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