The Week: The Blue Tsunami, Alphabet’s Worst Day Ever, and How to Log Off

George Hahn connects the dots across the week's biggest stories: How the Democrats won a majority in both chambers of Congress, why investors will hesitate to hand more money to Big Tech, and what a Stanford psychiatrist says about getting out of your own head. We’d love your feedback as we build this show! Let us know what you think: [email protected]. 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

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• 1:29Speaker 00

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• 1:37George Hahn?

  Welcome to The Week from PropG Media, where we break down what mattered and what it all means. I'm George Hahn, and it's Friday, November 6th. Today, a historic night for the Democrats and what comes next. Then, why Wall Street is losing patience with Big Tech. And finally, a Stanford psychiatrist on how to log off. Let's get into it. After months of buildup, the midterms are over, and the results were stunning. Democrats now have a majority in Congress with 54 seats in the Senate and 240 in the

• 2:22George Hahn?

  House. They also won five new governor seats around the country, giving them a majority of 29 governors nationwide. Some of the biggest upsets came from deep-red territory like South Carolina, Kansas, and of course, Texas. On Wednesday's Raging Moderates livestream, Scott tried to make sense of it all.

• 2:44Speaker 00

  I mean, all right, Kansas, first time in 100 years, they've sent a senator. Two things struck me. Well, a bunch of things, but the two I'll reference, and then I want to hear what struck you, is that, one, South Carolina, what the data shows is that if they had had, if they just put up someone and put an R next to their name that no one had ever heard of, and did not have Trump endorse this person or get near this person, that that person would have handily beat the Democrat, that it was Trump's association with Darlene and her de facto association with Trump vis-à-vis being Graham's sibling that basically sunk her.

• 3:24Speaker 00

  That if they had just said, "Bob Smith, you've never heard of him, but he's a Republican," and Trump got nowhere near it, I mean, this is such a clear, I mean, we call it a blue tsunami, it was a tsunami riptide. The other thing that I want to point out is that, and this has been a big thing, young men, or theme of mine, young men are the swingest swingers in voting. And that is, they vote mostly on economic issues, and economic issues, you know, on crime and immigration, Republicans are steadfastly seen as the better or the more serious party. On things like, sometimes around what I'll call empathy, better tax policy, whatever

• 4:05Speaker 00

  you want to call it, the Democrats poll stronger. Young men go with the economy, and the economy flips back and forth. Sometimes, people think that Republicans are better for the economy, sometimes they think Democrats are better for the economy, and I'll come back to that because I have data on that. But if you look at what happened, if you look at who pivoted the hardest in this election, it is just striking what happened, and that is, if you look at white women, they went, they swung 11 points towards Dems this election. White non-college swung 14 points.

• 4:45Speaker 00

  Black men swung 16 points back towards Democrats versus 24. Hispanic people, 28 points. Young people, 32-point swing. And then, the biggest swing of any group, and arguably the biggest swing we have seen in any cohort in recent history in an election, is males age 18 to 29 swung 38 points. So for those of you who have this lazy thinking that young men are just Neanderthals, not worth saving, who drag their knuckles along the ground, they're paying attention, they're

• 5:27Speaker 00

  focused on economics so they can form households, they're less socially minded, or less concerned, I should say, over geopolitics or social issues, they want to know who's going to give them the prosperity that their parents had.

• 5:40George Hahn?

  Republicans also lost ground with rural voters, the heart of their base. And in Florida and North Carolina, Democrats won in the same districts Republicans had redrawn to keep them out. Later in the livestream, Jessica Tarlov made sure to call out the irony of cheating and still losing.

• 6:00Jessica Tarlov?

  The rural vote was one of the most interesting facets of this race that was a particularly big deal in South Carolina, and once those numbers started trickling in, folks knew that it was going to be a very bad night. Those are core Donald Trump voters. And J.D. Vance has posted this long, long tweet about what happened and saying, you know, it was the war in Iran, and even the president says this, he did some Israel blaming. It's very interesting to see, you know, those voices kind of converging, but he talked about traditional Republican voters leaving the cohort, and what a shot across the bow this is for Republicans.

• 6:43Jessica Tarlov?

  And by no means does last night's results indicate to me that this coalition is now enduring on the Democratic side. I mean, there are, you know, people who definitely showed up to vote yesterday, who may have no interest whatsoever in the Democratic ticket come 2028 if there are normal people on the Republican side of it. But the collapse of the rural vote was a huge storyline, that every gerrymander ended up being a dummy-mander. Those Florida numbers, as they came in for Kathy Castor, for Jared Moskowitz, looking at North Carolina, didn't pick up one seat out of that, like, they cheated so badly. How embarrassing to be that low and that corrupt and not even be able to pull it off.

• 7:25George Hahn?

  Some Republicans have been walking away from the party for a while. David Brooks spent most of his life as a conservative, and he doesn't recognize what the movement has become. On Thursday, we re-aired his conversation with Scott, where he traced the split back to his own early days on the right.

• 7:45Speaker 00

  Yeah, I became a conservative in my 20s after being a police reporter in Chicago, and the two heroes for me were Edmund Burke, who was an Irish conservative statesman and philosopher, who believed that in epistemological modesty, the idea is the world is really complicated, and when we do change, we should do it constantly, but incrementally. And my other hero was Alexander Hamilton, who was a Puerto Rican hip-hop artist from Upper Manhattan. Now, and so Alexander Hamilton believed that progressives believe in government to enhance equality, and libertarians believe in limited government to enhance freedom. Hamiltonianism believes in limited but energetic government to enhance social mobility. And so those are the two North Stars for me.

• 8:29Speaker 00

  And of course, over the course of the Trump administration, I've come to believe that whatever conservatism is, it's not what Trump is producing. He's producing reactionary politics, something completely different. And so I went back to those books that I used to read from Edmund Burke and people like Isaiah Berlin and a guy named Michael Oakeshott, and I loved them all over again. I think the essential conservative truths are still very profound, but they are nothing like what is called conservatism today. There is nothing like Fox News. And I go back to one moment in my formation where now in retrospect, it looks like there's a crucial fork in the road. I came out of the year of Chicago, and I read Burke and Adam Smith and these books.

• 9:14Speaker 00

  And I worked at National Review, the Wall Street Journal editorial page, the Weekly Standard, and we believed in promulgating conservative ideas. At the same time I graduated from Chicago, there were a couple of people graduating from Dartmouth who had worked at the Dartmouth Review, and people may recognize Laura Ingraham, Dinesh D'Souza, they were in this group. And I've come to see, they were not pro-conservative, they were anti-left. They were in elite institutions, but they hated the progressive lean of those institutions, and so they were sort of the rebel bad boys. The defining feature of the Dartmouth Review was, in 1986, some progressive students on Dartmouth's campus erected a shanty town to protest apartheid.

• 9:55Speaker 00

  And in the middle of the night, the editors of Dartmouth Review, about a dozen of them, descended on the shanty town and took sled shammers to them. And it was an attempt to dismantle the left, really. And to me, it was like Gestapo tactics. I was shocked and appalled because apartheid really is worth protesting. But I've come to see that difference between being pro-conservative, which I would say John McCain was, Mitt Romney was, George W. Bush was, and anti-left, which is what Lauren Grim is, which is what Pete Hexeth is, what Vivek Ramaswamy is. That, to me, is a crucial difference.

• 10:28George Hahn?

  Our allies have been watching all of this, too. On Tuesday's special conversations episode, Fareed Zakaria told Scott how countries like Canada and India are rethinking their relationship with the US and why that won't change overnight.

• 10:45Speaker 03

  But it gets to a central question, which is, are other nations so burned by the two Trump elections? One could be a fluke, but two makes them think, look, do we need to buy insurance? Okay, you guys come in, some, some nice Democrat comes in, he starts saying all the right things, just as Joe Biden did. But what happens if 10 years from now, or even just six years from now, we get another Trump-like character? We get J.D. Vance, we get Don Jr. We need some protection. We need some insurance. And we are going to, so I see this, for example, with Canada. Canada made a fundamental decision decades ago, and Brian Mulroney and, and George Bush Senior,

• 11:29Speaker 03

  to bind the US and Canadian economies together, to almost create a North American economy. And the car industry, for example, is currently a North American car industry. The parts move 15 times across borders to, to make the most efficient North American cars. The Canadians are thinking, if, if that dependence on America has proved to be a vulnerability, because America will use it to squeeze us, to punish us, to bully us, we've got to get some leverage back. And so he's making, Mark Carney, the Prime Minister of Canada, is making deals with the European Union, with China, with India. Now, I think he's going to keep doing that, even if, even if a Democrat is elected in '28.

• 12:11Speaker 03

  India was going to wean itself off its dependence on Russian arms. But then watching what, the way that Trump behaved towards India, but also the way it's behaved towards Ukraine, I'm sure the Indians, I know the Indians are thinking, well, you know, we'll wean ourselves off the Russians a bit, but maybe slower than we planned to. And we'll diversify, we'll buy, the, the big order they placed out this year was actually for French fighter planes, not American. And there had been a hope that India would essentially trade its dependence, 80% of Indian weaponry comes from, uh, comes from Russia. We trade that for America. And there, there were many people in India advocating that.

• 12:54Speaker 03

  But the Trump administration's attitude has completely changed the way India, Indians at the elite level look at, uh, look at America. In, in general, Indians are still wildly pro-American, but at the elite level, it's changed. So this gets to the, to the, the, the question you're asking. I think we have set in place motion, you know, kind of series of motions that people are going to buy insurance. So I think we can get a bunch of it back. I think we can, we can, we can stabilize the system again. But we can't go back to the way it was, because once you sow that level of mistrust, that doubt, that sense that we need a bit of insurance,

• 13:36Speaker 03

  it's hard to see how you, how you get, we, we did the, we did the impossible. You know, for 50 years, the second and third richest countries in the world, Germany and Japan, said, we don't need to have, you know, major defenses. You take care of us. We are basically subcontracting our national security policy to you, the number one country. The idea that the number two and number three economies in the world would subcontract their foreign policy to the number one country, again, historically, never happened in the world. And it was, it was American genius. And it has now been American stupidity and recklessness that has, that has wrecked that system.

• 14:18George Hahn?

  We'll be right back.

• 14:26Speaker 00

  Support for the show comes from Odoo. If your business runs on five different apps, 12 browser tabs, and one spreadsheet that everyone's afraid to touch, it's probably time for Odoo. Odoo is an all-in-one business management software that connects every part of your business into one powerful, easy-to-use platform. So instead of wasting time switching between disconnected systems, your entire business works together in real time. Your team moves faster, your data stays accurate, and you can actually focus on growing your business. Let one unified system run your entire business. From the first opportunity to the final payment, everything works together in one place. Whether you're a small business or managing a large operation, Odoo gives you one flexible platform built to grow with you. Try today for free at Odoo.com/PropG.

• 15:11Speaker 00

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• 17:08Speaker 00

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• 17:37George Hahn?

  Welcome back. The midterms weren't the only reckoning this week. Big tech had one of its own over, you guessed it, AI spending. After reporting earnings last week, Alphabet, Google's parent company, fell nearly 13%. It's worst day since going public. And Amazon dropped about 7% the next day. Both companies are now spending more on AI than their core businesses bring in. Stocks bounced back after the midterms, and the Dow jumped more than 1,500 points on Wednesday. But on Monday's Prof G Markets,

• 18:18George Hahn?

  Scott explained why investors aren't letting big tech off the hook.

• 18:23Speaker 00

  I thought it was pretty shocking. And it's sort of a tale, a tale of two cities. It's the same AI arms race, but entirely opposite verdicts. Microsoft was up 5% on cash flow discipline, and Alphabet down double digits on cash burn. And the way I would describe it is both companies had amazing, year-on-year revenue growth and really outstanding businesses. But I think it's two things that punished, Microsoft was able to thread the needle here, and that is, they said, we're going to surprise to the upside on the top line and the bottom line. And what I think really excited people is their capex looked fairly disciplined. Now, granted, it's still unbelievable, it's still out of control, but it looks fairly disciplined.

• 19:06Speaker 03

  Compared to the alternatives.

• 19:08Speaker 00

  Yeah, and compared to Alphabet. And when Alphabet's executive admits on the earnings call that AI mode generates fewer ads, it's like the company confessing its flagship product cannibalizes its core business. So AI is a profit center that needs to be managed well for Microsoft in terms of capex. AI needs to be a profit center for Alphabet that needs to be managed well. It doesn't look like the capex was managed as, as, in as disciplined a fashion. In addition, AI is an existential threat to Alphabet because the world's most profitable, largest toll booth in history, Search, is, it appears like, is kind of under attack. I don't know about you, but I think there's probably a lot of analysts listening and hearing, seeing, hearing the numbers.

• 19:51Speaker 00

  They see the capex of a company growing its AI business. But what they don't see, or what they also see, is that AI is an existential threat to their ability to generate the cash flow they need for capex for the arms race. And the anecdotal evidence, I don't know if you find this, I am now doing basic search. On Claude. And at some point, that's just going to show up in the in the numbers. But Microsoft data was unbelievable. Microsoft renovated with cash on hand. And Alphabet appears to be taking out second mortgages, you know, for the same renovation, which is going to result in kind of a different call from the bank, if you will. So really, two divergent results here.

• 20:36Speaker 00

  And the largest market cap erosion, single day market cap erosion in the history of the company? That's a big deal.

• 20:43George Hahn?

  Alphabet and Amazon aren't the only ones in the red. Ed Elson pointed out that nearly every hyperscaler is now spending more than it makes. And explain what that means for investors.

• 20:56Ed Elson?

  But I do think that the real problem, in my view, is that negative free cash flow. And to be clear, Google is not alone there. Because we also know that Oracle's free cash flow is negative. Meta's free cash flow is negative now. Amazon's free cash flow is negative now. All of the hyperscalers have now entered into negative free cash flow because of how much money they're spending on the data centers. It's nearly $700 billion on CapEx in the past 12 months. That's up nearly 90% from a year ago. The only hyperscaler with positive free cash flow is Microsoft, which is great, but it still came down 27%. So the thing that worries me

• 21:40Ed Elson?

  is the fact that these businesses can no longer use their profits to finance their goals, which is, in this case, to build data centers and build the AI revolution. And so you think about, okay, well, what can they do then? If the most profitable companies in the world can't even use their profits to do whatever it is that they want to do? Well, then you'd say, okay, they can go to the cash on their balance sheet. And that's what a lot of people have pointed out. And to be fair, these guys have a lot of cash on hand. If you look at their cash and cash equivalents and their short term investments, you've got Amazon with more than $120 billion. You've got Google with more than $250 billion. If you add all the hyperscalers together, it's nearly $600 billion, which is great.

• 22:25Ed Elson?

  But then you look at how much CapEx is going to rise next year and the year after that. And if you add it all up among the hyperscalers, the five of them, Oracle, Microsoft, Meta, Amazon, Google, over the next two years, it's estimated to be more than $2 trillion. So basically, what you have is like a one and a half trillion dollar gap between how much money they're going to spend and how much money they actually have. Because remember, they can't use the profits anymore. Because or the cash flows, because those cash flows are negative. So they have to get the money from somewhere else. And so then you think, okay, where is that money going to come from? And the answer is they have to go to the capital markets and raise money.

• 23:10Ed Elson?

  And that's why I was really like, it felt really powerful that literally the day after Microsoft reports their earnings, they also announced a $25 billion bond sale. And that's just a week after Meta said, we're going to go raise $95 billion in the equity markets. So what it was so great about these companies is how independent they were for so long. They were so strong, so profitable, they could do whatever they want. Who gives a shit about the market conditions? They don't need our money. But that has now completely changed. They need money from the capital markets. They need money from us, the investors.

• 23:51Ed Elson?

  And if we decide that we don't want to give them that money, then they're screwed. They're just in a systemically more vulnerable position. And that, to me, is the real shift in what's happened here for big tech. There used to be these dependent or, excuse me, independent companies do whatever they want. But now they have to go out there and they have to please investors and they have to convince them, don't worry, give us the money, we'll pay it back. We can we can raise it through the bonds, we can raise it through the equity, but just play the game with us. They're dependent on the capital markets now.

• 24:25George Hahn?

  It was a week of election maps, live counts and market alerts. To close, Stanford psychiatrist Anna Lemke, author of the new book Radical Surrender, told Scott on Tuesday's bonus conversations episode, how to get out of your own head and back into the world.

• 24:48Speaker 05

  We just have to get out of our own heads. We spend so much time not in reality. We have to get out of our heads and we have to be very suspicious of the stories that we tell. I mean, one of my my patients who got into recovery from long time addiction finally kind of came to the realization that like he couldn't really trust his own narratives. Like in some ways, they were all sort of not real. And what he needed to do was go kickboxing, look at a rose bush, go out and meet some people and talk to them. And I think that's exactly right. When we are feeling down, distressed, anxious, we're usually ruminating. We're caught up in our own heads.

• 25:33Speaker 05

  If we can pivot our psyche outward, surrender that desire to try to control things through our mental mentations and rumination, because that's what we're trying to do. It's this illusion that if I just keep thinking about this, I'm going to be able to, you know, fix this and solve this problem. It's like, no, no, stop, stop thinking about that. Go out into the world, pay attention to reality and what's really happening. Like, see what needs to be done, do that thing, move forward.

• 26:03George Hahn?

  That's the week. I'm George Hahn. We'll see you next Friday.

• 26:16Speaker 06

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• 27:03Speaker 03

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• 27:50Jessica Tarlov?

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