Pod Insights Prof G Markets The Iran War Risk Markets Are Ignoring About this episode Scott Galloway and Ed Elson break down what markets are signaling about the war with Iran, and whether they think investors are getting it wrong. Ed also maps out the “what-if” scenarios Wall Street may be ignoring. Then they dive into Anthropic’s clash with the Pentagon and why Sam Altman might have botched the moment yet again.
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Transcript 10,235 words · 12 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:15 Scott Galloway? Today's number 81. That's the percentage of Gen Z and millennials who plan to travel based on a movie and TV locations. Ed, why can't millennials take a joke? Why? Well, often it lands too close to their parents' house.
1:29 Scott Galloway? You'll get it. Keep thinking. You'll get there. Junior year classics, Princeton. Imagine you went to a real college. Hits too close to home. Their home is their parents' house? Ah, okay. What does a millennial get on his wedding day? What's that? A participation trophy wife.
2:00 Scott Galloway? How are you? I'm doing well. How are you? I'm good. I've just, I spent most of last night. I did one of my favorite things. I took an edible and packed, which is like a seven hour experience for me, but... That sounds awful to me. That actually sounds like my nightmare. This is what happens when you get older. A Rolls Royce starts looking cool. The douchiest car in the world starts thinking, "I'd like, I'd like the cut of my jib in a Rolls." I already feel that way, but, yep. You like the silver shadow? It's pretty cool.
2:24 Ed Elson? I like fancy cars.
2:26 Scott Galloway? With the suicide doors and the umbrella that comes out of the backseat. I once, true story, I was at Chipriani and this rolls rolled up and Jay-Z stepped out and he got that umbrella out of the back door. I think just for effect, it wasn't even raining. Second thing about, you can tell you're getting older, you start thinking, wow, cruise actually sounds like a pretty good time. Like, I never would have thought I'd be attracted or drawn to a cruise. And then, what were we talking about?
2:52 Ed Elson? We were talking about packing high.
2:54 Scott Galloway? Oh, yeah. Packing becomes enjoyable.
2:57 Ed Elson? That's crazy to me.
2:58 Scott Galloway? I love, I'm like, which shoes am I gonna wear? Do I need to transfer stuff to, you start thinking, you start checking the weather. You want to make sure that you're packing appropriately. I need, for me, packing used to be throw literally, you know, some toiletries, a hoodie, a pair of jeans, some socks, some underwear, and my edibles in a duffel bag. I used to be the lightest traveler in the world. I'm like fucking Queen Anne now headed to Rwanda.
3:24 Ed Elson? That's me. But I hate it because it's so stressful for me. I get made fun of whenever we go on work trips because I'll have a very large bag and then Claire will make fun of me because I'm being, yeah, exactly, sort of Queen Anne about it. But I find it so, I mean, I think it's the worst thing in the world, trying to figure out and predict, what am I gonna want to wear? Are there gonna be variables? Is the weather gonna be bad? Is the weather gonna be good? Doing all of this. And then, once you pack, like, that's it. That's all you've got.
3:53 Scott Galloway? I used to be the person that just left, you know, a few clean pairs of underwear and my toiletries in a duffel bag and I was ready to come and go. I don't have many things. I'm not that into things. I mean, I like homes, so I guess that's a thing. But I don't own a car. I've never been that into watches or art or anything like that. The, I do have a few things that I just absolutely love. And one of them, I love luggage. I love Ramoa. I love, by the way, Ramoa, if you're out there, you should absolutely be an advertiser and I'll take selfies of me and the Ramoa going around the world to speak to the National Cotton Growers Association about the future of AI.
4:34 Scott Galloway? But I love good luggage and it drives me crazy when when people have bad luggage or, you know, especially people with money.
4:41 Ed Elson? Those Ramoa bags are ridiculously expensive, by the way. I mean, I it's it's quite shocking. I mean, it's you you have to spend over a thousand dollars to get even the smallest of those bags.
4:53 Scott Galloway? Yeah, I think it's a pretty strong signal, though. And also, I sound like I sound like a privileged douchebag, but I'll go there. It's kind of like your watch, your phone and your luggage. And if you have a car, your car are sort of your signal. And what guys don't realize is that if they ever get if they're about to get down, the biggest turn on for a woman, I'm going to get shit for this, is if you have a decent, relatively nice place, like you actually put some thought.
5:20 Ed Elson? I think that's fair. I don't think you're going to get cancelled for that.
5:23 Scott Galloway? Yeah. And it's clean and she thinks, oh, I wouldn't mind waking up here on the occasional Sunday morning.
5:28 Ed Elson? Hundred percent.
5:29 Scott Galloway? But the the chasm in your packing strategy is it's absolutely okay to pack a lot if you look nice. And that's where the chasm comes in at.
5:38 Ed Elson? That's a good point. We've got a lot to get into today, so I'm going to launch us right into it.
5:44 Scott Galloway? Go ahead.
5:44 Ed Elson? Today, we are discussing what the markets tell us about the war in Iran and also anthropic stand against the Pentagon. By the way, just a reminder, we will be recording our live episode from the Vox Media Podcast stage at 10 a.m. this Saturday at South by Southwest. We're very excited about it. We hope to see you there. We've told you enough about it. If you're in Texas, come come hang out with us. It'll be a lot of fun.
6:09 Scott Galloway? It will be great. I got another live event coming up, Ed. I noticed how you just glossed over that on Sunday.
6:15 Ed Elson? Yeah, we'll keep moving.
6:16 Scott Galloway? We'll keep moving. Ed's a little jelly. Ed's a little jelly of the other podcast. He just thinks because he has a foot and a half on Kara Swisher that somehow she's his nemesis.
6:27 Ed Elson? I don't know what you're talking about. I don't even know what that podcast is.
6:32 Scott Galloway? Now is the time to fly. I hope you have plenty of the well at all.
6:39 Ed Elson? The US and Israel launched military strikes on Iran last week. They killed Iran's leader Ayatollah Khamenei and several high ranking military officials and damaged government and defence sites. The conflict shows no clear signs of winding down. President Trump said the campaign could intensify and last for weeks, while Iran has indicated it is not willing to negotiate with the US. Despite the turmoil, markets have been relatively calm. The S and P is down quite modestly since the strikes began and the yield on 10 year treasuries climbed. However, one of the more significant reactions has been in energy with crude oil prices surging to
7:18 Ed Elson? an 18 month high. So Scott, our job is to look at the markets here, or at least our job on this podcast is to look at the markets, what the war is telling us about what's happening in the markets, also what the markets are telling us about what's going to happen in the war here. I think one takeaway is that if you were looking to the markets to tell you something about the future, it would be that the future of this conflict will probably be somewhat contained. Just the stock markets reaction, basically flat since this happened and of course, treasury yields climbing, which means that actually people
7:59 Ed Elson? have been, investors have been selling their treasuries and treasuries are usually the safe haven asset. When conflicts break out, you'd expect the opposite to happen. Now, I'm not sure what I make of it, or I think I'm a little sceptical of the market's reaction. But let's just start there. Your reactions to what the markets are telling us about this military conflict.
8:24 Scott Galloway? I think you nailed it. I think the market thinks it's going to be an interruption. It'll probably ding some of the earnings of travel stocks, luxury stocks, dependent upon airport retail. It'll take travel down. I was thinking about going to India and Bahrain and we're now in April, now we're contemplating whether we're going to go or not. So it's just a short term hit to earnings. But in terms of a long term war or real structural impact, it doesn't look as if the market believes that's going to happen. And if you look at If you look at most wars, typically, stocks fall in the short term and then they actually recover pretty robustly. And what's happened essentially since nine eleven, where stocks in New York real estate checked down, but then came ripping back, the check
9:07 Scott Galloway? down is usually shallower and shorter than usual because people look for the bump and start investing in the bump before it's even had a chance to go down. And in addition, the kind of risk on of metals going up, metals have come down. So what do we have? We have some of the stocks have been hit really hard, the travel stocks, right? So basically airlines and cruise stocks are down about 10%. I thought, LVMH is down. I thought the most interesting thing in the market was that the Cosby or the Korean market had its largest one day decline, I think, in history or since 2000, for a long time. It was down, I think, at 1.1%. And I think it's because their pricing, energy,
9:52 Scott Galloway? the flows, 20% of the oil flows through the Straits of Hormuz. The big, kind of the big loser here arguably is China, which gets 80% of the oil exported out of Iran was going to China, similar levels or pretty big levels out of Venezuela. So the supply of energy into Asia has been hit hard. And also, there's just a general recognition, and it might be that the Cosby was up so dramatically, this is just letting some air out of the balloon, that a lot of their biggest companies, whether it's Samsung or they're, you know, building microchips, they just require a lot of energy and that if energy spikes, that will really have a big impact on their earnings. But I basically,
10:36 Scott Galloway? I essentially think the markets are saying, and this is why the markets are so powerful, because it takes out all emotion or conflicts of interest. The markets are immoral. There's nothing like getting truth from someone than asking them where they're actually investing, right? Well, I love when, whenever a company asks me to call, I've been on boards more raising money and they ask me to call investors, the first thing investors ask is, are you participating in this round? And that's, you know, that's sort of, that's Wonder Woman putting a golden lasso around you. So I think what the markets are saying here, and the markets get it wrong, but Is that they think this conflict is going to hurt some companies in the short run.
11:17 Scott Galloway? But effectively, if oil is up 10% or 12%, diesel's way up more because of supply chain concerns in Europe in the short term. But I think the market is essentially saying, and you tell me if you think I got this wrong, this conflict is going to hit certain sectors in the short run, but we think the conflict is short-lived and the world will return to some level of normalcy sooner rather than later.
11:40 Ed Elson? I think that's exactly what the market's telling us. And to be fair to the markets, and to your point, that is often what happens. I mean, this is one of the strange things about war and about military conflicts is that usually they are not that impactful to the markets. Or at least you look back since World War II, three-quarters of the conflict since then. If you measure a year after the conflict began, stocks ended up in the green. You saw a positive return. And actually, JP Morgan did this study and they found that S and P returns are actually the same on average during peacetime and following conflict.
12:20 Ed Elson? So I think recent history would tell us that this is strangely not that impactful on markets. And I think that can be a little frustrating for us sometimes because Rob Armstrong makes this point. We often want the markets to tell us what we really believe. And I look at the death and destruction that is happening and part of me wants to think, you know, this is like a big deal. This is scary. This is problematic for various reasons. And I want the market to reflect that. The markets are definitely not reflecting that, at least not yet. The markets believe that this is going to be contained.
13:04 Ed Elson? It's going to be, you know, maybe there's going to be a little bit of instability, but not so much that it's really going to hit investors very hard. That's what the markets believe right now. Now, the question you bring up is, are they right or are they wrong? And usually, I would say usually the markets are pretty much right. I'm not someone who thinks that the markets are always getting things wrong and investors don't understand what's happening. But I'm also someone who believes that the markets can get things wrong sometimes. And that's how I felt about the Satriani article. I think that's how you felt about the Satriani article too, when this AI blog post comes out and suddenly everyone devolves into a panic. They start pricing in things that don't really exist yet, they don't have evidence of.
13:49 Ed Elson? And to me, that was a moment where the markets got it wrong. We'll see what happens over the next few years. On this occasion, I'm not so certain that the markets are getting it wrong, but I am struck by the market's certainty about what is happening here. And I felt this way when we talked with Steve Iseman about this, where I said, you know, what does this do to your investment strategy? And he said very, very plainly, this doesn't change anything. This won't change my investment strategy by a single dollar. And I'm hearing this a lot, actually, among investors, that this isn't a big deal, it's
14:28 Ed Elson? contained, Trump has essentially concluded the problem, and we're now living in an era of actually more stability and more certainty now that the bombs have been dropped than we were before. I'm just not so convinced of this. And I think there are plenty of what ifs that the markets ought to be at least considering, but they seem to be not even willing to even acknowledge. I mean, the first what if would be, what if Iran is destabilized even further? What if the nation devolves into something even worse? And by the way, that is not an unlikely scenario, because it is exactly what we've seen in
15:13 Ed Elson? most of the regime changes throughout recent history. It's what we saw in Iraq as an example. I mean, we've seen many instances where there's actually been more instability, more chaos, more death and destruction within the region following a regime change. So there are a lot of what ifs here, a lot of what could go wrongs, a lot of worst case scenarios that to me are very big deals. And I am struck by investors' general consensus here that none of this is going to happen.
15:46 Scott Galloway? Whether or not you think that bombing Iran and trying to diminish their capacity to continue to sponsor and wreak havoc in the Middle East, it is clear that the American public feel that at a minimum, the president should have gone to Congress, should have informed Congress, would have been much better off had he figured out a way to use diplomacy to enlist one or more European and Gulf allies. And also, it's reflecting a level of incompetence, and I call right now Iran as war is improv. It literally feels as if they're making it up as they go, right? So the messaging, we'll be there for five days, we could be there a long time.
16:28 Scott Galloway? This is a special combat mission, according to Republican senators. No, according to the president, it's war. We want regime change. We're not necessarily interested in regime change. Both those statements came from the president. Not being able to get American citizens out of the Gulf, no one actually thought through, well, what happens when everyone wants to come home? What's our plan for getting our own citizens out? Bombing Tehran, where we have probably more pro-West sympathy or empathy than many of the rural regions that are much more theocratic and loyal. It just feels as if it's not. Tactically, they are absolutely diminishing their navy, their missile launch capability.
17:09 Scott Galloway? I do believe that they're going to totally neuter their capacity to build nuclear weapons. So tactically, you could say it's a, I would argue it's a win so far, they're achieving objectives. But when you have no real thoughtful delineation of what the objectives are, and the story keeps changing, and you're going about it alone, and you basically have held up the middle finger to democracy and aren't even briefing the Senate Intelligence Committee. I mean, I've never seen Senator Warner so apoplectic that, and it does, it shows just such extraordinary incompetence, because wouldn't you want to at least brief Senator Warner, who has had several presidents in front of him and oversees the intelligence community, or informs the intelligence community, to kind of get his thoughts?
17:50 Scott Galloway? Wouldn't you want to brief Senator Kelly, who has flown dozens of combat missions to get the benefit of their thing? Wouldn't you want to have Representative Seth Moulton, who was in the Marines, I think in Iraq and/or Afghanistan, to get their feeling about what might be going on the ground? Because the reality is, we haven't had diplomats there since 1979. So other than relying on the Mossad, which is obviously going to have their own agenda and their own objectives, we have no color or real context here. And it looks as if America, this is another data point, and the larger impact on the market is not the war itself, but another data point that America is no longer the operating system through which the world operates.
18:31 Scott Galloway? We used to have, we controlled the, we controlled the supplies or the routes of energy, right? It was generally speaking, ships and maritime passageways were kind of off limits. We just sunk a ship with a torpedo for the first time since World War II in international waters. We were the one, everything was settled in dollars. Loosely speaking, our trade and our IP agreements were the ones that people lived by. It was our, our 700 military bases overseas ensured the safe flow of global trade and international norms. And now what they see is, okay, here's a rogue nation. We used to be the one ensuring no nations went rogue. Now we are that rogue nation. And something happened that I actually think, you know, it's the stuff you don't see that's,
19:16 Scott Galloway? or that doesn't get reported, that has a bigger impact. India and Canada just struck a trade deal. And they said, we're going to do, it's a $50 billion deal. And the really interesting thing within that deal was they've decided they're going to settle all of that trade in non-dollar-denominated currencies. So they're not only, they're not only rerouting their supply chain and trade agreements around the US, they're, they're purposely trying to figure out a way to de-dollarize, to no longer have what I would argue is the most formidable carrier strike force in the world, and that is the US dollar. Everything settles in dollars. So we have access to everything in terms of flows of capital and power. And we also have the ability to sanction people really severely
20:01 Scott Galloway? because everyone wants to settle in dollars. So what this is, I think the markets have said, okay, this conflict will probably be ring-fenced. It'll probably end sooner rather than later. But I do what you're going to think what you're going to see over the next year. I think the market, the US market is going to underperform. And we're going to see a weakening of the dollar because this is yet another example where nations think, Jesus Christ. The operating system we've been operating on is no longer, we can no longer depend upon it because these guys, quite frankly, are out of fucking control. They no longer see themselves as part of the West. They no longer feel the need to, you know, if we'd gone in
20:42 Scott Galloway? with British, French, and German intelligence and resources, fewer of those missiles would have landed or hit targets in the Gulf. Now granted, those missile launches have been, have largely diminished. It looks as if Iran may have run out of munitions to fire at their neighbors. If we had figured out a way to try and get one or two Gulf states to join us, it would have just had so much more legitimacy. It would have been another example of how the West brings people together and has some checks and balances. Instead, I think the biggest danger to the markets is not the actual action in Iran. It's another data point that we are now that rogue nation.
21:21 Ed Elson? But I don't understand why, because all of the points you bring up here should not instill or inspire much faith in Trump's decision-making on this issue. At least that is my view of it.
21:34 Scott Galloway? Agreed.
21:36 Ed Elson? And so what I don't understand is why there seems to be this kind of blind faith and trust in his ability to handle this competently. And what I've seen, all of the points you made, no congressional approval, no willingness or effort to inspire or reach some level of legitimacy and consensus on this issue, either in America or with our allies. Also the fact that he was the anti-war candidate for many, many years. I mean, this whole thing, his whole political career really began with, I think Iraq was a bad idea. I think Afghanistan was a bad idea. Personally, I don't see that much evidence that this
22:18 Ed Elson? situation is that much different from what we saw before. I don't think that he's proven that to us. There seems also, as you say, the messaging, you know, what are we actually trying to achieve here? Are we at war? Are we not at war? And to me, that's not a function of bad messaging. That's a function of- Actually bad strategy. I don't think it's that they don't know what to say. I think it's the is that they actually do not know what the plan is. They don't have a strategy. And so all of that makes me think we are getting into very, very dangerous territory here. We are we are potentially witnessing that what may might be the next trigger of of some very, very
22:58 Ed Elson? difficult, long war, something similar to what we saw with Iraq, which, by the way, they also told us was only going to last a few days, a few weeks. They said it wouldn't. I mean, Donald Trump said, literally said, I doubt this will last six months. That's what he told us. It ended up lasting eight years. It ended up costing three trillion dollars. Nearly forty thousand Americans were injured, four and a half thousand Americans died. So all of this, to me, says we don't really know what we're getting into here. And there are so many other downstream effects that could be really dangerous. For example, you know, if one very likely scenario would be that this isn't contained, that Israel hits Iran's oil facilities, Iran starts hitting other nations' oil facilities to just cause some chaos
23:43 Ed Elson? because they're frustrated, they're on the back foot. Oil starts, the price of oil starts to go up, could easily breach a hundred dollars a barrel. At which point, what does that do to inflation at home? What does that do to the interest rate policy of the Federal Reserve? That's its own thing. This what this could do to the affordability crisis and to gas prices in America and also in Europe could also massively destabilize Europe. And we're already seeing this in liquid natural gas prices, which are skyrocketing in Europe. Not the case for America. We're insulated from the issue a little bit more because we have our own supply. So that's good. But then even things like cyber attacks. I mean, we've already seen a huge increase in cyber attacks on Israel, literally days after they struck Iran.
24:29 Ed Elson? What if that happens to America too? What if there is a refugee crisis? I mean, this is a country with a population of ninety million people. What happens if they all decide, okay, we're out of here. This is a hot zone, which it is. And they decided to stop fleeing to Europe. What does that mean for the polit- Complexion de Europa. ¿Qué significa eso para el ascenso del populismo derechista, que ya está ganando un poco de ánimo en Europa? ¿Qué haría eso a los mercados europeos? ¿Cómo afectaría a los mercados estadounidenses? Mi mente se rie con todos los "¿Qué si?" Y entiendo que soy más de un pesimista que la mayoría. Pero siento que eso es lo que los mercados están supuestamente contando con ahora. Y puramente basado en mis conversaciones con los inversores,
25:14 Ed Elson? siento que nadie está honestamente contando con esos posibles resultados malos.
25:24 Ed Elson? Vamos de nuevo después del descanso. Y si estás disfrutando del programa hasta ahora, envíalo a un amigo. Y por favor, suscríbete si aún no lo has hecho.
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26:58 Ed Elson? We're back with Prof. Markets.
27:00 Scott Galloway? Anytime you start a war, there's an enormous X-factor, including, you know, the worst-case scenario, a downward spiral that results in somebody detonating a nuclear bomb. I mean, that, there's just, because the reality is, the enemy gets a voice in this. And you can't predict what they're going to do. All norms kind of go out the door. What is it? War is, is negotiation when all diplomatic efforts have failed. So there, but also, you could make these arguments and never decide to go into Kosovo and liberate people, to not create a multilateral force and go into Kuwait and push out Hussein,
27:44 Scott Galloway? to not, to not fight their war again, after we got nothing from World War I, but a bunch of injured and maimed Americans, and just strike a deal with Hitler. And, you know, there was a very large movement. The biggest hero, the Elon Musk, the biggest hero in 30s America, was Charles Lindbergh, who was, who was absolutely against it. There was a huge anti-war. Basically, a lot of people accused FDR of lying to the American public to try and send armaments to Europe. So there is always a thoughtful and reasoned argument around how any war or any conflict could result in Armageddon. I get it. I would argue that, and this is my prediction, oil in a year from now will be less expensive
28:29 Scott Galloway? than it was at the beginning of this conflict, or war, let's call it a war. And that the biggest opportunities, from an investment standpoint, if things go right, if we can figure out a way to ensure that if the war in Ukraine comes to an end, and we can figure out a way to ensure that they have some reasonable sense of security, I think the amount of investment that's going to pour into Ukraine because of the spillover of technology and drones and surveillance technology, I think the Ukrainian economy is absolutely going to boom. But the key will be to make sure that we, we help them at least win the war, have enough negotiating power such that we're not, we're preventing the next war, just not scheduling it. If we in fact can figure out a way, if the Iranian
29:12 Scott Galloway? Military is diminished to the point in their launch capabilities, their ability to lay mines in the Straits of Hormuz, their ability to enrich uranium. If all of that is absolutely neutered, I think the Middle East is safer. If we can, and this is the optimist viewpoint, and let's go to what Josh Brown says, what could go right. If we got, not even get a pro-West governmental ruling party, but a neutral one that embraces technology, maybe normalizes relationship, relations with Israel, which has a lot of technology, normalizes or has enough, a neutral enough relationship with Europe and the US to get better oil infrastructure and technology, I think you're going to see an economic boom in Iran. I think the private equity guys will all of a sudden be flying in, there'll be a Four
29:57 Scott Galloway? Seasons in Tehran where they're there trying to figure out a way to invest. So, a lot of times, look at World War II. What have been the two most productive economies the last half of that century?
30:07 Ed Elson? Germany and Japan, but, but those are the exceptions to the rule, kind of, here. If we're talking regime change, and if we're talking US involvement, like, those were success stories.
30:22 Scott Galloway? Do you think the Venezuelan economy is going to be better two years from now or two years, or two years back?
30:27 Ed Elson? I think it's a very open question. I think right now.
30:30 Scott Galloway? Fair enough.
30:31 Ed Elson? I think right now, there is some support for the US, and I think that there is, as you mentioned, in Tehran and Iran, there is support for the American cause because they have been so oppressed. But, I mean, my mind just, I feel like we've seen this movie before. We saw this in Iraq where there was also some support for the US. And then there was so much instability over the next few years that suddenly everyone decided to go, actually, we wish these guys didn't come in here. Whether, whether they're right or wrong, I'm not, I'll leave that up to them, but the reality is, you know, when the, a year after the invasion happened, the Iraqis were pretty split, and then three years later, all of them decided that, that America was the enemy.
31:14 Scott Galloway? So far, that was the worst geopolitical mistake of this century, was George Bush lying to us and getting, propping up a CIA director and, and General Powell to say their weapons of mass destruction. There wasn't. He wasn't, he, he himself didn't have plans. His, the organizing principle of Iraq, unlike Iran, wasn't death to Israel and death to America. But, this is how I would summarize it.
31:41 Scott Galloway? The why and what they're doing, I think, I think that Trump would have had potentially, had he gone to Congress, he would have gone for an authorization of the use of military force. They never get a declaration of war. And I think he may have gotten or may not, but he needed to do that because what it forced him to do was to say, oh, this is a defensive posture. Well, why is it defensive? Because they were about to be attacked, and if they were attacked, they would attack us back. Okay, so you're saying that Israel is now running the military and US policy? The what and the why here and why now, I think have real rational justification. The problem is, no one trusts the guy that's
32:25 Scott Galloway? driving the bus to execute it correctly, and that it could backfire. Because if our messaging is wrong, if we don't execute well, if we... I mean, right now, quite frankly, I believe everyone just wants this war to be over. I think the worst thing we could do right now is make a bunch of hollow excuses for pulling up stakes and leaving. Because what's the next time we want to take military action? The nation just points its missiles at its neighbors and says, wait four or five days, and hire a bunch of troll farms to piss on the president on social media. Russia, to their, I won't say to their credit, but Russia has lost a million people and has spent four years and has not moved an inch. Meanwhile, Spain won't put a single fucking boot on the ground. And I hate to
33:07 Scott Galloway? say this, but it kind of goes back to what the one smart thing that I forget the guy, Masayoshi Son, said, who would you rather be, less rather be in a fight with? Someone who's really smart or someone who's fucking crazy? And the reality is, the West, if the West leaves right now, and I understand that there was no legitimacy going into Iran, that they lacked, he lacked the legitimacy, when you declare war, and this is war, you are supposed to get congressional approval and let the US public have a vote in this vis a vis their representatives. And you have more legitimacy going in if you go in with a multinational force. He did not do that. People on the left and right are pissed off. By the way, he's got about, I think it's 72 or 77 support of Republicans, 17%
33:50 Scott Galloway? of Democrats. This has, everything is a dramatic political divide. The more probably better litmus test is independents, and it's only got about 30, 32% support. But again, I go to, this is another data point. That the leader of the free world does not know how to allocate resources in a responsible, safe way. I think he could have made a very solid argument for why this was a good idea if he'd outlined objectives that were very straightforward, measurable, had a multilateral force, including European nations and Gulf nations, gone to Congress, briefed the right people. And if Congress, if he didn't get the votes, then he shouldn't do it because this is war. This isn't, this isn't a defensive act where he's understandably
34:33 Scott Galloway? given the rights to move quickly. So this isn't, in my opinion, this is moved from whether or not this was the right thing to do. The bottom line is this is another data point where we think we have an autocrat who does not think things through, who acts based on the last person he spoke to, whether it was Secretary Rubio or Bibi Netanyahu, and is allocating our resources in a very irresponsible, dangerous way, and has the whole world going, Jesus Christ. The knock at the door now that we're supposed to be scared of was supposed to be the good guys. Now they're the knock at the door.
35:09 Ed Elson? The one thing I don't, I'm not sure I'm aligned with you on is when you say that their messaging, I mean, as the, as the example, they come out and they say in so many words, this was Netanyahu's decision. He brought us into this. That's what Rubio basically says.
35:29 Scott Galloway? That is the stupidest thing they have, and this is not, this is a high bar. That is absolutely the stupidest, most damaging thing they could have said.
35:38 Ed Elson? But what if it's true? Like, I mean, if it's a messaging problem, I mean, if it's, they, they flubbed their explanation, that's one thing.
35:47 Scott Galloway? So you think that Netanyahu and AIPAC are effectively controlling the president and deciding if and where we, we, we declare war?
35:57 Ed Elson? I think that what Rubio said I could see as being true, which is that Netanyahu said, we're going in. Join us or not.
36:08 Ed Elson? And then America decided to join us.
36:09 Scott Galloway? I don't think America scares that easily. I don't, even Trump, I don't think that, I think it more likely when something like this, and we won't know until, you know, those tapes are, eventually, the truth is like oxygen trapped underwater. At some point, there's a bit of an earthquake and the oxygen reaches, the truth reaches the surface. I think what more likely happened, I think he respects Netanyahu, and Netanyahu was one of probably several voices saying, this could be your legacy. You could unlock, vis a vis this incredible resource in the best performing organization in the world, the US military, you could unlock unprecedented peace, prosperity and stability in the Middle East with this bold leadership action. And oh, the free gift with purchase, wink, wink, is you're going
36:53 Scott Galloway? to push Epstein out of the news for, for a few weeks. But I don't, I just do not buy, and I'm uncomfortable with the notion that I feel kind of plays into this trope, that 2% of the population in the US that is Jewish is somehow controlling, you know, the, the, the US government.
37:11 Ed Elson? Agreed.
37:11 Scott Galloway? I don't doubt that, I don't doubt that Trump listens to Netanyahu and, and respects him. But this was Trump's decision, not, and if they said, we're going in with or without you, they could have, fine, they're not afraid to do that. What, what's become clear since October the 7th, is that Israel is the superpower in the Middle East.
37:32 Ed Elson? Yeah.
37:32 Scott Galloway? That they are, I mean, if you look at, we talked about geopolitical disasters. Iraq, disaster, total fucking disaster, and set off a hallucination that has damaged your generation, that can be distilled down to the following, oh, hey, everybody, hey, old people, we can cut your taxes and go to war. Because guess what? We have so much built up trust because of previous generations' responsibility and leadership, that we have massive borrowing capacity.
38:00 Ed Elson? Exactly.
38:01 Scott Galloway? George Washington to George Bush, 7 trillion in deficits. George Bush to Donald Trump, another 30 trillion in deficits. Right? So that was a huge mistake. The second biggest geopolitical mistake, and may have surpassed, was October the 7th. If someone had Told Sinwar and Khomeini, you're both going to be dead and Assad is going to be playing video games in Moscow and Hezbollah, the supposedly great fighting force is going to be neutered. The Houthis in Yemen are going to have are basically going to be just bothersome, but not a real force. And Iran is not even going to have control over its own skies. And Syria is now run by some, I mean, this was the biggest mistake. We made the second biggest mistake,
38:44 Scott Galloway? or biggest mistake so far of the century. I think Sinwar and Iran, and let's be honest, it was Iran, made the biggest mistake. Again, let me just wrap all this up. How are the markets responding? They believe this is short term and going to be ring fenced. There is always an X factor because the enemy has a say in it. I do believe that the biggest mistake here, I think that Trump could have made a very strong argument for why to do this, why now, why it's an opportunity right now, if he'd set very clear objectives, and quite frankly, had a secretary of war that didn't have his head up his ass and was a little bit more competent. We are veered so far from the markets. Reel us back in, Ed. Reel us back in.
39:26 Ed Elson? We have veered far, but I do think that it all relates. That's the problem. It's we're trying to price massive levels of uncertainty here. That is what the market's job is to do at this point. And so that is the question. They believe we're okay. And then I guess the question is, if you're an investor, do you agree with that? And I think there's a decent argument for that. And I also think there are some decent arguments on the other side as well.
39:50 Scott Galloway? Well, let's, let's make a bet here and let's timestamp it. And I keep saying let's timestamp it and our producers don't listen to me. In a year, do you think oil is going to be higher or lower than it is now?
40:00 Ed Elson? I think it will probably be lower. I think I agree with you. But my certainty rating on that is very low. That's not a bet that I'm willing to put a lot of money on because I don't feel much conviction in it. But if I had to, gun to my head, I would agree with you. Oil goes lower. We'll be right back. And for even more markets content, sign up for our newsletter at profitemarkets.com/subscribe.
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41:58 Ed Elson? We're back with Profty Markets. Last month, we thought Anthropic's Super Bowl ad was going to be its big moment. The ad went viral, racking up nearly 5 million views on X in under 24 hours. But the buzz then faded. And now, the real big moment may have actually arrived. At the end of February, Anthropic rejected a $200 million Pentagon contract. The company refused to allow its technology to be used for surveillance of US citizens or autonomous military strikes. Trump swiftly blacklisted them, and hours later, OpenAI picked up the contract. But taking that stand appears to have paid off for Anthropic. Claude climbed to number one in the App Store, and Anthropic's enterprise market share rose to 32% over taking OpenAI.
42:45 Ed Elson? Meanwhile, ChatGPT's uninstall rate in the US reportedly jumped nearly 300% after news of its Pentagon deal broke. Now, the question will be, how hard of a line is Anthropic actually willing to draw? It looks like the company is now back in negotiations with the Pentagon, seeking a compromise that would enable the government to keep using its technology. It would also prevent Anthropic from being excluded from the military supply chain. So Scott, I think this is very interesting because this goes back to something that you were saying a long time ago when tariffs were unfolding, where you said, actually, if you're the leader of a large public company, a lot of them were very scared to say anything bad about Trump or to stand up to him or to disagree with him in any way.
43:30 Ed Elson? And you made the point, actually, this could be good for you.
43:35 Scott Galloway? In business school, we have, we have ethics, we have leadership, and we have sustainability courses. And they each cost, every course costs $7,000. Let me save you $21,000. Ethics, think about right and wrong. Okay, that's the ethics course. Leadership, do the right thing even when it's hard. Boom, you're done with leadership. And the sustainability, thinking about doing the right thing, doing the right thing when it's really hard, you might make money out it. Boom, you're done. I just saved you $21,000. When you don't speak out on behalf of our wonderful allies and other companies, and speak out on behalf of your own company, just wait, folks.
44:18 Scott Galloway? In the long run, it's just really bad for you not speaking out.
44:22 Ed Elson? Someone's now tried it in Dario Amade, who stood up to the president. And what happens? Install rates of Anthropic and of Claude skyrocket. And actually, their revenue, their ARR, went from $14 billion to $19 billion in two weeks, which is a 36% increase. It's just unbelievable. So it seems that they have actually proven your point here. But let's get your reactions to what's happening between Anthropic and Trump and the Pentagon and OpenAI.
44:53 Scott Galloway? He's the first CEO who said, no. And he's absolutely right. Andorl builds weapons so the government can kill people. The Silicon Valley wokester ethos was no, we're gonna walk out during lunch because we don't like Google working with the Defense Department. Well, good for you. That's that'll show them, you little woke bitch. Meanwhile, go back to the cafeteria and get your sushi and cry into your Atlantic. Anyways, they get to do that.
45:25 Scott Galloway? Palantir, if they want to provide data to Israel, as long as they go, they get security clearance, they're allowed to do that. Because as long as you comply with the law, you get to operate within, you're entitled to and subject to the laws. When the Pentagon starts saying, no, you gotta do this. And he said, he stuck up the middle finger. And guess what?
45:50 Scott Galloway? We're here for it. America's here for it. And as I mentioned before, on Sunday, we're going to Minneapolis. We've had this resist and unsubscribe movement highlighting a bunch of companies unsubscribe from. The next evolution of it is the following. We're going to try and put out a bunch of data and a bunch of messaging and a bunch of media encouraging people to not use and unsubscribe from OpenAI, but to subscribe and patronize Anthropic. If you believe that companies have the right to operate under the laws and not and should not be subject to intimidation from the president or the Pentagon to do exactly what they want when they're not comfortable with it, then sign up for Anthropic.
46:33 Scott Galloway? He's the hero we were waiting for. And it's, and we have been saying this for, I've been saying this for six or nine months. There's an enormous commercial opportunity for the first person who gets off their knees and says, fuck you. I'm an American. This is an American company. We get to, we get to operate by the law. We get to, we get to decide who we work with. We can't do it based on sexual orientation. We can't not serve people because of their, their sexual orientation or their race. Actually, that's not true now. Like, I think the Supreme Court has decided you don't have to make a cake for someone if a gay wedding cake. But anyways, my point is, he's the guy.
47:17 Scott Galloway? Finally, someone took advantage of the biggest commercial opportunity of the last six months. And that is to stand up and say, you know what? Is last I checked, being an American and being incorporated in America means we have to, we absolutely have to operate by rule of law, but also we are protected by rule of law, meaning we get to make, we get to make these decisions. And he's been articulate, he's been forceful. And this goes to another prediction we made, I think about three, four months ago, that within a year Anthropic would be worth more than OpenAI, mostly because I think OpenAI is going to decline in value.
47:56 Ed Elson? It's been proven now. I mean, I just returned to this unbelievable number that their ARR, their annualized recurring revenue, two weeks ago was $14 billion and today it is $19 billion. Like, we literally have the data in front of us that getting off of your knees, as you say, standing up to the president, literally translated into a $5 billion revenue opportunity. And who knows how much it'll increase in the future. Meanwhile, look at the damage that it is levying on his greatest competitor, which is OpenAI, and Sam Altman. They step in, they say, okay, we're going to take the contract with the Pentagon. And suddenly the uninstall rate absolutely skyrockets. One and a half million users leave ChatGPT.
48:41 Ed Elson? And then there's this movement online that starts to trend, hashtag cancel GPT. So we're watching the evidence play out in real time. And I think the other thing that is so interesting is how badly Sam Altman is fumbling the bag every time from a PR and communications perspective, something that is quite striking. A year ago, 9% of Americans said they disliked Sam Altman. That's already a pretty big number. Today, that number is 20%. So it has more than doubled in the past year. And you think about all the things that he's gotten wrong, obviously his response to that Super Bowl ad, his very awkward Senate hearings, his very awkward interview on Jimmy Fallon,
49:24 Ed Elson? where he tried to present as this fun, likeable, relatable guy, ended up being quite awkward and seeming quite, honestly, a little evil in a lot of ways. But then I think the most, except the worst.
49:39 Ed Elson? Moment we've seen from him happen a couple of weeks ago. And I just want to play this clip for you. Get your reaction because I think this is probably the worst thing Sam Altman has ever said in a public forum.
49:52 Sam Altman? People talk about how much energy it takes to train an AI model relative to how much it costs a human to do one inference query. But it also takes a lot of energy to train a human. It takes like 20 years of life and all of the food you eat during that time before you get smart. And not only that, it took like the very widespread evolution of the 100 billion people that have ever lived and learned not to get eaten by predators and learned how to like figure out science and whatever to produce you. And then you took whatever you, you know, you took. So the fair comparison is if you ask chat GPT a question, how much energy does it take once its model is trained to answer that question versus a human? And probably AI has already caught up on an energy efficiency basis measured that way.
50:36 Ed Elson? Let's get your reactions.
50:38 Scott Galloway? There are certain looking glasses into people's character and souls. And I've also saw two easy ones are how people treat service staff. Do they look them in the eye? Are they patient with them? Do they tip well?
50:52 Scott Galloway? And then also how they treat their pets. I have a close friend who I like to drink with and no matter what, at exactly 11 and he, I might lose him as a drinking buddy. He's like, I gotta get home and get my dog out. It just, how you treat your pets and how you treat staff, looking glass into people's soul. And there's a lot of different things, right? This was a rare moment when we had a bit of a looking glass into Sam Altman's soul. And he's a fucking nihilist. He is basically saying there is a rational reason to invest more in non sentient beings because sentient beings require too many resources.
51:32 Scott Galloway? And it's like, well, all right, boss. That means you're the guy who's looking for the fuck doll. And rather than having a human to have a relationship with, that you don't, you really don't understand what the shooting match. The reason we're here is to, is to create friction and resources and investment and relationships and resources to create sentient beings we can have relationships with. And that he even thinks that way, that it's unfair. When you think about the amount of energy we have to put into raising a child to get to the point where it's intelligent, that wait, I can replicate that with less energy.
52:17 Scott Galloway? Just that, just that he's thinking that way feels, it feels, quite frankly, it just feels frightening. Someone who sees power and ROI as besting emotion, relationships and sentience. And no, power and ROI and the markets and AI are all meant to unlock greater prosperity and an absence of anxiety such that you can focus on those little energy consumptive nightmares called children. That's the whole fucking point is that we do all this other stuff such that we can make the investments in these children that are worth it.
52:58 Scott Galloway? And I thought this is such a, this is such a, a statement from someone who has not had enough love in his life or hasn't experienced what it's like to raise children and generally sees maybe a legitimacy of the rise of the robots. It's kind of this Peter Thiel nihilism weirdness that they just look at stuff as, as ROI being the end game. No, the reason why we pursue ROI is such that we can waste time and money and be very inefficient with the investments we make. And I still haven't got my money back on my children. I'm not sure I'm ever going to. And in almost every calculation of ROI, I say this to my kids all the time. I'm like,
53:44 Scott Galloway? I talked to them about becoming a man and the idea of surplus value. And I'm like, you're surplus negative right now. I'm like, the school's spending way more than you're giving back. We give you so much more love than you give us. I can't, I'm like, do you know how much I'm spending on you? Like, my son's been selling Pokemon cards. And I'm like, okay, give that to me back. I've forced my kid who just got into college to go through and tell me how much I will have to make pre-tax, such that he can join a fraternity and sorority and, you know, and, and, and make out with girls from, you know, from Richmond, Virginia. Negative, negative value. But this is the whole point. The whole point of humanity or of being a parent is that you make these investments because that's where you give in to purpose.
54:29 Scott Galloway? That's where you give in to the most loyal Americans and some of the most satisfied Americans are veterans. They will never get an actual return on their service and being away from their families. But it gives them purpose that they're able to invest in something, that you're able to give up your resources and your emotions and invest in something, realizing on a tangible anodyne level, you'll never see a return. What you get back is knowing that you added value.
54:55 Ed Elson? I think that's well said. I think that it is a very significant concern and question for us. I mean, what do we do about the fact that the leaders and the builders of the technology of tomorrow appear to have a genuine fundamental misunderstanding of the point of life, of the point of why we're all here, what existence and humanity is actually all about? I mean, what does that mean for us? I totally agree with you. I think, Sam, we saw into his soul there. He does not have an understanding of these things. He doesn't have an understanding of purpose. And I think that quote said it all. Now, the question's gonna be.
55:37 Ed Elson? Dario Amadei now appears to be in talks again with the Pentagon. Is he going to fold on his previous position? I mean, I, I, I hope not. We'll see how these talks unfold. But I think he has something good here, which is standing up for his actual beliefs and his values. If he caves, then maybe it was fake. Maybe he didn't have values, at which point we'll have to turn again. But it is very interesting to see how this is all unfolding. I'm going to wrap us up here because I know that you need to go. Let's take a look at the week ahead. We will see inflation data from the personal consumption expenditures index for January and the consumer price index for February. We will also see earnings from Oracle and Adobe. Any predictions, Scott?
56:18 Scott Galloway? My prediction is no. And that is Dario Amadei has taken his company from 14 billion a year in AR to 19 billion a year in AR with one simple strategy, no. And by the way, the average S and P company, I think, does 18 billion a year. And I think that is going to give CEOs the confidence to say no. I think you're going to see a half a dozen to a dozen CEOs over the next 30 days find their testicles and say, no.
56:49 Ed Elson? This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Shalane, Isabella Kinsel, Kristin O'Donoghue and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Profitec Markets from Profitec Media. If you liked what you heard, give us a follow and join us for a fresh take on markets tomorrow.
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