Prof G Markets: Bob Iger’s Bad Day, Trump Media’s Fraudulent Auditor, and Uber’s Venture Investments

Scott shares his thoughts on Disney and Warner Bros. Discovery’s latest earnings and what they mean for the streaming space. He then reflects on the implications of Trump Media’s auditing firm being charged with fraud. Finally, Scott and Ed discuss Uber’s Q1 earnings and why the company swung to a major loss in the first quarter. Follow our new Prof G Markets feed: Apple Podcasts Spotify Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit 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.

• 0:00Speaker 00

  Here's your report.

• 0:01Scott Galloway?

  Oh, thanks, Jane. I wish I could hire someone just like you.

• 0:04Speaker 00

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• 0:20Scott Galloway?

  Let's do it. You're irreplaceable, Jane, but another you would be great.

• 0:24Speaker 00

  Hire right the first time. Post your job for free on LinkedIn today at LinkedIn.com/quality.

• 0:30Scott Galloway?

  This week's number, 461 feet. That's the record French bakers set for the world's longest baguette. True story. After World War II, the French were so embarrassed, they thought about changing the name of their country. Unfortunately, Iran was already taken. That's not fair.

• 0:56Scott Galloway?

  I was about to scream, "Go, go, go!" And then I remembered it was the wrong podcast. Welcome to Prof G Markets. Today, you know, they don't masturbate in France. They jacquent off, Ed. Is that better?

• 1:08Ed Elson?

  That's good, yeah.

• 1:09Scott Galloway?

  There we go. Welcome to Prof G Markets. Today, we're discussing streaming earnings, Trump's media's auditing firm, and Uber's huge loss. Here with the news is Prof G Media Analyst Ed Elson. Ed, what is the good word? Are you basking in the glow of 34? That's actually the number we should have had. Prof G, as of today, the Prof G Pod, is the 34th most downloaded podcast in the world. We're number 34, Ed.

• 1:37Ed Elson?

  Prof G Markets, our new podcast, and we haven't even released our first episode. All we have as a trailer is number 21 in the world. So I think we're even better than that. Where'd you get that 34 number from?

• 1:50Scott Galloway?

  I use Chartable. The thing about, just not to diminish our achievement here, but I think it's more about momentum than actual downloads.

• 1:57Ed Elson?

  That's probably right.

• 1:58Scott Galloway?

  And because, I don't know if you know about this, Ed, but I was actually at TED last week. Where I gave what Chris Anderson described as a scorching talk. And but since then, and since, you know, my appearance on what's the name of that show? Bill Maher, since I was on that, we have, everything is kind of like the flywheel is flying. Ed, you're welcome.

• 2:21Ed Elson?

  But Prof G Markets is doing better than the Prof G Pod. So I'm trying to think what the difference.

• 2:26Scott Galloway?

  I don't get that. How'd that happen? We haven't had an episode yet.

• 2:28Ed Elson?

  Yeah, it must be something. I can't tell what it is, but it feels like it must be me, right?

• 2:33Scott Galloway?

  We sexted up with young Ed Elson. All right, Ed, enough of that. Get to the news.

• 2:38Ed Elson?

  I will do that. I just want to remind everyone, if you haven't done so yet, please go subscribe to Prof G Markets. It's our separate channel. It's overtaking the Prof G Pod. So please go subscribe. Okay, let's start with our weekly review of market vitals.

• 2:57Ed Elson?

  The S and P 500 climbed, the dollar is stable, Bitcoin declined, and the yield on 10-year Treasury slumped. Shifting to the headlines. Microsoft is investing more than $3 billion to build AI infrastructure in Wisconsin. The money will go towards a new data center and training programs focused on AI manufacturing. Microsoft said the new location would create more than 4,000 construction and data center jobs. FTX's lawyers announced that its creditors will receive all of the money they lost plus interest. Payouts will amount to 118% of creditors' assets based on their November 2022 value when the company filed for bankruptcy. In its first earnings report as a public company, Reddit reported a revenue increase of 48% from last year

• 3:41Ed Elson?

  and a 37% increase in daily active users that beat analyst expectations. However, Reddit has yet to turn a profit, reporting a net loss of $575 million. Shares popped as much as 15%. Airbnb reported first quarter revenue that exceeded analyst expectations, growing 18% year over year. The stock fell the most in a year, however, after reporting lower than expected revenue guidance for the second quarter. The company is expecting international events like the Summer Olympics to reaccelerate revenue growth and travel demand in the second half of the year. And finally, TikTok is suing the US government over claims that the forced sale or ban violates the First Amendment.

• 4:20Ed Elson?

  The company is arguing that the government's national security concerns are not a sufficient reason to restrict free speech. The legal proceedings will delay the timeline on the ban, meaning it could take years to go into effect. Scott, your thoughts?

• 4:34Scott Galloway?

  A lot here, so let's start with Microsoft. It's just staggering. The Infrastructure Act at the US government, largest economic power in history, 1.2 trillion dollars. Just the three or four companies we talk about invested 32 billion or an annual run rate of 120 billion. So the Infrastructure Act is supposed to take place, I think that's spending over probably the better part of a decade. So you could argue that these companies are kind of, at least right now, and granted, it won't, it won't continue this way, but these companies are essentially spending almost on pace what the government is spending to try and reinvigorate and upgrade America. It's just staggering how much money these folks are spending on. Anyways, this is a long-winded way of saying, it'd be very interesting to try and figure

• 5:19Scott Galloway?

  out, are there companies that make generators that are especially good at cooling data centers or specialize in construction or selling materials into, into the types of infrastructure they're going to be building? Because the amount of investment here, I mean, it's just, it's just staggering. What are your thoughts?

• 5:38Ed Elson?

  Yeah, I just think it's fascinating how all of these big tech companies, which historically we thought of as very different, you know, Amazon is e-commerce, Google is search, Microsoft is PCs, they're all basically turning into the same company now. And that is they're all cloud service providers. They all are building data centers and they rent those data centers out to smaller internet companies. And the greatest evidence of that is just the operating income of these companies. So just as an example, 45% of Microsoft's business today, as measured by operating income, is cloud. And for Amazon, that number is 60%. You know, it feels like once you reach this level of scale, like these companies have, it's almost like the mission changes.

• 6:23Ed Elson?

  The mission Today isn't, okay, we're going to innovate, we're going to build great products. The mission is, we just need to own the rails. And you look at the history of markets and it feels like, exactly as you've said, that's always been true. The largest companies have always been the ones that have owned the rails, whether that means literally, you know, the railroad, i.e. like US Steel. But in this case, I think they've identified that owning the rails means we have to supply and control the computing power. And I think that's why we're seeing all of these massive tech companies morphing into basically the same company. They want to be the next US Steel, or the next Standard Oil of the next generation. And so they're just trying to own all of the computing and processing power in America.

• 7:07Scott Galloway?

  The hard part is, unless you have the capital to invest, not tens or hundreds of millions, not even billions, but unless you have the capital to speculatively invest tens of billions of dollars, you can't play in this. It's almost like there's just, no matter how bad you want to produce or be an energy producer, it's very hard for Japan in the seventies and eighties, right? They just don't have the natural resources. You have to sit on top of a sea of oil somewhere. These guys essentially sit on a sea of oil in the form of intellectual property. They're very smart, they have roots in cloud and AI. And they sit on a reservoir of capital. What I don't get is, I was, I was thinking about this.

• 7:51Scott Galloway?

  The kingdom desperately wants to transition away from fossil fuels to more of a services or tech or tourism based economy. I would have thought that they would be the second biggest investor behind Microsoft and AI and be trying to figure out a way to go all in on tomorrow's energy and that is, that is compute. Because not only is the US currently the biggest energy provider of traditional fossil fuel and also renewable energy in the world, we're about to become the largest producer by far of the new form of energy, and that is compute. So while we hate each other and we might tear each other apart from, from inside, externally, in terms of our ability to produce economic value,

• 8:36Scott Galloway?

  which unfortunately would be sequestered to a smaller and smaller group of firms and people. You know, the US, it just strikes me, an objective analysis, when you zoom back and look at the earth, the US is pulling away from everybody. That's how I see it. I think this has really big implications geopolitically. I think it's fascinating that these companies have this kind of capital to make this type of forward-leaning investment. And in general, where I see, I'm always saying, what's the investment opportunity? I would want to look at everything that's required to build a data center, and what companies sell those products, what companies have some sort of differentiation, or distribution, or intellectual property, or trademarks around that type of product, and find out if they're public companies.

• 9:19Ed Elson?

  FTX?

• 9:19Scott Galloway?

  Well-

• 9:20Ed Elson?

  And that's just the context, which is, you bought a bunch of FTX claims ages ago. You basically called this, that you thought that, you know, I don't think you expected 118 cents on the dollar, but I think you were shooting for something like 70 cents on the dollar. I think you bought them for 20? How are you feeling about this?

• 9:38Scott Galloway?

  Well, all I can say is, hello ladies, that's right. This is the story. First off, let me, I hate it when people just talk about their wins. And last year, I lost $15 million shorting the market. That was a really, like, a bad thing for me. I am wealthy, but that kind of money was like-

• 9:58Ed Elson?

  Not wealthy.

• 9:59Scott Galloway?

  Very upsetting. That was very upsetting, Ed. This one, I got this one right. It's super exciting. And the learning here is the following. The best investments I have ever made, first and foremost, low-cost index funds, diversification, and then just holding on, and making sure you're diversified, and letting the American economy and demographics and productivity take over, and bring, you know, let the rising tide lift all boats. The individual best returns I've ever had, that have been just incredibly outsized, have been- What I'll refer to as old people. And that is, what I've noticed is generally speaking, that people have a huge bias against old people. What is the most successful small business in the world

• 10:44Scott Galloway?

  that has the lowest failure rate? There was just a study on this. Senior care facilities. Because nobody wants to be around seniors. They don't want to invest in them. The whole idea sounds depressing. And I can see why a lot of people think, oh, no, I want to invest in a members only club for artists and models or whatever. Right? But here's the thing. You want to run into the fire. You want to run to the least sexiest things possible. And FTX, people don't remember this. When I bought these things in June or July of last year, FTX stank. I mean, nobody wanted near it. People thought, I'm going to lose everything. This is fraud. Sam Bankman Freed, crypto.

• 11:28Scott Galloway?

  When the narrative is this asset class of this company is just awful and going to zero. Look at it and look at it hard and say, what if they're wrong? Because if they're wrong, the upside might be four, five, eightfold. And you can afford some zeros if you do enough of those because the returns can be so outsized. But anyways, the existential question this brings up is the following. If everyone's getting their money back, then should Sam Bankman Freed still go to prison for 25 years? And the answer is absolutely yes. What he did was fraudulent. He took money from depositors who did not think they were investing in a hedge fund. He then probably went on the worst, from a legal perspective,

• 12:12Scott Galloway?

  handled his prosecution, his defense, I should say, worse than any defendant I have ever seen. A poor person who does not have access to top legal counsel, who gets a public defender. The public defender would have advised him much better than his parents or his lawyers, or maybe he wasn't listening to everyone, but running around the world saying, shrugging his shoulders and saying, oh, I didn't know. I'm just this sloppy eight year old that just got out of bed. I didn't know where all those billions went. And, but wait, weren't you sleeping with your co-founder and doing drugs and setting up? Incorporating purposely in the Bahamas, didn't you hire a shady auditing firm? I mean, all of these things just added up to you're lying.

• 12:57Scott Galloway?

  If he had gone to the authorities and said, you know what? I fucked up. I'm guilty. I'm going to try and get you all your money back. I want to cop a plea deal. He probably would have gone to prison, but he would have gone to prison for one to three years. I mean, this might be a life sentence for the guy. So I find it fascinating. There's going to be a big story on him, but it doesn't in any way exonerate or make it less illegal what he did.

• 13:20Ed Elson?

  We got to move through quickly here between Reddit, Airbnb, TikTok. Any initial thoughts?

• 13:26Scott Galloway?

  The biggest question surrounding Reddit is will they be able to monetize their user base? By the way, their user base is now bigger in America than Twitter or Pinterest. And their ARPU, their average revenue per user is now greater than SNAP. Revenue is up 48%. I mean, and at 37% increase, I mean, they're firing on all cylinders right now. So this was, and I am a small shareholder, full disclosure, not a big shareholder. I'm a small shareholder here. Reddit is delivering and the question they needed to answer is can you monetize this incredible user base? The answer is yes. In addition, they get a higher multiple because people are wondering if their content is especially rich. Like, you know, light, sweet crude oil, the best kind of information for L L Ms.

• 14:11Scott Galloway?

  And they've only monetized it to the extent of 50 million. But people, people think this might be kind of an option that Reddit might end up being able to garner or grow an exceptionally profitable revenue stream, selling their data into L L Ms. Airbnb, I got whacked and I'm a, I'm a shareholder. I have a large position in Airbnb and it got whacked. And I think that what's happening here is that there was a bit of a post COVID bounce in travel. People were sick of being locked up, so they were traveling a lot. And there's fear in the market or general consensus that that post-COVID travel surge is beginning to moderate is the way I would describe it. Because if you look at the numbers, they grew 18%. And it was their guidance that took them down.

• 14:55Scott Galloway?

  So still a great company, still trading at a solid multiple. It just felt like the air got let out here. And then TikTok, this is essentially an argument between really powerful legal constructs or orthodoxies. One is First Amendment and one is national defense. And the First Amendment says that you need to find other remedies first before you inhibit someone's free speech. But at the same time, occasionally, national defense or defense concerns trump First Amendment. For example, we didn't want foreign ownership or an individual to own more than 25% of a broadcast company. So Rupert Murdoch had to become a citizen.

• 15:36Scott Galloway?

  We do, on a regular basis, let national defense or concentration of ownership trump First Amendment. I think that as we get closer and closer to the DC Circuit trial, if in fact it goes to trial, I think the odds, right now, the odds are 70 30. If you look at, if you look at, you can bet on anything now. You can bet on this trial. They're saying it's 70% likelihood that the government wins this case, 30% that TikTok wins. Now, the thing that I think will trump to be the deciding factor here that will result in the DC Court, DC Circuit winning if it goes to trial is the following. The court is typically very remiss to overturn a decision that has the backing of a bipartisan

• 16:21Scott Galloway?

  law passed in Congress. Now, having said that, having said that, and this is the interesting part, does the government win or does China win? The answer is yes. And that is, this comes right up to the date, and I think you're going to see the likelihood of a government win go from 70 to 75 to 80. And then I think Beijing is going to decide to negotiate directly with the White House, which is a much easier way to negotiate than trying to figure out public policy or laws or negotiate through the courts. They will call the White House and they will come to some sort of accommodation that satisfies the White House and that the CCP, not ByteDance, let's be honest, the CCP is comfortable with as the notion, the idea, the threat that they're about to be.

• 17:06Scott Galloway?

  Banned if they don't divest becomes a more and more stark reality that that threat comes into sharp relief. I think this is similar to Twitter that when Musk gets closer and closer to actually having to get on the stand and go to trial, his lawyers say, you realize you're going to lose here, right? And the day before, he decided to close. Same thing's going to happen here. We're going to come right up to the trial date. I don't think it's going to go to court. I think they're going to come to an accommodation because there's two things here. There's the use as the ultimate propaganda tool. And then there's two, hundreds of billions of dollars at stake. And I think the CCP was hoping to hold on to both of those things. When it becomes increasingly clear they can

• 17:49Scott Galloway?

  only have number two, they're just not going to have number one, they will opt to hold on to number two and they'll come to some sort of accommodation with the White House. What are your thoughts on that?

• 17:56Ed Elson?

  I just find it funny that a Chinese company is suing the US government for violating free speech laws.

• 18:01Scott Galloway?

  Well, you know, I don't know if you know this ad, but in China, they have free speech because no one has ever said otherwise. That's good. A little geopolitical humor.

• 18:10Ed Elson?

  We'll be right back after the break with a look at Disney and Warner Brothers Discovery.

• 18:25Scott Galloway?

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• 19:10Scott Galloway?

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• 19:30Scott Galloway?

  The guide is free to you at netsuite.com/propg. Netsuite.com/propg.

• 19:47Ed Elson?

  We're back with Prof G Markets. For the first time ever, Disney streamers turned a profit for the quarter. That is, if you don't count ESPN Plus. Hulu and Disney Plus together made $47 million in profits, but the sports platform dragged the streaming segment to a combined loss of $18 million. Still, that's a huge improvement from its $659 million loss a year ago. Disney also offered weak guidance for its Parks and Experiences unit citing the moderation of post-COVID travel demand. The stock fell 10% its worst day in more than a year. Meanwhile, Warner Brothers Discovery reported earnings that missed expectations on the top and bottom lines. However, the streaming unit was profitable and subscriber growth beat expectations and outpaced last year's quarter. The stock rose about 1%.

• 20:32Ed Elson?

  Scott, Disney and Warner Brothers were two of your stock picks for 2024. Disney's up 15% year-to-date. Warner Brothers is down around 30% year-to-date. What do you make of their performance so far?

• 20:44Scott Galloway?

  What I make of it is my co-host is cherry picking. I had a third stock pick, bitch. Why didn't you bring that up? You're literally like Twitter right now. You're just cherry picking something that makes me look bad.

• 20:54Ed Elson?

  Come on. No, no, no. We're discussing the two companies that released their earnings.

• 20:59Scott Galloway?

  Anyways, I picked, I also picked Google. What's Google up year-to-date?

• 21:02Ed Elson?

  Let's check that.

• 21:02Scott Galloway?

  Typing into Google. Okay, year-to-date. Oh, it's up 23%. Oh, but we conveniently didn't mention that.

• 21:11Ed Elson?

  Yeah, because we covered Google last week.

• 21:13Scott Galloway?

  It's up 30% since I picked it. Anyways, look, I think it's somewhat related to Reddit because now there's even a new, if you look at advertising as a share of GDP globally, it's remarkably consistent. It's like 1.5% of GDP globally, and it has been for the last 40 or 50 years. And the massive ascent of digital platforms has come at the cost of traditional platforms. And if you think about Reddit, if Reddit grows their revenues 48%, that means they're increasing their top line every year 500 million.

• 21:47Scott Galloway?

  That's not new economic activity. That's all coming out of the hides of traditional advertisers. So yet there's another player sucking oxygen out of the room. In Disney, I was shocked. This was one of Disney's worst trading days in the last decade. And I think the thing that scared them was the same thing that spooked Airbnb investors. And that is, one, it looks like the travel surge is a little bit over and people were starting to take the parks and the 10 billion in EBITDA that the parks create for Disney, a little bit for grand. And they thought, oh shit, if the parks are gonna not be the gift that keeps on giving, we really don't like this company. And that seemed to overwhelm. I was surprised. If I had saw this earnings report before the release of the market, I would not have thought that stock would have been taken to the woodshed.

• 22:32Scott Galloway?

  But people were really disappointed. I also wonder if they look at their, you know, ABC, and they look at ESPN and they say, things are only gonna get worse here. And did you see what Bob Iger said after the opening bell the next day on Disney? No. He said the following, fuck. That's a joke. This was a really bad day for Bob Iger, cuz you know who might be back in about six months? Nelson. Nelson. Because the bottom line is with activist investing, the incumbent management team always wins at the first election unless they've done something illegal. They usually win at the second, but if a stock isn't up, they get bounced at the third.

• 23:16Scott Galloway?

  And if this, his stock goes back into the double digits or gets down to like 80 bucks again, which it may or may not, I actually don't think it will, see about one of my stock picks. But if it does, he has to fly down to Florida, kiss Nelson's ass, give him a seat on the board. And all of a sudden, that succession plan gets sped up. Because if it, if it, if the stock underperforms, if the stock were to go down from here, there's then gonna be new calls to break up the company. And I don't entirely understand why it was taken down this much. I think it's related to Reddit. I think it's related to the same things around Airbnb. But I would not have thought that Disney would have had one of its worst days. Because as you pointed out, the streaming service has great momentum right now.

• 24:00Scott Galloway?

  But basically, how this company performs over the next two or three quarters, this is the crowning. Or not crowning achievement on Bob's career. He's not a young man. He's got to announce a succession strategy probably in the next 24 months. And it's either going to be done, he's either going to take a victory lap or it's going to be done under duress, under the cloud of like, okay, Bob didn't figure it out. So I think, I think he was crazy to come back. I mean, literally fucking crazy to come back. He was, he was thought of as one of the most talented, successful executives in history. And instead he's come back. I just don't get it. It's like Mike Tyson fighting again. It's all downside. It's all downside.

• 24:39Ed Elson?

  The other news that we should bring up is that Disney and Warner Brothers Discovery have announced that they're creating a new streaming bundle that includes Disney Plus, Hulu and Max, formerly HBO Max. It's going to include content from ABC, CNN, Discovery, Disney, HBO, Hulu, Marvel, Pixar. The list goes on. In other words, this is cable, but on a streaming platform. What are your thoughts on this?

• 25:05Scott Galloway?

  I think the streaming, what's happened in the streaming market over the last 15 years is the only industry you'd need to look at to kind of understand economics. Promise of the future attracts way too much capital. They, unbelievable, the overinvestment results in an unbelievable but unsustainable consumer value proposition, grows the market substantially. But unless you have cheap capital, you can't keep up. So Netflix just basically used capital as a weapon, outspent everybody. And then all of a sudden, the market said, okay, fun time's over. We're not just going to give you money to acquire customers. You have to show that this is economically viable. The company begins to modulate and consolidate. It's consolidating everybody, but kind of the big two or three is looking for a dance partner real fast.

• 25:50Scott Galloway?

  They're either going to go out of business or they're going to sell to someone else. And Netflix has not only cut its content budget. It's raised prices, which creates cloud cover for the other survivors to raise prices. And you're seeing, you're seeing the market just modulate. But it's just, it's just fascinating that these companies are basically now distressed assets. If you look at their multiple on, you know, Disney still trades at a decent multiple on EBITDA. But people are sort of looking at Warner Brothers as if it's going out of business.

• 26:22Ed Elson?

  I think that's right. And I think we haven't seen the political advertising kick in yet. I mean, the TV network revenue was down for Warner Brothers. I think that scared a lot of people, but I think it's going to come back up. The one thing I will end this story with is a quote by Jim Bolksdale, who was the former CEO of Netscape. Said, there's only two ways to make money. You can make money bundling and you can make money unbundling. And it's just funny that that's exactly what we've seen with the streaming industry.

• 26:57Ed Elson?

  The SEC charged the accounting firm that audited Trump Media with, quote, massive fraud. The agency found that the firm, BF Borgers, failed to actually audit its clients before putting its stamp of approval on 1,500 public company regulatory filings. The firm is now permanently barred from auditing public companies and it must also pay a $14 million fine. Trump Media, along with all of Borgers' other clients, are now forced to find new auditors. Scott, I'm shocked that Trump's auditing firm is fraudulent. What do you think?

• 27:30Scott Galloway?

  This guy is literally a crime boss. Everyone around him is either in jail or has a reputation. I mean, trying to think, like, who hasn't been? He's the definition of toxic. Who comes in contact with this guy and doesn't end up in jail with their reputation ruined? I mean, he's the definition of toxic. And this firm, what a shocker, is being massively accused of SEC. I was trying to think of opportunity. The opportunity here is to get a list of those firms that were audited and create a basket of shorts. Because at some point in the next One, two, three weeks Hindenburg or one of these short players is going to come out with a research piece showing that they don't believe a company's numbers and they're

• 28:15Scott Galloway?

  going to highlight that this company's auditors are BF Borgers or Borgers or Borgé or hi, we're going to jail soon. Big fucking deal. We lied about everything that these guys.

• 28:27Ed Elson?

  Yeah.

• 28:28Scott Galloway?

  I mean, my favorite stat is between 2019 and 2021, they doubled their client list, but didn't hire anybody. So they were just saying, congratulations. What? Send us over what you want us to sign. And I had, as someone who's served on a bunch of boards and has served on the audit committee, we work with blue chip firms usually, a Deloitte or wait a minute, see, there's Deloitte, there's Deloitte.

• 28:53Ed Elson?

  HWC.

• 28:54Scott Galloway?

  This is such a consolidated market. They are so worried about getting sued that they come back with the most ridiculous request for disclosure. And it's like, okay, aren't we being a little overboard here? And they charge you so much money. Like, we keep talking about your return on your invested capital is going to be inversely correlated to how sexy an industry is. A really decent business to start is an accounting firm or an auditing firm. The tax code keeps getting more and more complex. Hardworking, smart, honest people to make a lot of money in that business because there just isn't a lot of competition as far as I can tell.

• 29:32Ed Elson?

  Yeah, I find this such an interesting dynamic here because I think what regulators are increasingly realizing about Trump and honestly, what makes him great, in my view, is they basically realize that he is a honeypot for criminals. And I'll bet what probably happened here is the SEC said, hey, I wonder what accounting firm in their right mind

• 29:56Ed Elson?

  Would decide, yeah, let's associate with Trump, let's associate with Truth Social, and let's represent them as their auditing firm. And so the SEC investigated, and what do you know? Seventy-five percent of the audits this firm has ever produced over its 15-year history have been fraudulent. And it has the eighth largest client list in the US, yet it only employs, I mean, you kind of made this point earlier, it only employs 10 certified public accountants across the whole company. And it operates out of this random little one-story building in a suburb in Denver. So this is a huge deal. There are 170 public companies that now need to find a new accountant. But the thing we should remember is that none of this would have been possible if it weren't for Donald Trump.

• 30:39Ed Elson?

  I mean, whether you like him or not, he has basically been a phenomenal servant for the US justice system because he acts as a mousetrap for all these other fraudsters and criminals, which are now coming to light.

• 30:51Scott Galloway?

  It's also part of a larger theme that's a really unfortunate thing in America, and that is the new superpower is shamelessness. And, you know, that, that, that thread that sort of struck my eyes was a woman is giving testimony, under oath, outlining the sexual encounter in graphic detail he had with a porn star and then paying her off. And it's like, not even that interesting news today because there's so much other shit going on. This is a guy running for president. Gary Hart had an affair in the election, I forget, kind of 20, 30 years ago. And basically, it dominated the news every day. Bill Clinton had an affair with one of his interns, and it dominated the news every day.

• 31:33Scott Galloway?

  And this barely even registers as news because shamelessness is everyone's new superpower. Oh, you killed your dog and buried it in a gravel pit and claimed you met with Kim Jong-un and you actually didn't? Just, just continue to lie, don't back down, just be totally shameless about it. I don't know entirely how to label it. It's, it's literally the, the toxic shamelessness, but the market seems to be rewarding it. So it's, it's an unfortunate thing that shamelessness has become the superpower. And any one of these things would have taken down. Any other presidential candidate in anything. But again, because there's so, so many of them, it just gets lost in the noise of this conspiracy that everyone's out to get them. No, no.

• 32:18Scott Galloway?

  Everything this guy does is usually has, has some connection to some sort of criminal activity. It's just, it's crazy. I don't, I don't, I don't know. I should move to London.

• 32:32Ed Elson?

  We'll be right back after the break with a look at Uber's earnings.

• 32:46Scott Galloway?

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• 33:31Scott Galloway?

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• 33:58Ed Elson?

  We're back with Frifig Markets. First quarter bookings at Uber rose 20% from a year earlier. However, that number was below analyst's expectations and the stock fell 9%. The company also posted a $654 million loss for the quarter. Analysts had expected a profit and that loss was largely due to the revaluation of Uber's venture investments, which were marked down by $721 million. Scott, this is a huge hit to earnings and it's coming directly after one of Uber's best ever quarters. What do you make of this?

• 34:30Scott Galloway?

  I think Dara Khosrowshahi is a great CEO. I think Uber is one of the great turnarounds, you could argue. They've done, they've done an amazing job. The whole space seems to be getting better. They're paying their drivers more, revenues are up. I love the fact that the number two looks like it's going to survive. Lyft is doing really well. On the whole, I just think, I think ride hailing is doing great. This just seems like a quarter, it feels like a lot of these things, whether it was Airbnb or Meta or Uber, it just, their stocks have gotten out a little in front of their skis, if you will.

• 35:03Ed Elson?

  And the reason that they're having this massive loss is because of this $721 million loss from revaluing their investments, their equity investments, IED, Aurora, Grab, Kareem, all these other kind of taxi-esque startups. Now, that's huge. That's basically their entire net loss this quarter. And I want to talk about that for a moment because you compare that to last quarter's earnings, they turned a huge profit and the main reason for that profit was again, revaluing their equity investments. They posted a $1 billion gain from the value of their venture investments.

• 35:45Ed Elson?

  And I just find this kind of suspicious that we're seeing these wild swings in the value of their investments, you know, $1 billion gain, one quarter to a $720 million loss the next quarter. And those investments are ultimately dictating whether their earnings, whether the bottom line is positive or negative.

• 36:04Scott Galloway?

  Well, they couldn't have done anything wrong here, Ed, because their accounting firm, BF Bourgeurs, signed off on it.

• 36:12Scott Galloway?

  By the way, I don't think that's true. I don't think Uber is counting from his How do you say that? BF Borges?

• 36:19Scott Galloway?

  I imagine like a bunch of French guys like, oh, they're stupid. Just send them a bill. Yeah, whatever you want. We're signing off on it. Jacques Borges. Jacques Borges. Okay, so technically what you're stating is this all comes down to the mark. Private equity firms and VC firms have been accused consistently of fucking around with their marks. Because when they go into fundraising, they want to have good numbers to raise a bunch of money or to pay themselves. Now typically a firm that does responsible marks and as I'm signed up by an auditor, the responsible auditor will go, well, what are you basing your mark on? And so for example, I donate stock to nonprofits and I have to hire a third party firm to value that stock.

• 37:00Scott Galloway?

  And they do a pretty good job and they come back and they say the stock is worth this and this is why we think and they're not afraid to come back and say it's worth it's worth less than it was last year. Typically with these kind of companies, the mark should be pretty obvious because they just look at a recent round of financing, then they look at how the publicly traded companies compare in terms of marks. The best marks are from its valuation in the public markets. And if it's a private company, what are the last round's valuation of third party investments, not related parties? And then they look at what's happened in that time to the whole sector. So a responsible auditing firm will say, okay, your mark is off. Or we're only giving you, we're only signing off on this valuation.

• 37:45Scott Galloway?

  But I don't think, I gotta think that Uber with the Dara and with the investors it has is probably got a as legitimate a mark as anybody else has. The more I think interesting thing here is I think you're about to see a massive increase in venture capital investment from corporate venture. I think you're going to see a lot of this. I think a lot of firms, especially this size are going to start buying stakes or making investments. Almost like a free option, not a free option. They're going to start buying options in other companies. They get access to information, they get an inside track and acquisition. And sometimes they say, we can help this firm grow its value and recognize in the upside. There's always a cycle here.

• 38:30Scott Galloway?

  Then there'll be a bunch of losses and then external shareholders or an activist will show up and say, what are you, a VC firm or in the ride hailing business? But I think we're going to see over the next three to five years, a surge in corporate venture capital.

• 38:44Ed Elson?

  We're already seeing it. 63% of venture funding through Q3 of last year was corporate VC.

• 38:51Scott Galloway?

  That's amazing.

• 38:52Ed Elson?

  That's the highest percentage in history. It's all corporations.

• 38:55Scott Galloway?

  I mean, think about that. Two thirds, VCs are only a third of venture investment. I mean, that's just, the people are supposedly pros at this. I mean, it's really interesting. You're probably going to see a lot of, what I see in the venture capital, what I have a lot of friends who are venture capitalists, the really big ones are raising enormous funds and everybody else is struggling. I mean, there's some niche firms that are very, very focused, but for the most part, fundraising has gotten harder and harder for everyone but the biggest funds because big is just better. I mean, there's, there's literally a correlation between returns and the size of the firm right now. The biggest firms are just doing better. And that's also true in VCs and private equity players. And they can diversify more and attract better talent.

• 39:38Scott Galloway?

  They have the capital to defend their positions and on and on and on. And they attract the best talent because their management fees are bigger and they can pay their people really well. So I think you're going to see increased consolidation, which isn't a, which isn't a good thing, but you're going to see a lot of the players from the smaller firms, really good firms, leave and go run, you know, corporate venture for General Electric or for LVMH. I mean, LVMH actually has a huge investment in a great firm called El Catterton that has been very successful. But I think you're going to see even more of that. I think you're going to see firms that you wouldn't have thought of being in the venture business have, you know, say, okay, we're going to take a hundred million, a billion, three billion, $5 billion.

• 40:22Scott Galloway?

  And we're essentially going to start a wing of Snowflake called Snowflake VC or whatever. I think you're going to see a lot of this.

• 40:29Ed Elson?

  Which is going to bring up a huge and interesting conversation for shareholders, which is, do you want to be a shareholder in Uber? Or do you want to be an investor and a shareholder in Uber Ventures? And those are two very, very different things. And I think that's going to be an important question for shareholders to start asking themselves. But let's move on to the week ahead.

• 40:49Ed Elson?

  We'll see earnings from Home Depot, Walmart and Alibaba. And we'll also see the consumer price and producer price indices for April. Do you have any predictions?

• 40:57Scott Galloway?

  Well, what I said earlier, my prediction is that the case filed by TikTok. I think on the eve of the court case, they come to a settlement. No one loses their TikTok. A ban doesn't happen and it never ends up in court. And just to follow on to that, the value in the secondary market of ByteDance shares skyrockets.

• 41:20Ed Elson?

  And I predict Prof G Markets hits top 10 in global podcasts.

• 41:23Scott Galloway?

  There you go. From your words to God's ears. Oh my God, I feel a date coming for the little dog. That's right. That's right. You should literally just have shirts printed up that say, I'm 34. Ask me why.

• 41:38Ed Elson?

  21, 21.

• 41:40Scott Galloway?

  That's very exciting. Congratulations, Ed.

• 41:42Ed Elson?

  We're two ahead of Ben Shapiro. We're five behind Andrew Huberman.

• 41:46Scott Galloway?

  We're two ahead of Ben Shapiro. We're ahead of Huberman?

• 41:50Ed Elson?

  No, we're five behind Huberman. And I think we're about 30 ahead of Pivot.

• 41:54Scott Galloway?

  Just start saying you hate alcohol. You hate alcohol. That'll get us up there. Let me just save you millions of hours of Huberman Lab. Don't drink alcohol.

• 42:05Ed Elson?

  Sunlight for 90 minutes.

• 42:06Scott Galloway?

  There you go.

• 42:07Ed Elson?

  All right. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producers are Jennifer Sanchez and Alison Weiss. Our executive producers are Jason Stavas and Catherine Dillon. Mia Silveira is our research lead and Drew Barrows is our technical director. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Wednesday for office hours and we'll be back with a fresh take on markets every Monday. And don't forget to subscribe to the new Prof G Markets channel, wherever you get your podcasts.

• 43:16Speaker 03

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