Prof G Markets: Alibaba and Mercado Libre, Share Buybacks vs. Dividends, and National Credit Ratings

This week on Prof G Markets, Scott shares his thoughts on two titans of e-commerce (that aren’t Amazon), and how to assess government risk when investing. He also explains why share buybacks have surged in popularity compared to dividends. Finally, he discusses why population decline is sending national credit ratings towards junk status. 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

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• 1:18Scott Galloway?

  This week's number, 31. The world's oldest dog, Bobby, just turned 31. More than 100 people attended his birthday party in Portugal. True story, when my girlfriend's dog died, I got her an identical one. And she said, what am I going to do with two dead dogs?

• 1:46Scott Galloway?

  Welcome to Prop G Markets. Today, we're discussing MercadoLibre and Alibaba, share buybacks, and the market impacts of an aging population. Here with the news.

• 1:57Scott Galloway?

  Is non pet owner and property media analyst Ed Elson. Ed, you don't have any pets, right?

• 2:02Ed Elson?

  No, I used to have a dog, but he died.

• 2:04Scott Galloway?

  Well, I'll get you an identical one. What kind of dog did you have?

• 2:06Ed Elson?

  Thank you. I had a Border Terrier.

• 2:08Scott Galloway?

  Nice.

• 2:09Ed Elson?

  It's a Scottish dog, but he wasn't, he wasn't the best dog because he, he would attack other dogs. Um, and he would not play fetch. He was kind of like a pretty bad dog, to be honest.

• 2:21Scott Galloway?

  Well, that's, that's, you know what? That's just a charming experience, Ed. That's a great story. I love how you shitpost your dead dog. That's really touching.

• 2:31Scott Galloway?

  I appreciate that. Anyways, break down the headlines for us, Ed.

• 2:34Ed Elson?

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

• 2:43Ed Elson?

  The S and P 500 was up and gold sank as the dollar gained. Shifting to the headlines. The European Union approved Microsoft's $69 billion acquisition of Activision Blizzard just weeks after the UK blocked the deal. Qatar has thrown its hat in the ring to host the 2025 Rugby League World Cup, its latest bid to attract global business through sports. Vice officially filed for bankruptcy as we anticipated a couple of weeks ago. What's curious is that it was one of seven companies that filed for Chapter 11 in just two days. Montana is banning TikTok. The law will go into effect January 1st and will block the app from operating within state lines. It will also penalize app stores if they make it available for download.

• 3:28Ed Elson?

  And finally, OpenAI founder and CEO Sam Altman testified before Congress on the state of AI. He urged members of the Senate to regulate the technology to avoid causing, quote, "significant harm to the world." Also on the panel was Gary Marcus, Scott's colleague at NYU and the host of the Humans vs. Machines podcast. Marcus is one of the most vocal critics of AI and has raised the alarm about the threats he believes it poses. Mia spoke with him after his testimony, and he believes that when Altman called for regulation, he meant it.

• 4:01Speaker 04

  I think he was very sincere and I could just like see that because I was next to him from the side, you know, three feet away, see things that you can't on the camera. And I actually said as much towards the end of the testimony. I said, I'm sitting next to this man and I, I think he's, he's speaking sincerely.

• 4:18Ed Elson?

  For more of Mia's interview with Gary Marcus, check out our special report on YouTube. Scott, any thoughts?

• 4:25Scott Galloway?

  I just feel as if we've been to this movie before. And I don't, I don't doubt he was sincere. I don't doubt that Shel Samberg was sincere when she said-

• 4:36Speaker 05

  We're open to regulation. We work with lawmakers all over the world.

• 4:39Scott Galloway?

  I don't think Zuckerberg was insincere, maybe, but said-

• 4:42Speaker 06

  I, I think the real question, as the internet becomes more important in people's lives, is what is the right regulation? Not whether there should be or not. But you as a company, welcome regulation? I think if it's the right regulation, then yes.

• 4:54Scott Galloway?

  I think Twitter's CEO, Dorsey, probably meant it in April of nineteen when he said-

• 4:58Speaker 07

  Generally, I, I think regulation is, is a good thing. It's a, it's a net positive. And I think our role as a company should be that, that of an educator. Helping regulators and legislators understand what's happening with technology.

• 5:14Scott Galloway?

  I think it goes to something much deeper, and I, I'm cynical around this. Everyone I know that knows Sam Altman says he's a good guy. I think it's sincere now, but I think to be a billionaire in the United States is to be loved. And I think slowly but surely, the incremental road to hell is, okay, we're good people, we'll figure this out. And also, we have the opportunity to make tens or hundreds of billions of dollars. So I'll incrementally start making a series of decisions that maybe ignore or delay and obfuscate, and attempt to push back on our firm's profit-making ability because they're worried about it. But don't be worried because at the end of the day, I'm a good guy. And I've just seen this happen over and over and over. I don't think these people went into these companies as bad people.

• 5:58Scott Galloway?

  I think slowly but surely, they figured out reasons why I embrace regulation, just not this regulation. So I hope I'm wrong. There's some evidence here that maybe we're taking a different tact with AI. But there are now three different types of regulation that have been proposed recently. And I mean, there's Amy Klobuchar's antitrust regulation. There's Senator Bennett's proposed regulation around a new digital czar. There's Senator Warren's Restrict Act. Nothing ever fucking happened. So the other weapon of mass distraction being deployed here is OpenAI referring to themselves or constantly saying that they're governed by a nonprofit body. They really shouldn't say that because it's really not true. The first, I think, the money goes back to the nonprofit after the original investors get, I think

• 6:41Scott Galloway?

  it's 100 times their original investment, something, I think we did this calculation, that the first 80 or 90 billion in profits go to investors and management and Microsoft, meaning that until this company is one of the five most profitable companies in the world or in history, it effectively is a for-profit. So I don't, look, I hope I'm wrong. I hope that Congress acts, and it's not his fault. I'm sure he's earnest. Onus is on Congress to actually create some sort of regulatory body. I think there should be one under NATO, because I do think there's a need for multilateral cooperation. But, you know, I'm sort of like in the show me phase. What are your thoughts?

• 7:21Ed Elson?

  Well, I was really interested in his interaction with Senator Kennedy, where Kennedy asked him...

• 7:26Speaker 08

  You make a lot of money, do you?

• 7:28Speaker 06

  I make, no, I'm paid enough for health insurance. I have no equity in OpenAI.

• 7:32Speaker 08

  Really?

• 7:32Speaker 06

  Yeah.

• 7:32Speaker 08

  That's interesting. You need a lawyer.

• 7:35Speaker 06

  I need a what?

• 7:36Speaker 08

  You need a lawyer or an agent.

• 7:38Speaker 06

  I'm doing this because I love it.

• 7:41Speaker 08

  Thank you, Mr. Chairman.

• 7:43Ed Elson?

  What do you think of that? Do you think that is also a distraction? I mean, he's very rich, that's for sure, but he's not rich from OpenAI.

• 7:50Scott Galloway?

  I think that's a great counterargument, and I hope that Congress acts on this quickly. I think that they feel like, you know, we won't be fooled again. Fool me once, shame on you. Fool me twice, shame on me. I think they've been fooled about seven million times by these people. But there's just, our ecosystem just sets it up such that ultimately over time, they find really good reasons to delay and obfuscate around regulation, and we end up with... Technology that has externalities that has absolutely no guardrails. Anyways, we'll, we'll see. So on Montana, that's not a state's job. I want TikTok banned. It's not a governor's job to ban media companies. You're the CEO of the state and you're meant to make sure that the trains run on time and

• 8:35Scott Galloway?

  the police force and the fire department show up when you call 911. And he's kind of making it probably more difficult for federal legislation because it'll probably be overturned in court. It's grandstanding. Every governor wakes up, looks in the mirror and says, hello, Mr. President, and then tries to inflame the crazies around the nation to raise money and get a call that you're a principled weirdo and you should run for president. It's just, it's just total posturing. It's what Governor DeSantis is doing. You know, telling, passing legislation, telling principals and teachers what pronouns they can or can't use in schools. That's not what a governor is supposed to be doing. Qatar throwing its hat in the ring for the 2025 Rugby League World Cup.

• 9:16Scott Galloway?

  You're going to see more and more of this because if you want to burnish your image as a nation, you can run those ads on CNN saying, come to Malaysia, do business in Malaysia. Right? Have you seen those sort of, those ads on CNN International that promote Taiwan is a great place to do business? That is probably effective, makes you feel better about the country, right? But it costs money. Well, what if you could do something, run an ad, you know, 80 times a year that reached hundreds of millions of people? And in 10 years, you could sell all of those ads for more money than you paid for them. That's called a football team. So you're going to see, you know, the term of sports washing, but you're going to see

• 9:57Scott Galloway?

  this everywhere. You're going to see it in enormous acceleration in the value of these companies and we're already seeing it. And then probably the bigger news in business, that won't get a lot of attention because it's boring, is the EU approving Microsoft's acquisition of Activision after the UK blocked the deal. And I think basically the EU said, hey, you Brexit-loving bitches, we're on top. And they basically said, we're approving a deal. This probably means the deal goes through.

• 10:26Ed Elson?

  We'll be right back after the break with a look at two titans of e-commerce. Stay with us.

• 10:41Scott Galloway?

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• 11:25Scott Galloway?

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• 11:58Scott Galloway?

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• 12:43Scott Galloway?

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• 13:10Ed Elson?

  We're back with Prof G Markets. Two e-commerce giants recently reported earnings. Argentina's MercadoLibre and China's Alibaba. MercadoLibre, known as the Amazon of Latin America, saw significant growth in gross merchandise volume, up 43% year over year. Meanwhile, earnings per share came in at $3.97. That was 30% higher than analyst estimates. Alibaba missed expectations on revenue and EPS, but it announced it will spin off its cloud division as a separate publicly traded company. Scott, that's something you've suggested Amazon should do with AWS for a while now. Now, we spend a lot of time focusing on Amazon, but we rarely look at its international competitors.

• 13:55Ed Elson?

  Scott, what are your thoughts on these earnings?

• 13:57Scott Galloway?

  So MercadoLibre is probably the most impressive company, probably in Latin America. It's really well-run. The revenue grew 78% in 2021, 50% in 2022, and 58% in Q1 2023. And this is off a big base. I mean, this company is, you know, kind of the little Amazon that could. Their operating margins increased from 3% in 2020 to 10% in 2022 on the integration of their ad network. And this is several times higher than Amazon's operating margins. And it's profitable. Again, see above, 58% growth in Q1. That's just, that's just striking.

• 14:38Scott Galloway?

  MercadoLibre, you would argue, is a teenager, not a mature adult like Amazon right now. Amazon went public in 1997, MercadoLibre 10 years later in 2007. The one that's probably the value here is there was so much overhang, even with their recent run-up, there's so much overhang. On Chinese stocks because of the CCP's involvement and willingness to just shut companies down overnight, Alibaba only trades at 12x EBITDA. So that's probably if you were looking for a value play, but we'd spend so much time talking about Amazon, we don't talk about the other guys. And I think Alibaba spinning its cloud unit is exactly what Amazon should do. I wouldn't be surprised if at some point that cloud unit is worth more than Alibaba itself.

• 15:22Ed Elson?

  Yeah, you mentioned the the sort of government risk discount that you're seeing with Alibaba at 12x EBITDA. A couple of things. One, I assume the reason that the 12x EBITDA multiple is there is because they're pricing in that government risk because, you know, the Chinese government disappeared Jack Ma, among other things. And then the other side of this is with Mercado Libre. There's also government risk there. I mean, the Argentinian government has defaulted nine times on its debt, most recently in 2020. There's this really long history of government corruption. I saw that just a few months ago, the country's vice president was sentenced to six years in prison for fraud. Do you not think that government risk and our lack of ability to trust these governments is something that investors should

• 16:06Ed Elson?

  be thinking about when they look at these stocks?

• 16:08Scott Galloway?

  It's absolutely something they should be thinking about. And I mean, in the US, we basically err on the side of the private sector. We have a ton of respect for companies, and we let our horses run, so to speak. In China, they were doing that. China's a much different place than it was 10 years ago. And then Xi came in and said, yeah, fuck that. You want to shippost me? I'll disappear your ass and you can show up painting in Tokyo. And, oh, we think you're bad for middle of class in terms of these this huge tutoring industrial complex. We're just going to shut you down. Oh, you don't want to share your data, Diddy? Fuck you. We're going to put you out of business. And here we have laws and senators who like to claim they're pro-business and want to protect the private sector and say, this is the engine of growth. This is what makes America great. The call we made,

• 16:51Scott Galloway?

  and we actually picked Chinese internet stocks in our predictions deck in November of 2022 as being the best performing sector, and we got that right, was because I don't think Xi is gonna, I think he's gonna cut off the fingers, but I don't think he's gonna cut off limbs of his thoroughbred, so to speak. And I think that the private sector kind of got the message and said, okay, let's be honest, he's in charge and the CCP is in charge. And now these companies are, you know, have had huge run ups. And even though it's at 12 times, it was at eight times. So the question is, do you think they're going to come in? And, you know, pull another like heavy handed move. But absolutely government risk. One of the reasons that the S and P always trades it or typically trades at a higher price earnings multiple than other markets is people do have a lot.

• 17:36Scott Galloway?

  When I say people, investors globally do have a lot of respect for rule of law. Think that you can't have an event where all of a sudden one guy, she moves in and kills a company. That we have, you know, due process. And as a result, capital flows into our market like no other market in the world. But to return to Alibaba, I think it was, that was an unbelievable buying opportunity because the CCP still wants to bring tens of millions of people out of poverty. Otherwise they have a revolution on their head.

• 18:13Ed Elson?

  As we discussed on an episode last September, there are two main ways a company can return money to shareholders. The first is a dividend. A share of the company's profits are distributed to shareholders on a regular basis, usually every quarter. And the second is a share buyback. That's when a company buys its own outstanding shares, which reduces the supply of shares on the open market and thus increases the share price. Now, historically dividends have been more popular, but recently that started to change. Over the past decade, share buybacks among the world's 1,200 largest companies tripled. And last year, share buybacks hit a record of 1.3 trillion dollars. That's almost the same amount companies paid in dividends last year.

• 18:56Ed Elson?

  Meanwhile, over the past 10 years, dividend payments have only increased 54%. So Scott, the obvious question here is why are companies choosing share buybacks over dividends? But before we get to that, can you refresh our memory on why a company would buy back shares or pay dividends in the first place?

• 19:15Scott Galloway?

  So a dividend payer, there are a lot of investors who are willing to put a hundred bucks into a stock and then wait till they sell it, hoping to get some appreciation. There are other investors, usually a little bit older that want dividends, that want cash flow. Like, okay, I've got a hundred thousand dollars and I want to get four thousand dollars a year. I want to get some type of cash flow. I need some money to live. They like dividends. One of the reasons that stock buybacks have been so popular is that. I mean, essentially, a stock buyback is the following. You have $100 in earnings. You have 10 shares. That's $10 per share in earnings. If you buy back 20% of your shares, you have, you know, eight shares. It's $100 in earnings. Now you have $12.50 per share in earnings and the stock should go up.

• 20:00Scott Galloway?

  And what that does is, for the shareholder, you get taxed on dividends. But effectively, if you're not selling your shares, it's a way of increasing or distributing capital back to the shareholder, at least capital appreciation, without an immediate tax hit. But also, it appears the market, at least in the short term, likes these share buybacks. And it's a means of a CEO who makes most of these decisions with his or her CFO of moving the stock up in kind of the medium term. Between one and four years, the vesting period of the CEO, so he or she can get their Gulf Stream and their home in the Hamptons. So the controversy is whether or not, I think I read that Apple has bought back $600 billion worth of shares,

• 20:41Scott Galloway?

  which means that if Apple had decided to try and grow through acquisitions, it could have bought any but maybe the three or four most valuable companies in the world with that money. But instead, it buys back shares. The fear is that rather than growing the economy, rather than investing in new plants, property, equipment, new hiring, you're just trying to push up the share price, which largely benefits a small group of people. I think about 90% of all shareholder equity is owned by the top 1%. And the question is, well, okay, do we have sort of a perverse incentives here? Where share buybacks are great in the short run for the CEO, but maybe not for the economy. So there's been additional taxation placed on share buybacks. They're talking about increasing it.

• 21:24Scott Galloway?

  But it is a very efficient way to return capital, if you will, to shareholders.

• 21:28Ed Elson?

  Yeah, there's also some arguments against, which I was found interesting. One is that Kind of like you say, there's this self-serving bias for the company's executives. But there's a very specific bias here, which is that if you take shares off of the market, you essentially inflate the earnings per share because the profits are being divided up among less outstanding shares. And typically executives get bonuses that are tied to increases in earnings per share. That's been one of the big criticisms, but something that I was thinking in pushback to that criticism, isn't it on the board and the shareholders to create the right incentive structures for the CEO? In other words, shouldn't they be the ones that are taking buybacks and any manipulation

• 22:12Ed Elson?

  that you could do to earnings per share and any bonuses that you get as a result of that? Isn't it on the board to figure out how to accurately compensate the CEO such that they incentivize what's best for the company?

• 22:25Scott Galloway?

  Well, 100%, but how does the board get compensated? They get some cash and they get options. So they too are incentivized around the same thing. But, you know, I've always thought compensation is the hardest part about being on a board. Whenever you see really strange behavior at a company, you can usually reverse engineer it to compensation. So linking compensation to behavior is incredibly difficult, but what you have with boards, they approve share buybacks because at the end of the day, the board's not going to come up with a vision for the company. That's just not their job. What's really interesting is companies like Restoration Hardware have actually taken out debt. They've actually borrowed money and bought back shares.

• 23:02Ed Elson?

  And that seemed really irresponsible. I mean, I don't have any basis in that. It just feels irresponsible.

• 23:09Scott Galloway?

  It's aggressive, but you could make an argument if you feel your stock is deeply undervalued, you can access the debt markets at incredibly low interest rates, which you could, you know, two, three years ago. If you could borrow money at 2% or 3%, you might say, the CEO might go, you know what? I'm going to be able to grow this company faster than 2% or 3% a year. So it is, I mean, it can go very wrong very fast.

• 23:33Scott Galloway?

  And generally, I think you're right, Ed. I think your gag reflex is probably the reflex that most it kind of.

• 23:38Ed Elson?

  It's like desperate in a way. It's like you're trying, you're borrowing money just to inspire confidence versus invest in real assets, it feels like.

• 23:46Scott Galloway?

  It's an interesting and valid take, but the what you're probably going to see, you might see an increase in the tax on share buybacks because it does look as if we've entered into this kind of circular mechanism for creating more income inequality. The existing shareholders get wealthier, but the engine of capitalism, corporations aren't investing back in quote unquote, the real economy. They're not buying more land. They're not putting up a new factory. They're not making new hires because they're like, at the end of the day, let's just buy back shares.

• 24:16Ed Elson?

  I just want to end with a case for share buybacks versus dividends, which is that the historical advantage of dividends is that you can earn some cash without having to sell the stock. And in the past, selling stock was kind of a pain. There were trading fees. The fees were especially high when you were selling less than a hundred shares at a time. But now that we have all these trading platforms that have zero commission trading, and they even allow fractional share trading, it's not really a problem to sell anymore. So you can take, you know, what's called synthetic dividends, where basically you just sell your stock in increments and you get to choose when to sell. As you said, you can also defer your tax payments. So it feels like share buybacks might be a marginally

• 24:58Ed Elson?

  better deal if you're paying attention to the stock and if you're paying attention to when to sell and if you want to actively be selling your stock. Would you agree that that's a fair case?

• 25:09Scott Galloway?

  Yeah, I think that's accurate. I also wonder if it's just a psychological, it just seems like dividends feel boring in this age of crypto and stocks going up 50% sometimes in a year that that investors are just a little hornier.

• 25:25Ed Elson?

  Yeah.

• 25:26Scott Galloway?

  And not as excited.

• 25:28Ed Elson?

  Yeah, it's just a vibe thing.

• 25:29Scott Galloway?

  You know, they're just, they don't want to marry a nice guy.

• 25:31Ed Elson?

  Yeah.

• 25:32Scott Galloway?

  Right? They want, they want something fun. They want something, I want to get rich.

• 25:37Ed Elson?

  Yeah, I'll bet you're right. It's just a vibe shift in what feels sexier as a, as a management executive.

• 25:43Scott Galloway?

  Do you own any dividend paying stocks?

• 25:44Ed Elson?

  No, I don't.

• 25:45Scott Galloway?

  It sort of outs the company is no longer growing a little bit.

• 25:48Ed Elson?

  It reminds me of Nike, which does pay a dividend, but. One of the first things that you see on their investor relations page is Nike is a growth company. It's like the main message they're trying to get across to investors is we are future forward. Yeah, we pay dividend. We may look old, but we're looking at the future.

• 26:05Scott Galloway?

  There you go.

• 26:06Ed Elson?

  We'll be right back after a quick break with a look at what happens to the markets of an aging country.

• 26:24Scott 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?

• 27:09Scott 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.

• 27:32Speaker 09

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

• 28:09Ed Elson?

  We're back with Prof G Markets. One of our biggest recent focuses here at Prof G Media has been population decline, or more specifically, population degradation. As birth rates continue to plummet, the age demographics of our society are becoming increasingly imbalanced. In 1960, people 65 and over made up 9% of the US population. Today, that number is 17% and growing. This is a global shift, and it has major implications for the economy, from social security costs to overall work productivity. And we've discussed much of this before on No Mercy, No Malice.

• 28:44Speaker 10

  Researchers project the global population will peak in 2064 and then begin its retreat. More than 20 nations will see their populations shrink by 50%. The greatest threat to humanity isn't climate change or thermonuclear war, but nothingness. Specifically, that our species will decide it should slowly and steadily fade to black.

• 29:19Ed Elson?

  New data suggests there's another aspect we ought to be worried about: creditworthiness. Ratings agency S&P projects that by 2060, half the world's national credit ratings will be downgraded to junk status if measures aren't taken to address aging populations. Put another way, extending credit to half the world's countries will be like loaning money to rent the runway: highly risky, low guarantee of getting your money back. Meanwhile, the share of countries with double or triple A credit ratings, that is, low risk, will fall from 25% to less than 5%. This is all assuming current population and policy trends stay the same, but the question remains: what are we going to do about all these old people?

• 30:00Ed Elson?

  Scott, I'm sure you have lots of answers to that question, but first, can you explain to us how demographics impact a country's creditworthiness?

• 30:09Scott Galloway?

  I mean, essentially, young populations are just more productive, because old people want to stop working and relax, and they require more government assistance because they get sick. And they want pensions. So the ratio of young to old people is an indicator of the productivity and the economic vibrance or potential of a country. Italy and Japan have gone into population decline and neither of their economies have really registered any growth for the last 20 or 30 years. So it is a big, big issue. And Peter Drucker, kind of my role model, or if I have a role model as an economist, that every major business shift of the last 100 years can be reverse engineered to a

• 30:51Scott Galloway?

  demographic shift. So I think it's a really big issue. And we're either going to have to extend the working age and figure out a way to make seniors more productive, or we're going to have to have more kids, or we're just going to see Western nations go into decline. And it means that when an economy is less productive, it becomes less economically viable. When it becomes less economically robust, it becomes less of a player on the world stage. Its military isn't as big. It doesn't have as many diplomats. It's not as attractive to foreign investment. And unfortunately, the economies that look like they're going into population, i.e. economic decline, are the democratic ones.

• 31:30Ed Elson?

  Yeah, I mean, the trouble is that we need to find more money to spend on the old people. Just a crazy statistic. The US spends 40% of our tax dollars on people 65 and older. 19% on social security, 13% on Medicare, and 7% on other senior benefit programs. And what this credit rating data is basically telling us is, we might not be able to borrow money in order to support those people. So it feels like there are three options that we have now if we're not able to borrow. One is, we just somehow become massively more economically productive and create more prosperity so we can take care of them. Two, massively increase the tax rate, and then just spend more on old

• 32:11Ed Elson?

  people as a percentage of our own individual income. Or three, spend less on old people. So right now, some suggestions are that we increase the age of eligibility for social security, or maybe we just flat out cut back on senior benefit programs. Aside from having more kids, where do you stand on those issues?

• 32:32Scott Galloway?

  The real culprit here, in my view, is the tax code. And that is people immediately have a gag reflex around, what, you're going to take my taxes from 50% to 60 now? If you live in New York or California and you make good money and it has to go all go on your W2, you are paying a lot in taxes. I would argue it's not tax rates, it's tax code. There are five of the Fortune 100 that don't pay any taxes, including Nike, Amazon, FedEx. Wealthy people manage to find ways, or their representatives in Washington have found a way for them not to pay taxes. Now, something like half of corporate profits from American corporations are taxed overseas, i.e. taxed at a lower rate through inversions. It takes about 23% of GDP to operate our government.

• 33:16Scott Galloway?

  And as you referenced, about 40% of that's going to seniors. It's going to go to over 50%, which will crowd investment in technology, investment in young people, education, that quite frankly, just have a higher ROI than making sure Pop-Up and Nana can continue to take a cruise every year. So if we want to grow the economy, we just need a certain level of investment in these things. And if we want to support a navy that scares the shit out of everybody such that we can continue to have dominance around the world, or influence, I should say, we're going to have to grow our economy. We need more investment in young people. We're just going to need more and more sustainable revenue sources, i.e. taxes. So I don't think you raise tax rates. I just think you have to get rid of these loopholes. Corporations have seen their tax rates plummet. Wealthy people, at the

• 34:00Scott Galloway?

  end of World War II, the top tax rate was 92%. And every year, it's gone down. And I would bet that the majority of very wealthy people pay less than 20% now. Some pay less than 10%. Once you get above 98th or 99th percentile as a wealthy person, once you get on the gold medal stand, the government takes the bronze and the silver away from everybody else because it's the workhorses, the people that make between, say, $200,000 and a million a year in ordinary income that really get fucked. But there's just no getting around it. We're going to need to make seniors more productive. Maybe we do that through technology. We, as a nation, are probably going to need to get more productive. We probably should do technology. And, and we need corporations and wealthy people, to quote Bernie Sanders and Elizabeth Warren, to pay their fair share. And we need to stop

• 34:42Scott Galloway?

  this bullshit where companies can offshore their revenue and merge with a company in Norway and avoid American taxes.

• 34:52Ed Elson?

  Okay, so before we go to the week ahead, let's take a listener question. We get a lot of listener comments and emails, and we actually do read most of them. We got this one after you brought up one of your favorite topics last week, Scott, private jets.

• 35:05Scott Galloway?

  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.

• 35:16Ed Elson?

  This question is from another Scott in Virginia. He says, fan of all your podcasts, I can understand how owning and flying in a private jet, or a PJ, can be very aspirational. My question, would you be in favor of a private jet tax to offset the carbon emissions of private jet travel? Say, a tax of $1,000 per flight taken, or more depending on miles traveled, and the money would go towards combating climate change?

• 35:40Scott Galloway?

  Oh, yeah. I mean, in order to try and find some moral clarity. So I sold my plane about nine months ago because it went up in value, moving to Europe, wrong plane from my mission profile. Mission profile means the trip you want to take. It's very sophisticated aviation talk that me and my douchebag friends speak to each other. I'm serious, one of the reasons I sold the plane is I'm becoming a little bit more thoughtful about my carbon footprint. And I thought, okay, do I really need to be spewing that much shit into the air? And six months later, after having dealing with TSA again, I'm like, fuck that, I'm gonna buy another plane. I've had it. I'm sick of pretending that I give a shit about the environment. But what I did all the time was I bought those carbon offsets.

• 36:22Scott Galloway?

  I'm all for it. If you have the money to fly private, you should be paying taxes everywhere. There should be taxes on jet fuel, there should be taxes, landing fees, there's landing fees on the size of the aircraft. And what's interesting is in the UK, their attitude is, and I think it's probably the right attitude, is, look, boss, you're really rich, you're gonna pay taxes. Whereas in the US, the landing fees and the hangar fees and the taxes are actually quite low, because in America, we love rich people. So, but if, if the answer is, should people who are putting a lot of shit into the environment, pay for some sort of offset, or pay for not only a replacement, but a pretty serious penalty for making that

• 37:03Scott Galloway?

  decision? Because it's wonderful for me, it's fun for me, it improves my lifestyle now, but these types of actions are gonna have impact on future generations. So, I'm all about tax me and my big fucking Gulfstream. Hello.

• 37:19Scott Galloway?

  Hello.

• 37:26Ed Elson?

  Thanks, Scott. Let's take a look at the week ahead. We'll see the personal consumption expenditures index for April. We'll also see earnings from Nvidia, Zoom, and a slew of retail, including Lowe's, Best Buy, and Urban Outfitters. Do you have any predictions for us?

• 37:40Scott Galloway?

  Couple of predictions unrelated. This Montana ban gets overturned right away. Pure posturing. And also, I do think Senator Feinstein is going to retire. I think this has become... Senator Feinstein is a lion of the Senate. An assault weapons ban, releasing data on torture that was really important in terms of the US facing up to what it had engaged in. She's just been incredible, and this is unfortunately ruining her legacy. Our ability to get Democratic judges put in seats is being held up. It's getting really bad. Anyways, so in Montana, we're going to see the TikTok ban overturned immediately while

• 38:22Scott Galloway?

  I still am hoping for federal legislation, specifically the Restrict Act goes into place, and then it gets spun into I do think Senator Feinstein is going to retire in the next 30 or 60 days. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our executive producers are Jason Stavers and Catherine Dillon. 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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