Netflix Wins the Warner Bros. Bidding War

Scott Galloway and Ed Elson break down Netflix’s acquisition of Warner Bros. Discovery and what it means for the future of streaming. They then turn to the potential Anthropic IPO, examining how the AI narrative has evolved over the past year. Finally, they discuss the Trump Account Program and what America should be doing to better support kids before they turn 18. Subscribe to the Prof G Markets newsletter Order "Notes on Being a Man," out now Note: We may earn revenue from some of the links we provide. Subscribe to No Mercy / No Malice Follow the podcast across socials @profgmarkets Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

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• 1:29Scott Galloway?

  Today's number 60. That's the percentage of America's cats and dogs that have obesity. True story. I met the president last week and I said, "Jesus, you're obese." And he said, "Well, it runs in my family." And I said, "Nobody runs in your family, you fat fuck."

• 1:55Ed Elson?

  How are you doing, Scott?

• 1:55Scott Galloway?

  I'm good. I've had a busy day. I just did my predictions deck to whatever 22,000 people. I'm in London.

• 2:01Ed Elson?

  22,000?

• 2:02Scott Galloway?

  Yeah, what is that? Madison Square Garden plus Madison Square Garden?

• 2:06Ed Elson?

  That's pretty good. 22,000, is that your largest audience? Just for anyone who didn't know, Scott always does his predictions deck at the end of the year and it's like a live stream. I love that you're live streaming, by the way. And yeah, and so you do this every year. 22,000, is that the record?

• 2:24Scott Galloway?

  Last year was close. I don't know. Maybe I'm tiring. Oh, fuck that. Let's talk about me. Did you say I was on Oprah? Have we already talked about this? I was on Oprah. I was on Oprah. Ed.

• 2:37Ed Elson?

  I know you're on Oprah.

• 2:38Scott Galloway?

  Have you been on Oprah? Oh, no, I don't think so. I don't think so. You're on Katie Tour every like twice a day. But I was on Oprah.

• 2:48Ed Elson?

  That's the only person who wants to speak with me. It's Katie Tour and that's it.

• 2:51Scott Galloway?

  Ed, I just love it. Let me just summarize every show you've been on MSNBC. They bring on a bunch of boomers and then Katie goes, "For the Gen Z view, we bring in Ed Elson." And you go, "Fucking income inequality. I can't trust any of you." And everyone else on the panel looks like they've just been caught masturbating. They don't know how to respond to you. It's like a mic drop every time. You're literally like, and everyone who's watching MSNBC is like, "He looks like he's four years old. Look at that young..." Do you think we could set him up with our granddaughter? "Where's my oxygen tank?" That's what they're saying when they're watching you. Cause you know, they're old.

• 3:27Ed Elson?

  I would push back, but I think you're actually, I think you're actually completely right on this one. That's exactly what happens every time.

• 3:33Scott Galloway?

  It's funny because they're old. They're super old. What have you been up to, Ed?

• 3:40Ed Elson?

  Oh, you know, just podcasting. We have a team drinks tonight, which will be fun.

• 3:45Scott Galloway?

  Where are you guys going?

• 3:46Ed Elson?

  We're going to San Vicente, which will be good.

• 3:48Scott Galloway?

  Ooh, who's a member of San Vicente Bungalows? Who am I paying too much to?

• 3:51Ed Elson?

  That's me.

• 3:52Scott Galloway?

  You're a member of San Vicente? Oh, Mr. Trenta, Mr. Trenta de Tras, Trenta, Mr. Thirty Under Thirty is a member of San Vicente. How many members' clubs are you a member of?

• 4:04Ed Elson?

  Enough. We've talked too many about, we talk all the time about these stupid clubs.

• 4:09Scott Galloway?

  It never gets old.

• 4:10Ed Elson?

  It does. I'm telling you, it does.

• 4:12Scott Galloway?

  I'm just jealous because I haven't been. I'm in fucking in 50 degrees and gray weather and less hot people, London. I've been going to Roof Gardens, which is a fucking sausage factory. All these dudes. Your work's so inspiring. Get away from me. Where are the hot chicks? So Ed's head is in his hands. Head is in his hands.

• 4:36Ed Elson?

  It's just terrible because it is how your brain actually, actually works. But yeah, we are going tonight.

• 4:44Ed Elson?

  By the way, I also saw you on the This Morning Show, which was funny because that's kind of one of those shows that I would grow up watching when I'd be homesick from school.

• 4:52Scott Galloway?

  Oh, the British thing yesterday?

• 4:53Ed Elson?

  Yeah, the British thing. I found that cooler than you being on Oprah because that was the show that I was seeing as a kid when I grew up. And I know, I could tell by your demeanor, you weren't that excited to be there, but I was pretty excited to see you.

• 5:06Scott Galloway?

  Let me literally break it down. I'm about to, whatever it is I do in the morning, eat my protein shake and take a walk with the dogs. And Mary Jean starts blowing up my phone saying, "The car's there." I'm like, "The car? Where am I going?" She's like, "You have a live hit on ITV." And I'm like, "What the fuck is ITV?" It's like, it's a big news sta- it's a big station in the UK. And I'm like, "No one lives in the UK and the economy's not growing. I don't want to go on live TV." And she's like, "You gotta go now. We committed to this." And I go there and it's a big operation and it's exactly the same as the US. It's a very attractive woman and a hot guy and sitting on a couch, asking you softball questions. And then cutting to an ad for restless leg syndrome or opioid-induced constipation ads.

• 5:51Ed Elson?

  No, because they don't have those in the, they don't have those in the UK.

• 5:54Scott Galloway?

  The segment was before me was guessing who was going to be voted off of Love Island, the British version. And I'm like-

• 5:59Ed Elson?

  That sounds right.

• 6:00Scott Galloway?

  And I'm literally like, "How far have I fallen? This is what it means to be a thought leader."

• 6:05Ed Elson?

  This is cool. You're on the This Morning Show with the Love Island stars. I think that's very cool. You should be proud of that. It's hilarious that you didn't even know that you were, you were going to be on that show. But that's exciting.

• 6:18Scott Galloway?

  You gotta be honest with me, and we should, we should fill out the comments with this with another one of our knockers questions. Is the dog overexposed? Am I like Lassie right now? If Lassie was Kim Kardashian and just fucking everywhere. I, I have, in the last 24 hours, I've received three messages from friends that have all said the same thing. Make it stop. Make it stop. Because I'm in their phone or whatever and Meta knows her friends, they're like, "All I'm getting is fucking videos of you and I can't stand it."

• 6:50Ed Elson?

  No, you're everywhere. It's crazy. I can't stand it either.

• 6:53Scott Galloway?

  I think I'm overexposed.

• 6:54Ed Elson?

  Well, no, it's a good thing. You're trying to get yourself out there, but-

• 6:57Scott Galloway?

  There is a limit.

• 6:58Ed Elson?

  Well, what is that limit? When people get bored?

• 7:00Scott Galloway?

  I don't know. I just, I'm getting attacked online. I think that, I think that's part of it.

• 7:04Ed Elson?

  That's good. That means you're saying something.

• 7:06Scott Galloway?

  I do think I'm overexposed. I told the publicist to dial it back a notch.

• 7:10Ed Elson?

  What would be your, and then we'll move on to our actual job, which is covering the news. But what would be your dream show to be on? You've been on Oprah, you've been on Bill Maher. What, what's next? Or are you at the top of the mountain?

• 7:24Scott Galloway?

  My dream show is Bill Maher. I always wanted, my dad wa, my dad used to watch.

• 7:28Ed Elson?

  Yeah, but now, now.

• 7:29Scott Galloway?

  I don't really have, I don't have anything left. I'd like to go on. At some point, I'd like to go on Rogan and tell him that he's been spreading vaccine misinformation and is incredibly reckless and irresponsible, but I'm, he hasn't called me for that.

• 7:43Scott Galloway?

  No, there's nothing like, I'm dying. Oh, I'm going on Colbert. I'd like to be on one of those evening shows.

• 7:48Ed Elson?

  That's cool. That's exciting. Yeah. The late night.

• 7:50Scott Galloway?

  How about you? You're on your way up and you're, your, your ascent is like 10 times the velocity of mine in terms of where you are. You're, oh God, are you kidding? At 26, I was trying to like, I was following my girlfriend to graduate school and living with my mother. I, I had no, I, I literally didn't know what to do and I was a waiter at Islands, a burger joint. You're on Katie Tour.

• 8:14Ed Elson?

  Yeah. If this is how we measure success, is how many shows you can get on.

• 8:17Scott Galloway?

  What show would you like to be on?

• 8:19Ed Elson?

  My favorite show that you have been on, which I would love to be on, is Theo Von's show. I was so excited when you made it on that show. Yeah.

• 8:27Ed Elson?

  I also think, I also think Joe Rogan would be amazing. I think, I'm surprised he hasn't reached out to you yet. He must know that you were upset with him. That must be the reason. You're like.

• 8:36Scott Galloway?

  Oh, hold on, hold on, hold on. I pulled all of our podcasts off of Spotify during COVID and publicly said it was because Joe Rogan was distributing misinformation about vaccines. It was going to result in unnecessary death, disease and disability. So yeah, Joe knows who I am and I'm not going on anytime soon.

• 8:57Ed Elson?

  That's probably it. That's right.

• 8:58Scott Galloway?

  SNL would be cool.

• 8:59Ed Elson?

  It would be. You want to host SNL?

• 9:01Scott Galloway?

  No, no, I want to be mocked. I want to be mocked on SNL. I want to have someone with a big nose and glasses who's like telling bad dick jokes and pretending to have insight. I want to be mocked. Or The Simpsons.

• 9:13Ed Elson?

  I remember when I was working with Michael Wolff and that happened to him. Fred Armisen went up there and did a croaky voice and pretended to be on Morning Joe. It was pretty good.

• 9:20Scott Galloway?

  That is pretty good.

• 9:22Ed Elson?

  You're almost there.

• 9:22Scott Galloway?

  Almost there. You'll be, my prediction, you will be, you're clearly like, the producers at MSNBC hear your name and start touching themselves. Pretty soon, pretty soon, his head's in his hands again. Pretty soon, you're, trust me on this one, you're going to be on Morning Joe. They're going to have something about young people and they're like, for, they're going to be like, for the Gen Z perspective, this is, they're going to be like, up next, someone born in this millennium. They are, they're actually out there.

• 9:55Ed Elson?

  A live young person in the flesh.

• 9:58Scott Galloway?

  What's this talk tick thing you keep doing, the kids are doing right now?

• 10:04Scott Galloway?

  No, no. Morning Joe. You're up. Morning Joe's up to you.

• 10:08Ed Elson?

  I can't wait. I cannot wait. That's going to be great.

• 10:10Scott Galloway?

  Get to the headlines. Stop delaying.

• 10:12Ed Elson?

  Okay, let's do it.

• 10:15Scott Galloway?

  Now is the time to fly. I hope you have plenty of the well with all.

• 10:22Ed Elson?

  It's official. Netflix has won the bidding war for Warner Brothers Discovery. The $72 billion deal plus debt includes WBD's studio and streaming service. Meanwhile, Discovery will proceed with spinning out Discovery Global, which includes its portfolio of linear TV networks, including CNN. Netflix stock fell as much as 4% in pre-market trading. Warner Brothers Discovery shares rose nearly 4% on the news. Scott, we were wrong. The first thing we should say, we thought that Netflix would not make a bid. We thought, or I thought that David Zasloff was running a little bit of a fake auction that it would go to David Ellison and Paramount.

• 11:04Ed Elson?

  We were wrong. Netflix won. $72 billion plus debt. Your reactions?

• 11:09Scott Galloway?

  I don't think the deal's going to close, Ed. I think it'll be blocked. So first off, you're, and by the way, we were still wrong. We thought the Ellison's would just walk away with this with a bid no one would match. And Netflix has stepped up and I guess they look at their $400 billion market cap and say, okay, if I'm going to pay whatever it is, 70 billion plus the debt for assets that are singular. It just, it's just crazy what, how human nature plays such a big role in everything. This stock was at 10 bucks not that long ago and nobody wanted near it. And then when I was in junior high school and I asked Lynn Sugamora to the prom and everyone found out that Lynn Sugamora didn't have a date and was willing to go with me.

• 11:52Scott Galloway?

  Everyone decided they wanted to take Lynn Sugamora to the junior prom. And that all of a sudden when faced with the idea of losing these assets and never having access to them again, everyone is all of a sudden decided this company is worth a lot more, you know, 120% more than, you know, just a, just a few months ago. But as I think about it, and by the way, let me just highlight that if Adam Newman and Marissa Mayer, the two most overcompensated executives had a baby, it would look something like David Zasloff, who's going to walk off, who's going to walk off with 600 million dollars for basically

• 12:28Ed Elson?

  600 million.

• 12:29Scott Galloway?

  Just being, and that's after the 250 he got from playing banker, cramming Shark Week and Game of Thrones together, which made no fucking sense. Anyways, you know, have at it. But essentially, if you look at this, if you look at the combined companies, so let's back up. Trump and Mom Donnie, one, because they're focused on the right thing and that is affordability. All citizens globally want prosperity, which is a function of affordability and the amount of, and their earnings, the ratio between affordability and their earnings. Affordability has become less so in America and Americans think that, oh, if someone just puts money in my pocket or screams socialism, they're going to make things more

• 13:11Scott Galloway?

  affordable, not recognizing that doesn't work. As a matter of fact, it makes things less affordable. Affordability is a function of structural, long-term policies that result in one word, competition. You need structural regulatory

• 13:29Scott Galloway?

  Systemic, not reform, but policies that create competition. And unfortunately, this is a great move for Netflix. This is, they can afford it. It would be great for them. I really like Ted Sarandos. I think he's one of the better leaders in all of tech or media. But I don't think this is a good idea. They would control an enormous share of premium TV and streaming. They would have the largest subscriber base, one of the largest libraries of premium scripted content, some of the most valuable franchises in entertainment. HBO Max, DC, Harry Potter, CNN, Discovery.

• 14:06Ed Elson?

  Not CNN and Discovery, but yes, to Max and.

• 14:09Scott Galloway?

  That would be spun out. They don't want anything anywhere near.

• 14:12Ed Elson?

  Anything that's old and stodgy, they're not touching. But all of the good stuff, all of the IP, the streaming service HBO Max. As you say, I think the IP is really important on Harry Potter, Game of Thrones, Lord of the Rings, DC Universe, Succession, Sopranos, Euphoria. We could go on and on and on. That's all go to Netflix now.

• 14:32Scott Galloway?

  But put together, they'd control a huge percentage of must have shows and movies. And which quite frankly, leads to fewer choices, higher prices and worse terms for consumers. And if you look, the consolidation in the streaming media market that's already underway has resulted in acceleration of prices across these platforms. And you want to put Netflix, which I don't want to call it Walmart. I'm trying to think of another big retailer that's a little bit more aspirational. But basically this would be Walmart and LVMH. HBO is the artisanal network with $2 billion versus Netflix's tonnage of 18 billion in content. They managed to create these watercooler moments and the culture there. When I was pitching our original scripted series on Big Tech and we had several offers,

• 15:16Scott Galloway?

  we all were hoping that HBO would come in with the best offer because talent, what I learned quickly, all wants to work at HBO. So if you had LVMH on top of. On top of Walmart, I just think they become unassailable. I think it creates greater, ultimately, more leverage with, against consumers, advertisers, different content providers. I think it ends up lowering the salaries of creatives because there's fewer bidders for their talent. And then just looking at the politics of this, and the prediction here is that I don't think this deal closes. You have very powerful and connected people who are going to be against this deal because if Paramount doesn't win here, they're subscale. They're kind of fucked if this deal goes through.

• 16:01Scott Galloway?

  They're a distant five probably in this world, which is not a good place to be. And is, in addition to Trump and his cronies not wanting this deal to go through, the economists, I believe, at the DOJ and the FTC are going to go, you know, this isn't good for consumers.

• 16:17Ed Elson?

  I think that's exactly right. I think antitrust is the giant question mark right now. And it is so interesting because when we thought that Paramount was going to be the buyer, we still thought that that was a concern from an antitrust perspective. And Paramount, I mean, they own some iconic properties, but compared to Netflix, Paramount is a pimple compared to Netflix. I mean, it's tiny. And so now here we are. If antitrust was a concern, if when Paramount was going to buy Warner Brothers, it's going to be a huge concern now that Netflix is buying Warner Brothers. This is the biggest company in media and entertainment, basically buying the second biggest, maybe the third biggest, what we should call it. But what is interesting is they seem to be pretty confident because the breakup fee

• 17:01Ed Elson?

  that they offered was larger than what Paramount offered, $5.8 billion. Basically, like, if this doesn't go through, here's $6 billion.

• 17:10Scott Galloway?

  Great point.

• 17:11Ed Elson?

  Which I think is a vote of confidence, but perhaps, I don't know, maybe we shouldn't be comparing it to Paramount because Netflix has so much cash on the balance sheet already that maybe it doesn't matter that much to them. But yeah, I mean, antitrust is going to play a huge role here. That is the giant question. And then there are further questions of, does a Trump, DOJ, and FTC really care about actually regulating these companies? Consumers are going to be up in arms about it because we know this is going to lead to higher prices as it always does. And even if it isn't, even if the price increases aren't a direct consequence of the increasing monopolization, whatever Netflix does now, people are going to point their fingers and say, you monopolize the industry. This is all your fault. Anything

• 17:55Ed Elson?

  they do wrong. So consumers are going to hate this. And so I think it'll be very interesting to see how does the DOJ and the FTC, how do they respond to this? Do they want to buck their usual trend of going very soft and seemingly not caring about monopolization? Or are they going to step in and say, no, this is not acceptable?

• 18:19Scott Galloway?

  The consumer outrage will not be that great, I don't think. I think consumers are lazy. I don't think they're going to want to do the math around, okay, this probably means Netflix will go to $30 a month in four years. There's this like, they just want to take an edible and watch Wednesday. And yeah, whatever. They, I don't, I don't think they're like following the semantics of the competitive landscape and streaming.

• 18:40Ed Elson?

  Perhaps not yet. If their, if their prices rise a year from now, and then they suddenly realize.

• 18:45Scott Galloway?

  Too late then, can't unwind it. Who's going to get apeshit here is the precious creative community. Because already, real leaders in the community, including James Cameron, have said, this is going to be bad for the theater going. He's basically said film is over. Well, okay, film's already over, boss, but he'll weaponize the, the fourth rider on SpongeBob SquarePants to, to, they're, they're about to create, they're about to turn Netflix in this deal into Darth Vader. And that will catch fire. I don't know how much impact it'll have. But this is legitimately has real DOJ and antitrust and FTC concerns that the president will nod and

• 19:27Scott Galloway?

  pretend to give a shit about DOJ FTC because he'll have Ellison saying, boss, I'm fucked if this deal goes through. Maybe I won't have enough money to spend for your illegitimate third term, or whoever you anoint president. But also just to look at some of the Past deals and what happened, the AT&T Time Warner merger was an especially long battle and that made no sense to get in the way of that. This was two companies, this is two anchors grabbing onto each other to try and fight digital. Made no sense to begin with and several years later, AT&T spun it off, realizing they'd screwed up. Comcast merging with Fox, that was blocked. Paramount and Skydance, somewhat scrutinized.

• 20:06Scott Galloway?

  Penguin Random House and Simon and Schuster, both my publishers, that was blocked for monopoly and buying authors' rights. So regulators have actually been pretty aggressive here and I think the populism will be on their side, politics will be on their side. I think what ultimately ends up happening, as I think about it, the, you know, the folks at Netflix are so smart, they didn't put up a $6 billion breakup fee without doing their homework. And I think what they've probably figured out is even if it gets blocked, it won't be full blockage, it'll be you have to spin off these assets. And they think that as long as we get X, Y, and Z, we don't need the following things

• 20:49Scott Galloway?

  or we'll come to some sort of accommodation. But I find all of it shocking.

• 20:55Ed Elson?

  I think that the argument will be, you know, you're monopolizing the sector and then the question will be, well, how do you define the sector? And this is what we keep on seeing with, specifically with monopolization in digital media and technology, because Netflix is going to say, hey, if we're talking about media, what about YouTube? What about even TikTok? What about Instagram? We're not monopolizing things, we are trying to fight off all of these other screens that are trying to compete for people's eyeballs. And, and so that would be their argument. And then the other argument would say, no, we're talking specifically about streaming. And then the question would be, how do we define streaming? And I think that'll be really interesting to see.

• 21:39Ed Elson?

  I think it was easier with the Penguin Random House because it was like, clearly, we're just talking about publishing and we're talking about books and you guys are the powerhouses and this is not going to be fair. But that's going to be the argument that plays out. You also mentioned how Bad this is for Paramount, I think that is worth highlighting because, I mean, David Ellison has really, he's hung his hat on this whole thing. This has been the plan for months. And we saw last week, as things were developing, he sent a letter to the board of Warner Brothers, complaining that they were unfairly giving preferential treatment to Netflix and saying that this wasn't fair and they were not upholding their fiduciary duty.

• 22:23Ed Elson?

  I mean, he made it very clear to the market, to everyone, how much, how important it was to get his hands on the Warner Brothers assets. And then you look at the stock reactions, as soon as the news came out that Netflix is buying Warner Brothers, there was not that much reaction from Comcast, from when you look at Disney stock, when you look at Netflix stock even, there's one stock that got burned, and it was Paramount, which fell 6% on the day, down 12% on the week. So they are certainly in a tough position right now.

• 22:52Scott Galloway?

  Well, you'd mentioned also theaters, movie theaters, which are already in structural decline, need a certain number of new releases to be profitable. And historically, mergers actually decrease the number of theatrical releases. So when Disney bought Fox in 2019, the number of films released annually declined by 44%. So this would potentially make the movie theater business even worse. And let's be clear, David Ellison isn't hanging his hat, he's hanging his gold-plated big wheel. I fucking hate rich kids, Ed. I just fucking hate them.

• 23:25Ed Elson?

  Well, like, he lost. I thought he was gonna win, he didn't, he couldn't pull it together.

• 23:29Scott Galloway?

  It's like he went to Princeton and he was like 30 under 30 or something.

• 23:36Ed Elson?

  Me and David Ellison.

• 23:37Scott Galloway?

  Yeah, you and Big D. All right, my brother. Good analysis, good crisp analysis.

• 23:42Ed Elson?

  Well, before we end here, I just wanna point out one thing, which is, I think we should just recognize how crazy it is that Netflix, this fledgling little company that showed up 20 years ago, has now taken over the entire industry. And I just wanna read you a quote from 2010. This was a quote by Jeff Bukas, who was, at the time, the CEO of Time Warner.

• 24:10Scott Galloway?

  Is this the Albanian Army quote?

• 24:12Ed Elson?

  It is. Let me read it to you.

• 24:16Ed Elson?

  So they were asking him about Netflix and whether Netflix is gonna just kind of destroy Hollywood or take over Hollywood. He said, it's a little bit like, is the Albanian army going to take over the world? I don't think so. Here we are, 15 years later, Netflix is the largest streaming entertainment company in the world, and it has literally bought Warner Brothers Discovery for $72 billion. I just want to get your reactions to how phenomenal the rise of Netflix really has been.

• 24:51Scott Galloway?

  First off, I'm a little bit defensive because Jeff is a mentor of mine, and I'd like to remind people that he's probably been the best CEO in the history of media as it relates to shareholder value. He sold the magazine business and the cable business. He knows exactly when to sell, which is where CEOs really fall down. They're good at acquiring, they're not good at selling. Anyways.

• 25:06Ed Elson?

  But.

• 25:07Scott Galloway?

  Anyways, yeah, he made that comment. It was, it was, it was a bad comment. It didn't age well. In terms of Netflix, I bought Netflix for what is now about $3 a share. That's the good news in 2010. The bad news is I bought it in November, it went down to $2.70 a share, so I sold it for the tax loss, and I never bought back in, and today it's at 101. So the acquisition, the purchase of Netflix was the best decision I ever made, selling it for a tax loss and not buying back in. I want to find a time machine, get in the time machine, go back, find me, kill me, and then come back and kill myself. So I, I hear the term Netflix, and I start to feel a little bit nauseous, but yeah, the

• 25:49Scott Galloway?

  Netflix is, and if you think about it, they were delivering DVDs by mail. And then they made this huge pivot, they saw the broadband was finally leaving up to its promise, and they made what is arguably one of the most bold pivots in history into streaming, and they also adopted the Amazon model of quite frankly, overspending to try and run away with it with cheap capital, recognizing that other media companies had made the mistake of getting, letting their shareholders' lips get around the crack pipe of profits. And they said, no, we're not profitable, we're going for growth and share, and investors loved it, so they could just show up with quite frankly, more artillery.

• 26:31Scott Galloway?

  But Netflix is arguably one of the great success stories, probably the success story, the biggest success story in media.

• 26:38Scott Galloway?

  Would you say more? Maybe it's fucking meta. Anyways, I'm going with Netflix. But yeah, what they've done is just extraordinary.

• 26:46Ed Elson?

  We'll be right back after the break. And if you're enjoying the show, send it to a friend. And please follow us if you haven't already.

• 27:00Speaker 00

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• 28:35Ed Elson?

  We're back with Prof G Markets. Anthropic is gearing up for an IPO which reportedly could arrive in early 2026. OpenAI appears to have a similar timeline, setting up a race to the public markets. This moment marks a new chapter in the AI story, one that has evolved at a rapid pace over the past year. We've seen model launches, we've seen massive capital expenditures, numerous circular deals, growing bubble fears, and now it appears that the IPO race is on. So Scott, we'll get your reactions to Anthropic potentially going public. Those are the reports, but I also do think this is kind of a good moment to just kind of review

• 29:16Ed Elson?

  where we are in the AI story, which has been through many twists and turns throughout 2025. And we're coming to the end of the year here. But I'll just start off with just the way we want to frame this. And that is clearly we are entering a new chapter. But I just want to go over the chapters that we've seen in the AI story so far. You know, we started at the beginning of the year with what we would describe as a sense of optimism about AI. There was DeepSeek, of course, which made people anxious, but then we very quickly got over it. Nvidia led the gains, the S and P hit a record high. Then we went into the second chapter, which was what seemed to be the euphoria chapter. And that is where the majority of the gains happened this year.

• 30:00Ed Elson?

  We saw all of these crazy AI deals that were announced, massive CapEx spending increase announcements. And it seemed that AI could do no wrong. Now we're entering into this kind of, we don't know what to call it, phase, where people seem to be a little bit more anxious about what is happening. And this leaves Anthropic and OpenAI in kind of an interesting position going into 2026. So I guess just to start this off, where would you say we are at in the AI cycle right now? What, how would you describe the market sentiment towards AI? And then we'll get into Anthropic.

• 30:38Scott Galloway?

  It feels as if around the narrative going from AI boom to AI bubble, that the market is climbing a wall of worry. And that is the valuations aren't coming down. I mean, they've come down a little bit, but not a lot. The numbers seem to be supporting or continue to kind of roll on. If I had to peg where we are relative to the dot com bubble, we'd be in ninety seven or ninety eight. And generally, what you find in bubbles is when valuations go crazy, they then go insane. I feel like we're right now in crazy town. But so I actually believe valuations are probably going to continue. And I really like this. I think they were smart to kind of step on OpenAI and announce an IPO. I think the CEO there is managing

• 31:22Scott Galloway?

  his brand really well. I think he's sort of a he comes across a bit more as a grown up and a bit more civic minded than than Sam Altman, who all of a sudden decides that porn is okay. And also, I like the I mean, I have a bias because I've always felt B to B companies, not B to C. Or my most successful companies have been B to B, not B to C. And this feels more B to B anthropics than than the B to C OpenAI. So I like this. I will probably try and get in on the IPO if it actually happens, because I think the first big guys to get out, I think the retail market is just going to go crazy regardless. And what they'll do is they'll price it if you can get into the IPO, they'll price it below

• 32:07Scott Galloway?

  what they think it's going to go out at, because it's it'll be a branding event for these guys, and they'll want the stock to pop. What are your thoughts?

• 32:13Ed Elson?

  I think there are two differences between anthropic and and OpenAI. Like, if we're just going to simplify things down very, very simply. The first difference is what you mentioned, which is OpenAI is a consumer company. Anthropic is an enterprise company. Anthropic's generating eighty percent of its revenue to from enterprises, selling their API to businesses. And for OpenAI, it's flipped seventy five percent of their revenue comes from consumer. So that's the first big difference. If you're if you're thinking, okay, one, one is a consumer play, and one is an enterprise play. And then the other difference, and this is why I it sounds like you are bullish on anthropic.

• 32:55Scott Galloway?

  I am, yeah.

• 32:56Ed Elson?

  I am, too. And the reason that I am bullish largely is because, kind of as you say, Anthropic is the responsible AI company. And we've talked about the difference between how AI companies are innovating technologically and then the work that they're doing economically in terms of balance sheet management and financial management. Anthropic is the startup that is spending a lot, but not spending like totally crazy. They are on track to break even by 2028. Meanwhile, you look at OpenAI, they are projecting to spend or lose $75 billion in operating losses in the same year. They're going to burn 14 times more cash than Anthropic through 2030.

• 33:39Ed Elson?

  So OpenAI is the company that is basically drunk on spending and Anthropic isn't. And I think that that is a really big deal. And I think it is important in terms of the AI narrative, which I can get into in a moment. But this is very relevant because our buddy Andrew Ross Sorkin spoke with the CEO yesterday at the Dealbook Summit. The CEO of Anthropic is Dario Amade, and he basically said what we are saying and what we have been saying in no uncertain terms. Let's just listen to what he said.

• 34:17Speaker 10

  I think there's a real dilemma deriving from uncertainty in how quickly the economic value is going to grow and the lag times on building the data centers that drives it. So I think there's genuine uncertainty, there's genuine dilemma, which we as a company try to manage as responsibly as we can. And then I think there are some players who, you know, who are YOLOing, who pull the wrist dial too far, and I'm very concerned. Who is YOLOing? So that's a question I'm not going to answer.

• 34:46Ed Elson?

  The answer is OpenAI. Your reaction, Scott?

• 34:49Scott Galloway?

  Well, yeah, he's coming across as the adult in the room when it feels like Sam is saying, we just purchased $300 billion, assigned a framework for a $300 billion agreement. I mean, haven't they committed to something like $1.2 trillion?

• 35:02Ed Elson?

  Yeah, one and a half.

• 35:03Scott Galloway?

  Yeah, it's a sort of, it feels very musky to me that, oh, it's a lot of jazz hands. And he brought up, and this is probably virtue signaling, I don't know if how sincere he is, but he said that, look, this is going to have a huge impact on employment and labor in society. And maybe we should be thinking about some sort of tax for the massive increases in value fostered or inspired by AI companies. He probably realizes that would never go through, but he just comes across as a little bit more measured, a little bit more thoughtful. And again, I like their positioning, the kind of safer, more responsible enterprise AI and its affiliation with Amazon. I prefer Anthropic to or Claude to ChatGPT.

• 35:48Scott Galloway?

  I find it's a little bit more rigorous and hallucinates a little bit less. I use them both. Cautiously pessimistic is the right way to describe this market because, you know, there are some red flags here. Insider selling reached a 25 year high in November and the last time that happened was in 2019 before the last kind of hiccup. And there were also spikes in insider selling before the great financial recession and the dot com crash. In other words, I would bet a ton of people at OpenAI and at Anthropic, especially with the decision around the IPO, which supposedly is going to potentially fetch a $300 billion valuation. I bet insiders are selling like crazy right now in these secondary markets.

• 36:31Scott Galloway?

  So, you know, if, if the market stays just level, it doesn't even need to keep going up, these IPOs will be huge because there really aren't that many pure play ways to play the AI market right now. You can invest in Microsoft, you can invest in, I guess Nvidia is the pure play, but Nvidia at five trillion. So it, these things will be monstrous, there'll be IPO events. As long as the markets, they don't even need to go up, stay where they are, I think they'll get out. I'll be very curious to see if, see if OpenAI decides if they want to kind of announce it, but this was a very strategic from a branding standpoint. Basically Anthropic kind of stepped on OpenAI and it's going to dominate the news cycle

• 37:15Scott Galloway?

  for the next few days about, and there's generally a connotation that the company goes, that goes public first is further ahead than the others, which may or may not be true. But if I were going to invest in either company right now at their current valuations. I would probably purchase Anthropic.

• 37:33Ed Elson?

  Yeah, I think the the narrative that we're trying to sort of map out right now is is really important. And it's very confusing because, as we've said, you know, this AI story has been going up and down. And and the forces of fear and greed have been really in conflict with each other. And it's been very unclear. I mean, as I said, over the summer, it was very clear that everyone was very bullish on AI. And now the question is, like, how do people really feel about AI? And I think what you said there, cautiously pessimistic, is a good way to put it. And, you know, there's this, uh, this, the Fed has this economic news sentiment index where they basically just map out what what news outlets are saying about the economy and how bullish they are.

• 38:18Ed Elson?

  And, you know, you can go find this chart, but basically what they map out is that you had this giant trough when the tariffs hit. So everyone was very, very scared. Then, over the summer, you had this giant rebound and suddenly everyone was very bullish. And then, as we went into the fall and as we started to hit November, it came back down again. And I think there's probably a mixture of the circular deals that we're seeing and everything that people were saying they were concerned about when they saw OpenAI announcing these ridiculous deals and Oracle saying they're going to spend all of this money. And I think that a good indicator of of how the market feels about things, specifically AI, has been the market's reactions to these capital expenditures and and these announcements of capex in these earnings.

• 39:04Ed Elson?

  Because during the summer, if you announced a big capex increase, if you said, we're going to spend a ton on on AI, your stock went up. And we saw this with Microsoft, this happened in July, they released this record capex forecast, stock goes up 7%. Google did the same thing, stock goes up as well. Meta did the same thing, their stock went up 11%. Now, the opposite is starting to happen, where if you increase your capex, or you say, we're going to increase our spending, suddenly the market gets scared. And that's exactly what we saw. Microsoft, they report earnings, they announce an increase in CapEx, similar to what they did back in the summer, but the stock drops 3%. Meta does the same thing. They get more aggressive with their CapEx. The stock drops more than 10%.

• 39:48Ed Elson?

  So it's so interesting because when the same thing is happening, when the same material thing is happening, increasing your spending, you're seeing these wildly different reactions from the market, which is carrying with it trillions and trillions of dollars worth of market value. And I think what that tells us is the narrative, the sentiment, the vibes, whatever we want to call it, is actually incredibly important right now when it comes to AI. It's actually not the fundamentals that are doing much work here in terms of valuations. It's the story that people are telling themselves about AI, and it's the vibes. It's how people feel about AI right now. So having a good understanding of what

• 40:32Ed Elson?

  the vibes are, what is the sentiment, what is the narrative, is actually crucial to understanding how the market is going to to move over the next several months, the next year, or whatever you want to call it. And if I had to make any predictions about where the narrative is going, what the sentiment is going to be, I think what we are about to see is that the age of exuberance and these big grand visions of artificial general intelligence, which used to be very sexy as recently as the summer, I think that's going out of fashion. I think investors are now getting scared of that. They're scared when Sam Altman goes on on these podcasts and says these wishy washy vague statements

• 41:16Ed Elson?

  about the future of the universe, which used to be a very bullish signal to the market. I think that is flipping. I think markets are now more excited about the people who As you say, come out as the adult in the room who say, here is our responsible plan for how we're going to manage the balance sheet and spend the cash that we have on data centers and AI over the next few years. And I think that is going to be the bullet signal, which is why I believe that in 2026, the AI company of the year is going to be anthropic, because they are signaling all of these things to the market. And I would not be surprised if by the end of the year, I mean, whether or not they're making as much money as OpenAI,

• 41:59Ed Elson?

  or more or less, I think their valuation will be higher than OpenAI's.

• 42:03Scott Galloway?

  Your big prediction in 2024 was Oracle, and you got that right. The thing that worries me is that, you know, AI, they say AI will someday surpass human morality, and which cracks me up because it's been crawling the internet. So it means it's, you know, if it's trying to learn morality, it's like learning hygiene from a raccoon behind a 7-Eleven. One of the things that really bums me out about AI. That was good. I'm a little punchy. I took, I couldn't sleep last night, so I took something called a Hulk Xanax. Hulk Xanax. Wow, did I sleep well. Oh, my God. Like, the nanny had to shake me to wake me up. She's

• 42:48Scott Galloway?

  like, Mr. Scott, Mr. Scott. By the way, she's German. She's German. She's not Latin. She's German. She had different plans for me 80 years ago. All right.

• 43:02Ed Elson?

  Do you want to continue to talk about AI, or would you rather talk about Hulk Xanax?

• 43:06Scott Galloway?

  Yes. My 2026 AI company is going to be, and my big tech stock pick, I just did this predictions deck, the AI company of 2026 is going to be Amazon. And I think the

• 43:23Scott Galloway?

  Best application of AI, the second best application, I actually think the LLMs are bit out over their skis. The IPO branding event where Anthropic will price the IPO below its market demand such that they can have that once in a lifetime branding opportunity of saying the stock popped forty or sixty percent, that'll happen. But the greatest increases or shareholder value increases will happen to, in my opinion, and maybe it's already baked in, Alphabet, because I think Waymo, I think autonomous is an incredible application of AI that actually results in real money being made. And two, or the number one beneficiary of AI is going to be Amazon, because I think that the chocolate and peanut butter of AI is AI and robotics.

• 44:04Scott Galloway?

  And I think Amazon is about to become, if it's not already, the Ford of the 21st century. And that is Ford, over the course of 15 years, reduced the time to build a car by ninety percent. And Amazon is on the same pace to scale the time from a click to the time an order is fulfilled. And they think by 2032, they could double their retail revenue, which is the largest part of their business, by gross dollar volume, without adding any additional employees. And the investments, here's a stat that'll just blow your fucking mind or a blue mind. The number of robots in operation, automated robots, you know, industrial robots, in the US, it's 400,000, excluding Amazon. Amazon is a million.

• 44:47Scott Galloway?

  The only entity that has more, that is deploying or utilizing more operational robots is China. And the number two is Amazon, the corporation. And I think AI training these things is finally, and their purchase early and often in Akiva, their revenue per employee is actually way down relative to the others, because they've been making an extraordinary investment in capex around robotics and now AI. AI on its own as a consumer application, in my view, right now, is overpriced, with the exception of the private to public branding event of Anthropic. But the real shareholder value increase is going to be from Amazon. That's only up 6% in the last two years versus the others, which are dramatically more because they've been spending so much money on this shit.

• 45:32Scott Galloway?

  But I think about that investment is about to pay off. So where AI really adds stakeholder value, I believe, will be through autonomous. The leader in autonomous is Waymo. But the real champagne in cocaine is going to be AI and robotics at the hands of the largest retailer in the world, Amazon.

• 45:48Ed Elson?

  Yeah, I totally agree. I think the robotics have not gotten nearly enough attention. And the China point is such an important one. It's like robotics is one of those things where we are just so far behind China. It's not even, it's not even close. But yes, Amazon seems to be the only sophisticated company that is, that is properly investing in this technology. So I would agree with that. We'll be right back. And for even more markets content, sign up for our newsletter at profgmarkets.com/subscribe.

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• 48:00Ed Elson?

  We're back with Prof G Markets. The Trump Accounts program has officially launched. This initiative gives every child born between 2025 and 2028 a $1,000 contribution to a tax-deferred account invested in low-cost index funds. The funds can only be accessed once the child turns 18. That money will help these kids once they become adults, but it does raise a bigger question. What about the years before that? And how are we investing in children while they are growing up? Right now, the picture isn't great. Adjusted for inflation, federal investment in kids has fallen 40% since 2021, and their outcomes reflect that decline. Math and reading scores are dropping sharply. Literacy rates are at their lowest levels in decades.

• 48:43Ed Elson?

  So Scott, let's start with these Trump accounts. We had Brad Gerson on The Daily Show last week to tell us about how this all came about. He was the guy who really pushed this through Congress. He met with Trump. He had some funny stories about meeting with Trump. But he's kind of the guy behind this. He was very excited about it. I just want to get your reactions to the Trump accounts. We give kids $1,000 when they're born. It goes straight into the markets locked up until you're 18 years old.

• 49:16Scott Galloway?

  Well, on the whole, I like it. So I like the concept of thinking very long term. And Australia has their super fund. I forget what it's called, but.

• 49:26Ed Elson?

  Yeah, the superannuation.

• 49:27Scott Galloway?

  Superannuation. And it really has, I think, paid dividends for them. But I think, okay, so let me back up. I really, what really bothers me, and I think it's really upsetting, is just how much shit and criticism the Dells are coming under.

• 49:43Ed Elson?

  I just want to clarify with people because we didn't say this out loud, but for those who don't know, the Dells have donated $6.25 billion to this, these Trump account programs, and they're basically giving $250 to millions of kids around the country. And then they've gotten some pushback from people who say, oh, these billionaires just giving, giving this money to get in good with Trump, or, or whatever the criticism may be.

• 50:11Scott Galloway?

  And there's some veracity to that. Dell is no accident, one of the people that is getting a big slice of the TikTok pie that Democrats don't have access to. But I just, I, I think it's bullshit to criticize the Dells for giving $6 billion to kids. Should rich people be dictating public policy? Should we just not tax billionaires at a greater, more progressive rate and then let our elected representatives representing broader populace decide our, our priorities? Yes. Having said that, at some point, folks, if you want to keep criticizing people, billionaires who are giving money away, they will listen and they will stop giving money away. So I, that part of this, what's played out here has kind of bothered me, or I don't think is fair. I like the idea, I don't like the execution in that is, I think this, for this to be

• 50:56Scott Galloway?

  a three or four year program while Donald Trump is president, it, to me, it's like, okay, what we need is co-equal branches of government that create things that are systemic and last beyond the 36 months he has left. And my, I like the idea of money letting compound interest and a little bit of government money, uh, compound such that at a long way in the future, we have more financial stability for people. So what do we, we want to take advantage of compound interest, we want to also recognize... That a lot of people are not, do not understand compound interest and that one of the key advantages China has over the US is they think

• 51:37Scott Galloway?

  in 50-year terms. We think in 24-month terms because of Citizen United and the fact that people are basically will do whatever, will say and do whatever they can to get re-elected in 24 months or every six years or every four years in Senate and the presidency, respectively. The idea I like, I actually thought Bill Ackman's idea was a really good one. $7,000 to every baby born, 40 billion a year, and then they can't touch it until they're 65. And if the market continues to do what it's done 8% or 9% since the beginning of the markets, the kid ends up with $1 million at 65. You think, well, okay, there's long-term thinking and then there's 65 years. But I do not think that 12 to 1, young people

• 52:18Scott Galloway?

  to old people, now gone to 3 to 1, makes social security sustainable when you have a democracy where old people can be voting themselves more money and we can't seem to figure out a way to get a $40 billion tax credit for kids through, but $120 billion cost of living adjustment for social security flies through. The transfer of wealth from young to old in this country, who are the wealthiest generation in the history of the planet, seniors of 1.2 trillion a year, makes no fucking sense and is not sustainable. So what do you do? I like this idea. I would broaden it. I would have Congress pass it so it lasted more than 36 months and we pretended we had co-equal branches of government. I'd go 40 billion a year, $7,000 per kid born, they can't touch it till they're 65, and finalize them low-cost

• 53:00Scott Galloway?

  ETFs, make some sort of contribution tax efficient or whatever from the employer or from grandma and grandpa such that the kid builds his own retirement fund. And then when they're 65, in 30 years, basically, you could say, in 30 years, we're not going to need social security because everyone's going to have between $1 and $3 million. And then interest rates would come down enough because of the reduction in the deficit spending and the excitement around not having a social security transfer every year, that the lower interest rates would begin to pay for the program itself. So I want more long-term thinking. I want to lock this money up till 65 and say, no one in America will need social security. For 40 billion a year, we're going to get rid of social security and we're going to start to pay for it through lower interest

• 53:42Scott Galloway?

  rates in 20 or 30 years when people see the light at the end of the tunnel. So I like the idea of compound interest. I like the idea of accounts. I do not like the idea, 0 to 18, favoritism, donors leaning on the generosity of rich people.

• 53:58Scott Galloway?

  And a lack of co-equal branches of government such that the next people to come along are going to do away with this bullshit.

• 54:05Ed Elson?

  It's so interesting because it sounds like most people agree that this is actually a good idea. I feel like that is so rare with government policies where everyone just kind of like looks at it, no matter what side of the political spectrum you're on, and they just say, oh yeah, this makes sense. And it's like, what is interesting, and I agree with all of your comments, is the only things that we are, that we can find fault in this is that it's not going to last long enough, or it's not going to be implemented as strongly and vastly as perhaps we would like because it is such a good idea. And I think that is very true. It's like, this is one of those great ideas that we want to last for a really long time.

• 54:47Ed Elson?

  And we want it to have bipartisan support and we want no one to be poking holes in it and saying, no, this, or not poking holes, but we don't want people just flagging it down because they don't like it for, you know, biased or political reasons. And so if I were to make one amendment to these accounts, my one amendment, and I agree with yours, but my, bigger than that, my amendment would be do not call them Trump accounts.

• 55:15Scott Galloway?

  A hundred percent. He's politicized it.

• 55:18Ed Elson?

  Exactly. It's like, that's the one way to make sure that this will not last beyond the duration of his presidency. Because I'm sorry if you're going to be as ridiculously divisive as he is, attaching your name to anything. This is the price you pay being Donald Trump. If you want to shit on people and be rude to people, then yeah, you are going to alienate half of the country, which you have done. And if you attach your name to anything, any piece of legislation, half of the population will find a way to not like it. And that's what frustrates me so much is I think Brad's goal with this was only coming from a good place.

• 55:57Ed Elson?

  And same with Michael Dell. I mean, maybe he's going to get some benefits, but he gave $6 billion away. And now that they're called Trump accounts, it's like all, everyone who is even remotely left-leaning is looking for a way to say, this is wrong, or this is corrupt. And it really isn't. It's actually good policy.

• 56:20Scott Galloway?

  Do you think that the branding is interesting? I was thinking, did they make the same thing with Obamacare, but it was really called Affordable Care Act, right? Did it, did it take on the moniker of Obamacare?

• 56:30Ed Elson?

  I think that was what they dubbed it. And, and by the way, you know, Brad made this point as well about, you know, Roth IRAs. It's like the guy who, who's in charge of getting it passed. In this case, it was Trump. Usually the policy is named after that person. But I just, you know, Trump, let, let's not pretend Trump is like any leader in history. Let's not pretend that he is remotely as, you know, amenable or neutral to people than any previous president. He's the most divisive, aggressive, polarizing president and political figure we've ever seen. And it's by design, he wants to be that person. So, yeah, like, I don't want his name on it.

• 57:12Scott Galloway?

  Well, you know, he was asked about it today. And did you see what he said?

• 57:14Ed Elson?

  No.

• 57:18Scott Galloway?

  I love that he's falling asleep. I'm so here for it. And when Rubio goes on this thing about war and geopolitics and how this is the only president that could solve this problem and bring peace to Ukraine, and he's sleeping.

• 57:33Scott Galloway?

  I love the idea of compound interest. I love the idea of, of getting rid of some of our, I, I just want to get rid of social security. And forcing, you start them off with six or 7,000. You create all sorts of tax incentives. You totally go, you infantilize people. They can't use it till they're 65 or until they die, or their kids get it or whatever. And there's no senior poverty. There's no social security. You just don't need it. And because these people have these investment accounts and they can start to build wealth. And there's some interesting similar programs around the world. I think. I mean, Singapore gives people homes. You know, how do you, how do you start getting people to invest?

• 58:16Scott Galloway?

  Fifty eight percent of US households hold stocks, but the top 1% owns nearly 50%, while the bottom 50 is just 1%. Income inequality has obviously gotten worse. The share of national income going to the top 1% doubled between 1980 and 2022. And congratulations to Brad. I think this is a real feather in his cap. And then major donors are, you know, and I think they should be applauded for this. We're scaling the program beyond government funding. You know, you can see it being like little Rachel's Bot Mitzvah. You just put money into this account, right? It becomes a place where gifts go instead of like getting your kid, you know, PlayStation or something, you put another 50, 100, 200 bucks, whatever it is. And it's tax advantage.

• 59:01Scott Galloway?

  Maybe grandparents can use it to, you know, start giving money away tax efficiently. But I like this, I like the concept. One of our flaws in our species that you want to take advantage of is that our species has a difficult time, literally registering for 99% of our time so far on this planet. The average life expectancy has been 35 or less. Like you're already a senior citizen in most of history because a bad cut, a broken bone mean, or war, childbirth usually meant at some point in your 30s, you died. And now that's it. The thing about that I find so amusing is that in 10 years, you're going to look at yourself and you're going to be 36 and you'll be like, oh, I'm 36. I'm 36 year old Ed Elson.

• 59:44Scott Galloway?

  I'm just 10 years older, but you'll be fine with the way you look. When you hit 46, you're going to like, oh my God, what happened? And it's because when you look in the mirror as 45, your brain can't process it because you're not supposed to be around. And that way you're like, Jesus Christ, I'm fucking ugly. I mean, it's really, Ed, I'm telling you, I just like trying to avoid mirrors right now. Anyways, the species has a terrible time calibrating time. Specifically, we have a difficult time really imagining we're going to be around when we're 85. And if you could give people a magic box that says, all right, trust me on this. Ed Elson, you're going to wake up and you're going to be my age and you're going to get over how fast it went.

• 1:00:26Scott Galloway?

  And you understand finance, you know, putting a thousand bucks away now is 10 or 20 or 30 grand then. But most people just, even if they Intellectually get it, they don't emotionally believe it. So let's take advantage of flaw in the species and let's start investing in kids from a very young age, such that, and maybe you give it to them, who knows? Maybe give it to them when they're 40. And the other stat I love about compound interest is my kids are, my youngest, we're moving back to New York, my youngest is applying to schools there. And I was thinking about it, you know, I put my kids in private school because I probably, I went through all public schools and then I was one of those people, kids are never going to go to private school and then boom, all of a sudden they're in private school.

• 1:01:08Scott Galloway?

  But if you're really honest, if you took the $68,000 that, whatever it is, Brooklyn Poly Prep or, you know, these, or, or Avenue's charges in Manhattan, and instead you sent them to the local public school and you put that $68,000 in a low-cost ETF from the age of four until they were 18, and then you left it in there, assume you're wrong. Assume that in fact, public schools aren't as good as private schools and the kid didn't get into as good a college and he didn't find the right job at Google or KKR and at 35, he isn't doing as well as the parents who put their kids in Avenue's or Grace Church or wherever. Well, at 35, with that, with that money, you'd be able to give your kid $3.5 million,

• 1:01:53Scott Galloway?

  which makes up for a lot of lost time. So people really don't have a sense for how much decent amounts of capital early on can result and can compound. And it's, it's a flaw in the species that everybody wants to take advantage of, figure out a forced savings plan from a very young age and start, start putting it away.

• 1:02:13Ed Elson?

  I think those are all such important points because it's like, what we need to be doing is figuring out a way to invest in children, full stop. And the question is like, how do we, how do we implement that? And there are many different ways to do that. And all that we've done is just like, present a way that apparently billionaires are down with. I mean, yes, you could just raise taxes and you could invest more in children, but at the very least, this is like, we're seeing this work. I mean, the proof's in the pudding here. Michael Dell came out. And and gave $6 billion that is being invested directly in children. But then it brings up this question of, okay, how do we keep going? Because at the current clip of our investment in children, as you've talked about many times before,

• 1:02:57Ed Elson?

  it's not nearly enough. We currently spend $9,000 on each child every year. That's the US government's expenditures on children. And for comparison, it costs us $17,000 to deport a single person. So we're spending all of our time on these deportations. As Catherine Ann Edwards told us, we spend more on deportation than we spend on childcare and school lunch. We're not spending nearly enough on children. And we're seeing the results for themselves. I mean, obviously, there's the the effects of technology in the phones. But we're literally seeing that math rates and and literacy rates among children are plummeting right now. Reading scores have reached their lowest levels in decades.

• 1:03:42Ed Elson?

  Only a third of eighth graders, actually less than a third, have what we call a proficient reading score. So these are huge issues that that we we clearly need to start thinking more critically about. And then I think what I like about your point about how you would invest your money, depending on where where where your kid goes. I think it's important to think about our investment in children from a financial and ROI perspective. Like, we should consider the fact that if you invest in the education of children now, if you invest in the livelihood of children, it will pay off later because they'll be more productive citizens and they will contribute to economic growth.

• 1:04:24Ed Elson?

  And in fact, a Stanford report just studied this flat out. And they found, I find this fascinating, if we raised student achievement to levels that we saw in 2013, not that long ago, but a combination of many things, including COVID, means that achievement among students has just fallen off the cliff. If we did that, the lifetime earnings of the average student would rise by 8%. And also GDP growth would be, on average, 6% higher. And that's just if we got our act together in terms of educating children. I think the larger point being, this is a start, but there's a ton of work to do when it comes to simply investing in children today. And we are massively falling behind, it seems like.

• 1:05:09Ed Elson?

  What do we do, what do we do besides Invest America?

• 1:05:12Scott Galloway?

  Oh, okay. Property taxes no longer are the funding vehicle for schools because

• 1:05:18Scott Galloway?

  schools being dependent upon property taxes means low-income neighborhoods have less money for schools. We need to reform education and have, hold unions and teachers more accountable. We keep throwing money, even when we throw money at the problem, it doesn't fucking work. We need to start kids, boys at six versus girls at five. We need to recruit more men into these schools so boys feel like they're seen more. We need to have more freshman seats at universities such that if you're not growing your freshman class faster than population growth, you lose your tax-free status because you're no longer a public servant. You're a hedge fund with classes. We need more vocational programming. We need tax credits.

• 1:05:56Scott Galloway?

  We should offer, every university has to have 20% of its certificates be one- and two-year vocational programs, whether it's nursing or specialty construction or cybersecurity. We need to have child tax credits. I mean, I would be up for letting single mothers with kids have two or three votes because the D in democracy is working too well. Old people keep voting themselves more money. And as you said, your budget reflects your values. And when you're spending more money on separating undocumented workers from their families and deporting them than you're spending on kids, it says that you've decided that our priority is deportation and not children, which just makes absolutely fucking no sense.

• 1:06:39Scott Galloway?

  So, and unfortunately, we are creating this out-of-control caste system when we spend $150,000 on a poor kid's education and we spend $1 million on my kid's education. Well, what do you know? Kids from rich households are 77 times more likely to get into an elite university and less likely to be obese, depressed, more likely to get married, more likely to run, you know, more likely to run for Congress. Just the numbers are absolutely striking here. You have We have to, at the end of the day, we have to figure out a way in America where your, America is not about how rich your parents are, that the signal for your success,

• 1:07:18Scott Galloway?

  if, if a kid from a poor household takes the SAT, on average, he does 150 points worse than the kid from middle income home. Okay, 150 points. And then where income inequality really goes crazy is the upper income kid scores 250 points higher than the middle income kid. So if you were going to have true flattening or true equality, when a kid shows up from a low income household to take the SAT, he or she has spotted 380 points, meaning if they get a 1220, that's a perfect score. And so we're perpetuating, we're perpetuating a cycle of income inequality and rage and young people who won't have the opportunities to mate. So I think from a very, very early age, we have all sorts of affirmative action

• 1:08:02Scott Galloway?

  and government programs. It is not based on identity. That creates more problems than it solves. It has nothing to do with your sexual orientation, your race, your gender. It's based on how much money mom and dad have, full stop. Exactly. And we're going to infantilize the household. We're not, maybe don't give you straight up cash. I would do it in the form of universal childcare, tax credits for the kid. I mean, I'm, I'm talking my own book here because I got assisted lunch in elementary school. And when I think about how decent government and California taxpayers are, we used to have these coupons to get lunch and they would send the coupons to my house and made sure that the coupons looked like the ones that were purchased by everybody else. So I wouldn't feel any sense of shame. And Pell Grants I got. So I'm just talking my

• 1:08:47Scott Galloway?

  own book here, but people look at me and think, okay, he's not the recipient of affirmative action. Yeah, I was. And at the same time, I don't think Trevor Noah or Tyler Perry's kids deserve any sort of leg up here. Anyway, I, I think a lot of this just comes back to money. I think the less government programs in the middle, the better because unfortunately, government programs become like parasites or barnacles. You can scrape them off. I do think there's something about reforming the Department of Education. I hate to say it. Don't disband it by a woman who doesn't know the difference between a fucking steak sauce and calls AI a one. Okay, that's probably not going to be thoughtful reform. But the Department of Education has consistently gotten increases in funding since since W or since George Herbert Walker Bush, and the outcomes keep going down.

• 1:09:32Scott Galloway?

  So this means it needs radical reform. What's happened in Mississippi is very interesting. All this wokeness around phonics and everything or images. And then they realized kids aren't reading. It was like when the Blue Man Group started in elementary school and was all about shapes and feelings and emotion. And then they woke up and said, my 15 year old can't fucking read or write. So I do think there needs to be radical reform, but at the end of the day, your household, we are the wealthiest nation in the world. Every household needs a basic level of income. I don't like UBI. I want to encourage people to work $25 an hour minimum wage. And anyways, I could go on and on, and I will. My next book, by the way, is going to be called Project 2028. Ed, I know you're very excited about this, but there are a series of things we need to do to lift up young people.

• 1:10:16Scott Galloway?

  And a lot of it, a lot of it is making their parents less anxious such that that economic anxiety doesn't waterfall down to the kid. Kids in low income households have much higher sitting or resting systolic blood pressure than kids in middle income homes. You want to talk about a kid that is fucked from the beginning, who's obese, who's anxious, who has poor relationships with women, poor relationships, opportunities for mating? Show me a kid in a low income household. So I'm for more programs that put money in their pockets, but the hand of government isn't doing it because it's super fucking inefficient.

• 1:10:48Ed Elson?

  Yeah. Which I do think this almost exactly does. But again, we need more of it. The final thing that I would point you to is just, you know, there's the issue that the children themselves aren't being invested in enough. And then there's the other issue that is young people at large don't want to have children at record levels. And the share of people younger than 50 who say they are unlikely to ever have kids is at record highs right now. It's half of them. And that's sorry, that is among those who do not have children already. So people do not want to have kids right now if you're young. And I feel like there's this very kind of one dimensional view of things where it's like, oh, it's because they're worried about climate change or oh, it's because.

• 1:11:36Ed Elson?

  You know, they don't want to, they don't want to put in the work or whatever it is. It's like, it's because it's just too expensive right now.

• 1:11:43Scott Galloway?

  Yeah.

• 1:11:44Ed Elson?

  And the cost of raising a child has risen 25% in two years. It's, it's $300,000 now, and that's not including college. So it's like, the reason people don't want to have kids right now isn't because they don't want to have kids. It's because they can't afford to have kids.

• 1:12:02Ed Elson?

  And so what are we doing if, if, if that's the, the outcome of our policies right now? And I guess all I would say is like, I think this is good policy. I think it's, I think it's great. I hate that they are called Trump accounts, but now it's like, okay, how do we take this a step further? How do we continue the momentum? How do we make sure that maybe people start matching the Dells? I mean, where is Zuckerberg? Where is Bezos? Why aren't they investing in children as well? I think we just need to keep this, keep this train running.

• 1:12:35Ed Elson?

  All right, let's take a look at the week ahead. We'll see earnings from GameStop, Adobe, Broadcom and Oracle. We'll get the delayed job openings report for October and we'll also hear the last interest rate decision of the year from the Federal Reserve. Scott, any predictions?

• 1:12:51Scott Galloway?

  Yeah, I said it earlier. My big tech stock pick for 2026 will outperform the rest of big tech is Amazon. I think that their huge investments in robotics, they have a million automated robots. And the rest of the US is 400,000. I think it's about to pay massive dividends and that the real juice in AI is around autonomous and robotics as it relates to manufacturing and throughput. And again, they have managed to decrease click to fulfillment by 90% and are estimating they can double their retail revenue within the next seven years with a zero increase in employment. And I think that you're going to see margin expansion across their biggest revenue line, which is their retail group. Traditionally, it's been cloud.

• 1:13:36Scott Galloway?

  That has expanded their margins and advertising Amazon Media Group. But I think some of these big investments, which has been reflected in their underperformance because they have lower revenue per employee. But I think Amazon is about to is about to show up with AI-enabled robots that they finally start to really register incredible benefits and yield and margin expansion. So anyways, big tech stock pick for 2026, Amazon.

• 1:14:09Ed Elson?

  This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silver is our research lead. Our research associates are Isabella Kinsel, Dan Shalun and Kristin O'Donoghue. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media. Tune in tomorrow for a fresh take on the markets.