Pod Insights Prof G Markets U.S. & China Strike TikTok Deal? Paramount’s WBD Bid & Robinhood’s New Social Platform About this episode Ed breaks down the latest news that the U. S. and China have reached a framework of a deal to prevent a TikTok ban. He’s then joined by Rich Greenfield, co-founder and media/tech analyst at LightShed Partners, to discuss why David Ellison’s Paramount Skydance is reportedly preparing a bid for Warner Bros. Discovery. Finally, Ed and Scott dive into Robinhood’s new social platform, which lets users share and follow trades.
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Transcript 6,774 words · 11 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 Exchanges on the economic impact of AI. Exchanges on gold, energy and the commodity markets. For the sharpest analysis on finance, business and the economy. Count on Exchanges, the Goldman Sachs Podcast. Listen now.
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1:50 Ed Elson? Welcome to Prof G Markets. I'm Ed Elson. It is September 16th. Let's check in on yesterday's market vitals. All three major indices climbed on expectations for a rate cut this week. The S and P closed above 6,600 for the first time ever. And the Nasdaq ended the day at yet another record. Meanwhile, Treasury yields fell and the dollar slid. Tesla shares closed nearly 4% higher after Elon Musk purchased $1 billion worth of the stock. And finally, Google climbed more than 4% and became the fourth company in history to join the $3 trillion club.
2:27 Ed Elson? Okay, what else is happening? TikTok just got a lifeline. The US and China announced a framework for a deal to keep the app alive in America. The framework was hammered out during a new round of talks in Madrid, but the terms of the deal have not yet been made public and the timing is critical. The announcement comes just days ahead of a deadline that could have banned the app in the US. So this is officially the fourth punted deadline for the TikTok ban. It's been 240 days since the original deadline of January 19th, which was first put into place and delayed under the Biden administration. And now the Trump administration has announced that they have a framework for this TikTok deal between the US and China. Now, do we know what the deal actually entails?
3:12 Ed Elson? No, we do not. We can assume that TikTok will be sold in some way, transferred maybe to some sort of US entity. But do we know who or what that entity will be? Do we know what the terms are? Do we know what the deal will actually look like? No, once again, we have a framework of a deal, a verbal commitment to make a deal, call it whatever you want. We are back to announcing deals before the deals are done. We have seen this movie before. Another deal that isn't actually a deal. Having said that, there is one thing they're doing differently this time. And that is they're not making these big false promises. You'll remember with the Japan deal, they said Japan was going to invest $500 billion into the US.
3:57 Ed Elson? That turned out to be false. It was only $5 billion. Or the Saudi Arabia deal, where they said the Saudis were investing $600 billion, also never materialized. Many such cases of these big provocative statements that never actually pan out. However, on this occasion, we are not seeing much of that. The statement was vague, it was cryptic and quite frankly, a little bit confusing. Beyond a tweet from the president and a very quick statement from Scott Besant, we haven't really heard anything. We haven't heard from the White House, nor from TikTok, nor anyone else. So we don't know what's going to happen here. Many questions. So to help us figure out what to make of this news, our producer Claire Miller spoke with Alan Rosenstein,
4:40 Ed Elson? Associate Professor of Law at the University of Minnesota and Senior Editor at Lawfare.
4:46 Speaker 04 We're seeing the terms framework and deal interchangeably used to refer to this news.
4:53 Speaker 04 Much like the trade deals we're seeing Trump broker across the world. So how close do you think the US actually is to a proper deal on TikTok?
5:04 Speaker 05 The honest answer is I have no idea.
5:07 Speaker 05 And I know that's a very bad podcast guest answer, but it's the truth. And I'm going to blame the Trump administration for this because I think in a normal administration where words have meaning, you'd have some basis to think that if the administration is announcing that there is a deal or a framework or a framework for a deal and a task force or whatever, okay, well, you have some sense of what that means. And the problem is we just don't know what that means in the Trump administration. So you mentioned that Trump has been brokering these trade deals and he's been trying to broker trade deals. He's been saying he's been brokering trade deals. Occasionally we get a trade deal, but often we get nothing at all.
5:42 Speaker 04 Right.
5:43 Speaker 05 And often what we get bears no resemblance to the thing that he said we were going to get. So it's quite possible that we have a deal and the Chinese are going to sign off on it and TikTok will be in the clear very soon. It's possible that there's nothing going on and this is total vaporware and it's possible that there's anything in between those two extremes. And so I will withhold my excitement until I see some deal text and there is a legally executed divestment agreement.
6:13 Speaker 04 Do you have a sense of how important TikTok has been as a bargaining chip with China when it comes to the broader trade negotiations?
6:21 Speaker 05 I mean, I have to assume that it's been at least lurking lurking kind of in the shadows of it and that that has been very much been to China's benefit. You know, America wants TikTok to stay in America, I think, much more than China does. And certainly at least China doesn't care about whether or not ByteDance makes money off of this, which I think puts China in a better position. Certainly Trump has decided that he wants to help TikTok. His ego is on the line. He has the tendency to conflate his interests with the national interest. And so I think this is a situation in which China probably has a lot of leverage. And the big question for me is, even if there is a deal and even if the deal actually satisfies the law, at what cost will that deal have occurred?
7:05 Speaker 04 Right.
7:06 Speaker 05 What will we give up for this deal?
7:08 Speaker 04 Are you able to venture any guess as to what the tit for tat would be on TikTok?
7:15 Speaker 05 I mean, it could be a whole range of things. I mean, you could imagine that the most straightforward thing would be that it would Be in exchange for some weakening of US trade restrictions on China, which I think it actually would be a good thing because the trade war is so stupid to begin with, that if this is how Trump climbs down from some of the absurd provisions of his China policy, I think that'd be a good thing. It could also be in exchange for weakening security guarantees for Taiwan, or selling out the Uighurs, or, I don't know, handing over the Dalai Lama, who knows, right?
7:44 Speaker 04 You're a constitutional law professor, so what do you make of how all of this has gone down?
7:49 Speaker 05 The part of the story that I care the most about, frankly, has been Trump's refusal in flagrant disregard of his constitutional obligations to enforce the law, and what I think is the quite shameful willingness of giant American companies to go on with this. And that has been the case since January, and even if ByteDance sells TikTok and the law is finally satisfied, that will not redress the fact that for almost a year now, we have, you know, the administration and these giant companies have been engaged in really dramatic lawbreaking.
8:21 Speaker 04 And you're referring to the the constant extension of the ban?
8:24 Speaker 05 I am, and I'm just a guy, should go into that for a second, and I know this just sounds pedantic, but I'm a law professor, so you'll have to pardon me. There have been no extensions of the ban, because to say that the ban has been extended is to concede that Trump can extend the ban. He cannot do that. He has no power to extend the ban. The ban came into effect on January 19th. The ban has been in effect ever since, and all the noise and nonsense from the Trump administration to the contrary does not change that fact. Now, Trump can not enforce the ban, that's what he's been doing, and he can set whatever arbitrary deadlines he wants, and that those, though all of those deadlines are meaningless, they're not legally operative, they're just him saying, I don't want to do my job for another 90 days with respect to this law.
9:09 Speaker 05 And the companies can say that Trump told us it's okay, that doesn't change the fact either. So even the language we use, I find very problematic, because it implies that Trump can extend this deadline. He cannot extend the deadline, and that's the whole point. For nine months, Trump has been acting as if he has the power to change deadlines set by Congress. He does not have that power. And we've all just been playing up, you know, going along. I mean, I've been screaming hysterically about it, but you know, it's just some random dude in Minnesota. We've all been going along as if that's okay, and it's not okay.
9:40 Ed Elson? That was Alan Rosenstein, Associate Professor of Law at the University of Minnesota. There is so much we can't know until the deal terms are actually announced, if there indeed is a deal. But if there is, then the next big question is going to be, who will own it? If it is transferred to a US entity, which US entity will it be? Will it be Microsoft? Trump pushed for Microsoft a few years ago. Will it be Amazon? Could it be Blackstone? Many potential buyers here, but we are going to lock in our prediction for TikTok's next owner. We believe that it will be the man who made $100 billion in 40 minutes. We think it'll be Larry Ellison. So far, by the way, the markets do too. Oracle stock popped more
10:23 Ed Elson? than 3% on news of this framework of a deal. Several reasons why this would just make sense. For one, Larry is a longtime associate of Trump's. And as we've seen, being friends with the president can go a long way now, especially in terms of deal making. Larry Ellison has hosted fundraisers for Trump dinners. He's visited him in the Oval Office. So if Trump is brokering a deal between China and a private American citizen, it would add up that that person would be Larry Ellison. In addition, Larry Ellison already has ties to TikTok. He's, of course, the chairman of Oracle. Oracle already has a partnership with TikTok. That partnership puts Oracle in charge of hosting all of TikTok's US data.
11:06 Ed Elson? So in a way, they've already been vetted by both the Trump administration and by ByteDance. And then finally, this is just the kind of thing that Larry Ellison would find fun. He's already worth $350 billion. He has the money. He's bankrolled his son's adventures in M and A, in media. And as we discussed on Monday, he jumped at the opportunity to invest in the Twitter takeover by Elon Musk. He said it would be, quote, "lots of fun." So this is exactly the kind of investment that an 81-year-old mega billionaire would love to make. So that is our prediction, not a hot take. We're looking at the markets. The market appears to agree, but our prediction, Larry Ellison takes control of TikTok. Maybe
11:50 Ed Elson? he won't be the sole owner, but we believe he will at least take a minority stake and perhaps even a majority stake.
12:00 Ed Elson? After the break, more consolidation in legacy media. And if you're enjoying the show, give Prof G Markets a follow.
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15:16 Ed Elson? We're back with Profitey Markets. David Ellison's Paramount Skydance is reportedly preparing a bid for the entirety of Warner Brothers Discovery. This news comes after WBD announced plans to spin off its TV networks from its streaming and studios. Warner Brothers Discovery shares surged more than 28% on that news. That was the stock's best day ever, and shares of Paramount Skydance rose 15%. Okay, so David Ellison, remember, this is Larry Ellison's son, who recently acquired Paramount. Apparently, he isn't satisfied with Paramount, which he bought in August. He wants more. Now he wants Warner Brothers Discovery, too. So this would be a huge merger. It would
15:56 Ed Elson? mean rolling up several of the largest legacy media properties all into one. WBD, of course, owns HBO and also CNN, also the Discovery Channel. They also have some incredible IP: Harry Potter, the DC Comics Universe, Game of Thrones, the list goes on. And all of that may soon fall into the hands of David Ellison and the Ellison family. So for more on what this means and what a Paramount-Warner Brothers merger would actually look like, here is Rich Greenfield, co-founder, partner, and media and technology analyst at Light Shed Partners.
16:34 Ed Elson? Rich, great to have you on the program again.
16:37 Speaker 09 Thanks for having me, Ed.
16:38 Ed Elson? So I kind of just want to start with your initial reactions here. Paramount making an all cash bid for Warner Brothers Discovery. Were you surprised by this? What are your thoughts?
16:49 Speaker 09 Well, it hasn't happened yet, so you're still talking in the theoretical sense. Obviously, it's been widely reported and not just by the Wall Street Journal first, but CNBC's David Faber has said it's coming. So everyone believes that an offer is coming. Don't know when.
17:06 Speaker 09 Obviously, there was nothing this morning or today. We'll see. All signs point to this being true. Look, it's a bold move. If you think about it, Warner Brothers Discovery was in process of separating into two pieces. So they were separating into a business called Warner Brothers, which was going to comprise the film and TV studio and the gaming studio, as well as HBO Max, the streaming platform. And then Discovery Global, which was going to have all of the cable networks, effectively all the cable networks that were acquired as part of the Discovery merger, as well as what was the legacy Turner Networks business. And so you're going to have two companies starting in sort of middle of next year. Paramount, led by David Ellison, the son of Larry Ellison,
17:51 Speaker 09 is clearly trying to preempt that process. And instead of waiting for the split where there might be more bidders after the split for the Warner Brothers studio, he's willing to buy it all right now. And with the benefit of the Ellison family fortune, willing to make a mostly cash bid, at least again, if you believe press reports, a mostly cash bid, which is not an easy thing to turn down.
18:17 Ed Elson? Right. Yeah, one thing that's a little confusing here, and I'm glad you mentioned that this is all theoretical at this point. But one of the things that I'm a little confused about is what the economics look like for Paramount and for the shareholders of Paramount. Because as you say, the whole thing is going to be bankrolled by David Ellison. Um, so it seems like
18:39 Speaker 09 Paramount doesn't have 50, 60, 70 billion dollars of of cash. It's just not sitting around at Paramount.
18:45 Ed Elson? Exactly.
18:45 Speaker 09 That this has been the problem. I mean, the Skydance merger effectively bought out a bunch of Paramount shareholders for cash and infused some cash into Paramount. But there is certainly not tens of billions of cash sitting at Paramount. And so effectively, what would happen in this scenario is you'd issue some Paramount equity, but the vast majority of this transaction would be cash going from the Ellison family into Paramount in return for more shares in Paramount and then using that cash to then go and buy out WBD shareholders. And so you you would essentially have this transaction where the Ellison family would maintain the very strong,
19:26 Speaker 09 high level of control that they have today, even after buying a far larger company in Warner Brothers, because they're the principal source of the cash economics of this transaction, if that makes sense.
19:40 Ed Elson? That that does make sense to me. It's also sounds like almost only upside for the shareholders of Paramount. Is that right?
19:47 Speaker 09 Well, Paramount, Cheryl, you're probably being pretty heavily diluted.
19:51 Ed Elson? Yes.
19:52 Speaker 09 But, you know, from the standpoint of, you know, you are, even before you've started to integrate Paramount and Skydance, you're making another larger transaction. And so it certainly gets harder to sort of
20:09 Speaker 09 understand what's actually going on in terms of like, what would have 2026 earnings looked like? You obviously can muddle it with all of WB, you know, it sort of all becomes a moot point if you're buying WBD on top of it.
20:22 Ed Elson? Yeah.
20:23 Speaker 09 But look, I think the reality is David Ellison is 42 years old. He's got a vision for competing with the likes of Netflix. Like, he wants to combine his, you know, he, his dad is Oracle, right? Like, that is Larry Ellison, Cloud, Oracle. He used to walk the, you know, the, the offices of Apple as a young kid and he's, you know, a fanboy of Steve Jobs. And he wants to combine. You know, Southern California, meaning Hollywood, with Northern California and Silicon Valley. That's the vision and the dream for Paramount, which is a Skydance company. My guess is, you know,
21:05 Speaker 09 the content at Paramount is not amazing, right? Like, you don't have a lot to work with in terms of like what they acquired. Buying Warner Brothers would give you, yes, you could go out and you could invest tens of billions in content, but if you wanted to sort of hit the fast-forward button, the acceleration button, this is an interesting way to sort of jumpstart the content creation. And, you know, it essentially is trying to use the cash-rich fortune of the Ellison family to move at a time that other bidders are probably unlikely to want to move.
21:41 Ed Elson? Yeah, a lot of suggestions I've seen that this might have something to do with the fact that his dad got $100 billion richer literally in the same week that the bid was made. Do you think that that has anything to do with this?
21:54 Speaker 09 I think that's overly simplistic. I think the reality is Warner was expecting to bring in a minority partner into the Warner Brothers studio piece of the company fairly soon. They needed to delever. The linear networks, the Discovery Global piece, needed to delever. And so they were going to bring in a partner to basically buy the stake that was being retained in Warner Brothers within the Discovery Global spun-off company. That, having a minority owner of the Warner Brothers studio, whether that was a strategic or a private equity firm, might have impacted the timing of this because that wasn't something, when they originally announced the split, they weren't planning on selling that stake beforehand. Now that they're selling it beforehand,
22:39 Speaker 09 it's possible that spooked Paramount to want to bid sooner than they otherwise might have wanted to. So I don't think it was... Oracle stock soaring, although I'm sure that doesn't hurt, but I think that's sort of coincidence rather than rationale.
22:53 Ed Elson? Yeah, if this does turn into a bidding war, and it looks like that's might be where this is headed, there were rumors that-
23:00 Speaker 09 Why do you say that? Who do you think bids?
23:02 Ed Elson? Well, this was gonna be my question. Apparently, according to Puck, Zaslav thinks that the offer is small and that this is gonna be, or at least he wants this to become a bidding war. And then I've seen suggestions online and on CNBC that maybe a big tech company would come in and make a bid. An Amazon or an Apple has been floated out there. And I wanted to get your reactions. Do you think that is feasible or not?
23:30 Speaker 09 Look, anything is possible. I never would rule out, you know, I don't like the word never, but I will say that, you know, Netflix, Amazon, Apple have all been building up their own content libraries and as well as their sports licensing without making a major acquisition. I mean, yes, Amazon did buy MGM, which was sort of a pure play studio, smaller studio. But here you're talking about buying a very large asset. I mean, you're talking about, you know, at $20 a share, it's sort of a $50 billion equity check and $80, $90 billion enterprise value. Like, this is a huge transaction. I think Apple's largest
24:12 Speaker 09 transaction ever is $3 billion. So it's always convenient. I mean, Apple's a buyer of every company, yet they bought none. So, you know, it is funny how they, you know, remember when Apple was buying Disney? I'm sure you remember all those conversations, you know, Ed.
24:25 Ed Elson? Scott said Apple was buying Peloton.
24:28 Speaker 09 Look, it is easy to say Apple buys everything because they have trillions of dollars. So, you know, Amazon, you know, sure, had they made an acquisition of MGM, they have. But, I mean, this is at a very different scale. And again, The largest asset in here is cable networks, right? Like you're buying linear cable networks. Does Amazon or Apple want to own linear cable networks? Heck, even HBO Max, a substantial part of the HBO Max business is still linear television. And, you know, distribution deals where they're bundled into Charter and distribution deals where they're bundled in with, you know, Disney Plus and Hulu. So you're not getting the pure play IP. I mean, sure, if you were just auctioning Warner Brothers, I think the line would actually be quite long.
25:13 Speaker 09 But when you tie it into all these other assets, look, a bidding war is possible, although I think a bidding war is a lot more possible. And I think this is, if you want to see a path for where the Warner Brothers board could say no to the Ellison family or to Paramount, it's that they could, they could certainly come to the conclusion that a bidding war is more likely to break out post-split than pre-split. And so that could be the reason they turned this down. Again, the number could be big enough because we're still talking theoretical. If the number is big enough, they may not be able to say no, just given the size of a cash offer. I don't know if $20 gets that done, does 25, does 30. I mean, this is very hard to know.
25:57 Speaker 09 The wild card in all of this that we're not talking about is Comcast because Comcast could be a bidder now. I mean, they are in the cable network business, they're in the film business, like they would love to have HBO Max to combine with Peacock. Like, so there is real industrial logic to a Comcast offer. The question is, how does Comcast ever win out over Paramount and the Ellison family? They don't have that type of cash sitting around.
26:23 Ed Elson? Yes.
26:24 Speaker 09 And as I'm sure you know, Ed, they have a Trump problem. Like, they definitely are not, you know, whereas the Ellison family is liked by Donald Trump. I don't think there is any love of Brian Roberts from Donald Trump.
26:37 Ed Elson? Yes, exactly. Just going to wrap up here and then we'll let you go. You spoke about the vision of David Ellison, sort of combining SoCal with Silicon Valley. I think that's right. I would just love to hear a little bit more from you on what that vision will actually look like. As you say, he's going after cable networks here. And I guess. Part of the question here is, what do you even do with that? We saw what he did with this bid for the Free Press and now Barry Weiss is going to go run CBS News. Perhaps it's an editorial decision.
27:09 Speaker 09 Maybe Barry's gonna run CNN.
27:10 Ed Elson? He's just gonna run CNN.
27:12 Speaker 09 Maybe Barry Weiss is gonna run CNN soon. So, look, I think the reality is this is not a 12 or 18 month plan. I think that's what makes it so hard to analyze is I don't think they really care about earnings over the next 12 or 18 months. And I know investors obviously care about earnings estimates and how much they earn next year in 26 and 27. But my guess is David's taking a 10, 20 year view. I mean, he's probably running this company for the next 30, 40 plus years. He's got a very different timeframe that doesn't align with public market investors. And they're really, in many ways, they're sort of running this as a private company.
27:48 Ed Elson? Right.
27:49 Speaker 09 And they're really trying to take a long-term strategic approach of, hey, look, the one thing, if you look across all of the streaming services not named Netflix, and let's even expand the aperture a bit to include YouTube. Outside of those two services, nobody really has focused on time spent.
28:07 Ed Elson? Yes.
28:08 Speaker 09 That's what every tech company that you and Scott and others talk about, like whether you're Meta, TikTok, like all they care about, they obsess over time spent. They want more of your minutes per day. I think Ellison gets that.
28:20 Ed Elson? Yes.
28:20 Speaker 09 And he's trying to build a company that can really drive daily user engagement, something that no one has succeeded in, you know, in the traditional media space. And so he's trying to change that, but that takes time and it takes a lot of content relative to what Paramount was doing today. My guess is, you know, whether it's Warner Brothers Discovery is a part of that, heck, Oracle potentially being one of the buyers or the home of the new TikTok.
28:48 Ed Elson? Yes.
28:48 Speaker 09 Could also be part of it. And so I think they're sort of, you know, I sort of call it 4D chess. Like I think there's a larger game that's going on that we're not privy to all the details, but I think there's a much bigger strategic vision than what you see on paper today.
29:04 Ed Elson? Very interesting. Thank you very much, Rich. We really appreciate your time.
29:08 Speaker 09 Thanks for having me.
29:13 Ed Elson? Robinhood is getting into social media. The brokerage firm is launching a social platform that will allow users to post their trades, follow investors and track the investments of celebrities and public figures. The platform, called Robinhood Social, is designed to look and feel like X, formerly known as Twitter, and will compete with Reddit pages like Wall Street Bets. The idea is to transform Robinhood into a financial super app that allows users to trade across asset classes, including options, futures, crypto and prediction markets. The platform's beta will roll out to 10,000 users in the first quarter of next year, with a broader rollout to follow. Okay, Robinhood is getting into social media. What could go wrong?
29:56 Ed Elson? Let's bring in Scott Galloway, who has been a longtime critic of Robinhood. I'm sure he will have a lot to say on this new move.
30:08 Ed Elson? Scott, good to see you.
30:09 Scott Galloway? Thanks, Ed. Good to see you.
30:11 Ed Elson? Where are you? In the studio?
30:13 Scott Galloway? I am in the studio slash...
30:15 Ed Elson? Beautiful.
30:16 Scott Galloway? Gym.
30:17 Ed Elson? Looking good.
30:18 Scott Galloway? It is my home, or that is the basement of my home, where I retreat to a cave before I go upstairs and all hell breaks loose.
30:26 Scott Galloway? Just wait, Ed.
30:27 Ed Elson? I can't wait. We want to hear your reactions to this news coming out of Robinhood. They are launching a social media platform, Robinhood Social. I'm sure you have a lot of opinions.
30:38 Scott Galloway? You know, probably nothing too strong here. I actually think it's a good idea for Robinhood and for shareholders. I think that, you know, they're trying to become Reddit before Reddit becomes them. I wouldn't be surprised if this inspires something like a Reddit to buy a smaller trading platform. You can just see how going, this is sort of going vertical, and that is... They want to keep people on the platform as long as possible. And passive sort of index trading is sort of their enemy because those are very little margin businesses that are businesses of scale and Robin Hood doesn't have anywhere near the scale of a fidelity or Vanguard. So they're in the business of getting people
31:23 Scott Galloway? to trade.
31:24 Ed Elson? Yep.
31:25 Scott Galloway? And I don't know if you're subject to this, I am. Occasionally I'll read an article from somebody that I trust and like and think, oh, I should buy stock. So you can imagine reading, you know, an article from Josh Brown or something in the FT and getting excited. And it says, okay, click here to trade stock now, right? So them integrating content that keeps people on the platform for longer probably results in more trades. So, you know, public has something sort of similar where you can track other people's trades or you can track your friends and message them. Bloomberg was the original gangster here and they had these terminals that were meant to help people identify alpha with everything from information
32:07 Scott Galloway? on the height of tankers in the ocean to try and figure out if exports from a certain country were up or down such that traders could trade on that. And then they started with messaging such that you didn't have to leave the platform if you wanted to message other people on your Bloomberg. So effectively every one of these companies are all trying to do the same thing. They're just trying to capture more of your attention and more of your time such that they can monetize it. So I think it makes sense for them. So I just see it as, I just see it as a natural evolution. What do you think, Ed?
32:40 Ed Elson? Well, I'm surprised that that is your reaction. I agree with you, but I'm surprised because you've been very critical of Robin Hood for a long time, specifically the payment for order flow model where the business is predicated on people making as many trades as possible.
32:58 Scott Galloway? Right.
32:58 Ed Elson? And that has led to some questionable product decisions. For example, when they used to have confetti explode out of the screen whenever you made a trade, essentially encouraging people not to Invest long term, but to become day traders. And as we know, most people lose money on day trades.
33:20 Scott Galloway? That's right.
33:20 Ed Elson? To me, I I I see this as a natural evolution in the business model that will be smart and will be successful and will work. But it also means we're going to see a lot more degenerate gambling in the stock market, which is net net, probably not a great thing for society, right?
33:39 Scott Galloway? Well, what you see is the percentage of stocks or the percentage of assets going into passive investments, that is indexed or funds or ETFs, has gone up every year. And that's a good thing. At the same time, you know, these platforms that attract a younger investor, there's some real downsides around an incentive system where they're not on your side. Their incentive is to kind of spin you and get you trading as much as possible, which it is, has been statistically, peer reviewed research has shown that's just a great way to underperform the market.
34:14 Ed Elson? Yep.
34:14 Scott Galloway? So that's just what Robin Hood is. At the same time, it does bring a new generation into the investment marketplace. They do learn.
34:23 Ed Elson? Yep.
34:24 Scott Galloway? I was with my son earlier tonight. He's on public. And yeah, I I've told him the way to go is for you to take your allowance and the money you save and invest in a low cost Vanguard ETF. At the same time, he took me through all his stocks and all the things he's bought, and he's excited about it. And he's learning.
34:45 Ed Elson? Yeah.
34:45 Scott Galloway? He's learning about markets. He's learning about buying and selling. So there is, there is an upside here. Uh, whether or not, now, I think the bigger risk is the following, and it's the same risk, the same externality as on Twitter or threads or Instagram or any other social media platform. And that is. The bad actors here are going to try and send false signals and try and manipulate the market by posting false content. And if they were genuine about this being educational and helping their customers, they would have identity verification, they would age gate it.
35:23 Ed Elson? Well, to be fair, just in their defense, they have an interesting form of verification, which I'm not sure will solve the problem, but their form of verification is in order to post, you have to have actually made a trade. In other words, you can't just go pumping a stock and not buy the stock. You gotta prove that you bought it. I'm not sure that that fixes the problem. However, that is their solution to that problem. Just want to put that out there.
35:48 Scott Galloway? Well, that's something. That does create some friction, such that it's not a thousand fake accounts from Albania weaponized by the GRU or the CCP meant to get us to hate each other, or bots, thousands of bots trying to pump a certain meme coin. So that is something. But that's the fear here. And the fear is that it's not educational, it's people basically trying to inspire buying that's not based on valuations and that they're bad actors and that they're effectively pumping and dumping. And you'd said something earlier that you're worried about this is out of control casino or gambling. And I empathize with your sentiment, but the reality is there's something like $3 trillion a year in transactions
36:31 Scott Galloway? on these platforms, or there's $3 trillion in quote unquote trades. 300 billion is what it's supposed to be, and that is secondary is their IPOs. Ultimately, the markets are these public markets are supposed to be a vehicle for raising money. So that means 90% is some form of speculation, and that is a market maker, you know, creating, finding buyers and sellers, and a buyer like you says, I think I know more than Scott, and I'm gonna, I think Apple's stock is going down, so I'm gonna sell Apple, and I think I know more than you, and I'm gonna buy it. That is speculation. And now we're at a point now where people can speculate on whether we're gonna have a civil war on polymarket.
37:13 Scott Galloway? So, you know, it was the kind of horses out of the barn around a speculation nation where we're all looking for DOPA hits.
37:21 Ed Elson? Yeah.
37:21 Scott Galloway? With gambling and a rush and that, you know, to a certain extent, the markets have become more about DOPA, which isn't necessarily a good thing, that's a bad thing. The silver lining is hopefully more informed investors, people learn about the markets at an earlier age, we bring more people into the markets, they learn some life lessons and they start investing in ETFs and just build wealth and focus on their day job where they're better at that than they are investing.
37:47 Ed Elson? Yeah.
37:48 Scott Galloway? That's the most positive spin I can put on it. Anything else is sort of infantilizing people and getting in the way of free speech. So it just kind of is what it is.
37:57 Ed Elson? Yeah. The question is, who can capitalize on America's gambling addiction in the most elegant way possible? And this might be the most elegant option we've been presented.
38:07 Scott Galloway? Yeah.
38:07 Ed Elson? All right. We appreciate your time, Scott. Have a good night.
38:10 Scott Galloway? Thanks, guys.
38:14 Ed Elson? Okay, that's it for today. This episode was produced by Claire Miller, edited by Joel Patterson and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our research team is Dan Shalane, Isabella Kinsel, Kristin O'Donoghue and Mia Silverio. Our technical director is Drew Burris. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow. I'm Ed Elson. I'll see you tomorrow.
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