Perplexity’s Fourth Funding Round + Lessons From Boeing in Long-Term Thinking

Scott and Ed open the show by discussing the decline in existing home sales, Tesla’s earnings, the McDonald’s E. coli outbreak, and Shein’s deceleration in growth in the first half of the year. Then Scott explains down why he thinks, despite the disappointing earnings, Boeing could be a buy. He and Ed also discuss why the pension plan is the biggest sticking point in negotiations for the striking workers. Finally, they break down Perplexity’s latest funding round and Ed explains why he’s not so bullish on the company. 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.

• 0:00Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed sponsored jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs.

• 0:30Speaker 01

  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 02

  This episode is brought to you by Subaru. You know that place your mind always wanders to? The lake, the mountains, the homes of the people you love most? The completely redesigned 2026 Subaru Outback is built to help you get there. With legendary capabilities, standard symmetrical all wheel drive, and the confidence to go further. The 2026 Subaru Outback. Love never looked so good. Visit Subaru.com/Outback to learn more.

• 1:25Scott Galloway?

  Today's number, $400,000. That's how much Al Pacino paid his landscaper per year to maintain a property he didn't live in. True story, Ed. The pool boy fucked my nanny, so I ended up catching a cold [bleep]. True story, Ed. My pool boy fucked the nanny, so I caught the cold my wife had.

• 1:57Scott Galloway?

  Takes a minute, but it's funny.

• 1:59Ed Elson?

  I think the funniest was the initial botched delivery. That was my favorite part of the joke. I hope that stays in the edit.

• 2:07Scott Galloway?

  That happens a lot. Welcome to Property Markets. Today, we're discussing Boeing's terrible day. A lot of jokes in there about air disasters, but I'm not going to make them. And perplexity's fourth funding round. That's where we are. Boeing workers are on strike and perplexity is raising a fourth round. But here for, oh, wait, banter. I'm sorry. It says banter. Ed.

• 2:31Ed Elson?

  Stop giving it away. You can't read the script word for word.

• 2:34Scott Galloway?

  What's going on in the life of a 20 something living in Brooklyn?

• 2:37Ed Elson?

  I'm doing very well, Scott. It's been a busy week. Doing a lot of interviews. I just did two first time founders interviews, which are very exciting, but I'm not going to give any of the details away.

• 2:47Scott Galloway?

  No, you don't want to promote it. You don't want more downloads and for us to actually make money off this Joey Bag of Donuts first time founders podcast that we're supporting as your vanity project? Why don't you take up DJing and charge us to do that?

• 2:57Ed Elson?

  I already do that.

• 2:59Scott Galloway?

  What else are you doing other than first time founders interviews? What's been going on?

• 3:03Ed Elson?

  Let's see, I got some Halloween parties coming up, but I don't, I don't have a costume. You got any ideas for me?

• 3:09Scott Galloway?

  I have a Deadpool costume you can have.

• 3:10Ed Elson?

  Oh, yeah?

• 3:11Scott Galloway?

  Yeah, it's awesome. Mary Jean got it for me.

• 3:13Ed Elson?

  You still have it?

• 3:14Scott Galloway?

  Here's if you want it.

• 3:15Ed Elson?

  Maybe I might take you up on that. That's a good idea. What are you going to be?

• 3:19Scott Galloway?

  I'm very excited. I'm going as Richard Simmons, although I'm going to be in London. And A, they don't have Halloween and me walking around in dolphin short shorts with my sons, who will be walking 20 meters ahead of me because they'll be so horrified.

• 3:32Scott Galloway?

  They're at that age where they're not going to do Halloween for 20 years. Halloween's awesome when you're a kid and then it's awesome when you're older.

• 3:37Ed Elson?

  Yeah, exactly. I don't, I don't like Halloween myself these days.

• 3:41Scott Galloway?

  Oh, my God. How can you not love Halloween?

• 3:45Ed Elson?

  Because it's like the whole thing is just like, wait, what are you? And then everyone has to go around and explain what they are. And it's like, I don't know. It's just like, it's always, it feels so contrived to me.

• 3:54Scott Galloway?

  Well, I go as myself and people ask me what I'm supposed to be. And I say, I was supposed to be a lot of things. And then I start, and then I start weeping. That's good. Get to the headlines, Ed.

• 4:06Ed Elson?

  Let's start with our weekly review of market vitals.

• 4:15Ed Elson?

  The S and P 500 declined, the dollar gained, bitcoin was flat and the yield on 10 year treasuries increased. Shifting to the headlines. Sales of existing homes in the US fell three and a half percent from a year earlier. That's their lowest level since 2010 and on track for their worst year since 1995. Tesla's net income rose 17% in the third quarter from a year earlier, beating analyst expectations. Elon Musk also predicted vehicle growth would reach at least 20% next year and the stock rose more than 20% following that earnings report. McDonald's stock fell 10% after its quarter pounders were linked to an E. coli outbreak. The illness has led to 10 hospitalizations and

• 4:55Ed Elson?

  one death. And finally, Shein's profit declined 70% in the first half of the year to just under $400 million. Revenue growth also slowed to 23%. That's nearly half of what it was a year ago. The deceleration in growth could complicate the company's plans for an IPO. Scott, your thoughts, starting with this disappointing home sales data?

• 5:16Scott Galloway?

  It's really wild. The housing crisis or the housing sales just keep getting worse. So I would have guessed we would have bottomed out about a year ago. Also, I think people are sort of just giving up on housing and they don't see it any longer. It's kind of the American dream. I think it's really too bad. I think it's a supply problem. We talk about interest rates. We talk about having cheap capital go buy a house. I think there's only one way out. I think we need fairly significant government subsidies to kind of put the private sector into action to just start building a ton of houses and also pass regulations that make it increasingly difficult to block housing permits. What are your thoughts?

• 5:52Ed Elson?

  It's massively disappointing to me, especially as a young person who wants to buy a house someday. I mean, that is a personal objective of mine. So I hate to see this this news. Having said that, yes, home prices relative to income have never been higher. I mean, it is out of control, the price of homes today. But if you look back at the data and if you also factor in mortgage rates in addition to home prices, it turns out that actually housing affordability today in a holistic

• 6:28Ed Elson?

  Level is around where it was in the mid nineteen eighties. And that's because back then the mortgage rates were just way higher, like a thirty year rate was around fifteen percent back then. Today it's around six percent. So when you factor all of that in from an affordability perspective, things actually look very similar to the nineteen eighties. And now I'm twenty five. And who were the twenty five year olds in the in the nineteen eighties? It was the boomers. And who ultimately benefited from this rapid transformation of the housing market right when they hit their income earning years? It was the boomers. So I look at that data. And there are definitely very different dynamics at play here. For us, it's a price issue because of supply. And back then, it

• 7:10Ed Elson?

  was a rates issue. But I am hoping, just based on the fact that I am in a kind of similar position to where boomers were at my age, I'm kind of hoping that something's gonna change. I don't know exactly what it's gonna be. I don't know what that would look like. Hopefully, it just means more housing permits, more supply. But I do have hope. And I think the right thing to do, which is what I'm doing, is just scouring real estate. I'm trying to get an understanding of this market, not because I'm gonna buy something right now, but just so that when things do change, I will be ready to get involved. And I would encourage other people my age to do the same.

• 7:44Scott Galloway?

  So when I was your age, I bought my first home at twenty seven. I was a year older than you when I bought my first home. I'd just gotten out of the hospital of business. While I decided to start my own business, the offer I had from a consulting firm was a for a hundred grand total comp. My girlfriend was making, I think, about eighty. So we had a hundred and eighty grand, and we bought a house in Petronero Hill in San Francisco for two hundred and eighty five thousand dollars. So one and a half, one point six times our, you know, our annual income. And we borrowed some money from her parents, and we bought our first home.

• 8:17Ed Elson?

  Did you take out a mortgage on there?

• 8:19Scott Galloway?

  Oh, yeah, we had a mortgage. I don't even remember the interest rate. But two or three years later, maybe four years later, I peaked early, Ed, I bought the house that is no joke on Noe Guerrero and twenty first that is next door to where Mark Zuckerberg lives. And I paid seven hundred and sixty thousand dollars for it. And a few years later, I sold it for 920 and I thought I was a fucking real estate genius. I thought, oh my God, pretty sure like his security lives in that house. And I would have paid so much money to just be able to sit out on my porch in a wife beater in a lawn chair. And when he come home, like, how many teens depressed? How many teens are self-cutting today, you fucking bitch? I just would have given anything.

• 8:58Ed Elson?

  I'm sure people are already doing that.

• 8:59Scott Galloway?

  I just, anyway, so, but where I was headed with this is if you think I was making a hundred grand, a story of privilege out of an elite business school, 2.8 times got you a house in San Francisco. Now I bet the average compensation out of the high school, again, these are good problems, is about 200 or 225. The average home, I think in the Bay area or San Francisco now is 2.1 million. So it's gone from, it's gone from 2.8 times the salary of an MBA grad to 10 times.

• 9:29Ed Elson?

  Fucking insane.

• 9:30Scott Galloway?

  This needs federal action. This needs a fairly serious subsidy or tax credit for developers who figure out a way to build housing. And then some sort of, I don't know if you have to go state by state, supposedly there's some mayors in, for example, Minneapolis and in Austin, who've done a good job of figuring out a way to build more housing. But I had a really interesting conversation with Jessica Tarlov, who's my co-host on another booming podcast. Ed, I don't, I don't know if you've met her.

• 9:57Ed Elson?

  I don't know. Who is she?

• 9:58Scott Galloway?

  Who is she? She said, her and her husband, they're like really good livings and they've decided, they live in Manhattan, they decided to rent, not to buy. And they could afford to buy, but they said, and it was, it seemed simple, but it was sort of striking. They said, our money is doing better in the market than it would in a Tribeca condo. And I thought that was really interesting, that they've made a conscious decision to leave their money in the market instead of putting all of it into a condo. But I like the way you're thinking. I think, I do think at some point, buying a house, understanding the market is the way to go.

• 10:29Ed Elson?

  Certainly a case by case basis. I think that, as Ramit Sethi told us, the cult of home buying is kind of a trap. Sometimes renting is the right move. But let's move on to these Tesla earnings. Tesla had a good quarter, actually. Revenue was up 8%. Their energy and storage business was up 52% and margin growth was really good. Operating expenses are down 6% after they cut a 10th of the workforce. So this is. Sort of what we've been looking for. This isn't the BS that we saw at the We Robot event at Warner Brothers Studio. This is real, meaningful progress. It's real data. This is just about the performance of the fundamental business and the fundamental

• 11:10Ed Elson?

  business is doing pretty well. Does it mean that it needs to, does it warrant a 20% jump in the stock price? I don't think so. I think it certainly warrants a jump. The one thing I would flag, though, is the valuation still, you know, it's trading around 30% down from its, from its peak in 2021, but it's still trading at 79 times forward earnings, which is roughly double the multiple of, wait for it, Nvidia. So if you wanted to value Tesla today on par with Nvidia, the stock would need to come down 48%. So, good quarter, but Tesla is still way, way overpriced.

• 11:51Scott Galloway?

  The only thing I saw in this as I looked through the earnings was that it was revenue increasing 8%. Isn't that big a deal? I mean, that's, that's good for a car company. But the story here, and they did a good job laying it out in their earnings call, was that it's not the revenue increase, it's the revenue mix. And that is the sale of higher margin products. So, storage batteries, which are used by utilities, businesses and homeowners increased 52%. And revenues from services, including charging, jumped 29%. And those are higher margin offerings in their cars. And they've also deployed more battery storage products this year than it did in all of 2023. So for all the Tesla bulls who say, it's not a car company, it's an energy company, it's a services company, now they can legitimately

• 12:35Scott Galloway?

  say, see, I told you.

• 12:37Ed Elson?

  Yeah, but it's not, it's not an AI company. And that's, that's my issue. They're not selling you robots.

• 12:42Scott Galloway?

  But to be fair, this, this more robust revenue mix or growth in higher margin product categories resulted in their gross margins increasing 200 basis points and their net income increasing 17%. And I think that's an important lesson for entrepreneurs. And that is, when I had my firm L2, I would say, okay, we can get, we get paid, you know, if I come spoke or one day symposium, or the people constantly want us to do a consulting gig. And I'm like, rather than getting a half a million dollar consulting gig, we'd much rather get a $200,000 annual recurring membership. Because all revenues are created equally and revenue they get from their automobiles is going to have a much lower multiple on it than revenue they get from services or

• 13:27Scott Galloway?

  charging because they have higher margins, more sustainable. I think the Tesla product lineup, quite frankly, is a little bit tired. So this is about revenue mix, not about revenue growth.

• 13:37Ed Elson?

  Should we talk about McDonald's and this E. coli outbreak and the initial reactions?

• 13:41Scott Galloway?

  See, here's the thing about what you want to do if you're McDonald's or in the fast food business. You can kill hundreds of thousands of people as long as you kill them slowly. But if you kill a bunch in one day, your stock gets taken down. Like what number, seriously, what, how many people do you think are going to have colon cancer this year because of a lifetime of McDonald's? I mean, it's just if you price McDonald's to its externality, specifically if you price beef to what it costs because of water, subsidized water, and the health externality, you know, a Big Mac would be 50 bucks. So I don't, I don't especially like this firm. I would just love to see an article on how many people

• 14:22Scott Galloway?

  died today because of long-term illness from this type of food. Anyway, it's easy for me to say.

• 14:28Ed Elson?

  Yeah, I mean, the investor reaction, I think people were pretty freaked out by this. But I think the thing to remember about these outbreaks is that in the food industry, this actually happens all the time. It happened to Wendy's a couple of years ago, and it was, it was, it was E. coli. It's happened to Taco Bell, Jack in the Box, Tim Hortons, on and on. This is sort of a rite of passage in the fast food industry. You have an outbreak, then you announce a recall, and then you kind of, you move on and life goes on. What you don't want is what happened to Chipotle back in 2015, which is where there was an E. coli outbreak, 20 people were hospitalized and zero people died. But it just exploded

• 15:11Ed Elson?

  into this giant international news story. The media totally ran away with it. It was really exciting. Everyone was talking about it. And as a result, despite the fact that it was historically pretty standard, sales dropped 20%, profits fell 50%, and the stock was cut in half. And it was like the The worst thing to happen ever. So McDonald's needs that to not happen. My view, it won't happen. Why? Because we've got a presidential election coming up in two weeks. I just don't think there is enough steam in the media to turn this into something bigger than it is. My prediction is that, you know, come next week, it won't be an issue. We're focused on other things.

• 15:50Scott Galloway?

  Chipotle, after it had that 50% cut, it's up, it's up sixfold since then. And this is pulse marketing, but my first thought when I read about McDonald's was like, oh, it's time for a colonoscopy. Yeah. And also I quite enjoy that Michael Jackson drug. Oh my God, that shit is money. That shit is money. God, that's a good sleep. That's a good sleep. And I love my jokes in there. I'm like, I'm like, will you stroke my hair as you're probing my? I just, I'm full of so many jokes and they're like, we've heard them all. Any new ones?

• 16:22Ed Elson?

  Exactly. It's like, it's like hosting this podcast. Yeah.

• 16:25Scott Galloway?

  Yeah. And, but my first thought, I remember when I heard about the Chipotle E. coli outbreak, you know what my first thought was? Jesus, I'd like some Chipotle. I think that Chipotle product is so outstanding. I think it is just an amazing, and actually it's not. I wouldn't call it health food, but I would go as far to say it's actually fairly healthy and, and it's got the right fats, it's fairly fresh and the most, I have such fondness or affection for Chipotle because the first swag I ever received when we started this Joey Bagadonuts podcast about 300 episodes ago. I just constantly talk about Chipotle and you know what they sent me? They sent me a lifetime free card of Chipotle like,

• 17:10Scott Galloway?

  and I had this card and I knew I was going to get it. So my kids are in Manhattan and then I, we roll into Chipotle and they order something and I pull out the card and I'm just very slick about it. My youngest one goes, what is that? And I'm like, oh, it's a Chipotle card. And so what do you get with it? I'm like, well, I never have to pay for Chipotle.

• 17:24Ed Elson?

  Holy shit.

• 17:25Scott Galloway?

  He has never been as impressed with me. He just couldn't believe it. He wanted to see the card.

• 17:31Ed Elson?

  I want to say, what does it look like?

• 17:32Scott Galloway?

  It's okay. It looks like a, I don't know. It's just a little, it looks like a credit card and it says Chipotle lifetime free or whatever. I don't use it because I'm lazy and I can't find the card and I, I don't know. I can buy my Chipotle. But anyways, let's talk about Shin.

• 17:47Ed Elson?

  Yeah, let's talk about it. Your reactions to the growth is slowing. You're an investor, right?

• 17:51Scott Galloway?

  I am an investor. It's one of my biggest investments. So, okay, let's just be real here. And granted, I have a vested interest in success this company. The bad news is its growth slowed to 23%. The good news is it's growing 23%. Ed, Amazon Retail was up 9%, Zara was up 7%, H&M was up 1%. So Shein is growing two and a half times as fast as Amazon. I mean, I guess it's all how you frame this. When I got, when I heard about this, I actually felt pretty good about my investment. If a company that's doing, you know, $36 billion in sales is still growing 20, can you name any company over 10 or 20 billion, growing more than 20% a year that isn't valued at a trillion dollars?

• 18:34Ed Elson?

  I was gonna say Nvidia until you said that.

• 18:36Scott Galloway?

  Right. I mean, there are firms that big, growing that fast, but they're all worth more than a trillion dollars. So, I don't know, I like my prospects here, Ed. I like my prospects. What do you think? What do I have this wrong?

• 18:48Ed Elson?

  I don't think you have anything wrong on the financials. I completely agree with you. I think this business is still crushing it. Where I continue to disagree with you, and I don't want to rain on your parade or be the woke police, is the moral viability of this company.

• 19:04Scott Galloway?

  The moral viability. Well, smell you, you little indulgent, virtue signaling, millennial, Brooklyn sandal eye.

• 19:11Ed Elson?

  Don't speak too soon, because wait, wait till I drop this on you. So I've told you that I, I think that there are valid concerns about child labor at Shein. And it turns out, as of a couple of months ago, they released a report, they have been using child labor. They found two cases of child labor in their supply chain. And to be fair to them, they reported it, and they disclosed it, and they cut the ties with those suppliers. But the fact remains, it's like, wow, how do they sell dresses for $10? Well, the answer is that they've spent the majority of their time employing children to do it.

• 19:48Scott Galloway?

  Again, I'm defensive. I spent, I spent some time looking at this. The first was that they were using forced labor for their cotton. And they've actually gotten out of all cotton, I believe all cotton production in China. And they had a company that looks at clothes and tries to estimate the amount of cotton coming from a forced labor region. And they actually had a lower count than many of the other fast fashion guys. So the management I know, or at least the interaction I've had with them, is they are committed to, for economic reasons, being the best or one of the better players in this space around this stuff. And I think when they found that out, they disclosed it, which is unusual. It wasn't like Mark Zuckerberg going in front of Congress and lying and saying, I've heard actually social media is good for the the mental health of teens.

• 20:32Scott Galloway?

  They said, we found it out, we're disclosing it, and we're severing ties with these guys. I would like to see a similar audit across all the other fast fashion guys and find out, yeah, where is their cotton and where is their shit being made? I agree that when you're buying a T-shirt that's three bucks, it's unlikely the supply chain is aspirational. It's just, it's unlikely that the employees are getting pet bereavement leave and mental health counseling. But I don't, I believe management when they say, we're going to try for economic reasons to starch our hat wide here. So I don't, you know, if I sound defensive, I am. But Donald Tang, the chairman, has said to me straight up, he's looked me in the eye

• 21:14Scott Galloway?

  and said, we're going to be the role model in, they don't call it fast fashion, an on-demand fashion around a sustainable, progressive, ethical supply chain. But they should be held accountable like anybody else.

• 21:26Ed Elson?

  As you say, countless companies have done countless bad things. Apple has had supply chain and child labor issues as well. You know, so has Nike. I think the reality is, you know, I just look at the company, I associate it with that. It turns out it's true. It may be true of other companies, but the reality is that, for me at least, I still hear the word Xi'an, and my initial gut reaction is, eh, not a huge fan. And I would bet that a lot of people feel similarly, and I think that's why you're seeing some of these issues they're having with getting out to the public markets. It's also because they're, they're from China, or at least the majority of their supply chain is in China. But that's just the gut reaction.

• 22:09Ed Elson?

  And so, like, yeah, I think it's on them to address that. And I think that starts with doing a very, very thorough audit of their supply chains, which they appear to be doing, and maybe over time, they'll, they'll get me on their side.

• 22:21Scott Galloway?

  Actually, Edward, you buy your clothes. Where do I get the kind of like skateboarder who things didn't work out for look?

• 22:29Scott Galloway?

  That's good. That's good.

• 22:32Ed Elson?

  I've been on a pretty big J. Crew kick recently.

• 22:34Scott Galloway?

  J. Crew? So you're just leaning into that whole Caucasian thing?

• 22:40Scott Galloway?

  J. Crew. Wow, I did not expect that.

• 22:43Ed Elson?

  J. Crew, send me a lifetime card, please.

• 22:46Scott Galloway?

  There you go.

• 22:48Ed Elson?

  We'll be right back.

• 22:59Speaker 00

  When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsored job credit at indeed.com/podcast. That's indeed.com/podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs.

• 23:28Speaker 01

  Energía baja. Falta de concentración? Nevra 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.

• 23:58Speaker 02

  This episode is brought to you by Subaru. You know that place your mind always wanders to? The lake? The mountains? The homes of the people you love most? The completely redesigned 2026 Subaru Outback is built to help you get there. With legendary capabilities, standard symmetrical all wheel drive, and the confidence to go further. The 2026 Subaru Outback. Love never looked so good. Visit subaru.com/outback to learn more.

• 24:28Ed Elson?

  We're back with Prof G Markets. Boeing workers rejected a contract proposal that included a 35% raise over four years. As we discussed previously, the workers are demanding a 40% pay increase. That vote extended their strike and made Boeing's bad day worse because earlier that morning Boeing reported a quarterly loss of $6 billion, its worst loss since 2020. The company's CFO also said it will continue to burn cash into 2025. The stock dropped 4% following those earnings and went even lower after the union vote. So Scott, let's start with the strike. Nearly two thirds of the workers voted against this proposed contract. What are your reactions to that result?

• 25:11Scott Galloway?

  Look, good for them. They know they have power. It seems like the bid ask here are not that far apart and Boeing has incentive to solve this, whereas Netflix had disincentive to solve the strike. I wouldn't be surprised if this was a kitchen sink quarter where they just threw everything into it. But it's great, even if you're the number two in a duopoly, it's great to be the number two in a duopoly. The firm has a $500 billion backlog of over 5,400 commercial planes. I mean, that's just half a trillion dollar backlog. And also the strike, it may end up medium and long term being a good thing because it gave the CEO Kelly Ordberg cloud cover to lay off 17,000 workers. He's like, okay, fine, you're not happy.

• 25:56Scott Galloway?

  We got to cut costs. They haven't reported a full year profit since 2018. They need to cut costs. They need to get labor relations back on track. Talk about a change in fortunes. Boeing has declined 57% in the last six years and Airbus has increased 45%. I would argue that this IP, this brand, its customer relationships and the fact there's only two people really producing planes at this scale, you know, they're going to be fine and I would bet this is actually a pretty, a pretty good buy right now. What are your thoughts?

• 26:27Ed Elson?

  I don't think I agree on that they're fine, but just on the, on the proposal that they are disagreeing on. So the main thing, or the one sticking point.

• 26:40Ed Elson?

  Is the difference between a traditional pension plan and an individual retirement plan. So what the Boeing workers really want, they want the 40% pay increase, but what is becoming clear, because they said no 35% increase, is that what they really want is the restoration of this defined benefit plan, this traditional pension plan that Boeing removed back in 2014. And this is kind of an interesting difference. So like, what is the difference between a traditional pension plan and, and, and a, and a individual retirement plan, like a 401k? Well, unlike the 401k, where the employer invests in your retirement

• 27:21Ed Elson?

  account during your time at the company, the traditional pension basically just pays you a predetermined amount of cash that begins when you retire and ends when you die. So it's basically like a mini salary for life. And this used to be the most common form of retirement account in America. Back in the eighties, around 40% of US retirement plans were pension plans. Today, though, they're very, very rare. Only 8% are traditional. Meanwhile, the most common are the individual retirement accounts, the 401k. That makes up 50%. That's what I have. Most people I would, I would imagine who are listening to this podcast, if they're offered a retirement plan through their employer, it's a 401k.

• 28:04Ed Elson?

  So I find it very interesting that this is sort of the main problem. It's not actually about the amount of money they're receiving necessarily. It's, it's really about how they are receiving it. They want a monthly paycheck once they've retired versus Boeing investing in their accounts now. And Boeing has said, this is unacceptable. We cannot do it. So I'd love to get your view as an employer who has set up retirement plans in the past. Why is this such an issue for the workers? And also, why is it such an issue for Boeing? Why doesn't Boeing just say yes?

• 28:40Scott Galloway?

  So the, the workers are being smart. They're realizing that time goes fast. And at some point, they're going to be retired and they want a paycheck. I would imagine the reason they're pushing back is the last thing you want is a type, is a liability against an unproductive asset, and that is a retired person. So setting up, setting up a pension fund that might have obligations, there are some companies that are technically bankrupt if you calculate in their pension obligations.

• 29:08Scott Galloway?

  What we do for you, Ed, is I say, I want you to save money. So I forget, I don't even know.

• 29:13Ed Elson?

  You're, yeah, defined contribution and it's a 5% match. So if I invest 5% of my salary, you match it and also invest 5%.

• 29:23Scott Galloway?

  I like to think of it as 100% match bitch, because if you put 5% in, I'm doubling it to 10%. But if at your age, we're trying to eat our own cooking here. At your age, if you get 5% of your salary and you put it away, goes into this thing, I match it. So that's 10%. At the age of 26, if you can just do that for the rest of your life, regardless of whether or not this pod works or not, as long as you can hold on to your job, you're going to be fine. And that's powerful. And I think all employers should encourage that. I do believe in being a little bit paternalistic. But other pensions are, work here for 20 or 30 years and we're going to give you, this is a big problem in government or local governments, and that is they have these pension plans with cops.

• 30:08Scott Galloway?

  And they say, if you work 20 years, you then get a pension the rest of your life. You get payment. And unfortunately, the cops who are smart will game it. And what they say is, we're going to give you 60% of your salary the last two years of your tenure. So what they do is they wink at their staffing sergeant and they work 80 hours a week their last two years where they get time and a half. And they end up making $220,000 the last two years and they end up with $120,000 obligation for the rest of this cop's life. And you end up with 13% incremental tax rates in New York State because we have all of this incredibly onerous pension liabilities. So what I think, I'm all for,

• 30:48Scott Galloway?

  I'm all for companies taking current profits and matching, you know, I like the fact that you show some discipline and I gross it up. I like that. And then if you leave, it's portable, it goes with you. And at 59 and a half or 65, hopefully you have economic security. What companies want to avoid, and they can't afford, and it's kind of created some zombie companies, is this notion that if you work it for a certain amount of time, we're just going to keep paying you a certain amount of your salary. And they don't fund it. They don't figure out a way. They just assume the good times are going to keep, keep going and that they'll be able to pay it. And then you end up with a company whose biggest, or one of its biggest expense lines. Is revenue going out to employees who are not working, who are unproductive? So this is a big issue.

• 31:33Scott Galloway?

  What this clearly shows, though, is that this union is smart in thinking about, okay, how do we set our, our members up for long-term financial health? 99% of people, the lesson here is the following. 99% of people will spend everything that comes into their hands. You know, I'm kind of that way. So what I do is as soon as I get money, I start, I put it away. I try and get it away from me where I can't touch it. That's the way to go. You never see it. It doesn't go into your hands. You don't think, oh, I'm going to Coachella with the guys. You're like, I don't have the money. And the money just, you never have it in your hands. When I'm talking to young people and they're asking for advice around compensation, my attitude is ask for more options. Ask for more match.

• 32:17Scott Galloway?

  Ask for the shit that's going to build wealth, not that's going to get you a bigger flat screen or a bigger apartment.

• 32:21Ed Elson?

  Yeah, exactly. It's interesting that it does feel like these pension plans are very outdated in terms of just the, just the concept of you've worked here for 30 years and therefore you're set for life. You are a lifetime Boeing employee in a way. And it does feel sort of outdated because I just, people aren't working their entire lives at one company anymore. People are switching companies. The idea of a company giving you sort of the stamp of approval and then you're on their paycheck for the rest of your life, to me, just feels outdated, which I think is also kind of a, an argument in favor of Boeing.

• 33:02Ed Elson?

  But I do understand their points and I do understand that these workers have really gotten screwed. Their compensation has only increased 4% over the past eight years. I mean, it is crazy. They deserve something legitimate, but I don't know if a traditional defined benefit pension is the way to go about it.

• 33:20Scott Galloway?

  It does feel very Angie Dickinson, Johnny Carson. It does feel a little bit from an age come by. The broader meta learning here, though, is that you have to try and fight your instinct or supplement your instincts. And it's the following. At your age, you just can't imagine you're ever going to be old because for the majority of our species' existence on this planet, you haven't lived past the age of 35. So you, you literally, your brain cannot realistically imagine you're going to be my age.

• 33:53Scott Galloway?

  And the other thing you can't imagine is how fast it's going to go. And you want to lean, you want to A, try and fight that instinct and leverage that instinct or leverage the reality. And that is, if you continue to do that 5%, and then maybe you start making real money and you go up to 10 or 20%, before you know it, I mean, I'm not exaggerating, I look at you and I think, oh, I look like Ed. I look like a young, fairly awkward guy, but I look young. I have this lame J. Crew shit. I relate to you. And then I look in the mirror and I look like a fish that swam too close to a reactor. I look like I suffer from radiation sickness. True story. People can't imagine, people,

• 34:34Scott Galloway?

  basically because I haven't lived very long, people's image of themselves stops evolving at 39 supposedly. In other words- 39. Yeah. You, you see yourself and you're like, oh, I'm getting older. I'm getting older. Oh, I'm 39. And then every time you look in a mirror from the age of 39, you're like, Jesus fucking Christ, what is going on here? So interesting. You can't, because here's the thing, you're not supposed to be here. All 7,000 of your ancestors were dead. They never got to see how ugly you got. They weren't getting colonoscopies every two months. They didn't need Botox because they were dead. They never had wrinkles in their forehead. Do you realize most people your age, you're going to live to be 100. So,

• 35:16Scott Galloway?

  and assuming you're probably going to work till 70 or 75, if not later than that, but that means you got 50 years. And 50 years, I mean, just do the math. You, I know, we joke a lot, you make good money. You make really good money for someone your age. And well, just stop, you just make good money. If you saved, if you managed to figure out a way through matching and other things to save 10% of your income, and you, say you just grew your income from here, 8% a year, and you're very talented, you're going to grow it faster than that. But say it just grew 8% a year. At 10%, if the market goes up 7 or 8%, you're, I would bet you're going to be worth 10 to 20 million dollars by the time you're my age. And that's without an enormous win. And that's the problem. Young people are always banking on the enormous win. That's what I did. I'm like, I don't

• 36:00Scott Galloway?

  need to save money. I'm a baller. Look at, look, you know, and I'm going to sell companies or I'm going to do this. So I would spend what I had. And that's just really stupid because inevitably, the market has a shock.

• 36:13Scott Galloway?

  And you can end up like where I was in your early 40s when a kid comes marching out of your girlfriend and you don't have much money and it's very upsetting or very scary even.

• 36:23Ed Elson?

  So it seems like, based on what you're saying, and I think I would probably agree with this, the solution here is take the the contribution plan versus the traditional benefit plan, but make them up it, get a really good deal, get a really good contribution match. And I feel like that's the way to do it. And I would bet that Boeing would be more amenable to that agreement versus just doing an entire wholesale turnaround and scrapping the contribution plan and going back to the traditional pension. I just don't think there is a place for the traditional pension plan in 2024 anymore.

• 36:58Scott Galloway?

  I absolutely agree. I agree.

• 37:01Ed Elson?

  Stay with us.

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• 38:42Ed Elson?

  We're back with Profi Markets. Perplexity AI is in talks for its fourth fundraising round of the year, aiming to more than double its valuation to $8 billion. The AI search engine and chatbot is seeking to raise $500 million in this round. That's roughly what the company was worth just nine months ago. So Scott, Perplexity is clearly following OpenAI's lead here. What do you make of this funding round?

• 39:07Scott Galloway?

  I think Perplexity has done a great job of creating a brand positioning that is really clean. And that is, I think of it as the AI search engine. Whereas I think of ChatGPT and Claude as AI. I think of them as their own unique, different category. Whereas I think of Perplexity as a true threat to Google. To me, this feels like at 8 billion, I don't know, it kind of feels like a deal to me here. And they have annual revenue of 50 million. Well, maybe it's not cheap. That's 160 times revenue. Both OpenAI and Anthropic traded around 40 times revenue. So this one's trading at four times on a multiple revenue. But I don't, I just like the positioning here. It's much smaller than ChatGPT.

• 39:48Scott Galloway?

  Perplexity has about 15 million monthly active users, roughly the same as Anthropic's Claude, which I think just raised money at 30 or 40. Google's Gemini has over 270 million active users. So what is that about 18 times more? And ChatGPT has over 200 million weekly active users. I'd like to invest in this company. Would you like to invest in this company, Ed? I wouldn't. You would not?

• 40:10Ed Elson?

  No, I wouldn't. I mean, let's just talk about what Perplexity actually is. I think you sort of nailed it. It's kind of like the, the AI search engine. And so what I find interesting about that is that we say that it's a competitor to ChatGPT. We say that it's a competitor to Claude. But actually, when you really think about it, I mean, people are using ChatGPT for sort of more generative, creative projects. They're having it write poems and, you know, do this in the voice of Scott Galloway. People are doing similar things with Claude. The main thing that, that Perplexity offers is a search engine. And so who are they competing with? They're really competing with Google. That's sort of the main competitor.

• 40:55Ed Elson?

  And right now, Google is far and away the best search product. I mean, there is basically no question about that. And they also have this massive, massive pool of capital that they can tap into. And so the the the main thing for me here is, you know, why is perplexity raising for the fourth time this year? And they raised around in January. They raised another round. Three months later, they raised another round in October. And here they are again. They want to raise $500 million at an $8 billion valuation. So they raised four rounds in one year. And that tells me two things. One, they must be growing rapidly. It's a good thing.

• 41:39Ed Elson?

  Two, more importantly, they must be spending an absolute fuck ton on this business. Because every time they've gone out, they've raised the money, they come back and they say, actually, we need more. And so this, to me, is proof of what we've been saying for a while. And I don't think this is a good thing for perplexity, which is that AI is becoming just a flat out arms race. It's not about who can outsmart the other. It's about who can outspend the other. It's the same thing that we saw in streaming. And that's great news for OpenAI. They have demonstrated that they can just go out and raise pretty much into infinity. But for perplexity, the fact that they've done four rounds, I'm sure they're sort of realizing that the only way

• 42:22Ed Elson?

  that we make it out alive here is if we just keep on raising and keep on raising. It's basically grow or die. And, you know, the rounds were, the size of these rounds we're talking about, $50 million, $100 million, $500 million. Those numbers are way too small. If you want to compete with OpenAI, they just raised $6.6 billion. They're on track to spend $5 billion this year. You have to think way, way bigger. And so if I were an investor, I'd be very, very scared. Because the only way you win is by basically spending all of your money.

• 42:55Scott Galloway?

  You're right, it's an arms race. I don't, I'm not surprised. They don't want, they don't have, they can't go out and raise billions at a time, which is what required for compute and staffing up. So they're just constantly raising money. But you're right, it's an it's an arms race, but I would invest in this company just because I think their positioning is so clean. AI searches are really clean positioning and they're going after a $300 billion market.

• 43:18Ed Elson?

  Okay, what about this? If you could invest in, if you had the opportunity to invest in OpenAI or perplexity, who would you go for?

• 43:24Scott Galloway?

  Yes. Have you learned anything? We want to, we want to, we want to diversify. I would, I would like to invest in both. By the way, Sam Altman and whoever the CEO of perplexity is, I'm super easy to track down. I'm not a journalist. I've got to match Ed's 401k. That bill's coming up. So Ed's retirement, unless you want Ed eating cat food, not funny. You need to let me into this deal. You need to let the dog, let the, let, the dog's gotta eat. Let me put it this way, ChatGPT at 150 billion, I can easily see it being worth 500 billion. I can also see the cleanest AI search company being worth 25 billion, which is triple where it's at right now.

• 44:09Ed Elson?

  Yeah.

• 44:09Scott Galloway?

  So I like both of these companies. I, I'm trying to figure out a way to get exposure to the AI space other than buying Microsoft. It's not easy. Everything's private. So I don't know, we need some exposure. We need a little, a little taste of some of this AI magic and then.

• 44:26Ed Elson?

  Totally agree. I, all I want is OpenAI and just the stat that really gets me. They're, they're at over 200 million users right now and only 10 million pay for it. So that's only 5%, probably less, way less than 5% of the user base.

• 44:42Ed Elson?

  And, you know, a lot of people would say that's a problem, but I feel like that's just a huge opportunity.

• 44:47Scott Galloway?

  They're, they're going to get to a billion people and then they're going to flip on, they're going to have people.

• 44:50Ed Elson?

  Flip the switch.

• 44:50Scott Galloway?

  Yeah, that's exactly right. They get people addicted to the format, the UI and the comfort with it. And then they'll flip the switch and start monetizing the hell out of it or come up with amazing. Can you imagine using AI, the most amazing singular ad they could run against the one search you do?

• 45:06Ed Elson?

  Exactly.

• 45:07Scott Galloway?

  So yeah, this is, you're right. This thing is a, this thing is a juggernaut. Plus Sam Altman and his hushed tones. He's just very concerned about the world, Ed. He's worried about, he's worried about, yes, we need to work with government.

• 45:24Ed Elson?

  Let's take a look at the weekend.

• 45:27Ed Elson?

  We'll see data on the personal consumption expenditures index for October, as well as earnings from big tech. Google, Microsoft, Meta, Amazon and Apple are all reporting. We'll also see earnings from Starbucks, Berkshire Hathaway and Uber. Big earnings week coming up. Do you have any predictions for us, Scott?

• 45:45Scott Galloway?

  My prediction is that Boeing at 155 bucks a share today over the next year, we should timestamp it the way it's going to outperform the market. I think this is a great company with a great brand, great products. And it's effectively in a duopoly. The global economy continues to grow. A key component of the global economy is commerce. Key to commerce is international flows. Key to international flows is commercial jet transportation. These are really difficult products to produce. You just can't, you cannot spin up an airplane manufacturer in even a decade. It takes massive government subsidies, massive engineering talent. So anyways, Boeing will outperform the S and P over the next 12 months.

• 46:31Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Jessica Lang is our research associate. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Aswath Damodaran. He's back only on Prof G Markets.