Prof G Markets: The Failure of FTX, Why HBO Will be Acquired, and the Cannabis Industry

This week on Prof G Markets, Scott shares his thoughts on how Sam Bankman-Fried’s crypto exchange FTX came crashing down like a house of cards. He then explains what Disney’s earnings reveal about a streaming market headed for consolidation, and why HBO makes for an appealing acquisition target. And in this week’s Unpack, we check in on the cannabis industry after the recent midterms, and learn where the investment opportunities might be. Show Notes: FTX Disney Earnings Music: https://www.davidcuttermusic.com / @dcuttermusic Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Scott Galloway?

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• 0:48Speaker 01

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• 1:18Scott Galloway?

  This week's number, 105%. That was Royal Caribbean's third-quarter ship occupancy rate in the Caribbean market. Fun fact, one of the ways you can tell you're getting older, the idea of a cruise doesn't sound horrific.

• 1:43Scott Galloway?

  Welcome to PropG Markets. Today, we're discussing the downfall of FTX, the consolidation of streamers, and an unpack on the cannabis industry. Here with the news is PropG Media Analyst Ed Elson. Ed, what is going on in the world right now? Let's start with our weekly review of market vitals.

• 2:07Ed Elson?

  The S and P 500 was volatile in a busy news week, but rallied on reassuring inflation data. The dollar was stable and remains near multi-decade highs. Bitcoin dropped below 16,000 to its lowest price in two years. More on that in a minute. And the yield on 10-year treasuries fell sharply on the inflation news. Shifting to the headlines. U.S. core inflation slowed in October. Prices were up 0.3% last month compared to 0.6% in August and September. That could mean that the Fed will start slowing interest rate hikes. Tesla stock dropped to a two-year low on Wednesday on news that Elon Musk sold roughly $4 billion worth of shares. Meta is laying off 13% of its staff, or about 11,000 employees.

• 2:51Ed Elson?

  The Patagonia vest recession marches on. And finally, Walgreens' primary care unit, Village M.D., is acquiring urgent care provider Summit Health for $9 billion in an effort to expand its healthcare footprint. Scott, you've talked about healthcare for a while, how Amazon might get involved. Now we're seeing Walgreens. What do you want to start with?

• 3:13Scott Galloway?

  Well, let's start with Walgreens. Walgreens retail pharmacy sales are declining. They're down 7% year-on-year in September. They face competition from online pharmacies, Amazon and Costco Drugs. And the stock's off 27% year-to-date. CVS is down 3% year-to-date. So they need, they need to do something. And they still have large market cap. So I think it's actually the right move to begin making acquisitions. CVS has purchased Signify. So they're, they're not going down without a fight. Regarding Meta layoffs, it's really striking. Talk about news versus noise. All the noise around Twitter's layoffs, which amounted to half the staff, which sounds like a lot, and it is, half the people, but it was 3,750 employees.

• 3:57Scott Galloway?

  Meta laid off 11,000. So get this, Meta laid off three times the number of Twitter employees that lost their job. But you won't hear much about it. Why? Because the people at Meta are professionals, and they did a very good job of this. They leaked it to the press to take some air out of the balloon. And then, when did they actually release it? The day of the midterm, so it was buried. These guys are pros, so this will barely get any sort of attention. It'll get some, and then people will go back to their Elon obsession. And with respect to Tesla, Musk always says he will not sell, and then he sells more. He sold $4 billion worth of stock, November the 4th through the 8th. He needed it. He's a forced seller now. He had to pay for Twitter, which he dramatically overpaid for.

• 4:40Scott Galloway?

  He'd sold $7 billion in August, $8 billion worth of stock in April. And year-to-date, Tesla's down 46%. The Nasdaq's down 30%. And I just can't help but add, this car company, and it is a car company, is still the most overvalued company in the world, over $100 billion. It's going to have a lot more pain. Everyone's gotten taken to the woodshed here. And even with Tesla 46%, its valuation still makes no sense.

• 5:14Ed Elson?

  Last week, a Shakespearean drama unfolded in crypto. Binance, the world's largest crypto exchange, walked away from a deal to acquire rival exchange FTX, leaving FTX on the verge of collapse. This is a long story, so here's the play-by-play. Binance was an early investor in FTX. The two companies were seen as friendly rivals. So were their founders. FTX's founder is Sam Bankman-Fried. He goes by his initials SBF. And over time, he became the face of crypto, making media appearances, speaking in front of Congress, and so on. Binance's founder is Changpeng Zhao. He also goes by his initials CZ. And he's less public, but no less powerful in crypto.

• 5:58Ed Elson?

  So here's where things started to come off the rails. In 2019, FTX created a token called FTT. The idea was that FTT would be the native currency of the FTX ecosystem. This is common practice in crypto. Binance received a bunch of those tokens as part of its investment deal with FTX. But a couple of years later, the relationship between SBF and CZ started to southe. And then last week, CoinDesk obtained a leaked balance sheet from Sam Bankman-Fried's hedge fund, Alameda Research, which showed that Alameda held $6 billion worth of FTT tokens. That accounted for roughly 40% of its total assets, and it meant that SBF's crypto empire

• 6:44Ed Elson?

  relied heavily on the value of FTT, a token that FTX had invented and whose underlying value was shaky. When CZ learned this, he announced that Binance would sell all of its FTT, worth at least $580 million. That spooked the market, and the value of FTT started to fall, which damaged people's faith in FTX, which caused FTT to fall further, and so on. It became a death spiral. Everyone tried to withdraw their money from FTX at the same time, and within 72 hours, FTX saw around $6 billion worth of withdrawals. That's money that FTX didn't have, because so much of its wealth was tied up in that

• 7:28Ed Elson?

  FTT token whose price had collapsed. SBF needed a lifeline, so he called perhaps the only person with the crypto experience and the cash who could save him, his frenemy, CZ. Binance agreed to buy FTX in order to save it. But 24 hours later, after getting a look at FTX's book, Binance walked away. FTX's problems were, according to the company, quote, "beyond our control or ability to help." Those problems apparently include the fact that FTX lent out its customers' funds to prop up SBF's own Alameda fund. FTX was last valued at $32 billion.

• 8:10Ed Elson?

  It received funding from investors including SoftBank, Tomo Bravo, and Sequoia. But now FTX appears insolvent, Sequoia has marked down its investment to zero, and the $15 billion fortune of CEO Sam Bankman-Fried has practically vanished overnight.

• 8:30Ed Elson?

  Scott, there is so much to unpack here. Where do you want to start?

• 8:35Scott Galloway?

  This is, it just feels like this highly levered Ponzi scheme. And also, you have players who decide they can crash the market by starting to sell your coin or create rumors about the underlying value of the coin, which you propped up as some sort of asset you could borrow against to make other investments in other companies and other coins. I mean, it really does feel like a house of cards. It feels like Jenga when we're all building this tower higher and higher and can't believe how high it's gotten. And then all of a sudden, it starts to waver and the whole thing comes crashing down. I'm, call me a boomer, but something that strikes me is that they've created this illusion of security and it feels like a bank and it feels like an exchange, but it's not.

• 9:19Scott Galloway?

  Because when you put a dollar in a bank, it's backed by the government. And for a long time, anytime you showed up to the bank, you got your dollar back. That is not happening at these exchanges. One by one, they are starting to default. They take the money, they lever up wildly. And then it's really, it's something called mismatch durations. The way financial institutions go out of business is not even that their assets that they invested that capital in that they took in from depositors goes down. It's just that they invested long and they borrowed short. What do we mean by that? People put their deposits into these exchanges or place their crypto into those exchanges, thinking they can get it out short, meaning that they can show up at any time or on their computer and ask for their money back.

• 10:01Scott Galloway?

  And what oftentimes they do is they invest long, they invest in other coins, they invest in other companies, whatever it might be. And they find out that those assets aren't liquid. And the moment word gets out that they can't meet the redemptions, there's a run on the bank. Everybody tries to get to the front of the line and get on the last helicopter out of Saigon. And it creates an inextricable downward spiral and a panic. And it can happen to the biggest institutions. But the federal government isn't here to backstop it. Financial institutions are really just two things. They're brands and trust because so much of it is done digitally. There's no real hard asset. So this creates a contagion. And at the end of the day, it really questions the value of these exchanges.

• 10:42Ed Elson?

  Do you think that these tokens, like the FDT token? Do you think they should be allowed? And do you think they should be legal?

• 10:49Scott Galloway?

  Well, I think they should be allowed. I don't think you want to finalize investors. If investors want to try and come up with a way to create a new currency, I think that's an interesting idea. And to a certain extent, Bitcoin has established that because of this trust that it's created around scarcity. And that is people believe that they're going to stop mining and minting Bitcoin at 21 million coins. So it seems like it's got a fixed supply and there's buyers and sellers willing to use it as a store of value. But the majority of these coins are really just speculation. And that is two parties decide it's worth something. One is hoping that it'll go up in value. But when there's no underlying utility, it's kind of like if Tesla produced cars, but the cars didn't move. And that is you've decided, okay, this is a speculative asset, this big shape of steel.

• 11:34Scott Galloway?

  It doesn't actually do anything. But as long as there's buyers and sellers to treat it like some sort of exchange of value, we're fine.

• 11:41Ed Elson?

  Everyone's blaming SBF, but do you think that the investors are at fault here? Is there anything that you would say to the people at Sequoia who were so long this company?

• 11:51Scott Galloway?

  I can't imagine that anyone going into these things didn't know that they were playing with an incredibly risky asset class. So this was definitely buyer beware. And Sequoia Capital is going to be fine. I think I read the letter they put out. They've lost, I think, $100 or $200 million as part of a $7 billion fund. The fund has already returned that $7 billion. So they're going to be just fine. And if you did what you're supposed to do, and that is you don't allocate too much to any one asset class. And occasionally you invest in asset classes like this that offer opportunity for asymmetric upside. I mean, some of these people who got in and got out 10x their money. There's very few assets where you might be able to do that. And all of those assets are highly speculative.

• 12:34Scott Galloway?

  So you're not going to 10x your investment in General Motors, or at least I don't think you're going to 10x it. So whenever you're in an asset class that you think could 10x, you have to be comfortable with the notion that anything that can 10x usually has a pretty decent chance it could go to zero.

• 12:49Ed Elson?

  Let's go to Mia on the street. Mia's been asking New Yorkers about the latest in crypto.

• 12:54Speaker 03

  Do you own any crypto?

• 12:56Speaker 04

  Yes.

• 12:56Ed Elson?

  No.

• 12:57Speaker 05

  I sort of wrote it off as a loss a long time ago.

• 13:02Speaker 06

  I don't know much about crypto. For the little bit I do know, it seems like a bit, uh...

• 13:09Speaker 06

  What's the word? Chaotic.

• 13:13Speaker 03

  Um, I hear that crypto is gonna be the new dollar. So I don't know how I feel about that because if that's really what's gonna happen, to be honest, a lot of people are gonna be broke. You own any? No, not yet. I'm scared. Does the downfall of FTX affect how you feel about crypto?

• 13:32Speaker 04

  Not at all. Um, a little bit. It definitely kind of makes you lose a little bit of trust.

• 13:39Speaker 07

  No, I know what I'm getting into. Hundred percent.

• 13:42Speaker 03

  Which is, what do you think?

• 13:43Speaker 07

  It's a volatile market. It's an unproven market. It's a market that, you know, we've yet to see what's gonna happen over decades. So it's kind of, if you're going into that with thinking that it's like stocks, thinking it's like bonds, stuff like that, you've already lost. You gotta know it's a risk. It's a gamble.

• 14:02Ed Elson?

  Disney erased almost all of its pandemic gains after missing big on its earnings last week. Revenue fell short of Wall Street's expectations by $1 billion and earnings per share came in at 30 cents versus 51 cents expected. The low earnings were largely due to Disney's streaming business, which includes Disney+ ESPN+ and Hulu. It added 15 million subscribers, but operating losses almost doubled. That was a result of significant increases in content and marketing spend, and Disney shares fell 13% after the earnings call.

• 14:34Scott Galloway?

  So this is an unbelievable franchise. It just got out over at SKIES. I remember reading an analyst report saying as a multiple of revenues, Disney was the most expensive media company in the world. Total revenue, $20 billion, up 9%, which is really healthy. The parks revenue was up 36% year on year. Media and entertainment revenue was down 3%. But here's the thing, they're caught in this shooting war called streaming that is just getting more and more expensive until recently. And so in order to compete, go toe to toe with the other streamers, they just have to make these extraordinary investments. And the thing about Disney is it trades like many old economy companies, it trades at a multiple of EBITDA. It's not like Netflix or Amazon. Where they were trading on growth metrics.

• 15:19Ed Elson?

  Could you explain more what you mean there?

• 15:21Scott Galloway?

  So before a company is profitable, it's basically valued on how fast it's growing. And oftentimes, sort of the cardinal sin is when you go profitable, because then you move to a multiple on profits. And Disney's been profitable for decades, so it gets valued through a different lens than a Netflix. And so whereas Netflix is basically their stock moves on subscriber growth or loss, Disney continues to trade on its profitability and also its growth, but mostly profitability.

• 15:50Ed Elson?

  Yeah, so Disney Plus added 12 million subscribers. Disney Plus now has 164 million subscribers total and Netflix has 223 million. So the difference is now 60 million. A year ago, that difference was 100 million. What's going to happen here in terms of the overall streaming wars landscape?

• 16:11Scott Galloway?

  What we're going to see here is is is different. So the crypto market is undergoing a massive disruption. That will result in a lot of failure. What's going to happen in the streaming market is that we're just going to see a consolidation. You know, I don't know how many streamers there are now, but the number of them is going to decline by 30 to 50%. You just can't have this many players spending this much money trying to carve out their own niche. People are getting subscription fatigue and you can only have so many hero shows that encourage people to sign up. But you're just going to see a lot of marriages here.

• 16:41Ed Elson?

  Which companies do you think will be the winners here? I mean, Paramount released its earnings, it was a miss. Earnings per share was 39 cents versus 43 cents expected. Warner Brothers also released earnings, it was also a miss. Revenue was 9.8 billion versus 10.4 billion expected. It had losses of 95 cents per share. Who wins this game?

• 17:04Scott Galloway?

  I don't know who wins, but it strikes me that the consolidatees, the ones that will be acquired or they'll be acquired, I don't think they'll go away, are Hulu, Paramount and even HBO Max. I don't think HBO Max survives as an independent company based on their capital structure.

• 17:21Ed Elson?

  Could you elaborate more on why the capital structure makes it vulnerable and what that capital structure is?

• 17:28Scott Galloway?

  Essentially, how a company is valued is the following. The value of the company minus its debt is what its equity trades at. So if you quote unquote own a home. And it's worth a million dollars, but you have a $900,000 mortgage on it, then your equity value is $100,000. So you take the value minus the debt and that's the equity value. So in this instance, the company has 50 billion in debt, meaning that if it's worth 60 billion, it will get a $10 billion market cap. Right now, it has a $24 billion market cap. Its stock dipped below $10 for the first time in five years. You could see the equity value go to 10 billion or 5 billion if the market says this company is not worth more than $50 billion. Now, what happens? What happens?

• 18:12Scott Galloway?

  I think an Amazon or an Apple or even a Netflix, to keep it out of the hands of Amazon or Apple, would love to own HBO Max. Whoever owns HBO Max is the clear and singular number one overnight. HBO has consistently figured out a way through culture, through talent retention, to produce the most talked about shows in the history of streaming. I don't care if it's Succession or Euphoria or Game of Thrones. They just do more with less and they have an incredibly loyal following. So if the stock continues to decline, I gotta think that HBO Max gets put in play.

• 18:52Ed Elson?

  And to be clear, on Warner Brothers' side, the reason that they'd want to get rid of HBO Max is because they want to secure their capital structure such that they have more cash on the balance sheet because the debt is just dangerous.

• 19:05Scott Galloway?

  I don't think they're going to decide to do this. I think an activist is going to come in and say, okay, playtime's over, you overpaid and we need to go good bank, bad bank. And that is, I think, the way you'd unlock value here is to split them up into two companies. You'd have all the cable assets, right? Everything from the Cartoon Network to CNN to Turner. And this is a melting ice cube, but it's still a very profitable cube. That's the bad bank. That's worth something. There's a lot of EBITDA there. And then there's the good bank, and that is the streaming business. That's HBO Max and Warner, the Warner franchise that does these big burst movies with men in tights and capes that makes hundreds of millions or billions of dollars that directly feeds into what is arguably the prestige or artisanal streaming network that is HBO.

• 19:48Scott Galloway?

  I think, I think that an Apple or an Amazon would pay. The entire value of the company right now, just to get HBO Max and Warner. So what does that mean? Think about this. The value of the entire company is $75 billion. So they might say to them, we'll pay you $100 billion. Apple could pay $100 billion for this company and take a 4% dilution. So would it be worth diluting Apple shareholders by 4%? So it's an Apple TV Plus included HBO Max and all the Discovery streaming and all the Warner film franchises? There'd be a bidding war. HBO and Warner are a set of iconic assets that aren't available anywhere else, Ed,

• 20:29Scott Galloway?

  because any assets of this kind of history operate within dual-class shareholder companies or are just too expensive to buy. This is the last breakable, if you will, or winnable assets of this quality.

• 20:41Ed Elson?

  We'll be right back after a quick break with an unpack on the cannabis market.

• 20:52Scott Galloway?

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• 22:09Scott Galloway?

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• 23:24Ed Elson?

  We're back with Prof G Markets. Marijuana legalization was on the ballot in five states this election, passing in Maryland and Missouri while failing in Arkansas, North Dakota, and South Dakota. That brings the total to 21 states and the District of Columbia that have legalized recreational marijuana since Colorado was the first state to do so in 2012. Legalization has spurred the growth of a multi-billion-dollar retail marijuana industry, but it's an industry that still operates on the fringes of law and society. That's the topic of this week's unpack with Prof G Media's Editor-in-Chief, Jason Stavas.

• 24:06Speaker 08

  It's been 10 years since Colorado authorized the retail sale of marijuana. And today, about half of Americans live in a state where marijuana is legal under state law. 10 years ago, Colorado initially licensed 34 retail stores. Today, there are thousands across the country, including Planet 13 in Las Vegas, which bills itself as the largest marijuana shop in the world, has a 20-foot-high LED entertainment wall, and 80 cash registers working 24/7. The legal marijuana business will do about $20 billion this year in the United States, and that's projected to more than double by 2026. For some perspective on that, the US tobacco market is about $80 billion, and the alcoholic

• 24:50Speaker 08

  beverage market around $200 billion. So the legal cannabis market is expected to approach the size of the tobacco market in the United States by the end of the decade. Yet, despite all this, the industry still feels like the Wild West. Why is that? What's the problem here? Well, a major problem is that even where marijuana is legal under state law, possession and sale is still a federal crime. Now, marijuana retailers aren't worried about getting busted by the feds. Federal authorities have refrained from pursuing retail marijuana enforcement in states that have legalized it. But banks and credit card companies are wary of doing business with anyone actively violating federal law. So marijuana remains largely a cash business, which increases costs and makes for serious security risks.

• 25:35Speaker 08

  The murky legal situation, it also complicates fundraising, income taxes, and interstate commerce. Even at the state level, though, there are some pretty big challenges. Marijuana is very tightly regulated, and most states have adopted a system requiring detailed tracking. The industry term is "seed to sale," meaning every gram of marijuana must be tracked from when it is grown to when it leaves the shop. All of that requires a lot of labor and technology. And then finally, there's still significant competition from the black market. States have legalized marijuana in part because they can charge high taxes, usually around 20 or 30%, and illegal marijuana sales are tax-free. Nationwide, the black market is estimated to be as high as $100 billion,

• 26:20Speaker 08

  or five times the legal market. And while illegal dealers can't operate storefronts, the profusion of legal advertising and delivery services has made it a lot easier for them to operate visibly.

• 26:32Ed Elson?

  That makes sense, but this is a $20 billion market. I mean, someone's making serious money here. So what's the investor's angle from a legal perspective?

• 26:43Speaker 08

  So the heart of the business are the companies that are growing the plant, then packaging it for sale, either as a smokable product or in the form of edibles or other products, and then selling it at retail. The largest players are taking a vertically-integrated approach. Quite a few of them are publicly traded, though not always on major US exchanges. Like Planet 13, for example, the retailer with the Las Vegas mega store, they're public, but they trade on the Canadian Stock Exchange. Marijuana is legal in Canada as well. There are eight marijuana pure plays with public market caps of over $1 billion, the largest of which are Cure Leaf and Green Thumb. It's been a rough year for the whole sector, though. Most of them are down 30 to 50% since January.

• 27:27Ed Elson?

  Is this just a general, broad market decline? Or has something specific happened here?

• 27:34Speaker 08

  No doubt, part of what's going on is investors are concerned about discretionary spending, inflation, everything that's happening in the macro environment. But more specifically to marijuana, and over a longer timeframe, the industry is just taking a long time to mature from a risky quasi-legal operation to an efficient, multi-billion-dollar opportunity. When retail marijuana first began 10 years ago, there was a sense that this was a gold rush opportunity. But this just isn't like tech where you can scale up to millions of users by adding servers. It takes time to build the infrastructure. It takes time to build the brand equity. And that would be difficult even without the complexities of this quasi-legal marijuana market.

• 28:15Ed Elson?

  So what's being done to ease those complexities?

• 28:18Speaker 08

  Well, it's been slow. Democrats have historically been much friendlier to legalization than Republicans. So with the likely change of control at the midterms, there's a sense that it's now or never for the industry to take the next step. The White House has been trying to reschedule marijuana within the existing DEA system, which would make some of this easier. But it really takes Congress to unlock the market. One significant piece of legislation we might still see passed this year is the SAFE Act, which would protect banks and payment processors from federal prosecution if they do business with marijuana retailers. That's actually passed the House several times, but it's been stalled in the Senate.

• 28:58Ed Elson?

  And besides these pure-play weed stocks, are there any other sort of pick-and-shovel investment opportunities that we should be looking at, maybe in supply chain or in weed tech, if that's a thing?

• 29:11Speaker 08

  It is, and there are. Lately, nothing in the sector's been doing particularly well, but that might be a buying opportunity. The main thing that marijuana businesses need is specialized supply chain software. Because of these stringent regulatory requirements, the seed-to-sale system that I mentioned earlier, retailers use unusually comprehensive tracking systems, typically involving RFID tags on every plant and every product for sale and complex inventory and point-of-sale systems. And there are a few larger players in this segment. One is publicly traded. It's called Akerna, and its main product is something called MJ Freeway. Akerna was venture-backed, and now it trades on NASDAQ. Another venture-backed business in this space is a company called Dutchie,

• 29:56Speaker 08

  which is still private, but was valued at over $3 billion in its last private round. Both are dealing with the same difficult conditions as retailers, however. Akerna recently had to undergo a 20 to 1 reverse stock split in order to keep its stock price above NASDAQ's $1 minimum. And Dutchie announced it was laying off 8% of its 700 person staff. Now, you can get even closer to the sort of metaphorical idea of picks and shovels with the equipment that you actually use to grow marijuana at industrial scale. And some of these are huge operations. Ultra Health claims that its facility in New Mexico is the country's largest. It's nearly 10 million square feet. It looks like a Tesla factory. The equipment for these operations, though, it overlaps

• 30:40Speaker 08

  quite a bit with other forms of agricultural equipment. So it's really a growth segment for existing players more than a new company opportunity. The company most associated with this space is Grow Generation, which has touted its sales to the marijuana industry to investors. But things are tough all over. After several years of triple-digit revenue growth, Grow Generation's most recent quarter posted a 39% year-over-year decline. The good news is that was better than expectations and the stock was actually up on the announcement. So marijuana remains a tremendous potential opportunity, and some people are making money in this space. But it's tough going. They are creating a new industry, more or less from scratch, but they have to compete with an existing,

• 31:22Speaker 08

  well-established black market, and it's still not fully legal, even on the supposedly legal side.

• 31:29Ed Elson?

  Thanks, Jason. Scott, are you an investor in the marijuana industry?

• 31:33Scott Galloway?

  I'm a consumer, and I smoked a lot of pot in college, probably not good. I wouldn't recommend that to anybody. I think it lowered my drive. I do edibles now. I enjoy it. I think it actually enhances my life. It helps me relax, helps me sleep sometimes. I do edibles once to twice a week. The reason I have not invested, I think it's over-invested. And that is, I would say, 50% of the billionaire baby boomers that I know want to invest in marijuana because they are consumers and they love it, the same way that people want to own sports teams or invest in movies. I think this is a sexy investment for a large portion of wealthy baby boomers who would like to be involved in cannabis. And just as Jason said, there's an enormous market here. But the problem is, do you invest in the manufacturers? We really haven't seen a brand emerge.

• 32:18Scott Galloway?

  Do you invest in the distribution with this huge regulatory overhang? The place I like, or the place I would invest, is an existing product that is cannabis infused. I think we're going to see an explosion in things like cannabis infused tea, or chocolate that has CBD in it, whatever it might be. I think this is going to become a very powerful ingredient brand. But it falls under the same rubric I look at every lens, and that is the sexier, the lower the return. This is a sexy business. A lot of money wants to go in here, and as a result, it's over invested, in my view. So for me, I'm happy to be a consumer and have billionaires come up with a bunch of different ways for me to kick up my feet and watch See Above HBO Max on the couch,

• 33:02Scott Galloway?

  and then hit to the kitchen to see if there are any baked goods.

• 33:06Ed Elson?

  Have you found a dealer in London?

• 33:07Scott Galloway?

  I have not, although whenever I go to Aspen, I load up.

• 33:13Ed Elson?

  Okay, let's take a look at the week ahead. We've got October's existing home sales and retail sales data. We'll also see earnings from a slate of retailers, including Walmart, Home Depot, Target, Macy's, and Alibaba. And chipmaker Nvidia is reporting as well. Scott, we heard your HBO prediction. Do you have any other predictions for us?

• 33:34Scott Galloway?

  Actually, Ed, after listening to you talk about FTX and Binance, just as the subprime market in the 2008 Great Financial Recession created tremendous upheaval in the markets and really dented the economy, but nobody went to jail, I think the opposite is going to happen in the world of crypto. And that is, the asset class is now only a few hundred billion dollars, I think, maybe a trillion. I don't think it's going to have much of a dent on the economy. But I think as we peel back the onion, we're going to find that there was a lot of fraudulent behavior here. And I think we're going to see people in orange jumpsuits. I think we're going to see more people in jail, but less impact on the economy. It's going to be a lot of news, not noise, versus what happened the last time with the subprime market. That's all for this episode. Our producers are Claire Miller and Jason Stavert.

• 34:20Scott Galloway?

  Special thanks to Catherine Dillon, Ed Elson, Mia Silverio, and the Prof G Media team. If you liked what you heard, please follow, download, and subscribe. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. We will catch you next week.

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