Pod Insights The Prof G Pod with Scott Galloway Prof G Markets: The Writers' Strike, the Art of the Earnings Call, & Microsoft’s Nuclear Fusion Bet About this episode This week on Prof G Markets, Scott shares his thoughts on how the business model of television has changed, and why the new model gives the studios the upper hand in the writers’ strike. He then explains the importance of positioning a company as the hunter on an earnings call, rather than the hunted — particularly amid this AI hype cycle. Finally, he takes a look at Microsoft’s agreement to buy energy from Helion, a nuclear fusion startup, and shares why nuclear is an area he’d invest in.
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Transcript 8,573 words · 13 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:18 Scott Galloway? This week's number, 334,000. That's how many fast food delivery orders New Yorkers placed every day. No joke, one of my high school teachers predicted I would be an alcoholic working at a fast food restaurant. Yeah, fuck you, that was just a lucky guess.
1:46 Scott Galloway? Welcome to Prop G Markets. Today, we're discussing the writer's strike, AI hype on earnings calls, and Microsoft's next big bet. Here with the news is fast food consumer, Chick-fil-A extraordinaire, McDonald's September Man of the Month, Prop G Media Analyst, Ed Ellison. Ed, what is going on? I'm counting down the days till Costa Rica.
2:10 Ed Elson? Scott.
2:10 Scott Galloway? Daddy's sending his kids to Costa Rica. You came down to it. You had Tulum again, Costa Rica. What was the other one you were thinking of?
2:17 Ed Elson? Third one was Saint Bart's.
2:18 Scott Galloway? Oh, Saint Bart's. Yeah, I cabosh that.
2:20 Ed Elson? To quote you, you said that was that was too ritzy for us. What does that mean exactly?
2:24 Scott Galloway? Well, that means daddy's credit card has a limit and that is he's generous, but he's not stupid. And also you guys in Saint Bart's.
2:30 Ed Elson? It doesn't fit.
2:31 Scott Galloway? That's just, you know, that's when like, you know, my wet dog jumps in the back of a Mercedes. It's just, it's just not a good idea. You guys are wet dogs.
2:40 Ed Elson? Wet dog.
2:41 Scott Galloway? Go on. All right. What's going on in the news?
2:43 Ed Elson? Let's start with our weekly review of market vitals.
2:52 Ed Elson? S and P 500 was relatively stable. The dollar gained Bitcoin fell below 27,000. And the yield on 10 year treasuries tumbled on fresh economic data. Shifting to the headlines, US inflation cooled for the 10th month in a row to 4.9% from a year earlier. That should make it easier for the Fed to pause rate hikes at the next meeting. The nation's banks posted record profits of $80 billion amid the banking crisis. It appears the industry in aggregate benefited from that turmoil as well as continued interest rate increases. Crypto exchange Binance is planning to leave the US and set up operations in the UK. As we reported last month, the CFTC sued the company for evading commodities compliance.
3:37 Ed Elson? Binance later said it's quote, very difficult to do business in the US. And it's doing, quote, everything we possibly can to be regulated in the UK. Icon Enterprises is under federal investigation following Hindenburg's short report, which questioned the company's asset valuations and dividends. We discussed that short position last week. The stock dropped another 15% on news of that investigation, bringing its loss for the month to around 40%. Airbnb reported record bookings and its first ever profitable start to the year. However, the stock fell 12% on the company's cautious guidance that the second quarter will be up against a tough comparison to last year, which saw a surge in revenge travel post COVID.
4:21 Ed Elson? And finally, as you predicted on this show, Scott, Tucker Carlson is launching a show on Twitter. He claimed Twitter is the last big platform in the world allowing free speech. Elon Musk then clarified that there is no commercial relationship, but that he hoped others would follow suit and become content creators on Twitter. Scott, your reactions?
4:41 Scott Galloway? Shouldn't we play a clip of me predicting the Twitter thing?
4:44 Ed Elson? Let's do it.
4:47 Scott Galloway? Yeah, my prediction is around Tucker Carlson and Twitter. I think they're going to do something together. I think he's pissed off. And my impression of Twitter and Elon Musk is it's gone totally red pill.
5:00 Scott Galloway? You know, listening to that self, I can't help but touch myself. Is that wrong? Is that wrong? By the way, I've been getting, people have been sending me personal emails saying I need to tone down the cringey sex jokes.
5:13 Ed Elson? I also got an email from someone saying that.
5:15 Scott Galloway? People are just like, look, boss, it's just, it's not funny. It's really, just stop it already. Look, the banks, it's no doubt, what do you know, there's going to be less competition. So a bunch of capital flows into the banks and they're making a bunch of money. So that's not, that's not shocking. That's the problem with consolidation. The icon thing is really interesting. You've been following this and talking a lot about it on Twitter. What are your thoughts here?
5:41 Ed Elson? Well, you know, last week, we pointed out that the accusations weren't just about mismanagement, but that it's about outright fraud, specifically that dividend yield, which they believe isn't subsidized by the cash flows and is therefore likely subsidized by outside investors. And you pointed out, that's just a Ponzi scheme. I think we should also point out what you got right, which is that you made the point that Icahn will not go out without a fight and that he'll make a huge deal out of this. And he had this pretty remarkable quote. He said, quote, Hindenburg research would be more aptly named blitzkrieg research, given its tactics of wantonly destroying property and harming innocent civilians.
6:22 Scott Galloway? Well, that's rich, coming from Carl Icahn, who is literally, rolls around corporate America for the last 40 or 50 years with a mace and a blowtorch. The thing I noticed about that was he owns, I think, about 80% of the stock. And so the question is, is there a play now that its dividend yield is 25 or 28%? And someone has challenged him or kind of, you know, taken their glove off and smacked him in the face and, you know, in front of his honor? Will he just come up with more sleights of hand to continue to pay this 25% dividend? I mean, he has so much capital or could he do some sort of offering or some sort of financial engineering because he is a billionaire? You know, one of the assets I'm looking at, I'm kind of curious when the banks that underwrote
7:03 Scott Galloway? the Twitter debt are going to cure it or sell it and take it off their balance sheet. And I would be interested in that paper because I imagine it's going to go out at a severe discount or a really high yield. And because of the success of SpaceX and mostly ego, I don't think Elon Musk is going to let Twitter go into receivership or bankruptcy. I just don't think he could handle that from an ego standpoint. So, and he has, he's going to get a much more cash from SpaceX such that he could just continue to pay the, pay the interest on the debt. And I wonder if the same thing's going to happen here if Icon is going to figure out a way to capitalize this such that it's solid just for pure ego reasons. Now, the Fed's getting involved is really interesting.
7:45 Scott Galloway? It feels as if more generally, whether it's George Santos or the libel case against former President Trump, or some of these tech executives getting put away, I think Elizabeth Holmes is about to start her tenure sentence. It feels as if the sheriff has shown up on a lot of different levels. And that is the Justice Department is saying that the markets and more generally our society have moved to this post-truth environment that is not healthy and they are going after people and saying, well, no, that's not an exaggeration. It's fraud. So, moving on, Airbnb is my largest holding. I love those guys. We talked to Brian Chesky on this show. I like what he's doing. He's doing kind of some boring stuff, things around pricing transparency and just kind
8:30 Scott Galloway? of operational fixes. I generally find when I'm on a board that the CEOs who move shareholder value over the medium and long term aren't the ones with a lot of jazz hands who try, you know, who go for kind of sexy, quick wins, but that are very operationally focused and sort of huge companies. And my mom used to say how to eat an elephant and the answer is one bite at a time. And I think how you build shareholder value. Is one small incremental operational change at a time. Every day, what can we do to get a little bit better? The crypto guys taking their Bitcoin and going home, you know, good riddance. The notion that it's hard to do business in the US. Well, actually, most surveys would show that the US, I think, other than Singapore, is arguably the most business friendly place in the world.
9:13 Scott Galloway? And that oftentimes, to a fault, we opt for a lack of regulation or to be exceptionally business friendly. We love corporations, so that just doesn't, in my view, that doesn't hold water. Do you have any thoughts?
9:24 Ed Elson? Just that I completely agree. I mean, we talked about this last time. I think Binance as a company is predicated on illegality and it can't exist within a strong regulatory system. And now they're complaining, they're probably going to say that the US is anti-innovation, that they're stifling progress. But the reality is that there are laws around commodities and securities and you've got to follow them. And so, yeah, they're not, they're not going to be able to exist here. And I think they're getting their heads around that. And so they're packing up and leaving. My prediction in April was that this company wouldn't exist in the next 12 months, or at least it would be a weird pivoted shell of the company that it once was. So this, to me, is more evidence that that'll probably come true.
10:07 Ed Elson? We'll be right back after the break with a look at the writer's strike.
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12:54 Ed Elson? We're back with Prof G Markets. Hollywood is facing its first strike in 15 years after a six-week negotiation between screenwriters and movie studios collapsed. Almost 98% of the Writers Guild of America voted in favor of authorizing the strike, and their 11,500 members are demanding greater pay and greater transparency from their employers. Much of the dispute has to do with streaming. Under the traditional broadcast model, writers produce roughly 22 scripts per season and earn royalties if the show performs well. But streaming series are usually eight to 10 episodes, and royalty payments are much more limited. Also at issue is AI. The WGA's contract demands that studios do not use AI to write scripts, and also that
13:38 Ed Elson? the writers' own work is not used to train AI models. Thousands of writers picketed in New York and LA last week. Several late-night shows went dark. And while streamers have a backlog of content to serve in the meantime, the pressure is on to produce more. Scott, we had a long discussion about this yesterday. You feel that people are misplacing the blame. Can you take us through your thoughts?
14:01 Scott Galloway? Yeah, so in typical Hollywood fashion, there's all of these shots of famous actors standing shoulder to shoulder with their union and brothers and sisters on the picket line, saying, "I stand with the writers." And you know, that's adorable. And there are some real contrasts here, as there always is, between kind of the working class, if you will, and management. Specifically, an interesting comparison is David Zaslav, the CEO of Warner Brothers Discovery or Discovery Warner Brothers, who made $39 million last year, and get this, a quarter of a billion dollars the year before. My suggestion, and he's the CEO of Time Warner or Discovery Time Warner, is that he just keep quiet around this stuff. As is always the case, at the end of the day, the culprit here is the end consumer
14:44 Scott Galloway? and how much money they're spending or not spending. The model is changing and the model is more of an equity model than a revenue model. What do I mean by that? The streamers for a while were able to attract enormous market capitalization because the market valued growth over profits and they over invested and now they're all, or most of them, are in a situation where they're not making nearly as much money. In addition, consumers aren't interested in watching late night with Jimmy Kimmel every night as much for 60 minutes where they can run 12 or 18 minutes of ads. That's an incredible business when you're running that many ads every night. And that's supported a lot of writers who were very busy and there was a lot of cash.
15:26 Scott Galloway? There was a lot of money coming from the manufacturers of Nissans and opioid-induced constipation medication. And now that it's gone to streaming and consumers can get a ton of content for 12 bucks and the studios are saying, all of a sudden, the market wants us to be profitable. We aren't. Our ad revenues are collapsing. I think all of the big guys have sort of looked at each other and winked and said, it's grown up time. We've got to cut costs. We've got to hold the line here. I think this is going to be a strike that's going to go on for a while. I think there's probably a lot of distance between the parties and I don't think the corporations or the streamers are going to give in. I think they realize their model has been flipped upside down. It's a poor economic model. They have got to cut costs.
16:11 Scott Galloway? They have no choice. And this strike will not only have economic ramifications around what they pay writers, but it'll set the tone for future negotiations with different unions across the entertainment industry. So I think it's about to get awfully chilly in Los Angeles. I think you're going to see a lot of people out of work, at least temporarily. And the thing I don't understand about this industry is that the shows I worked on or tried to work on, The writers have a lot of power. I'm shocked that they're not exceptionally well compensated because I'm trying to turn my book The Four, my first book, Ed, New York Times bestseller. I'm trying to convert it into an original scripted series.
16:51 Ed Elson? I did not know that. That's awesome.
16:52 Scott Galloway? You're not on the A-team here. We don't let you in on stuff like this. But what Succession was to family-owned media, or Billions was to hedge funds, we're trying to do the same thing around Big Tech. And the reason my agent got so excited was we got a fantastic writer attached to the project. The other interesting part is about the AI. And that is, I think the union should, it does make sense for them to say, we need to put in place IP protection that if a script or a bunch of scripts from Modern Family get fed into an LLM and inform it such that AI can be used to draft scenes and scripts, then they should be compensated. But the notion that they should somehow put the kibosh on a technology is just fucking ridiculous. That's like saying, we don't want you to use typewriters because that'll replace us. That's just a non-starter.
17:38 Ed Elson? I generally agree with everything that you've said thus far. But I think the main thing that, one of the first things that the writers would point to is the CEO compensation that you mentioned. So CEOs of these TV companies are making around $40 million a year. Bob Iger made $46 million, Ted Sarandos made $38 million, and then you mentioned David Zaslove. Isn't it on them to start cutting their pay packages dramatically in order to serve the interests of the writers?
18:07 Scott Galloway? Isn't that adorable? Isn't that adorable that you would think these individuals would sacrifice? You're a CEO. You're a CEO, and you've worked your whole life, you've kissed a ton of ass, played Game of Thrones politically, you're finally the CEO, and your buddy Bob, who became CEO of Viacom or whatever, made $200 million bucks in five years. You're really going to decide to be a good guy and cut your pay? No, you're going to clock as many Benjamins as you can because you worked your ass off. And No one says at your funeral, and you know, Joe or Lisa was such a good person. She took 60 million instead of 120 during their six-year run at Marvel or whatever.
18:49 Scott Galloway? That's just, yeah, that's all fine and good until it's you. And then, you know, you're going to reach your hand as far and as deep as possible into, into the barrel. What this reflects is just a broader trend in society. And that is, CEO pay has gone from about 30 times the average worker's compensation to about 300. And I'm not sure there's anything we can do about it because we assign too much credit and too much blame to the top guy or gal. So getting the right guy or the right gal, you pay up. I've been on these boards where we just have to hold our nose and give them a pay package that is just so outrageous. But you gotta pay market. These people will do a market check and find out, well, if I go over to Comcast, I'm going to make this much money.
19:32 Scott Galloway? I think the only way you address this is with, and it's an odd solution here, but it's one thing, is that at a minimum, we need to have a more progressive tax structure. But at the end of the day, what was the stat that the average compensation on inflation adjusted basis has gone down 23%?
19:48 Ed Elson? In the past decade, yeah.
19:49 Scott Galloway? Okay, but look at what's happened to your expenditures on the consumption of great content. You are now spending at least 23% less. When I was your age, I had to pay 100 to 150 bucks so I could get Food Network's four, five, and six because I wasn't allowed to have HBO or CNN unless I had the Food Network and Bravo and all this other shit that they bundled in. And also, there was so much regulatory capture with cable companies that they figured out a way to be the only cable company in all of Manhattan. And so they would raise prices. And then that chin, that mother of all chins, was met by a fist of stone called Netflix. But the bottom line is, there's just a lot less money to go around because people your
20:31 Scott Galloway? age can now spend 12 bucks a month instead of 100 or 150 and get amazing content. Maybe you double up and you go Netflix and HBO. Actually, it's a good question. Where do you spend money on media? And then there's one other huge elephant in the room that we'll talk about. But where do you, how much money do you spend on media every month?
20:49 Ed Elson? God, I don't know. I honestly canceled a lot of my subscriptions because I just haven't been watching television.
20:54 Scott Galloway? Well, case in point.
20:55 Ed Elson? Yeah.
20:56 Scott Galloway? Are you saying that just because you think that chicks will dig it? That you're like, you read and you don't watch a lot of TV? Are you at home watching Keeping Up with the Kardashians like 18 hours a day?
21:05 Ed Elson? No, it's even worse. I'm in the YouTube K-hole. I'm just obsessed with YouTube.
21:09 Scott Galloway? Okay, so there's YouTube. And then the other elephant in the room here is the writers aren't competing against David Zaslove or streaming. What they're really competing against is TikTok. And that is the most valuable consumers in the world are teenagers and young adults because they're stupid and they spend a lot of money on dumb things like high margin coffee and tennis shoes. And so advertisers love them. And here's the problem. They're not watching TV. They're watching TikTok. In addition, in addition, here's who the writers are competing against. There's 1.7 billion people on TikTok. Half of them are creators. So you have a talent pool that's the depth of the Mariana Trench, or 850 million people who are working for, get this, not $200,000 a year, but most of them for zero.
21:51 Scott Galloway? Now granted, they're not nearly the same quality as the half a million people employed by the streaming networks. But if you have 850 million creators, assume 1% are really talented, that's eight and a half million creators creating content for next to nothing that the consumer loves and is spending more time watching that free content instead of watching HBO or watching ESPN or what have you. So the bottom line is the tail that's wagging the dog here and who they should be picketing against is you, Ed. And that's the bottom line. You're not spending as much time or money on traditional ad-supported television that supported a plethora of writers such that we could all tune into The Big Bang Theory.
22:32 Ed Elson? One detail that I found really interesting from this guy, Rich Greenfield, who's an analyst, who's a media analyst at Lightchat. He points out that the longer that you prolong this strike, it could actually mean boosted profits for a lot of these companies because a lot of them already have a massive backlog of content and they don't need to be producing more. They don't need to be increasing their expenses. And then there are also a lot of companies, specifically Netflix, who have a massive library of international shows and they can continue producing those international shows. And so to me, what we're finding out here, it's like a very tough, difficult economic negotiation of who actually has the power here. I think-
23:14 Ed Elson? Basically, in agreement with you, what we're going to find more and more is that writers actually don't have as much power as they think they do.
23:21 Scott Galloway? Like, you're exactly right. This is capitalism or the invisible hand of the market. And regardless of whether, you know, Bob Odenkirk marches and shows up and all these photo moments that are just such radical virtue signaling from actors who are making 10 or 20 million dollars a year because they're in the 0.1%, standing with their brothers and sisters on the picket line, it's going to get ugly.
23:44 Ed Elson? We should mention this one, this one final point, which is residuals. And that's what a lot of the, residuals is another word for royalties, basically. And that's been a big point of contention. Basically, residuals from streaming are way lower than residuals from cable. One thing that the studios pointed out is that the residuals actually hit an all-time high in 2021. The WGA's response to that is that the only reason it's hitting an all-time high is because so many more programs are being made. So on a per-program basis, residuals are actually way down. Now, the studios haven't responded to that, but what I assume that they would say is, well, look, we're making more programs, which means we're making more jobs, we're employing
24:28 Ed Elson? more writers, so you probably have a choice here, which is, we can pay more to the best writers of the best shows, or we can depress the salaries of all of, of all of the writers on a per-writer basis and give more jobs to writers.
24:43 Scott Galloway? There are some similarities here between big tech and what's going on in media, and that is, big tech, they couldn't hire fast enough, and they stuffed so many calories down the esophagus of big tech that there was fatty deposits everywhere. I got to think employment is way up with the streaming wars over the last 20 years. And I'm evidence of that. When, when an angry professor with ED can get three TV shows greenlit in three or four years, it probably means they're reaching too far into the barrel.
25:10 Ed Elson? Strongly agree.
25:11 Scott Galloway? And, and I'm only being, I'm only being, you know, half-serious or half-kidding. I think these companies are going to wake up and go, you know what? We could lose a third of our writers, they could go decide. You know, to sell real estate or do something else and we wouldn't miss them. And I think that that is the ugly truth around what is going to happen in terms of the shakeout here.
25:32 Ed Elson? So Mia actually went to one of the writers' strikes today in New York and she spoke to a lot of the writers. So she is probably far more equipped to opine on this than we are. Mia, what did you hear from them?
25:44 Speaker 03 There were some surprising takeaways. First of all, these writers do understand that these cable and streaming companies have obligations to their shareholders and they have profit obligations. But they also believe that these companies have an obligation to pay their writers a livable wage.
26:04 Speaker 04 Yeah, we've seen, we've seen writers go from being able to earn a livable wage in this, in New York and LA, the cities where this industry mainly is, to, to poverty levels, basically. I mean, like to be able to get into a writer's room is harder than it's ever been. And then, once you're there, that's absolutely no guarantee that you're going to be able to live in the city where you have to be working. It's insane.
26:29 Speaker 05 In network, the more money a show makes for that network, the more residuals we get paid. Like if they syndicated a bunch, we get more residual checks. But streamers have been very opaque about how many views their shows get, how much, how many subscriptions a given show is driving.
26:45 Speaker 04 The streaming companies are holding their data hostage. They, for, for a while, took this ridiculous position that they didn't know how many people had streamed a show. And it's like, no, this is, this is what we're dealing with on the other side. They're straight up lying to us constantly and, and using like these, like, oh, well, you know, it's all a bunch of really difficult decisions. Cause like, well, what if someone just streams it for two seconds? Should that count as a whole stream? And it's like, sure, there are details to be worked out, but to hide behind that as an excuse for basically not paying people anything is absurd.
27:18 Speaker 03 They also were surprisingly unfazed by the threat of AI.
27:24 Speaker 04 I mean, it's, it's a stochastic parrot, right? As they say, so it's, it's very good at giving you what the predictable next thing is. And if you want more predictable things in the world, then I guess that's what you want.
27:37 Speaker 05 My fear is that the studio executives don't care about the job being done well. They care about it being done cheaply and. They, I mean, you can see in the sort of like list of proposals and counter proposals that the Guild published, like AI was a topic that the studios full on refused to engage on at all.
28:00 Speaker 06 Studios don't even want to talk about it. It's like the third rail for them because they have their plans already in motion.
28:08 Speaker 05 The fact that they're not brave enough to say, of course, we're interested in humans telling human stories is so lousy and has definitely motivated me.
28:18 Speaker 07 You know, I'm sure it's as good as some weak writers and not as good as some strong writers, but it's only going to get stronger. It's been around for, what, seven minutes? And so it's developing faster than I think we as humans can. So that's challenging.
28:37 Speaker 05 I think it would work the way a lot of capitalism works, meaning that it would make a few people so much money and it would make the rest of us hate every second of our lives. And like, yeah, in that sense, yeah, total success.
28:54 Scott Galloway? So Mia and Ed, you guys are headed to Costa Rica. I will upgrade your hotel if you go back to that writer's strike with a sign that says, I steal my parents Netflix password.
29:07 Scott Galloway? Quite frankly, you guys are the problem. This industry is just not clocking high margin ad-supported dollars the way it used to because you guys are see above, stealing your parents' password or just not spending as much time watching broadcast television. So just FYI, you're the enemy.
29:26 Ed Elson? We'll be right back with a look at the corporate buzzword of the year, AI.
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31:19 Ed Elson? We're back with Prof G Markets. This earnings season, we've seen one phrase make a remarkably frequent appearance: AI. S and P 500 companies have mentioned AI more than 1,000 times on earnings calls this year, up 64% from a year ago. Between Google, Meta, and Microsoft, it was mentioned 161 times. Now, for many companies, talking about AI has inspired massive investor confidence. Palantir, for example, said it was, quote, "running hard at AI technology", and its shares rallied 20% after the call. For others, not so much. Last week, we discussed Chegg, which despite making plans to implement AI in its products, said that tools such as ChatGPT are harming its business, and the stock got nearly cut in half.
32:03 Ed Elson? So, Scott, clearly, these companies believe they need to make assurances about their implementation of AI. My question to you is, why do you think investors are so sensitive to that word?
32:15 Scott Galloway? We gotta play the clip. Have you seen the TikTok of Sundar Pichai from Google? We've got it. Let's play that right now.
32:22 Speaker 09 AI, AI, AI, AI, generative AI, generative AI, generative AI, AI as AI, AI, AI, AI, AI, AI, AI, AI. It uses AI to bring AI, AI, AI, AI, AI.
32:36 Scott Galloway? Okay, so we live in an era where typically, stock prices or equity values are driven by two things, numbers and narrative. Things have totally flipped because now the majority of companies that go public aren't very profitable. So it's all about the narrative because the metrics are sort of up for grabs. Which number do you look at? Do you look at margins? There is no profitability. Do you look at growth, subscriber? I mean, it gets harder to value these companies. So it becomes about the narrative. And as a result, the number of PR and comms people who send me five emails a day saying, "Hey, would you love to have so and so on your podcast?" I'm like, no, this person sounds like they brightened up a room by leaving it. But there are so many people flacking their leadership to try and shape a narrative, right?
33:20 Scott Galloway? Or my favorite is when some big tech CEO comes to town and their comms calls me and says, "Would you like to come sit down with the CEO of Uber over dinner and hear his vision for technology?" I'm like, oh my God, put a fucking gun in my mouth. Anyways, these individuals, these very smart PR and comms people, sit down with the CEO and do a lot of work before the earnings call because they know guys like us are going to go through the earnings call and actually literally track how many times they said the word. And you can kind of get insight into their strategy. It's almost like an X-ray on the corpus of the company, parsing the words that they say and they repeat over and over. And nothing is accidental. This is very intentional.
34:00 Scott Galloway? And what they're trying to do here is the ultimate jujitsu move and not be Chegg and say, we're a victim. We're the predator. We're the apex predator. We're leveraging AI. To massively increase our business. This is the closest thing I can remember is all of these companies started running ads saying, we're not Target, we're Target.com. We're not Williams Sonoma, we're Williams Sonoma, wait for it, dot com. This is, I've never seen, I haven't seen this since kind of the mid and late 90s where everybody thought, let's accessorize our analog outfit with digital earrings called AI.
34:33 Ed Elson? You mentioned that they're very surgical about the amount of times that they mention that word, especially that word right now. Some companies barely mentioned it. So, Apple, on its earnings call, only said it twice. Amazon only said it seven times.
34:48 Scott Galloway? Tim Cook is Jesus Christ. This guy has added more shareholder value, literally, than any individual in history. When you took over the company, when Steve Jobs passed away, I think the company had a $300 billion market cap. Now, I think it's, what, two and a half trillion or something? Now, granted, a lot of people would say it's harder to go from zero to 300 billion than it is from 300 billion to two and a half trillion, but be that as it may, he has added more shareholder value. He has the luxury of being very sober and being very adult and not using adjectives or embellishment and just talking down the stock, being very, kind of the adult in the room, being very measured and sober. And that's how he is on earnings calls and everyone is used to Tim just showing up and doing amazing work and thinking long-term and not getting caught up in trends.
35:32 Scott Galloway? 99% of CEOs don't have that luxury. If the stock goes down 30, 40%, the next day after an earnings call, there's a 1 in 3 chance they're going to be fired in the next six months. And so, there's a lot more jazz hands across the rest of the ecosystem. So, you can't really compare Bezos, or Andy Jassy even, or Amazon and Apple, they just have so much investor credibility.
35:59 Ed Elson? You think substantially more than Google? I mean, Sundar Pichai mentioned it, I think, over 60 times. Is Google less credible?
36:08 Scott Galloway? That's the correct question. And the answer is, is that for the first time in probably 20 years, Google has been taken off their toes and onto their heels. All of a sudden, all of a sudden, literally overnight, with the emergence of OpenAI and ChatGPT, the best corporate VC investment in history was Microsoft. They leapfrogged Google, who developed much of the original technology. And all of a sudden, Google looks borderline incompetent. All of a sudden, Google looks mismanaged.
36:40 Ed Elson? You mentioned this idea of jazz hands. So a few years ago, the jazz hands were blockchain. In 2021, the jazz hands were metaverse. Now it's AI. You clearly believe in AI and its substance and its potential. How much of it is jazz hands and how much of it is real?
37:00 Scott Galloway? What I tell people, and I spoke in Austin this morning at a conference. And if you look at academic research, it was a slow, enduring, multi-decade build around mobile and GPS. And mobile and GPS is arguably the most transformative technology of the last several decades. In metaverse and in crypto, a massive spike in academic research, and then it went away almost as quickly as it popped up. The curve around academic research or peer-reviewed research published in academic journals around AI looks eerily similar to the research curve around mobile GPS, which leads me to believe that it is a much more enduring technology. In addition, just anecdotally, when I used to go to these conferences
37:42 Scott Galloway? and we'd all gather around some microwave that would miraculously create a Yoda out of a bunch of goop. And there was the notion that 3D printing was going to change the world. I'm like, this is ridiculous. When I put on a headset, an Oculus, and I thought, other than just outing myself as an incel and getting really nauseous, this shit's not going to work. Internet of Things never made any sense to me, but this feels like an enduring technology.
38:20 Ed Elson? Microsoft is betting on another hot sector in the tech industry: nuclear fusion. Last week, the company announced it signed a purchase agreement with nuclear fusion startup Helion Energy, and it will buy electricity from Helion after 2028. Now, the reasons we call this a bet is because nuclear fusion actually doesn't work yet. Unlike nuclear fission, which makes energy by splitting atoms, this process, like the sun, collides them. It's very powerful, but also very difficult, and so far, no company has been able to produce electricity from it. Now, nuclear fusion companies have raised more than $5 billion from big-name investors like Bill Gates and Sam Altman. Altman is, in fact, an investor in Helion.
39:05 Ed Elson? But this is the first time a purchase agreement has been signed. The implication, therefore, is that Microsoft believes nuclear fusion is right around the corner. So, Scott, Microsoft has long had this reputation as a sort of sluggish, almost outdated competitor to companies like Apple and Google and Meta. But this year, they've made headlines in AI, and now they're making headlines in nuclear fusion. Is this the year that Microsoft finally shrugs off that reputation?
39:33 Scott Galloway? Oh, I think they shrugged it off a while ago. I think Satya Nadella is the CEO of the decade. Microsoft and Apple trade off as the most valuable companies in the world, and occasionally Satya Aramco slips in there. But I would argue that they're working with a pretty good hand when you sit on the Atlantic Ocean of oil. But anyways, what he's done here is just nothing short of remarkable. They missed, or his predecessors missed, mobile. They missed social. They missed search. And yet, it's the second or the most valuable company in the world, depending on the day you look at it. They have established the ultimate rundle in the form of Microsoft Office. They have a recurring revenue relationship with probably 97% of companies in the world
40:15 Scott Galloway? that are over $10 million in revenue, and they continue to innovate. What's even more remarkable is just culturally, they've gone from Anakin Skywalker to Darth Vader to Anakin again. They're now seen in the 90s, when I was coming of professional age, Microsoft was seen as the worst partner in the world. That they just abused their partners and they were terrible people to do business with. And now they're seen as great partners. I think this nuclear fusion thing is probably the influence of Bill Gates, who has been a real proponent, and I'm a huge fan of nuclear energy. I think that it's ridiculous to not have a sober conversation around the wonders and power and productivity of nuclear power
40:58 Scott Galloway? in an age when we're really trying to get serious about climate change. And he's a big fan of it, knows a lot about it, is actually a big investor in one of the new guys in nuclear energy. So I would bet that he sat down with Satya and said, this is the future. Fusion is super interesting. My senses are still a long way to go, but recreating the sun in terms of energy is pretty exciting. And then Sam Altman, you know, I've said this before, Sam Altman will be Time's Person of the Year because the richest person in tech or creates the most shareholder value in tech has a one in three chance of being Time's Person of the Year because of our idolatry of innovators.
41:34 Ed Elson? I mean, you mentioned that you think Bill Gates had a part to play here. Do you think it's possible that Altman did as well? I mean, he's the CEO and the founder of OpenAI, who Microsoft invested in. He's the majority owner of Helion. He invested $375 million. That's his biggest holding that he has. Do you think it's possible that he sort of influenced this decision?
41:55 Scott Galloway? I wouldn't be surprised if on Sunday afternoon Satya calls up Sam and says, Sam, what are you doing, buddy? And Sam goes, nothing. Saty, what are you doing? And he said, well, why don't you come over here and rub La Roche Posay over the small on my back and we'll sit out and smoke cigarettes and eat ice cream. I bet these guys are thick as thieves.
42:12 Ed Elson? And if you just look at the terms of this agreement, this isn't actually an investment. This is just, we agree to buy your power. It's not really clear what skin Microsoft has in this game, though. It's possible that maybe they've agreed to some sort of predetermined price per megawatt hour, whatever it is. Have you ever seen a contract like this in tech? And do you have any insight into what it might actually look like?
42:37 Scott Galloway? I don't know the specifics of the contract, but it strikes me that Microsoft or Satya is as good as anyone, maybe with the exception of Bob Iger. Also, Richard Branson is really good at this. Richard Branson never found a deal that he wanted to put his own money into. He always said, do you want my promotional capabilities? Do you want my brand? But he never put his own money into these deals. And my sense is a deal like this, when you're Microsoft and you have this kind of distribution, you can offer this sort of credibility. Anything that Satya signs up for, anything that has a press release, a joint press release with a Microsoft logo on it, that business is taken very seriously. So they can extract several kilos of flesh, if you will, in terms of terms. And probably part of those terms are, I bet he turns to his CFO and says, this is all upside for us because we're not putting much capital to work.
43:22 Ed Elson? And then just finally on nuclear fusion. So one theoretical physicist from U Chicago said, quote, "This is the most audacious thing I've ever heard. In these kinds of issues, I will never say never, but it would be astonishing if they succeed." One expert, when there was a breakthrough six months ago when scientists achieved a net energy gain from a fusion reaction for the first time, one expert said, "This is one of the biggest results of science in the past 20 to 30 years. Nuclear fusion's been called the holy grail of clean energy. It creates four times more power than nuclear fission. There's no greenhouse gas emissions. There's no nuclear waste." Are you excited about nuclear fusion? And is it something that you would want to invest in yourself?
44:05 Scott Galloway? I think it's incredible, and I'm super excited about it. And the idea of recreating the sun such that you can create non-carbon-based energy source? I mean, what's not to like? I think it's wonderful. I'm trying to figure out ways to be part of the solution with my capital in addition to buy a much bigger plane. Because when Daddy owns a Gulfstream, he goes from being interesting and quirky to fucking fascinating.
44:27 Ed Elson? Well, you had one, right? You got rid of it.
44:30 Scott Galloway? Yeah, I sold it. But that doesn't mean I can't buy another one after my huge windfall from my investment in fission or fusion or whatever gets Daddy the Gulfstream. I don't care. I or you, I just want to recreate the sun such that I can load up the plane with people headed to Costa Rica. Anyways, I don't know how we got here. Yeah, I would invest. I think it's very exciting. I think it's incredibly cool. I imagine it's going to go into a hype cycle. But in terms of its impact on the world, it's hard to imagine a technology you would want more to win. If you look at the people sitting on top of fossil fuels, they generally aren't very good people, other than the Norwegians. Those are really nice people.
45:13 Ed Elson? Okay, let's take a look at the week ahead. We'll see earnings from Walmart, Target, Home Depot, Alibaba and Baidu. What is your prediction?
45:21 Scott Galloway? So you know Ramsey, was it Ramsey Bolton, the guy who gets tortured slowly but surely? Ramsey Bolton tortures Rec?
45:28 Ed Elson? No idea.
45:28 Scott Galloway? You didn't watch Game of Thrones?
45:30 Ed Elson? No, I was watching YouTube, remember?
45:32 Scott Galloway? Game of Thrones literally is life changing. Anyways, Ramsey Bolton tortures Rec or Rick, Rick, Reek over the course of about three months, I think, including just some pretty, pretty vile things to Rec. Anyways, I think that Ramsey Bolton is the studios and the writers are Rech or Reek or whatever his name is. I think this is going to be really fucking ugly for the writers. I think they are playing with a weak hand and they don't realize what a weak hand they have. I think that this strike is going to go longer and it ultimately ends up with the writers getting very little and trying to put lipstick on a pig here, but the market dynamics give all the leverage to the studios.
46:17 Scott Galloway? This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our executive producers are Catherine Dillon and Jason Stavers. Mia Silverio is our research lead and Drew Burrows is our technical director. 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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