Pod Insights The Prof G Pod with Scott Galloway Prof G Markets: OpenAI’s $90 Billion Valuation, FTC Takes on Amazon, and The Recession is Coming About this episode This week on Prof G Markets, Scott shares his thoughts on OpenAI’s new valuation and Amazon’s investment in Anthropic. He also debates the FTC’s case against Amazon with Ed. Finally, he explains why he thinks a recession is on the way (for real this time).
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:33 Scott Galloway? This week's number, 121 billion. That's the record number of instant noodle servings purchased globally last year. That's roughly 15 instant noodle meals for every human on the planet. I get a lot of shit for cooking frozen dinners for my kids seven days a week, and that's misinformation. I heat them up first.
2:06 Scott Galloway? Welcome to Prop G Markets. Today, we're discussing big AI investments, the FTC's Amazon suit, and the decline of household savings. Here with the news is Prop G Media Analyst Ed Elson. Ed, do you like the dad joke?
2:18 Ed Elson? Um.
2:19 Scott Galloway? Not a lot?
2:19 Ed Elson? Yeah, let's bring back the daddy jokes, maybe.
2:21 Scott Galloway? Okay, that's easy. I'm an easy S on that.
2:24 Ed Elson? I checked the Signal Awards voting this morning, and guess what percentage of the vote we're at?
2:28 Scott Galloway? If it's not 100, I don't want to know. Where are we?
2:31 Ed Elson? Pretty close. We're at 90%.
2:32 Scott Galloway? Yeah, but it's all about the last minute. People game it, and then they weigh in at the last minute. So, see, all you're doing is telling people to be lazy not to vote. So, here's the bottom line. We're at 3%. So, please show up and vote for us at the Signal Awards for Best Money and Finance Podcast. Plus, we're up against, we're up against the Wall Street Journal and the FT.
2:53 Ed Elson? The FT and Barron's. I guess they're owned by the Wall Street.
2:56 Scott Galloway? The FT, which is owned by Nikkei, owned by Japan. I don't have anything bad to say about Japan. But the other one is owned by Wall Street Journal. What do you think of Rupert Murdoch? What do you think of Rupert Murdoch? Vote for the dog. That's right. All right, what are the headlines here, Ed?
3:12 Ed Elson? Let's start with our weekly review of market vitals. The S&P 500 declined, the dollar rose, Bitcoin gained, and the yield on 10-year Treasuries hit a 15-year high. Shifting to the headlines. Chase UK is banning its customers from purchasing cryptocurrencies starting this month due to an increase in scams and fraud. Meta unveiled a new smart glasses model in collaboration with Ray-Bans. The glasses will start at $299 and include speakers, microphones, and a camera. Las Vegas hospitality workers authorized a strike against major resorts on the Strip. The union representing 60,000 workers is
3:55 Ed Elson? demanding higher wages, more safety protections, and stronger recall rights. Those rights enable workers to return to their jobs during an economic crisis or a pandemic. And finally, the writers' strike officially came to an end. The Writers Guild of America called the agreement, quote, "exceptional with meaningful gains and protections for writers in every sector of the membership." Scott, I assume you have a lot of thoughts.
4:19 Scott Galloway? Wait, let me get this. The writers went on strike? I did not know that. I did not know that. Now, let's start with Meta Glasses. I do think that kind of smart lenses or smart speakers, smart cameras or micro cameras, once that technology is there, I do think that you'll have some sort of smart glasses, whatever the term is. And remember Google Glass? It was just, I don't want to say it was out of its time, but the technology wasn't there. My guess is the technology is still not there and this product will be more kind of novelty than useful. Also, Meta has never been very good at designing actual products. So to partner with Luxottica, who makes Ray-Bans, makes a lot of sense. And also, I would imagine Luxottica is probably looking for some of that innovation pixie dust.
5:03 Scott Galloway? So I think that's a smart thing for both companies. Chase banning cryptocurrency, you know, crypto is kind of like the thing that was going to change the world that didn't. I'm shocked how resilient Bitcoin and Ethereum have been, although I don't know how much of that is market manipulation, but I think Bitcoin is still at $29,000. It feels like those technologies are enduring. The strike in Vegas, you know, good for them. I hope they have leverage. I hope that, you know, I think Vegas is doing better. I think it's actually a growing industry again. And, you know, when daddy's, when daddy's playing blackjack and he needs his seventh cup of coke, Vegas, the service there is amazing. I don't know what it is about Vegas.
5:45 Scott Galloway? I think they do a great, I think the workers there, I think the culture, the vibe, I think they just do a great job. So they want to negotiate a five-year contract with a major Las Vegas property. The current minimum wage in Las Vegas is $11.25 an hour. That is ridiculous. A, they have leverage. Those places just print money every day and I think they're growing. So I would imagine they'll probably come to some sort of agreement, at least before I go to the Sphere and see you two in Las Vegas at that new thing that looks like a giant golf ball. And then what else should we talk about? Let me think here. Let me think. Oh, yes, the strike came to an end. Oh, wait, you forwarded me regarding the writer's strike. You forwarded me a breakdown of their exceptional terms that they had. They had garnered as a function of the strike.
6:29 Scott Galloway? Give us a breakdown and let me know your thoughts, Ed, on what they did or didn't get and whether you think it's exceptional or not.
6:34 Ed Elson? My thoughts are that it is extremely unexceptional. I mean, one of the first things they got was a 5% increase in pay. But just to account for inflation in the past three years that the contract's been in effect, they would have needed a 10% bump. So in order to not devalue the purchasing power of the writers, they would have needed a 10% increase in their pay and they got 5%. They asked for 6%.
7:00 Scott Galloway? To be fair, though, they get 5% the first year, then 4% the three and a half. So technically, over three years, it's a 12.5% increase?
7:07 Ed Elson? Sure, but prices are rising at 4% right now.
7:10 Scott Galloway? In terms of the direct wage compensation increases they were able to garner from the studios, it's basically just a cost of living adjustment. I mean, for God's sakes, the government gave social security recipients a 9% bump. And by the way, and this isn't necessarily the union's fault. It's a function of the dynamics in the industry, which is in structural decline, quite frankly, especially linear TV. The UAW, over negotiating against the domestic auto manufacturers, has already been offered a 20% bump in pay and they've already rejected it. This is an indication that, again, they just didn't, they clearly didn't have a lot of leverage. What about some of the other terms? They did get some other stuff. Any thoughts?
7:49 Ed Elson? Yeah, so the other thing that was, that they were disputing was residuals, which is basically another word for royalty payments. And they wanted more transparency in their residual payments. They achieved more transparency, but the main thing that they want is more money. They want more money from the residual payments they get the more that a show is streamed. Here's what I found crazy. You will receive a residual bonus if and only if your show is viewed by one fifth of a streaming platform's entire domestic subscriber base.
8:22 Scott Galloway? Bridger Tenon, The Last of Us and nothing else.
8:24 Ed Elson? Exactly. So, you know, it's, it's supposed to be a win for, meaningful gain for all writers from every sector. It's a meaningful gain for only the top 10, the writers of the top 10 shows. You're not going to see those gains across the rest of the writers. There is one thing that I think is somewhat meaningful, and that is that they now have a minimum staffing requirement for each show, which means that you're going to have more jobs for, for younger rising writers. And there's an increased minimum duration that they have to work on each show. So they'll be working for longer.
8:57 Scott Galloway? I just couldn't get over it. The media was heralding this as that they, they got huge concessions and this was an exceptional win. And then I kept looking for the exceptional win part. And it felt like they had all these convoluted things around this new formula for calculating residuals in international thought. These are folks from the union trying to add in a bunch of language just to give the illusion that there's a there there. And the thing in America, I think people really are rooting for labor. I think they, they recognize that, that labor has gotten screwed, that the tension between capital and labor has swung way too far towards capital. Wages have gone flat the last 40 years and
9:40 Scott Galloway? productivity's up and to the right, meaning there's trillions of dollars in shareholder gains or stakeholder gains, and they've all gone to capital. That is shareholders. That is the top 1%. So everybody is on the side of labor. But this specific union in its representation in the current atmospherics, it was sort of, I thought they'd lost before they won. I will say they did get more than I thought. I think that, I do think that minimum staffing thing is, is a big deal. They also got another half a percent and then up to 1% additional contribution to their pension or healthcare fund, which isn't huge, but every dollar counts. But the thing that nobody wants to talk about is their
10:21 Scott Galloway? compensation went to zero for five months. In addition, I don't know if you know this yet, I've been on Bill Maher several times. When I'm there, there's probably 100 people working on the show and that's everyone building the set, the guy driving the golf court to go get me my COVID test, you know, the person warming up the crowd, the five or six cameramen, the people, I mean, there's people everywhere. There's probably 100 people. I would bet somewhere between a half a dozen and a dozen of them were in the writers' union. And they basically took everyone's wages, all 100 people, down to zero. And while we'd all like to think, they like to think of themselves as precious, they also took the California economy down by $3 billion. So who accounts for those lost wages, you know, that lost revenue?
11:05 Scott Galloway? So this for me was, okay, they're back to where they were at the beginning.
11:10 Ed Elson? We'll be right back after the break with a look at recent AI investments.
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13:40 Ed Elson? We're back with Prof G Markets. OpenAI is exploring an existing share sale at a valuation between $80 and $90 billion. That's roughly three times its January valuation, when Microsoft made a $10 billion investment in the company. At $80 billion, OpenAI would become the third most valuable private company in the world, behind SpaceX and ByteDance. Scott, what do you make of this?
14:03 Scott Galloway? I think we're probably at that peak. There really is a cycle that's repeated, and that is there's a hype cycle, peak valuation, it goes into kind of this trough. I forget what they call it, disappointment, and then the enduring technologies come back. I think we've probably hit... Peak AI in terms of valuation. I just, Aswath Damodaran, who we've had on the show several times, says that unless Nvidia finds another market similar to AI and captures 90% of the processing market for a brand new market that needs processors, it's overvalued. And when you look at the fact that since the pandemic, the kind of five, the big five, have added $4 trillion in market cap, and central to all of those gains has been something to do with AI, whether it's increased engagement on reels for Meta, whether it's the release
14:48 Scott Galloway? of, or the investment in ChatGPT or OpenAI from Microsoft and incorporating AI into its Office suite. This has been an AI-inspired kind of tech, Lollapalooza, market cap, boom. And I think it's peaked. You know, I think it's just crazy that these guys call themselves a nonprofit. Ed, we need to start a nonprofit and see if we can get a valuation of $90 billion on it. So, look, good for them, but I can't help it. I'm going to return back to my favorite writer's strike. There was an Atlantic article, and this guy highlighted a place you could go in your database, type in your name, and see which of your books, if you're an author, have been crawled by generative AI. And it ends up two of my books, The Algebra of Happiness and The Four, have been crawled by generative AI. And if you go to ChatGPT
15:33 Scott Galloway? and type in something and say, "In the voice of Scott Galloway," it returns something that feels kind of eerily similar, including almost exact phrases lifted out of one of my books. And my question is, why am I, or specifically Portfolio Penguin Random House, who paid me a large advance for the rights to my book, not getting compensated? And this is what you want to do when you're negotiating. You want to figure out your leverage, and then you want to go after the biggest pile of money. You want to find out in the supply chain, where you're adding value that is garnering or creating the most economic value. And what I think they should do, and I'd like to be a part of this, is develop a consortium. We're going to call it the Sisterhood of the Dog, or the International Sisterhood of
16:14 Scott Galloway? Creators. And you go to everyone from Nikkei to FT to Naspers to Le Mans, to The Telegraph, Time Warner, Disney, Vox Media, small and big Canadian broadcasting company, the Pittsburgh Gazette, and you say, "We're starting a consortium because we believe generative AI is crawling your IP and not compensating you. And you're going to give us a small amount of money that we're going to spend on lobbyists, lawyers." And enforcement. And by the way, the content's gonna have a lot of leverage here, Ed. You know why? I know you're wondering why. Because the LLMs themselves will use their own generative AI to ensure that no other LLM gets too far out ahead of them from a technical standpoint.
16:57 Scott Galloway? Very hard to maintain technical differentiation. So what's the point of differentiation? The coal that goes in the fucking furnace, specifically the content. So if we all rallied together and then packaged it into one licensable agreement, and then we went to all of them, "Hey Meta, hey Alphabet, hey Apple, hey Microsoft, how would you like to have access to all of this gorgeous content from all of the most famous authors, podcasters, creators, producers, showrunners, every piece of content out there that has any value, and only one of you gets to crawl it? And anyone else who crawls it, we have our own generator of AI that will flag it, and we're gonna sue your ass and you have to stop." This is that moment. Instead, we're fighting over pennies, see above 5%.
17:42 Scott Galloway? We could go get billions. If OpenAI, if ChatGPT is going from 30 billion to 90 billion in four months or five months, how much money do you think one of these entities would pay to have access to the world's greatest content if, one, we had total unanimity and we developed leverage through either existing or new IP laws? We gotta start thinking bigger, Ed. When I say "we," when I say "we," I mean content creators, not the 11% of people that have decided that, okay, look for the union label. Folks, they're not representing labor real well. That's my idea. Look for the union label.
18:18 Speaker 03 Look for the union label. When you were buying a coat, dress, or blouse, remember somewhere our union saw me.
18:31 Ed Elson? Well, the other news in AI is that Amazon is investing $4 billion in Anthropic, which is another generative AI startup. The valuation hasn't been disclosed, but the company said in a joint statement that Amazon will be taking a minority position. And as part of the deal, Anthropic will move most of its software to Amazon's AWS data center. Do you think that this is a good move by Amazon?
18:54 Scott Galloway? I think it's a good move by Anthropic. I mean, it all comes down to valuation. I bet the folks at Anthropic were really excited to see OpenAI raising it a $90 billion valuation. I mean, unless they've signed the deal, the valuation at Anthropic has just gone up. Because the other guy is raising money at a $90 billion valuation or whatever it is. Everyone is partnering up. It's literally like the lights are about to come up and it's like, okay, if I'm gonna find anyone to take home, it's now or it's never. They're all pairing up. So it'll be interesting to see what the valuation is. They're probably gonna offer them in kind. They'll probably offer them like a modest amount of cash and then in kind around use of their, their cloud, which is I think the biggest cost line across an LLM. So I think this makes sense for both of them, but everyone's pairing up. I like Anthropic.
19:36 Scott Galloway? I think, what is it? Claude? Claude? Is it Claude or Claude? Claude too? Claude?
19:40 Ed Elson? Claude.
19:40 Scott Galloway? Bonsoir Claude. Yes, yes. Merde. Oh, no.
19:46 Ed Elson? I mean, you gotta explain what Claude actually is, right?
19:48 Scott Galloway? The assistant for Anthropic. I like the voice. Actually, I'm kinda into Anthropic right now. Anyways, I think it makes sense. They're all pairing up and Amazon has the processing power. Anthropic has a leader. I think it's probably a better deal for Anthropic because you don't wanna be, it's like they're sitting on top of oil, but you need Exxon or BP or someone to come in who knows how to actually turn it into something, although this is the processing power. I don't know what the analogy is, but they need each other. And there's only, there's, there's a finite number of the folks that have the kind of processing power that these folks will need to be like serious players. So I think it's, I think it's a good deal. It's gonna be really interesting to see what the valuation is.
20:24 Ed Elson? It's also good news for you as an investor because FTX invested half a billion dollars in Anthropic in 2020.
20:31 Scott Galloway? Half a billion?
20:32 Ed Elson? Half a billion.
20:33 Scott Galloway? Oh, champagne and cocaine for the dog.
20:36 Ed Elson? I mean, you've still got several, several billions of dollars in crypto to figure out, but Semaphore said that they think that FTX will make at least nine figures for the stake.
20:45 Scott Galloway? Yeah. So what Ed is referring to is I've been buying claims against FTX and Celsius for about 25 or 28 cents on the dollar, thinking that once the court administrator finds where all the bodies are buried and the gold coins in the pockets of the dead body, that when they distribute it out, it'll be worth more than 27 cents. And one of the assets that FTX has is what appears to be a billion dollar stake in Anthropic.
21:06 Ed Elson? Half a billion.
21:07 Scott Galloway? Half a billion. God damn it, Ed.
21:09 Ed Elson? The trouble is that no one knows what the valuation of this company actually is. They've been so secretive about valuation disclosures, but that's how much they invested back in 2020. So who knows what that's, what that's actually worth now?
21:20 Scott Galloway? Okay, if they invested 500 million two years ago?
21:22 Ed Elson? That's right.
21:23 Scott Galloway? Oh, Ed, Ed, let's just shut off the pod now. We don't need this shit. We're heading to Ibiza. All right.
21:31 Ed Elson? I hope so.
21:31 Scott Galloway? I'm literally texting the guy who finds these deals at FTX. That stake has got to be worth four to 10 billion. It's up at least April in the last two years, I would imagine, especially with this hysteria.
21:52 Ed Elson? The FTC filed an antitrust lawsuit against Amazon accusing the company of operating an illegal monopoly. The suit made several complaints against Amazon, such as overcharging sellers, decreasing quality for consumers, and punishing merchants who offer lower prices on competing sites. Douglas Farrar, the director of the Office of Public Affairs at the FTC, pointed out that the size of Amazon is not the problem in this case. The complaint specifically targets anti-competitive tactics, which he calls monopoly rents.
22:19 Speaker 04 It's not about Amazon being big. It's about Amazon doing everything it can to illegally prevent rivals from gaining the scale they would need to provide real competition to Amazon in the online superstore and services market.
22:34 Ed Elson? Amazon said it will challenge the lawsuit in court. They also added in a statement that the FTC is, quote, "wrong on the facts and the law." Scott, you are a shareholder in Amazon. What do you think of this?
22:45 Scott Galloway? Amazon should be broken up, and Doug, and the FTC's argument, in my opinion, is valid. What Amazon says, and I've been a party to this. Say you want to establish a presence on eBay or on Overstock. Or, I mean, it's even hard to come up with them. They're so dominant, but other platforms. You say, well, as a function of doing that, I'm going to run a promotion. My product is unique. They're being good to me at eBay or whatever, and I want to run a really good promotion and give people a great deal. Amazon has crawlers that alerts Amazon when you are selling your product at a lower price than they can get on Amazon. And then they call you and say, we're going to kick you off of Amazon. And they have such dominance that unless you kind of play by their terms,
23:24 Scott Galloway? which ultimately kind of includes using their shipping, buying their media. Amazon's cut of revenue from US sellers has grown from 19% in 2014 to get this 45% of sales because none of us have any choice. So it's not size. It is their willingness to leverage and abuse that size and that strength to force companies not to work with other platforms, meaning no other platforms can compete. This is the definition of monopoly, anti-competitive abuse. And also as a shareholder, I'm going to make money because this company should be broken up. This company should be forced to innovate and it'll be good for shareholders.
24:06 Scott Galloway? I believe AWS would be one of the most valuable companies in the world as an independent company. I think Amazon Media Group would be an incredibly valuable company as an independent company. So I think as a shareholder, as someone who's in the ecosystem, as someone who invests in venture capital firms, I think this is a win-win-win all around.
24:25 Ed Elson? I'm again going to take the other side of this monopoly argument. Everything that you said about those merchants, that they're punishing merchants, okay, that's, I think that's true. But in my view, the number one priority here is the consumer. And the reality is that Amazon has done more for consumers in the past decade than just about any other company. If you ask any customer of Amazon, everyone's happy. I'm sure you're happy as well. So I just, I don't really buy this business of, oh, it's not, it's not because they're big. To me, they look at the market cap, they look at, you know, how rich Bezos is. Lina Khan wrote that landmark article at Yale Law. I think she set really high expectations for herself.
25:06 Ed Elson? And to me, this is just all about that and fulfilling those expectations.
25:11 Scott Galloway? So first off, I'm not happy yet. I'm just not, generally not a happy person. So you're, this is what your first of many inaccuracies there. Second. When you have one company that dominates 50% of online shopping, you are going to have the power, the market power, to start raising prices. And across a variety of product categories, it's no longer the least expensive. And two, your consumer test is what's called the Bork test. And Bork has mostly dominated antitrust law for the last 20 or 30 years. But before that was a better test, and that's the Brandeisian test. And because there's two things that create health in our economy. One, low prices and competition. And I would argue there's not a lot of competition here.
25:54 Scott Galloway? And we don't know what we're not missing in terms of innovation. And two, what we do know is that retail has not been a growth sector and is not paying a lot of people a lot of money because everyone's had this oxygen sucked out of the air because of the channel power, the unfair power that Amazon exercises every day. So we have a lack of... Ed, try and go get funding for an e-commerce startup right now.
26:16 Ed Elson? But this is my point. Why is the FTC trying to protect the founder of an e-commerce startup?
26:22 Scott Galloway? They're trying to maintain a healthy competitive ecosystem. We need startups.
26:26 Ed Elson? I think the ecosystem is already healthy as measured by the experience of the consumer. The rents that they're charging to those founders of those startups or the rents that they're charging to those third-party sellers allows them to drive the prices down for consumers. So in my view, the consumer wins.
26:45 Scott Galloway? There is research everywhere showing that Amazon, because of its volume and its liquidity, will give you the impression that it's cheaper because it sees if you're going somewhere else, it'll match that price. But when you actually do the hard analysis, it is no longer the least expensive place. Why? Because they no longer need to be because they are a monopoly and they are abusing those monopoly rents. In addition, Ed, when you finally decide you've had enough of me and you want to start an e-commerce company, there is no way to start it. Two-thirds of jobs come from small and medium-sized companies. Retail is one of the biggest sectors in America, and it's been stagnant because small companies can't form. And the place they need to form and show some sort of growth is online. And no online player can survive without going to this toll booth, without going to the death star known as Amazon.
27:30 Scott Galloway? This is not a healthy ecosystem. If you broke them up or they signed a consent decree where they couldn't fool you at Elson, as you have been fooled into believing you're getting the cheapest price somewhere. They've been able to raise their rents on third-party retailers by 60% in the last 10 years. Is that a competitive marketplace?
27:47 Ed Elson? The reason they can do that is for the same reason that you can charge millions of dollars for ad placement in the Super Bowl. There's a reason why CPG brands are spending 50% of their promotional budgets to get good product placement on grocery shelves. And it's because they have the best platform with the largest reach. And it's the same reason why merchants are willing to pay 45 cents on the dollar to get product placement on the first set of search results on Amazon.
28:14 Scott Galloway? But you have a lack of options. So even on TV, any other place you would advertise, whether it's in-store shopper marketing at Kroger's, whether it's at the Super Bowl or whether it's on a broadcast network, wherever you would advertise, there are substitutes. If you're a CPG company selling groceries or a home good, and you have to be online because your market capitalization is largely dictated by analysts who want to know the percentage of your sales on online, you have to be on Amazon. And Amazon slowly but surely says, if you want any sales online and you want to be able to report to your analysts that your online sales aren't anemic, you need to use our fulfillment, you need to advertise a certain amount. And every year, the rents go up ultimately over time.
28:57 Scott Galloway? And I think there's evidence the consumer, who in the beginning was getting a great deal because Amazon used incredible vision and execution to pull capital forward and offer the consumer an incredible deal. And now that they essentially have monopoly power, they can charge monopoly rents. And as evidence shows, they're increasing prices, not only across consumers, but they're extracting greater rents across retailers, which reduces job growth, which reduces money, which means Ed has no money to go buy shit on Amazon, distinctive of how much he's been fooled into believing it's a great deal.
29:28 Ed Elson? I think that's just, you know, go to Walmart, go to eBay, go to an in-store retailer. In terms, as a percentage of total US retail sales, Amazon only represents around 5 or 6%.
29:39 Scott Galloway? Oh, you're gonna play that game?
29:41 Ed Elson? Yes.
29:42 Scott Galloway? You're gonna play that game? It's all in retail, it's been e-commerce, e-commerce and e-commerce. Full stop. Even if you're, even if you're Lululemon or Williams Sonoma, the analysts want to know what percentage of your sales are coming from e-commerce. And if your e-commerce channel isn't growing faster than your offline channels, you are fucked. They will take your stock down, your employees leave, and you don't have the money, the capital to reinvest. It's all about how fast you grow your online sales. And there is one stop, one toll booth that 50% of all cars have to travel through, more like 60 or 70, unless you're getting gas, and that's Amazon. That is not healthy for the ecosystem. We should move on. We should move on.
30:18 Ed Elson? We'll be right back after the break with a look at household savings.
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32:12 Ed Elson? We're back with Prof G Markets. A Federal Reserve study showed the bottom 80% of Americans by wealth have run out of pandemic savings and now have less cash on hand than before the pandemic began. Across all income groups, personal savings hit a peak in 2021, but they've since come down dramatically. Among the bottom two fifths of earners, savings are now 8% lower than they were before the pandemic. That's compared to an 8% increase among the top 20%. Scott, this comes during a period of rising interest rates, which has ratcheted up the cost of borrowing in America. The average rate on a 30-year fixed mortgage, for example, is about 7.5% today. That's the highest level since November of 2000. Meanwhile, it appears that consumers are running out of cash.
32:54 Ed Elson? So a sort of big, general question here. Are you at all concerned about the state of the US economy right now?
33:01 Scott Galloway? I wouldn't say I'm concerned. I now believe, and we do a predictions stack every year, in October of last year, I said there's no recession in 2023 and inflation is going to come down as fast as it went up. I just didn't see any signs of a recession. And I don't know if you've noticed, but every economist in the world now is now saying it's a soft landing and it looks like we've avoided a recession, which all leads me to believe we are absolutely headed for a recession. It's going to happen, I think, in the first half of next year, and it's two primary drivers. I mean, there's a bunch of little ones. Student loan repayments are about to begin again, which puts a drag on people. Interest rates acceleration here, 525 basis point acceleration in interest rates, really hasn't been felt in the economy. And every month, more and more people have to refinance their house, wake up to a mortgage
33:44 Scott Galloway? rate that's 40% higher than it was. And then the big one that you referenced is that about six, seven months ago. Consumers or US households had about 1.2 trillion dollars remaining in COVID stimulus capital. And they were spending 100 billion of it a month, or that's like seven months later. So they got about another five months before they run out. We're starting to see the ratio of open jobs to people seeking jobs. It was 1.7, it's come down to 1.4. The atmospherics here all lead to a recession. And the reason why I'm not concerned is that I don't think you've ever been, I don't think you've ever been out of Premier League pajamas during a recession. The last recession, you were what, seven?
34:29 Scott Galloway? And here's the thing, recessions are a natural part of the economic cycle. When Jamie Dimon was asked, what is a recession? He said, something that happens every seven years. So let's just look at probability. If effectively a recession is kind of you roll the dice and a six comes up, it's a recession for 12 or 24 months. And you, some people would argue recession is healthy. We've been rolling the die 15 times and it's never come up six. So quite frankly, someone your age should be praying for a recession that verges on a depression. Because here was what I had that you haven't had yet and that you need. In 2009, I was able to take the few nuts I had squirreled away and buy Apple and Amazon
35:12 Scott Galloway? for, you know, 10 bucks a share. And Apple is at 180 now. And I was able to buy Amazon at $4 a share on a split adjusted basis, and now it's at 140. This constant paddling and life-saving procedures to keep rich people rich and people my age and capital owners, rich at any cost by propping up the markets with deficit spending that you will pay the price for, is nothing but a transfer of wealth from you to me. Because when you let stocks go down, when you let businesses go out of business, people coming into their prime income earning years, i.e. you, can buy stocks at a reasonable
35:54 Scott Galloway? rate and who knows, maybe even buy a house that's gone into foreclosure and finally afford a house. And who knows, maybe if you go back to Brooklyn Culinary Academy and give up on podcasting, being an analyst, when you can move in to Cafe Select, which is an amazing restaurant that I don't think is going out of business in Soho and Lafayette, but say a boomer owned it and there was a recession and he got fed up and turned it back to the bank, you could move in and buy it for, at a great rate. The bottom line is catastrophe or economic strain, not even catastrophe, is a rebalancing of power from the old to the young. And we've decided that if 1.2 million people die, that would be bad, i.e. the pandemic. But if the NASDAQ went down, that would be tragic. So we're going to spend
36:38 Scott Galloway? trillions of dollars propping up boomers and capital. And you know, maybe we'll spend a few billion dollars on the CDC for future research of pandemics, but eh, people who own shit, no, they're our heroes. We're going to bail them out. You want a recession, Ed, and guess what? You're going to get what you want. It's coming in 2024.
36:59 Ed Elson? All right, let's take a look at the week ahead. We'll see job openings data for August as well as the unemployment rate for September. Do you have any predictions?
37:08 Scott Galloway? Well, my prediction was just that. I think we're going to see a recession in the first half of, although the one outlier here, someone, someone pushed back on me and said, there is no way in a presidential and election cycle, the government is going to let us go into recession. And I think that's a fair point. I don't know, it just feels like we're due. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our executive producers are Jason Stavers and Catherine Dillon. Miel Severo is our research lead and Drew Burrows is our technical director. Thank you for listening to Property 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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Previous No Mercy / No Malice: Think Bigger Next Office Hours: A Guide to Business Partnerships, Consumption vs. Investing, and What to Do if Your Adult Children Are Still Living at Home Page updated September 30, 2026 · transcript and summary are machine-generated
