Prof G Markets: Why TikTok Will Be Spun, Credit Suisse, the Big Bitcoin Bet, and Blank Street Coffee

This week on Prof G Markets, Scott explains why he thinks TikTok is headed for a spin-out rather than a ban. He then breaks down Credit Suisse’s spectacular fall from grace and shares his thoughts on the million dollar bet on bitcoin and hyper inflation. We close out with a look at Blank Street Coffee’s brand strategy after its latest funding round. Dig further: read Fast Company's story on Blank Street Coffee. 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.

• 0:01Scott Galloway?

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• 0:48Speaker 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.

• 1:18Scott Galloway?

  This week's number five. Rupert Murdoch is engaged to be married for the fifth time at the age of 92. What is the key to a successful marriage at 92? Have sex in different locations.

• 1:40Scott Galloway?

  Welcome to Prop G Markets. Today, we're discussing Credit Suisse and UBS, the million-dollar bet on Bitcoin, and Blank Street Coffee's latest funding round. Here with the news is someone who needs to carry the show today because daddy went deep in the paint last night. That's right, he's in L.A. when the dog is at the Beverly Hills Hotel. He goes to the Polo Lounge and he starts ordering a lot of Al Khamahal. And I am hurting. I thought that the edible would help balance it out. It didn't, Ed. That was not a good decision. It was as if I was making my decisions drunk.

• 2:20Scott Galloway?

  All right. All you. Wait, I have another joke. Let me try my other joke.

• 2:26Scott Galloway?

  Ruben Murdock is engaged to be married for the fifth time at age 92. Ed, quick question, should you be worried that your fiance has sucked 100 dicks? Or is my fiance overreacting? That's good. That's good.

• 2:42Ed Elson?

  No comment, no comment on that one. Sorry, man.

• 2:44Scott Galloway?

  There you go.

• 2:45Ed Elson?

  By the way, Drew told me to ask you about the Michael Jackson suite.

• 2:48Scott Galloway?

  Yeah, I'm at the Beverly Hills Hotel and I may never get to stay here again, but I'm in a room that they all call the Michael Jackson suite. And I'm like, why is it called the Michael Jackson suite? And they're like, see the door, it's actually on the ground level. And they're like, see the secret entrance that people can get in and out of easily? And that's like, Michael Jackson liked this room. I'm like, well, that's, that's uncomfortable.

• 3:09Scott Galloway?

  Yeah, yeah.

• 3:11Ed Elson?

  I thought it was gonna be that he stayed there.

• 3:13Scott Galloway?

  Well, yeah, that's the point, Ed. Ed, seriously, Ed. Wow, some critical thinking going on there.

• 3:18Ed Elson?

  That's your analyst.

• 3:19Scott Galloway?

  Yeah, I think the, the implication is that he stayed there and had visitors that didn't want to come through the front door.

• 3:26Ed Elson?

  That's crazy.

• 3:26Scott Galloway?

  Anyways, I'm in the Michael Jackson suite. Yeah, I'm wearing one glove. I'm sorry, go ahead.

• 3:33Ed Elson?

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

• 3:42Ed Elson?

  Barring a brief drop after the Fed's interest rate decision, the S and P 500 gained through most of the week. The dollar fell, Bitcoin climbed above 28,000, and the yield on 10-year Treasuries reached as high as 3.6% before falling after the Fed's announcement. Shifting to the headlines. The Federal Reserve increased interest rates by 25 basis points, squashing hopes of a pause in rate hikes amid this banking drama. Still, Powell indicated the rate hike campaign may come to an end sooner than previously anticipated. And notably, a statement from the central bank read, quote, "The US banking system is sound and resilient."

• 4:23Ed Elson?

  Meanwhile, inflation in the UK rose 10.4% year over year after slowing for three months straight, and the Bank of England also raised rates by 25 basis points. Back in the US, home prices fell year over year for the first time in more than a decade. Median existing home sale prices dropped 0.2% in February from a year earlier. Mortgage rates also declined to almost 6%, that's down from a high of 7% towards the end of last year. Google's AI-powered chatbot Bard finally rolled out to the US and UK public, at six weeks after Microsoft launched its Bing AI engine. Currently, Bard is a standalone webpage, it's accessible through a waitlist, but it has not yet been integrated into Google's search engine.

• 5:06Ed Elson?

  And finally, TikTok CEO Shou Chu went before Congress to testify on the app's data privacy, as well as their Chinese ownership. Lawmakers have increasingly called for the app's banishment or sale in the US, but Chu said he's seen, quote, "no evidence that the Chinese government has access to TikTok data." Congress was not convinced. Scott, what's your take here?

• 5:29Scott Galloway?

  I thought that there wouldn't be a rate increase, and then what was interesting here was, I'm sure they decided, or the Fed and Chairman Powell decided, the way to calm the markets around the contagion was to pretend that you were not panicked, and the way you signaled that you were not panicked was that you will go ahead with what was probably an expected rate hike. And he moderated it, my guess is they were planning on 50 bips. I think he's got his mojo, you know, inflation at 10% in the UK, what is it, 6% here? When people complain about inflation, or the right tries to say, you know, Americans are suffering at the Biden policies that resulted in hyperinflation. You know, our inflation is less hyper than anywhere else in the world. This is a global phenomenon.

• 6:12Scott Galloway?

  But he still wants to be seen as a gangster taming inflation. He wants to be the guy, his idol. Is a figure in history, Paul Volcker, because he tamed inflation. And it took leadership to do that. And I think Chairman Powell kind of likes being seen as a leader and doing what he thinks is the right thing. And what is leadership? Leadership is making progress, sticking to your guns, fomenting change in the face of incredible resistance. And that's kind of what he's doing. But at the same time, if he hadn't raised rates, people might have taken that as wow. Now this is the primary concern on their, on their minds is ensuring that the contagion doesn't get out of control and bank. So this seems obvious in hindsight. Home prices falling, I think that's a good thing.

• 6:58Scott Galloway?

  And one of the most discouraging things about our economy is this rejectionist, elitist, whatever you want to call it, NIMBYist culture that has evolved in the U.S. And nowhere better demonstrates this, maybe with the exception of education, than housing. Young people can no longer afford homes. And this is, it's not only taking away a great means of building wealth. It takes away something that gives people center of gravity around saving and family formation and a sense of pride. So it's, it's really a shame that the only reason the housing prices went down here was for the wrong reasons. And that is the demand side fell. People can't move. Interest rates, you know, if you have a 3% mortgage, you can't move. You're stuck. You literally can't go anywhere.

• 7:43Scott Galloway?

  And so you have a lack of mobility and you also have people, new entrants who can't afford to buy a home. One of the most disturbing pieces of data that came out about last year's home purchases was that over a third of homes were purchased for cash. Over half of homes in Naples, Florida were purchased for cash. There's a lot of people killing it, yet at the same time, the number of first time home buyers was at a record low. And then with respect to the chatbot. I'm excited that so far they're pursuing a business model that is the key here. And that is the focus of these businesses is on the person typing the query. And the original center of the internet is the majority of people on the internet.

• 8:24Scott Galloway?

  The business model isn't to add value to the person typing in a query or connecting with friends. It's to figure out a way to create this ultimate espionage network on their data and then turn them into the product and sell it to someone else. That is the original center of the internet. So what's encouraging about AI business models so far is that the company is trying to add value, not extract value from that consumer. So that's very encouraging. Bard, I don't know, I found it kind of hilarious. It was asked whether Google should be broken up and its answer was yes, which I thought was hilarious. That's awesome. Yeah, that really is awesome. The really interesting news and the clips that are going to be ripping around the internet

• 9:06Scott Galloway?

  is going to be the clips of this person who has just been drawn and quartered. And that's TikTok's CEO.

• 9:12Speaker 03

  Your company destroyed their lives.

• 9:15Speaker 04

  This video has been up for 41 days. It is a direct threat to the chairwoman of this committee, the people in this room. And yet it still remains on the platform. And you expect us to believe that you are capable of maintaining the data security, privacy and security of 150 million Americans where you can't even protect the people in this room?

• 9:34Speaker 05

  The question is, are you 100% certain that they cannot use your company to promote such messages?

• 9:40Speaker 06

  It is our commitment to this committee and all our users that we will keep this free from any manipulation by any government.

• 9:46Speaker 05

  If you can't say 100% certain, I take that as a no.

• 9:49Scott Galloway?

  One of the few bipartisan efforts has been to literally beat the shit out of this guy on public TV. It is amazing to me, amazing to me. And I like to think, and we're patting ourselves on the back, we were sort of out in front of this when it was very unpopular, to think about how people responded to when we suggested and urged and advocated for a banning of TikTok just six months ago.

• 10:12Scott Galloway?

  I mean, you're called a racist, a jingoist, you know, I had a famous journalist say this motherfucker doesn't know how the internet works and you're letting meta off the hook. I mean, just real anger and it's all of a sudden, everyone seems to have done a 180. And I think there's so much momentum now that I don't think they're going to go for, you know, oh, a governing body or some bullshit like that, or this guy saying he sees no evidence of the CCP. Well, boss, unless you can confirm and validate there isn't, we're going to go approach this when it comes to national defense from kind of the negative hypothesis. And that is you need to validate and give us comfort that there's no way it's happening. And there's no way he can do that. There's absolutely no way he can do that. So I think a spin is coming.

• 10:56Ed Elson?

  Well, it's funny that you were saying it six months ago, but actually the first guy to say this was saying it three years ago, and that was Trump. And, you know, I feel like that we actually got to give credit where credit's due. Like, that guy was actually kind of ahead of this, of the issue on this. But it feels like we're now reaching this geopolitical turning point where we're down to completely escalate the tensions between the US and China. Like, I feel like that would be the consequence of this, that we're going to say, no, you can't do business here, which is sort of addressing the elephant in the room, which is, we really don't like each other, and we also really don't trust

• 11:37Ed Elson?

  each other, and we don't want to have anything to do with each other. Which historically has not been the case from a foreign policy perspective, until Trump came in throwing hands. It was, you know, we have a relationship with them and, you know, we enjoy having a trade union and all these things. And now, suddenly, we're like, we don't want anything to do with you. Do you think this would be the turning point? Do you think we're going to finally see tensions rise and maybe something might snap?

• 12:10Scott Galloway?

  So first off, to your point about Trump, Trump does, I think if you were to look back on the Trump administration and say, what did he get right? And just by sheer virtue of probability, when you have to make so many decisions and take so many stands on something, you're going to accidentally get shit right. No matter what you think of the individual, it would be impossible for him not to get some stuff right. I think the one thing that it would be hard to say he wasn't ahead of the curve on is what you're saying, but not just with TikTok, but on China generally.

• 12:35Ed Elson?

  Yeah.

• 12:36Scott Galloway?

  He basically used the words, he said, it's our relationship is asymmetric. And he was right that they they had unfettered access to our markets. They picked and choose who had access to their markets. The kind of the symbiotic relationship we always talked about is we buy their goods, they buy our treasuries, but it did get out of balance from a trade policy standpoint. What he screwed up was he got the strategy and the general notion correct. He screwed up on the tactics and that is he thought, okay, I can carve up TikTok like my birthday cake and hand it out to my friends, including, you know, Larry Ellison, my campaign donor. I get to decide what happens to it. And you don't. The president is not an investment banker. He can pass a law banning it or an executive order, but he can't then decide, okay, I'm going to carve it up and hand it out to my

• 13:20Scott Galloway?

  political donors. And the thing absolutely went nowhere. And there's a reason why the CCP hasn't blinked first. And that is, well, they like, well, just do what we did last time. Let, let the angry Americans stamp their feet, tear the legs off their Barbie dolls, kick the dog, they'll tire out, they'll move on to another red dot like some ADHD cat. And we'll just wait them out. And it doesn't look like that's gonna work here. What this will do, I look at it the other way. And that is if China refuses to engage in a spin, and that's I see is the only solution at this point, a spin or a banning, that will create an additional chill. Because China, at the end of the day, doesn't have a leg to stand on here. It's like, well, okay, let's just distinctive the privacy, distinctive

• 14:05Scott Galloway?

  whether we can trust you, distinctive our allegations of you being a bad actor. Let's, let's assume, let's put all this aside, let's just talk about trade policy. What happened when we took our media platforms and enter into China? We'll let you in here just long enough such that we'll steal your IP, and then we'll prop up a local entrepreneur and we'll capture the value ourselves and kick you out. There's just no way you can have them with a neural jack plugged into the minds or the neural network of, of the majority of US youth. You just can't, you just can't have it. Now, my prediction is they're going to do a spin. But if they refuse to do a spin, it will be a certain amount of corporate chaos here. Because it's like, how are you going to keep 150 million people, especially

• 14:49Scott Galloway?

  kids who are much, who are really wily and really technically sophisticated? You know, how do you get, how do you enforce the ban? Do people start using VPNs to access it? So I would argue that if they don't spin it, it's a signal from Beijing that they are willing to give up a third of a trillion dollars to escalate tensions. Because at the end of the day, them spinning it, the only reason it would be an enormous give for them is to acknowledge this tool has real propaganda value.

• 15:20Ed Elson?

  We'll be right back after the break with a look at Credit Suisse and UBS. Stay with us.

• 15:32Scott Galloway?

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• 16:17Scott Galloway?

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• 16:35Scott Galloway?

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• 17:20Scott Galloway?

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• 17:47Ed Elson?

  We're back with Prof G Markets. UBS is buying Credit Suisse in an emergency effort to prevent a banking crisis. This rescue came after Credit Suisse's largest shareholder said it wouldn't provide the bank with any more financing, and the stock immediately fell 25%. Within hours, Credit Suisse had to tap the Swiss National Bank for a $54 billion emergency loan, and eventually, the government brokered a deal with UBS to save them. UBS will pay $3.2 billion for the bank. That's a fraction of what Credit Suisse was trading at before the deal. Scott, Credit Suisse has a pretty complicated history. Take us through how this all went so wrong.

• 18:28Scott Galloway?

  It's interesting. When I graduated from UCLA, the most aspirational job was to get into the two-year analyst program of an investment bank. There were like good jobs, you know, going to work for Procter & Gamble, going to work for a pharmaceutical company. If you're an athlete or hot, you get to go make more money than anyone. You know, flirting with dentists and selling in some stupid dental supply or calling on, you know, some... I don't know, general practitioner in selling in your diabetes medication. So all the hot people and athletes went to work for pharmaceutical companies. But the premier job, it was investment analyst program. And the four premier programs, you know, there's a pecking order. Young people are very brand sensitive because we don't have a sense of ourselves. So we rely on brands and advertisers love us. Advertisers love young people because

• 19:13Scott Galloway?

  people your age are trying to find mates and signals. So they do stupid things. They buy expensive coffee, expensive shoes. You know, they'll spend 400 bucks for Grey Goose versus 300 for Sky Vodka because you think it signals you're a baller and that you're more likely to protect children than if you just ordered Smirnoff. Anyways. But you would never do that. Oh, I did a lot of that. Oh, my God. I was running around with the worst peacock feathers in the world. It's like, oh, God, tell them to stop. Anyways, yeah, I'm still going through a midlife crisis. That's the bad news, Ed. The good news. That was my point. The good news is I am definitely, I think I'll grow out of it in about 30 or 40 years. Anyway, as I sit here in the Michael Jackson suite of the Beverly Hills Hotel.

• 19:53Scott Galloway?

  So effectively, what you have here is the best brand in the late 80s and 90s, or one of them, was Credit Suisse First Boston. The four premier jobs out of UCLA were Solomon Brothers, which went away. I think it was sold to the city at some point. Morgan Stanley and Goldman, still around. And then Credit Suisse First Boston. And just to see this company's fall from grace is really dramatic. The last 20 years, this company's been the gang that can't shoot straight. In early 2020, CEO Tejan Tiam resigned amid a spying scandal, spying on a former employee who had moved to UBS. In early 2021, they registered a $10 billion loss after the bankruptcy of fund partner Greensill Capital and a $6

• 20:37Scott Galloway?

  billion loss after the Archegos, remember them, default. And then the hits kept on coming. In late 2021, they were fined over corruption scandal in Mozambique. And then most recently, their annual report was delayed. It's just been a series of terrible decisions, bad management, could never get their act together. So finally, this thing was taken out. It was weak. The Swiss government acted really crisply and said, sorry, you're selling. Yeah, the shareholders are getting wiped out. Fuck you, you've had your chance for 20 or 30 years and what is the best business in the world? Banking. And right now you're a problem. Sorry, we're sending you to boarding school. Uh, yeah, this isn't a discussion. You're going to boarding school. In this case, we're going to sell you. And it was sold just for, you know, really just chump change. Three billion in 2007.

• 21:21Scott Galloway?

  Credit Suisse had a market cap of 90 billion. That's a destruction of value of about 96%. And the bank run again triggered a liquidity crisis, which triggered insolvency. What's interesting here is the people that got wiped out were the Saudis. The Saudi Crown Prince directed Saudi National Bank to invest 1.5 billion in Credit Suisse last year. And that investment gave them a 10% ownership, making it the largest shareholder. And they decided no more. And that's what kind of sent it into Swiss government hands, if you will.

• 21:49Ed Elson?

  Yeah. I mean, on that point about the Saudis, there are two things I find so strange about this. I mean, the reason, the reason this all started was because the stock price collapsed when the chairman of the Saudi National Bank said something. And that is a Bloomberg reporter asked him, are you going to increase your stake in Credit Suisse? And he said, absolutely not.

• 22:11Ed Elson?

  So that was what caused the downfall of this bank. It was that one statement, which is weird for two reasons, because one, the largest shareholder brought it all crashing down. He's, he's basically responsible for why this happened. But the second stranger thing about this is that that statement actually wasn't new. He, he said the same thing back in October. He said, I have no plans to expand this stake beyond 9.9%. But it's almost like the market was just clinging to any excuse that they could find, such that they could bring this bank down. And they ultimately were reacting irrationally. I mean, the, the information was already out there. We're not going to increase the stake.

• 22:55Ed Elson?

  So to me, this feels like a signal of basically just too much panic, that this is an irrational reaction, that, you know, if they're going to freak out now, they should have been freaking out maybe a few months ago.

• 23:08Scott Galloway?

  My dad used to say to me that communication is with the listener. And that is, uh, the same person will have a different reaction to the exact same statement based on what's going on with them. You know, I was at, I was at a conference earlier in the week and someone got very upset based on his seating arrangement. And of course, it's a dude that would get upset that he wasn't, for whatever reason, didn't see himself as being in the power alley of the seating arrangement. And had the most emotional inappropriate reaction to the situation. And I said to the person that had to deal with this bullshit, I'm like, this has nothing to do with the seating arrangement. It has nothing to do with the conference. It has nothing to do

• 23:48Scott Galloway?

  with you. This is about this individual and what is going on in this person's mind. And you don't know. You don't know of why this person is stressed. But I find this is a life lesson. And that is oftentimes when someone gets angry at you, or has an outsized irrational reaction to something, just keep in mind, you know, it pays sometimes to be a little bit deaf and also realize this may not be about you. And you don't have to, you know, point out how irrational is. Sometimes you just want to be supportive and you just want to listen and say, this is more about what's going on with that person right now. The Kingdom of Saudi Arabia, I don't know if it was a public investment fund, if they had said, okay, we know there's real contagion and real insecurity right now. If they had

• 24:30Scott Galloway?

  softened that language, if they had said, okay, we've made a huge investment here. We're always available for additional capital when we think it's needed. We have looked at this company's capital ratios and given that they're as strong as UBS and other banks, we don't feel a need right now to supply additional capital. They could have softened their language. Instead of absolutely not, it felt like executive anger. And it felt like they were sort of saying, this thing is fucked up. We're angry. We've had it. That is not, that is not how you create confidence. And so that tone and that language played a part here. Now, would they have just been kicking the can down the road? Who knows? But when you're in an environment, it's all

• 25:12Scott Galloway?

  about trust. It's all about emotion. Words matter a lot. I would bet in three years, when there's a similar situation, we have some sort of large language model, i.e. AI, that says, okay, we have risk of contagion in a financial services company. These are our numbers. This is the situation. What type of phrasing and communication has the lowest likelihood of adding to the contagion? And what type of phrasing and words?

• 25:43Scott Galloway?

  Have the greatest probability of calming the panic.

• 25:47Ed Elson?

  Yeah, these are basically turning into these giant PR firms and their job now is just to manage expectations. And one bank that is that we probably ought to mention that's dealing with this is First Republic. Their stock is down more than 80% this month. They've lost around 70 billion in deposits this year. That's roughly 40% of what they had at the end of 2022. It feels basically identical to Silicon Valley Bank and to Credit Suisse.

• 26:13Scott Galloway?

  First Republic so far, Ed, is not like SVB. And that is, once the run on SVB started, it went from zero to illiquid or insolvent really fast. First Republic has survived so far. And that is it's had significant withdrawals, but you had, I believe, the six biggest banks put in 30 billion of their own deposits. And it looks like it might be the dam that holds. That this might be the end or where things turn around or bounce back because SVB was basically over in 48 hours. And then everyone looked for the next one and it was Signature. And then everyone looked for the next one and was like, okay, what's a big bank with a lot of assets? It's regional and very focused. Okay, First Republic. Stock

• 26:55Scott Galloway?

  goes down, run on the deposits. But it appears, at least for the time being, to be modulating or lessening. So the question is, is this the next domino? Or is this where the virus stops spreading, where it hits a block?

• 27:18Ed Elson?

  Bitcoin has risen roughly 30% since Silicon Valley Bank collapsed. Some think it's because of a short squeeze. Others think it's just regular volatility. But the most widely accepted theory is that people are flooding to Bitcoin in anticipation of this larger economic collapse. And there's one prominent figure whose actions support this notion. So this guy Balaji Srinivasan, a former Coinbase executive and crypto enthusiast, he believes the US is about to enter a period of, quote, "hyperinflation." And he's putting his money where his mouth is. Last week, he made headlines after Betting a million dollars that in the next ninety days, the price of Bitcoin would hit one million dollars.

• 27:59Ed Elson?

  Why? Because in his view, the central banking system is on the brink of collapse and the dollar is about to be worth zero. So Balaji has since gone on several podcasts laying out his concerns and he's published many Twitter threads for his nine hundred thousand followers. Scott, what is your take on this?

• 28:18Scott Galloway?

  I mean Bitcoin's having its moment, right? It was supposed to be inflation that was going to take it up or conflict. None of those things really accelerated it. This, a lack of faith or fear and risk in the banking system. What people think is an attack on fiat currency, that the printing of money here is what really accelerated this decline. It's sort of the perfect storm of good things for Bitcoin, which has seen just a massive uptick. And we have very intelligent, articulate individuals who have a huge vested interest in Bitcoin, have kind of gone all in on it. Who are, have huge followings on social media and are talking up

• 28:58Scott Galloway?

  the crisis, if you will, and talking up Bitcoin. I would love to get your viewpoint here because I don't really. Occasionally I follow Balaji and I find it interesting. I don't agree with a lot of it, but I'm just curious what your take on all of this is.

• 29:12Ed Elson?

  Well, you know, I've been researching what his history is and he came into public view in twenty thirteen when he gave this talk at Y Combinator. And I encourage anyone who is a Balaji fan to go back and watch that video. Because it sort of gives insight into what his whole thesis is. And basically, what he said, the talk was titled Silicon Valley's ultimate exit. And his belief is that the US is in structural decline and we're about to see an economic collapse. And mind you, that's in twenty thirteen that he's saying this.

• 29:51Ed Elson?

  And he suggested that we start a, what he sort of calls a network state, which is basically a techno utopia. Where all of the technologically

• 30:03Ed Elson?

  literate and elite people in Silicon Valley can gather their resources and basically start their own country. And basically bail on America because he believes that the government, government regulation gets in the way of things. That America is too slow, it's brittle, it's in structural decline. Um, and so he wants out. And one of the vehicles to do that is Bitcoin because you're not subject to the central banking system. Now, the, the thing that I, I find really troubling about this is, you know, just as you said the other day, that, you know, recession's been a week away for the past 18 months. In the case of Balaji, doomsday has been 90 days away for the past 10 years.

• 30:48Ed Elson?

  And whether or not you think he's right, you have to acknowledge the fact that this is a guy who has been investing for the past decade in doomsday occurring. I think it's, it's very dark and I think it's actually really destructive.

• 31:05Scott Galloway?

  Let's assume that he's done really well. He's, I believe, one of the founding CTO of Coinbase. I don't know what his wealth is, but I imagine he has real wealth. By the way, Coinbase, I think is about to go under SEC investigation. Let's assume he owns a thousand coins or $27 million worth of Bitcoin. If he can get the price to go up three or 4%, even if he loses a million dollars by creating this signal of panic by his bet, then he wins. He can lose his bet and still win because his holdings, he's done the math. I think this is an incredibly savvy PR move. Because even if it's just a little bit of inflation, even if it just creates a little bit more insecurity,

• 31:48Scott Galloway?

  that's going to take Bitcoin up by more than, call it three or 4%, and he will be a net winner here. The broader issue is the following, and that is when Jim Chanos, a famous short seller, takes a short position against Tesla and then starts shitposting Tesla and retweeting my tweets when I say Tesla's overvalued. When, uh, Bill Ackman says the arrests are coming at Herbalife, saying it was an illegal pyramid scheme, which was totally hyperbolic. The arrest did not come because he's shitposting Herbalife, trying to talk the stock down. That's one, one thing. It's an entirely different level when you have an economic vested interest that results in you constantly shitposting America. They're protected by the First Amendment. I

• 32:32Scott Galloway?

  think they are fairly transparent around their interests and their financial interests. They have a right to do this, but you just think, okay, there is this really dangerous emerging cohort of nihilists, and I think we're talking about this in No Mercy, No Malice, what you guys call quitters. And that is, they've sort of given up on America and this planet. They talk about the need to colonize another planet. They want to take us to another universe, even if it's legless. They want to start a new economy, a new banking system. And it's like, they're basically saying, the world is ending. For those of you who want to get on my ark, you know, I have a limited number of tickets. I'll sell them to the highest bidder, and a few lucky few get to escape the floods. But they're not trying

• 33:15Scott Galloway?

  to figure out irrigation systems such that we can all survive. So I find it all just sort of unseemly and disappointing. And I think it all comes back to, well, why are people so receptive to this? And for me, it comes back to this central notion that a 30-year-old man or woman isn't doing as well as his or her parents were at 30 for the first time in American history. So people are very disillusioned, and they're receptive to these arguments of, let's quit America. And not only can we quit America, because America isn't working for us, we can make money while we're quitting. But let's look again, let's look at the data around just how bad America is doing. You know, our inflation is 6%. That's bad. And Canada's is 5, and Japan's is 4. It's lower. In France, it's

• 34:00Scott Galloway?

  7. In Germany, it's 9. In the UK, it's 10. Our GDP growth is only 2%. But everyone else is somewhere between 1 and 4. And our unemployment rate is towards the low end. So on a balanced scorecard of how we're doing, and much less, let's just ignore that we have the best vaccines. Let's ignore that we're able to fund the valorous Ukrainian army to kick back on an autocrat without putting a single boot on the ground. I mean, let's ignore that we're food and energy independent, right? No one has us by the short ones. We are masters of our own domain. I mean, we are doing so well on every single dimension. So this nihilist view of the United States, it's just not accurate. The data doesn't support it.

• 34:46Ed Elson?

  Okay, we've been talking about banking for weeks now. Let's switch gears and talk about coffee. We'll be right back.

• 35:02Scott Galloway?

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• 36:10Speaker 03

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• 36:44Ed Elson?

  We're back with Prof G Markets. Blank Street Coffee, that's a two and a half year old coffee chain based in New York. They just closed a $20 million investment round that included Tiger Global and General Catalyst. That's less than the 67 million that it raised in 2021, but still impressive considering basically no one is raising venture funding right now. Blank Street's business model is pretty intriguing. Each store is an average of 350 square feet and the coffee making process is almost entirely automated. So that allows them to charge prices almost 25% lower than Starbucks, but they're still really profitable. They've opened more than 40 locations in New York and they've all been profitable within a month of opening.

• 37:26Ed Elson?

  So Scott, can we just get your first glance, marketing professor branding take? What do you think of this business?

• 37:33Scott Galloway?

  I love it. One, because I love caffeine and I love coffee. I wish, one of the things I regret about growing up is it's amazing that the propaganda you're exposed to and the music you're exposed to somewhere between the ages of like 15 and 24 really get purchased, right? I was listening to Tom Petty and ELO and George Michael and the Cars. And you know, as long as it's one of those bands playing for me, I don't, you know, I forget everything else. That's fine, right? And one of the pieces of propaganda that that really stuck with me is somewhere we were played one of these films in high school about the evils of coffee and caffeine. And it was in Coca-Cola and it was in coffee.

• 38:17Scott Galloway?

  And I never, I didn't have a single cup of coffee until I was 40. Oh my God, did I fuck up. Coffee is wonderful.

• 38:26Ed Elson?

  Whoa.

• 38:26Scott Galloway?

  I mean, it is like, and now I wake up and I'm like, I hate everything about the morning except for one thing. And that is my latte with my whole milk. None of this PBS woke bullshit coconut, whatever milk, just basic whole milk from some cow there about to slaughter. Anyways, back to this company. This company's brand mission. Is cultural and that is it pays people I think about twenty eight bucks an hour, including tips. And while I was out there harping around how minimum wage absolutely needs to be increased. And if it just kept pace with productivity, it'd be twenty three bucks an hour right now. The market just really did its job.

• 39:07Scott Galloway?

  And that is that where you've seen wages accelerate for the first time in like forty years is at the lower income levels, our frontline workers. So if someone can do a great job and have good EQ and work hard, which a lot of frontline workers do in a food services setting and make twenty bucks an hour. That's awesome and the company still does well. And the fact that VCs are funding a company like this that has both a great product and I would argue, you know, kind of good, good paying jobs for, you know, semi skilled labor, if you will, I, I, I like this a lot. I'm real happy about it. What are your thoughts?

• 39:42Ed Elson?

  Well, the thing that I was finding interesting is that this is basically the, the anti Starbucks. I mean, Starbucks pioneered this whole idea of you go to the coffee store and you sit in your chair and you have high speed internet and you talk with strangers and you hang out, basically. I mean, that, what you talk about this idea of the third place, Starbucks kind of pioneered that. Bank Street has basically just done a total one eighty. They're, they're operating out of these tiny little trucks, three hundred fifty square feet. You don't hang out there. You get your coffee, it's automated, uh, and then you're out of there. And I wonder if that's sort of gonna be the, the bellwether for where

• 40:23Ed Elson?

  consumer brands are gonna start moving is that actually people just want total efficiency. They don't necessarily wanna hang out and chill. Um, and it's funny how the coffee industry is, it might be about to change. I wonder if this will make a sort of iconic business case study.

• 40:39Scott Galloway?

  Well, when you guys told me about this, it sounded almost like a meth dealer and a meth dealer is, all right, come here, here's your, here's your drug, give me the money, now get the fuck out of here. I mean, they don't want you to hang out, right? It's you want this drug, I want your money, let's make this as efficient and frictionless as possible. And that's what this model kind of reminded me of. Now, the, the business learning here is the following. When a company like Starbucks or Amazon is so successful, everybody starts benchmarking everything they do and everyone piles in and invests in everything that Amazon and Starbucks does in every way. And what happens is it becomes like Florida real estate in the sense that that business strategy becomes over invested.

• 41:24Scott Galloway?

  And it creates an opportunity for someone to come in and zag when everyone else is zigging. So for example, Amazon was all about, it's our platform, we make you advertise, we do the fulfillment and slowly but surely, it's our data, we own the consumer, we get to decide what goes in the box, it's all Amazon branding and you know, we will dictate your terms and you're just fortunate to be on the world's largest e-commerce platform. Shopify comes in and says, we're gonna zag. You own the data, you own the customer, you own the packaging. We turn on, we make totally transparent, we are just a service provider, we, we make transparent everything, we're, we are the anti-Amazon.

• 42:09Scott Galloway?

  And the company becomes one of the most valuable companies in the history of Canada, one of the most, one of the best performers on the NASDAQ. Starbucks says, hang out, it's all about that Italian coffee feel, stay as long as you want. And someone goes in and says, no, we're the meth dealer, we're the meth dealer, here's your drug, get the fuck out of here. And there's always opportunity and it's inspiring. When everyone's barking up the same tree, when Florida real estate gets over invested, that's the time, that's the time to move in and zag.

• 42:40Ed Elson?

  So Scott, I was talking to a SoftBank investor last night and they basically told me that they haven't written a check in nine months and they, they just don't have a job. They're still getting paid, but they sit around doing nothing and whenever they try to bring a deal to investment committee, they say, no, bad macro environment, we're not really looking for deals right now, but thanks for doing this anyway. The venture market is just totally stagnant right now, but it feels like, you know, you've got a consumer facing coffee brand that's raising a $20 million round. Do you think that could be the moment that sort of reinvigorates the, the venture market, especially the consumer venture market?

• 43:19Scott Galloway?

  Probably not. What's going on in the venture market is similar to what's going on in the housing market and that is entrepreneurs who raised their last round at a billion dollars still haven't come to grips with the fact that their company may be worth 200 million now. So just as Bob, who saw Eric down the road sell his house for one and a half million at the height of the frenzy, thinks their house is worth one and a half and won't take 1.2, there's just a standoff in the private markets. And also venture capitalists have been understandably very distracted with other things right now. And they'll just, time is on their side. It's not like a deal is going to get away from them because people are piling in. The most encouraging thing about this is that it's great to see venture capital firms investing in great consumer concepts and not trying to pretend it's some sort of technology

• 44:04Scott Galloway?

  solution. And that is, there's a lot of opportunities for kind of main street startups, if you will, that offer, maybe they don't offer the parabolic returns of a SaaS company, but SaaS has been so over invested that there might be under investment, again, see above zagging when everyone's zigging, in some consumer companies. So I like consumer, I like when venture capitalists get into great consumer companies. I think it's good for the economy and good for job growth. But this, there's still some, there's still some sitting on your hands for a while here. The private markets are going to stay kind of locked for a little while.

• 44:37Ed Elson?

  Thanks, Scott. Let's take a look at the week ahead. We'll see the revised US GDP. We'll also see consumer confidence data for March and the personal consumption expenditures index for February. Do you have any predictions?

• 44:51Scott Galloway?

  Well, I made my prediction. I do believe that the CCP, which is the same as ByteDance, and ByteDance is the same as the CCP, is going to decide that they'd rather hold on to $300 billion than lose $300 billion and lose this propaganda. They're losing the propaganda weapon that is TikTok. I think that's happening, based on what I've seen in the hearing so far. And I think on the eve of the banning, or maybe into the first implementation of it, they decide or they come to some sort of agreement to spin the asset. So my, my prediction is this time next year, TikTok is a publicly traded company whose majority of governance and asset holders are US-based.

• 45:32Ed Elson?

  So if they get spun, that, basically that means that they're selling it to the public on the public markets. Is there a possibility, you think, of a sale, or not a forced sale, but a negotiated sale? That was what Trump wanted to do. He was trying to get Microsoft to buy them.

• 45:50Scott Galloway?

  I don't know who can afford it, I guess. I mean, this is, if I'm ByteDance, my attitude is... If we give the US enough comfort that they will let us be an independent company with an independently traded stock, that stock is going to go ape shit in a good way. And so, the price they could get from Microsoft under the auspices of solving a problem would probably be a discount or significantly lower than what the thing would trade on as an independent company that had solved this security problem through the, by virtue of the spin. It strikes me that a spin to US investors with US governance and US regulatory oversight

• 46:31Scott Galloway?

  around the product and data storage and all that good stuff creates a company that will probably be worth a half a trillion to a trillion dollars by next year. And Microsoft has about a $2 trillion market cap. ByteDance isn't going to let this go cheap, nor is the CCP. So say it's $500 billion. I don't even know if Satya Nadella would have the backbone to issue an additional 20% of shares to buy TikTok. That would be, that would be largely a Bet the Ranch type of acquisition. And as exciting as it would be for him, he doesn't need to do it. The company is firing on all 12,000 cylinders. So I think what you have here is the incentives are aligned such that a spin probably makes the most sense. This episode was produced by Claire Miller and engineered by Benjamin Spencer.

• 47:16Scott Galloway?

  Jason Stavert is our editor in chief. Mia Silverio is our research lead and Drew Burrows is our technical director. 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.

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