Pod Insights The Prof G Pod with Scott Galloway Mania and Smoke Signals in the Markets — with Richard Kramer About this episode Richard Kramer, the founder of Arete, an independent equity research firm, joins Scott to discuss how to think about and assess value in companies. We also hear Richards’s thoughts on the tech space, including why he’s more bullish on YouTube than TikTok.
Scott opens with his thoughts on the economic consequences the United States will endure now that the Supreme Court has overturned Roe v. Wade.
Algebra of Happiness: be effective.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:18 Speaker 02 Episode 174. ABBA won the Eurovision Song Contest for Waterloo in 1974. People born in 1974? Leo DiCaprio, Kate Moss, Christian Bale, Victoria Beckham. People keep asking, what is the surgery I just had done? Obvious, cap implants and I've had my asshole bleached blonde. But who hasn't? Who hasn't? Go, go, go!
1:49 Speaker 02 Welcome to the 174th episode of the Prop G Pod. In today's episode, we speak with Richard Kramer, the founder of Erité and independent equity research firm. Richard previously worked at Goldman Sachs, where he was ranked the number one institutional investor, technology analyst in Europe. I am, yeah, I call myself friends with Richard. He is... He has this great line that the majority of equity analysts are sycophants and stenographers. And Richard has just never been scared to fly in the face of the conventional wisdom or the narrative out there and just call it like he sees it. I have a lot of respect for him and I've parroted a lot of his, he has just interesting insights and he always comes up with something that I write down and then I adopt as my own. I remember him
2:30 Speaker 02 saying that the Mossad, the NSA, or the CCP couldn't come up with a surveillance tool as powerful as Facebook. And I remember him saying that and thinking, oh, he stole it from me. And I was like, no, actually, I stole it from him. Anyways, he's an intelligent guy. I'll make for a good conversation. Okay, what's happening? Well, this isn't the America I think most of us are used to. This has been a strange time. I'm at that age now where I never could relate to this. I haven't turned on the news because I just don't want to watch it. And I never thought I would get to that point in my life where I would just thought, I just can't, I just don't want to know, or I just want to put my head in the sand for a little, a little bit. The US Supreme Court overturned Roe v. Wade
3:12 Speaker 02 last week, the constitutional right to an abortion that's been in place for the last 50 years. Abortion rights are now in the hands of the states. And we're already seeing the consequences of that. According to the New York Times tracker, abortion has been banned in at least seven states so far because of trigger laws. About half the country is expected to ban or place other limitations on the procedures. And I say procedures in plural, as these clinics provide a variety of services for women's health that will likely decline dramatically once these clinics are shuttered. In the states that have banned abortion or are expected to soon, 16 million women of reproductive age will be impacted. 16 million women. And as we know, women in red states will bear the brunt of these
3:56 Speaker 02 decisions. I've always thought this isn't as much a war on women as it is a war on poor women. Now, putting aside just how
4:07 Speaker 02 I don't know if the term's batshit crazy or just disappointing the decision to control a woman's body is. We want to highlight, and I spent a lot of time thinking about this. I didn't know, I wasn't sure even whether to bring this up because I'm not sure I have a lot to add to this that hasn't already been said by people with more domain expertise and who are much more qualified to speak on the, on the topic. Or what I wanted to look at though, was try and think of it from the economic angle because typically men vote more on economic issues and women vote more on social issues. And I don't think that men fully understand the economic ramifications of this withdrawal or this reversal of people's
4:50 Speaker 02 rights. And also, I think I'm a little bit disappointed. I've saw, watched all these marches that were inspired over the weekend. And it just struck me that they just seem to be all women and that men aren't picking up the fight, if you will. Anyways, so let's try and think of this or look at this through the lens of economics and the impact it'll have on America's economic might and our geopolitical power, which are inextricably linked. America's been kind of the economic force globally since the end of World War II. Our robust military, access to markets, our agility, our embrace of technology, our
5:32 Speaker 02 appetite for the consumption of risk. All of these things lead to this kind of crazy compound of economic growth that is unprecedented. And even threats of China, I remember when I was in business school, everyone was talking about how we had lost the war to Japan and then it was a foregone conclusion that China had won the last 10 years. I just don't think there's any getting around it. America has the most robust economic engine in the world in history and our prosperity and our freedoms are directly correlated to that economic engine.
6:05 Speaker 02 And what is missing from that list of ingredients that create that chemical compound or catalyze that explosion of prosperity is that in contrast to Hitler, I always go back to World War II, kind of my favorite, my favorite genre, if you will. Hitler decided that it made sense to have German women in the home, taking care of the household and raising, you know, Aryan youth. And America took a different tack. It decided that women should be in factories. And if you look at World War II, which I believe is the defining event of the last, of really the modern world, it was, we overwhelmed the Axis power with armaments and cash. Essentially, we produced more planes, more bombers, more
6:49 Speaker 02 tanks. And why were we able to do that when our manufacturing base wasn't being bombed every day, which was, you know, awfully helpful. But we also, we had manufacturing line, assembly technology. But we also decided to let, or to encourage women to come into the workforce. And we had women in the factories and we encouraged it and we embraced it. And it set a tone or an awakening in America that women would be an economic force in the workplace. And since then, the number of women who have entered the workforce in the United States has been a big part of our sustained economic growth. And if you look at the seventies and
7:30 Speaker 02 eighties, when the economy appeared to be stagnating, it was women's entry into the workforce and our adoption of women into the workforce that kept our, kind of our economy humming on all 12,000 cylinders. So when the COVID-19 pandemic hit and millions of women left the workforce, why was that? And obviously, it hit the economy pretty hard. A lot of those women had to endure the taxing work of childcare as schools and daycares closed. And I think that's a metaphor for what might happen here. The Washington Post reported that one out of every four women who reported becoming unemployed in 2020 said it was because of a lack of childcare. That was twice the rate among men. As the country moves to a position where more women will not have the right to choose
8:14 Speaker 02 whether they give birth or raise a child, we're going to see fewer women entering the workforce and more women bearing the economic costs of that. So when we say economic costs, what do we mean? Aside from the extraordinary expenses of raising a child, abortion bans will have just second order effects everywhere across the entire economy. Researchers from the Institute for Women's Policy Research estimate state-level restrictions on abortions cost state economies $105 billion a year due to decreased earnings and labor participation time off and greater employee attrition. Furthermore, a study by the National Bureau of Economic Research found that in the five years after women were denied an abortion, their unpaid debt rose by 78% and negative
8:59 Speaker 02 credit events such as bankruptcies and evictions rose by 81%. And some, you know, at a very base level, when people are forced to have kids, they can't pay their rent. Their kids suffer tremendous economic consequences as well. The turnaway study from the University of California showed that pre-existing children of women who are denied abortions have lower childhood development scores and are more likely to live below the federal poverty line. In some, the number one reason that women pursue abortions is because they have an unreliable partner. And that's sort of Latin for economic and emotional insecurity. And so what you end up with is more kids who live in households that are fatherless and a kid that lives in a household where there is no male role model is twice as likely
9:43 Speaker 02 to be incarcerated, which more crime, more expense, more addiction, slower growth, and just on and on and on. On the flip side of all of this, the financial and economic benefits of terminating unwanted pregnancies are profound, not only for women, but also for their male partners. A study in the Journal of Adolescent Health found that young men whose partner ended an unwanted pregnancy were four times more likely to graduate from college than those whose partners gave birth. And some, if you and your partner become pregnant, and I say you the man,
10:19 Speaker 02 You are, in this instance, the man, if you decide to terminate the pregnancy, or if you're given the option to terminate the pregnancy, it just dramatically increases the likelihood you will have more opportunities. I have some personal experience here, and I don't want to overdramatize this. I've talked about it on Pivot. At the age of 47, my mother became pregnant, and I don't think she'd be uncomfortable with me talking about this. She spoke openly about it, and she told me. And we lived in California. She decided to terminate the pregnancy. But the thought immediately kind of hit me in a very kind of ice cold bucket kind of way that at the age of 17, I might have to take economic responsibility for the household.
11:01 Speaker 02 Now imagine if my mom had not had access to family planning. It's just very unlikely I would have gone to UCLA. At the age of 17, it was just me and my mom. There was no other source of support. This wasn't, my mom didn't work at Google. This was 19, you know, this was the early 80s. There wasn't even maternity leave, I think, where she worked. I would have had to have gone to work to try and support my family. My family being my mom and what would have been a newborn baby. What would that have meant? I would not have gone to college. It's unlikely I would have started a strategy firm or an analytics firm without a college degree. It's unlikely I would have gone on to get an MBA without a college degree. It's unlikely I would have hired hundreds of people. It's unlikely I would have paid millions of dollars in taxes
11:46 Speaker 02 had my family not had access to family planning. I don't think that men have really thought through, or the majority of men, what this is going to mean for us. Not only in terms of the rights that are being taken from our mothers and our sisters, but what it means for the economy and what it means for our opportunities moving forward. A nation's GDP, a nation's freedoms, a nation's health of its democracy are all correlated to a few basic things. And one of those things are women's rights. And central to that is, in fact, a woman's right to family planning. If you were to develop... The perfect weapons to try and undermine America.
12:26 Speaker 02 If you said, okay, how can we, how can we ruin the greatest experiment in the history of democracy, which is United States of America? What, what would be the killer Trojan horses here? I think, one, if you really wanted to go after rural America, if you wanted to kill a lot of rural Americans and have a lot of unmarked graves and lower life expectancy, make us less healthy, it'd be opiates. They have been the perfect weapon. Two, if you wanted to divide us and you wanted to make our discourse more coarse, you'd have social media and you'd have companies that have a profit incentive for us to be less kind to each other and more polarized. And then finally, if over the long game, over decades, if you wanted to diminish our
13:08 Speaker 02 economic standing and our geopolitical power, you would reduce a woman's ability to access family planning, you would reduce our ability to grow our economy, you would reduce the options for half our population to balance career and work, and you would further divide us. This is, this is one of the most damaging things that will happen to our nation on a number of levels and men need to step up here. And if you believe that it's something that you can just talk about and it's not going to impact you, well, just as Trotsky said about war, you may not be interested in family planning, but family planning is interested in you.
13:51 Speaker 02 We'll be right back for our conversation with Richard Kramer.
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16:33 Speaker 02 Welcome back. Here's our conversation with Richard Kramer, the founder of Ereté, an independent equity research firm.
16:41 Speaker 02 Richard, where does this podcast find you?
16:44 Speaker 03 I'm speaking to you from my office slash library in London, where I don't let the accent fool you, live for the last close to 30 years.
16:54 Speaker 02 I tell you, you're a trailblazer. So let's bust right into it. Markets, question mark. Your turn.
17:02 Speaker 03 The markets have moved from a phase of what during the war you might have called the collaborationists, or I might sort of loosely term the extrapolationists as analysts, the kind of folks who would see a trend that goes from one to two to three and sort of think that by 2030, that'll be 362. And, you know, there was a lot of, let's say woolly thinking over the past couple of years. I think you called it a consensual hallucination. We might have called it a willingness to suspend disbelief and even to look at three or four or five companies in a sector and assume that they could all prosper equally. And that extrapolationist thinking has run smack dab into the middle of what I would
17:47 Speaker 03 call at least three of the four horsemen of the apocalypse. You know, we've had pestilence, we've had now war, and we may be getting famine. And, you know, these things are starting to prey and weigh on the minds of investors, and they're starting to extrapolate the negative trends, much like they were extrapolating the positive ones with abandon back in November last year, when literally everything went up every day.
18:11 Speaker 02 Do you think, though, that, I always say the market's just always looking for an excuse to return to fundamentals. Do you think there's any truth to the notion that these stocks just got so over their skis in terms of valuation that the market was looking for a reason to bring them down? Is it really macro that's impacting these stocks?
18:28 Speaker 03 So, you know, if you talk to a macro hedge fund or a macro, a large macro fund, they will absolutely tell you it's all about macro and the, the unsustainability of money printing and so forth. If you talk to a fundamental analyst, uh, at least one that's independent like ourselves as opposed to the ones that are, are still saying buy in the stocks that have fallen 80%, um, they will tell you it's all about the individual company fundamentals and whether, uh, the backdrop of the economy can support those fundamentals anymore. Um, or they may say these companies are now great buys because we were recommending them, uh, 80 or 90% higher. And indeed, when a stock falls 90%, it really means that it fell 80%
19:08 Speaker 03 and then fell by half. So it's easy to imagine that we are all readjusting or re-moring ourselves from the unmoored position we had, waving away fundamentals and saying, you just have to get on the train. But I don't think that's entirely true. I think there are still plenty of stocks in which, uh, you need to suspend disbelief or you need to look out, uh, on a very long time horizon with a lot of duration to make the company, uh, generate a return that will pay you back. And then there's a whole other class of companies that are largely ignored, uh, that have come into vogue. I mean, who thought that telcos would be one of the best performing asset classes, uh, in the market this year?
19:52 Speaker 02 It seems to me that a lot of this stuff could still go down another 50, 60%. It just, we're, aren't we going through a rerating where the growthy stuff is coming way back in towards where kind of more value stuff is, but it's still relatively speaking, or historically still looks expensive?
20:10 Speaker 03 There's a couple of layers to this that you need to unpack. The first is that indeed, a lot of the growthy stuff has been wiped out and come all the way back. And you know what, how that ends and that all this stuff gets, gets wound down and, and ground down because it, they have valuations that can't support the weight of the actual results. Now, the other next layer to unpack is that, um, there are a bunch of value companies that are generating a lot of cash. And I don't need to tell you the way in which cash is kind of being debased right now because we have inflation eating into it and, and, uh, money printing eating into the value of that cash. And
20:54 Speaker 03 No one wants to do M and A in a down market. Everybody is happy to buy something when everything's just going up all the time and you get rewarded for almost any crazy acquisition you might do. But no one wants to stick their head above the parapet when times might be getting bleaker and you might need to preserve that cash. So that cash value that would have underpinned valuations doesn't have the same solidity at the floor that it might once did. And indeed, as you start to get a rerating based on cash flows, you're going to see that very few companies really are able to generate them consistently. And really, very few management teams know how to manage with a plan B in mind, how to do something other than just chase the next big thing.
21:38 Speaker 02 But doesn't that result in a lot of consolidation or cost cutting? It strikes me that, let me put a narrative out here, you tell me where you think I got this right or wrong. I've never, I know just enough about economics to be dangerous, never seen a period where you've had to raise interest rates as quickly as I think we have to raise them without a recession. And we've never had an environment where we've had a recession and haven't seen stocks come way off the multiples they're at right now. I mean, the problem is we're anchoring off the highs, right? Apple's at 20, what is it, 24, 25 times earnings, which you might say, well, that's, that's on sale. That's a third from 36 last year, but it historically traded somewhere between 10
22:22 Speaker 02 and 15. Where do you think we are? Do you think we're just, is this, is this the beginning of the end of this cycle? Or are we just getting started in this downward cycle?
22:32 Speaker 03 In terms of how far stocks have come off the peak, if you looked back to the last three major downdrafts, both in 99 and 2008, and then there was clearly some wobbles a couple of years ago, you would have said, we're about halfway through this process. But in each case, and this is, I think, one of the most important things, and you mentioned the word consolidation. In each case, you had a bunch of what were frankly, I think there's no other term for it, I've been bull bullshit companies that needed to be flushed out of the market. In in 99, 2000, as you well remember, there were, I think you might have participated in one or two, a lot of web design companies and there was Webvan and there was a lot of competitive
23:17 Speaker 03 local exchange carriers and crazy new telcos that sprung up and they all were dearly departed, along with the WorldComms and Enrons of the world. That consolidation process, I actually see of see more as a a Darwinian cull. Some of those companies just simply go to the wall. They get reduced in importance and and right now we can see a whole tier of founder led companies that just simply need adult supervision, that seasoned operational management to to navigate through what are clearly going to be some extremely choppy economic waters in the next 18 months.
23:55 Speaker 02 Yeah, so I'm I'm old enough to remember cycles and what people don't remember is in the 90s when I was starting companies. It was just it was just conventional wisdom, a known known that entrepreneurs were a necessary evil and we were crazy. And once the company became real, you brought in some gray haired guy from IBM to run the thing. I mean, you just you just push the founder out or you sideline them, you let them get rich, fine, but you didn't let them stick around to run the company. And then Steve Jobs and Bill Gates changed everything and it's gone entirely to the other extreme. Where there is such an idolatry of founders and this notion that they have some sort of secret sauce that
24:38 Speaker 02 you lose the DNA of the company, it really has gone 180. I wonder if we've seen
24:45 Speaker 02 peak founder with Adam Newman. But anyways, I want to talk specific sectors. People are predicting or a lot of people are saying there's going to be a recession, which would obviously reduce advertising spend. Do you think that trickles up and impacts Meta and Google? Do you think the big guys are going to feel a slowdown?
25:02 Speaker 03 So, yes, you can worry that Google might see a declining growth rate. But they have $120 billion worth of cash. They are going to spend about $28 billion a year in R and D this year and spend $26 billion in CapEx. If there is a wider concern about concentration in the economy, the big concern should be that these companies that have ample resources will come out the other end stronger in a relative basis. Because a lot of the other companies they're competing with, the relatively newer ones, and we can talk as much as you like about how mismanaged the likes of a Twitter have been, and I can give you a long list of other companies, founder-led companies that have been mismanaged.
25:47 Speaker 03 They are not going to find their discipline, their management mojo, in the midst of a recession. It's going to be forced upon them. And they will likely take rash and almost certainly wrong decisions, whereas the companies that have ample resources can afford to invest through that cycle. So I don't expect Google to make dramatic changes in its R and D roadmap in the next couple of years. It doesn't need to. But many of these smaller companies, by necessity, are simply going to have to give up on a lot of their dreams. And I think you could see that with both Uber and Lyft in the ride-hailing sector. Neither of those companies are directly trying to build autonomous vehicles anymore because they realized, you know what?
26:30 Speaker 03 We'll bankrupt ourselves and we're not generating any cash as it is, so we can't stay the course on this. And meanwhile, Google can keep investing in Waymo and see it through.
26:42 Speaker 02 Well, they can play offense when everyone else is playing defense. And it strikes me, if you look at their stock prices, they do well in good times and they do crazy well in bad times, right? When everyone's on their heels, they can be on their toes. But you said something, and I want to apply it to one company. You said, "have to give up on their dreams." I would argue, and there's some bias here, isn't Meta in the midst of being forced to give up on some of their dreams?
27:03 Speaker 03 So, when you...
27:07 Speaker 03 Meta is a stock we downgraded last August. If you look at the four principal drivers of their business, it's time spent, it's ad load, it's ad pricing, and it's users. Users and time spent have pretty well tapped out and certainly they have some challenges for time spent. That has implications for ad pricing because if you don't have more users spending more time, it's difficult to increase your ad loads and increase your prices. And I think they're in the midst of a business model transition to what we believe will be a lower margin business. I guess for the moment-
27:50 Speaker 02 What's that business, Richard?
27:52 Speaker 03 Well, I think if you look at the way Reels is going, it will look more like YouTube, where they have to pay out share to content creators. And that will be a lower margin business model than having all user-generated content that you never had to pay for. And indeed, you might look at this whole Metaverse idea as a giant misdirection play. Let's look over here, look to the right of something completely new that will take a long time to work out, but get everybody talking about that whilst we undergo a business model transition in our core business to a more content-rich environment where, in the end, we're going to have to pay some of that share to creators.
28:35 Speaker 02 So, you think Meta is a $10 billion head fake? You think that they're just trying to change the conversation?
28:42 Speaker 03 So-
28:43 Speaker 02 Or the Metaverse, excuse me.
28:46 Speaker 03 Well, first of all, I think the Metaverse, as Meta has already laid it out, they might spend $3 billion, not $10. And $10, I think, was a classic, what I think you've probably seen in many other contexts, kind of peacock announcement, "Hey, we're going to spend $10 billion because we can." Does anyone else want to match that? And let's, A, attract a lot of interest to the sector because of how much we say we're spending, and B, scare off anyone who thinks they were just going to hop on the bandwagon. But I don't think it's a head fake. I think it's something that everybody who's involved and that we've spoken to knows will take years to play out, and I'm not talking small, single-digit number of years. And indeed, we've seen-
29:32 Speaker 03 Many of these head fakes from various companies, I mean, probably 18 months ago, we were hearing that Clubhouse was going to wipe out everybody because we were all going to be doing social audio. And I mean, there's
29:46 Speaker 02 That was a hot minute.
29:48 Speaker 03 Exactly. Well, so the metaverse will go into, and by the way, VR had an enormous hot minute about four or five years ago, and then really faded faded away.
30:02 Speaker 02 So agree or disagree, just as what Netflix did to Hollywood, what Google and Facebook did to ad agencies, TikTok is now doing to both Netflix and to Meta?
30:14 Speaker 03 I would disagree to a point of saying that there is, there are several Achilles heels to TikTok. One certainly is its Chinese provenance. And I think were I the big tech companies being potentially disrupted by TikTok right now, I'm sure they are whispering in their ears of their favorite senators of that this can't be allowed to be directed from Beijing as it is.
30:44 Speaker 02 I think it's a real threat. What do you think?
30:46 Speaker 03 Well, I think algorithmic serving of content has already been a threat to, to mental health around the world and to elections and, and fact-based reality. And the fact that you have a company that is so private and so little is known about it. I've never seen the ByteDance accounts. We don't know who's in the management team and we don't know that much about the algorithm other than where it's been reverse engineered. So Yeah, I think that that is one Achilles heel.
31:25 Speaker 03 Another is, as you've seen with TikTok and then Instagram reels and then YouTube shorts, that copy with pride has been around on the tech industry for a very long time. And there are very large, extremely well-known, top 10 interbrand survey brands that are starting to do their own versions of TikTok. So if TikTok had a free run for the first few years of its existence, that's no longer the case. And I think that competition will certainly limit or constrain the opportunity for TikTok in terms of its next legs of growth, because when they show up at the next stage of the
32:08 Speaker 03 party, let's say e-commerce, they may find that social commerce is something that dozens of other companies are already actively involved in.
32:17 Speaker 02 You often correctly point out that companies do this sort of kabuki dance and if they don't, if their metrics are ugly, they come up with new metrics. My thesis is that TikTok right now is the only tech company in the world that is sandbagging its numbers because they're so good and they also recognize the, what I would say is valid concern. Do you think there's any, I get the sense that TikTok is literally taking over the world. It's going to be the first company where we speak about attention as market share. I think it's the first company that now has, I guess Facebook's probably there, 1% of global attention. Do you think they're sandbagging their numbers?
32:57 Speaker 03 I mean, I'd love to know because I'd love to look at those numbers and really understand them properly. A lot of the numbers that we see about attention are based on either panel data or relatively flawed metrics or don't take into account that we can pay attention to several things at once. I would certainly with one and a half to two billion monthly or daily active users, I would put YouTube in that category because I think they consume an enormous amount of positive, you know, time spent around the world. And what I don't know yet is, I haven't worked out in my own mind, a vision for what I think TikTok will be in five years.
33:40 Speaker 03 If you ask me about YouTube, I think, you know, YouTube is the world's only complete video repository. They can let their AI or ML loose on Any document on every documentary on YouTube, and then you can sit down in front of YouTube and say, "I've got 45 minutes. Spin me up the greatest games, the greatest moments of Glasgow Rangers football matches of the 80s." And you can lean back and YouTube will have literally produced a documentary personally for you with their AI and delivered it with incredibly targeted advertising because they'll, obviously, Google knows a tremendous amount about you just from your search history alone,
34:25 Speaker 03 not to mention Maps and Android and Chrome and all that stuff. But they can spin up an incredibly personalized experience out of the world's largest video library. And I think that's going to be an extremely compelling user experience that if I were sitting in one of the rival media companies, I would be thinking, "What do we do about this?"
34:45 Scott Galloway? We'll be right back.
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35:57 Speaker 01 This episode is brought to you by Michelob Ultra. Good times mean competitions between you and your friends, like seeing who can throw some pigskin the farthest or rush the field the fastest. Winner gets an Ultra. Because it's not just a superior light beer, it's also giving fans superior access to their favorite sporting events. Superior is worth playing for. Visit michelobultra.com/superioraccess to enter. Enjoy responsibly. Copyright 2026 Anheuser Busch InBev Michelob Ultra Beer, St. Louis, Missouri.
36:27 Speaker 02 So you advise institutional investors on tech and media investments. Put on your financial advisor hat. You got a young man or woman coming into their prime income-earning years, starting to save some money they want to invest, or someone who's a little bit older who has some assets. You know, the million-dollar question, given this environment, how do you protect slash play this market?
36:52 Speaker 03 The one anchoring feature in any person's investing thought process has got to be looking at real cash flows that companies generate. If a company fails to generate cash, well, you've been in failed startups. What happened when the money ran out?
37:13 Speaker 02 Well, yeah, businesses don't go out of business because of bad ideas. They go out of business because they run out of cash.
37:18 Speaker 03 Right, right. Or as Ernest Hemingway famously said about going bankrupt, first, it happens very slowly, and then it happens very quickly. So if you want to see what's going to happen in the next six to 12 months, you are going to see a lot of those companies that were cash-burning not really have the mentality to conserve cash, not understand that they need to behave differently and fall by the wayside. So if you're constructing a portfolio or you're thinking through what sort of companies you want to invest in to preserve capital, you need to find the companies that themselves are generating cash and able to preserve capital. Because the easiest way to preserve capital is to keep refreshing it all the time. And that doesn't necessarily mean
38:03 Speaker 03 only the biggest companies, because there are a lot of small companies that are very well-run and understand their path to the world very well.
38:11 Speaker 02 Is there a new generation of leadership that you look at adult supervision that you're impressed by?
38:17 Speaker 03 Yes, I think there are several companies you can look at, which I think Snap is a good example, where you had a founder CEO who found he needed, understood that he needed to find seasoned operational management to work alongside him. And I will say, you can look at a long list of companies that have had difficult times in the stock market. We would put Shopify and Spotify and Lyft and Twitter and Pinterest on that list. These are companies that are founder-led, and they have not yet recognized that they need seasoned
38:57 Speaker 03 operational management to work alongside the mercurial, brilliant founder. And the chance of them surviving will be improved greatly by them bringing in those silver-haired folks that know how to manage variable costs through a downturn.
39:16 Speaker 02 So pivot here, Richard. You born, raised, and educated in the United States, have lived in London for two decades?
39:25 Speaker 03 Three.
39:25 Speaker 02 Three decades. Wow. I'm curious, and I think I know, I have some sense of this because you and I talk offline, but give us an arms-distance view of what you think or what your observations are right now around the state of the United States.
39:48 Speaker 02 We need a bigger boat.
39:50 Speaker 03 Yeah. So, wow.
39:53 Speaker 02 And also, I protect my investment portfolio. Just answer those two things.
39:58 Speaker 03 Yeah. I've always thought that culture shock, or whatever you wanted to call it, moving abroad was really looking back at the culture you came from through different eyes. And
40:16 Speaker 03 When I left the States back in the early 90s, I had felt at that point that things were a bit off kilter, that the US felt very insular. And because my father was born in Europe and I had the chance to come to live in London, which is a very easy place for someone who I have limited language skills and a few other European languages, but nothing that would easily get me by. And I made my home in London, which is a fantastic global city, a wonderful place to live, in my view. And over the years, it's been, I think, I've found it increasingly disturbing what I've seen happen in the States, not just the polarization,
41:01 Speaker 03 but the kind of the insularity and the petulance. So for all the 400 million people living in Europe, they're all living pretty close to a border. And national identity is something that's not pounded against your chest and sort of boasted about, maybe except for during football matches. Generally, people are very aware, very cognizant of other cultures, other ways of life, different people. And I can boil it down to one simple, very simple phrase or very simple thought, which is, when you meet someone in America, what is the first question they ask you?
41:46 Speaker 03 What do you do? Which is shorthand for how much money do you make? When you meet someone in Europe, the first question they ask you, after you've uttered a few words and maybe they try to pick out your accent, is where are you from? Oh, you're from Hull. Which side of Hull? You know, it is you. Your identity is your place, is your culture, is your language, is your food. And sometimes I find it very disturbing being back in the States because of this lack of recognition that there's this big, wide world out there that may not be just like us.
42:22 Speaker 02 Yeah, in the US lottery economy, I mean, as you know, I'm moving to London and one of the things I'm looking forward to is just incrementally, I've seen what's happened in our household and that is there's this American, I don't know, you can call it the American dream or expectation that I will have failed as a parent if my boys don't end up at MIT and then Google. And even at the age of 11 and 14, I see the pressures it's placing on them in our household. That everything is tracking towards this American vision of success and it's mostly based around, based around money.
42:57 Speaker 03 Money. Yeah. And can I tell you, you are, you have been, you have been targeted by the parental anxiety industry. It is a hundred billion dollar global industry with tutors and consultants and, and apps and you name it, to make you feel anxious that you're not doing enough as a parent. And guess what? The one thing I've learned as a parent is there are no answers. You get what you get. You're, you know, if your kid's an introvert or an extrovert, or, or rambunctious, or, or calm, or whatever, you, you got what you got. And so you just have to live with it. And it's, you know, the idea that we're
43:37 Speaker 03 all going to mold our sons and daughters to be these, to fit these, you know, to go to, to Columbia and then Wharton and then Goldman Sachs is just, is, is fantasy. And it, it's incredibly anxiety inducing for parents to think that you might fall short. And it's a lot of it's status anxiety as well. Yeah. Well, it's, you know, and you see it at, I get it, at your university, you see all these kids show up and they have no idea how to behave as, as students. Because they've been helicoptered all their life.
44:09 Speaker 02 Yeah, they have no idea how to fail either. It's just, you do see this, this hamster wheel that everyone, and I'm, I'm part of it. I've, I've grown up in America. I've become, I don't want to say obsessed with money, but I've always, my entire identity is professional. I don't say I'm from Los Angeles. I don't say I went to UCLA. I say what I do. And, and I do find I want off that hamster wheel.
44:39 Speaker 02 But anyways, Richard Kramer is the founder of Ereté, a pioneer in independent equity research. Prior to founding Ereté, Richard spent four years at Goldman Sachs, where he was ranked the number one technology analyst in Europe by Institutional Investor. He's spent more than 20 years focusing on the mobile internet space. And Richard, what's the name of your pod with Will?
45:01 Speaker 03 It's called Bubble Trouble. We'll have to have you on as a guest and we'll ask you, when you get to London, we'll ask you how you find the difference between New York and London.
45:20 Speaker 02 Algebra of Happiness. Been such an emotional weekend for so many people. And something that bothers me about the Democratic Party, which I'm a proud member, is that we have a tendency to be emotionally outraged all the time and believe that our outrage is somehow going to translate to change. And whether it's the war in Ukraine, or gun violence, or now Roe being overturned, it's just from one outrage to the next. And something I have struggled with my entire career, and I'm finally getting better at, and I would urge you to think about, is the difference between being right and being effective. And I think many of us believe we are right and have every reason to be outraged here. But
46:05 Speaker 02 that's not going to change anything. I don't think, I think Democrats make the mistake of believing, and I apologize for being so political in Algebra of Happiness, but I do think there's a personal learning here. We believe that people are going to vote for, based on what offends them. They don't. People vote based on what affects them. And I would suggest that in business and in your personal life, that you try and figure out the difference between being right and being effective. And I was always more interested in being proven right than evolving and getting to a solution. And I'll bring it down to a much more mundane topic. Someone earlier in the show talked about moving to London. I have purchased a house there. I'm supposed to close on financing. It's taking
46:49 Speaker 02 forever. And, long story short, the bank called and said, your lawyers haven't gone back to us in two weeks from our vacation. And I immediately started writing this angry email because I had an opportunity to be indignant and angry and outraged. I should also just...
47:06 Speaker 02 Restate, I'm not saying there's an equivalence here. But the way I've changed or evolved is I realized that at the end of the day, I just want to get this fucking financing done. And so I just pinged them and said, can someone get back as soon as possible? Please copy me. And that is unlike the young Scott. The young Scott would have been, what the fuck is going on here? Why am I paying you $1,200 an hour? Why are you holding up my finance? I just would have read them the riot act. And this is what would have happened. It would have put them on their heels. They would have gotten defensive. I would have had some emotional, emotional sensors tickled because it would have given me a chance to be angry or righteously angry. How do you be effective? Imagine you're part of the 12.
47:51 Speaker 02 The 12 is some sinister organization in Villanelle in the series Killing Eve. They never, they're anonymous. Nobody knows who they are, but they basically redraw the maps of the world. Imagine that you have power, but no one's ever going to know who you are. No one cares who you are. No one cares about your emotions. You're just there to redraw the maps of the world. If you want to change, and this comes back to democratic politics. I think everything comes back to gerrymandering and having more moderates. I think if we'd had more moderate Republican senators, they would have realized that these three justices were blatantly lying at their Senate confirmation hearings and wouldn't
48:33 Speaker 02 have approved them and created what is now a super majority ultra conservative court. So I think we need to be effective. Now, that might be the right or the wrong tactic, but I believe we are long on society. And I was long as a young man on outrage and indignance and righteousness. And I was short, I always came up short on, okay, how unemotionally, tactically, and thoughtfully playing the long game? What do I need to do to be effective here? It's not enough to be right. You need to be effective.
49:11 Speaker 02 Our producers are Caroline Shagerman and Drew Burrows. Claire Miller is our associate producer. If you like what you heard, please follow, download and subscribe. Thank you for listening to the Prof G Pod from the Vox Media Podcast Network. We will catch you next week.
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