The Case for AI Optimism — ft. Reid Hoffman

Reid Hoffman joins Scott and Ed to make the bull case for AI amid rising public skepticism. They cover OpenAI's missed targets, the frontier model landscape, the dangers of Mythos, AI's impact on jobs and wealth inequality, why Inflection merged with Microsoft, and Reid's framework for sensible AI regulation. Reid Hoffman is a co-founder of LinkedIn, Inflection, Manas AI and author of Superagency: What Could Possibly Go Right with Our AI Future. Check out his new Substack, Theory of the Game, now. Get your tickets to the Prof G Markets tour Subscribe to the Prof G Markets Youtube Channel Check out our latest Prof G Markets newsletter Follow Prof G Markets on Instagram Follow Ed on Instagram, X and Substack Follow Scott on Instagram Send us your questions or comments by emailing [email protected] 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.

• 0:00Speaker 00

  Are your ad campaigns lighting up the dashboard? But not the pipeline? That's bull spend. And marketers are calling it out in dashboard confessions.

• 0:09Speaker 01

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

• 0:17Speaker 00

  Cut the bull spend. See revenue, not just reach. LinkedIn delivers the highest return on ad spend of major ad networks. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 0:30Speaker 02

  Energía baja. Falta de concentración? Nebla mental? You might be dehydrated. Gatorade Zero Powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade: Hydrates better than water. Is it in you? Signos de dehidratación leve y moderada. Consulta a tu médico si los síntomas persisten.

• 1:00Speaker 03

  Welcome to Sephora.

• 1:01Speaker 04

  I'm looking for a perfume that's not too perfumey?

• 1:05Speaker 03

  I got you.

• 1:06Scott Galloway?

  Serum moisturizer or moisturizer serum?

• 1:09Speaker 03

  Let's get into layering.

• 1:11Speaker 04

  My concealer is making me look worse?

• 1:14Speaker 03

  Sounds like the wrong shade. Let's get you matched.

• 1:18Speaker 06

  There's only one store that really gets what you're going for. Get beauty from people who get beauty. Only at Sephora.

• 1:25Speaker 03

  Hi, I, uh... Let's get you a basket.

• 1:29Scott Galloway?

  Today's number point 001. That's a percentage of deep sea ocean floor that explorers have actually seen. Ed, how do you identify the blind man at Inuta Beach?

• 1:40Ed Elson?

  How?

• 1:40Scott Galloway?

  It's not hard, Ed.

• 1:44Speaker 08

  Listen to me. Markets are bigger than us. What you have here is a structural change in the world's distribution. Cash is trash. Stocks look pretty attractive. Something's gonna break. Forget about it.

• 1:54Scott Galloway?

  Ed, how are you?

• 1:55Ed Elson?

  Um, let's see. I'm headed to Florence, Italy.

• 1:59Scott Galloway?

  What?

• 2:01Scott Galloway?

  For what?

• 2:01Ed Elson?

  For a speaking gig.

• 2:03Scott Galloway?

  Hold the phone. Now we know why my speaking revenue has crashed. You're taking my gig. Let me get this. Who's, who's bringing you to Florence?

• 2:11Ed Elson?

  Royal Bank of Canada.

• 2:13Scott Galloway?

  RBC is bringing you to Florence?

• 2:15Ed Elson?

  That's right. Florence, baby. I'll be there for one day. So I'll give that, do that, probably try to have some fun as much as I can, but we'll be recording at the same time, coming back, then going to Texas.

• 2:26Scott Galloway?

  Oh, well, that should be easy. There's, there's a ton of direct flights from Florence to Houston.

• 2:33Scott Galloway?

  Oh my, you're literally living the life I had in the twenties and thirties and now, let me tell you, it's exhausting. Look at me. You're gonna look like this.

• 2:38Ed Elson?

  I'm anxious about it for sure.

• 2:40Scott Galloway?

  So you are now getting my speaking gigs and your memo to self undermine Ed's credibility.

• 2:48Scott Galloway?

  Begin slowly diminishing his professional standing.

• 2:53Scott Galloway?

  Kill the prince. Okay, okay. That's great. Congratulations.

• 2:57Ed Elson?

  Thank you. Yeah, I'm excited. It'll be, it'll be fun.

• 3:00Scott Galloway?

  That's really exciting. Have you been to Florence before?

• 3:01Ed Elson?

  No, it's gonna be my first time.

• 3:03Scott Galloway?

  It's, I love the tourist places. People always say it's so touristy like Venice and Florence. I love highly touristy destinations. I think they're great. It's a beautiful little city.

• 3:14Ed Elson?

  Why, why are you a fan of the tourist traps?

• 3:15Scott Galloway?

  I went to Florence right out of college with a backpack and a Eurail Pass.

• 3:21Ed Elson?

  Oh, nice.

• 3:21Scott Galloway?

  Do young people do that anymore? Or do you just sit at home on their phones?

• 3:25Ed Elson?

  Yeah, of course. Interrailing. That's what I did too. Yeah, a little bit. I joined my friends for the latter half. So I was mostly in Eastern Europe. We were in like Slovenia, which was not that interesting, but Florence would have been fun. If, I'll probably have like an hour to, to myself. If I had to see one thing in Florence, do you have any recommendations?

• 3:44Scott Galloway?

  The honest answer is get fucked up. You know, a lot of good food. I don't, I don't have any like cultural landmarks or in, in the know and Florence with Scott Galloway. I couldn't be less Stanley Tucci. I couldn't be, I'm like, where's the bar? Where's the bar? Yeah, that's not, that's not my good, but I'm very happy for you. Should, uh, Oh, we should get on our promo. Ed, how are ticket sales going? What's going on with our tour?

• 4:10Ed Elson?

  I believe they're going quite well. We're, I think we're close to sold out in San Francisco. To be honest, I haven't checked, so I'm sort of speaking out of my ass here.

• 4:20Scott Galloway?

  New York and San Francisco are almost sold out. We have, very soon, we're going to be announcing speakers in LA, Miami, and I think, are we close to New York? I think we're close. Very excited about that. We're doing kind of business of, business of entertainment or business of nightlife in Miami. We're going to do business of money or business of finance in New York. We're going to do business of media slash entertainment in LA, business of tech in San Francisco, you know, that kind of stuff. But if you are interested in getting a ticket, please go to Prof Markets Tour.

• 4:50Ed Elson?

  Prof G Markets Tour.

• 4:51Scott Galloway?

  Thank you. profgmarketstour.com. And we look to see you in either LA, San Francisco, Chicago, Miami, or New York.

• 5:03Ed Elson?

  Absolutely. And if you're watching us on YouTube and you like what you're hearing, hit subscribe. And if you're listening on Spotify or Apple Podcasts, hit follow. And with that, shall we get into our conversation?

• 5:14Scott Galloway?

  Let's do it.

• 5:17Ed Elson?

  Over the past month, we have focused on the downsides of AI, from real world violence targeting industry leaders to growing political pushback against data center expansion. So this felt like the right moment to bring on someone who believes that AI can serve the public good. Our guest has spent years making the case that AI will improve our lives. He has also created, advised, and invested in some of the largest and most successful technology companies in the world. Few individuals sit closer to what might turn out to be the most transformative technology of our time. And so we wanted to find out what is actually happening on the ground. Here is our conversation with Reid Hoffman, co-founder of LinkedIn, Inflection,

• 6:00Ed Elson?

  and Manus AI, partner at Greylock, and author of Super Agency: What Could Possibly Go Right With Our AI Future? Reid, great to have you on the show. Thank you for joining us. I want to start with some specific news that We saw this week that is making investors a little bit anxious and that is this OpenAI news. Specifically that they missed their revenue target last year. They also missed their user target. And they're obviously set to go public soon. It should be one of the most important IPOs ever. And suddenly investors are very anxious about this company and anxious that they're actually not growing in the way that they had expected.

• 6:43Ed Elson?

  And you are in an interesting position because one, you're on the board of Microsoft. And Microsoft is obviously one of the largest shareholders in OpenAI, one of the earliest investors. And also you are an early investor in OpenAI through your VC firm Greylock. So let's just start with this. What do you make of this news? And should investors be worried about OpenAI?

• 7:05Speaker 09

  Well, ultimately, as an investor, I'm not worried.

• 7:09Speaker 09

  I mean, part of it is the company had very aggressive targets. And so when you have aggressive targets and you you kind of go in a little below them. That's actually not the kind of thing that I worry about that much. And classically, the reason why public companies, because you know, most public investors tend to want reliability quarter to quarter, you know, tend to do their best to be on target in terms of what they're saying. Because there's this kind of reliability thing, whereas I, as a private investor, tend to be the just established the really, really strong basis. And so, you know, for me, the thing I wasn't tracking so much was, you know, last year's revenue, last year's user count. Those are great in the making progress. Obviously, we'll need to grow more too.

• 7:53Speaker 09

  But a lot more, but the the real question that I was like very happy to see was, you know, the the 5.5 release. Because, you know, I think the thing that I'm most tracking is is OpenAI continuing to deliver some of the world's best. You know, kind of technology frontier models and so forth. And, you know, that's, that's, I think, the precursor to everything else. And that, from every source I've seen and multiple different benchmarks and multiple different engagements has been, you know, is the kind of the new world leader in quality of model. So that that's more of what I pay attention to. Because it's, you know, with investing, it's downstream effects. It's, you know, what does next year look like is the most relevant question.

• 8:32Ed Elson?

  Does that make you concerned? It's an interesting point, like early stage investors, venture capitalists, they're more interested in the technology. They're more interested in what's going to happen 10, 15, 20 years down the line. Public markets investors are more interested in what's happening right now. I mean, we're literally, we read quarterly earnings. We look at what happened last year. We look at what happened in the previous quarter. It's much more of a sort of backward looking practice, which seems to be like it might be a big problem for OpenAI. If they are to go public at the end of this year, because suddenly they will be scrutinized for their financials. And so I wonder if that concerns you that suddenly you're the companies leaving an ecosystem of people

• 9:17Ed Elson?

  and investors that are okay with financials that might not make sense right now. But then suddenly they're going and pitching the company to a group of investors who care a lot about that stuff. Are you worried that maybe they will get punished or that they will have a hard time in the public markets when that time comes?

• 9:34Speaker 09

  Well, if they can't establish themselves, there is a small set of companies. And it isn't just Tesla, which is the probably the extreme example of this, which is kind of betting on the future. But Amazon for a significant number of years and others that say, hey, I've got a foundational promise of which I'm going. Where investors go, we believe in that future and so we're buying in that future. And the fact that the, you know, the, the current, you know, you know, PE comparables, other kinds of things, you know, don't make sense on a quarter by quarter basis, even factoring in a, you know, an interesting CAGR or anything else. I think it'll be for all of the AI companies that are, you know, kind of, you know, prepping and considering going public.

• 10:19Speaker 09

  It'll be important to establish that basis because I think the first year or two will look a lot like, you know, kind of early dot com companies, some of which were complete flameouts and some of which were enduring institutions, Amazon. Being an example.

• 10:35Ed Elson?

  What do you make of the unit economics right now? This is something I've been thinking about when we think about these companies like 10 years down the line, where currently the unit economics don't really make sense. Like, the cost to build these models is so incredibly high. And that is why OpenAI and Anthropic, any of the sort of foundation labs are burning a lot of money right now. And it almost seems as if the only way that this works out, from the perspective of the business model, is for these companies to become like, essentially, utility companies. Like, almost have these monopolies over compute. And Sam Altman has said this. He said that eventually, he could see OpenAI becoming something like a utility company

• 11:21Ed Elson?

  down the line, which to me is quite an interesting perspective, because it's quite different from what we saw in the dot com boom, where we've had, you know, a handful of companies, we might call it an oligopoly, but a handful of companies operating in the same space. I mean, where do you see the business model trending further down the line?

• 11:43Speaker 09

  Obviously, you know, you know, you have to distinguish between the training costs and the inference costs. And one of the things, when you look at these numbers, and the inference costs are actually, in fact, pretty good economics for inference, but obviously, you have an exponentiating training category. And so the question is, is you're doing this exponentiating training. And I do think that at some point, the training costs, even though there's a goal to get as strong as you can there, because then your quality of model, you know, kind of dominates through all of the different inference units. Essentially, you know, at some level of exponential, that starts asymptoting, just because it doesn't make sense within, you know, how many gigawatts do we have? What kind of economic cost do we get there? And I think a little bit of the race is a race to that asymptote.

• 12:29Speaker 09

  Now, where is exactly that asymptote? Is, I think, somewhat governed by availability of capital from investors believing, and then the delivery of revenue. Now, part of the delivery of revenue was not just the current services, where you say, okay, you know, OpenAI is dominating the kind of chatbot and kind of what the consumer and kind of interaction with that service is. Anthropic is doing the coding side, you know, followed by OpenAI, you know, as the, on the coding side, in terms of how the API encoding works. But like, this has got to be just the beginning. Part of how you're looking at these AI models is not just the provision of tokens, which obviously is interesting and across a number of things.

• 13:10Speaker 09

  But what is the output that comes from now that software engineering can be much more broadly spread and a whole bunch of areas which otherwise wouldn't have been able to afford software engineering can now do them? That can affect what their productivity of their areas, what happens there? What happens in services firms when a bunch of different services, you know, take legal or accounting or anything else can be done with intensive, you know, kind of amplification of this? And it's not just the question of like, you know, paying seats in the software basis, but what is the delivery in terms of the margins of, of what the delivery of the service is? And, and where all those economics play out is, I think, very early in TBD.

• 13:54Speaker 09

  And you'd say, well, should we wait to go public for those? I actually think one of the, the things when you, you know, you, you two know this better than I do, but I think one of the things that's been a bit of a, kind of call it a social problem over the last few decades has been so much of the growth has been contained only to the private markets because of like, let's delay going public until it's, you know, extremely stable, which means that a lot of folks who, who cannot participate in the private markets only get exposure to the public markets. And I think that's one of the benefits of having some of these AI companies. But I think it's early relative to what are the business models going to be? And then what is that revenue going to be?

• 14:34Speaker 09

  And now utility, I think in terms of the fact that any task that you do with language or information, I think will have AI participation at some level of depth, whether it's complete automation, whether it's augmentation, whether it's assistance in various ways. And so the spread of that is, I think, a good measure on utility. I think one of the things that's good for society is the fact that we have multiple providers of these frontier models. So they're competing with each other in terms of, you know, pricing, in terms of availability to entrepreneurs, building other kinds of different services, in terms of being able to, you know, like the best governance mechanism

• 15:18Speaker 09

  is, you know, relative to the health of society for the cost of things, oligopoly, monopoly, et cetera, is to have competition, which then brings the price down. And I think that's something that we are also seeing. So the utility question around, um, kind of around the, the, like, should it run like utility? Um, you know, I, I don't know how, uh, you know, how well utilities are thought of in the UK. And the US utilities are kind of a disaster. So, uh, you don't want it run like that.

• 15:49Scott Galloway?

  So I'd love to just get your, I mean, granted, you have, uh, you might have a bias because you're on the board of Microsoft, but and you're, uh, an investor in several AI platforms or LLMs. Can you give us a lay of the land in terms of the competitive set? You know, obviously OpenAI, Anthropic, Google with Gemini, and then the Chinese models, and I'm sure there's a bunch of others. But give us what you think is the competitive landscape right now.

• 16:14Speaker 09

  So I think, um, and this is to some degree a good news for startups and productive startups is I think the strongest positions are OpenAI and Anthropic. I think in the traditional big companies, Gemini is, is kind of next. And I think we'll have a bunch of different efforts from Meta, you know, Microsoft on its own, obviously uses a lot of OpenAI right now, you know, Amazon, um, who knows where Apple will play out and all this stuff since, you know, like they still don't seem to realize that Siri is like, you know, 20 years old, um, kind of in, in tech terms. Uh, now for the Chinese models,

• 16:55Speaker 09

  the interesting question will be, like, there's a lot of good open source models that pretty clearly have some roots and distillation from.

• 17:06Speaker 09

  Kind of the major Western frontier models. And I think part of what we're going into is an area where that distillation will get a lot harder. Now, that being said, the Chinese are building up compute, building up chips, have extraordinary amounts of talent, hard working, great tech companies. Matter of fact, the C dance, you know, multimodal video model is, I think, amongst the best in the world. So I think it's already, you know, you already have stuff that's kind of playing there. But like, and then you've got a kind of a jagged edge. Like you go, okay, let's go coding specific. So, most developers will

• 17:47Speaker 09

  say Claude code. Part of the reason is because Claude code has got the best model, I think, the best interaction thing for iterating through, kind of the amplification of a software engineer. But then, the in-depth engineers that I know who play with them go OpenAI Codex, because it spends, it's much more useful at like, call it, you know, 20, 30, 50, 90-minute reasoning, long tasks that play to a harder engineering. And so they prefer that versus Claude code. And right now, at the moment, that's it. When you get to, like, people who have exposure to it. Now, some people then go, okay, I can't afford either of those.

• 18:31Speaker 09

  So I'll use Quen, you know, the Chinese open source model, which is quite credible. But when you think about the fact that, you know, when you're looking for coding, just as one instance, you're actually looking for really, part of the reason why you pay, you know, software engineers and all the rest, you're really looking for something that's quite good and quite reliable, that doesn't introduce bugs. Obviously, we have mythos coming with questions around cybersecurity, and what does this all mean there? And that matters too. So, you know, the, I tend to think a little bit on the coding side. For your particular coding problem, it's a little bit like what we call in blitzscaling a Glengarry Glen Ross market, which is, you know, first prize Cadillac, second prize steak knives, second prize steak knives, third prize you're fired. So.

• 19:15Speaker 09

  Roughly, but but then it's different across, you know, like images, like the OpenAI image generator is, I think, now like like I've been wanting to create graphic novels for eight years with AI and I now I think I can. So that's interesting. Anyway, so they just, we could go, we could spend the entire time on the on the on the the different capabilities of these.

• 19:39Scott Galloway?

  So it's a good segue into talking about Mythos. So Anthropic described Mythos, it said that it turns every computer into a crime scene. And I'm trying to distinguish between what is responsible warnings about their own product and catastrophizing as a means of fundraising. Because everyone's talking about Mythos right now and there's sort of this, and it's prevalent, I think, across a lot of AI. That my technology is so amazing that it's going to reshape the world, both good and bad. Please invest in my series D at 100 times revenues. How much of this is responsible warnings from, you know, Dr. Frankenstein that Frank could be dangerous? And how much of it is just, quite frankly, is just fundraising?

• 20:24Speaker 09

  One, I think the Anthropic people are very earnest, principled and honest. So I think there's a fundamental basis which is completely honest. And here's a simple way of making that the case, which is if you said the the minimum that Mythos is is an ability to have an infinite number of

• 20:47Speaker 09

  quality cybersecurity engineers who are penetration testers. And it's not infinite, obviously, because there's a compute cost for running them. But you could take a thousand of them and run them in a direction. You end up, you know, if it's just that, you end up with a re-changing of the cybersecurity landscape. Because we have billions of lines of code that essentially haven't been touched. And partially because there hasn't been either an economic model.

• 21:15Speaker 09

  For the number of cyber criminals or the number of people employed by rogue states to go after any other than a certain set of systems, but it broadens the range by the ability to just kind of spin up many new penetration testing engineers, you know, with a kind of an AI mechanism. And that's the minimum that I think you could look at the, the discussion around Methos and its cybersecurity issues. I think that it's actually somewhat better than that. And I don't mean that, that's amazing, what I just said. But I don't know yet how much more, right? Like, is it, is it, oh, my gosh,

• 21:54Speaker 09

  you put a, a classic, you know, call it a, you know, top 10% cybersecurity engineer and put them against, you know, kind of a couple of Methos agents and do they outpace that person? You know, it's unclear to me. Does it think in ways that we haven't thought about before and generate new patterns? That's unclear to me. But you don't need those to have this be a massive, you know, kind of shift in how we think about cybersecurity. What are the kinds of things we need to do? And so I actually think that they're doing a responsible thing by saying, there's an important change coming and we need to get

• 22:39Speaker 09

  at least the essential systems ready.

• 22:41Scott Galloway?

  Well, we're actually more than a minute to answer this because it's, it's a difficult or, you know, we're going to need a bigger boat. But Andrew Yang, who was on our podcast a few days ago, said, you know, he's having a moment, right? Because he's sort of in some ways predicted all the fears, the sum of all fears around capital destroying labor. And there's, you know, people would point, there's already evidence around youth unemployment increasing, a lack of hiring, layoffs at some of the early adopters.

• 23:13Scott Galloway?

  We, I won't use we, I have taken the view that we have been to this movie before and some of the catastrophizing around the destruction in the labor market doesn't recognize the new opportunities and the new jobs that will be created. So I would love to just get your thought and take whatever time you need to describe what you think the impact on the labor market is going to be of AI.

• 23:38Speaker 09

  Every job that uses language or information will have an AI component that will range, in certain cases, in automation, in certain cases, much more AI work, and in certain cases, kind of AI amplification or augmentation of human labor. And I think that will be true of all of those things. And so almost every industry, because if you think about like even like steel manufacturer, you still have meetings, financial analysis, you know, kind of capital, other kinds of things, you know, legal, other kinds of things, all that play in it, you know, strategic planning, and so that means that AI will touch everything. Now, and I, by the way, inherently also agree with you that

• 24:24Speaker 09

  one of the general problems when you get new technology, kind of put this in super agency, is you go, well, I can see if I take jobs as a fixed number that do not grow and do not change, and I can see that a bunch of them will be, you know, now the horses, then the buggies will go away and we'll have cars and like all the groom's people will go away and all the horse carrying jobs will go away and all the horse cleanup jobs will go away. And I can tell that and be like, well, but you didn't predict all the new car, the new jobs and drivers and da, da, da, da, and that particular thing. And you can predict the negative changes and you can't predict the positive ones. So now the rub in this is

• 25:06Speaker 09

  There's a couple of places where AI creates kind of multi-industry, very fast, much cheaper things. Like say, for example, if you said, well, you know, like, for example, one of the areas where I think you'll see a lot of automation is where human beings are following a script. The AI will follow a script much better. So I think, I think like customer service jobs go completely away. But by the way, I think like, sales jobs transfer a whole bunch too. And what does the new sales universe look like? Both of them are, are, are lots of body employers. And so you get, you get a, you get some pretty big transitions in terms of, of how this plays.

• 25:51Speaker 09

  And that's the thing is, I actually think that the, the transition points will be like,

• 25:59Speaker 09

  more likely than not challenging to navigate. Now, part of the reason, like, I, I still tend to be a AI, like, we just should, should accelerate as much as possible and use it. We can go into that, even though we're going to have this transition difficulties. But the thing we should be doing is saying, well, with AI, how do we help in these transition difficulties? Namely, how do we say, oh, if you're not long, long, if customer service jobs, they haven't really been decreasing yet. And so therefore, a little bit of the, you know, kind of college people not being hired and so forth. It's much easier for companies to say, we're doing layoffs because

• 26:39Speaker 09

  of AI than we mis-hired in the pandemic. There's global instability. We're not investing in the future at the moment because of global instability, etc. No, no, we're strong because we're using AI. So there's a lot of discourse on that. But I actually think that, you know, like, things like the customer service jobs, it will be the, as one of the kind of canaries in the coalmine of, we have to have customer service and all of a sudden the jobs start going down because of Sierra Parloa or whatever. Then I think that the

• 27:11Speaker 09

  That you'll begin to see some of that now. You I think you'll see it. It's just a question of speed, time, how, etc. And then we get to the transition, the transformation, transitions. And part of the transition is let's deploy AI for that. Let's deploy AI for, OK, I no longer have a customer service job. How do I, what other jobs could it like work with me? What other jobs could I do are being created? What are the things that, you know, like you could help me learn? What are the things you could help me do? What are the, what are the jobs you can help me find? And when I think about this from a society point of view, because these kinds of workforce transformations, you know, the industrial age was really painful in terms of its transfer. The like, we don't have any of the wonderful things we have

• 27:55Speaker 09

  without the industrial revolution. And I think the same thing is true of the cognitive industrial revolution with AI. But the transition is really painful. How do we make the transition better? And I think the simplest thing is deploy AI for it.

• 28:12Ed Elson?

  We'll be right back after the break. And if you're enjoying the show so far, tune in on Sunday for our founder series. We will be speaking with the co-founder of the hot new legal AI startup, Harvey.

• 28:32Speaker 10

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra because it's not just a superior light beer. It's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 29:01Speaker 00

  Are your ad campaigns lighting up the dashboard? But not the pipeline? That's bullspend and marketers are calling it out in dashboard confessions.

• 29:10Speaker 01

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

• 29:17Speaker 02

  Energía baja, falta de concentración, nebla mental. You might be dehydrated. Gatorade Zero powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade hydrates better than water. Is it new? Signos de dehidratación leve y moderada. Consulta a tu médico si los síntomas persisten.

• 29:54Ed Elson?

  We're back with Prof G Markets. I agree, and Scott knows this, that eventually new opportunities will come as a result of AI transforming our economy. But the question is what happens in the interim? And the industrial revolution, I think is a great point. We're in a comfortable position now, looking back 100 years ago, saying, oh, it worked out. Look how wonderful the world is today. But I'm sure there are thousands, potentially millions, of people who lived through that revolution, who did lose their jobs, who were not very happy about the situation. And we've talked to people who have talked about that, too. Darren Asamoglu is someone who says, actually, we didn't do a very good job of handling that transition.

• 30:35Ed Elson?

  And it seems that this is going to be a similar thing, except even faster, because instead of putting vehicles on the ground or building factory equipment, you're literally just shipping software to companies. And we're already seeing it where employees are being laid off like thousands at a time in one go. I mean, this is what happened with Block. This is what happened with Amazon. They just literally send an email. They say, you're all fired. Sorry. Like, that's a new kind of system. And...

• 31:15Ed Elson?

  From a just purely like capitalist perspective here. One, I mean, from a human perspective, that's got to be kind of shitty for a lot of people. I'm already seen that. But also from a capitalist perspective, it seems as though one of the biggest obstacles for the AI build out, if you are an AI optimist technologist, one of the biggest obstacles is how unpopular it is now, largely because of this work being replaced dynamic where AI is now less popular in the US than ICE. So that seems to be a big issue and we're now seeing it in the political sphere. And so I guess my question is like, how much of a problem is that?

• 31:55Ed Elson?

  Is the popularity problem for AI a genuine concern among the technologists who you are close with in Silicon Valley, who are actually building this technology?

• 32:06Speaker 09

  You know, you'd have to be pretty blind not to be concerned about the popularity problem. And, you know, it's manifest and such, you know, things also is, you know, weird like we should have, we should ban data centers. And you're like, okay, you want the data centers built in Canada or somewhere else, you know, as opposed to here, you know, and, and most of the arguments against data centers are pretty spurious. I think the key question around the local economy is say, hey, make it a good enough trade for us to bring it here, like bring in some economic prosperity. Sure, the construction jobs and the running jobs aren't a lot of jobs. Maybe there's some other things you can bring in, like, you know, maybe you could bring in a plus 10% of your energy of your usage.

• 32:50Speaker 09

  You add 10% that helps us in a structural way. I mean, there's all kinds of different ways you can do that. Now, that being said, you know, for example, you know, the UK didn't invent the industrial revolution, but embraced it strongly and had, you know, centuries of global prosperity from it. And so I do think the transition is challenging, but I think the embrace is valuable. And, um, and I think that the, the question around, you know, what should we do is like, it's important from a economic, it's like, it is the driving force of what the future economies are. And

• 33:33Speaker 09

  It'll only work for future generations if we embrace the right economic things. But I think the key thing is to try to figure out what's the way we navigate better. Like I think is like, you know, anyone who says, oh, we navigated the industrial revolution perfectly is out of their mind or a historical or anything else is like, look, what's the learnings? What are the things we can do now? The most often thing that people who are not building within the, you know, kind of just called competitive business world or competitive technology world say, we'll just slow everything down. Right. And you're like, okay, the problem is, is competition doesn't slow down. That's actually not, not the way that, that kind of competition works. Like if you just said, hey, everyone, wait for me to get my economy in order. And then you can start shipping your export things.

• 34:15Speaker 09

  I mean, you know, take a look what, what's going to be happening within Europe with the spread of BYD cars from Hungary. For example, it's like, oh, no, no, wait for a decade for us to get our auto industry in, in, in place. That's not going to happen in terms of, in terms of how this operates. So you have to be like figuring it out, how to make the adjustments and transformation at the speed that, you know, here we are in a markets podcast that the markets are, are bringing about. And that's the, the thing to do. So the idea is they give good ideas on the transformation that we can embrace to help make the transformation better. And that's part of the reason why like I gesture at the speed and, and depth of AI. Also gives us tools to help with the transformation.

• 34:59Ed Elson?

  How much genuine thought is being given to those kinds of ideas? Like, I think the trouble that a lot of people have is on the one hand, there's the possibility that AI could be good for society and it could be a great thing and bring prosperity to many people potentially. But also on the other hand, it could also make a small handful of individuals incredibly, incredibly wealthy. It could make wealth inequality even worse. It could concentrate power and wealth into the hands of a, a small few, which makes it.

• 35:35Ed Elson?

  I think it makes people feel fairly unjustifiably suspicious. And, you know, Dario Amadei could go on a show and say AI is going to be, you know, wreck everything and people would might say that that's not a lie, but exaggeration. He could also say AI is going to be a great thing for everyone. Everything's going to be fine. Everyone would say that's an exaggeration. That's a lie. He's just trying to get rich. So I guess the question is like, when you interact with these people as someone who's kind of like in the eye of the storm, to what extent are people actually concerned and working on solutions to make this work for everyone versus just trying to kind

• 36:19Ed Elson?

  of like, keep the message intact as they pursue the ultimate goal of wealth?

• 36:27Speaker 09

  I don't think that's wrong to produce a goal of wealth. I think every networked system, cities, trade, everything else creates, you know, economic inequality and economic inequality is part of the engine by which we, you know, fuel capitalism and competition and all the rest. So it's like, you know, just to be clear, I think that's a fine thing. I do think the question is, is how do you bring, you know, kind of the bulk of society along, e.g. how do you have benefit that spreads, you know, throughout all society? And I'd say, like, for example, is one instance, you know, Sam Altman's gotten a bunch of bad press over the last, you know, X months. And yet, in the very early days, he was funding, you know, universal basic income experiments,

• 37:11Speaker 09

  trying to figure out what kinds of things would work there and, you know, spending money directly himself in order to do that. So I'd say that there are people who actually, in fact, pay attention to the issue, care about the issue. It's one of the things I don't think Sam gets enough credit for is just one instance. Now that being said, the question is to say, all right, are we putting in time and energy in order to help society? I think that that a number of the different players, you know, definitely Microsoft, Google, Anthropic, OpenAI, and some others would are interested and willing to do that.

• 37:52Speaker 09

  They're not willing to do it if it's fruitless relative to its engagement and everything else, given that they also have an intense competition clock going. So if you wanted to say, like, one of the things that I've been telling, you know, governments for years is, like, the kind of thing you should be asking for is, I'd like to have a medical assistant that runs on every smartphone that can help people. I'd like to have a legal assistant that runs on every smartphone that can help people. I'd like to have a tutor that runs on every smartphone and essentially make those the equivalent of free as part of the benefit for helping in transition. Like, I think you could do that, and I think you could very easily cut the deals in which they would build it and so where, then the government could make sure it's there for

• 38:33Speaker 09

  everybody and to be getting some benefits in, you know, as we sort out the kind of melee of what's going. But like, say, for example, they just say, okay, we'll go build a tutor that helps with, like, all things economic and jobs. Well, okay, we build it. Are we going to use it? How is it going to get there? Do we have to expend energy and time on that, too? So, given that there's this focused competition about where the primary economics are and the establishment of platform and so forth. So this is kind of an area where I think they are legitimately concerned. Part of the reason why they, in their own minds, will will say, you know, pretty, this is, you know, Scott was gesturing at, you know, kind of like the, oh, are you as fundraising

• 39:17Speaker 09

  by saying, white collar bloodbath in next years, you know, you know, buy my Series D? And it's, I don't think that's a great way to try to sell the Series D. I think it's actually like, hey, shit's coming. Somebody should be helping do something here and we're happy to help. We got our shit that we're working on, but we're happy to put some energy into it. And I think that's what we need to be doing. You know, now unfortunately, at the moment, saying well-run government seems to be, you know, something on kind of on the order of dinosaurs or dodo birds or anything else. And, and it's, it's difficult to figure out what to do.

• 39:57Speaker 09

  You know, I'm always happy whenever a, you know, any government of any Western democracy, style democracy calls me and says, hey, I'm trying to figure this out. What can I do to help? Like, I'm like, okay, here's some ideas. Here's things like, you know, the medical assistance one that I've been talking about since 2018. Right. Because you want to say, hey, this AI transformation is challenging. Most people do not have immediate access to medical advice. Right. The vast majority of the world does not have that. And so it's like, oh, could I get some? That's good. And that would be easy for governments to set up because it's changing the legal liability and then the, the mandate for how it's reached.

• 40:40Speaker 09

  And then having a deal with whatever number of companies you want in order to, to go into that in terms of what you do. And then all of a sudden you're providing something.

• 40:48Ed Elson?

  Part of me wonders if, I mean, you mentioned how like Sam Altman has been working on and talking about universal basic income ideas for a long time. And in fact, OpenAI recently just published a proposal. They called it like this new deal style proposal where they gave a bunch of ideas on how we might lessen the potentially harmful impacts of AI on our economy and things like wealth inequality. They suggested higher capital gains taxes. They suggested something akin to a UBI. Like to their credit, they are thinking about this and proposing solutions and putting it out there. Part of me wonders, however, that.

• 41:29Ed Elson?

  This issue of comms and AI's PR is almost an impossible problem because of the reality, the fundamental reality of wealth inequality on the ground today, where, and this is something Scott and I have talked about, where, you know, we look at like the wealth inequality Gini coefficient, for example, which is 0.83 in the US right now. And during the French Revolution, it was the same number, things like that, where Americans hear this and they get very upset about it. And so anything that suggests that this could worsen that trend, AI being one of them, and it could,

• 42:13Ed Elson?

  like, there's nothing, there's no amount of communications, there's no amount of PR or IR that you can do to make them feel better about that. That's what I've started to wonder about this AI revolution. I wonder if you have any thoughts on that and if you agree or disagree.

• 42:29Speaker 09

  I tend to not focus as much on the inequality question as much on, like, could you say, the kind of the bulk of 80% of society, is there circumstances improving in some substantive way? And I tend to think that if they think, hey, I've got some reasonable opportunity playing the game, my circumstances can improve, they might be improving, then I think you get more social stability. And I think it's when I, like, I don't know how to feed my children. I think, you know, my prospects over the next decade are just categorically worse, you know, et cetera, et cetera. I think when you hit it, and it's not, you know, like, the usual kind of thing that I tend to say is inequality tends to be more of

• 43:13Speaker 09

  a political topic, because like, well, the CEO should only be paid 20 times as much as the bottom person. You're like, well, how do you get to that magic number? Why isn't it two? Why isn't it 5,000? You know, like, you let markets sort those things out. And by the way, inequality comes with the economic system that we have built prosperity and capitalism and in competition. And, you know, cities generate higher wealth because of network density, trade generates higher Wealth, you know, kind of the, these kind of things, and it always has some disparate curve. It's not like it's evenly spread out like peanut butter across the whole system. Now, that being said, it is absolutely mandatory for healthy societies to be saying,

• 43:53Speaker 09

  hey, I, as a middle-class family, am like viewing myself as having better prospects as I'm going into it. I might have a rough year or two, I might have some way that I have to work hard or anything else, but like, that kind of thing is, is an option. And I think that, that that needs a strong solution. And I think that part of the thing is, is right now, I think people are like, look,

• 44:20Speaker 09

  times are hard, it's part of the reason why, you know, I think democracies around the world are tend to be, tend, not a hundred percent, but tend to be, you know, kind of saying, hey, we want to elect someone who's going to take a wrecking ball to everything because we think maybe that's the only way that things could get better. That's almost always leads to things being worse, you know, cultural revolution, you know, French terror, et cetera, et cetera. Renovation is the important thing, but I, I get the frustration, the anger, the uncertainty that gets there. And, and I think it's beholden on all of us to try to say, hey, let's try to renovate these institutions together and let's try to make it work for the bulk of eighty percent. And whatever it takes to get there.

• 45:03Speaker 09

  Because like, for example, if you said the simple problem's inequality, it's like, well, then let's just simply, you know, institute a, you know, kind of like a ninety percent upper bound tax on stuff, and that should just simply solve everything. And I don't think that would actually, in fact, solve everything. I think, you know, like, I think someone did an estimate that if you took one of the super billionaires, you know, Elon or Bezos or whoever, and then simply redistributed their economics across the entire US country.

• 45:32Speaker 09

  It makes a difference. Everyone said like, you know, small savings account gets a little bit bigger, but it doesn't fundamentally change anything there. So you want to be changing the actually economic system of what's happening.

• 45:45Scott Galloway?

  I would push back a little bit, Reed. I find that just because taxing billionaires or super wealthy people wouldn't solve the problem, it does feel like once you get to the kind of the 0.1%, your tax rate plummets. And just from an equity standpoint and being responsible, we do need to restore a progressive tax structure, including it should go up for the wealthiest, not down. And yeah, the defense that it's not going to solve our problem, I don't think is a, is a, a solid defense.

• 46:15Speaker 09

  Oh, just to be clear, I'm for progressive taxation. This isn't an equality point as being the, like, that's the problem of society and what we need to solve.

• 46:23Scott Galloway?

  You think there should be a floor?

• 46:24Speaker 09

  How do we raise as much of the, kind of call it 80% plus of people as we can? And whatever that took in progressive taxation, that's awesome from my point of view. Um, I just that progressive taxation itself, I don't think is sufficient to the solution, right? Like it's, it's, by the way, I completely agree. The, the differential, like, there's a reason why I think in, in most of the places where we've had strong growth in societies, we've had progressive taxation. The fact that, um, the wealthy can hack it in ways that they're paying less tax than a middle-class person as a percentage is essentially a malfunction of society and that that should be fixed. Right? But that's fixed for a different reason other than pure inequality questions.

• 47:09Ed Elson?

  What would be that fixed? Cause right now, a lot of people are just like, well, wealth tax, I mean, it might be a crude and unnuanced perspective, but that's what is being proposed in California because they're like, well, we haven't seen anything else. Like, what is the alternative in your view?

• 47:26Speaker 09

  Well, so take the California one, which is. They go, okay, we have a budget shortfall because of, you know, things that Trump's, you know, quote unquote, big, beautiful bill did. So we're going to impose a one-off wealth tax for a particular, you know, kind of benefit of segment of California. I think all the optics in this are wrong. It's not fixing the systematic thing. It kind of, you, you start with California, which other than Manhattan, has the highest income tax rate in the country. From, from the way of doing this, no real, you know, understanding of this and no sense of what we're really trying to do is fix the overall system. Now,

• 48:04Speaker 09

  like, for example, I was supportive of the increase of, of, of the state income tax provision and the fact that you say, hey, we now charge this income tax now at, we added a new level at, you know, higher levels, like a million dollars of income and so forth. I think those are good things to do. There's a, and by the way, some people against wealth taxes go, well, our wealth taxes, we never do wealth taxes. They're terrible. They're unproven. You think, well, actually, property taxes are formal wealth taxes. There's, there's ways to do it. Now, there's a bunch of questions around what happens with private, you know, stock and so forth. I mean, there's a bunch of unknowns and challenges and you

• 48:44Speaker 09

  want to compound into growth. I'd say that the, you know, the reason why the wealth tax comes out in California is because it's more politically expedient. The easiest one is repeal Prop 13, but that's a third rail, which is a, which is a fixed on property taxes, which is a wealth tax. But that's a third rail in California because the commercial real estate associations, which benefit massively economically, slaughter any candidate who does that. So it's like, oh, let's go after billionaires versus, versus, you know, real estate across the entire country.

• 49:16Scott Galloway?

  I'd love to get your take on the case that kicked off yesterday, and that is Elon Musk's actions against, or action against OpenAI.

• 49:25Speaker 09

  I was around and basically Elon, I think, is doing everything possible to throw anything he could possibly invent at OpenAI. And you know, among them was, you know, kind of claiming that they misled him. Like he wanted to identify himself as a co-founder of creating it, but then it's, oh, you misled me into philanthropic donation with a later plan to turn this into commercial. And having been around it, I know it's factually incorrect. We'll see what happens. It seems that it's like, it's the kind of the definition of legal harassment. And kind of trying anything possible to kind of say, no, I didn't make a huge mistake.

• 50:06Speaker 09

  When I basically told OpenAI that it should become a company that I own, I Elon should own 80% north of, and if you're not going to do it, I'm leaving. And oh, look, the, the organization did well. So I'm, I'm very, I'm hoping that truth and justice will prevail, which is basically it'll be a speedy trial, which all of this stuff will get kicked out. And maybe even an OpenAI counter suit for massive defamation and false suits. Might even work, but we'll, but we'll see.

• 50:39Scott Galloway?

  What do you think of the idea of creating sort of this space media AI conglomerate? And I mean, they're talking about a SpaceX IPO. You're a market guy, you're an investor at 95 times revenue. And Ed pulled some data, when Google in public, it was growing 240% a year and trading at 10 times revenues. SpaceX is growing 20% or 24% a year and going out at 100 times revenues. And I'll, I'll say this about all the kind of upcoming IPOs. Doesn't it feel like the valuations have gotten way out over their skis here?

• 51:20Speaker 09

  I certainly wouldn't buy in the SpaceX IPO. I think most of the people who are, who are buying there are kind of in the, hey, everyone thought Tesla was crazy for a long time and I made a bunch of money on Tesla.

• 51:34Scott Galloway?

  And they did.

• 51:37Speaker 09

  I agree, but they did. Oh, yes, exactly. And so, well, the hell, I'll give it a shot. As I think roughly what the investment thesis is there, which, you know, it's kind of like, that strikes me as like a Bitcoin charters. Like, well, it went up, so I should buy because it continue, well, it will go up again, which is, again, not smart investing behavior.

• 52:01Speaker 09

  I also, a friend of mine kind of said, hey, I think what he thinks is going to happen is is that the, and he's heard from other people, he thinks SpaceX will go out and then they're going to merge it with Tesla because, you know, Elon's comp package is apparently on market cap. So, you know, gets a whole bunch of money if the, if it goes out and they merge. You know, I haven't cross-checked this, but, you know, it strikes me as a possible, you know, set of considerations.

• 52:32Speaker 09

  But anyway, so I think it's, it's IPO should be

• 52:37Speaker 09

  made on a prospect of real growth. And so, if you're not having that, I think, you know, the market should be more sane. Whether or not they will be sane is a different question.

• 52:52Ed Elson?

  We'll be right back. And if you're enjoying the show, come join us on tour and hang out with us live. You can get your tickets at profgmarketstour.com. The link is in the description.

• 53:11Speaker 10

  This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an ultra. Because it's not just a superior light beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser-Busch InBev Michelob Ultra Beer, St. Louis, Missouri.

• 53:39Speaker 00

  Are your ad campaigns lighting up the dashboard? But not the pipeline? That's bull spend. And marketers are calling it out in. Dashboard Confessions.

• 53:49Speaker 01

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

• 53:56Speaker 00

  Cut the bull spend. See revenue, not just reach. LinkedIn delivers the highest return on ad spend of major ad networks. Advertise on LinkedIn. Spend $250 on your first campaign and get a $250 credit. Go to LinkedIn.com/campaign. Terms and conditions apply.

• 54:10Speaker 02

  Energía baja. Falta de concentración? Nebla mental? You might be dehydrated. Gatorade Zero Powders han sido diseñados científicamente para ayudarte a mejorar el balance de hidratación en el cuerpo. Hechos con la mezcla número uno de electrolitos, sin colores ni sabores artificiales. Shop now online or at retailers nationwide. Gatorade hydrates better than water. Is it in you? Signos de dehidratación leve y moderada. Consulta a tu médico si los síndomas persisten.

• 54:44Ed Elson?

  We're back with Prof G Markets. We were talking earlier about that there is a lot of competition in AI, at least for the moment, and that might be a good thing, bringing prices down. One thing that I would also add is that it's also being subsidized right now by essentially the VC community, which is helping with prices. I feel like eventually prices are going to go up. Either way, one thing that we have been a little cautious of in the AI ecosystem is what we have described as corporate incest, which is where there is a lot of sharing of revenue that we're seeing. We saw this between Nvidia and OpenAI. And then also, we saw this trend of these kind of like pseudo acquiesces or pseudo investments that turned out to be acquisitions.

• 55:29Ed Elson?

  And one of the most prominent ones was a company that you founded, which is Inflection. And something that really struck me, I mean, I remember reading the headline like Microsoft is partnering with Inflection. And Inflection was this company that everyone was talking about. It was one of the hot AI startups. Microsoft is partnering with Inflection. They're gonna pay them like several hundred million dollars to partner with them. And then suddenly we also learned that half of the employee base has moved over to Microsoft. And then we also learned that the co-founder, who you started the company with, Mustafa Suleyman, also moves over to Microsoft and is now the CEO of Microsoft AI. At which point I started to think, well, this wasn't a partnership. This was an acquisition.

• 56:13Ed Elson?

  And then we started to see it with other companies too. Meta goes and grabs Alexander Wang, who started Scale AI, another big AI startup. We saw it with Google and Character AI. They kind of create this deal and then suddenly all the employees end up working for Google. It made me think that big tech is sort of taking over the AI ecosystem. You are sort of at the heart of this. What happened there with Inflection and what do you make of that, that concept in my head?

• 56:40Speaker 09

  Whether it's an acquisition or not, my actual point of view is, does the business continue? Inflection continues. It has 70 employees. It has been doing a B to B business and so forth and pivoted. So I think the question is, you know, is the business continuing relative to the, is it really an acquisition or not? Like, so it's a partnership is a very generic world and it's a huge deal, which a bunch of employees and a non-exclusive IP, right? And, you know, co-founder went and that's happened in even more cases than you've mentioned. I think Inflection, we, we set the, the stage on. And I think that the question is, is, I think part of what you've seen in the

• 57:23Speaker 09

  large tech companies is they would prefer to be buying companies versus doing these kind of, you know, kind of strange deals, but feels that the regulatory environment is too hostile to, for them to do that, especially earlier. And so are looking for other ways to make it work. And so you say, well, what's a deal that you could make work that isn't an acquisition? It's like, well, you know, uh, get a like, kind of something that's not quite a BD deal, but not quite a corp dev deal, corp dev, like it's kind of like halfway in between. And the measurement is, does the business continue, you know, with, with vigor and effectiveness afterwards?

• 58:06Speaker 09

  And I think that the, you know, I think regulators, you know, from having seen a bunch of commerce questions about this, you know, aren't fond of it because they're, they're like, well, we want to be, we were trying to regulate the corp dev side of things. I think part of the challenge is, is I think that the theory, just speaking in the US, although I, I know that the, uh, the UK competitions market can be a little nutty, you know, like view, like we should not allow something if there's going to be future competition, which is like, kind of strange. I think that the question around acquisition should be not like, are we increasing the

• 58:51Speaker 09

  amount of capability of competition? Like, so let's take, for example, one of the big companies that has no play in AI right now, which is Apple. Like you shouldn't go get in a way, in the way of Apple buying an AI company because that will actually increase their competitiveness with the other hyperscalers in terms of what they're doing, even if it makes a big company bigger. You want to be increasing the competitive landscape of this and looking at where they currently are. And I think that's what you'd want to do on the corp dev side. Now, this kind of thing, I think is a deal innovation that's like BD plus in order to

• 59:34Speaker 09

  kind of navigate the, the universe and, you know, Inflection got a bunch of capital and could pivot its business from doing frontier models to B two B and, and a bunch of other things in order to, to, to execute on this.

• 59:47Ed Elson?

  I mean, it sounds like you acknowledge like it is a way of getting around regulation, essentially. And I guess, you know,

• 59:58Ed Elson?

  People can make and do what they will with that fact, whether it's a good thing or a bad thing, whether it's innovation or like, you know, kind of skirting around the law.

• 1:00:08Speaker 09

  Well, I don't think it's skirting around the law because I think what happens is corp, the corp dev law doesn't cover it.

• 1:00:14Speaker 09

  Right? So it's like, here's a way to make a deal transaction of a certain sort, a new sort of work.

• 1:00:19Ed Elson?

  Right.

• 1:00:20Speaker 09

  Because this doesn't cover it. So like skirting implies like, well, I'm going 80 miles an hour versus the 60 miles an hour that's, that's, that's, that's posted on the highway. It's like, well, I'm going down a different road.

• 1:00:32Ed Elson?

  Right. It's almost like tax avoidance versus tax evasion. Like it's technically legal, but it's like, in essence, accomplishing kind of like the same thing. It's still, it's still following the law, but effectively like it is an acquisition like in a lot of ways. So I guess the question would be like, is that of concern? Should, should, should startup founders, I mean, just as an observer, I looked at Inflection, I looked at Mustafa Suleyman, I'm kind of thinking, you know, and, and you, and you co-founded this company. And I'm thinking this company could be the next Google. This company could be the next Microsoft.

• 1:01:12Ed Elson?

  And that didn't happen because there was this moment where big tech had so much cash essentially, that it could just kind of be like, hey, like, let's just partner, we'll, we'll pay you hundreds of millions of dollars and then that'll be the end of it.

• 1:01:29Speaker 09

  Well, actually, I think you've got it exactly reversed.

• 1:01:31Ed Elson?

  Okay.

• 1:01:31Speaker 09

  No, I think you've got it exactly reversed because the question is, I think these deals are generally terrible for investors.

• 1:01:40Speaker 09

  They're, they're not like, what you really want to be able to do is command a really high price and say, the only way you get anything here is that you buy the whole company.

• 1:01:49Speaker 09

  And if that's not available and you believe that your prospects on your current path aren't working, you will accept a suboptimal deal. So I think these deals are broadly much less good for investors.

• 1:02:02Ed Elson?

  Fair enough.

• 1:02:02Speaker 09

  Right. And so investors don't want them. And by the way, then there's also the function of, you know, are they, usually in these deals, it's on smaller numbers, deals are better for investors. On larger numbers, investors and employees are the same. But that also means that it's then suboptimal for employees as well. By the way, the reason why people will do this is because they go, oh, I see that the path we're on currently with this business is not going to work. So for example, in the inflection cases, we're not going to be able to establish our agent with building frontier models in the way that we hoped. We need to pivot. So we're going to pivot to P2B. How do we get the capital? How do

• 1:02:45Speaker 09

  we make that happen? Well, we do a deal where that that enables that to happen. But that was a, that's a, that's a pivot deal, not a, like, it wasn't Microsoft came along and kind of said, hey, a little bit of cash, you know, you completely upend your business. It was like, no, no, we've, we've actually already decided that we need to change and we're trying to figure out how to fund that change and make that change go through.

• 1:03:07Ed Elson?

  But then the question becomes, why is inflection in a position where they feel that they can't compete in this space? Like inflection, from my understanding, you had some of the greatest minds assembled in all of technology, yourself included, to make this thing a success. And the fact that you guys decided that, that the better option would be to sort of slightly fold and pivot into Microsoft tells me that the landscape was too dominated by big tech, which is something that people have been concerned about, about this generation of technology versus, say, like the dot com boom.

• 1:03:41Speaker 09

  So we figured on a chatbot side, which is the thing we were focused on, that going into scale, building frontier models would be too expensive. And a year or two down the road, we'd be like in this really, really difficult position because in a strategy, you're trying to, you try to pivot before you've, you've driven the bus off the cliff. Try to not, you try to go down a different road before you're like off the cliff. Now, if we had had the idea, which Anthropic got into, which is let's go totally coding and APIs and just on that, maybe we would have been Anthropic, right? We didn't have that idea. So we had a bunch of talent, but it's always about the engagement with the market, what you're showing to investors, even in crazy times, et cetera.

• 1:04:24Speaker 09

  And we looked at the thing we had and said, we need to pivot to B two B. If instead we said, hey, we could do coding, maybe things would have been different, but we didn't, you know, more fool us. We didn't have that idea and, you know, hooray for Anthropic's, you know, iteration.

• 1:04:39Ed Elson?

  Do you believe that the monopolization or market power of big tech isn't a problem? Do you think that it isn't stifling innovation or having a negative impact on startups?

• 1:04:54Speaker 09

  Well, the short answer is no, for a couple of reasons. One is it's, it's a question of do you have growing number of competition? So like, for example, if we were five hyperscalers heading to three, right? Then I'd say we have a problem. But I think we're five to seven hyperscalers heading to 10 to 15, you know, OpenAI, Anthropic, you know, Nvidia being some of the new ones with all competing with each other. And in, as a startup founder and as an investor, that surface gives me a lot of opportunity to maneuver. And by the way, the reason why you don't want to block out corp dev is you say, I want to create a company to complete with hyperscaler X. Well, what happens when the company is not doing that well?

• 1:05:39Speaker 09

  I cannot raise substantial amounts of capital if I don't have an acquisition opportunity to get out. Right? And so if you say, well, we're going to block all acquisition opportunities for that, then I will never create the capital. And then, by the way, me as a series A VC means that I'm not going to invest in a company that's trying to create a new kind of search experience because I can't get an acquisition out as one possibility if the IPO doesn't work. And by the way, my incentive is to create, you know, in modern parlance, a trillion dollar company. That's what I want and I want to go long for that. So that's the reason why the, the regulatory structure is somewhat foobar in terms of the way it's currently conceptualized. And right now you could say, well, you get pure capital determination about like what

• 1:06:24Speaker 09

  the markets are and every VC is trying to spend as much money on AI companies as they possibly can in investing.

• 1:06:30Scott Galloway?

  What do you think of these, some of these? Tech companies going vertical and acquiring media companies.

• 1:06:38Speaker 09

  Complicated question, actually, you know, and actually, I'd be very curious to hear your answer to this, too. Like, roughly speaking, I think that people have not quite generated the right interesting generalizations from like Netflix originals and Prime and Apple Movies and so forth, like all these things. I actually think that part of what you should be doing in the modern age of the Internet is everyone has an ability to have a certain amount of expressiveness to the world at large, society, customers, industry. And so everyone should be running kind of like, almost like some version of content marketing. And I don't mean that as pure like, buy my product.

• 1:07:23Speaker 09

  But I mean, it's kind of like, this is who we are in the world is the kind of thing we're doing. Now, some of it could be more pure like, hey, we're just gonna have a cool set of TV series, you know, whether or not we're, you know, Netflix, you know, Amazon or Apple. But it also could be other things. I actually think that's a good way for the companies to process. Now, that's separate from we desperately need kind of objective civic news for democracy. And how do we solve that problem, which has been crushed from multiple sides? And obviously, I don't think the commercial is the tech companies, other people buying these things isn't helpful, but I don't think it's the source of the harm.

• 1:08:07Scott Galloway?

  By the way, I'm a huge fan of big tech vastly overpaying for independent podcast networks. I think it's a great.

• 1:08:14Speaker 09

  Yeah, can you put a good word for us at Microsoft?

• 1:08:17Scott Galloway?

  Yeah, I think it's a great idea. Well, I mean, it's, it's funny. I mean, there's definitely a tension, right? There's a tension between deep-pocketed companies using what feels like, or cosplaying independent journalism to do anything but independent journalism. That's the fear. And they crowd out true independent journalism, which doesn't have the backing of deep pockets. But at the same time, going vertical and having content or thought leadership, that's how I built my last company, analytics company. I started putting out media on YouTube, so they should be absolutely be allowed to do it. I'm a, I'm a big fan. What, um, I'm, if you were asked by the administration, let's be

• 1:08:59Scott Galloway?

  real, you won't be asked by this administration. Let's, if you were asked by the next administration to help loosely speaking with a crude AI framework for regulation, uh, as far as I can tell, the only regulation that's come down so far is meant to stop regulation at the state level. If you wanted some sort of safe and sane guardrails for AI right out of the gates, what are the two or three things you'd want to see happen?

• 1:09:25Speaker 09

  Well, by the way, I thought what the Biden administration started doing was pretty smart, which is bring all the tech companies in, push them very hard on a set of things, get them to make some voluntary commitments, then to up it and kind of start enshrining it. And it's kind of like having red teaming on safeties, safety plans and so forth. I think the first and most important issue is what happens in like bioterrorism, what happens in cybersecurity, et cetera. How does that get provisioned? So, and I think there, because you want to start, stop anything that could have a systematic damaging of the entire system. And you want to make sure that that's kind of, you know, kind of well guardrails. And that, that would

• 1:10:06Speaker 09

  be one set of things you would do. I think another one you would do is say, um, I want to generate, like, whatever your list of concerns are, like, say, if your concern is job replacement, or your concern is, you know, I don't think the environmental impacts are, actually, I think they're all more politicking than anything else. But it will say you had those. Then say, I want to have you generate these kinds of reports, could be for, you know, in a, you know, only for, you know, government consumption, but validated by your auditors, whatever the particular set of concerns are. And I want to, I want to have a trigger that if you, if some of these numbers are getting worse, you know, in a timeframe that is

• 1:10:52Speaker 09

  Quick, I want to have a trigger by which your auditors tell us quickly. Whether so we can say, what is something really happening and, you know, jobs or something really happening and, you know, etcetera, misinformation on networks. And we could get some sense of it so that we can start intervening on it. And then, you know, as part of that, we also want to get previews about what's actually happening in the engagements with your products. So we know how to steer. And I think that's a really good place to start versus all of the political melee, which is more about what I care about versus what I what I what I perceive the world to be versus actual data and information.

• 1:11:36Ed Elson?

  Reid Hoffman is the co-founder of LinkedIn, Inflection AI and Manus AI. He's also a partner at Greylock and sits on the board of many companies, including Microsoft. He authored six bestsellers, including his latest super agency, What Could Possibly Go Right With Our AI Future? Reid also co-hosts two podcasts, Possible and Masters of Scale. And for more, you can check out his new Substack, Theory of the Game. Reid, thank you for your time.

• 1:12:01Speaker 09

  Pleasure.

• 1:12:11Ed Elson?

  Ed, what do you think? I agree with him on some things and I disagree with him on other things. I think what he kind of honestly acknowledged is that big tech is really dominating the AI landscape. And I don't think he convinced me otherwise, to be honest. So I think that's one thing I disagree with him on. I also kind of disagree with him on his views on the wealth inequality problem. Like, it sounds like he is pretty.

• 1:12:43Ed Elson?

  Aggressively against a wealth tax, and that's fine. By the way, I don't think it would work either. But I think that there could have been more. I think there should be more attention paid to, okay, what is the alternative? Like, it is getting to that point where we need to be very seriously advocating for different redistribution methods if you are going to also say that the one that other people have proposed is not the right path forward. So I guess that's where I would be in sort of disagree agreement with him on. You know, he's also an incredible entrepreneur, incredible power player in the tech community. I mean, you can't deny his accomplishments. So I appreciate him for sharing his thoughts on all of these subjects with us.

• 1:13:24Scott Galloway?

  If you talk to anybody with the fingers and the pies he has, they're like, oh, no regulation, income inequality isn't a problem. Let our horses run. What if China gets out ahead of us? You know, it's constant. Excuse, excuse. There shouldn't be any regulation of AI. There's no problem here. Move along, nothing to see. Reed is going to be as focused on preventing a tragedy of the commons as anyone in his position. You know, it's just, he can, and it's hard for him. He's on the board of Microsoft. He has to be very measured about what he says about OpenAI. He has to be very measured about what he says about Elon Musk. And he sort of calls it as he sees it. He says, look, this is, calls it

• 1:14:09Scott Galloway?

  as what it was, that Elon's having the biggest case of sellers regret in the history of business.

• 1:14:13Ed Elson?

  Yeah, a lot of people just wouldn't give their opinion or give an answer to many of the questions that we asked him just then, and he did.

• 1:14:20Scott Galloway?

  Find me a VC or someone hugely invested in AI that has anything resembling the kind of moderate reasoned views of Reed. There just aren't very many of them.

• 1:14:32Ed Elson?

  This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Corte. Our research team is Dan Shalala, Isabella Kinsel, Kristin O'Donoghue, and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, Give us a follow and join us for a fresh take on markets on Monday.

• 1:15:35Ed Elson?

  Life.