The Week: The Hidden Debt Behind the AI Boom

George Hahn connects the dots across the week’s biggest stories: how hidden debt is fueling America’s AI buildout, why China is spreading cheap, open-source AI around the world, and what the rise of solo founders reveals about the new creator economy. Plus, No Mercy / No Malice turns ten. 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.

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• 1:15George 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, July 31st. Today, the hidden debt financing the AI boom and why the market turned this week. Then, China's push to spread cheap, open-source AI around the world. And finally, the reality behind the creator economy and the rise of the solo founder. Let's get into it.

• 1:50George Hahn?

  This week, the debt underneath the AI boom came into view, and the market didn't like what it saw. An investigation from Nikkei Asia found that the five biggest companies in AI, Alphabet, Microsoft, Amazon, Meta, and Oracle, are now carrying more debt off their balance sheets than on them. On Monday's PropG Markets episode, Scott walked through what that means.

• 2:16Scott Galloway?

  There is a sweet spot of leverage in the economy, both in the banking system and corporate debt, and even personally, a certain amount of leverage. But wait, big tax 1.7 trillion in off-balance-sheet debt versus 1.4 trillion reported?

• 2:35Scott Galloway?

  That gap is sort of a story, because when you're hiding a bigger number than what you're reporting, that's not accounting, it's concealment. And Meta's off-balance debt is $420 billion, which is 3X what they report. That's not a rounding error. That's the second company hiding liabilities inside of the first company. And the mechanism is that shell companies will fund the data centers. Private credit funds the shell companies, and pension funds and insurance annuities fund the private credit. If you reach far enough into the barrel, or you reverse-engineer far enough, what you find is that a teacher's retirement account is underwriting Zuckerberg's GPU bill.

• 3:20Scott Galloway?

  And, you know, Bernanke always said this, "We're obsessed. 90% of the airtime on this show or on CNBC is about equities, because they're more interesting, and they have a daily scorecard, and the movements are more dramatic. Stocks are just more fun, they have more personality, they're more interesting to track." But whether it's the depression, whether it's a great financial recession, whether it's a dot-com implosion, nothing rings the bell of a beginning of a crisis like leverage.

• 3:49George Hahn?

  The hidden debt wasn't the only warning. Nvidia had lined up more than $750 billion in new AI commitments, including a $1.5 trillion guarantee for OpenAI. And the cost of insuring its debt posted its biggest one-day jump on record. Just another iteration of the circular financing PropG Markets has flagged for months. On Wednesday, the market stopped ignoring it. The Nasdaq fell into correction territory. Chip stocks got crushed. Torsten Slok, chief economist at Apollo, explained what the market was suddenly pricing in.

• 4:32Speaker 07

  The challenge at the moment is that the hyperscalers and those who are building the infrastructure, they are changing their financing, which used to be mainly from the equity side of the balance sheet, to now being on the debt side of the balance sheet. And the amount of debt that has come to the market from the hyperscalers, meaning the companies that are building out the infrastructure, has just been enormous. So as a result, we've seen a very, very significant increase in supply of investment-grade credit that is in the hyperscaler space. And the consequence of that is that we have started to see spreads in credit widen out on that hyperscaler debt. And this has resulted, of course, in a number of questions being asked, namely, are spreads widening out on hyperscaler debt because of worries about the underlying credit of these companies,

• 5:16Speaker 07

  meaning their ability to pay back their debt? Or is it simply just because of demand and supply that there's just more supply at the moment?

• 5:23George Hahn?

  Here's what makes that debt harder to carry. The American bet, hundreds of billions borrowed against a build-out, assumes the companies doing the building can eventually charge enough to pay it back. And China is attacking exactly that. Not by building better models, but by making cheap ones the whole world can download for free. This week, Xi Jinping stood up at an AI conference in Shanghai and made it official. On China Decode, James Kynge laid out the scale of the plan.

• 5:59Speaker 08

  And so China doesn't want to miss the boat. It doesn't want the US to win AI as well. And in fact, it wants to win AI, so that in 20 years' time, whoever is doing this version of this podcast will be talking about the fact that China won AI. And that's what this whole plan is all about. And I think the political nature of the plan comes over really clearly when you see how the training that you mentioned is organized. So China's going to be training thousands of people, and the focus is going to be on the Global South. The training's going to be on how to use Chinese Openweight models.

• 6:41Speaker 08

  And there are going to be six major regional AI centers that are set up within regional groupings, so that the training will be delivered through the auspices of these regional groupings. And so that we can see that China is getting behind this strategy in a very major way.

• 7:04George Hahn?

  We'll be right back after the break.

• 7:10Scott Galloway?

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• 7:54Scott Galloway?

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• 8:27Scott Galloway?

  Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. The regentic trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?

• 9:12Scott Galloway?

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• 9:34Scott Galloway?

  Support for the show comes from Vanta. As AI adoption grows, so does your company's security risks and requirements. New frameworks, audits, and vendors keep piling on, but your team isn't getting any bigger. Most compliance tools promise automation, but you're really stuck doing all the work by hand, chasing screenshots, validating controls, and playing catch-up when audit season comes around again. Vanta works differently. The regentic trust platform is built to scale with you, not slow you down. With over 1,400 automated tests across 400-plus integrations, Vanta collects evidence and monitors your controls year-round, cutting your audit prep by 82%. Plus, you can access the Vanta agent everywhere you work, whether your team is in Vanta every day or living in tools including Claude or Cursor. Want proof?

• 10:19Scott Galloway?

  Over 16,000 fast-growing companies like Ramp, Ryder, and Harvey save time and resources while scaling fast with Vanta. Learn more at vanta.com-propg and get $1,000 off. That's spelled V-A-N-T-A dot com slash PropG for $1,000 off.

• 10:44George Hahn?

  Welcome back. There's risk at the top of the economy, but this week also brought a story about risk at the bottom of it. The record number of Americans calling themselves founders. Last year, Americans filed nearly 6 million applications to start a business, the most on record. But only about a third intend to hire a single employee. And on LinkedIn, the number of people calling themselves a founder jumped 69%. On Monday's Prof G Markets, Scott made the case that most of them aren't founders at all.

• 11:24Scott Galloway?

  Okay, I have a real B in my bonnet around the whole founder thing. And if you typed in the name on LinkedIn of every company I've started, you're going to find there are 30 or 40 co-founders of all these companies. Everyone has decided they're a co-founder of Red Envelope, of Profit. And people would call themselves co-founders, and I'd be like, fine, have at it. Titles are cheap. Have at it. But here's what a founder is. A founder signs the front of checks, not the back of checks. And the reality is, the vast majority of people are not willing to put their own money. Here's what it means. You know, L2, amazing, great company, smart people, we sold for 160 million, I got very

• 12:08Scott Galloway?

  lucky, extraordinary, all the moons lined up. The first two years of L2 was me going home and telling my girlfriend, who had just given birth to our second son in about 36 months, "Oh, business is good, and I apologize, I can't be home for bath time. I am working 14 fucking hours a day, and I've got to work all day Sunday, and just go in on Sunday to be emotionally supportive of the people who showed up on Sunday. And in exchange for that, on the 31st of every month, we've got to take $100,000 out of our savings and put it into the company." And my girlfriend would literally look at me with this look of fear, like, what the fuck are you doing to our family?

• 12:52Scott Galloway?

  And I would have to sit there for an hour and explain to her why, hopefully it was going to pay off. And not once, but twice, I came within a hair of losing it all, couldn't pay my lease on my office, was going to have to shut the whole thing down and go home, and not only lay off a bunch of people, but go home and tell my girlfriend and the mother of my children, "Oh, the $1.2 million, or basically the majority of our savings, is gone." That's what entrepreneurship is, folks. And by the way, that's a good story. It worked out.

• 13:31George Hahn?

  Ed also gave us his take on the side hustle economy.

• 13:35Ed Elson?

  So that leads me to one conclusion that makes a lot of sense, which is that these are all kind of bullshit side gigs. This is, "I'm bored at work, I'm still employed at work, but I work remotely, and I kind of want to start like a lifestyle brand, and I'm going to make an Instagram account, and maybe I'm going to make a Substack, and maybe if I'm feeling really excited about it, I'll also create an LLC, because I'm interested in doing that." But to be clear, that's not a business that is actually contributing to the economy. It's basically a hobby.

• 14:15Ed Elson?

  It's basically like a more legit vehicle to express yourself based out of the boredom that you feel in your real job.

• 14:26George Hahn?

  But economic anxiety isn't the whole story. A lot of people, especially younger people, aren't turning to solo work only because traditional employment feels less secure. They're also betting that the internet has made it possible to build something meaningful without millions in capital or hundreds of employees. Jack Rains, author of the newsletter Young Money, joined Scott this week to discuss the business model behind that bet.

• 14:56Speaker 10

  On the media industry, I think, this might be a hot take, I actually think it's a very good time to start a media brand, because you can just do stuff a lot leaner now. Like, if you look at the radio industry, it's like, there was so much infrastructure, you had so many people working in the studio, versus now, you can launch a podcast and hit publish and effectively get distributed to the entire world immediately. Like, I know you have a whole team that works with you, that team is still probably way leaner than it would have been 40 years ago to try to have the same level of distribution, right? So there's a lot of, like, what I would say is like bloated media companies that didn't really adapt to social media and now kind of influencer creator first stuff, that like their revenue model and their cost structures doesn't really make sense.

• 15:41Speaker 10

  But for like individuals or lean teams, whether they're building a subscription model, ad model, whatever, I think there's like a lot of value building in niches with like a pretty low cost basis and low headcount. On the creator front specifically, like the fund I'm at, Slow Ventures, we actually have a, like, we have our fund that invests in startups, like tech, AI for whatever, yada, yada, yada, like Silicon Valley, New York, we do everything. We have a separate fund that invests in creators and creator-led businesses, where the bet that we're making there is that the internet is getting more and more siloed, where like, I have my internet, you have your internet, like, algorithms and interest drive everything. People that are kind of like cult leaders in different pockets have interesting opportunities

• 16:24Speaker 10

  to build businesses around like their niche or their audience, where if you're kind of seen as the like, like market or industry leader on your thing, and you have hundreds of thousands or millions of followers, like, can you build businesses on top of that platform? We think so.

• 16:39George Hahn?

  And that trust still takes time. This week, No Mercy, No Malice turned 10. 10 years of Scott writing the same newsletter every Friday and four years of me narrating his words for the audio edition. While the cost of publishing has fallen towards zero, the cost of building a voice people care about hasn't. It takes consistency, vulnerability, and a willingness to keep showing up. In this week's anniversary essay, Scott explained the reason he keeps writing. Here's what he wrote. "I write a lot about the end, death, believing that I'll go first, and that someday I'll

• 17:24George Hahn?

  look into my son's eyes and know our relationship is coming to an end. This has been an unlock. All the fear of shaming, worrying what other people think, and reticence to tell people I love them melts as the light at the end of the tunnel draws nearer. My boys have little interest in my work, I doubt they've ever read a post, but they will. It will transport them back to this era, the good and bad, and cement what they feel but may not know, how much I think about and love them."

• 18:08George Hahn?

  Platforms change, markets turn, business models come and go, but a voice worth remembering can outlast all of them. That's the week. I'm George Hahn, we'll see you next Friday.