Nike’s Dramatic Downfall & Britain’s Road to Economic Recovery

Scott and Ed open the show with a discussion around why Microsoft and Apple have relinquished their board observer seats at OpenAI. Then Scott breaks down Nike’s fall from dominance, shares some insight from when Nike was a client at L2, and considers if the stock is a buy. Finally, Scott and Ed discuss the state of the UK economy post-election and Ed identifies his largest point of concern with the Labour party’s manifesto. Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

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• 0:59Scott Galloway?

  Today's number 85. That's the percentage increase in sales of adult fantasy novels in the first half of 2024. Ed, I took my cousin to see a sci-fi fantasy movie the other day, but the sex was way too graphic. Everyone in the theater asked us to stop.

• 1:26Scott Galloway?

  You saw that coming, didn't you? Yeah, I'm sort of used to it. Welcome to Prop G Markets. Today, we're discussing the fall of Nike and Britain's economic future. But first, first, by the way, we just did two jokes and they were so profane and inappropriate and not funny. I think the word is cringe. Yeah, it's the synergy right there. There we go. But first, but first, speaking of cringe, here with the news. Here with the news is Prop G analyst Ed Elson. Ed, what is the good word? I've got three words for you. It's coming up. It's all I have to say to start this episode. I am literally beside myself. Well, I was in a beer garden last night. I was an American living in London.

• 2:10Scott Galloway?

  In Munich, watching Team England play the Netherlands in a beer garden. And I thought, life is so rich.

• 2:17Ed Elson?

  Epic. Were you with your kid?

• 2:19Scott Galloway?

  Of course, yeah. And we went and got a kit today. And by the way, we went and bought him these new Jude Bellingham cleats at the Adidas store, the Adidas store, or the Bayern Munich store. And yeah, so I'm just, we're just thrilled to be here. What's your prediction?

• 2:36Ed Elson?

  This is gonna come out the day after the final. So I'm gonna get proven wrong, maybe, but I don't know. I'm gonna say 2-0 to England, my prediction.

• 2:45Scott Galloway?

  Spain looked pretty damn good.

• 2:47Ed Elson?

  They look good. They look good. But I have to have the money on England. I mean, what do you think?

• 2:52Scott Galloway?

  Oh, Glick, I gotta go. I mean, you're talking to someone who's ordering, paying ridiculous money to have two, you know, England kits shipped to me in Berlin about a Sunday. So, yeah, we're, I'm even trying to, I'm trying to find how I can find someone to, to paint our faces, but.

• 3:09Ed Elson?

  By the way, you mentioned the Munich store. Do you still have the shirt that I bought you from the Bayern Munich store a few, I want to say a year ago, I got you a Bayern Munich shirt with Prof G on the back. You still have that?

• 3:21Scott Galloway?

  Oh, of course, and I love it.

• 3:25Scott Galloway?

  What? You bought me a shirt? No, no, yeah, oh, yeah, we love it. We love it.

• 3:31Ed Elson?

  When we were in Munich a year ago, we got you a Bayern Munich jersey with Prof G on the back, presented it to you on your plane. And of course, you don't remember, but.

• 3:42Scott Galloway?

  That was the douchiest sentence ever muttered on a podcast. We bought you a Bayern Munich.

• 3:47Ed Elson?

  That's right.

• 3:47Scott Galloway?

  Kit. So I have a closet full of kits. And it's one of those things, you know, those things are pretty perishable. It's not like I'm headed out for dinner one night and I think, oh, I'm gonna, I'm gonna wear my Bayern Munich kit.

• 4:02Ed Elson?

  You should have framed it and put it up on the wall. This is the momentum of how much your employees love you.

• 4:08Scott Galloway?

  These things have a shelf life of like the game. The shelf life of the game. I always buy it and I take a bunch of pictures of the game in the kit. And then it doesn't get a lot of use, a lot of use out of that.

• 4:19Ed Elson?

  Throw it in the bin with your Arsenal jersey and your Spurs jersey and your Chelsea jersey as well.

• 4:24Scott Galloway?

  Anyways, enough of this shit. Get to, get to the news.

• 4:26Ed Elson?

  Just one note before we move on. We'll be recording an Ask Me Anything episode in the coming weeks. So if you have a question for me and Scott, send us a message to [email protected] or you can tag us on X or threads at profgpod. Or if you're watching on YouTube, just drop a comment below. Let's start with our weekly review of market vitals.

• 4:51Ed Elson?

  The S and P 500 closed above 5,600 for the first time. The dollar fell, Bitcoin climbed and the yield on 10-year Treasury has dropped. Shifting to the headlines. OpenAI will no longer have board observers after Microsoft relinquished its existing observer role and Apple scrapped its plan to take up a similar position. Regulators have become increasingly concerned about Microsoft's relationship with OpenAI and its dominance in the industry. CNN announced it's cutting 100 jobs and launching a new digital subscription product. CEO Mark Thompson said CNN is working to create a billion dollar digital business built mostly through CNN.com. Verge Capital firm Andreessen Horowitz is collecting thousands of AI chips to help secure deals with AI startups. The firm has already started giving some startups access to those chips in exchange for equity

• 5:35Ed Elson?

  and plans to build an arsenal of more than 20,000 GPUs. And finally, talks for a server deal between Oracle and Elon Musk's AI startup XAI have reportedly come to an end. As we covered in a May episode, XAI was prepared to pay $10 billion to rent AI chips from Oracle, but Musk now says XAI will build a system on its own. Scott, thoughts?

• 5:58Scott Galloway?

  Well, I want you to take a little bit of a victory lap here because you first highlighted to me how just incestuous and concentrated the kind of current incumbent players were around dominance around AI. So anyways, what, what are your thoughts around the first story?

• 6:13Ed Elson?

  Yeah, well, what I said was that the Microsoft board seat on OpenAI was illegal and that there was just no way that this could last. And, and that's what happened. I think we have the clip. I guess we might as well play it right now.

• 6:28Ed Elson?

  I can name you three illegal board positions in AI right now.

• 6:32Scott Galloway?

  Name them, you high IQ bitch nominated for best co-host. Name them. I'm calling your bluff. Name them.

• 6:38Ed Elson?

  Microsoft. Microsoft's on the board of OpenAI. It's, you know, they say it's a non-voting board seat, but that's still a board seat. And Microsoft is also an investor in Mistral and Inflection, which are both AI companies that directly compete with OpenAI. All I can think is, what's going to happen when the DOJ launches a full-fledged investigation into this thing? Because I would bet that no AI company is safe. I mean, this was bound to happen sooner or later. And, you know, if you have that level of influence on three major AI startups, it's going to allow you to manipulate and control and tilt the marketplace in your favor. So regulators are finally catching on to this and Microsoft got scared.

• 7:21Ed Elson?

  It's now sort of jumping ship before it gets punished. Here's the problem, though.

• 7:27Ed Elson?

  I would argue that the damage here has already been done. And the example I would give is what happened with that other up and coming startup, AI startup, Inflection. You might remember, within weeks of when I first made those comments, the CEO and founder of Inflection, this guy Mustafa Suleyman, we learned he was ditching the company. And where was he going to go? Microsoft. And who else left with him? His co-founder, Karen Simonian, and most of the staff, they all work for Microsoft now. So think about what that means. OpenAI's biggest competitor was somehow convinced to just abandon ship

• 8:09Ed Elson?

  and climb aboard OpenAI's biggest backer, Microsoft, which owns 49% of OpenAI's profits. So, yes, Microsoft is leaving the board, but we should be very clear here. Microsoft has already gotten what it wanted. It embedded itself in the AI scene. It quietly formed all of these strange alliances between all these AI startups that should have been competing, but we didn't really keep track of it. And now the stage is set for Microsoft to get exactly what it wanted, which is for the golden child, OpenAI, which it more or less owns, to go out and take over the industry. And that's exactly what's happening. So this may look like a win for competition. It really isn't.

• 8:52Scott Galloway?

  You were prescient in your comments around this and...

• 8:57Scott Galloway?

  There's a few things here. One, it reminds me of what, I had this fantastic lawyer, Red Envelope, guy named Josh, I'm blanking on his name now. But when, there were so many conflicts, like Sequoia was on our board and they would have a failing portfolio company and then the Sequoia representative would show up and say, I have a great idea, Red Envelope should acquire this company. It'd be like so obvious that they wanted us to acquire this, the failed products of Sequoia portfolio companies. And then this guy, I think his name was Josh Green, he said to me, he said, Scott, also keep in mind, he's like, you gotta be mindful of conflicts, but keep in mind, conflict, where the valley is run on conflict. And that is, having a board member who has vested interest

• 9:39Scott Galloway?

  and influence over other companies can be really helpful. That you want, you want connections, you want, you know, he says the valley runs on conflict. And the person at the center of what you were just talking about, the founder of Inflection, was Reid Hoffman, or is Reid Hoffman, who is on the board of Microsoft, who owns and controls OpenAI. So it is all sort of a, you know, a Kentucky wedding, if you will. And what's quite interesting here is that they've both said, oh, just kidding, we don't want to be on the board, we don't need to be on the board. Clearly, either they're lobbyists, or somebody from the FTC and the DOJ called these guys and said, just to be clear, this is not kosher. It's no accident that they both decided they're not going

• 10:24Scott Galloway?

  to be quote unquote, in their observer board status at the same time. This is the most valuable and the second most valuable company in the world, sitting on the board. This observer's board status thing is just fucking ridiculous. So just an example, my venture capitalists at L2, two of them were on the board, really super impressive guys. And they kept showing up with their associate who had done diligence on the deal for the board meetings. And the first time they didn't even say anything. And the second, I'm like, why is he in these board meetings? And they said, well, he's done a lot of the work and it's really good learning for him. And I'm like, well, that's all fine and good, but I didn't give you guys three board seats. And what a shocker, every time the two of them said something, he would chime in and agree.

• 11:07Scott Galloway?

  And here's the thing about boards, they never come to a vote. That scene in Succession where they go and vote, go board member by board member and vote on the acquisition and it ends up being, you know, seven to, seven to six, that never happens. I don't think I've ever seen.

• 11:23Ed Elson?

  What do you mean? It's sort of like everyone has a conversation, you come to a decision, you kind of unanimously agree on a path forward.

• 11:29Scott Galloway?

  It's. You don't take a vote until it's unanimous. And so you work it out. The way you come to an agreement is one who owns the most shares. That person always has the kind of the loudest voice because they're the ones that have put the most money in. And quite frankly, they're the ones you might need to go back to and ask for more money. But the number of voices in the room, everyone has an equal voice, voting or non-voting, it doesn't matter. So the fact that they, and not only that, if, if the guy from Apple and the guy from Microsoft both say, we'd rather you not do that, do you think they're going to do it? I mean, it's like, okay, we control Android and iOS. We control access to the entire, of any company, to anyone.

• 12:10Scott Galloway?

  If they said, you know, if OpenAI said, we think there's an unbelievable opportunity to do something with Spotify, you know, Apple Music is a competitor of Spotify. We'd really like to develop music and we think the best partner for some sort of AI relationship around generating music would be Spotify. Do you think the guy from Apple's going to go, that's a great idea? You're about to see an FTC and DOJ investigation launched here. Because, and you pointed this out earlier, I didn't recognize, the most seminal technology of the last 20 years, probably since handhelds, is more concentrated than any new technology in, in terms of concentration and benefits accruing to the incumbent. Specifically, the most valuable company in the world, I think today is a Microsoft,

• 12:55Scott Galloway?

  and the second most valuable company in the world have way too much influence across this emerging technology. But the, the idea that, the notion they both got out of Dodge on the same day means they both heard from the same person or people and realized, okay, shit's getting real. We need to, to try and create a misdirect and try and take the temperature down. It's not going to work. You're going to see an FTC or a DOJ investigation here.

• 13:20Ed Elson?

  But also, if you think that by them leaving the board, that's somehow going to relinquish their influence over OpenAI, then you're not grasping what humans are like. I mean.

• 13:34Ed Elson?

  They're friends now. They're all friends now and they have gutted all of the, all of the companies that were supposed to be competing, that should have made this a competitive landscape. It's, it's just, it's one team now. So it's a huge concern. We should move on to these other headlines. Any thoughts on CNN and this CNN plus 2.0?

• 13:55Scott Galloway?

  Well, I think CNN plus, I think it scripted, an original scripted offering from CNN is just an outstanding idea. For the 1% of people listening to this podcast who don't know, I had a show on CNN plus. And on a Tuesday night, five or four or five episodes in, my producer, this guy named Scott.

• 14:14Ed Elson?

  Scott Matthews, I want to say.

• 14:16Scott Galloway?

  Oh, Scott, yeah. And either Scott called me or the other producer called me and said, I've got great news. And this is Tuesday night. I'm in San Diego for a speaking gig. And they said, we're the number one most viewed weekly on CNN plus. There were daily shows like CNN five, five things or whatever. And then there were weekly shows, Anderson Cooper on parenting, Jake Tapper's book club.

• 14:40Scott Galloway?

  I mean, what is Jake Tapper reading this week? Oh, God, that's page turn. I went Game of Thrones, Bridgerton, Euphoria, or what is Jake Tapper reading this week? Let me think. That's a toss up. By the way, I love Jake Tapper. I'm serious. I do love the man. And so, super excited. Send out an email to everybody. We're the number one show on CNN. Now, they didn't tell us how many people were watching. I don't know if that meant like 85 people were watching.

• 15:07Ed Elson?

  Exactly. That's the, that's the key detail.

• 15:10Scott Galloway?

  That was the key question that no one would answer. And then I wake up Wednesday morning and I check my text messages and obviously New York's three hours ahead. And I got a text message from Kara Swisher saying, are you all right? And I got so panicked because Kara's pretty measured. And I'm like, am I all right? What? Did something bad happen? And I go, I text her back. I'm like, why? What's up? What's wrong? And she sent me the article, New York Times, CNN Plus being unplugged. Anyways, it kind of died in unceremonious death. My understanding here, and I'm not sure how much research you've done, is that they're going to put the wall, the paywall, they're going to bring it increasingly forward every day. And CNN needs to do something. Its viewership has declined 15% with people aged 25 to 54,

• 15:53Scott Galloway?

  which is the only people advertisers care about because once you hit my age, you start getting smart and stop spending money on stupid shit like clothes and coffee and things like that. Total primetime viewers in that demographic for May for CNN were 96,000, whereas Fox had 199,000. So the thing about this, Fox is doing double the viewership in that court demo. And MSNBC had 110, so MSNBC is now beating CNN. So it's pretty ugly at CNN right now. They're going to have to figure out something. And, and by the way, no one's called me, Ed. No one's called me.

• 16:23Ed Elson?

  That was going to be my question. Would you say yes? I think you will say yes, yeah.

• 16:28Scott Galloway?

  A, I don't think I'm going to get that call. And B, I have firmly decided, figured out that I have a face for podcasting.

• 16:35Ed Elson?

  Yeah, you say that. You say that a lot. I don't, I don't really believe you. I think if Netflix called you up and wanted to do some sort of Scott Galloway series on the story of Scott Galloway's life, I think you'd probably say yes within, I would say, three milliseconds.

• 16:50Scott Galloway?

  UCLA failed startups and erectile dysfunction. There you go. Let's turn it into an original scripted series. By the way, do you know, you know, there's a term for when you, you play a recording of yourself on your own podcast, as you just did a few minutes ago? You know, the term for that. It's called megalomania.

• 17:10Ed Elson?

  I, I'm learning from the best, though.

• 17:11Scott Galloway?

  Oh, my God. I've been infected with that virus for a while. I will, I will, when I'm speaking, show a video of me above me. And I'm like, watching a video of me on top of me speaking is like shavings of shit on a shit salad. But anyways, you have gone full, full egomaniac.

• 17:29Ed Elson?

  I love it. I'm loving every minute of it.

• 17:30Scott Galloway?

  Anyways, XAI and Oracle ending talks over its $10 billion server deal.

• 17:36Scott Galloway?

  This is, you want to talk about confirmation that Elon Musk is unreasonable? The person who runs Oracle is his mentor.

• 17:44Ed Elson?

  Larry Ellison.

• 17:44Scott Galloway?

  They are very close. So for Larry Ellison to back away from this just says one thing that Musk's demands, he just must be so, he must have been so difficult here. Do you have any thoughts?

• 17:56Ed Elson?

  Well, this is what he does. I mean, if you read Walter Isaacson's book, that's one of the main conclusions is he's obsessed with rushing these production schedules and pushing up timelines. And, and whenever someone says, hey, man, like, you know, we, we want to do this too, but we just don't think it's possible. He erupts or he fires them or, and crucially, in some cases, he says, figure it out and they do and it works. So I've always been a little bit ambivalent about this management style and how unreasonable Elon is because it's rude, it's disrespectful and it's kind of lazy to just say, you know, without knowing any of the details of the technical details of how to get it done, you say, oh, just do it faster. But at the same time, it's also very effective. It's evident from what he's done at Tesla and SpaceX.

• 18:41Ed Elson?

  So we'll see if it's true at XAI as well.

• 18:44Scott Galloway?

  We'll see.

• 18:45Ed Elson?

  Andreessen Horowitz, buying GPUs to get AI deals. I feel like this is an incredibly smart move. Your thoughts?

• 18:51Scott Galloway?

  So it used to be there were a small number of venture capitalists. It was a small industry. They made a shit ton of money and then everyone realized technology was the future and there was a lot of money to be made and the amount of capital these guys were able to raise went up exponentially. And then junior partners would split off and start new companies, new venture capitalists and the entire venture capital community. And as an asset class has just absolutely exploded over the last, you know, couple decades. And the key now is how do you compete against each other? And they compete on brand. Andreessen Horowitz, Sequoia, General Catalyst, they just get more deal flow. What they also do is they compete on downstream services or what you would call verticalization.

• 19:31Scott Galloway?

  And that is some of the deeper pocketed VCs now have value added services for their portfolio companies. So they'll say, we'll, we'll share or rent you a CFO. We have very strong contacts with venture debt firms. We will help you recruit talent. We have a full time recruiter. If you take our money. We have a full-time recruiter that will help you build out your team. And this is going even more vertical. This is saying, hey, cool AI startup. You have great IP, you have smart people, maybe, who knows? Maybe, you know, you might even have quote unquote product market fit with your limited beta testing or whatever. But the gating factor here is compute. And these chips are expensive and hard to find.

• 20:16Scott Galloway?

  So we have bought a bunch and you can use our compute until you get out of the nest. So this is going very vertical. I think it's very smart. And not only that, it separates them. It basically creates pretty tangible differentiation from the other venture capitalists who don't have the money or the vision to go ahead and aggregate these GPUs. So I think it's super interesting. I just think it's super smart.

• 20:39Ed Elson?

  We'll be right back with a look at Nike.

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• 20:59Speaker 01

  My boss asked for results, so I opened my dashboard for the only positive sounding metric I had: impressions.

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• 22:20Ed Elson?

  We're back with Profi Markets. In a terrible earnings report at the end of June, Nike lowered its full year guidance and slashed its sales projections for the current quarter by 10%. That report sent the stock down 20% in a single day, wiping out $28 billion in market value. It was the company's worst day on record, but the pain has continued. Nike was the biggest loser on the Dow last week as it slumped to a new 52-week low. And year-to-date, the stock is down more than 30%. Scott, Nike's downfall here has been slow and then quite sudden. In the past three years, the stock has been cut in half. What do you think is happening here to Nike?

• 23:00Scott Galloway?

  I have some personal history with Nike because Nike was one of our biggest clients at L2 and it's, talked about them, it's an outstanding firm. It's got smart management, it's obviously got, arguably Nike is one of probably the 10 strongest brands, not only now, but over the last 30 or 40 years. They made a very strong transition into going vertical. It just has a history of innovation and they also got out of the kind of the brand era and said, all right, we need to be direct to consumer. And I have a bias towards them because when, after Gartner purchased L2 and I gave the acquiring firm a list of the most talented people in the company and within about six months, 11 of those 12 people had left.

• 23:42Scott Galloway?

  I mean, three of the most talented people at L2, Daniel Bailey, who was probably one of my best students ever, Ashley Tolbert, super talented young woman, and Maureen Mullin, who in many ways kind of built L2, all three of them went to Nike and I think worked in the direct-to-consumer group. And so I know that they have extraordinary talent there, they have an unbelievable brand. They're saying that they over-invested in direct-to-consumer such that when we came out of COVID, they didn't have the same amount of shelf space. I think most of it is that there's a, they're struggling with the same headwinds in China as like an Estee Lauder is. And also they say that these, it's at the Hoka brand and On Running have eaten share, these two kind of cool upstarts of. Gotten huge traffic and are now kind of billion dollar plus brands.

• 24:27Scott Galloway?

  But at the end of the day, to have this kind of erosion in market capitalization and for the company to be trading at what is, I think, a multiple of 17 versus an average of 28 over the last five years, to have its stock cut in half versus a doubling of the S and P at that time, I think most likely the CEO's days are numbered. Because what this looks like is that to have this kind of implosion, I think their stocks off, I figured their stocks off substantially this year.

• 24:56Ed Elson?

  30% year to date.

• 24:57Scott Galloway?

  Year to date it's off 30%, but I think Adidas is up 20%.

• 25:01Ed Elson?

  That's right.

• 25:02Scott Galloway?

  So it's not the whole category, right? This is, this is specific to Nike. So I would bet that, I think it's John Donahoe is his name?

• 25:09Ed Elson?

  Yep.

• 25:10Scott Galloway?

  I think he's on the green mile.

• 25:11Ed Elson?

  His background is very interesting. He was the CEO of eBay, then he was the CEO of ServiceNow, he's been the chairman of PayPal. So he's kind of this software tech guru. And it was, I think people were excited, but also a little ambivalent that Nike would bring him in. But I think the thesis there was that he would digitize the company, he sort of fix the supply chain, you know, he'd do all these things to bring the company into the future. What looks like has happened is that during that process, he has neglected the brand.

• 25:44Scott Galloway?

  I think bringing in a tech guy to run what is the largest or most, you know, arguably one of the most important consumer brands ever is probably in this instance, just not paying off. He's been there a while. He owns this performance now. And, and the performance has been such a disaster from a shareholder standpoint, you know, he's going to have to outline pretty serious, a pretty serious change in direction here and give investors confidence, or like I said, there's going to be, there's going to be a switch at the top. This feels to me just like tailor made to make us, to switch the CEO, because this just hasn't worked. That with a brand like this, with the human capital I know they have, I remember, I think

• 26:26Scott Galloway?

  I worked for a woman named Heidi Reusen, and she was so talented. And I remember when they brought in. Don, I remember thinking, the hard thing about sexism or antisemitism or any ism is it's subtle. No one's gonna say, no one's gonna say, oh, you know, we'd rather just have a white guy running the company. But I remember I met several executives at Nike who were women in their 50s, who I thought were just incredibly impressive, who I thought were going to be the next CEO. And then boom pops up a white guy from Silicon Valley. At the end of the day, the reason the CEO can make so much fucking money is he or she, the buck stops with them. And so he's, I think, got three months to outline a vision,

• 27:07Scott Galloway?

  and he's got 12 months to show some traction against that vision. Otherwise, I think he's out. As a matter of fact, I bet the board is having several, what I call parking lot conversations. And that is, there's two board meetings typically. There's one that happens during the board meeting. And then there's a second one. And the two or three most important people on the board kind of get together in the parking lot, or downstairs, or they talk, or whatever, or they meet up and they're like, hey, what do you think's going on here? Like, do you think Bob is the right guy? And then there's a bunch of kind of one off calls. Once those two or three people come to a consensus decision, there's a few more calls. And then in executive session, at some point, they'll do a call where they

• 27:49Scott Galloway?

  think, you know, we have some concerns. What do you think? And then they'll make a decision. And then they'll go about trying to affect the decision. But right now, I can't see any reason for why all roads don't lead to a leadership change, because it's nothing obvious to me that you could blame this on.

• 28:07Ed Elson?

  Yeah, it's interesting you say that. I don't think it's obvious, but just at a very simple level, sales growth is declining, and they are giving up market share to other companies, other brands that we've mentioned, On, Lululemon, ALO, Hoka. These are all great brands, and the stocks of a lot of these companies are way up this year. On Running is up almost 40% this year. I think-

• 28:34Ed Elson?

  Very simply, it wouldn't be unreasonable to say the Nike brand is just falling out of favor. And that's what they have had to depend on. And just as a consumer, I don't know if you've been to a Nike store recently. It used to be like going to the Apple store when I was a kid. It was like the coolest experience going to Nike Town in London. Last time I went into a Nike store, it feels cheap. It sort of feels like a English listeners will know this, a JD Sports. I don't know what the equivalent would be. Almost beginning to feel like a Dick's Sporting Goods.

• 29:06Scott Galloway?

  Or even worse, Big Five, where I bought my first boogie board in Culver City.

• 29:10Ed Elson?

  It's become Big Five, sure. To me, it feels like this is, plain and simple, a brand issue. So I just want to return to brand again. If you were advising Nike today, what would you do to sort of revitalize this brand that at one point seemed to own the premium luxury athletic wear market? And whose market share has just been diluted down by these other companies like On Running, who are now the sexy sports brands?

• 29:39Scott Galloway?

  I don't think it's a big, bold, strategic move here. Again, you're right. It's a brand thing. And what you just said about the stores, that bubbles up to the CEO. This is the CEO, that means the CEO has the wrong guy or gal in charge of retail operations. And I don't think there's what I call like an obvious quick fix here. I don't think it's, you know, fire the agency and have a new ad agency. I don't, I don't think it's buy On Running, which is now probably too expensive to buy. I think this is unfortunately very boring shit around supply chain, trying to increase the pace of innovation with new products to get people excited about the brand again. You know, this is just, it's, to me, this is just blocking and tackling and bringing in a CEO who's going to make a lot of hard decisions.

• 30:24Scott Galloway?

  I'd be very interested to know, what is the employee to revenue headcount? You know, is this in fact a company that's sort of fat? But this is the boring stuff of day to day operations. And what it sounds like is that the CEO has the wrong people, making the wrong decisions across the strongest brand or one of the strongest brands in consumer history. But if I'm a shareholder here, actually, I am a shareholder in my 401k. I have Nike and Oracle, although it's not a big, it's not a big position. But I'd be pissed off that the three, that I just mentioned, my three colleagues that went to work for them five years ago.

• 31:03Scott Galloway?

  I mean, L2, we were purchased by Gartner and it was not a cultural fit, but you just have to give it to the management team there and a lot of people left and some of the most, our most talented employees went to Nike. Gartner's up 160% and Nike is down 20%. So you gotta think there's a lot of people internally who are just saying, okay, so my stock options are worthless. Everybody, all of my buddies, you know, I graduated from the whatever, University of Oregon and I took a job here and I had an offer with Google. I maybe I'm very talented. I had an offer with Salesforce or I had a chance to go to work for Adidas or, I mean, name the company.

• 31:45Scott Galloway?

  Those people have made a lot more money than people at Nike. The stock is, the stock has been cut in half. I mean, that's just, that's just crazy. And at the end of the day, the only real litmus test or metric that matters for the CEO is the stock price.

• 32:04Ed Elson?

  17 times EBITDA, EBITDA multiple of 17. For Adidas, that number's 29. For On Running, it's 48. Nike is almost three times cheaper than On. Is it a good time to buy?

• 32:15Scott Galloway?

  I think comparing it to On is unfair because On is a hot new growth brand. And by the way, I'm wearing a pair of Ons. It's literally, you know, tell me you're a douchebag without telling me you're a douchebag. Every VC in the world is wearing On.

• 32:28Ed Elson?

  I haven't seen you not wear Ons for the past two years.

• 32:32Scott Galloway?

  Yeah, it's true. I sleep in them. I shower in them now. I love this brand. I absolutely love the brand. Anyway, that's not fair because it's a hot upstart brand that's growing fast. The, the better comparison is Adidas, which is at 29 times. And the even better comparison is Nike's average over the last five years has been 27 and now it's at 17. But to your question, I don't like to make stock recommendations. I think everyone should invest in ETF or index funds. But I think, yeah, the answer is I think Nike is a buy because. This brand is so strong and the depth of human capital there is so deep that they can survive headwinds, some exogenous shocks and even a bad CEO.

• 33:16Scott Galloway?

  I think we might look back on this and think it was a buying opportunity.

• 33:19Ed Elson?

  Okay, well, Scott, I'm going to give you your own megalomaniac moment. Two years ago in October of 2022, when Adidas was dealing with this crisis management with Kanye West, here's what you said about Adidas stock.

• 33:35Speaker 07

  The stock actually even looks cheap. And I think that's kind of a learning here is that there's, when you have bad news and you have dislocation, you have tumult, no obvious answers, a lot of unknowns. That usually spells opportunity. And that is, there's just a, just a perfect storm of bad things right now at Adidas. There's loss of this hugely lucrative partnership. Their core business is weak. So as a result, Adidas market cap sits around 19 billion. For an iconic century old brand that has real aspirational value and is probably, it's a maybe a distant number two, but it's a solid number two to Nike.

• 34:16Speaker 07

  Nike on a relative basis is trading at about 3X the valuation of Adidas. So I would argue that the opportunity here from an investment standpoint is actually with Adidas.

• 34:27Ed Elson?

  And by the way, the stock has doubled since then. So Scott, your reactions to your own prediction?

• 34:33Scott Galloway?

  Oh, Ed, I hate it when you do this. I, I just, you know, Ed, I don't, I don't, I don't like to draw attention to myself. And I think it's, it's just, it's just inappropriate to talk about your wins.

• 34:45Scott Galloway?

  Daddy! But the truth is my nipples are hard. My nipples are hard. Thank you, Ed. Thank you.

• 34:53Ed Elson?

  We'll be back with a look at the road ahead for the UK.

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• 36:36Ed Elson?

  We're back with Prof you Markets. In her first speech as Britain's new Chancellor of the Exchequer, Rachel Reeves said the country's Labour Government has inherited, quote, "the worst set of circumstances since the Second World War." She cited new analysis from the Treasury, which showed that if the UK economy had grown at the average rate of other OECD nations in the past 13 years, the economy would be £140 billion larger. We went over why the UK is struggling on our May 27th episode. But now the Labour Party needs to get out of this mess and Reeves laid out the government's plan to do that. It includes increasing public sector investment by £5 billion a year, launching a national wealth fund for green sector investment, building one and a half million homes over

• 37:18Ed Elson?

  the next five years, and letting the world know that, quote, "Britain is a place to do business." In short, Labour's economic agenda today is growth, growth, growth. Scott, do you have any reactions to Labour's first week in charge in the UK and the road ahead for the country?

• 37:36Scott Galloway?

  Everything here makes a lot of sense to me. And the thing I found really refreshing around these elections was I feel like they were trying to govern from the centre and that is, they said no to the far right and the far left. And I like this kind of leftward breeze that's coming back from continental Europe. France figured out a way to bind together to, to kind of body check or, or, you know, stiff arm the far right, which I thought was very encouraging, although the far left in France is not as crazy, but they're still fucking crazy. So I like this and I'm rooting for them. And I think everything they've outlined here makes a lot of sense for green sector investments. Now, people would say the government shouldn't be, shouldn't be picking winners. I think a better investment would be to come up with some sort of tax scheme or subsidisation of venture capital.

• 38:19Scott Galloway?

  There's, for every, for every startup in Europe, there's 1 million in venture capital available. In the US, it's 5 million. So a lot of this is just, we need, they need to free up the purse strings to encourage more investment in startups. I think increased public sector investment makes sense. More housing, I think that's a fantastic idea. We definitely need that in the United States and the price of housing has outpaced inflation. And also just being more kind of open for business and trying to encourage foreign investment. The only thing I would suggest, and I don't think if it's possible, is what I'm deeming or labelling Brexit and basically say Brexit was the stupidest fucking thing we'd done.

• 39:02Scott Galloway?

  And let's undo it to basically say a lot of this stupid shit here where we made things more expensive that made our own, our own products less appealing and made our own economy less productive. We're going to try and counteract these things. But anyways, I'm, I'm hopeful. You're the Brit. Do you have any thoughts?

• 39:19Ed Elson?

  Yeah, I think directionally speaking, the whole Labour manifesto makes a lot of sense for all of the reasons that you just described, and I agree with them. My concern though, is that I looked at the actual numbers and the numbers that they are proposing for this big national turnaround are shockingly small. So I'm just going to give some examples here. They want to boost public sector investment by five billion pounds a year. That's not a lot of money. That's as much as Google spends on CapEx in a single quarter. And if you look at the Tories' proposals, what were the Tories' proposals to cut spending over the next several years, this plan would only undo a fifth of those cuts. So this is

• 40:04Ed Elson?

  actually a very incremental change in public sector investment. The other issue that's happening in the UK right now is the NHS, the National Health Service, is in crisis. There are 7.6 million people on the waiting list right now to get treatment. Now, Labour has a whole plan. They've promised 2 million hospital appointments per year, an extra 2 million per year, which, again, that's only a 2% increase from the year before. And even if everything goes to plan, it's going to take five years to clear that waitlist. You mentioned home building. They want to build one and a half million homes over the next five years. That's 300,000 homes a year. Back in the 60s, England was building 600,000

• 40:48Ed Elson?

  homes a year, double what their plan is today. So these are all directionally the right changes in my view, but numerically, they're so small. And it does make me wonder if the UK can even bounce back from this because it just feels like they don't have enough money. There's just not enough money in Britain. They don't have the capital or the credit. They're now at 100% debt to GDP to dig themselves out of the hole. And it does make you think,

• 41:20Ed Elson?

  If you're American, you should feel lucky to be American because yes, America has its problems, but at the very least, America has the option to spend its way out of those problems. And I'm looking at what's happening in the UK right now and these very small incremental changes. And I'm wondering if the UK has the option to spend its way out as well.

• 41:42Scott Galloway?

  You may be right, but it's definitely classic half glass, half empty British thinking.

• 41:47Ed Elson?

  It's the Southgate, the Southgate analysis.

• 41:49Scott Galloway?

  I don't care. We're in the finals. You suck.

• 41:54Scott Galloway?

  Look, the second greatest self inflicted wound in geopolitical history of the last 50 years, beyond the invasion of Iraq, was Brexit. And there's something about the culture there that does not inspire a lot of organic value creation. Having said that, the quality of the educational institutions, specifically the universities, the fact that London is the new luxury item globally. What do I mean by that? I don't want to say I started a trend. I was part of a trend, but some of the wealthiest Americans with the most opportunity are moving to London.

• 42:30Ed Elson?

  You started it. I'll give you credit.

• 42:32Scott Galloway?

  Yeah, yeah, I started it. But if you're, if you're opening a business, an American business or an Asian business in Europe, I think you put your headquarters still in London. There's all this talk about, oh, we're going to France. I have a lot of friends in Britain who do very well. And all this bullshit a two months ago, although the non Dom thing, I'm moving back to Hong Kong. No, you're not.

• 42:55Ed Elson?

  So people are saying that. And give, give us a brief explanation of what this non Dom thing is.

• 43:00Scott Galloway?

  Well, basically, my understanding is the UK essentially had a tax status where you could be a non domiciled resident of UK and pay taxes from your resident taxable place. And now they're basically saying, sorry, if you're not paying taxes here, you can't stay here.

• 43:17Ed Elson?

  And there was this issue where you had all these rich people who have houses in the Maldives or wherever, and they basically weren't paying taxes in the UK. And it was, it was a big problem.

• 43:27Scott Galloway?

  I have several friends who do really well and pay no tax. Right? So if you were a resident for whatever, for tax purposes out of Hong Kong or, or Portugal, and you can live in London, you can pay effectively no tax. And so this thing came through and I heard a lot of people bitching and moaning that they were going to leave the UK and was going to ask for a UK. But here's the thing. They want, the UK, especially London, is one of the world's great cities. And when you get to a certain point of wealth, I mean, if we wanted to avoid, if you wanted to avoid taxes, if you're wealthy, I could move to Puerto Rico right now and basically not pay taxes. They have this deal, it's totally legal, you can go and you can pay,

• 44:12Scott Galloway?

  I think, two or three percent tax rate, it's two or three or seven percent, but dramatically decrease taxes. But here's the thing, you gotta live in Puerto Rico. And supposedly, what's different about the Puerto Rican tax evasion is that you actually have to live there for 183 days a year. You have to prove that you're living there for 183 days. And supposedly, not supposedly, it's reported, several billionaire hedge funders move there. And supposedly, almost all of them have moved back, and that's the thing that London has. It will always attract a disproportionate amount of capital because it's an outstanding city to live in. And I still think it's the capital of Europe. Everyone says eventually, oh, it's, no, it's not. It's, it's Berlin, or it's Frankfurt,

• 44:53Scott Galloway?

  or it's startups are headed to, no, they're not. It's still, I still think the center of Europe is in fact, London. Your point is an interesting one, and that is you're saying the tagline for all these initiatives should be the following, think small. What you're saying is it's just, it's just not that dramatic. It's not that, it's not that interesting. The other signs of life here are Raspberry Pi going public there. I think Shein going public there on the L S U is going to be a big deal. But the, the nation with the best players wins. And I do see a trend towards wealth and human capital continuing to aggregate in London.

• 45:33Ed Elson?

  You've been predicting, ever since Shein said it was probably going to list in London, and then we had this development where Raspberry Pi listed in London, you've been predicting that we were going to see a revival of the stock market in London. I want to flag a new report from BlackRock. The note said, quote, "We are now overweight UK equity market. Valuation is attractive. It has been the case for a while, but now we have a catalyst of potentially perceived political stability that could act as a trigger for international sentiment to warm up." Is it time to start reinvesting in the UK?

• 46:04Scott Galloway?

  So again, if you're going to do this, I would say, put it in an index fund. But if you look at the multiple on earnings for stocks in the FTSE, it's, it looks cheap. And the markets are cyclical and just about the time everybody says it's all about America and it's all about tech and just throwing the towel, you see other markets outperform. And at some point, any market gets so cheap that it's irresistible. To me, it looks like the UK has been beaten up so badly for so long. You're right, it probably is a decent buying opportunity right now.

• 46:39Ed Elson?

  Let's take a look at the weekend. Second quarter earnings season continues with the banks, Goldman Sachs, Charles Schwab, Bank of America, Morgan Stanley and US Bank are all reporting. And we'll also see earnings from Johnson & Johnson, Netflix and American Express. Do you have any predictions, Scott?

• 46:54Scott Galloway?

  I think you're going to see an activist at Nike. It's just too juicy a target. I don't think, it's hard to imagine, and these are famous last words, that this company is going to trade that much lower than it's already gone. But the numbers here are just striking. I gotta think that some of the bigger players who have a lot of capital to put to work have their pencils out and are looking at this thing. So my prediction is in the next 90 days, you're going to see an iconic activist firm pop up and say, we're here and we're concerned. We're here and we're, we're here to help is how they'll position it.

• 47:33Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss, our executive producers are Jason Stavas and Catherine Dillon, Mia Silverio is our research lead and Drew Burrows is our technical director. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Kyla Scanlon, only on Prof G Markets.

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