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- [00:00]
Scott Galloway
Scientists find weird kinds of life all the time, and normally they can run experiments.
- [00:05]
Tim Higgins
If I hypothesize life can live in bleach, well, I can get bleach and see if life lives in it.
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Scott Galloway
But what if the weird thing about the life they find is that it lives for millions of years?
- [00:18]
Tim Higgins
Time. I don't have any control over that. I can literally do nothing with time.
- [00:24]
Scott Galloway
This week on unexplainable intra terrestrials, aliens on earth, deep beneath the seafloor follow.
- [00:32]
Tim Higgins
Unexplainable for new episodes every Wednesday. Have you noticed that headlights seem brighter these days? It's more than just a nuisance for some people.
- [00:45]
Scott Galloway
Those headlights and other LED lights knocked me out of being a teacher. I just, I couldn't get to work anymore without suffering these impacts, these neurological, psychological impacts.
- [00:56]
Tim Higgins
The dark side of those gleaming headlights. That's this week on Explain it to me. Listen every Sunday morning wherever you get your podcasts.
- [01:17]
Scott Galloway
Welcome to Prof. G Markets. So Scott is out this week. He's on his grand college tour with his son, I believe they are in Chicago right now. They just visited Northwestern and Uchicago. Fun time to be in the Galloway family. So I'm flying solo today, which means we're not starting with a joke. We're not starting with a dick joke. Many of you will probably be sad to hear that. Many of you will probably be relieved to hear that we'll just be getting into the markets today. Later on, I'll be speaking with Tim Higgins, Wall Street Journal columnist covering the automobile industry. We'll cover his thoughts on the winners and losers of the auto tariffs.
- [01:56]
Tim Higgins
But.
- [01:56]
Scott Galloway
But before we do that, let's get into the headlines.
- [02:01]
Tim Higgins
Now is the time to buy. I hope you have plenty of the borough.
- [02:07]
Scott Galloway
President Trump announced reciprocal tariffs on US Trade partners, marking the occasion as Liberation Day. He also imposed a 25% tariff on imported vehicles. Elon Musk's X AI has purchased his social media platform X. The all stock deal values X at $33 billion or 45 billion doll. You include the debt. And finally, OpenAI closed a $40 billion funding round led by SoftBank, which values the company at $300 billion. It is the largest private funding round in tech history. Okay, let's start with these reciprocal tariffs. Of course, everyone is talking about it. Liberation Day has come. You know, I think the idea of reciprocal tariffs, reciprocity, I actually think that's a nice idea in theory. I don't see any issue with saying, you guys charge us this amount and we're gonna charge you the same amount right back. Reciprocity. That sounds fair to me. The thing is, if you're going off of what Trump says, you would get the idea that we are the benevolent nation when it comes to tariffs. You'd get the idea that everyone else is screwing us. They've been playing hardball, we've been playing softball. So let's play hardball right back. And I would agree with that notion if it were true. And the trouble is, it isn't. The reality is that we are, in fact, the stringent nation when it comes to tariffs. Most other nations are actually more lenient than we are. And I can give you countless examples of where that is the case. You look at Japan, for example, we charge 25% on every Japanese truck that enters the U.S. meanwhile, for American trucks that enter Japan, the tariff is 0%. You look at Brazil, we charge them 81% for their cane sugar, they charge us 14%. You look at New Zealand, we charge them 13% for their butter and 10% for their milk, and they charge us nothing. In fact, since 2009, we have implemented the highest number of domestically beneficial trade interventions, more than any other nation. Three times more than Germany, three times more than Canada, five times more than France. So actually, when you look at the tariff situation, it's not that everyone's playing hardball and we're playing softball. We're actually going pretty hard on everyone. And I'm fine with the idea of reciprocity. I think reciprocity makes sense. But let's be clear. True reciprocity would mean we're in for hundreds and hundreds of tariffs that are coming right back in our direction. We are not the benevolent nation we think we are. In fact, we are quite hawkish on trade. So we'll see where this goes. I think implementation is going to be a nightmare. That's at least what many economists are saying. It's very difficult to do this as quickly as Trump is saying we can do it. I don't see those tariff revenues hitting our bottom line anytime soon. But I think the most important consequence of this action is we are going to see extreme retaliation from every other nation around the world when it comes to tariffs. I don't see how this works in our favor. All this is, to me, is a reflection of our delusion, our tendency and obsession with thinking that we are the victim. In a world where, both historically and presently, you look at the numbers, we are, in fact, in most cases, the victim. Let's talk about Xai. The first thing you might be thinking Here, certainly the first thing I thought when I saw this headline, wow, Xai is valued at $80 billion. X, the social media company is valued at $33 billion. 45 billion when include the debt. That's actually really impressive. You think back to just a few months ago when Fidelity marked down their stake in X and they were valuing the company at less than $10 billion. And in those few months since that point, the tech sector has only been in decline. The NASDAQ's down around 11% year to date. So I see this headline, I think, well, things must be going awfully well over at X if the company is commanding a $45 billion enterprise value at this point. I want to clear this up right off the bat. Both of those numbers are fake numbers. They are totally an accounting trick. And they are an example, in my view, of Elon's incredibly deft understanding not of how to run and operate a business, but of how to game the markets and inflate the perceived value of his companies way beyond what is even remotely reasonable or logical. And he's used several distinct strategies to get there here, and I'm going to explain them. Now, the first thing you have to understand here, this was an all stock deal, meaning no cash was exchanged in this transaction. What this deal does is it says to the shareholders of X, we're diluting your ownership stake in X. And in exchange, you're going to receive these shares in Xai. And to the shareholders of Xai, the opposite. We're diluting your stake in Xai. In exchange, you're going to get these shares in X. So to assign any dollar amount to this transaction to begin with is a red herring because no dollars were exchanged. The only thing that matters here is the ratio in the value between the two companies, because that's what determines the dilution. And what the ratio tells us is that the shareholders in x will own 30% of the combined company and the shareholders in Xai will own 70% of the combined company. But no one got richer and no one got poorer because again, no cash was exchanged. So how did we arrive then at this gigantic valuation? Well, a lot of it has to do with the power of the word AI Xai is an AI company, and despite the fact that it has generated almost no revenue yet, investors are willing to overlook that. And they're willing to assume that over the long term, the company is going to make a lot of money. Elon Musk knows this, and that's why he's combining these two companies. He believes that if he can rebrand the social media platform as an AI company, he can inflate the perceived value, which will make it a lot easier for him to raise money in the future. And by the way, I'm sure he's right. But again, this doesn't have anything to do with actual dollars. It has no basis in revenue, no basis in earnings. This is all a function of his ability to tell a compelling story. Now, everything I've described so far is pretty standard in the world of venture capital. An all stock deal, that's pretty common. Pumping AI, that's common too. We've seen it a lot. Here's where it gets a little dicey, though. You might remember a few weeks ago we discussed a headline that X had been valued at $45 billion in the private markets, not with stock, but with cash, meaning someone had actually paid money at that valuation. And I asked the question to Josh Brown, who the hell is paying for this? Revenues are down at x 40%. EBITDA is shrinking. It's down to $1.2 billion. And apparently, by the way, that's a highly adjusted number, which means the real number is even smaller. So how does the valuation add up? Well, I found my answer. According to Bloomberg, the buyer in that private transaction was Elon Musk. Elon invested $150 million of his own money at the ridiculous valuation of $45 billion. So when you read that headline, when you read a headline that says x valued at $45 billion, including debt, you're not actually getting the real story here. The real story is that Elon Musk valued X at $45 billion. The whole thing is a charade to make you think the company is more valuable than it really is. So I'm just FAS by this transaction because it shows you just how good Elon Musk is at gaming the system. You know, he's a master of branding, using the word AI, combining the company, turning this whole thing into an AI company. He's a genius in creative accounting, massively adjusting the EBITDA of X, the social media company, and then going in and buying shares in the private markets and not disclosing that it's him buying the shares so that everyone thinks the company is more valuable than it is. But most importantly, he understands more than anyone else that in 2025, all of this is worth it. Because if you can convince other people that you're more successful than you are, that your company is more valuable than it really is, when you go in and look at the revenue and you look at the numbers. If you can do that, you can ride the momentum until you actually are successful. The common term for this is, is fake it till you make it. But Elon Musk is a champion of this principle. And this transaction, what we've seen here, Xai buying X for $45 billion including debt, the numbers are nothing. The numbers are meaningless. This transaction is simply a reflection of his fundamental belief in that principle, that if you fake it, eventually you will make it. And that's what these numbers are. They are fake. Okay? OpenAI, $40 billion in funding, $300 billion valuation. This is the largest financing round in history. Actually the valuation is higher than any IPO in the history of global markets. So this is a huge deal. And I think the question everyone's asking, and everyone's going to be asking is, is it worth it? Is this company overvalued? My opinion, I don't think it is. I genuinely believe that this is a once in a lifetime company. Apple, Microsoft, Google, Berkshire Hathaway, Standard oil. I think OpenAI is on track to reach a level of influence and a level of value that is comparable to to these companies. And if I could have invested in this company at $300 billion valuation, I would have. But before we get into the details, I just want to check in on a prediction that Scott made on this deal and the role that SoftBank would play in it.
- [12:36]
Josh Brown
I think the insecurity in the market right now is probably going to give them a reason to hit the sanity button and either get different terms or better terms or not do this investment. I guess my prediction is I'm not sure this round is going to close on the terms initially reported in the US because it hasn't closed yet. And it just feels to me this is too rich. If you're a limited partner in SoftBank, basically Masayoshi San has tried to convince you that within five years this will be one of the 10 most valuable companies in the world because it's going to have to have a trillion dollar plus market cap to justify the kinds of returns for this type of risk. I think that is a difficult argument to make with any level of certainty right now.
- [13:18]
Scott Galloway
So that prediction didn't really pan out. OpenAI has secured that $300 billion valuation. But there is an interesting caveat in the deal and that is SoftBank is leading the round with $30 billion. But they've said that if OpenAI doesn't restructure into a for profit company by the end of the year, they're going to reduce that investment to $20 billion. So, to be fair to Scott, we do have a new and fairly significant term here, but in terms of the valuation, we're still at $300 billion. SoftBank was down for that. They did not get the jitters. And as I've said, I think that this is the right valuation. Let's look at the numbers on this company. Let's look at why this is such a strong company. On revenue, the company's on track for $13 billion in sales this year. Huge on users, They've now hit 500 million weekly active users. Not monthly actives. Weekly actives. So in other words, the population of the entirety of North America, so the US, Canada, Mexico combined, they are logging onto ChatGPT and using the product every week. This is absurd growth, especially when you consider the fact that ChatGPT launched only 26 months ago. It's only a couple years old. But what makes it so compelling to me, what makes the $300 billion valuation worth it is the monetization rate at OpenAI, only 5% of ChatGPT users are paying for the product. And as I've said before, this isn't because OpenAI hasn't figured out how to monetize the platform. They're smart people. It's because they've chosen not to. They're sacrificing revenue in exchange for growth. And all it would take, if they wanted to 5, 10, 15x, their revenue overnight would be to flip a switch. And the switch would be very simple. It would be a paywall that says, if you want to continue using ChatGPT, please insert your credit card details here. This is an absurdly strong position to be in, and it honestly reminds me of the early days of Amazon and of Facebook and of Google. The only difference, though, is that the customers of OpenAI are already paying for the product. They're not reliant on advertising to supplement the revenue. And by the way, they could take the ad model if they wanted to. That's certainly on the cards for OpenAI. But they have chosen not to. Instead, they're shooting for growth and it's paying off tremendously. So those are the numbers. Now, let's just talk anecdotally about the success of this company. I have never seen a product that has captured the imagination of the public like ChatGPT has. And it all started really with the launch. When they launched two years ago, the eureka moment for me was when my mom showed me that she was using ChatGPT to generate a personalized poem that she delivered to me and my family on New Year's Eve two years ago. And I really think this is a good rule of thumb in tech. I think if your parents start using a product, a frontier tech product, that means you have something extremely special. Even my grandparents are playing with this. That's just. That's just not normal. That doesn't really happen in tech. And since that point, it's only gotten better. It's only gotten more Viral. Last week, OpenAI launched Image Generation. On day one, they were clocking a million new signups every hour. I don't know about you, but. But my entire social media feed has been filled with these AI generated images that people have been making on ChatGPT. Everyone's making these studio Ghibli images. Some people are taking images and turning it into the Muppets characters. Last week, my sister sent me a picture of her and her new dog, except it was an AI generated image that rendered them as cartoon characters. She said she was playing with ChatGPT all day. This is the kind of creative inspiration that I don't think you can really capture or understand with just numbers. To me, it's so much bigger than that. To me, this is a once in a generation product. I think the only thing that stands in OpenAI's way is the competition. You know, it's not a question anymore of whether AI is going to take over the world. Everyone knows that's going to happen. It's a question of which AI company takes over the world. And the only real competitors you have right now are deepseek, Anthropic and Gemini. And you look at the user numbers on those platforms, you look at what they're doing in revenue, they are tiny compared to OpenAI. OpenAI is totally running away with it. So I'm really bullish on this company. My prediction, I think OpenAI is the next trillion dollar company. I think the growth potential there is massive. I think the technology is out of this world. I love using it. I use the product every day. I talk to my friends. They use it every day. People in all sorts of sectors, people in consulting, people in finance, people in creative industries. And so $300 billion valuation for this company, what I believe is the next big tech company. I think the investors are getting a good deal and I would have liked to be in the deal myself. Those are the headlines. We'll be right back for our conversation with Tim Higgins. We're going to be breaking down what is going on in the car industry and what these tariffs are going to do to the car industry. Stay with us.
- [18:58]
Tim Higgins
Last week we at Today Explained brought you an episode titled the Joe Rogan of the Left. The Joe Rogan of the Left was in quotations. It was mostly about a guy named Hassan Piker, who some say is the Joe Rogan of the left. But enough about Joe. We made an episode about Hasan because the Democrats are really courting this dude. So Hasan Piker is really the only major prominent leftist on Twitch, at least the only one who talks about politics all day. What's going on everybody?
- [19:27]
Scott Galloway
I hope everyone's having a fantastic evening afternoon prenup.
- [19:29]
Tim Higgins
No matter where they want his cosign, they want his endorsement because he's young and he reaches millions of young people streaming on YouTube, TikTok and especially Twitch. But last week he was streaming us.
- [19:41]
Scott Galloway
Yeah, I was listening on stream and you guys were like, hey, you should come on the show if you're listening. I was like, oops, caught.
- [19:48]
Tim Higgins
You're a listener. Yeah.
- [19:49]
Scott Galloway
Oh yeah, I am. Yeah.
- [19:51]
Tim Higgins
Thank you for listening. Head over to the Today Explained feed to hear Hasan Piker explain himself. If you've been online this week, you've probably seen an unending flood of those beautiful animated studio Ghibli style images of everything from happy families being together to beloved cartoon characters committing unspeakable acts of violence against each other. That, my friends, is the AI world we live in. And it's not going to get less complicated. That is what we are talking about this week on the Vergecast, along with the future of robot vacuums, what's happening with car tariffs and everything else going on in the AI world. All that on the Vergecast. Wherever you get podcasts.
- [20:47]
Josh Brown
So we want to introduce you to another show from our network and your next favorite money podcast for ours, of course. Net Worth and Chill host Vivian Tu is a former Wall street trader turned finance expert and entrepreneur. She shares common financial struggles and gives actionable tips and advice on how to make the most of your money. Past guests include Nicole Yoder, a leading fertility doctor who breaks down the complex world of reproductive medicine and the financial costs of those treatments, and divorce attorney Jackie Combs, who talks about love and divorce and why everyone should have a prenup. Episodes of Net Worth and Chill are released every Wednesday. Listen wherever you get your podcasts or watch full episodes on YouTube. By the way, I absolutely love the Vintu. I think she does a great job.
- [21:35]
Scott Galloway
Welcome back. Here's our conversation with Tim Higgins, columnist for the Wall Street Journal, cnbc, on air contributor and the author of Power Play, which is a book about Tesla. Thank you for joining me on Profgue Markets, Tim.
- [21:48]
Tim Higgins
Well, thank you.
- [21:52]
Scott Galloway
So there are a lot of headlines about cars that are floating around in the news this week. And so we really wanted to get you in here to talk about this today. For those that don't know, Tim covers media and tech for the Wall Street Journal. But he's also covered a lot of the auto industry as well. And of course he wrote that book about Tesla. So we're going to focus on the automobile industry exclusively today. And I'd like to start with this new tariff that Trump introduced last week. He's putting a 25% tariff on all foreign made cars and also a 25% tariff on all foreign made auto parts. So Tim, break it down for us. One, why is Trump doing this? And two, what does this mean for the car industry and for the economy at large?
- [22:36]
Tim Higgins
Well, the president has talked about how he's doing this for as part of his kind of make America great plan to bring manufacturing back to the US and to bring kind of that high value manufacturing to the U.S. for automakers, this is a nightmare scenario. Building, designing, making cars is something that takes many, many years. There's these supply chains, there's these factories and the system is not parochial anymore. It's very global. And if you think about the U.S. in the last year, more than 16 million cars were sold and 54% of those were produced in the U.S. that means 46% were imported. And that's just talking about where they're built. That doesn't even get into the complicated supply chain of where those parts came. And a lot of them come from outside the U.S. yeah.
- [23:32]
Scott Galloway
So, you know, all the car stocks basically dropped across the board after the announcement. And I think that was probably expected for the foreign car stocks. But you know, then I see stocks like General Motors and Ford, they're also dropping. So why are they dropping as well? Is that because of what you said there, that they also rely on car parts that are outside of the U.S. part of that.
- [23:55]
Tim Higgins
But also U.S. carmakers are not so us anymore. Think about General Motors. 46% of their cars that are sold in the U.S. are assembled outside of the U.S. primarily Mexico, Canada, South Korea. It's a global business. Ford is probably the best position. Perhaps they have a lot of US Manufacturing. The other Detroit automaker, now known as Stellantis, it used to be known as Chrysler, they build a lot of models outside of the US but they also have a lot of US Parts in their vehicles. So if they're made in Mexico, they got a lot of US Parts, so they could be okay. I mean, they could be better off, who knows? Overall, analysts are expecting this is going to hit the operating margins, operating profits for these carmakers.
- [24:45]
Scott Galloway
Are there any winners of these tariffs? We've been over the losers, of course, the foreign car companies. Sounds like most of the American car companies too. Are there any winners here that you could identify?
- [24:57]
Tim Higgins
Well, the stock market thinks that Tesla might be the winner if you look at the way the stock has moved. But even Elon Musk, the CEO of that company and a very vocal Trump advisor these days, has said there will be impact. So Tesla's probably better positioned. Ford seems to be better positioned. One of the real winners, at least if you listen to the United Auto Workers union, could be American workers. If in fact work does return to the US Whether it's final assembly or those, the work making parts. But it's not yet clear exactly if production is going to return to the US we don't know yet. We could see a scenario in which some popular models or some models might just not come to the US they might get discontinued. One of the concerns, one of the really big concerns you hear from economists and kind of industry observers since the pandemic. It has just been really amazing to watch the cost of cars increase for your pocketbook. I look at numbers from earlier this year and this was before the tariffs, the average price of a new car transacting in the US was around $48,000. I don't think a lot of people think $48,000 is affordable for many people. Economists kind of look at that number and they think it'll probably just go higher with these tariffs though, as my colleagues at the Wall Street Journal have reported, Trump has been, you know, perhaps warning US Automakers not to raise those prices, though most believe the cost increases will be pushed off to consumers.
- [26:43]
Scott Galloway
Yeah, there was this quote he said that I wanted to get your take on. The reporters were asking him about the prices and if he was concerned about what this would do to prices, because I think this is one of the main consequences of these tariffs is that prices go up. He said, quote, I couldn't care less. I hope they raise their prices, because if they do, people are gonna buy American made cars and we have plenty. So his point is, you know, let them raise the prices because it doesn't matter because people will buy American and in the American cars, the American companies won't have to raise their prices. I guess my Question to you. So is that true? Is that true that we have enough American carmakers and enough American car part makers? Can we do this all on our own such that the price of a truly American car won't actually go up?
- [27:37]
Tim Higgins
It depends on kind of the timeline you're looking at. He's making the gamble, the President is making the gamble that production will kind of return to the US That a new kind of American economy will emerge, they'll be stronger. That's going to take time. Cars take many, many years to develop and to kind of create that ecosystem. And you just don't see it pop up overnight. In the interim, there does seem to have been a buildup of inventory by some of the car makers in the US but that's going to probably be eaten through very quickly. If you look at sales results in March, which are just coming in, it seems to be a surge of buyers out there trying to get in before the effects go into place. Economists and industry observers are kind of talking about how the situation is kind of a perfect storm, if you will. That resembles perhaps what we saw in the wake of the pandemic when there was shortages of vehicles and sent prices up just because of that. There's a concern that there'll be a shortage of affordable vehicles and that'll just push prices up for everybody, not just in new cars, but also in used cars.
- [28:55]
Scott Galloway
You mentioned Tesla there, that it's a winner potentially from these tariffs. I'd like to talk about Tesla more generally, which you've covered extensively. It's been a very bad year for the stock overall. It's down 36% in the first quarter, worst performance for the company in any period since 2022. They've lost almost half a trillion dollars in market cap. As you look at Tesla today, what do you think are the biggest obstacles for the company right now? What's gone wrong and what do you think the next four years look like for Tesla?
- [29:34]
Tim Higgins
Well, there are two really big issues for Tesla. The one that's obvious, at least to people who are kind of paying attention to the brand and protesting outside of the stores or the showrooms in recent weeks is the political one. Elon Musk and Tesla are intertwined. It's hard to talk about Tesla as a brand without thinking about Elon Musk. And Elon Musk has clearly become very political. I can't think of a modern equivalent of a CEO essentially operating out of the White House grounds on a day to day basis. I mean, it's unprecedented in the modern time. And by that kind of very position, there's a large percentage of the US who's against it because they're Democrats perhaps, and he's on the Republican side. So you've got the politicalization of the brand, you've got Musk taking some contentious positions. And so that's a challenge for Tesla, the brand. But then Tesla, the company also has a challenge in that it does not have new product to speak of in the mainstream sense. Of course, we all know the Cybertruck, but that is not a mainstream vehicle. The last mainstream vehicle they brought out was the Model Y, a compact sport utility vehicle. As Musk likes to point out, the best selling vehicle in the world. Really helped build the modern Tesla, what we think of as this powerhouse, most valuable automaker in the world company because of this vehicle. But it's old and it's long in the tooth in the car business, fresh sheet metal is key to keep those sales growing and investors are getting jittery about that. What Musk is doing, he's been kind of vocal about that, is that he's betting that the future of Tesla is not about pumping out new sheet metal per se, but it's about software and it's about autonomous vehicles. It is about robots, the model and whatever the future cars that he makes, the Cybertruck or Cyber Cab, these will be delivery vehicles, if you will, for that software. That the potential, the value is in autonomy and that's the gamble. The interim, however, is all about selling that sheet metal. And he's still playing in the game of selling cars. And so it's not surprising given the age of his fleet, that sales have been the way they are. They're trying to kind of juice them or get some excitement in the lineup. This year with a refreshed version of the Model Y, it's not yet clear if that will bring the excitement back to the brand supporters. Fans of the company say that sales in the first quarter were probably affected because people are waiting to buy this new vehicle in the coming days and whatnot. But we will see.
- [32:34]
Scott Galloway
What do you think? Do you think that's true?
- [32:36]
Tim Higgins
Well, I think that there, there always is a segment of the Tesla kind of fan community who wants the newest thing. And that's, you know, clearly they're going to be out there now. How much wind behind that sale is there? I'm not quite sure. If you look at other car companies over the years, refreshes help, but they don't kind of overcome the fact that they aren't new vehicles. Time will tell there's also efforts to bring out cheaper vehicles this year. Basically variations what's already out there. So that could help. At one point, Elon, at one point MUS was talking about deliveries rising 23% this year. I don't think a lot of people think that's going to happen.
- [33:15]
Scott Galloway
Yeah, it seems that the valuation which is still actually quite high, I mean, yes, the stock's down 36% but on a price to earnings multiple, still trading at 130 times earnings. Then you've got GM trading at 5, 6, 7 Ford at 5, 6, 7 Stellantis. In the insane ballpark. I mean, it's a totally different story. It's a totally different valuation. And it certainly appears that the real story here for Tesla, or at least the growth story, is the robotaxis and the energy business and the AI and the robots, et cetera. As you look at all of those other businesses which I often write off because I say, well, show me when they ship. But when you look at those businesses, which of them is most compelling to you? If you had to sort of fashion a bull case on Tesla, which of those businesses do you think is going to really drive the value for the company?
- [34:17]
Tim Higgins
The biggest bet is the idea of the robots, the humanoid robots. Now when you talk about how real that is, I mean there's a lot of steps when I talk to robotic experts, professors, people in the, a lot of things that need to occur. You can do demos, you can do concepts, but many steps ahead, there are others out there who are still kind of showing the same thing and that's a big leap. When you talk about driverless taxis now this is a technology that some have figured out. I'm in San Francisco, I have been in the Waymo Robo taxi. People are using it for their daily commutes here. It's a business, it is expanding to places like it's in Los Angeles, it's going other places. Next on the horizon here in San Francisco is Amazon.com's its own gamble with Zoox. I have been in their Robotaxi as well. It's not yet been opened up to the general public, but is on a path. We've seen those with Tesla. We have not seen the company demonstrated an ability to operate vehicles without people behind the wheel on public roads. That's a big leap forward. Now supporters and Tesla enthusiasts will say that fsd, their full self driving technology, which is not fully self driving just yet, it is a driver assisted system which still requires somebody behind the wheel. Supporters would say that's getting very far along and they can see it happening. And Musk talks about how they're going to launch that technology in Texas this year. The robo taxi technology. We'll see. We haven't seen it yet. And when you look at companies that have launched robo taxis like Waymo, it's a many, many year process. The operational part of it, the behind the scenes, the boring stuff, if you will, how you get the cars charged, how you clean out the vomit in the backseat, how you just kind of keep that fleet operating is complicated. It's expensive. It takes effort, it takes discipline. And we haven't really seen Tesla get into the details of how they are going to think about operating all that.
- [36:38]
Scott Galloway
Yeah, we were talking about Waymo on this podcast last week because they're expanding into D.C. and many other cities around America. And something I was noticing is just how much of a difference there is between what they've shipped versus what all the other autonomous companies have shipped. And that is waymo is doing 10,000 rides a week and all the other companies are doing none. Not a single other company has completed a paid passenger ride in one of these Robotaxis. You mentioned Zoox there, for example, by the way. Insane name for a company. It sounds like a Dr. Seuss character to me, but.
- [37:18]
Tim Higgins
Or some sort of prescription drug.
- [37:19]
Scott Galloway
Or a prescription drug, exactly. But, you know, they haven't done anything yet. Nor has Tesla. There's GM's service cruise, which was shut down last year. The way it looks to me, Waymo is way ahead in this market, which seems like it is going to be a very large market. Now. What others would say to me is, well, Tesla has the scale. Tesla has the benefit of the unsupervised driving versus the supervised driving which people talk about. Take us through what the robotaxi market looks like in your view. And do you think I have it right or wrong that Waymo is just light years ahead of all the rest of them, or is it a bit more competitive than that?
- [38:07]
Tim Higgins
I don't think you're wrong in the idea that Waymo's out there doing it. And that means a lot at this point. Now, I understand in tech we can always point to the folks who let the other guys go ahead and learn and then come in and dominate the market. I think of Apple, they weren't the first with a cell phone or a smartphone, and they came in with a better idea and totally cleaned up. Maybe that's what Tesla will do. So we'll see. But Waymo gets a lot of credit for what they've done. It is not just the technology, it's the politics of the situation. It is managing the relationships with the local communities. General Motors crews in San Francisco really suffered from its relationship with the community. Uber technology, when they had their test vehicle back when they were in the business of trying to develop autonomous cars, really suffered when they had a fatality with one of their test vehicles outside inside of Phoenix. These were black eyes for the industry and kind of showed that this is life and death stuff we're talking about here. This is not just shipping software and fixing it down the road. Move fast and break things takes on new meaning when it's multiple thousands of pounds of robots going down the road in the messiness of humanity. It's complicated. Now, the Tesla case argument is somewhat compelling. Right? They are trying to figure out a way to price a vehicle that could be sold to the consumer. That that fleet of vehicles could in part be owned by the consumer. Maybe somebody will have a flock of autonomous vehicles. The owner will then be responsible for maintaining them. This is all kind of like interesting kind of modeling that could, could make sense. But one of the challenges for that kind of idea of a consumer model is the regulatory issues in this country. In the U.S. historically, the federal government has regulated the car and the state governments have regulated the driver, raising the question of who's in charge when the car is the driver. Right now it seems to be the states. And so the challenge is a patchwork of 50 states with 50 different ideas for how these vehicles could be operating. And on top of that, you have local municipalities raising concerns. So there was some thought and investors seemed to reward Tesla in the aftermath of the November elections, that Musk being close with Trump, Musk being in Washington might help Tesla in this regulatory issue in Washington or a few months into the the Trump administration. And we haven't necessarily seen any of those signs yet, but it's still early days for that kind of question. But regulations are going to be a big issue for kind of the Tesla kind of version or vision of the future.
- [41:09]
Scott Galloway
We'll be right back.
- [41:20]
Tim Higgins
You.
- [41:24]
Scott Galloway
We'Re back with property markets. Just want to shift us to some of these other EV makers that have been in the headlines recently. One company we've been talking about a lot and looking at is byd. It's the Chinese electric vehicle maker. Stock is up more than 50% year to date. They recently reported that they had higher sales annually last year than Tesla, which is just striking. We now have a new EV leader. So tell us about byd, what has made this company so successful. And I'd be curious to know how you think it compares with Tesla, both in terms of the vehicles themselves, but also the company as a whole.
- [42:08]
Tim Higgins
Yeah, BYD is a real threat. There are several Chinese companies that are a real threat. And even Elon Musk would talk about the way he sees competition in the market is China being very formidable. It is a place that has embraced the idea of the electrification of the automobile in a lot of ways embraced his vision for the idea of what the future of the car will be. These vehicles, these EVs coming out of China that are for that market are really kind of the next step, if you will, in the consumer product. Much more personal gadget, like, if you will. They do feel like kind of iPhones on wheels, if you will, which is what Tesla really carved as a niche for itself here in the States, in part because the people that are working on these vehicles in China come out of kind of that world. It is perhaps not surprising then, a lot of attention on kind of that personal environment, the touchscreens and being technologically forward byd, the number of new vehicles they have brought out is really almost staggering. In the last few years, we get to that point again about Tesla not having brought out new vehicles in the China market in particular. Really, the Model Y was the last new vehicle for the Chinese market. And that's many years now. And so when you're competing in a place like China that is moving at a rate of speed and development that US Companies, US Automakers are just not geared for, it's a challenge. Even Tesla is a company that was known for moving fast isn't keeping up in a place like China. And in a lot of ways, this was probably the hope of the Chinese government when they allowed Tesla in to be the first foreign automaker to open a factory in country without having to have the requirement of a joint partner, they could be solely US owned. Was the idea that they would spark an EV car revolution, that it would encourage local EV makers to compete. And that's really what we've seen. The challenge for a company like Tesla is can they remain relevant in the China market, which is so important to them. You look at companies like General Motors, which has just fallen off a cliff in that market, which is really incredible, given GM was the original US Automaker, to figure out how to crack that. Such an important market for them saw huge growth, huge development in China. And to see it kind of fall apart in recent years is rather remarkable. And it Is kind of a lesson of, in China, just because you were big once doesn't mean you're going to continue to be big. There are all these upstarts like BYD and a whole bunch of other ones that. And if we were to name them, I think a lot of the listeners would never have heard of them, but are massive at this point. And BYD is taking the world. We don't have them in the us they have some buses, but you can't buy these cars here in part because of these tariffs that we talk about. And so one potential here, if you look at the market for the global auto game, is kind of a two world situation, maybe three worlds. It's unclear how Europe's going to play out. The idea that China becomes kind of the creator of EVs for the world and then is the US kind of left with pickup trucks and SUVs and kind of a parochial kind of market? It seems like we're heading that way.
- [45:49]
Scott Galloway
Yeah. Where does this leave all of the legacy car companies? Because a lot of these legacy car companies, they are making EVs too. And we very rarely mention them in the EV conversation. You know, name any company, GM, Mercedes Benz, Porsche, BMW, everyone's making EVs. Where are they in that process? Are they just. Is it right that we don't include them in the conversation? Are they just old news or are they in the race?
- [46:23]
Tim Higgins
Well, I think General Motors would take exception. They would like to argue that they are in the race. They have invested a lot of money and a lot of time over the years and trying to develop electric vehicles. They have some, but they have, I think it's fair to say, failed to capture the imagination of the consumer in the way that Tesla has. But they're trying, they're trying to bring down price. They're being very aggressive. One of the challenges companies, these traditional legacy automakers have is they make the profits from the sale of. At least in the US they make the profits from the sale of pickups and, and SUVs. Having to go a whole new way is challenging. I mean, we've seen the Biden administration try to put in place kind of a regime that would help these legacy automakers make the transition to electric vehicles. And a lot of money was kind of promised for that. And the idea was to build up a US manufacturing infrastructure to compete against China, to compete against the benefits they have with the battery supply chain and such. And now with the Trump administration, that idea is kind of thrown out the window and a lot of chaos. Has been thrown into that the idea of kind of Trump would call it. It was mandating EVs, though it wasn't necessarily a mandate. He kind of argued it was. There was a push to have a percentage of vehicles go ev, without a doubt. But it's part of this kind of uncertainty that we're seeing in the US automotive landscape among these administrations. What the CEOs of these companies would like probably the most is a policy that stays in place for more than four years so they can plot it out. If you're looking at a seven year window of trying to plot out for your next new vehicle, and in that time you're going to have two different administrations with totally opposite views about how to industrialize the economy, that's a nightmare scenario, which is kind of where we began this conversation of like this is kind of the nightmare scenario for these car company executives who thought things were going to go a certain way and now are scrambling to try to figure out the chaos that they say is ahead of them.
- [48:42]
Scott Galloway
Two companies we haven't mentioned are Rivian and Lucid. I would say those are the other EV leaders in America at least. Where do they stand in all of this? How are they faring at the moment and are they in a similar position? Are they in a similar mess that these legacy car companies are as a result of these tariffs?
- [49:04]
Tim Higgins
Definitely not the same situation as legacy companies. They don't have the benefit of having the legacy product line that still is generating profit in the U.S. rivian has seen, I think, an interesting kind of positioning with its branding. It is not Tesla, it is not Elon Musk. It is producing a vehicle that people seem to be excited about. Both companies, Lucid and Rivian, are probably on that. If we have a scale of vehicles, companies who are like the Koreans who are importing a lot of vehicles and seem to be in looking kind of bleak here with the idea of these tariffs and Tesla on the other end of that, according to at least investors mindset of being largely US done, they're probably closer to the Tesla side of things on the tariff situation. Lucid is an interesting kind of branding kind of deal. They've got a cheaper vehicle coming. I shouldn't say cheaper. I think they'd be upset a more affordable vehicle coming. But they have an interesting branding position. They came out at the high end like Tesla did with the Model S and the idea was to kind of go more mainstream. But what are they at this point? Are they a high end vehicle or are they more affordable? They've Been trying to have lease deals and whatnot to make them more affordable. They've got new product that's interesting. People are excited about it, but they haven't quite hit that scale yet. To get out of that danger zone of you're still a startup car company, right? I know they're public, but Rivian is similar. They're growing pains. It is not easy to start a car company company in the modern era. That's why Tesla was such a remarkable story. And operating as a car company in this kind of environment, this geopolitical environment is a challenge. Then you throw in where are interest rates going to be? Are we going to head into a recession? There's a reason why it's tough to be in the car business, right?
- [51:06]
Scott Galloway
We've talked about all of these different car companies, these car stocks. Is there a car stock or a car company that you think that we're not paying enough attention to right now? We talk a lot about Tesla, been talking a lot more about BYD recently, I would say, but there are so many others out there. Is there a company that you are particularly interested in that you think that we should be paying more attention to either for good reasons or for bad reasons?
- [51:34]
Tim Higgins
Well, you know, it's interesting. I think one of the more interesting car stories of the last 10 years or so is the rise of Hyundai and Kia. They have just developed such a strong position in the US Market, but still a lot of that is coming from outside of the U.S. yes, Hyundai just opened a new factory in Georgia for its EV and hybrid vehicles and they're trying to become more US based. But it'll be interesting to see how they respond to these tariffs and can they respond quick enough. It's a company that has created a very powerful brand and that's not easy to do. That's an interesting company. I think the Germans are also kind of at this inflection point facing real challenges in their home market. Real challenges with that kind of evolution to the EV as well in a similar but different way than the Detroit companies. And watching them play in the tariffs here in the states could be another kind of interesting and eye opening experience. I think of a story one of my colleagues did about Mercedes and how they invested heavily in US factory in Alabama. Yet they still face the challenge that a good percentage of the parts come from outside of the US and so even though they're building here, those vehicles will probably be hit with cost increases. So lots of different simmering dramas around the auto automotive industry. We're already seeing CEOs kind of move in and out of these companies. Always a sign of kind of a critical period, if you will, in the space. A great global drama.
- [53:19]
Scott Galloway
Tim Higgins is a columnist for the Wall Street Journal. He writes about the worlds of autos, media and tech. He became a columnist in 2023 after working for more than two decades as an award winning reporter covering everything from the bankruptcy of General motors to the 2016 presidential campaigns. He is also a CNBC on air contributor and the author of Powerplay, a book about Tesla. Tim, this was great. I'm glad we got the auto update and I appreciate your time.
- [53:45]
Tim Higgins
Well, thank you.
- [53:48]
Scott Galloway
This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead, Isabella Kinsel is our research associate, Drew Burrows is our Technical director and Catherine Dillon is our Executive producer. Thank you for listening to Profit Markets from the Vox Media Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday.
- [54:24]
Tim Higgins
In kind Reunion.