Pod Insights The Prof G Pod with Scott Galloway Prof G Markets: Home Depot and the Housing Crisis, Stellantis Beats Tesla, and the Lithium Market About this episode This week on Prof G Markets, Scott breaks down why Home Depot’s disappointing earnings are indicative of healthy market trends. He also takes a look at promising earnings from Stellantis, the second largest EV seller in Europe behind Volkswagen and ahead of Tesla. Finally, Scott explains why companies and resources are nationalized, and discusses what it means that Mexico is nationalizing lithium.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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0:48 Speaker 01 Your heart can tell you a lot about your health. Apple Watch Series 12 measures your heart rate every five seconds with the most accurate heart rate sensing in wearable. So your vitals app, now with heart rate variability, can tell you when something is off. And your readiness score can let you know when to rest and when to push. Hear the story in every heartbeat with Apple Watch Series 12. The features described are for wellness purposes only and not for medical use. iPhone 11 or later required. Based on Apple conducted study of heart rate accuracy, August 2026. Visit apple.com/aplewatchseries12.
1:18 Scott Galloway? This week's number, one-third. That's the ratio of kids that have worked for their parents. I asked my father, "When was it time to see the dentist?" And he said, "When you get a job and can pay for your own fucking braces."
1:40 Scott Galloway? Welcome to PropG Markets. Today, we're discussing Home Depot's earnings, one of the largest EV sellers in Europe, and the lithium market. Okay, here with the news is PropG Media Analyst Ed Elson, who is now dressing like me. Ed, what is going on? Trust me, if you want to stay a virgin until you're 26, you're headed the right way.
2:03 Ed Elson? I'm great Scott, how's Tulum?
2:04 Scott Galloway? Muy bueno. Poppy is here and he's mostly doing mushroom chocolates and meeting interesting Canadian women. So you're from Alberta, what's that like? But yeah, it's nice. I like Tulum. It's very bougie. It's like boho chic. I'm having a nice time.
2:17 Ed Elson? Have you gone partying yet?
2:18 Scott Galloway? You know, I'm I'm here alone, so I I, you know, me alone at a bar is sort of like, you know, everyone is just sort of like, don't make eye contact with them. I mean, I'm having a nice time, but yeah, I'm not really, I'm not really partying.
2:30 Ed Elson? Yeah, I've been to Tulum once and just for our listeners, the reason I went to Tulum was because last year Scott asked us, or Scott told us that we need to take a vacation. He said, create a slideshow of different places that you want to go. And so we said, okay, we want to, we want to go to, maybe Claire can correct me. I think we said, uh, Mykonos, San Fray, and probably somewhere else in Europe.
2:53 Speaker 03 Don't forget about Cannes.
2:54 Ed Elson? Oh, yeah, Cannes, yeah. And Scott really supported that. And then he said, actually, no, uh, I'm going to send you to Tulum. And then he gave us the contact details of his concierge and basically set up a four day bender for four of his, uh, employees. So that was a pretty intimate experience at Tulum.
3:12 Scott Galloway? So there's a couple of things in there and I'm being semi-serious here and that is, one thing I have learned is that the key to hiring is making sure that no one leaves. And that is fire the people that aren't working, I'm good at that, but then retain people that are good. It's just so much less expensive to retain a good person by, you know, providing them with economic and non-economic compensation. Retention is really the key to building a good small business or any business. And in addition, I believe that the number one source of retention, or the way you build retention in your organization, is if the person has a friend at work. If a worker has a friend at work, they're something like forty percent less likely to ever leave.
3:55 Scott Galloway? And in an era of COVID, uh, we're saving a lot of money on office space. I thought, why wouldn't I take some? A portion of those savings and give it to you guys to have fun. And the thing about when young people go somewhere and their boss is paying for it, they tell everyone, they feel really fortunate. They, I mean, you guys, it's literally like you guys have died and gone to heaven. It's not that big a deal, but talk about a rookie move. I asked you guys to come up with some ideas and you come back with Saint Tropez for the weekend. And I'm like, okay, first off, do you know how to get to Saint Tropez? And you're going to be a bunch of 20 somethings walking around with no access to the clubs there.
4:35 Ed Elson? We're just trying to push the limits.
4:36 Scott Galloway? So daddy had to take over and say, all right, amateur hour is over. If you want to abuse alcohol and have a weekend, that's my specialty. Okay, enough of that. Ed, take us through the weekly review of market vitals.
4:53 Ed Elson? The S and P 500 posted its longest losing streak since December. The dollar climbed. Bitcoin spiked briefly above 25,000. That's its high for the year. And the yield on 10 year treasuries hit its highest level since November. Shifting to the headlines. The UK overtook India as the sixth largest stock market in the world. The India market has been dragged down by the ongoing drama at Adani Group. That was kicked off by the short seller Hindenburg Research. We covered that a couple of weeks ago. Bill Gates is investing $900 million in Heineken, the world's second largest beer maker. Part of that stake is attributed to the Bill and Melinda Gates Foundation. That's his nonprofit.
5:35 Ed Elson? Amazon completed its $3.9 billion acquisition of One Medical after the Federal Trade Commission said it would not challenge the deal. Amazon will get 200 doctors' offices and roughly 815,000 One Medical members in the transaction. Amazon also made the news for its return to office mandate that requires corporate workers to come in three days a week. In response, more than 20,000 employees joined a remote work advocacy Slack channel to voice their concerns. And finally, McKinsey is cutting 2,000 jobs, one of its biggest layoffs ever. For context, McKinsey has 45,000 employees, up from 28,000 just five years ago.
6:18 Ed Elson? Scott, what are your takeaways here?
6:19 Scott Galloway? First off, let's start with McKinsey. Catherine and I, my partner here at Prop G Media, we work for a firm called L2. And occasionally, we'd be invited into a board meeting and McKinsey would be presenting. And literally, I tell the kids in my class at Stern, if a kid has a really thick Northern European accent and wears German glasses and is really pedantic and kind of awkward looking, I'm like, you're gonna go to work for McKinsey. It is the land of awkward Northern Europeans. I've also been just struck, I was always so intimidated by McKinsey. They have such a great brand. I love their content. Whenever I've been in a meeting with McKinsey executives and they present, I've just been blown away around just how incredibly mediocre the work is.
7:03 Scott Galloway? I'm like, this is just people using platitudes and throwing up models on a screen that are an IQ test that no one can figure out. It just strikes me that this is arguably one of the best managed brands in the world because I literally was always like, okay, when are they gonna, when is the insight part of this program? But again, what is everyone talking about? The 2,000 layoffs versus the 17,000 new hires in the last, whatever, last three years?
7:33 Ed Elson? Five years, yeah.
7:34 Scott Galloway? Last five years. If I were Amazon, what we have here is quiet firing. Return to work mandates are an easy way to fire people and it goes something like this. Okay, I'm in HR and senior management has basically said, I'm under pressure from my shareholders and it's pretty clear. We overhired and we could lose 10, 20, 30% of our workforce and no one, no client or customer would likely register the difference. And all of those savings go to the bottom line. What's the most elegant way to shed 10,000 or 20,000 people to have this sort of elite culling, if you will, or culling of the expendable elite? Simple, back to the office mandate. And you can bet, Ed, Uh, that if someone is really good and has legitimate reason for the, why they can't be in the office, they'll make accommodations for them.
8:19 Scott Galloway? But the other five, 10, 15,000 people who join a Slack channel. Hey, good luck with that. Best of luck to you. You should quit. You should quit. I, we hate to see you go. But um, you should quit. Amazon's 3.9 billion dollar acquisition of One Medical. I love it. I'm a really happy customer of One Medical. I love remote healthcare. When I got COVID, I immediately dialed into or connected on One Medical and I was paired with this lovely uh, registered nurse and he could not only prescribe me Paxlovid, but had visibility into which pharmacy had it in stock and send me a map on how to get there. It was a really wonderful experience, fairly inexpensive. And also I don't think the FTC or the DOJ should get in the way of this, which they've signaled or not, because
9:03 Scott Galloway? that is one industry that needs more competition. The Bill Gates thing, I don't know what's going on there. I think that's just a value investment. At first I was trying to read into it, like what's, why are they investing a billion dollars? But I think they just see it as a good buy. And uh, the UK overtaking India as the sixth largest stock market. Um, you mentioned that I would bet Indian stocks are actually a decent investment right now because of the punishment of the overhang of the Adani Group and the corruption there. But India is going to get a lot more attention. Because India, I believe, has passed China in population. And is further behind the curve in terms of going into population decline, which I think is going to be the new. I don't know, sovereign debt. I think people are going to start talking about how much debt a nation has and also whether it's in population
9:48 Scott Galloway? ascent or decline is a forward-looking indicator of its success.
9:51 Ed Elson? I also want, just want to go back to the layoffs. I mean, you've had experience laying people off in mass numbers. And I'm wondering, um, as a manager and as an employer, how have you created those lists in the past?
10:05 Scott Galloway? So I haven't done math. I'm, I haven't run big companies. I run small and medium sized companies. So I run companies till they get to about a hundred or a hundred and twenty. As soon as we have a CFO or a head of HR, I know it's time for me to become chairman. And bring in someone more thoughtful and reasonable than me, who can scale the company. Um, what I have done is, uh, I did it at profit once. We brought in a CEO, the brand strategy firm. He raised some money, went on a hiring binge. And uh, recession hit and we had to call 20 or 30 people into a room, a conference room and had to say, uh, you've all been laid off. That was, I think, one of the most rattling professional things I've ever been through. But there's no easier elegant way to do it. I think you do it decisively and quickly. In that instance, we call people Sunday night or even maybe early Monday morning.
10:50 Scott Galloway? And the ones who weren't being laid off, we told them not to come into the office. I also believe that if you're doing a layoff, you do it crisply and you get them out of the building and there's all this PR around turning off their phones and everything. I, I, you know, are shutting off their security access. I don't think you're mean about it. I don't think you should have scored people out. Certain investment banks who scored people out was by security. Unless they've done something illegal, I don't think you do that. But I think it needs to be kind of short and violent. And the sooner you do it, the more severance you can give. But we don't talk about this a lot. I think part of being a good manager is not only strategic hiring, but strategic hiring.
11:27 Ed Elson? We'll be right back after the break with a look at Home Depot's earnings.
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12:54 Scott Galloway? Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. The regentic trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?
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14:07 Ed Elson? We're back with Prof G Markets. Home Depot disappointed with its earnings last week. Sales were relatively flat, missing Wall Street's estimates, and the company also forecasted a drop in profits for 2023. The company cited a few reasons for this miss. First was lumber costs. Lumber prices surged last year but are now down around 50% from a year ago. Second, wages. Home Depot will spend $1 billion in wage increases for its employees, which will have a negative impact on its margins. And finally, the economy. The CEO Ted Dekker pointed out that people are spending more on services like travel and dining and experiences and less on goods, in this case, home improvement products.
14:49 Ed Elson? Home Depot shares fell 7% after the call and ended that day with one of the biggest declines out of all of the S&P 500 stocks. Scott, what are your thoughts here?
15:00 Scott Galloway? My thoughts are what's bad for Home Depot shareholders is good for the world. And that is, there's this incredibly powerful Force in the universe and that is reversion to the mean. And that is luck is almost perfectly symmetrical. And that is if you have great luck around investment, that means you're due for bad luck. And you should pull in your horns. When you have bad luck, I think that's the time to be most aggressive because it means you're due for good luck. And what I've just been blown away by is how the majority of trends have reverted to where they would have been had there been no pandemic. So if you look at e-commerce, if you just took the growth rate of e-commerce in 2019
15:40 Scott Galloway? and took it out another three years, you see this huge spike up, but then it's come down and it's exactly where it would have been on its own. And what we're seeing here is vicious reversion to the mean around the amount of money people are spending on their homes. When people were stuck in their homes 24 by seven, they decided we need to upgrade. We need to renovate. And all of a sudden it's like, no, revenge travel. The last thing I want to do is be in my home. I experienced this at section four. We had this massive growth in 20 and 21 in online education. And then towards the end of 22, we couldn't get arrested because the last thing anybody wanted to do was be stuck in their house staring at a screen, learning about brand strategy. And the business is probably where it would have been had we just kept growing the way
16:25 Scott Galloway? we were growing pre pandemic. So this is healthy regression to the mean or reversion to the mean. And the other thing I really like about this is that frontline workers in retail are getting a raise. And I like that. I think it's hugely overdue. If you ever see an organization putting its workers in commercials, that means they're underpaying them.
16:48 Speaker 04 With courage in your eyes and determination on your mask covered faces and you continue to do it day in and day out. You are the ultimate doers and who you are makes us who we are. We are the Home Depot and we couldn't be more proud of you.
17:10 Scott Galloway? That means we're underpaying. You don't need to be called a hero if you're paying someone a fair wage. They're fine not to be called a hero. So Home Depot, I like the stock going down here because it's a function of some healthy trends. One, young people and people getting out of their house, and two, frontline workers and retail employees making more money.
17:32 Ed Elson? Just going back to the economy. So US existing home sales, we just had some data come out, existing home sales dropped for the 12th straight month just now, and it's at its lowest level in more than 12 years. And you've been describing that, you know, people aren't investing in their homes as much, and we're going to see revenge travel. How long do you see this lasting? I mean, Home Depot is forecasting a massive drop in their profits, basically for the entire year. Do you think that that's an over-projection?
18:03 Scott Galloway? As it relates to homeownership, there was some very disturbing data that came out last week, and that is one in three houses nationally are purchased all cash, meaning the rich are ballers. I think about one in three houses. I think over half the houses in Naples, Florida were purchased for all cash. And at the same time, first-time home buyers have hit a record low, meaning young people can't afford homes, but older, rich people can now pay cash. So this directly goes to income inequality and incumbents and advantage being ceded to old people at the expense of young people. We have a housing crisis because of this nimbus bullshit culture we have. It is so difficult to develop. And that is, once I have a home, I'm gonna endorse and show up to the local architectural review
18:46 Scott Galloway? board. And, I mean, I'm not exaggerating. We bought a piece of property in Delray. We're planning to develop on it. And someone showed up to the local review board meeting and said, well, I like to walk my dog over there. And I'm like, okay, that's called trespassing. And they decided to delay the approvals three months to talk about where there's other places this lady can take her dog to shit and pee over my property. But the local boards have incentives, they all own homes. And everyone who shows up to the meeting owns a home. The people who don't show up to the meeting are young people who want to move there who can't afford a home. They don't show up and say, hey, I'm thinking about buying a home in Delray. Is there any way you could make it like not unaffordable for me by having more housing
19:31 Scott Galloway? stock? We have a housing crisis. We have a crisis of too few freshman seats at colleges. And we have a crisis where it's hard for small companies to emerge past the big guys. And it all comes down to the same thing. The incumbents have weaponized government to their advantage. Once you have a home, a college degree, or a business, you don't want new entrants. And we need legislation that basically ensures that we, the law errands on the side of growth and new entrants. And that always gets people's hair on fire. What you're seeing in the housing market is more of a psychological phenomenon. And that's in addition to just the raw economics where young people can't afford it. You're seeing the economic impact of higher interest rates. So the affordability, if you make, I don't know, two or $3,000 a month, or you can pay
20:15 Scott Galloway? $2,000 or $3,000 a month for a mortgage, it's gone from, you can afford $750,000 home to half a million dollar home. So that just takes down, that's just a gut punch to the housing market. In addition, what we're seeing is this psychological impact of what I call just a standoff. And the standoff is the following. A couple who own a home think, okay, the Joneses 14 months ago got $700,000 for their home. That must mean my houses were $720,000. And they ignore the data that, that as interest rates have gone up and housing prices have come down, no, your house is probably worth 550. They refuse to believe that. People always anchor off the high point. And meanwhile, the buyers are reading all this data and think they're going to come in and swoop in and buy something on the cheap. And what there hasn't been yet is there hasn't been capitulation or price discovery.
21:01 Scott Galloway? And that is, I was looking for a home in Colorado. I love it there. I've seen the inventories build dramatically, but there's nothing trading hands. Because again, the sellers are still, still want to believe that it's early 2022 or late 21, and the buyers want a crash. The buyers think a crash has happened, and it's somewhere in between. But I would bet in two to three quarters, you're going to start to see capitulation. People need to move, the death, divorce, disease, whatever it is, and you'll see stuff get repriced. The good news is housing prices need to come down. Young people need to be able to afford homes. So I'm hoping that home prices do come down substantially. Now, if you bought a home in the last two years, that's going to be bad for you. There's always pain, but there's just no getting around it. A great means of saving
21:44 Scott Galloway? is to own a home. It's a point of pride for people, and young people can afford them. So I'd like to see housing prices come way down.
21:51 Ed Elson? Well, here's a tiny little piece of good news. Biden is cutting mortgage insurance costs for new home buyers insured by the Federal Housing Administration. It's only cuts costs by $800 a year. That's 0.3%. But it's something, and perhaps it'll slightly move the needle on this housing issue.
22:19 Ed Elson? One of the most profitable car companies in the world is one you've probably never heard of, Stellantis. Stellantis is the parent company to car brands such as Chrysler, Fiat, Jeep, Dodge, and Citroen. And last week, it reported blowout earnings. Revenue came in at $191 billion, up 18% on the year. It had earnings per share of $2.78 versus $2.67 expected, and it also posted impressive operating margins of 13% for 2022. For General Motors, that number was 11%, and for Ford, 7%. And finally, Stellantis is emerging as a premier
22:56 Ed Elson? electric vehicle company. The company delivered 288,000 EVs last year, up 41% from 2021. That makes it the second-largest EV seller in Europe, behind Volkswagen, but ahead of Tesla. What do you think of this?
23:12 Scott Galloway? Well, first, I want to do a survey with you and Claire. Had either of you ever heard of a company called Stellantis?
23:18 Speaker 03 No.
23:18 Ed Elson? Never.
23:19 Speaker 03 I only uh kind of realized what it was when I heard that they make Jeep.
23:24 Scott Galloway? I I literally had never heard the terms Atlantis before and made me feel really out of it. And then someone said, oh, it's the Chrysler Fiat brand. But a hundred ninety one billion in revenues, up eighteen percent, eighteen billion in net profit, uh twelve billion in free cash flow, up seventy eight percent. And five confirmed locations for new giga factories and plans to build a fast charging network in Europe. So the metaphor for EVs is they're following the same arc as streaming. And that is media companies were so focused on maintaining the legacy assets, couldn't get out of their own way. And Netflix just came in and said, we can raise cheap capital, we can lose money, we can over invest in content at a great value. And they basically had the playing field to themselves for the better part of a decade.
24:09 Scott Galloway? And then finally, the content guy said, okay, we have to get into this business. We have to do it well. We have to make the requisite investments. You know, shareholders hold your nose, here we go. And Netflix stock peaked a trough was cut seventy five percent. And now Netflix has all sorts of viable competitors. I think the same thing is playing out in EVs. And that is none of the traditional automakers uh wanted to make the requisite investments. All of their factories were optimized for internal combustion engines. They didn't know anything about producing EVs. They, you know, they'd heard all the scare tactics around internal combustion engines going away and never believed it. And wanted to think that big suburbans were going to be selling forever.
24:51 Scott Galloway? And then boom, Tesla comes along, is able to attract incredibly cheap capital, pulls away from anyone else. And is now worth more than, you know, the entire US and German auto industry. And they said about three or four years ago, I think there's a real lag, they started getting really serious. Um, what's interesting is Jason pointed out, these guys have been making EVs for the better part of, you know, a decade plus. They've just been shitty EVs. And now they have a good one. But what are you seeing? This is kind of like Disney Plus, right? This is uh HBO Max, whatever, you know, the new entrance. I guess HBO is not a new entrance, but all of a sudden there's viable competitors to Netflix. And I think that means, and again, this is my Waterloo, I will die on this hill.
25:33 Scott Galloway? I think Tesla is going to follow the same arc as Netflix in terms of its stock.
25:38 Ed Elson? Yeah, I mean, so the first EV. Well, one of the first EVs in nineteen ninety six, GM created the EV one. No one bought them and they stopped building them in nineteen ninety nine. And I think the comparison you're making is that like, you know, Stellantis is the combination of Chrysler and Fiat. They merged a few years ago and then they rebranded to Stellantis. And the idea here is that this is sort of a legacy entrant like an HBO that is finally getting involved in this space. And the only thing that could happen now is that Tesla's market share is going to decline. And what we saw with Netflix, so in two thousand and seven Netflix had a ninety one percent market share on all over the top streaming media.
26:24 Ed Elson? And then by twenty nineteen, the market share was down to nineteen percent. So with Tesla, its US market share was eighty percent in twenty twenty. And then in twenty twenty two, it's down to sixty five percent. And I guess your point is the only thing that could happen is that that keeps on going down as all of these legacy companies start to pile in.
26:44 Scott Galloway? Yeah, the question is, will the growth of the market supersede Tesla's loss of share to competition? And I think Tesla's stock is so priced to perfection that when it experiences the kind of competition they're experiencing. I think the market's just going to start looking for reasons for why this thing shouldn't be valued as much as in the entire German and US auto industries. To be fair, Elon Musk deserves a lot of credit here for sort of inspiring and catalyzing the race to EV. It just wouldn't have happened. It would have happened, it wouldn't have happened as aggressively and as quickly as it is now because he did such an amazing job with Tesla.
27:25 Ed Elson? I want to circle back to this idea of the Stellantis brand, which I had never heard of, Claire had never heard of, and you had never heard of. And I'm, you know, I'm looking at these these price to earnings ratios. Stellantis is at three point three, price to earnings Ford five point two, GM six point seven. Do you think it's possible that the disparity in those multiples is a product of? The fact that people don't know what this company is. I mean, is that a thing where a corporation's brand isn't known enough to investors? And as a result, they just don't pay enough attention. They don't buy.
28:03 Scott Galloway? I made my living until I was in my 40s based on one thing, and that is brand equity translates to irrational margins and above market stakeholder return. And it all comes down to this. You're in a bar, you see someone you're attracted to. She asks you what car you have. You can either have a Tesla Model 3, or you can have a Stellantis, which is a slightly better car at a slightly lower price. Which car are you more excited to tell this potential mate about?
28:31 Ed Elson? The Tesla.
28:32 Scott Galloway? Yeah. And the reason I bought a Tesla is I want to signal to friends and people that I care about the world and I'm rich. You know, that's a subtle way of saying I'm in a midlife crisis. And show me any high margin product. I'm going to show you something that either makes you feel closer to God, makes you feel like a better parent, or makes you feel more attractive to potential mates. And Tesla is an amazing self-expressive benefit brand. Stellantis? What the fuck is Stellantis? And Claire just mentioned probably the best brand in the Stellantis portfolio, Jeep, which has always maintained kind of an American gritty, tough feel to it. But the world's wealthiest man, it's not Elon Musk, it isn't Warren Buffett.
29:14 Scott Galloway? It's a guy who figured out that if you can figure out a way to reinforce brand equity such that when someone carries a product, it signals to the world that they are a superior form of this species. Their cheekbones are higher. They're wealthy. They appreciate art. They're good storytellers. Boom. That's LVMH. And this guy, Bernard Arnault, has known that for decades and through savvy deal making, has become the wealthiest man in the world. So brand equity, show me irrational margins on any consumer product. I'm going to show you a great brand.
29:47 Ed Elson? Well, in order to supply all these EVs, carmakers are going to need lithium, a lot of it. So we'll be right back after a quick break with a look at the rare earth metal market.
30:11 Scott Galloway? Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. Their Agentic Trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?
30:56 Scott Galloway? Over 16,000 fast-growing companies like Ramp, Ryder, and Harvey save time and resources while scaling fast with Vanta. Learn more at vanta.com/profg and get $1,000 off. That's spelled V-A-N-T-A dot com slash profg for $1,000 off.
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31:55 Ed Elson? We're back with Prof G Markets. Mexico is nationalizing its reserves of lithium, the rare earth metal used to produce batteries for mobile phones, solar energy systems, and electric vehicles. Lithium has often been referred to as the new oil, and Mexico's president, Lopez Obrador, has made that link clear. In a news conference last week, he said, quote, "The lithium is ours," a callback to the 1938 Mexican saying, quote, "The oil is ours." And that refers to when the country seized all of the oil assets from foreign companies. So this move will make the government responsible for all lithium exploration, all extraction, all development. And Mexico's lithium reserves are the ninth largest in the world,
32:38 Ed Elson? behind Canada and the Democratic Republic of the Congo. So Scott, why would Mexico, or any country for that matter, want to nationalize a resource like this?
32:48 Scott Galloway? Well, they see it as a strategic asset. It offers an opportunity for greater security, greater economic growth. But the reality is, it's a bad move. When you nationalize assets, it's usually a move by a government that's failing and basically wants to steal from rich people who have weaponized government. And the populace rises up and they nationalize, you know, the local brewery or whatever it is. It's usually, governments are usually not very good at running industries. They're good at running the navy. They're good at running industries that we need a natural monopoly in, whether it's utility. They're good at running companies where there's a social good but aren't profitable. But this doesn't make any sense, even in, you know, developing markets
33:32 Scott Galloway? that have no love for Western economies or the people in their fancy suits that come down from Shell or Exxon. They usually, at the end of the day, decide to bring them in to help them extract the oil because they can run the business better than they can. And I think this is a very negative looking forward indicator for the lithium industry in Mexico and in general Mexico. It's one thing to have tight regulation or control, but ensure there's not a lot of corruption. But nationalizing industries usually doesn't work out well. It usually means that the industry is going to be engaged in a certain type of, different type of corruption. And that is, contracts go to whoever gives money to politicians.
34:13 Scott Galloway? And government employees, you know, don't have the same level of incentive or creativity oftentimes.
34:21 Scott Galloway? Uh. In this type of industry. So why are they doing this? I don't know. I think it's a bad move.
34:26 Ed Elson? Yeah, we've nationalized companies in the U. S. Before, but usually it's it's in response to something that's gone fundamentally wrong with the industry. So for example, in two thousand eight, we bailed out AIG, which was basically nationalizing it in response to the financial crisis. Um. Amtrak was nationalized in nineteen seventy one. That was when a bunch of railroad companies went bankrupt. The airport security industry was nationalized by the U. S. That happened in two thousand one, right after nine eleven. We've never done it voluntarily like this. It's always been a situation that's sort of forced our hand. But when do you think nationalization makes sense?
35:03 Scott Galloway? Those are interesting examples. So in the case of TSA or airport security, your profit motive is in direct opposition to the social good, and that is keeping dangerous people off of planes. And so it probably makes sense for that to be a highly regulated or government controlled entity. When the government has come in and nationalized banks or industries, they usually then spin it out. They usually say the only reason we're nationalizing it, which is Latin for bailout, is because it represents systemic failure. And that is if J. P. Morgan goes away, or Goldman Sachs, or Barclays, or Lehman, or whoever Lehman was allowed to fail. So that's a bad example. But if they're allowed to fail, they might be too big to fail, and they might start a crisis.
35:44 Scott Galloway? And when we kind of nationalized, if you will, or bailed out General Motors, and I think it was Chrysler, I think, we then spun them out. And actually, I think the government got back more than it put in. I'm correct. So it's one when there's a direct social good that's totally contrarian to any sort of profitably run business, or you have systemic risk and you need to come in. I would argue that we need less bailouts and more failure. Um. It really disappointed me that we bailed out all these airlines and businesses with their hands out. I would have liked to have seen hundreds of thousands of small businesses go out of business during COVID. And people have their hair on fire because they think of small businesses like puppies. And it's just.
36:25 Scott Galloway? The only way you give young budding entrepreneurs a shot is through the violent winds of disruption are allowed to gale. And the 26 year old recent graduate of Brooklyn Culinary Academy wants to come in and buy a restaurant that's failed on the cheap. That's the point. And there are exogenous shocks that are sometimes really bad for you. There was an exogenous shock from 2009 till 2021 called a historic bull run. And we didn't impose special profit taxes or bull market taxes on people. So when we have the exogenous shock of the pandemic, I think you let businesses go out of business. Why on earth did we bail out Delta?
37:03 Ed Elson? And then something you were mentioning on our editorial call the other day is the idea of energy as sort of as a geopolitical force. Could you elaborate what you meant by that?
37:15 Scott Galloway? Well, the Gulf is a power player. And the reason they're a power player is they sit on top of these oceans of a resource that is incredibly valuable and who not only they decide to sell it to, but what routes, secure supply routes they set up is sort of an indicator. It's the oxygen to the world economy and they can technically cut off or restore oxygen to any economy. If you look at the flows of energy, you're really talking about the flows of power. And America is blessed, we're an energy exporter. Now granted, you have to do stuff with it. It doesn't guarantee anything. Russia is a basket economy. Some of the biggest nations in the world or some of the biggest oil producers in the world have not been able to get out of their own way.
37:59 Scott Galloway? But the question is, is that same power shifting to rare earth minerals? Are we going to see new players, new power players emerge based on their deposits of lithium?
38:11 Ed Elson? Yes, something we learned researching this, there's this thing called the lithium triangle, which refers to three of the biggest lithium reserve countries, which are Bolivia, Argentina, and Chile. They account for 55% of the world's lithium reserves. So this feels like a huge deal for South America. Do you think that lithium could be South America's ticket to becoming a global geopolitical superpower?
38:37 Scott Galloway? Yes, in a word. I mean, it's really interesting. It's better to be lucky than good. And with the US, we always talk about our great innovation culture and we have that and democracy and emphasis on education. But really, the two things we're blessed with are traditionally an openness to immigrants. And two, we sit on unbelievable swaths of almost every asset, whether it's oil or timber, you know, or agriculture. I mean, the breadbasket of the world, you could argue, is in California Central Valley. I mean, we produce more almonds. I mean, it's just, we have resources everywhere and then friendly neighbors, et cetera. But this could be, I think this would be wonderful.
39:21 Scott Galloway? I think those nations, I'm a big fan of Argentina mostly for football reasons, but, and they make great beef, super nice people, great beef. I would like to see Argentina do well. I think that's the right reasons a nation should prosper.
39:35 Ed Elson? Okay, let's take a look at the week ahead. We'll see consumer confidence data for February as well as earnings from Zoom, Target, AMC, Salesforce, and Lowe's. Do you have any predictions for us?
39:45 Scott Galloway? You know, I learned, one of the things I love about doing this is I learned. And my prediction is, and I'm going to put a little bit of money behind this, and we should timestamp it for a year from now, I'm going to go buy some Stellantis. When I look at these numbers, when I read how well they're killing it in EVs, and then I look at their valuation, it feels to me like this could be a spring waiting to pop, that as they get more traction in the EV market and continue to post the kind of numbers they're posting, that people are going to wake up and go, you know, great tastes, growth in EVs, plus low calories are really inexpensive valuation. So my prediction, or what we should timestamp for a year from
40:27 Scott Galloway? now, is I'm going to go buy some Stellantis at the current price, and we'll report back in 12 months on how I did.
40:35 Scott Galloway? That's all for this episode. Our producers are Claire Miller and Jason Stavers. Benjamin Spencer is our engineer, and Drew Burrows is our technical director. Special thanks to Catherine Dillon and Mia Silverio. If you like what you heard, please follow, download, and subscribe. Thank you for listening to Prop G Markets from the Vox Media Podcast Network. Join us on Wednesday for office hours, and we'll be back with a fresh take on markets every Monday.
41:37 Scott Galloway? And they think, "Why on earth am I working my ass off?" Hold on one second.
41:45 Scott Galloway? Hola.
41:48 Scott Galloway? Hola, es posible, ven detrás en aproximadamente una hora.
41:53 Scott Galloway? Bueno, gracias.
41:57 Scott Galloway? Nice Spanish. Daddy's so interesting. He has such depth and texture to him. He has such, he has such depth and texture to him.
42:08 Scott Galloway? Is it cerveza time?
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