16:25 and all parties will move on.
0:16:27 Am I missing anything here, Ed?
0:16:30 – Well, the only thing I would add is,
0:16:31 I listened to his comments on CNBC.
0:16:35 This is the CEO of Delta who is talking about,
0:16:36 what a disaster it was
0:16:39 and how upset he is about the whole thing.
0:16:41 The way that I would describe those comments
0:16:46 coming from a Fortune 500 CEO is small dick energy.
0:16:49 And the reason that I say that
0:16:50 is that if you think about the damage to Delta here,
0:16:52 it’s actually really significant.
0:16:53 There’s the financial damage
0:16:56 where you had five, 6,000 flights canceled.
0:16:59 And then they also had to cover all of the customers
0:17:00 who were staying in hotels
0:17:02 and all these other expenses associated.
0:17:05 But there’s also the reputational damage.
0:17:08 And I would bet there are many people
0:17:10 whose flights got canceled,
0:17:12 who don’t really know what CrowdStrike is,
0:17:14 who kind of heard of it
0:17:16 and who ultimately believe that their vacation
0:17:19 and their week was ruined by Delta.
0:17:23 So I think this is a really big issue for Delta.
0:17:26 I think it’s big enough to warrant
0:17:28 possibly a termination with CrowdStrike
0:17:30 or at the very least,
0:17:33 it warrants considering a termination with CrowdStrike
0:17:34 and stating that publicly.
0:17:37 I think it speaks to a larger point,
0:17:38 which you’ve sort of hinted at here,
0:17:41 which is, why doesn’t he just end it with CrowdStrike?
0:17:45 Why doesn’t he switch to another cybersecurity provider?
0:17:46 And I think the answer is,
0:17:49 one, these companies have gotten too big.
0:17:53 And two, it would just suck to do that.
0:17:58 When it comes to enterprise SaaS and tech infrastructure,
0:18:02 you end up with this deeply dependent relationship
0:18:03 that makes it really hard to leave.
0:18:07 CrowdStrike has got this a 95% retention rate
0:18:11 over the 20 years of operation, 95% retention rate.
0:18:12 Do we think that’s because CrowdStrike
0:18:14 has an incredible product?
0:18:17 Or do we think it’s because CrowdStrike has made it
0:18:20 so that if you try to leave, it’s a total nightmare?
0:18:22 – Yeah, so you’re exactly right.
0:18:23 And you’re making the same point.
0:18:25 Ed Bastion is the CEO of Delta.
0:18:27 He’s not afraid to fire people or companies.
0:18:29 I mean, but he can’t.
0:18:33 And my guess is that once CrowdStrike figured out
0:18:34 an agreement with Microsoft,
0:18:36 it’d become more definitely integrated.
0:18:38 And you have Microsoft, you’re just trapped.
0:18:39 So all you can do is sue them,
0:18:41 but you can’t actually fire them or switch them.
0:18:43 And it goes to the point that the industry
0:18:45 is too concentrated.
0:18:47 Let me use this as a segue into talking about
0:18:49 one of my favorite things, airlines.
0:18:51 I would argue amongst the big three,
0:18:52 well, actually it’s Southwest too.
0:18:55 I still think Delta’s probably done the best job
0:18:58 in an environment where it is increasingly difficult
0:19:00 to establish any sort of differentiation.
0:19:02 I was a Delta person before.
0:19:03 – Why’d you switch?
0:19:06 – ‘Cause daddy flies private now and you knew that.
0:19:07 Anyways.
0:19:10 Fucking jerk.
0:19:13 Anyways, gets a girlfriend.
0:19:16 And now he thinks he’s like, why do you do that?
0:19:20 Anyways, Delta’s not a good job.
0:19:23 And they do the least bad job of all the domestic carriers
0:19:26 with the exception of JetBlue Mint.
0:19:28 Think about the competition there.
0:19:30 Consumers flying a company, they get angry,
0:19:33 they can switch, but Delta can switch.
0:19:35 Why don’t you fly Delta anymore?
0:19:37 (laughing)
0:19:42 We’ll be right back after the break
0:19:44 with a look at Microsoft and Metas earnings.
0:19:46 And if you’re enjoying the show so far,
0:19:49 hit follow and leave us a review on ProfG Markets.
0:19:51 (gentle music)
0:19:58 Support for ProfG comes from Mint and Mobile.
0:20:00 If something seems like a great deal at first,
0:20:02 it might come with an added cost.
0:20:03 Like if your local bakery is advertising
0:20:06 as many free croissants as you can hold in your arms,
0:20:08 then sure on limited free pastries,
0:20:11 but there’s also all the coffee you need to buy
0:20:12 to wash down those croissants.
0:20:14 Hmm, thought of that.
0:20:17 Well, Mint Mobile is offering a deal that’s actually great,
0:20:18 not just on its face.
0:20:19 By switching to Mint Mobile,
0:20:21 you can get three months of premium wireless service
0:20:24 for just 15 bucks a month.
0:20:26 All of their phone plans come with high-speed 5G data
0:20:28 and unlimited talk and text,
0:20:30 which you can use to message your entire contact list
0:20:32 to give away your unlimited baked goods.
0:20:34 To get this new customer offer
0:20:35 and your new three-month premium wireless plan
0:20:36 for just 15 bucks a month,
0:20:39 go to mintmobile.com/profg.
0:20:41 That’s mintmobile.com/profg.
0:20:43 Cut your wireless bill to 15 bucks a month
0:20:45 at mintmobile.com/profg.
0:20:47 For $45 from payment required,
0:20:48 we’ll move into $15 from our new customers
0:20:50 on first three-month plan only.
0:20:53 Speed slower, above 40 gigabytes on unlimited plan,
0:20:55 additional taxes, fees, and restrictions apply.
0:20:57 See Mint Mobile for details.
0:21:02 Support for ProfG comes from LinkedIn Jobs.
0:21:04 Finding a great new hire is impossible
0:21:05 if you’re searching in the wrong place.
0:21:07 Traditional job boards might have been
0:21:09 the only game attempt for a while,
0:21:11 but today’s business owners need a platform
0:21:13 with more robust features and a broader reach,
0:21:16 a platform like LinkedIn Jobs.
0:21:18 We recently posted an opening to LinkedIn Jobs
0:21:20 and we got a bunch of candidates.
0:21:24 Some even felt fairly qualified, which is good news,
0:21:25 and it’s not that expensive.
0:21:26 With LinkedIn Jobs,
0:21:28 you can connect with qualified professionals
0:21:29 who won’t find anywhere else.
0:21:32 And according to LinkedIn, 86% of small businesses
0:21:35 find a qualified candidate within just 24 hours of posting.
0:21:38 So if you’re not looking for your next hire on LinkedIn,
0:21:40 you might be looking in the wrong place.
0:21:44 Hire professionals like a professional on LinkedIn.
0:21:47 Post your job for free at linkedin.com/prof.
0:21:50 That’s linkedin.com/prof to post your job for free.
0:21:52 Terms and conditions apply.
0:21:57 Support for the show comes from Into the Mix,
0:22:00 a Ben and Jerry’s podcast about joy and justice
0:22:02 produced with Vox Creative.
0:22:05 Would you have $25,000 to post bail?
0:22:07 That’s how much Inez Bordeaux had to pay
0:22:10 when she was arrested in 2016.
0:22:11 And since she couldn’t afford it,
0:22:13 she was sent to the workhouse,
0:22:16 a pre-trial detention center in St. Louis.
0:22:18 Inez and the other detainees weren’t locked up
0:22:20 because they’d been convicted,
0:22:23 but because they couldn’t afford their bail.
0:22:26 Experiencing what I experienced
0:22:29 and watching other women go through it
0:22:33 and know that there were thousands before us
0:22:36 and there were thousands after us
0:22:40 who had experienced those same things,
0:22:42 that’s where I was radicalized.
0:22:45 She spent a month at the workhouse
0:22:47 and witnessed abject conditions,
0:22:50 extreme heat and cold, mold and pest infestations
0:22:52 and poor medical care.
0:22:54 Eventually, her charge was vacated,
0:22:57 but the experience changed her.
0:22:59 They’re starting a campaign to close the workhouse.
0:23:00 Are you interested?
0:23:04 And I was like, hell yeah, hell yeah, I’m interested.
0:23:07 Hear how she and other advocates fought to shut it down
0:23:09 and won on the first episode
0:23:11 of this special three-part series out now,
0:23:13 hosted by Ashley C. Ford.
0:23:16 Subscribe to Into the Mix, a Ben and Jerry’s podcast.
0:23:27 – We’re back with ProfG Markets.
0:23:29 Microsoft posted earnings that beat expectations
0:23:31 on the top and bottom lines.
0:23:34 The stock fell, however, on its disappointing cloud results.
0:23:36 Revenue from Azure and other cloud services
0:23:38 slowed from the previous quarter
0:23:39 and also fell short of expectations.
0:23:42 That’s the first time since 2022
0:23:44 that Microsoft has failed to meet
0:23:46 or beat expectations for that segment.
0:23:49 Meanwhile, investments in that area are accelerating.
0:23:53 Capital expenditures rose 78% to $19 billion
0:23:56 with nearly all of it going to AI and the cloud.
0:24:00 Scott, initial reactions to Microsoft’s earnings.
0:24:02 – What seemed to spook everybody
0:24:04 was just the arms race and the spending race
0:24:06 that all these companies have now entered into.
0:24:09 And the stat that just blew my mind
0:24:11 is that the capital expenditures
0:24:13 of Amazon, Meta, Microsoft, and Google
0:24:15 will spend about $200 billion this year on CapEx,
0:24:19 double what the US government spends on Homeland Security.
0:24:20 The entire revenue production
0:24:23 or entire revenue spawned by the AI companies,
0:24:24 their front-end applications
0:24:28 or what they get selling these chips is about $20 billion.
0:24:30 But the analysis you guys have done
0:24:32 has shown that there’s been about $3 trillion
0:24:34 in inspired increase in market capitalization.
0:24:37 So we have an industry that loosely speaking
0:24:39 is trading at 150 times revenues,
0:24:42 which is just striking.
0:24:45 And some people would argue is unsustainable,
0:24:47 but it was the CapEx
0:24:48 that kind of freaked everybody out here.
0:24:50 But their business,
0:24:54 every part of their business seems to be on fire.
0:24:56 What’s interesting is that people talk about,
0:24:58 investors talk about flows.
0:25:00 And that is you can find the best company in Argentina,
0:25:02 but if the flows are consistently
0:25:05 out of the Argentinian market, the capital flows,
0:25:09 the market’s bigger than any individual company’s performance.
0:25:10 And the flows here are interesting.
0:25:14 And that is when people start to have any wisp or concern
0:25:16 around the future of AI and its valuation,
0:25:19 their go-to is to go to the infrastructure place.
0:25:21 The same thing happened to Cisco in 98.99
0:25:23 where people start saying on the front end,
0:25:24 they’re not entirely sure
0:25:27 the winners and losers are will just invest in the infrastructure
0:25:29 or the steel on the ground, if you will.
0:25:31 And we see this now in terms of flows.
0:25:33 And that is the software layer,
0:25:34 Microsoft, Meta, Google and Amazon,
0:25:39 their CapEx is up 31%, but their revenue is only up 19%.
0:25:40 Whereas the infrastructure players
0:25:44 or the hardware layer that’s NVIDIA, AMD and ARM,
0:25:46 their CapEx is actually flat to down.
0:25:49 It says minus 8%, 2022 to 2024,
0:25:52 but their revenues are up 146%.
0:25:56 – Yeah, it’s interesting that Wall Street
0:25:59 has really latched on to that CapEx issue,
0:26:01 this CapEx investing.
0:26:04 But there’s a reason they’re doing that.
0:26:07 And that is sales are slowing.
0:26:10 But by the way, barely sales went from,
0:26:12 in the cloud division for Microsoft at least,
0:26:17 sales went from 31% two quarters ago to 29% last quarter.
0:26:21 So sure it’s a slowdown, but it’s still a crazy big number.
0:26:23 But it’s not actually slowing
0:26:25 because there’s a lack of demand.
0:26:28 In fact, it’s the opposite, there’s too much demand.
0:26:32 And according to Microsoft, they can’t keep up with it.
0:26:33 And so that’s why they’re making
0:26:37 these huge CapEx investments, $19 billion
0:26:38 in the previous quarter alone,
0:26:41 which is up 80% year over year.
0:26:42 We’re kind of witnessing
0:26:47 one of the largest CapEx investment movements in history.
0:26:48 Because it’s not just Microsoft.
0:26:52 This is Google, which doubled it last quarter.
0:26:55 It’s Meta as well, which we’ll get to, it’s Amazon too.
0:26:58 Everyone is sort of full tilt on the AI CapEx.
0:27:02 And we’ve discussed before how maybe there’s a danger there
0:27:05 that maybe they’re investing too heavily in the space.
0:27:07 You made the point that all the dogs
0:27:08 are barking up the same tree.
0:27:10 But the question that I would pose to you
0:27:13 based on this earnings report is,
0:27:14 the demand is there.
0:27:18 Companies want to pay them for the compute
0:27:20 and they can’t keep up with it.
0:27:24 So does Big Tech really have a choice
0:27:27 other than to just plow billions,
0:27:31 tens of billions of dollars into AI CapEx?
0:27:34 – Yeah, so there’s been a dramatic shift
0:27:37 in the way the boards approach CapEx
0:27:38 in terms of strategy.
0:27:40 And generally speaking,
0:27:43 when we’re on a board and the CEO brought you a plan
0:27:46 that included billion dollar plus CapEx,
0:27:47 you were to say, okay,
0:27:51 we want the lowest CapEx relative
0:27:53 to the potential return, right?
0:27:56 Would we rather do a billion dollar CapEx
0:27:58 or a series of 10, 100 million dollars
0:27:59 that feel a little bit more reasonable
0:28:01 and see what happens.
0:28:04 Now, what’s shifted, especially among Big Tech companies
0:28:06 because of the dramatic increase
0:28:08 in their price earnings ratios,
0:28:10 or that is access to cheaper capital
0:28:12 versus the rest of the economy.
0:28:14 It used to be this is gonna cost,
0:28:16 this will give us an advantage,
0:28:17 but it’ll cost a lot of money.
0:28:19 Hmm, I don’t know, let’s think about this.
0:28:21 We want to be careful.
0:28:24 Now, when someone, Andy Jassy comes in
0:28:28 or Jeff Bezos comes into the Amazon board and says,
0:28:31 I think we can get everything we sell
0:28:32 to people within 48 hours
0:28:35 by building out this unbelievable infrastructure
0:28:38 or fulfillment network that’s largely been avoided
0:28:41 because everyone just wants to be lowest cost
0:28:44 in terms of how to get things from point A to point B
0:28:46 that we see an opportunity.
0:28:47 And the board says,
0:28:49 well, how much would that cost to be able to do that?
0:28:50 We know consumers would love it.
0:28:54 And Bezos goes, oh, it would be so much fucking money.
0:28:56 It’d be tens of billions of dollars.
0:28:59 And the board hears that and goes, perfect.
0:29:01 Because what these companies have
0:29:03 is access to cheaper capital than anyone.
0:29:07 So AI is not only presents a bold, brave new world
0:29:09 with growth and potential for them,
0:29:12 it positions them to leverage their core competence
0:29:15 and that is to outspend every other company
0:29:17 in the economy, except for a few.
0:29:20 So these companies, just as a large investor
0:29:21 has to go big game hunting
0:29:24 because I remember I worked for a hedge fund
0:29:26 and I used to bring him ideas and he’d say,
0:29:28 I’m not interested in putting 50 million to work.
0:29:30 I have to be able to put 500 million to work.
0:29:33 These companies love AI because they,
0:29:35 A, they see real potential in growth
0:29:38 and that it’s a seminal technology and B,
0:29:41 it’s a place they can put tens of billions of dollars
0:29:43 to work because they have access to that money
0:29:47 and 99.9% of companies don’t.
0:29:51 So this is kind of you can see why they’re spending so much
0:29:54 and this is their, it’s kind of like capital as a weapon
0:29:58 as that strategy was sort of forged by Amazon
0:30:02 and then Netflix and that is get a leadership position,
0:30:06 access to cheaper capital and then just go gangster
0:30:08 in terms of your spending, right?
0:30:11 Netflix spending $17 billion a year on content,
0:30:13 that’s probably more than the entire media industry
0:30:16 spent on content in the decade of the ’80s.
0:30:18 But that’s, they love that
0:30:20 because it plays to their advantage.
0:30:21 And it was, I think this is a,
0:30:25 this is a cat-backs arms race that plays to their strengths
0:30:27 and they’re happy to engage in it.
0:30:32 – Moving on to Metta, who had a very strong quarter.
0:30:33 Just run you through the numbers here.
0:30:35 Revenue grew 22%.
0:30:37 That’s the fourth consecutive quarter
0:30:41 of 20 plus percent sales growth for Metta.
0:30:44 Net income rose 73%.
0:30:46 Daily active users also grew.
0:30:48 Here’s a great start from Mia.
0:30:50 Over 40% of the world’s population
0:30:54 is currently using Metta’s platforms on a daily basis.
0:30:57 40% of everyone on Earth,
0:30:59 daily active user on a Metta platform.
0:31:04 But CapEx is also still growing as with Microsoft,
0:31:06 record CapEx for Metta this quarter.
0:31:10 And Zuckerberg said that number would continue to grow.
0:31:13 Scott, your initial reactions to Metta’s earnings.
0:31:14 – I mean, I hate to admit it,
0:31:16 arguably one of the best run businesses in the world.
0:31:19 You know, I mean, the number you cite that just jumps out,
0:31:21 40% of the world’s population
0:31:23 is on a Metta platform every day.
0:31:26 I bet 90% of the world that advertisers
0:31:27 have any interest in reaching
0:31:29 are on this platform every day.
0:31:32 And they have unbelievable ad stack, unbelievable technology,
0:31:35 ad impressions and average price per ad,
0:31:40 both increased 10% or EPS of 73%, unbelievable.
0:31:42 Just absolutely unbelievable.
0:31:43 And I hate to admit it
0:31:46 ’cause I don’t like the company or the management team,
0:31:49 but I’m on Metta platforms all the time.
0:31:50 – Yeah, I wanna get your reaction
0:31:55 to an article that came out about Metta last week.
0:31:57 According to the Wall Street Journal,
0:31:59 Facebook and Instagram have been running ads
0:32:01 that have been steering users
0:32:05 to illegal drug markets online.
0:32:09 In other words, there are ads for drugs on Instagram now,
0:32:14 ads for cocaine, opioids, other drugs,
0:32:18 and Metta has been collecting revenue on those ads.
0:32:19 Thoughts on that news?
0:32:21 – I think that the people running Metta
0:32:23 are generally awful people.
0:32:26 If you have the incentives to get wealthy,
0:32:29 which are everywhere in the United States,
0:32:30 to be wealthiest, to be loved,
0:32:32 you will make a series of incremental rationalizations
0:32:34 to do things that are perhaps bad
0:32:35 for your customers and the nation.
0:32:38 So the fact that they’re running at,
0:32:43 they would run ads for, I don’t know,
0:32:47 tied pods as launch if someone would pay for it
0:32:49 and they thought they could get away with it.
0:32:52 So I’m not, it’s one of those stories I file
0:32:56 under the notion of shocking, but not surprising.
0:32:57 What are your thoughts?
0:32:58 – I think it’s more of the same.
0:33:00 And I think the question is whether this will
0:33:06 instigate any changes, but my instinct is no,
0:33:08 because you’ve been calling for changes
0:33:13 on this very problem for years and years.
0:33:19 So have our politicians, so has government,
0:33:22 and we keep on hearing the same story every time.
0:33:25 So I’m sort of beginning to develop
0:33:27 kind of a nihilist view of it.
0:33:31 And I’m starting to think that, you know,
0:33:35 this isn’t gonna do much to Metta,
0:33:36 and it’s not really gonna do much to the bottom line.
0:33:37 – Yeah, I don’t know.
0:33:41 I find the whole thing, the whole thing’s discouraging,
0:33:44 but you just can’t get around it.
0:33:48 The combination between, you know, genius management,
0:33:50 an incredibly deep talent pool
0:33:53 that is trading well-being for the Commonwealth,
0:33:58 for shareholder value, feckless political leaders,
0:34:02 a population that is addicted to the affirmation of others.
0:34:03 It all adds up to a company
0:34:07 that’s gonna be extraordinary for shareholders and has-men.
0:34:08 – We’ll be right back after the break
0:34:10 with a look at Bill Ackman’s failed IPO.
0:34:22 – Your mom hates it
0:34:25 when you leave six half full glasses on your nightstand.
0:34:28 It’s a good thing mom lives on the other side of the country,
0:34:29 and it’s an even better thing
0:34:34 that you can get six Ikea 365 plus glasses for just $9.99.
0:34:36 So go ahead, you can afford to hoard
0:34:38 because Ikea is priced for student life.
0:34:41 Shop everything you need for back to school at Ikea today.
0:34:45 – Looking to buy or sell a used vehicle?
0:34:47 Forget the selection and protection
0:34:48 of BCAA auto marketplace.
0:34:50 Try some random guy off the internet.
0:34:52 – Some random guy.
0:34:54 – Yes, we offered zero security.
0:34:56 – I can pay in crypto.
0:34:59 – Plenty of questions. – Is it still available?
0:35:01 – And zero convenience.
0:35:04 – 46 messages and I still make up.
0:35:07 – BCAA auto marketplace helps you buy and sell vehicles.
0:35:12 Visit bcaa.com/marketplace and avoid some random guy.
0:35:19 – It’s new, it’s blue, and it was made for you.
0:35:21 Introducing the thirst quenching summer berries
0:35:23 Starbucks refreshers beverage
0:35:25 where natural berry flavors meet juicy bursts
0:35:27 of raspberry flavored pearls.
0:35:29 It’s our most blutiful drink yet.
0:35:32 So try it while you can, only at Starbucks.
0:35:41 – We’re back with Prodigy Markets.
0:35:43 Bill Ackman has canceled his plans
0:35:46 to take Pershing Square USA public this week.
0:35:48 As we discussed on the show in June,
0:35:51 Ackman sold 10% of his investment company
0:35:54 to raise capital for his new soon to be public fund.
0:35:57 Then he hit the road to drum up investor support
0:36:00 to the tune of $25 billion.
0:36:02 But after weeks of lacklustre interest,
0:36:05 he cut that fundraising target twice,
0:36:08 first to $4 billion and then to $2 billion.
0:36:11 Now he’s pulling the listing all together
0:36:14 and he says he’s rethinking its structure
0:36:16 to address investor concerns.
0:36:19 Scott, a $25 billion closed end fund
0:36:21 would have been the largest of its kind.
0:36:24 Ackman went from eyeing a new record
0:36:27 to slashing his target by more than 90%,
0:36:30 canceling this thing altogether.
0:36:34 You also made a prediction about this story
0:36:35 a few months ago.
0:36:36 Let’s play that.
0:36:41 – So just as BlackRock has lost a lot of business
0:36:44 and taken a lot of grief for its impact investing
0:36:46 and focus on ESG,
0:36:48 Bill Ackman is kind of becoming the face
0:36:50 of the kind of anti ESG.
0:36:53 And I think that he’s gonna lose some investors
0:36:55 and come under some pressure.
0:36:59 The first quarter that his fund underperforms the marketplace.
0:37:00 I think people are gonna accuse him
0:37:02 of having taken his off the ball.
0:37:04 And I think a lot of investors
0:37:07 who actually appreciate impact investment and DI initiatives
0:37:10 or are pissed off of the way he’s handled this
0:37:13 are going to very loudly and publicly withdraw
0:37:14 or redeem from his fund.
0:37:17 I think we’re gonna start to hear from his investors
0:37:18 about his activities.
0:37:21 – Reactions? – Me neither than I was right.
0:37:25 First off, let’s talk about every hedge fund manager
0:37:28 or every private equity firm dreams of captive capital.
0:37:29 Now, why is that?
0:37:32 The way a hedge fund or alternative investment manager
0:37:36 goes out of business is mismatch durations.
0:37:37 What do we mean by that?
0:37:40 You invest long, but you raise money short.
0:37:43 So you invest in small companies or micro cap
0:37:46 or even private investments that are illiquid,
0:37:48 but your investors have redemption rights
0:37:49 and overnight the economy goes down
0:37:52 or for whatever reason they don’t like your performance
0:37:54 and they put in a redemption notice
0:37:56 and you have to sell down your positions,
0:38:00 which puts pressure on the value of those positions
0:38:03 thereby even decreasing an already probably lackluster
0:38:06 performance resulting in more redemptions
0:38:08 and you enter into a doom loop.
0:38:13 And even worse, if you have investments in illiquid assets
0:38:14 and you start getting more redentions
0:38:16 than cash on hand or liquid investments,
0:38:19 you have to put up something called a gate,
0:38:20 which has just kidding.
0:38:23 I said you would get money back on 30 days notice
0:38:25 or receipt of a redemption notice.
0:38:27 Gates are up and you can’t get your money back.
0:38:28 Once you do that,
0:38:30 you’ve effectively signaled the end of your fund
0:38:33 because once you bring your gates down again,
0:38:35 everybody submits the redemption notice
0:38:37 ’cause they don’t wanna get caught again.
0:38:39 Captive capital is every alternative
0:38:41 investment manager’s dream.
0:38:43 And one way to do that, there’s several ways to do that.
0:38:45 What Apollo and Berkshire Hathaway have done
0:38:48 is they’ve essentially started as insurance companies.
0:38:50 You have a massive amount of captive capital.
0:38:53 Another way to do that is to take the company public
0:38:55 because you get, while the share price,
0:38:57 the people who bought into the Cypio could sell their shares.
0:38:59 That just puts pressure on the stock price,
0:39:01 but Bill and the Pershing Square Fund
0:39:04 would have their capital and it’d be captive
0:39:07 and it’d be theirs and no one could call and ask for it back.
0:39:11 Now, the other story here is that I think we have hit
0:39:16 peak signaling or peak drunken texting or peak
0:39:17 kind of bullshit from communication,
0:39:20 from people who think that they can go on CNBC
0:39:23 with chunky glasses or that people are really fascinated
0:39:26 by Bill’s thoughts on DEI
0:39:28 when he has absolutely no domain expertise here.
0:39:30 And some of his viewpoints are seen as somewhat aggressive
0:39:32 and a bit reckless.
0:39:35 And lately he’s tweeted and though he deleted this tweet,
0:39:36 a conspiracy theory that there was no proof
0:39:38 that President Biden had actually signed
0:39:41 his resignation letter and just weirdness like that.
0:39:43 And when you’re Ottawa teachers
0:39:44 or the Michigan State Pension Fund,
0:39:48 you have so many choices of good fund managers
0:39:49 who will underperform the S&P
0:39:52 like every other fund manager minus their fees.
0:39:54 They’ll say, you know, we just don’t need to put up
0:39:55 with this bullshit.
0:39:59 And this kind of what I’ll call tweeting for awareness
0:40:03 thinking if I’m famous, people will want to invest in my fund.
0:40:06 Hit, I think it’s peak a few days ago
0:40:10 when Kathy Wood put out the following tweet.
0:40:11 Open quote.
0:40:14 As a result, our trading related capital tax losses
0:40:18 should offset trading related capital tax gains for years
0:40:23 and underappreciated asset associated with our strategies.
0:40:24 What is she saying there?
0:40:26 – I can’t even tell you.
0:40:27 I don’t know what she’s talking about.
0:40:30 – What she’s claiming is that they’ve lost so much
0:40:32 of other people’s money who were stupid enough
0:40:34 to invest in their fund
0:40:36 that it’ll offset losses in the future, right?
0:40:38 These losses will offset gains in the future.
0:40:42 And this is an underappreciated asset
0:40:44 as a result of their strategy.
0:40:46 Let me get this.
0:40:49 This is a good thing that you’ve lost this much money.
0:40:53 I mean, talking about trying to turn chicken shit
0:40:56 into chicken salad and believing your investors
0:41:00 and people on Twitter are this fucking stupid.
0:41:03 No, our losses, our destruction in your capital
0:41:05 is a feature, not a bug.
0:41:07 And she ended up deleting that tweet.
0:41:11 But I think in general investors are just getting fed up
0:41:15 with adventures in social engineering or commentary
0:41:17 or people trying to pretend they’re anything more
0:41:19 than just shitty fund managers
0:41:22 by thinking they can spin shit a different way.
0:41:24 And this is evidence of that.
0:41:26 I mean, this market, this IPO went from him saying,
0:41:31 I’m gonna raise $25 billion to $2 billion to zero.
0:41:33 That is pretty dramatic.
0:41:34 The market has kind of spoken here
0:41:36 and that is, you know what?
0:41:40 Your day job should be getting us returns, positive returns,
0:41:42 not trying to talk about social engineering
0:41:44 or spin your losses into something positive.
0:41:46 I think this is actually an interesting moment.
0:41:49 There’s this internet term you might have heard of,
0:41:51 extremely online.
0:41:53 I’m just gonna read you the internet definition
0:41:55 of extremely online.
0:41:57 To be extremely online is to post
0:42:00 and to see what has been posted as very important.
0:42:02 It is also to risk misunderstanding
0:42:04 what is seen on your screen
0:42:07 as too representative of the rest of the world
0:42:09 to think our niches are bigger than they are.
0:42:11 Whereas being online may simply be a matter
0:42:13 of having a phone, to be extremely online
0:42:15 would designate when the habits common
0:42:18 to communicating the screens seep into our awareness
0:42:21 and our identity and our behaviors
0:42:23 regardless of the screen’s presence.
0:42:27 Now I’m gonna read you Bill Atman’s sales pitch
0:42:29 when he proposed a $25 billion offering
0:42:32 which went to four and then two and then zero.
0:42:37 Quote, I have built a relatively large following on Twitter.
0:42:39 I have built up a large base of institutional
0:42:42 and retail followers that follow our every move.
0:42:46 Media interest is valuable in attracting investor interest
0:42:49 and also in creating liquidity for our shareholders.
0:42:51 I will be completely unrestricted
0:42:53 in terms of my ability to update our shareholders
0:42:55 about developments in the portfolio.
0:43:00 This is the internet definition of what it means
0:43:02 to be extremely online.
0:43:05 But I just love this story because for the first time
0:43:09 it’s put a literal dollar number on the delusion
0:43:11 of some of these extremely powerful
0:43:13 and extremely online individuals.
0:43:17 And the number is so big, it is so comical
0:43:20 that I would expect and I would hope
0:43:22 that it’s kind of shaken Bill Atman up
0:43:24 and it’s kind of made him think,
0:43:28 okay maybe I don’t have everything figured out.
0:43:30 – Yeah, I thought that was well said.
0:43:35 It was so lately I’ve found out
0:43:36 I’ve gotten a bunch of shit online
0:43:40 for some of the things I said about the election and the race
0:43:43 and Trump’s assassination or failed assassination attempt
0:43:46 and Megan Calley and some conservative podcasters
0:43:47 said my comments.
0:43:49 – Elon Musk, sorry, I just wanna point out.
0:43:52 Elon Musk said that your joke about Melania Trump
0:43:55 was quote, mean and cruel.
0:43:58 And that to me was one of the earliest indicators
0:43:59 that the right has gone woke
0:44:01 and that they have turned into the snowflakes,
0:44:03 but sorry, go ahead.
0:44:05 – Yeah, and just to be clear, this is a joke
0:44:08 and I actually got it off of a meme
0:44:10 is that Melania was seen yelling into a phone.
0:44:11 You had one job.
0:44:13 – How cruel of you, how cruel of you to say that.
0:44:16 – Yeah, whereas marking the disabled is just fine.
0:44:20 So I went on, I haven’t been on Twitter in a year and a half
0:44:23 but I went on ’cause I wanted to see these comments.
0:44:27 And the thought I had was that these folks
0:44:29 say the most ridiculous things,
0:44:33 but they’ve aggregated an audience of sycophants or bots
0:44:37 and they’ve blocked everybody that pushes back on them.
0:44:39 And they’ll say something ridiculous
0:44:42 and they get all this positive reinforcement.
0:44:43 And the thing that struck me was not only
0:44:45 how delusional these people are,
0:44:47 but just how small their world is.
0:44:51 And that I thought, okay,
0:44:53 I’ve been off of Twitter for a year and a half
0:44:54 and occasionally I do miss it
0:44:56 because I’ll get forwarded a link to an article
0:44:58 and I’d like to see the article and I can’t see it.
0:45:01 But what you realize when you’re off Twitter
0:45:05 is that it’s not only a bubble, it’s a really tiny bubble.
0:45:08 It just doesn’t have a hell of a lot of impact.
0:45:09 It’s an interesting communications.
0:45:13 But these people, they enter into this self-manicured,
0:45:16 self-reinforcing ideological bubble.
0:45:20 And I bet online that Bill Ackman probably,
0:45:23 when he’s on Twitter all day tweeting,
0:45:26 that he thinks, okay, my fund’s gonna be huge
0:45:28 and people love me online.
0:45:30 And I put out something saying Harvard’s DEI
0:45:33 is whatever, and I get 50,000 likes
0:45:35 and all this activity on Twitter.
0:45:39 And what you forget is nobody under the age of 30
0:45:44 uses Twitter, the person making investment decisions
0:45:49 on the behalf of ADIA or of the Florida State
0:45:53 pension program, they’re not on Twitter.
0:45:56 And these folks have literally entered
0:45:59 into an alternative universe where their idols
0:46:04 are Elon Musk or Kanye or tech libertarian brothers
0:46:05 who have a huge following online,
0:46:09 all talking to each other, all reinforcing each other.
0:46:11 And Senator Michael Bennett once said to me,
0:46:14 I was meeting with him about something and he said,
0:46:17 I said, well, Twitter says this and this
0:46:19 and he’s like, Scott, he’s like,
0:46:21 you’re under the impression Twitter is a much more
0:46:24 important place in the world than it actually is.
0:46:26 He’s like, the majority of voters don’t give a shit
0:46:29 what Twitter thinks or what’s happening on Twitter.
0:46:32 – You’ve said that to me before and it’s struck me too
0:46:33 because you’re off it now.
0:46:35 And I forget what the situation was,
0:46:37 but I said to you, everyone’s talking about this.
0:46:39 He said, no, no, no, everyone on Twitter
0:46:41 and your small following might be talking about this.
0:46:43 And it was absolutely right.
0:46:44 But that’s what happens if you’re on Twitter
0:46:45 and you’re on something all day,
0:46:47 you are where you spend your time.
0:46:50 And this is what has happened with Bill Ackman.
0:46:53 These folks are all figuring out that Twitter
0:46:55 is its own world and it’s a pretty small world.
0:46:58 And that is not how fund managers
0:47:00 or people in the real world are thinking.
0:47:02 – This is just how fucking toxic the platform is.
0:47:05 I did not know Elon Musk said that about me
0:47:07 and I’m already like just fucking angry.
0:47:11 – Don’t worry, I tweeted about it, I defended you.
0:47:12 I called him a snowflake.
0:47:14 – I’m literally, let me get this.
0:47:19 He goes on Jordan Peterson and says that his daughter
0:47:21 who went through transition is dead to him,
0:47:23 but I’m the cruel one.
0:47:27 – I believe he said, what mean and cruel people they are.
0:47:29 – That’s how people describe us.
0:47:32 Mean and cruel, the mean and cruel podcast.
0:47:34 Oh my God, watch out.
0:47:36 Yeah, anyways, let’s move on.
0:47:38 I feel like I need to shower.
0:47:40 – Okay, let’s take a look at the week ahead.
0:47:45 We’ll see earnings from Palantir, Uber, Airbnb and Disney
0:47:48 and we’ll also discuss Apple and Amazon’s earnings.
0:47:50 Scott, any predictions?
0:47:52 – Well, I think we said it.
0:47:57 We’ve hit peak tweet among alternative investment managers.
0:48:00 I think the bloom is off the rose.
0:48:04 I think people are like, just because you’re on CNBC
0:48:05 and have a large following on Twitter
0:48:08 does not mean that your SPAC makes any fucking sense
0:48:12 or that you can wallpaper over your shitty returns
0:48:16 or that support for your anti-DEI movement on Twitter
0:48:18 translates into investors thinking
0:48:20 they wanna give you captive capital.
0:48:21 I think there’s gonna be a lot of,
0:48:23 I think there’s gonna be more discipline,
0:48:24 not amongst politicians,
0:48:26 ’cause the person who started this
0:48:29 and it worked for him was Trump.
0:48:30 Trump would say, outrage is things online
0:48:32 and people that tickle people’s sensors
0:48:34 and it’s worked for him.
0:48:35 He is the Twitter president.
0:48:37 I don’t think it’s having that same sort of
0:48:41 efficacy or results for financial managers.
0:48:42 I think this is a much more serious business,
0:48:44 other people’s money and the people allocating
0:48:46 or making the biggest decisions around institutional
0:48:49 investment just have a different criteria.
0:48:51 – This episode was produced by Claire Miller
0:48:53 and engineered by Benjamin Spencer,
0:48:54 our associate producer is Alison Weiser,
0:48:56 executive producer is Jason Stavis and Catherine Dillon.
0:48:58 Mia Silverio is our research lead
0:49:00 and Drew Burris is our technical director.
0:49:02 Thank you for listening to Proficy Markets
0:49:04 from the Vox Media Podcast Network.
0:49:06 If you like what you heard, give us a follow
0:49:08 and join us on Thursday for our conversation
0:49:12 with Mark Mahaney, only on Proficy Markets.
0:49:17 ♪ Lifetimes ♪
0:49:24 ♪ You help me ♪
0:49:29 ♪ In kind reunion ♪
0:49:37 ♪ As the world turns ♪
0:49:41 ♪ And the dawn flies ♪
0:49:44 ♪ In love ♪
0:49:53 – Support for the show comes from Into the Mix,
0:49:55 a Ben and Jerry’s podcast about joy and justice
0:49:57 produced with Vox Creative.
0:50:00 Into the Mix is back for a new season
0:50:02 and welcomes you in with four new stories
0:50:05 that take listeners beyond the headlines
0:50:07 and into the lives of ordinary people
0:50:09 fighting for justice in their communities.
0:50:11 Starting with Ainez Bordeaux,
0:50:13 an activist and St. Louis native
0:50:16 who fought to shut down the workhouse,
0:50:18 a notorious pretrial detention center
0:50:21 that she says functioned like a debtor’s prison.
0:50:24 Subscribe to Into the Mix, a Ben and Jerry’s podcast
0:50:26 to listen to the first episode
0:50:28 of the special three-part series out now.
0:50:38 [BLANK_AUDIO]
0:00:04 While I see them all around the city,
0:00:07 I’ve never ridden in an autonomous vehicle myself.
0:00:09 I do have some questions about the tech.
0:00:10 You may as well.
0:00:13 – Hello, from Waymo.
0:00:15 This experience may feel futuristic.
0:00:16 – This is so cool.
0:00:20 – Vox and Waymo teamed up for an in-depth study
0:00:21 about AV perception.
0:00:22 And what they found was that,
0:00:24 as people learned more about Waymo,
0:00:26 their interest in choosing one
0:00:29 over a human-driven vehicle almost doubled.
0:00:30 – Person approaching.
0:00:34 Waymo can see 360 degrees and up to 300 meters away,
0:00:36 which helps it obey traffic laws
0:00:38 and get you where you’re going safely.
0:00:41 Swiss Re found that compared to human drivers,
0:00:44 Waymo reported 100% fewer injury claims
0:00:47 and 76% fewer property damage claims.
0:00:49 And speaking of safety,
0:00:52 folks identifying as LGBTQIA and non-binary
0:00:54 showed the highest interest in AVs
0:00:56 and women showed the greatest increase in interest
0:00:57 after learning more.
0:01:02 – Arriving shortly at your destination.
0:01:05 – So that actually felt totally normal.
0:01:06 AVs are here, and the more you know,
0:01:09 the more exciting this tech becomes.
0:01:11 You can learn more about Waymo,
0:01:13 the world’s most experienced driver,
0:01:14 by heading to Waymo.com.
0:01:20 – Support for the show comes from Into the Mix,
0:01:22 a Ben and Jerry’s podcast about joy and justice
0:01:24 produced with Vox Creative.
0:01:28 Ainez Bordeaux is a self-described hellraiser,
0:01:29 and she became an activist
0:01:32 after being caught up in the criminal legal system
0:01:34 when she couldn’t afford her bond.
0:01:36 And without a trial,
0:01:38 Ainez was sent to a St. Louis detention facility
0:01:41 known as the Workhouse,
0:01:43 notorious for its poor living conditions.
0:01:45 Here how she and other advocates
0:01:48 fought to shut it down and won
0:01:50 on the first episode of this special three-part series
0:01:51 out now.
0:01:54 Subscribe to Into the Mix, a Ben and Jerry’s podcast.
0:01:59 Today’s numbers, 180,000 and 200,000.
0:02:00 That’s how many people attended
0:02:03 the White Dudes for Harris fundraising event,
0:02:05 and white women answered the call,
0:02:08 which was the largest Zoom meeting in history.
0:02:10 Let’s turn this back to me.
0:02:12 I asked a hero of mine, no joke,
0:02:14 on the Zoom to say the following.
0:02:15 – I’m Luke Skywalker,
0:02:18 and I’m here to rescue you, Mr. Galloway.
0:02:20 (upbeat music)
0:02:24 (singing in foreign language)
0:02:31 – Welcome to Prop G Markets.
0:02:33 Today, we’re discussing Microsoft
0:02:37 and Meta earnings, Bill Ackman’s failed IPO, Ed.
0:02:39 That’s right, the farm boy from Tatooine,
0:02:42 who went on to be one of the most powerful Jedi Knights,
0:02:44 battling the Sith.
0:02:47 That’s right, he gave a shout out to me, Ed.
0:02:47 Jealous?
0:02:48 Jealous?
0:02:49 Do you even know what Star Wars is?
0:02:52 – I just watched like Ariana Grande or Bridgerton.
0:02:53 – No, what is Star Wars?
0:02:55 (laughs)
0:02:57 – My first sort of date, I was 13,
0:03:02 and I took Paula Cumnock to the Star Wars premiere
0:03:04 at the Abco Cinema in Westwood.
0:03:07 If that was back when, I’m not exaggerating,
0:03:09 I used to see movie, I used to see two movies a week,
0:03:12 and I would see some movies five or seven times
0:03:13 in the theater.
0:03:15 – Wow, that’s awesome.
0:03:16 – Well, I’m glad you’ve enjoyed
0:03:17 this walk down memory lane, Ed.
0:03:20 (laughs)
0:03:23 – I can see the enthusiasm in your voice.
0:03:25 – Yeah, yeah, it’s brimming, right?
0:03:29 This white dude’s Vaharis thing that you joined.
0:03:31 Have you been getting much shit from Fox people?
0:03:32 ‘Cause I’ve been seeing,
0:03:33 all I’ve been seeing on Fox News,
0:03:35 you know that’s my favorite news program.
0:03:37 All I’ve been seeing is people shitting
0:03:38 on white dudes Vaharis.
0:03:40 – No, I actually, I get more shit.
0:03:43 Fox in the far right is giving up on me.
0:03:45 I get shit from either the far lift
0:03:48 or I’m convinced it’s bots from people who hate me
0:03:51 or see me in the diametrically opposed to their economics.
0:03:53 – By the way, that’s one of my favorite biases of yours.
0:03:55 Is there any time that there’s a negative comment
0:03:58 about prof G, you have a theory that it’s a Russian bot
0:03:59 invasion?
0:04:01 – See, I believe what you just said was inspired
0:04:04 by some sort of the GRU or the CCP.
0:04:06 I don’t really think you feel that way about the dog.
0:04:07 – Yeah, the CCP has put me up here.
0:04:09 – It’s you, it’s you’re clearly been weaponized
0:04:11 by foreign adversaries.
0:04:13 Hey, just ’cause I’m paranoid doesn’t mean I’m wrong.
0:04:14 And by the way, when you get to my age,
0:04:15 you’re allowed to be a little bit paranoid.
0:04:16 – I agree, I like it.
0:04:19 – Fox is saying essentially that it was very identity,
0:04:22 it was the same identity politics that we always fall into
0:04:25 and that if Trump tried to do it, he’d get criticized.
0:04:26 – They did not like the name.
0:04:27 – Yeah, he would get criticized,
0:04:30 but he would basically say this is a thinly veiled
0:04:33 KKK meaning to inspire the crazies.
0:04:37 And when we did it, it was meant to sort of,
0:04:38 and it was a nice vibe kind of poke fun
0:04:43 at the identity politics that the left is guilty of sometimes.
0:04:46 But we weren’t there to represent white guys interests.
0:04:48 No one, I listened to all the speeches,
0:04:50 no one was talking about the power of white dudes
0:04:52 or why we’re not represented.
0:04:53 It wasn’t anything like that.
0:04:56 It was really, I was really, I don’t know
0:04:58 if you, how much time you spent up,
0:04:59 but it was a really nice vibe.
0:05:01 And we raised more than four million bucks.
0:05:04 I shouldn’t say we, it was this really talented guy.
0:05:06 He pulled off something so impressive so fast.
0:05:09 And if you think about every presidential election
0:05:11 usually has a technology at the core of it
0:05:16 or media, FDR was radio, JFK was TV, Trump was Twitter.
0:05:20 People say it was with Obama, it was Google.
0:05:21 And I used to think that this one
0:05:22 would be short form video.
0:05:25 This would be kind of the TikTok election.
0:05:27 But now I’m wondering if it’s gonna be the Zoom election.
0:05:29 All of these Zoom, have you been,
0:05:31 I assume almost everyone’s been invited
0:05:33 to a Zoom call something for Harris or something.
0:05:35 My bank account isn’t big enough for that.
0:05:39 No, like young men looking for love, Zoom for Harris.
0:05:41 Luckiest podcaster in the world,
0:05:44 drafting off the heels of someone much more talented
0:05:49 for Harris Zoom, do you haven’t got that call yet?
0:05:50 You haven’t got that call yet?
0:05:51 But we can keep going.
0:05:53 We should keep going with these ideas anymore.
0:05:55 Yeah, yeah.
0:05:56 You’re getting fed up.
0:05:56 You used to laugh at my jokes.
0:05:59 Now you realize, now you feel some power.
0:06:01 Now you’re like, oh.
0:06:02 Oh, come on.
0:06:04 So the big news, everyone comes up to me.
0:06:06 I had someone come up to me and asked me yesterday
0:06:08 and say, oh, we love your content.
0:06:13 Ed has a girlfriend, so this news has traveled
0:06:16 all the way to Picken County, Ed.
0:06:19 This is very exciting, very exciting.
0:06:20 So exciting.
0:06:22 Yeah, clearly you’re looking to move on.
0:06:25 Okay, let’s start with our monthly review of market vitals.
0:06:28 (upbeat music)
0:06:34 The S&P 500 had its worst July in a decade,
0:06:36 advancing about 1%.
0:06:39 The dollar fell, Bitcoin rose marginally,
0:06:41 and the yield on tenure treasuries declined,
0:06:43 shifting to the headlines.
0:06:45 The Federal Reserve held interest rates steady,
0:06:47 but acknowledged recent progress on inflation
0:06:49 could allow them to cut rates soon.
0:06:52 Second quarter revenue at Starbucks missed expectations
0:06:55 as total same-store sales declined 3%.
0:06:57 That metric was especially painful in China,
0:06:59 the company’s second largest market,
0:07:02 where same-store sales fell 14%.
0:07:05 And finally, Delta’s CEO revealed
0:07:07 that the CrowdStrike technology outage
0:07:09 cost the company half a billion dollars.
0:07:12 It took Delta longer than many other airlines
0:07:13 to recover from the outage,
0:07:16 and they ultimately had to cancel 5,000 flights
0:07:17 over several days.
0:07:20 The airline notified both CrowdStrike and Microsoft
0:07:22 to prepare for litigation.
0:07:26 Scott, your thoughts starting with the Fed meeting.
0:07:28 All right, so look, this continues to be
0:07:30 the kind of Goldilocks economy.
0:07:33 There’s 195 nations in the world, 194.
0:07:34 I wish they were the same nation,
0:07:37 and that is the US, at least economically.
0:07:39 Even though the current Fed funds rate
0:07:42 is at a 5.3% or two-decade high,
0:07:44 that historically is not that high.
0:07:48 US GDP rose at almost, I think it was about 2.8% annualized
0:07:49 in the second quarter,
0:07:53 which is higher than economists had forecasted.
0:07:55 And the unemployment rate’s about 4%,
0:07:57 which is still like historically low.
0:07:59 That’s basically full employment.
0:08:01 And the S&P and NASDAQ both had their best days
0:08:03 since February, following the announcement.
0:08:06 S&P up 1.6% of the NASDAQ up 2.6,
0:08:09 although I think it’s down today.
0:08:11 I just can’t get over how bad the Democrats are messaging.
0:08:15 The American public feels like Bidenomics didn’t work.
0:08:19 The economy here is, there is no nation in the world
0:08:21 that has an economy like ours right now.
0:08:23 And it just amazes me that we’ve done,
0:08:27 when I say we Democrats have done such a shitty job
0:08:30 communicating that I’m curious,
0:08:32 do you have any thoughts on why
0:08:34 Americans feel so bad about the economy?
0:08:36 – Well, we’ve talked a little bit about this
0:08:38 and we talked about it with Kyla Scanlon,
0:08:39 this idea of the vibe session.
0:08:43 But the data that we’ve seen is that,
0:08:45 generally speaking, consumer sentiment
0:08:48 doesn’t have anything to do with the economy.
0:08:50 All it has to do with is politics.
0:08:54 I mean, if you look at consumer sentiment by party,
0:08:57 Republicans were feeling good about the economy
0:08:58 until Biden took over.
0:09:02 And the same is true, or vice versa, for Democrats.
0:09:06 So I think the takeaway from this Fed meeting,
0:09:09 you know, this is probably the most decisive statement
0:09:11 we’ve heard from Jerome Powell
0:09:13 since we’ve started talking about this.
0:09:15 He was still a little bit cryptic,
0:09:16 but he did give us a timeline
0:09:19 and he was pretty confident and clear
0:09:20 about the direction of inflation.
0:09:24 And most importantly, he mentioned the word September.
0:09:27 He said, quote, a reduction in the policy rate
0:09:28 could be on the table as soon as September.
0:09:31 So I think we can be pretty confident at this point.
0:09:34 Rates will be cut at the next Fed meeting.
0:09:37 The cutting cycle is about to begin,
0:09:38 which will be good for the stock market.
0:09:40 It’ll also be really good for us
0:09:45 because for the first time in my career as a podcaster,
0:09:47 maybe I’ll get to stop talking
0:09:48 about Fed meetings every month.
0:09:50 – Yeah, or maybe buying a house at some point.
0:09:51 – Yeah, that too.
0:09:53 – So really interesting story,
0:09:56 Starbucks specifically, Elliot is gonna take a mistake.
0:09:58 You could go through the S&P 500 and say,
0:10:01 who has made the biggest bet is the most exposed to China.
0:10:02 And those stocks are probably
0:10:05 some of the worst reforming stocks in the S&P.
0:10:06 And that is China,
0:10:09 just as everyone uses the term AI and every earnings call,
0:10:11 if you go back seven, eight years,
0:10:13 it was the same except everyone just repeated
0:10:15 the word China over and over.
0:10:18 And Starbucks kind of went all in on China.
0:10:20 In the last five years, it’s nearly doubled.
0:10:21 Think about this.
0:10:23 It doubled its stores in the region,
0:10:27 but sales over that same timeframe are down 0.4%.
0:10:28 About one in five of their stores
0:10:30 are now located in China.
0:10:33 In addition to the lackluster spending,
0:10:36 Starbucks faces competition from Chinese coffee chain.
0:10:38 I think it’s called Lucan,
0:10:41 whose beverages get this ad cost a third of Starbucks.
0:10:44 And Elliot shows up, it’s an amazing brand.
0:10:47 Its stock price, I think is,
0:10:49 I don’t know if it’s down or flat over the last five years,
0:10:52 but it’s been a pretty significant underperformer.
0:10:53 I think they’re gonna take a page
0:10:58 out of the playbook from their activist intervention
0:10:59 at Salesforce.
0:11:01 And I think they’re gonna say,
0:11:03 stop the hallucination around growth and spending.
0:11:04 You need to cut costs here.
0:11:07 And so for example,
0:11:09 Starbucks is saying they plan to open an average
0:11:12 of eight new stores every day through 2030.
0:11:14 I think they’re gonna ask them to revise that.
0:11:15 I mean, these stores used to have
0:11:17 like an incredibly short payback period.
0:11:19 And so you just keep opening more stores.
0:11:22 And I think the juice has been squeezed from that lemon.
0:11:23 We’ve seen same store sales decline
0:11:24 for two straight quarters.
0:11:27 So there might be over stored in some regions.
0:11:29 They’ll probably urge them to invest more
0:11:31 in their expanding higher margin pickup delivery
0:11:32 and drive through businesses
0:11:36 while shutting down struggling brick and mortar locations.
0:11:39 But this feels like a classic sort of Elliot come in,
0:11:40 hi, we’re here to help,
0:11:44 meaning you need to cut costs or do the following things.
0:11:46 And we’ll go away quietly if the stock pops,
0:11:47 which I might hear.
0:11:50 And if it doesn’t, we’ll go gangstron you.
0:11:52 But Elliot typically likes to go after the ones
0:11:54 I’ve seen, big brands, big companies
0:11:58 where they have liquidity such that they can deploy AUM.
0:12:00 I also wonder if it’s sort of the last,
0:12:03 we’ll call it the last battle of Howard Schultz.
0:12:04 But Howard sort of left and come back.
0:12:06 He’s kind of the thing that wouldn’t leave in the sense
0:12:11 he’s always announcing his retirement and then coming back.
0:12:14 And so I’ll be curious if they get along here
0:12:18 like the kind of Benioff, Elliot love affair.
0:12:20 Again, this is all gonna come down to the male ego,
0:12:23 but starting or finishing where I started,
0:12:27 China has become the anchor around everyone’s neck.
0:12:28 If you’re exposed to China,
0:12:30 you’re just kind of hating life right now.
0:12:33 – Going back to Howard Schultz.
0:12:37 So this is the former CEO of the company.
0:12:38 He took up the job in 1986.
0:12:40 He sort of turned Starbucks
0:12:42 into the global iconic brand today.
0:12:46 He’s no longer the CEO, he’s no longer on the board,
0:12:49 but he has been publicly criticizing Starbucks
0:12:52 and its management for the poor performance
0:12:53 in the past few weeks.
0:12:54 – That’s helpful.
0:12:55 – Right?
0:12:57 – Thanks, thanks for that.
0:12:58 – This was a quote he said,
0:13:02 “The company has not executed the way I think it should have.
0:13:04 Senior leaders need to spend more time
0:13:06 with those who wear the green apron.”
0:13:08 He went and said this on LinkedIn.
0:13:11 He also went on a podcast and started talking about it.
0:13:13 And this is the guy, as you mentioned,
0:13:15 who’s been the CEO three times.
0:13:18 He came back to Starbucks in 2022.
0:13:20 And his job when he came back as the interim
0:13:24 was to facilitate a clean transition to the current CEO.
0:13:25 And now he’s going out to media outlets
0:13:29 and he’s shitposting the CEO and the rest of the board.
0:13:31 And the thing I find ugliest about this
0:13:33 is that Howard Schultz,
0:13:35 as I said, this is a holistic problem with Starbucks.
0:13:39 Howard Schultz is responsible for many of the problems
0:13:41 that they’re dealing with right now.
0:13:43 We mentioned China as an example.
0:13:45 This whole China investment thing,
0:13:47 this was all Howard Schultz’s idea.
0:13:49 He was the one who was pro-China
0:13:50 and who wanted to go and invest.
0:13:52 And I think the status that they wanted
0:13:56 to open up a store in China every nine hours.
0:13:59 And now it’s obviously backfiring on the company
0:14:00 and he’s shitposting them.
0:14:01 So I’d like to get your take
0:14:03 because this is a guy who’s sort of
0:14:05 the iconic American CEO.
0:14:09 He is known as sort of an impeccable businessman.
0:14:10 But I look at what he’s doing now
0:14:13 and I’m kind of like this behavior is pretty childish.
0:14:16 – Well, so just some disclosure.
0:14:18 Howard Schultz and his VC firm, Maveron,
0:14:22 run by this really wonderful thoughtful guy named Dan Levitan
0:14:26 invested in my e-commerce incubator in ’99
0:14:28 where I closed on my first round of funding
0:14:30 along with Goldman Sachs, J.B. Morgan.
0:14:32 So we closed on around in December ’99,
0:14:35 the concept was to punch out retail e-commerce companies.
0:14:37 And as you can imagine, six months later,
0:14:40 it just didn’t work ’cause the entire market imploded.
0:14:41 Which by the way is a good thing.
0:14:42 I’ve always said that fast failure
0:14:43 is the next best thing to success.
0:14:45 But so I have a little bit of bias here.
0:14:47 I do think that like Howard will go down
0:14:49 as one of the great consumer CEOs of all time.
0:14:50 He’s created a tremendous amount of value.
0:14:53 He’s legitimately and deserves to be a billionaire.
0:14:57 It’s just really bad form to shitpost the company.
0:14:58 Is that fair?
0:14:58 Have I done that?
0:14:59 I don’t think I’ve done that.
0:15:00 Well, maybe I have.
0:15:01 Well, shit, I don’t know.
0:15:02 But I’m a megalomaniac too.
0:15:06 So anyways, yeah, what he’s doing is not helpful.
0:15:07 What it signals to me is he’s planning
0:15:10 to be the CEO the fourth time
0:15:13 that he’s making a play to come back.
0:15:14 Can we get a hard prediction?
0:15:16 Will Howard Schultz return again?
0:15:17 I don’t know if the, enough dynamics there.
0:15:18 Let me go this way.
0:15:20 We have not heard it.
0:15:23 I’m almost entirely confident predicting Howard Schultz
0:15:25 is not gonna be quiet around this issue.
0:15:28 Let’s move on to Delta and CrowdStrike.
0:15:31 Your thoughts on Delta’s comments and the lawsuit.
0:15:33 I think the bigger learning here is that Lena Khan
0:15:35 has never been more important to our economy.
0:15:37 And she’s the FTC chair.
0:15:40 The concentration in the tech industry is just too great.
0:15:41 And what that means is,
0:15:43 is that the entire fucking airline industry
0:15:45 can be shut down or most of it,
0:15:48 except for the ones that had really rudimentary technology
0:15:51 Southwest, they were due for a break.
0:15:53 You basically can have the airline industry
0:15:56 in the largest economy nearly shut down
0:15:57 because these companies are dependent
0:16:00 upon a small number of technology vendors.
0:16:04 Since the outage CrowdStrike has declined nearly 25%.
0:16:06 I thought it was gonna give up 10% and then go back.
0:16:08 It’s not, it’s gone down further.
0:16:11 Still think it’s probably a buying opportunity.
0:16:14 But this is, this to me says more about the concentration
0:16:17 of power and how it can impact consumers and the economy.
0:16:21 The insurance, the settlement itself, they’ll figure it out.
0:16:22 They’ll come to some sort of,
0:16:24 they’ll come to some sort of accommodation
0:16:25 and all parties will move on.
0:16:27 Am I missing anything here, Ed?
0:16:30 – Well, the only thing I would add is,
0:16:31 I listened to his comments on CNBC.
0:16:35 This is the CEO of Delta who is talking about,
0:16:36 what a disaster it was
0:16:39 and how upset he is about the whole thing.
0:16:41 The way that I would describe those comments
0:16:46 coming from a Fortune 500 CEO is small dick energy.
0:16:49 And the reason that I say that
0:16:50 is that if you think about the damage to Delta here,
0:16:52 it’s actually really significant.
0:16:53 There’s the financial damage
0:16:56 where you had five, 6,000 flights canceled.
0:16:59 And then they also had to cover all of the customers
0:17:00 who were staying in hotels
0:17:02 and all these other expenses associated.
0:17:05 But there’s also the reputational damage.
0:17:08 And I would bet there are many people
0:17:10 whose flights got canceled,
0:17:12 who don’t really know what CrowdStrike is,
0:17:14 who kind of heard of it
0:17:16 and who ultimately believe that their vacation
0:17:19 and their week was ruined by Delta.
0:17:23 So I think this is a really big issue for Delta.
0:17:26 I think it’s big enough to warrant
0:17:28 possibly a termination with CrowdStrike
0:17:30 or at the very least,
0:17:33 it warrants considering a termination with CrowdStrike
0:17:34 and stating that publicly.
0:17:37 I think it speaks to a larger point,
0:17:38 which you’ve sort of hinted at here,
0:17:41 which is, why doesn’t he just end it with CrowdStrike?
0:17:45 Why doesn’t he switch to another cybersecurity provider?
0:17:46 And I think the answer is,
0:17:49 one, these companies have gotten too big.
0:17:53 And two, it would just suck to do that.
0:17:58 When it comes to enterprise SaaS and tech infrastructure,
0:18:02 you end up with this deeply dependent relationship
0:18:03 that makes it really hard to leave.
0:18:07 CrowdStrike has got this a 95% retention rate
0:18:11 over the 20 years of operation, 95% retention rate.
0:18:12 Do we think that’s because CrowdStrike
0:18:14 has an incredible product?
0:18:17 Or do we think it’s because CrowdStrike has made it
0:18:20 so that if you try to leave, it’s a total nightmare?
0:18:22 – Yeah, so you’re exactly right.
0:18:23 And you’re making the same point.
0:18:25 Ed Bastion is the CEO of Delta.
0:18:27 He’s not afraid to fire people or companies.
0:18:29 I mean, but he can’t.
0:18:33 And my guess is that once CrowdStrike figured out
0:18:34 an agreement with Microsoft,
0:18:36 it’d become more definitely integrated.
0:18:38 And you have Microsoft, you’re just trapped.
0:18:39 So all you can do is sue them,
0:18:41 but you can’t actually fire them or switch them.
0:18:43 And it goes to the point that the industry
0:18:45 is too concentrated.
0:18:47 Let me use this as a segue into talking about
0:18:49 one of my favorite things, airlines.
0:18:51 I would argue amongst the big three,
0:18:52 well, actually it’s Southwest too.
0:18:55 I still think Delta’s probably done the best job
0:18:58 in an environment where it is increasingly difficult
0:19:00 to establish any sort of differentiation.
0:19:02 I was a Delta person before.
0:19:03 – Why’d you switch?
0:19:06 – ‘Cause daddy flies private now and you knew that.
0:19:07 Anyways.
0:19:10 Fucking jerk.
0:19:13 Anyways, gets a girlfriend.
0:19:16 And now he thinks he’s like, why do you do that?
0:19:20 Anyways, Delta’s not a good job.
0:19:23 And they do the least bad job of all the domestic carriers
0:19:26 with the exception of JetBlue Mint.
0:19:28 Think about the competition there.
0:19:30 Consumers flying a company, they get angry,
0:19:33 they can switch, but Delta can switch.
0:19:35 Why don’t you fly Delta anymore?
0:19:37 (laughing)
0:19:42 We’ll be right back after the break
0:19:44 with a look at Microsoft and Metas earnings.
0:19:46 And if you’re enjoying the show so far,
0:19:49 hit follow and leave us a review on ProfG Markets.
0:19:51 (gentle music)
0:19:58 Support for ProfG comes from Mint and Mobile.
0:20:00 If something seems like a great deal at first,
0:20:02 it might come with an added cost.
0:20:03 Like if your local bakery is advertising
0:20:06 as many free croissants as you can hold in your arms,
0:20:08 then sure on limited free pastries,
0:20:11 but there’s also all the coffee you need to buy
0:20:12 to wash down those croissants.
0:20:14 Hmm, thought of that.
0:20:17 Well, Mint Mobile is offering a deal that’s actually great,
0:20:18 not just on its face.
0:20:19 By switching to Mint Mobile,
0:20:21 you can get three months of premium wireless service
0:20:24 for just 15 bucks a month.
0:20:26 All of their phone plans come with high-speed 5G data
0:20:28 and unlimited talk and text,
0:20:30 which you can use to message your entire contact list
0:20:32 to give away your unlimited baked goods.
0:20:34 To get this new customer offer
0:20:35 and your new three-month premium wireless plan
0:20:36 for just 15 bucks a month,
0:20:39 go to mintmobile.com/profg.
0:20:41 That’s mintmobile.com/profg.
0:20:43 Cut your wireless bill to 15 bucks a month
0:20:45 at mintmobile.com/profg.
0:20:47 For $45 from payment required,
0:20:48 we’ll move into $15 from our new customers
0:20:50 on first three-month plan only.
0:20:53 Speed slower, above 40 gigabytes on unlimited plan,
0:20:55 additional taxes, fees, and restrictions apply.
0:20:57 See Mint Mobile for details.
0:21:02 Support for ProfG comes from LinkedIn Jobs.
0:21:04 Finding a great new hire is impossible
0:21:05 if you’re searching in the wrong place.
0:21:07 Traditional job boards might have been
0:21:09 the only game attempt for a while,
0:21:11 but today’s business owners need a platform
0:21:13 with more robust features and a broader reach,
0:21:16 a platform like LinkedIn Jobs.
0:21:18 We recently posted an opening to LinkedIn Jobs
0:21:20 and we got a bunch of candidates.
0:21:24 Some even felt fairly qualified, which is good news,
0:21:25 and it’s not that expensive.
0:21:26 With LinkedIn Jobs,
0:21:28 you can connect with qualified professionals
0:21:29 who won’t find anywhere else.
0:21:32 And according to LinkedIn, 86% of small businesses
0:21:35 find a qualified candidate within just 24 hours of posting.
0:21:38 So if you’re not looking for your next hire on LinkedIn,
0:21:40 you might be looking in the wrong place.
0:21:44 Hire professionals like a professional on LinkedIn.
0:21:47 Post your job for free at linkedin.com/prof.
0:21:50 That’s linkedin.com/prof to post your job for free.
0:21:52 Terms and conditions apply.
0:21:57 Support for the show comes from Into the Mix,
0:22:00 a Ben and Jerry’s podcast about joy and justice
0:22:02 produced with Vox Creative.
0:22:05 Would you have $25,000 to post bail?
0:22:07 That’s how much Inez Bordeaux had to pay
0:22:10 when she was arrested in 2016.
0:22:11 And since she couldn’t afford it,
0:22:13 she was sent to the workhouse,
0:22:16 a pre-trial detention center in St. Louis.
0:22:18 Inez and the other detainees weren’t locked up
0:22:20 because they’d been convicted,
0:22:23 but because they couldn’t afford their bail.
0:22:26 Experiencing what I experienced
0:22:29 and watching other women go through it
0:22:33 and know that there were thousands before us
0:22:36 and there were thousands after us
0:22:40 who had experienced those same things,
0:22:42 that’s where I was radicalized.
0:22:45 She spent a month at the workhouse
0:22:47 and witnessed abject conditions,
0:22:50 extreme heat and cold, mold and pest infestations
0:22:52 and poor medical care.
0:22:54 Eventually, her charge was vacated,
0:22:57 but the experience changed her.
0:22:59 They’re starting a campaign to close the workhouse.
0:23:00 Are you interested?
0:23:04 And I was like, hell yeah, hell yeah, I’m interested.
0:23:07 Hear how she and other advocates fought to shut it down
0:23:09 and won on the first episode
0:23:11 of this special three-part series out now,
0:23:13 hosted by Ashley C. Ford.
0:23:16 Subscribe to Into the Mix, a Ben and Jerry’s podcast.
0:23:27 – We’re back with ProfG Markets.
0:23:29 Microsoft posted earnings that beat expectations
0:23:31 on the top and bottom lines.
0:23:34 The stock fell, however, on its disappointing cloud results.
0:23:36 Revenue from Azure and other cloud services
0:23:38 slowed from the previous quarter
0:23:39 and also fell short of expectations.
0:23:42 That’s the first time since 2022
0:23:44 that Microsoft has failed to meet
0:23:46 or beat expectations for that segment.
0:23:49 Meanwhile, investments in that area are accelerating.
0:23:53 Capital expenditures rose 78% to $19 billion
0:23:56 with nearly all of it going to AI and the cloud.
0:24:00 Scott, initial reactions to Microsoft’s earnings.
0:24:02 – What seemed to spook everybody
0:24:04 was just the arms race and the spending race
0:24:06 that all these companies have now entered into.
0:24:09 And the stat that just blew my mind
0:24:11 is that the capital expenditures
0:24:13 of Amazon, Meta, Microsoft, and Google
0:24:15 will spend about $200 billion this year on CapEx,
0:24:19 double what the US government spends on Homeland Security.
0:24:20 The entire revenue production
0:24:23 or entire revenue spawned by the AI companies,
0:24:24 their front-end applications
0:24:28 or what they get selling these chips is about $20 billion.
0:24:30 But the analysis you guys have done
0:24:32 has shown that there’s been about $3 trillion
0:24:34 in inspired increase in market capitalization.
0:24:37 So we have an industry that loosely speaking
0:24:39 is trading at 150 times revenues,
0:24:42 which is just striking.
0:24:45 And some people would argue is unsustainable,
0:24:47 but it was the CapEx
0:24:48 that kind of freaked everybody out here.
0:24:50 But their business,
0:24:54 every part of their business seems to be on fire.
0:24:56 What’s interesting is that people talk about,
0:24:58 investors talk about flows.
0:25:00 And that is you can find the best company in Argentina,
0:25:02 but if the flows are consistently
0:25:05 out of the Argentinian market, the capital flows,
0:25:09 the market’s bigger than any individual company’s performance.
0:25:10 And the flows here are interesting.
0:25:14 And that is when people start to have any wisp or concern
0:25:16 around the future of AI and its valuation,
0:25:19 their go-to is to go to the infrastructure place.
0:25:21 The same thing happened to Cisco in 98.99
0:25:23 where people start saying on the front end,
0:25:24 they’re not entirely sure
0:25:27 the winners and losers are will just invest in the infrastructure
0:25:29 or the steel on the ground, if you will.
0:25:31 And we see this now in terms of flows.
0:25:33 And that is the software layer,
0:25:34 Microsoft, Meta, Google and Amazon,
0:25:39 their CapEx is up 31%, but their revenue is only up 19%.
0:25:40 Whereas the infrastructure players
0:25:44 or the hardware layer that’s NVIDIA, AMD and ARM,
0:25:46 their CapEx is actually flat to down.
0:25:49 It says minus 8%, 2022 to 2024,
0:25:52 but their revenues are up 146%.
0:25:56 – Yeah, it’s interesting that Wall Street
0:25:59 has really latched on to that CapEx issue,
0:26:01 this CapEx investing.
0:26:04 But there’s a reason they’re doing that.
0:26:07 And that is sales are slowing.
0:26:10 But by the way, barely sales went from,
0:26:12 in the cloud division for Microsoft at least,
0:26:17 sales went from 31% two quarters ago to 29% last quarter.
0:26:21 So sure it’s a slowdown, but it’s still a crazy big number.
0:26:23 But it’s not actually slowing
0:26:25 because there’s a lack of demand.
0:26:28 In fact, it’s the opposite, there’s too much demand.
0:26:32 And according to Microsoft, they can’t keep up with it.
0:26:33 And so that’s why they’re making
0:26:37 these huge CapEx investments, $19 billion
0:26:38 in the previous quarter alone,
0:26:41 which is up 80% year over year.
0:26:42 We’re kind of witnessing
0:26:47 one of the largest CapEx investment movements in history.
0:26:48 Because it’s not just Microsoft.
0:26:52 This is Google, which doubled it last quarter.
0:26:55 It’s Meta as well, which we’ll get to, it’s Amazon too.
0:26:58 Everyone is sort of full tilt on the AI CapEx.
0:27:02 And we’ve discussed before how maybe there’s a danger there
0:27:05 that maybe they’re investing too heavily in the space.
0:27:07 You made the point that all the dogs
0:27:08 are barking up the same tree.
0:27:10 But the question that I would pose to you
0:27:13 based on this earnings report is,
0:27:14 the demand is there.
0:27:18 Companies want to pay them for the compute
0:27:20 and they can’t keep up with it.
0:27:24 So does Big Tech really have a choice
0:27:27 other than to just plow billions,
0:27:31 tens of billions of dollars into AI CapEx?
0:27:34 – Yeah, so there’s been a dramatic shift
0:27:37 in the way the boards approach CapEx
0:27:38 in terms of strategy.
0:27:40 And generally speaking,
0:27:43 when we’re on a board and the CEO brought you a plan
0:27:46 that included billion dollar plus CapEx,
0:27:47 you were to say, okay,
0:27:51 we want the lowest CapEx relative
0:27:53 to the potential return, right?
0:27:56 Would we rather do a billion dollar CapEx
0:27:58 or a series of 10, 100 million dollars
0:27:59 that feel a little bit more reasonable
0:28:01 and see what happens.
0:28:04 Now, what’s shifted, especially among Big Tech companies
0:28:06 because of the dramatic increase
0:28:08 in their price earnings ratios,
0:28:10 or that is access to cheaper capital
0:28:12 versus the rest of the economy.
0:28:14 It used to be this is gonna cost,
0:28:16 this will give us an advantage,
0:28:17 but it’ll cost a lot of money.
0:28:19 Hmm, I don’t know, let’s think about this.
0:28:21 We want to be careful.
0:28:24 Now, when someone, Andy Jassy comes in
0:28:28 or Jeff Bezos comes into the Amazon board and says,
0:28:31 I think we can get everything we sell
0:28:32 to people within 48 hours
0:28:35 by building out this unbelievable infrastructure
0:28:38 or fulfillment network that’s largely been avoided
0:28:41 because everyone just wants to be lowest cost
0:28:44 in terms of how to get things from point A to point B
0:28:46 that we see an opportunity.
0:28:47 And the board says,
0:28:49 well, how much would that cost to be able to do that?
0:28:50 We know consumers would love it.
0:28:54 And Bezos goes, oh, it would be so much fucking money.
0:28:56 It’d be tens of billions of dollars.
0:28:59 And the board hears that and goes, perfect.
0:29:01 Because what these companies have
0:29:03 is access to cheaper capital than anyone.
0:29:07 So AI is not only presents a bold, brave new world
0:29:09 with growth and potential for them,
0:29:12 it positions them to leverage their core competence
0:29:15 and that is to outspend every other company
0:29:17 in the economy, except for a few.
0:29:20 So these companies, just as a large investor
0:29:21 has to go big game hunting
0:29:24 because I remember I worked for a hedge fund
0:29:26 and I used to bring him ideas and he’d say,
0:29:28 I’m not interested in putting 50 million to work.
0:29:30 I have to be able to put 500 million to work.
0:29:33 These companies love AI because they,
0:29:35 A, they see real potential in growth
0:29:38 and that it’s a seminal technology and B,
0:29:41 it’s a place they can put tens of billions of dollars
0:29:43 to work because they have access to that money
0:29:47 and 99.9% of companies don’t.
0:29:51 So this is kind of you can see why they’re spending so much
0:29:54 and this is their, it’s kind of like capital as a weapon
0:29:58 as that strategy was sort of forged by Amazon
0:30:02 and then Netflix and that is get a leadership position,
0:30:06 access to cheaper capital and then just go gangster
0:30:08 in terms of your spending, right?
0:30:11 Netflix spending $17 billion a year on content,
0:30:13 that’s probably more than the entire media industry
0:30:16 spent on content in the decade of the ’80s.
0:30:18 But that’s, they love that
0:30:20 because it plays to their advantage.
0:30:21 And it was, I think this is a,
0:30:25 this is a cat-backs arms race that plays to their strengths
0:30:27 and they’re happy to engage in it.
0:30:32 – Moving on to Metta, who had a very strong quarter.
0:30:33 Just run you through the numbers here.
0:30:35 Revenue grew 22%.
0:30:37 That’s the fourth consecutive quarter
0:30:41 of 20 plus percent sales growth for Metta.
0:30:44 Net income rose 73%.
0:30:46 Daily active users also grew.
0:30:48 Here’s a great start from Mia.
0:30:50 Over 40% of the world’s population
0:30:54 is currently using Metta’s platforms on a daily basis.
0:30:57 40% of everyone on Earth,
0:30:59 daily active user on a Metta platform.
0:31:04 But CapEx is also still growing as with Microsoft,
0:31:06 record CapEx for Metta this quarter.
0:31:10 And Zuckerberg said that number would continue to grow.
0:31:13 Scott, your initial reactions to Metta’s earnings.
0:31:14 – I mean, I hate to admit it,
0:31:16 arguably one of the best run businesses in the world.
0:31:19 You know, I mean, the number you cite that just jumps out,
0:31:21 40% of the world’s population
0:31:23 is on a Metta platform every day.
0:31:26 I bet 90% of the world that advertisers
0:31:27 have any interest in reaching
0:31:29 are on this platform every day.
0:31:32 And they have unbelievable ad stack, unbelievable technology,
0:31:35 ad impressions and average price per ad,
0:31:40 both increased 10% or EPS of 73%, unbelievable.
0:31:42 Just absolutely unbelievable.
0:31:43 And I hate to admit it
0:31:46 ’cause I don’t like the company or the management team,
0:31:49 but I’m on Metta platforms all the time.
0:31:50 – Yeah, I wanna get your reaction
0:31:55 to an article that came out about Metta last week.
0:31:57 According to the Wall Street Journal,
0:31:59 Facebook and Instagram have been running ads
0:32:01 that have been steering users
0:32:05 to illegal drug markets online.
0:32:09 In other words, there are ads for drugs on Instagram now,
0:32:14 ads for cocaine, opioids, other drugs,
0:32:18 and Metta has been collecting revenue on those ads.
0:32:19 Thoughts on that news?
0:32:21 – I think that the people running Metta
0:32:23 are generally awful people.
0:32:26 If you have the incentives to get wealthy,
0:32:29 which are everywhere in the United States,
0:32:30 to be wealthiest, to be loved,
0:32:32 you will make a series of incremental rationalizations
0:32:34 to do things that are perhaps bad
0:32:35 for your customers and the nation.
0:32:38 So the fact that they’re running at,
0:32:43 they would run ads for, I don’t know,
0:32:47 tied pods as launch if someone would pay for it
0:32:49 and they thought they could get away with it.
0:32:52 So I’m not, it’s one of those stories I file
0:32:56 under the notion of shocking, but not surprising.
0:32:57 What are your thoughts?
0:32:58 – I think it’s more of the same.
0:33:00 And I think the question is whether this will
0:33:06 instigate any changes, but my instinct is no,
0:33:08 because you’ve been calling for changes
0:33:13 on this very problem for years and years.
0:33:19 So have our politicians, so has government,
0:33:22 and we keep on hearing the same story every time.
0:33:25 So I’m sort of beginning to develop
0:33:27 kind of a nihilist view of it.
0:33:31 And I’m starting to think that, you know,
0:33:35 this isn’t gonna do much to Metta,
0:33:36 and it’s not really gonna do much to the bottom line.
0:33:37 – Yeah, I don’t know.
0:33:41 I find the whole thing, the whole thing’s discouraging,
0:33:44 but you just can’t get around it.
0:33:48 The combination between, you know, genius management,
0:33:50 an incredibly deep talent pool
0:33:53 that is trading well-being for the Commonwealth,
0:33:58 for shareholder value, feckless political leaders,
0:34:02 a population that is addicted to the affirmation of others.
0:34:03 It all adds up to a company
0:34:07 that’s gonna be extraordinary for shareholders and has-men.
0:34:08 – We’ll be right back after the break
0:34:10 with a look at Bill Ackman’s failed IPO.
0:34:22 – Your mom hates it
0:34:25 when you leave six half full glasses on your nightstand.
0:34:28 It’s a good thing mom lives on the other side of the country,
0:34:29 and it’s an even better thing
0:34:34 that you can get six Ikea 365 plus glasses for just $9.99.
0:34:36 So go ahead, you can afford to hoard
0:34:38 because Ikea is priced for student life.
0:34:41 Shop everything you need for back to school at Ikea today.
0:34:45 – Looking to buy or sell a used vehicle?
0:34:47 Forget the selection and protection
0:34:48 of BCAA auto marketplace.
0:34:50 Try some random guy off the internet.
0:34:52 – Some random guy.
0:34:54 – Yes, we offered zero security.
0:34:56 – I can pay in crypto.
0:34:59 – Plenty of questions. – Is it still available?
0:35:01 – And zero convenience.
0:35:04 – 46 messages and I still make up.
0:35:07 – BCAA auto marketplace helps you buy and sell vehicles.
0:35:12 Visit bcaa.com/marketplace and avoid some random guy.
0:35:19 – It’s new, it’s blue, and it was made for you.
0:35:21 Introducing the thirst quenching summer berries
0:35:23 Starbucks refreshers beverage
0:35:25 where natural berry flavors meet juicy bursts
0:35:27 of raspberry flavored pearls.
0:35:29 It’s our most blutiful drink yet.
0:35:32 So try it while you can, only at Starbucks.
0:35:41 – We’re back with Prodigy Markets.
0:35:43 Bill Ackman has canceled his plans
0:35:46 to take Pershing Square USA public this week.
0:35:48 As we discussed on the show in June,
0:35:51 Ackman sold 10% of his investment company
0:35:54 to raise capital for his new soon to be public fund.
0:35:57 Then he hit the road to drum up investor support
0:36:00 to the tune of $25 billion.
0:36:02 But after weeks of lacklustre interest,
0:36:05 he cut that fundraising target twice,
0:36:08 first to $4 billion and then to $2 billion.
0:36:11 Now he’s pulling the listing all together
0:36:14 and he says he’s rethinking its structure
0:36:16 to address investor concerns.
0:36:19 Scott, a $25 billion closed end fund
0:36:21 would have been the largest of its kind.
0:36:24 Ackman went from eyeing a new record
0:36:27 to slashing his target by more than 90%,
0:36:30 canceling this thing altogether.
0:36:34 You also made a prediction about this story
0:36:35 a few months ago.
0:36:36 Let’s play that.
0:36:41 – So just as BlackRock has lost a lot of business
0:36:44 and taken a lot of grief for its impact investing
0:36:46 and focus on ESG,
0:36:48 Bill Ackman is kind of becoming the face
0:36:50 of the kind of anti ESG.
0:36:53 And I think that he’s gonna lose some investors
0:36:55 and come under some pressure.
0:36:59 The first quarter that his fund underperforms the marketplace.
0:37:00 I think people are gonna accuse him
0:37:02 of having taken his off the ball.
0:37:04 And I think a lot of investors
0:37:07 who actually appreciate impact investment and DI initiatives
0:37:10 or are pissed off of the way he’s handled this
0:37:13 are going to very loudly and publicly withdraw
0:37:14 or redeem from his fund.
0:37:17 I think we’re gonna start to hear from his investors
0:37:18 about his activities.
0:37:21 – Reactions? – Me neither than I was right.
0:37:25 First off, let’s talk about every hedge fund manager
0:37:28 or every private equity firm dreams of captive capital.
0:37:29 Now, why is that?
0:37:32 The way a hedge fund or alternative investment manager
0:37:36 goes out of business is mismatch durations.
0:37:37 What do we mean by that?
0:37:40 You invest long, but you raise money short.
0:37:43 So you invest in small companies or micro cap
0:37:46 or even private investments that are illiquid,
0:37:48 but your investors have redemption rights
0:37:49 and overnight the economy goes down
0:37:52 or for whatever reason they don’t like your performance
0:37:54 and they put in a redemption notice
0:37:56 and you have to sell down your positions,
0:38:00 which puts pressure on the value of those positions
0:38:03 thereby even decreasing an already probably lackluster
0:38:06 performance resulting in more redemptions
0:38:08 and you enter into a doom loop.
0:38:13 And even worse, if you have investments in illiquid assets
0:38:14 and you start getting more redentions
0:38:16 than cash on hand or liquid investments,
0:38:19 you have to put up something called a gate,
0:38:20 which has just kidding.
0:38:23 I said you would get money back on 30 days notice
0:38:25 or receipt of a redemption notice.
0:38:27 Gates are up and you can’t get your money back.
0:38:28 Once you do that,
0:38:30 you’ve effectively signaled the end of your fund
0:38:33 because once you bring your gates down again,
0:38:35 everybody submits the redemption notice
0:38:37 ’cause they don’t wanna get caught again.
0:38:39 Captive capital is every alternative
0:38:41 investment manager’s dream.
0:38:43 And one way to do that, there’s several ways to do that.
0:38:45 What Apollo and Berkshire Hathaway have done
0:38:48 is they’ve essentially started as insurance companies.
0:38:50 You have a massive amount of captive capital.
0:38:53 Another way to do that is to take the company public
0:38:55 because you get, while the share price,
0:38:57 the people who bought into the Cypio could sell their shares.
0:38:59 That just puts pressure on the stock price,
0:39:01 but Bill and the Pershing Square Fund
0:39:04 would have their capital and it’d be captive
0:39:07 and it’d be theirs and no one could call and ask for it back.
0:39:11 Now, the other story here is that I think we have hit
0:39:16 peak signaling or peak drunken texting or peak
0:39:17 kind of bullshit from communication,
0:39:20 from people who think that they can go on CNBC
0:39:23 with chunky glasses or that people are really fascinated
0:39:26 by Bill’s thoughts on DEI
0:39:28 when he has absolutely no domain expertise here.
0:39:30 And some of his viewpoints are seen as somewhat aggressive
0:39:32 and a bit reckless.
0:39:35 And lately he’s tweeted and though he deleted this tweet,
0:39:36 a conspiracy theory that there was no proof
0:39:38 that President Biden had actually signed
0:39:41 his resignation letter and just weirdness like that.
0:39:43 And when you’re Ottawa teachers
0:39:44 or the Michigan State Pension Fund,
0:39:48 you have so many choices of good fund managers
0:39:49 who will underperform the S&P
0:39:52 like every other fund manager minus their fees.
0:39:54 They’ll say, you know, we just don’t need to put up
0:39:55 with this bullshit.
0:39:59 And this kind of what I’ll call tweeting for awareness
0:40:03 thinking if I’m famous, people will want to invest in my fund.
0:40:06 Hit, I think it’s peak a few days ago
0:40:10 when Kathy Wood put out the following tweet.
0:40:11 Open quote.
0:40:14 As a result, our trading related capital tax losses
0:40:18 should offset trading related capital tax gains for years
0:40:23 and underappreciated asset associated with our strategies.
0:40:24 What is she saying there?
0:40:26 – I can’t even tell you.
0:40:27 I don’t know what she’s talking about.
0:40:30 – What she’s claiming is that they’ve lost so much
0:40:32 of other people’s money who were stupid enough
0:40:34 to invest in their fund
0:40:36 that it’ll offset losses in the future, right?
0:40:38 These losses will offset gains in the future.
0:40:42 And this is an underappreciated asset
0:40:44 as a result of their strategy.
0:40:46 Let me get this.
0:40:49 This is a good thing that you’ve lost this much money.
0:40:53 I mean, talking about trying to turn chicken shit
0:40:56 into chicken salad and believing your investors
0:41:00 and people on Twitter are this fucking stupid.
0:41:03 No, our losses, our destruction in your capital
0:41:05 is a feature, not a bug.
0:41:07 And she ended up deleting that tweet.
0:41:11 But I think in general investors are just getting fed up
0:41:15 with adventures in social engineering or commentary
0:41:17 or people trying to pretend they’re anything more
0:41:19 than just shitty fund managers
0:41:22 by thinking they can spin shit a different way.
0:41:24 And this is evidence of that.
0:41:26 I mean, this market, this IPO went from him saying,
0:41:31 I’m gonna raise $25 billion to $2 billion to zero.
0:41:33 That is pretty dramatic.
0:41:34 The market has kind of spoken here
0:41:36 and that is, you know what?
0:41:40 Your day job should be getting us returns, positive returns,
0:41:42 not trying to talk about social engineering
0:41:44 or spin your losses into something positive.
0:41:46 I think this is actually an interesting moment.
0:41:49 There’s this internet term you might have heard of,
0:41:51 extremely online.
0:41:53 I’m just gonna read you the internet definition
0:41:55 of extremely online.
0:41:57 To be extremely online is to post
0:42:00 and to see what has been posted as very important.
0:42:02 It is also to risk misunderstanding
0:42:04 what is seen on your screen
0:42:07 as too representative of the rest of the world
0:42:09 to think our niches are bigger than they are.
0:42:11 Whereas being online may simply be a matter
0:42:13 of having a phone, to be extremely online
0:42:15 would designate when the habits common
0:42:18 to communicating the screens seep into our awareness
0:42:21 and our identity and our behaviors
0:42:23 regardless of the screen’s presence.
0:42:27 Now I’m gonna read you Bill Atman’s sales pitch
0:42:29 when he proposed a $25 billion offering
0:42:32 which went to four and then two and then zero.
0:42:37 Quote, I have built a relatively large following on Twitter.
0:42:39 I have built up a large base of institutional
0:42:42 and retail followers that follow our every move.
0:42:46 Media interest is valuable in attracting investor interest
0:42:49 and also in creating liquidity for our shareholders.
0:42:51 I will be completely unrestricted
0:42:53 in terms of my ability to update our shareholders
0:42:55 about developments in the portfolio.
0:43:00 This is the internet definition of what it means
0:43:02 to be extremely online.
0:43:05 But I just love this story because for the first time
0:43:09 it’s put a literal dollar number on the delusion
0:43:11 of some of these extremely powerful
0:43:13 and extremely online individuals.
0:43:17 And the number is so big, it is so comical
0:43:20 that I would expect and I would hope
0:43:22 that it’s kind of shaken Bill Atman up
0:43:24 and it’s kind of made him think,
0:43:28 okay maybe I don’t have everything figured out.
0:43:30 – Yeah, I thought that was well said.
0:43:35 It was so lately I’ve found out
0:43:36 I’ve gotten a bunch of shit online
0:43:40 for some of the things I said about the election and the race
0:43:43 and Trump’s assassination or failed assassination attempt
0:43:46 and Megan Calley and some conservative podcasters
0:43:47 said my comments.
0:43:49 – Elon Musk, sorry, I just wanna point out.
0:43:52 Elon Musk said that your joke about Melania Trump
0:43:55 was quote, mean and cruel.
0:43:58 And that to me was one of the earliest indicators
0:43:59 that the right has gone woke
0:44:01 and that they have turned into the snowflakes,
0:44:03 but sorry, go ahead.
0:44:05 – Yeah, and just to be clear, this is a joke
0:44:08 and I actually got it off of a meme
0:44:10 is that Melania was seen yelling into a phone.
0:44:11 You had one job.
0:44:13 – How cruel of you, how cruel of you to say that.
0:44:16 – Yeah, whereas marking the disabled is just fine.
0:44:20 So I went on, I haven’t been on Twitter in a year and a half
0:44:23 but I went on ’cause I wanted to see these comments.
0:44:27 And the thought I had was that these folks
0:44:29 say the most ridiculous things,
0:44:33 but they’ve aggregated an audience of sycophants or bots
0:44:37 and they’ve blocked everybody that pushes back on them.
0:44:39 And they’ll say something ridiculous
0:44:42 and they get all this positive reinforcement.
0:44:43 And the thing that struck me was not only
0:44:45 how delusional these people are,
0:44:47 but just how small their world is.
0:44:51 And that I thought, okay,
0:44:53 I’ve been off of Twitter for a year and a half
0:44:54 and occasionally I do miss it
0:44:56 because I’ll get forwarded a link to an article
0:44:58 and I’d like to see the article and I can’t see it.
0:45:01 But what you realize when you’re off Twitter
0:45:05 is that it’s not only a bubble, it’s a really tiny bubble.
0:45:08 It just doesn’t have a hell of a lot of impact.
0:45:09 It’s an interesting communications.
0:45:13 But these people, they enter into this self-manicured,
0:45:16 self-reinforcing ideological bubble.
0:45:20 And I bet online that Bill Ackman probably,
0:45:23 when he’s on Twitter all day tweeting,
0:45:26 that he thinks, okay, my fund’s gonna be huge
0:45:28 and people love me online.
0:45:30 And I put out something saying Harvard’s DEI
0:45:33 is whatever, and I get 50,000 likes
0:45:35 and all this activity on Twitter.
0:45:39 And what you forget is nobody under the age of 30
0:45:44 uses Twitter, the person making investment decisions
0:45:49 on the behalf of ADIA or of the Florida State
0:45:53 pension program, they’re not on Twitter.
0:45:56 And these folks have literally entered
0:45:59 into an alternative universe where their idols
0:46:04 are Elon Musk or Kanye or tech libertarian brothers
0:46:05 who have a huge following online,
0:46:09 all talking to each other, all reinforcing each other.
0:46:11 And Senator Michael Bennett once said to me,
0:46:14 I was meeting with him about something and he said,
0:46:17 I said, well, Twitter says this and this
0:46:19 and he’s like, Scott, he’s like,
0:46:21 you’re under the impression Twitter is a much more
0:46:24 important place in the world than it actually is.
0:46:26 He’s like, the majority of voters don’t give a shit
0:46:29 what Twitter thinks or what’s happening on Twitter.
0:46:32 – You’ve said that to me before and it’s struck me too
0:46:33 because you’re off it now.
0:46:35 And I forget what the situation was,
0:46:37 but I said to you, everyone’s talking about this.
0:46:39 He said, no, no, no, everyone on Twitter
0:46:41 and your small following might be talking about this.
0:46:43 And it was absolutely right.
0:46:44 But that’s what happens if you’re on Twitter
0:46:45 and you’re on something all day,
0:46:47 you are where you spend your time.
0:46:50 And this is what has happened with Bill Ackman.
0:46:53 These folks are all figuring out that Twitter
0:46:55 is its own world and it’s a pretty small world.
0:46:58 And that is not how fund managers
0:47:00 or people in the real world are thinking.
0:47:02 – This is just how fucking toxic the platform is.
0:47:05 I did not know Elon Musk said that about me
0:47:07 and I’m already like just fucking angry.
0:47:11 – Don’t worry, I tweeted about it, I defended you.
0:47:12 I called him a snowflake.
0:47:14 – I’m literally, let me get this.
0:47:19 He goes on Jordan Peterson and says that his daughter
0:47:21 who went through transition is dead to him,
0:47:23 but I’m the cruel one.
0:47:27 – I believe he said, what mean and cruel people they are.
0:47:29 – That’s how people describe us.
0:47:32 Mean and cruel, the mean and cruel podcast.
0:47:34 Oh my God, watch out.
0:47:36 Yeah, anyways, let’s move on.
0:47:38 I feel like I need to shower.
0:47:40 – Okay, let’s take a look at the week ahead.
0:47:45 We’ll see earnings from Palantir, Uber, Airbnb and Disney
0:47:48 and we’ll also discuss Apple and Amazon’s earnings.
0:47:50 Scott, any predictions?
0:47:52 – Well, I think we said it.
0:47:57 We’ve hit peak tweet among alternative investment managers.
0:48:00 I think the bloom is off the rose.
0:48:04 I think people are like, just because you’re on CNBC
0:48:05 and have a large following on Twitter
0:48:08 does not mean that your SPAC makes any fucking sense
0:48:12 or that you can wallpaper over your shitty returns
0:48:16 or that support for your anti-DEI movement on Twitter
0:48:18 translates into investors thinking
0:48:20 they wanna give you captive capital.
0:48:21 I think there’s gonna be a lot of,
0:48:23 I think there’s gonna be more discipline,
0:48:24 not amongst politicians,
0:48:26 ’cause the person who started this
0:48:29 and it worked for him was Trump.
0:48:30 Trump would say, outrage is things online
0:48:32 and people that tickle people’s sensors
0:48:34 and it’s worked for him.
0:48:35 He is the Twitter president.
0:48:37 I don’t think it’s having that same sort of
0:48:41 efficacy or results for financial managers.
0:48:42 I think this is a much more serious business,
0:48:44 other people’s money and the people allocating
0:48:46 or making the biggest decisions around institutional
0:48:49 investment just have a different criteria.
0:48:51 – This episode was produced by Claire Miller
0:48:53 and engineered by Benjamin Spencer,
0:48:54 our associate producer is Alison Weiser,
0:48:56 executive producer is Jason Stavis and Catherine Dillon.
0:48:58 Mia Silverio is our research lead
0:49:00 and Drew Burris is our technical director.
0:49:02 Thank you for listening to Proficy Markets
0:49:04 from the Vox Media Podcast Network.
0:49:06 If you like what you heard, give us a follow
0:49:08 and join us on Thursday for our conversation
0:49:12 with Mark Mahaney, only on Proficy Markets.
0:49:17 ♪ Lifetimes ♪
0:49:24 ♪ You help me ♪
0:49:29 ♪ In kind reunion ♪
0:49:37 ♪ As the world turns ♪
0:49:41 ♪ And the dawn flies ♪
0:49:44 ♪ In love ♪
0:49:53 – Support for the show comes from Into the Mix,
0:49:55 a Ben and Jerry’s podcast about joy and justice
0:49:57 produced with Vox Creative.
0:50:00 Into the Mix is back for a new season
0:50:02 and welcomes you in with four new stories
0:50:05 that take listeners beyond the headlines
0:50:07 and into the lives of ordinary people
0:50:09 fighting for justice in their communities.
0:50:11 Starting with Ainez Bordeaux,
0:50:13 an activist and St. Louis native
0:50:16 who fought to shut down the workhouse,
0:50:18 a notorious pretrial detention center
0:50:21 that she says functioned like a debtor’s prison.
0:50:24 Subscribe to Into the Mix, a Ben and Jerry’s podcast
0:50:26 to listen to the first episode
0:50:28 of the special three-part series out now.
0:50:38 [BLANK_AUDIO]
Follow Prof G Markets:
Scott and Ed open the show by discussing the latest Fed meeting, Starbucks’ disappointing earnings, and Delta’s CrowdStrike problem. Then Scott shares his thoughts on Microsoft and Meta’s earnings and breaks down why capital expenditures have become so outrageous. Scott and Ed also discuss why Bill Ackman struggled to attract funds for his IPO, and what that says about a chronically online group of people. Note: For our analysis on Friday’s selloff, tune in to Prof G Markets on Thursday for our discussion with Mark Mahaney, Evercore’s Senior Managing Director and head of internet research.
Order “The Algebra of Wealth,” out now
Subscribe to No Mercy / No Malice
Follow the podcast across socials @profgpod:
Follow Scott on Instagram
Learn more about your ad choices. Visit podcastchoices.com/adchoices