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- [00:01]
Justin Wolfers
Security program on spreadsheets. New regulations piling up and audit dread. It's time for Vanta. Vanta automates security and compliance, brings evidence into one place, and cuts audit prep by 82%. Less manual work, clearer visibility, faster deals, zero chaos. Call it compliance or call it compliance. Get it join the 15,000 companies using Vanta to prove trust. Go to vanta.com calm Adobe Acrobat, your team's home base.
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Paul Kudrowski
Collaborate within a shared PDF space. You've got your docs, your plans, your specs and then invite the crew to build what's next.
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Justin Wolfers
Talk up the teamwork using a 3D render. They think that this design could be a contender, but when somebody wonders what's the next steps, AI helps you finish the rest.
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Ed Elson
Bolts are tight now your plan's refined.
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Justin Wolfers
Run a smoother business when you're all aligned. Do that with Acrobat learn more@adobe.com do that with Acrobat Recommendations can be great. Maybe someone recommended this podcast and here you are. But home projects are a little different. If the podcast isn't your thing, you
- [01:11]
Paul Kudrowski
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Justin Wolfers
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- [01:36]
Ed Elson
Hire the right pro today. Today's number 60. That's how many days it's been since the DAO hit 50,000. The index has since fallen to roughly 46 and a half thousand, which means we were only three and a half thousand points away from from keeping our attorney general.
- [01:59]
Justin Wolfers
Money market madness. If money is evil, then that building is hell.
- [02:03]
Paul Kudrowski
Show goes on.
- [02:08]
Ed Elson
Welcome to Property Markets. I'm Ed elson. It is April 7th. Let's check in on yesterday's market vitals. The major indices rode out a volatile trading session to end in the green. Traders wavered between hopes for a ceasefire and fears of escalation from President Trump. Brent crude climbed again above $110 per barrel. Meanwhile, treasury yields and the dollar were flat. Okay, what else is happening? Trump's deadline for Iran to open the Strait of Hormuz is tonight at 8pm Eastern. So far, both sides have rejected each other's proposals to end the war. President Trump escalated his threats against the country on Sunday, and yesterday he warned that the Entire country could be qu taken out as early as Tuesday. The conflict has already triggered the largest oil supply disruption in the history of the global market, according to the iea. That inflationary pressure gets its first real test on Friday with the release of the March Consumer Price Index data. We also saw the March jobs report last Friday, which provided a snapshot of where the economy was before the war. The economy added 178,000 jobs and the unemployment rate ticked down to 4.3%. However, the hiring rate fell to the participation rate declined and wage growth slowed. Meanwhile, the February numbers were revised from a loss of 92,000 jobs to a loss of 133,000 jobs. A lot there. Here to get the state of the economy, we're doing an economic update with Justin Wolfers, professor of Public Policy and Economics at the University of Michigan. Justin, great to have you on the show again. We wanted to get your update on the economy now that we're in week six of this war. They said it was gonna be four weeks or four to five weeks. We are now extending beyond that. What do you make of what's happening right now, Ed?
- [04:01]
Justin Wolfers
I think the good news is you and I have had a rehearsal for this. So, you know, we spent all of 2025 saying, the President is on edge. The president might be about to do dramatic things that could happen, upturn, how we think about global commerce. The jobs reports looked weak, and then they looked not quite so weak, and we've been on edge. And one thing I could say, Ed, I'm a little older than you, so, grasshopper, it's not always this way. There was a time when I'd be able to do a long and serious interview with it about the economy, understanding that it would have a shelf life of more than six hours. That's not the world we're in right now. So. Look, let me go back and answer your question. I think the jobs report was unabashedly good news. If you didn't update after that and say the economy's a little more robust than I had feared, then you're not paying attention equally when you say that we created. Was it 178,000 jobs in a month in the current moment, if that were the true underlying pace of job growth, you would see me grinning from ear to ear. I'm not grinning from ear to earth. There's some underlying weakness there, which is some amount of this was, you know, a bunch of folks are on strike one month, aren't on strike the next. That gives you a lot of the Healthcare, bunch of people are out because of bad weather, and they're now back because of good weather. And that also plausibly explains quite a lot of what's going on. So it's sort of a fantastic number with a weak underbelly, but does suggest that at the very least, the economy is running somewhat out. You know, it doesn't look like we're in a recession. Our expectations for the rate of employment growth should be substantially lower because we have no population growth. So the US Economy is, to some degree, the little engine that could. The thing I like to see most is that the unemployment rate. I think we should all keep our eye on the unemployment rate, especially right now, because looking at employment is only useful if you know how many jobs we ought to be creating.
- [06:11]
Ed Elson
Right.
- [06:12]
Justin Wolfers
And because of the shock to immigration, how many jobs we need to create is much, much less clear. So the unemployment rate sort of tells us how we're doing relative to how we got to do, and it's moving roughly sideways. That's certainly not a failing grade. It's not incredible success, but, you know, we're doing okay. Coming. So what that says is, on the eve of the Iran war, the US Economy is doing relatively well. Better than pessimists, and I've been a pessimist over recent months would have expected and not as well as the optimists have boasted.
- [06:51]
Ed Elson
Yeah. A couple questions that come to mind. The first is. Well, I'll start with the first question.
- [07:02]
Justin Wolfers
It's a good place.
- [07:05]
Ed Elson
The revision. We keep on getting these down, revisions. And so I look at the numbers that are coming out from this employment report. 178,000 jobs added. And it seems like the way this always goes is we all go, oh, it's not so bad. It's actually pretty good. And then we come back to it a month later and we learn, actually it's like 40 to 50 to 60,000 jobs lower than we originally projected. And in fact, Jerome Powell told us as much. He was literally telling us in the previous Fed meeting that we're basically overshooting the jobs added by around, I think he said, 60,000 jobs each time. So I guess my first thing, I see the number and I'm like, well, I don't even know if this even matters or if this even means anything, because I'm pretty sure that it's going to get revised in the next round. That's the first thing. And then the second thing is, well, now we also have this war with Iran, which is kind of a big deal.
- [08:00]
Justin Wolfers
We have to stop at one thing.
- [08:01]
Ed Elson
Okay, let's go with the first thing.
- [08:05]
Justin Wolfers
Look. So what I don't want you to do is see revisions and say, oh, none of this matters, because what you're looking for is the least bad indicator in a universe of terrible indicators. If it helps you see it that way, that's fine by me. It's hard to see through fog. It's hard to measure an economy of the size and scope of the United States. It's even harder when we're in the middle of so much change, which. And I think this is where you're going with your second question. What happens in March, you know, what happens before the war may be much less relevant than what happens after the war. We could say the same thing with the trade war as well. So it's hard. So you're sailing through fog. What do you do? You pull out your flashlight. The thing you discover about your flashlight is it helps you see about 12ft in advance. And a lot of really interesting stuff is like 13 or 14ft in the future. And that's sort of your point about the revisions, which is we have a rough sense that there's not a massive iceberg right there. Do we know that we're not going to run into a couple of penguins on the way? We could. They might be there. So even with all the revisions, what's true for any sort of serious analyst of business cycles is if you look at the ups and downs of every other economic indicator, payroll still, even with its revisions, is timely. Just came out extremely reliable, even though you just described as extremely unreliable. That's correct. There's some distance between it and the truth, but that distance is shorter, smaller than it is for anything else. And with this extraordinary track record over time, and it's the most watched market indicator, not because guys in markets like to do what everyone else is doing, but because it still has more signal than anything else. So. And then I just want to separate one other issue you described. So there's the revisions. And the revisions are very large. They're actually separate from what Jay Powell was talking about. Jay Powell, where he said payrolls is being overestimated. He's talking about benchmark revisions. So let's nerd out. I know you love to nerd out. Three ways in which each month we learn more about the past and we go back and revise it. The first is what we think of as being revisions. We use the word revisions for it, which is there's a bunch of firms that didn't send in their form last month telling us how many people were on their payroll. They eventually get round to it, and we figure, rather than using statistical extrapolation, let's count what they actually told us. And so then we have to update what we thought happened last month. That's a standard revision, right? Second thing not many people appreciate. The following is also seasonal adjustment, which is a very complicated beast. We update the seasonal adjustment factors every month. And so some of the. There's a further revision. There's a revision to the non seasonal adjusted data. That's the new forms that come in. There's also a revision, usually pretty slight, to the seasonal factors. So how much of it we think is the ups and downs of summer and winter? And then the third thing that happens is what we have at any point in time is a sample of the population of all firms sending in their forms. But to know what that means for the economy, we have to know whether that's a 1% sample or a 2% sample. We have to know what share of the economy is being featured. And we also have to make sure that it's representative of small firms and large firms and all of that stuff. That's what's called the benchmark revision. The benchmark revision is we go to a new universe of firms and we say, oh, this sample we have, how representative is it? Let's rescale things once we know how representative or unrepresentative it is or isn't. The near universe is called the qcew. It comes from unemployment insurance records. And what we saw through 2024 and early 2025 was that there were fewer firms than we'd implicitly been assuming. And we will get a benchmark revision much later in the year or some distance away from it. But we see early data from the numbers that are used as an input to that benchmark revision. And that's what Jay Powell's talking about where he says, I'm expecting another revision to come. He's not talking about the monthly revisions. He's talking about the annual benchmark. It all matters because it's all he's saying. What's going on right now probably overstates the extended job growth, but it's not gonna get washed out next month. It'll get washed out. It'll get fixed up in several months with the benchmark revision. Sorry if that was boring.
- [12:38]
Ed Elson
No, no. It's helpful to understand exactly what goes into this, Stu. It's interesting because these things, they're so important to the cultural conversation and the economic conversation. But Then there's a lot of caveats and details that sort of get lost in the complexity of it all, but people should really know about it. I do want to pivot to what's happened with Iran here, because what is so interesting is that employment report comes out, big deal. Very important for someone like you as an economist. But then we also see this message. I'm going to read it verbatim from the president. Quote, Tuesday will be power plant day and bridge day all wrapped up in one in Iran. There will be nothing like it. Open the fucking straight, you crazy bastards, or you'll be living in hell. Just watch. Praise be to Allah. President Donald J. Trump. I guess my question for you, which one is more important as an economic piece of data or economic piece of news to you as an economist? That tweet or the employment report?
- [13:40]
Justin Wolfers
The tweet. Yeah, the tweet. For two reasons. One, this tells us something about the future of the war. The war is overwhelmingly the most important economic thing going on right now. You don't have to be too much of a careful student of history to understand that wars have enormous implications for politics, for economics, for geopolitics, for our ability to do business with each other, for our future defence budgets, for those of our allies and our former allies, for our fiscal situation and, in fact, for our monetary situation. So the way this war will have direct effects through oil and indirect effects through geopolitics, defense and all the stuff that I feel somewhat unqualified to opine about. The problem, of course, is the folks who understand that stuff don't understand economics very well. No one's really qualified.
- [14:33]
Ed Elson
We need someone to talk about it. I think you're the guy. You're as good as we're going to get here.
- [14:38]
Justin Wolfers
Well, I'll be honest about what I don't understand. I think that's probably the most useful role that I can play. But I think there's a second thing, no less important, that we learned in that tweet. And we saw the same dynamic actually play out during the trade war. During the trade war, there were some really important moments, particularly around Liberation Day and the aftermath, where the market movements were enormous, even though what the President was doing was pretty small. And I think what was happening was markets were updating on this fundamental idea of how competent is this administration, how much do I trust it to react in a way that defends America's interests to challenges that come our way? And some of the lunacy around Liberation Day led to the sell America trade. If you Remember that language? And it led to, I think, an outright lack of trust in the administration. When you have a president using. I'm a parent, Ed. My kids would be in trouble for that tweet. They'd be in trouble for swearing. But fuck that, I'm okay with swearing. Trying to offend people about their deeply held religious beliefs at a moment where what's actually more important is that you both find a path forward towards peace is inane, insane, and does not serve America's interests at all. And so what we're learning from that tweet is not just something about the process of this war, but what's going to happen over the four years. Right. How much better do you feel about, I don't know, the next thing to come around the corner? What if it's a drought? What if it's an earthquake? What if it's a pandemic? What if it's. I mean, just a productivity slowdown? What if AI does something crazy? Whatever it is? How reassured do I feel that the President is going to make smart choices with our enormous military and scientific might in a way that leads to a more productive future? I feel much less confident. There are very real questions about the President's judgment. There are questions about his age. There are questions about his mental acuity. And if not that, then there are questions about his political strategies and his understandings of economics. I made that list broad, so I can include folks who are somewhat on the conspiracy side, but also at the other end, just, these are questions of judgment. Do you feel well led? Do you feel confident? Do you think now is a good time to invest in the United States? Or would you like to see some of these big issues resolved before you're gonna lay down millions or billions of dollars on a major investment here?
- [17:26]
Ed Elson
Yeah, just before we let you go, I mean, the idea is that by Tuesday evening, we have some sort of a deal and some sort of a ceasefire in some capacity, this comes to an end, or we get a signal that it's coming to an end. Whatever. That's the idea. I know you're not a geopolitical expert. I know you're not a military strategist, but you are a smart person who pays attention to what's happening and pays attention to the implications of what will happen. Do you think that this is gonna end anytime soon?
- [17:58]
Justin Wolfers
I hope and pray, and I'm not even religious. I think the stakes. You know, I think the only smart thing I can say that's moderately informed, that comes from my expertise, is the stakes here are really, really large. I will spend the next 24 hours on the edge of my seat. I am deeply worried. I worry partly because I care about the consequences for the American economy. I worry partly because I care about the consequences for the global economy. And remember that many of the consequences of our actions are being felt 2 times, 4 times, 10 times larger in other countries. And I worry because there are people around the world right now living in fear, and we should never lose sight of that. And great leadership is about removing that fear, giving us all the capacity for joy and safety and freedom. And it's a really, really critical few moments right now for trying to help spread that freedom around the world.
- [19:03]
Ed Elson
Justin Wolfers, professor of Public Policy and Economics at the University of Michigan. Justin, always appreciate your time. Thank you.
- [19:11]
Justin Wolfers
Pleasure mate.
- [19:14]
Ed Elson
After the break, an update on the AI IPO race and if you're enjoying the show, please follow our new Prof. G Markets YouTube channel. The link is in the description.
- [19:31]
Justin Wolfers
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Ed Elson
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Justin Wolfers
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Ed Elson
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Paul Kudrowski
Please consult a qualified tax professional.
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Justin Wolfers
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Paul Kudrowski
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Paul Kudrowski
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Ed Elson
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Justin Wolfers
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Paul Kudrowski
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- [22:37]
Ed Elson
We're back with profgumarkets. OpenAI and Anthropic are racing towards what could be the largest IPOs in history. The Wall Street Journal obtained conference confidential financial documents from both companies, giving us the first real side by side look at their books. Both companies are growing quickly. OpenAI has reached $25 billion in annual recurring revenue, while Anthropic is at 19 billion. But they both share the same problem. The cost of training these new AI models is devouring their margins. OpenAI expects to spend $121 billion on computing power in 2028. Anthropic plans to spend roughly $30 billion. Meanwhile, there is drama inside OpenAI. The company's CFO, Sarah Fryer, reportedly told colleagues that the company isn't ready to go public this year, and that put her directly at odds with Sam Altman, who is pushing for a listing in Q4. Since those comments he has reportedly cut her out of key investor meetings. Lots to discuss here. Here to discuss the state of the IPO race. And he's already laughing. His Paul Kudrowski, managing partner at SK Ventures. Paul, thank you for joining us. I guess we'll. What's making you laugh right now?
- [23:53]
Paul Kudrowski
You know, what it reminds me of is there's this great horror movie trope where the heroine is inside the house towards the end of the movie, and she's talking about how what's going on, and she feels really threatened, and somebody jumps on the call and says, the call's coming from inside the house. Get the hell out. This is kind of that, right? I mean, it's literally. I've been around this stuff for decades, to my shame. And a public ipo, an ipo, candidates, companies, CFO saying that we think we should probably not go public just doesn't happen, right? The job of the CFO is to say yes, and alternatively, we could be sued for that. And that's really it. That's all you're supposed to say. As a cfo, you really. You've got like, sort of two options, right? Option three is not. You know, I kind of feel a little bit meh about the IPO thing, that option 3 doesn't really exist. So this is really unusual. And to be somewhat serious, I mean, the idea that someone would say this at this point in the process and then potentially be cut out of conversations with respect to the book building and putting together documentation with respect to the ipo, and that someone happens to be your cfo, which is the primary reporting officer from an SEC standpoint, in terms of bringing the company public is, to use the technical term, ridiculous. I mean, it's just ridiculous.
- [25:11]
Ed Elson
So. Well, I mean, just so that people know, I mean, you were an engineer, you were a tech equity analyst. Now you're an investor. So you have seen this world before. I guess the question becomes if it is ridiculous, and I happen to agree, is it because the CFO is the problem here, Is it because she's doing her job wrong, or is it because the company is the problem? The company isn't ready to go public. It's in such a bad position that she is actually maybe doing a good thing by saying, hey, we really shouldn't do this.
- [25:45]
Paul Kudrowski
She's right. But it doesn't matter, right? If the CEO wants to take the company public, and your view as the CFO is we should not go public, then you're at the wrong company. I mean, it's literally that straightforward, right? You can't have that kind of disconnect. This isn't providing guidance to Pete Hegseth before he sends troops into Iran and saying, pete, I'd rather we didn't do this right now. It's like, no, dude, you're fired. That's not the advice I want right now. Here's the advice I want right now. And the same thing applies in the context of OpenAI. You're simply telling people in a very strange way that you're at the wrong company. Which, by the way, to your point though, she's not wrong. I mean, there were all kinds of things that were just wacky in the Wall Street Journal article. The accounting treatment of Frontier training, the provisions with respect to suspending the NASDAQ requirement to becoming part of the index. All of these things raise all kinds of problems that will all become obvious over the next 12 months. So the problem, the idea that in some sense this company should not be going public right now is much broader than just their unit economics suck or some such thing like this. It's a much broader problem than that. It's more systemic about the nature of what's going to happen when multiple trillion dollar market capitalization companies come to market in the course of 2026. This is like a economic shock treatment because you have to think about where's the money going to come from that flows into these. Well, it's going to come from a host of other companies who happen to be very liquid traded and overlap. Well, who are those guys? It's Google, Microsoft, Amazon and others. So money is going to flow from those places into these places because in a sense, you're being forced to by putting them into the index so quickly. Because index ETFs must immediately purchase the stock. They don't hold cash. They're not like somebody with a bag of money in the basement. They have to sell something else to move it over there. And so you're going to see this giant series of tsunamis of cash flows that are going to be wildly disruptive, all because this thing, this behemoth, these three behemoths are coming public this year.
- [27:49]
Ed Elson
So much there. And it's so interesting, almost your answer to my question is like it's both a problem that the CFO is making a mistake and also the company is not in the right position. It's sort of like a double whammy of badness.
- [28:01]
Paul Kudrowski
Well, in a triple whammy. It's also systemically problematic because of the amount of money is going to cost. You can Model it out. And hedge funds are doing it right now. I mean, one of my side gigs is talking to a lot of some of the largest hedge funds on earth and they're all already looking at this and saying, okay, the outflows from these places are going to do what to their share prices? Okay, then that has to mathematically happen because I have to fund my purchase because of this new requirement that they can be in the index very, very quickly. So what does that mean? It's kind of like a giant index rebalancing exercise. It's going to have consequences for one group of companies and consequences for another group as this great big pile of money goes swooshing through the economy. So there's high level issues and lower level issues, not least of which is this bizarro method that they want to use to hand to handle frontier model expenses. So the issues are legion.
- [28:51]
Ed Elson
Tell us a little bit about what you make of the business itself. I mean they just crossed $25 billion in ARR. They are the number one AI company. They have a ton of users. I guess it starts to get a little crazy when you look at the valuation, $852 billion as of this most recent round. What do you make of the business revenues? Yeah, yeah. What do you make of, of I guess the valuation and also the fundamental business itself.
- [29:16]
Paul Kudrowski
The unit economics are negative, meaning they lose money on every unit they sell that hasn't changed. And the way they try to get around that is by excluding their largest, most material and most predictable cost, which is frontier model training. So the line of pattern is that, and this was part of the Wall Street Journal piece was let's look at their earnings, excluding frontier model training. Excluding model training. And on that basis, I think it was OpenAI said in the pie or that the implication was in the piece that they'd be cash, could be cash flow positive in a very modest way. I think it was in 2029 or something like that, if you exclude those costs. But that's a ridiculous exercise because those are not costs you can exclude because that is a persistent annual expense that they concede in the piece is actually both accelerating and becoming more expensive. And so that's not a cost that's going away. So excluding it is a fundamental misunderstanding of the nature of their business. So to do that or by doing that you can make the unit economics appealing, but it's a misnomer because the unit economics are driven by these, by the models themselves, by their own admission that if they were to stop spending on Models today subscribers would move somewhere else.
- [30:26]
Ed Elson
Yeah, you're reminding me of just sort of a very simple truth which I feel like was top of mind for me and for many others maybe a few months ago, which is like this business actually isn't a good business when you just look at how it works. As you say, look at the unit economics. And in a way I've sort of forgotten that over the past couple of months I think because there's a lot of other stuff that's happening also. I mean Anthropic has made a pretty incredible push and we've seen a huge increase in their ARR recently, especially after what they had with the Pentagon. I mean, I tend to sort of draw a line in the sand between OpenAI and everything else. But how do you view the AI ecosystem? Are you as bearish on Anthropic, for example, as you seem to be on OpenAI?
- [31:20]
Paul Kudrowski
No, but only because OpenAI has probably one of the more bizarre management structures out there. There's a New New Yorker piece out there talking about this as well and I don't see how they're a long term survivor here for a bunch of dysfunctional reasons. Not just the unit economics, but also the management structure. So no, not as bearish, but they have the same unit economics problem, which is to say that they're face this giant problem of having to train very, very expensive models to more or less stand still. And they're seeing declining returns to training those models which are largely masked by the emergence of these very effective so called orchestration layers like Claude Code or Codex, which in a sense are like, I often argue are like really effective nannies who have to deal with really bratty kids. The bratty kids are the models. The really effective nannies are Claude Code and Codex. Most of the value is shifting if you think about it in operating system terms, or shifting towards these orchestration layers. And I sometimes joke that the model company that survives will be the first one to abandon models and just sell orchestration layers and things on top because the models are the problem. That's the capex that's breaking the unit economics at Anthropic and Codec and OpenAI. So in a weird, almost as a thought experiment is at least worth thinking about what happens as this realization finally hits hard and these companies are public and they're finally being really and truly punished for this massive capex. I wouldn't be surprised to see them rapidly shift and just become rappers on other things.
- [32:44]
Ed Elson
How do you think this ultimately all plays out? Because essentially what you're describing is yes, this, this technology is quite incredible and yes, a lot of people are using it, but from a business perspective it doesn't make any sense because it's too expensive to operate and to train and to run. And therefore, if we were to play this out over the course of several years, my mind goes to maybe AI just doesn't really happen in the way that we expected because maybe in some sense the money runs out. I mean the VCs and the Nvidia's of the world are essentially paying for this right now. But I guess what happens 10 years down the line.
- [33:21]
Paul Kudrowski
Yeah, well, it's not going to take 10 years. If only we were so lucky as to have it play out for 10 years. For me, it ends up looking kind of like the enthusiasm that led to rural electrification in the US in the 1920s where there was this incredible explosion of excitement. It was going to be transforming, it was going to be a growth industry, it was going to be ubiquitous and inside of everything. And it kind of disappeared like you can't really see it anymore electricity until at least the, the AI explosion of demand for training was kind of disappeared into the woodwork. And I think AI will rapidly do the same thing. It'll be almost like a utility like service, maybe a utility like service that kills us all and turns us into paperclips, but it's still going to be utility like service. And so in that sense the valuation accorded to it will change really rapidly. So my hunch is it's one of these classic industries that you see kind of a double and then, you know, then everything just sort of, the wheels fall off and everything falls by half or more. And so I think there'll be this incredible retail driven enthusiasm for these IPOs. It'll cause a huge amount of money sloshing around in the market, some huge dislocations and some of the other names out there and then eventually these guys are going to get punished for their capex. And what do they do about it? Do they cut it or do they, or do they do. What I'm suggesting, which is that some of them will actually move to just being pure wrapper companies. I have, you know, that's, that's a viable option.
- [34:33]
Ed Elson
Right. Just before we let you go here, how do you. Something I often think about with OpenAI, with anthropic, even with something like XAI, I'd be fascinated to know how these companies, how these, the shares would be performing if they were publicly traded. That's always my number one question, whenever I see any news related to OpenAI, the valuation keeps going up and up and up, but it almost seems like a fake valuation in a lot of ways.
- [34:59]
Paul Kudrowski
So you're seeing that already in secondary markets, though in secondary markets, Anthropic is performing much better than OpenAI. Demand for OpenAI shares in the secondary market, which is to say among people who already hold the shares through various other transactions, is already much weaker than the demand for shares of Anthropic. Now, some of that's purely valuation driven, but it's also a nice tell about the nature of how institutional investors and others already feel about the relative merits of the two companies.
- [35:24]
Ed Elson
Yeah. So I assume that. I mean, it sounds like you think the company's going to go public. A lot of retail demand, because what other AI company are you going to invest in? Very exciting. But then, well, because the Chinese AI
- [35:36]
Paul Kudrowski
companies are doing really well and people want, people want. There's a huge appetite for financial instruments. Just look at what happened with five or six now Chinese retail AI IPOs. The same thing's going to happen here.
- [35:46]
Ed Elson
Yeah, it's really, really interesting. Okay. Paul Kudrowski, managing partner at SK Ventures. Paul, that was very, very interesting and we'd love to have you back again soon.
- [35:56]
Justin Wolfers
Sure.
- [35:57]
Paul Kudrowski
Great.
- [36:02]
Ed Elson
In related news, OpenAI is getting into the podcast game. The AI company just acquired TBPN, a technology talk show that's become quite popular in Silicon Valley. How much did OpenAI pay? Well, we don't know, as the sum was undisclosed. However, there have been some rumors. According to the Financial Times, the deal was in the quote, low hundreds of millions of dollars. And I was also told separately by someone who knows people familiar with the deal, that the company was bought for $200 million. So we don't know the exact numbers, but either way, OpenAI bought a podcast and they paid, paid a lot of money for it. And it is especially a lot of money when you consider the fact that actually this podcast, while it is popular, it isn't that popular. In fact, their live streams, which is how they distribute the program, only receive roughly 7,000 views per episode. For context, this show, Proftry Markets, reaches roughly a quarter of a million people per episode. So why would OpenAI pay this much? Why would they pay what Spotify paid for the Joe Rogan podcast, for example, which was the most popular show in the world at the time? Well, there are a few reasons. Number one, OpenAI wants influence in the tech community specifically, and that is a very hard demographic to reach, which TBPN really owns number two. They probably wanted some marketing savvy in their organization, so they paid a premium for that. And most tech commentators have talked about this. But the third reason is less discussed and it is perhaps the most important reason, and that is that OpenAI actually wasn't paying for a podcast per se. What they were paying for was clips. Yes, clips. Those short one minute videos that you see on your social media feed every day. Those are actually very important and they are in fact fact the backbone of TBPN along with every new media organization on the rise. And here's the secret. While TBPN's live streams average only 7,000 views per episode, their clips average more than a quarter of a million views. And in addition, unlike most media companies, this media company sells their ads directly into their clips. They'll say things like this clip was brought to you by insert large corporation. And that is how they're making their money. That is why they just got bought for $200 million. It is an incredibly smart move, but it also says something about the media environment in which we now find ourselves. Think of any rising star in media right now and ask yourself, what do they all have in common? How did say, Nick Fuentes, the far right white nationalist, become the viral sensation that he now is? The guy who is feared and talked about by political leaders on the left and on the right. Did he do it with his live stream? No, his show only gets around 20,000 viewers per episode and it's only available on a platform called Rumble. No, he did it with clips and that is every day. Nick Fuentes clips go viral on X and on Instagram and on TikTok. In fact, one of his most recent clips received nearly 11 million views in less than two weeks. That is equivalent to the number of people that Fox News reaches over the course of two months. The same goes for the latest Gen Z looks maxing Star Clavicula, who you might have heard of. His live stream averages only 16,000 viewers. That's really nothing. But his past 10 clips on TikTok have reached 70 million viewers. That is more than than the population of France. Almost every new media sensation has leveraged this format, from Hasan Piker to Andrew Tate to MrBeast. In fact, it has now created an entirely new economy. Content creators are now paying agencies to create clips of their content and distribute them across the Internet. Andrew Tate, for example, actually pays his community of fans, of which there are a hundred thousand, to post clips of him. Mr. Beast just launched a clipping platform where he pays Clippers to promote his new shows. In fact, one live streamer called Neon actually revealed on his show how much he pays his clippers. Someone asked him, how much do you pay all of your clippers each month? To which he replied it was anywhere
- [40:33]
Paul Kudrowski
from 750 to like 900amonth.
- [40:37]
Justin Wolfers
Why? What are they posting?
- [40:39]
Ed Elson
I'll be your clipper.
- [40:40]
Justin Wolfers
What the.
- [40:41]
Ed Elson
No, you're doing great. I will clip you.
- [40:42]
Justin Wolfers
View a million dollars? No. Well, it's spread out with around like 400 people.
- [40:47]
Paul Kudrowski
Okay, so 400 people was like their base pay. It just depends on their view.
- [40:50]
Ed Elson
So it's all based on how many views they're getting. But my top guy this month is getting like 170.
- [40:55]
Justin Wolfers
170,000amonth?
- [40:57]
Paul Kudrowski
Yeah.
- [40:57]
Ed Elson
So there you have it. Content creators are now paying people nearly a million dollars a month just to create clips, which means that we have now officially entered into the clip economy. Clips are no longer a secondary medium. They're not promotional material for your main show. No, clips are your main show. They are where all the action is happening and increasingly, where all the money is being made. So what does this mean for media companies? Companies like us? Well, it means you need to get better at clipping, and more importantly, you need to get better at monetizing your clips. Will this be a good thing for society? Will it make audiences smarter, more informed? No, quite the opposite. And perhaps we can dig into those implications another time. But for now, let's recognize what is happening here. The future of media, whether we like it or not, is in the clips. Okay, that's it for today. This episode was produced by Claire Miller and Alison Wild, edited by Joel Patterson and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Shalon, Isabella Kinsel, Kristen o' Donoghue and Mia Silverio. And our social producer is Jake McPherson. Thank you for listening to Profit you Markets from Profit Media. If you liked what you heard, give us a follow. I'm Ed Elson. I will see you tomorrow.
- [42:28]
Justin Wolfers
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Ed Elson
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Justin Wolfers
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Ed Elson
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Justin Wolfers
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Ed Elson
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Justin Wolfers
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Paul Kudrowski
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