Red Flags at OpenAI — How One Company Could Burst the AI Bubble

Summary

Prof G Markets — Episode Summary

Episode Title: Red Flags at OpenAI — How One Company Could Burst the AI Bubble
Date: November 10, 2025
Hosts: Scott Galloway & Ed Elson

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Overview

This episode dissected alarming developments at OpenAI and the potential systemic risks to the entire artificial intelligence sector—and, by extension, the stock market. Hosts Scott Galloway and Ed Elson discussed leaked memos, questionable financial management, and tone-deaf leadership moments at OpenAI, painting a vivid picture of how a single company’s collapse could trigger an AI-driven market crash. The episode also covered shifts in prediction markets, the proliferation of what the hosts call a “casino economy,” and the rise of gambling-like financial products. Finally, the hosts explored the Supreme Court’s take on presidential tariffs and the emerging market for associated legal claims.

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Key Discussion Points & Insights

1. Red Flags at OpenAI: A Crisis of Confidence in AI’s High Priest

• Ilya Sutskever’s Deposition:
  • The co-founder’s testimony revealed he recommended Sam Altman’s firing for a “loss of confidence” and a “consistent pattern of lying.” (09:03)
  • Ed Elson: “That was not good for OpenAI.” (09:18)
• Altman Melts Down on Brad Gerstner’s Podcast:
  • Altman, questioned about OpenAI’s massive future spending ($1.4 trillion) and its mismatch with current revenues (~$13B), snapped at Gerstner:

    “If you want to sell your shares, I'll find you a buyer...I think there’s a lot of people who would love to buy OpenAI shares.”
    (Altman, played at 09:51)

  • Ed: “I couldn't think of a more defensive, frantic kind of sociopathic response.” (11:53)
  • Altman abruptly leaves the podcast minutes later. (17:50, paraphrased)
• CFO Sarah Fryer Seeks Federal Backstop:
  • She told The Wall Street Journal OpenAI sought government help for future data center funding, then walked it back.
  • Scott: “All of this is a signal headed towards an IPO...The company is definitely going to file, in my opinion, sometime in 2026.” (12:05)
  • Scott: “No CEO that’s held onto their job turns around and says, ‘Well, if you don’t like it, you can sell your shares.’” (12:36)

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2. The Market-Wide Stakes: How OpenAI’s Finances Underpin the Bubble

• The AI Backbone:
  • The hosts argue AI investment (anchored by OpenAI) is “holding the entire stock market together.”
  • Ed: “AI has been responsible for 80% of the stock market returns since ChatGPT was launched... If you didn’t have AI, GDP would be flat this year.” (14:18)
• Unsustainable Promises and Potential Collapse:
  • OpenAI’s projected $1.4 trillion spend dwarfs its resources.
  • Ed: “We added up all of the investments they have in the pipeline, the cash they have on the balance sheet—it’s about $150 billion. So they’re short $1.2 trillion.” (17:03)
  • Ed: “They’re going to have to go for some debt...and that could be the beginning of the end for the AI bubble.” (17:37)
  • Historical parallels: railroads, electric grid, dot-com, and housing bubbles all burst when credit dried up after periods of over-leverage.
• Scott’s Take on Investor Risk:
  • “When 40% of the S&P is riding on 10 companies, if they get cut in half, nobody gets out alive.” (22:05)
• Potential Bubble Poppers:
  • A “narrative shock” is needed—major defaults, fraud revelations, or inability to raise funds.
  • Ed: “If you had to bet on a story happening, it is the implosion of OpenAI. There is nothing else.” (25:24)
  • Scott: “These circular deals feel like late-stage. I don’t know if it’s '98 or '99, but... if these companies get whacked...the strafe and shrapnel here is going to be extraordinary.” (21:07)

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3. Comparisons to Historic Tech Meltdowns

• Noted recent tech drawdowns:
  • Meta lost 2/3 value in 2022 (rebounded since)
  • Nvidia dropped 58% in 2022 (rebounded)
  • Netflix fell 70% in a recent year
• Scott: “What do they all have in common? At some point, in a 12-month period, they were down between 50-70%... The problem is: if these guys go down 50-70%, the impact is going to be much more dramatic. There’s going to be nowhere to hide.” (27:02–30:40)

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4. Why OpenAI Could Be the Weakest Link

• Leverage & Financial Mismanagement:
  • The difference between a survivable drawdown and collapse is leverage.
  • Ed: “OpenAI is a fucking trainwreck from a financial management perspective.” (33:05)
  • Reports that deals lack legal counsel, contracts are vague; CFO says government bailout may be required.
  • Scott: “I think this is the mother of all fucking jazz hands, these agreements.” (34:47)

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5. Tariff Case at the Supreme Court: Prediction Markets, Arbitrage, and Epic Bets

• SCOTUS appeared skeptical of presidential authority to unilaterally impose tariffs.
• Prediction markets dropped Trump’s odds of winning from 45% to 23%. (43:35–44:36)
• Massive opportunity in legal claims for companies who paid tariffs if the ruling goes against Trump.
  • Scott: “The price may already...my guys are going to call me back and say, oh, prices have doubled. But I think this is going to become a really interesting market that we’re going to hear about, that’s going to be actively traded.” (66:48)
• Parallel drawn to FTX bankruptcy claim market—for opportunistic investors.

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6. The Casino Economy: Prediction Markets, Young Men & Social Risks

• Massive growth in Robinhood, Kalshi, Polymarket, and prediction/gambling-like markets.
  • Sports betting leads to a surge in personal bankruptcies (up 28% post-legalization).
  • Disproportionate harm to young men and low-income groups.
  • Scott: “Gambling has the highest suicide rate of all addictions... No one has any idea, and he decides, okay, I’m in too deep.” (55:34–58:39)
  • Story: Alex Kearns, a 19-year-old Robinhood user, received an errant margin message and committed suicide after being unable to reach customer support. (58:29)
• Rebranding risk—gambling is labeled “prediction markets” or “trading,” masking dangers.
  • Ed: “My view on gambling is, you know, it's gambling when you see it...day trading, options trading...sports betting, crypto trading, meme stocks...all of this stuff is gambling.” (61:48–63:20)

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7. The Trump Administration and the Casino Economy

• The administration is aggressively pro-casino: pardoning crypto figures, deregulating, launching official prediction markets.
  • Ed: “The government and the administration is deciding for one reason or another that we like this stuff and we should have more of it...I guess my question to you is: why do you think that Trump and the administration has decided pro-gambling, pro-casino economy?” (63:53)
  • Scott: “Well, I'm going to go out on a limb here and say that perhaps his own economic enrichment supersedes his concern for the public.” (64:03)
• Scott’s Advice:
  • “If you want to gamble, gamble. But call it what it is and assume you’re going to lose it all... The danger is when you think this is investing and you're going to make money. You're not. These companies aren't building anything—the reason they're worth so much money is that over time, everybody loses.” (65:47–66:13)

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8. Notable Quotes & Memorable Moments

• On OpenAI’s financial hype:

  “This is the mother of all fucking jazz hands, these agreements.”
  (Scott Galloway, 34:47)

• On the AI-anchored market bubble:

  “AI is what is holding the stock market together and also holding the economy together.”
  (Ed Elson, 14:23)

• On Altman’s defensive outburst:

  “You couldn't think of a more defensive, frantic kind of sociopathic response...He had a meltdown. And what wasn't included in that recording is the fact that a few minutes after that, he randomly bailed on the podcast and left the Zoom.”
  (Ed Elson, 17:14)

• On risk to investors:

  “If these companies get whacked and go through the same cycle as every other great technology company, the impact it’s going to have on everything is going to be much more dramatic. There’s going to be nowhere to hide.”
  (Scott Galloway, 30:33)

• On prediction markets and gambling:

  “Prediction markets are not gambling, but a form of financial market exchange. Yeah, we're not that stupid. This is gambling.”
  (Scott Galloway, 58:20)

• On historic skepticism:

  “There should be a line of separation between respectable stockholders and mere unprincipled gamblers.” — Alexander Hamilton, 1792 (quoted by Ed Elson, 66:13)

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9. The Week Ahead

• Earnings: Rocket Lab, AST SpaceMobile, Paramount/Skydance, Disney in focus.
• Scott’s Investment Focus:
  • Claims on tariffs could be the next hot private asset class, with SPVs likely to open it to more investors soon. (67:38–67:50)

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Conclusion & Takeaways

Prof G Markets delivered a dire warning about the AI-driven market exuberance, drawing a direct line from OpenAI’s unchecked promises and corporate dysfunction to existential risk in capital markets. The proliferation of “casino economics” and gambling-inspired financial products compounds these risks, especially for young male investors. Galloway and Elson pressed for skepticism toward hype, sobriety around speculation, and clarity on the difference between investing and gambling—while highlighting rare asymmetric opportunities for those willing (and able) to exploit market anomalies, such as tariff claims.

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Selected Timestamps for Key Segments

• 09:03: The OpenAI “loss of confidence” deposition and Altman’s podcast outburst
• 12:05: Scott on Altman’s investor missteps
• 14:18: AI’s outsized role in driving market returns
• 17:14: Ed on Altman’s lack of answers and podcast bail
• 22:05: Scott on systemic risk to the S&P from big tech concentration
• 27:02–30:40: Tech drawdowns and risk of a bigger crash
• 33:05: Ed on OpenAI as a “trainwreck” financially
• 43:35: Supreme Court skepticism over Trump’s tariff authority
• 55:34: Robinhood, prediction markets, and the casino economy
• 58:29: Story of Alex Kearns and the dark side of retail options trading
• 63:53: Why the Trump administration supports the “casino economy”
• 66:13: The Alexander Hamilton quote on gambling vs. investing

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Summary prepared for those who want a clear, sharp understanding of the market’s biggest present risks—especially the mounting evidence that OpenAI’s red flags could become the match that lights a historic market fire.

Transcript

[Scott Galloway]

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[Ed Elson]

This building to get to where they need to be.

[Scott Galloway]

Welcome to the pitch season 14 where startup founders raise millions and listeners can invest on this season of the show. 10 VCs, 7 startups with one shot to build the company of their dreams. Oh my God, we built the entirely wrong product. Two shots to build the company of their dreams with that intro.

[Ed Elson]

Let's go.

[Scott Galloway]

Season 14 is available now wherever you listen to podcasts, so subscribe to the Pitch so you don't miss it. This season is presented by Adobe. As marketing channels have multiplied, the demand for content has skyrocketed. But everyone can make content that's on brand and stands out. With Adobe Express, you don't have to be a designer to generate images, rewrite text and create effects. That's the beauty of generative AI that's commercially safe. Teams all across your business will be psyched to collaborate and create amazing presentations, videos, social posts, flyers and more. Meet at Adobe Express, the quick and easy app to create on brand content. Learn [e-mail] Express Business Today's number 63. That's how many hours Americans spend in traffic each year. Ed Trustee I was driving down in Florida with my 13 year old son and of all things, a dildo hit the windshield and trying to protect his innocence. I said oh my God, did you see that bug? And he said, yeah. I can't believe bugs have dicks that big. What'd you do last night Ed? What'd you do?

[Ed Elson]

I went to your book launch, Scott.

[Scott Galloway]

Say more. You're not getting up that easy.

[Ed Elson]

I had an incredible time. I met many of your friends who are wonderful people. You had your 92nd Street Y performance with Ben Stiller. I don't know what you'd call it, but I do know that it was the fastest sellout in the history of the 92nd Street Y. I don't like.

[Scott Galloway]

These commercial metrics, Ed. That was so nice, wasn't it? I was really happy with that I.

[Ed Elson]

Had a great time. It was great to see you.

[Scott Galloway]

You forgot that I was on the Daily show right before that.

[Ed Elson]

I forgot, yes. That's a very good point. You were on the Daily Show.

[Scott Galloway]

Second time I started crying this week. Jordan Klepper actually had to reach across and grab my hand. That's a good look.

[Ed Elson]

I'm a little annoyed that they're not putting you on with Jon Stewart though. They're giving you sort of like the, the Jon Stewart's Ed Elson's to interview you. What's going on with that?

[Scott Galloway]

Jon Stewart intimidates me. I think I'd be too nervous. But yeah, I love, I love Jordan. He just his type of humor really. And I get the sense, I kind of relate to him that maybe he was tall and didn't have a lot of social capital in high school. So I sort of relate to him like little too tall and he's got a five year old kid. Yeah, I like.

[Ed Elson]

God, I love.

[Scott Galloway]

I think they, they've done such an amazing job. Backup cast. God, how do I find better people? Memo to self. How do I get better people? Yeah. I'm about to head on the Pivot live tour. Seven cities in seven days.

[Ed Elson]

When is the markets live tour happening?

[Scott Galloway]

We'll do one next year. I think we'll do one in Q1 of next year. So if you're watching this YouTube, tell us which cities we should go to. I just thought it was so funny. We're doing Toronto, DC, New York, Boston, Chicago, San Francisco, LA and I thought the funniest comment was why do you hate Arizona? So funny.

[Ed Elson]

We'll do it. Phoenix 2026.

[Scott Galloway]

Yeah. So if for those of you watching this pod, we're going to be doing a profiting Markets live tour and whoever has the most comments from any city, we don't care if it's Madison or I don't know, whatever Little Rock will come to that city. If we get a lot of comments.

[Ed Elson]

Who are going to be the groupies?

[Scott Galloway]

Well, this is the problem. This is what I'm scared of. Don't tell her I said this, but whenever we do a live tour, more people come up to see me than Kara. And it really pisses her off. It really pisses her off. And I have this really awful dread that the same thing is going to happen to me with you. That if a line is at any point longer to get a selfie with you, I'm gonna freak the fuck out.

[Ed Elson]

There was a very interesting moment for me when we had the the south by Southwest event where someone had your book and they brought it over and they asked me if I could get. They could get my signature. And I was like, what am I supposed to do with this? Cause it was your algebra of wealth. I was like, no, I can't do this. You gotta get. You gotta give this to Scott.

[Scott Galloway]

I can just sense it. People are constantly coming out to me and like on the street they're like, Prof. G, Where's Ed? Where's Ed? And all these women and gay men are like, so is that single? Is that single? Because I don't. Just a crazy idea. Do you want to set up a total stranger who just accosts you on the street with your podcast co host?

[Ed Elson]

That's a great idea. Well, look, I'm very excited for that. I think I'll need. I think I need a few more years before I'm at that level. Scott, I'll be honest with you. I don't think I'm anywhere close.

[Scott Galloway]

Brother, I hate to say anything nice about you, but you are literally like Muhammad Ali meets, I don't know, LeBron meets Messi at your age. Compared to where I was when I was 26, I was just out of grad school. I had started a market research firm, pivoting to a strategy firm. I was working out of my apartment. I had no idea what I was gonna do. And I was. My highlight was I used to take my dog for long walks and my girlfriend at the time was supporting us and she was not happy about that. She was pretty cool about it, but I don't think she was really happy about it. When she came home, she wouldn't be like, do me, you indigent loser. That wasn't an enormous turn on for her. I'm starting a market research, I mean, a strategy I. E. Commerce company. The Internet, the Internet, the Internet.

[Ed Elson]

I was.

[Scott Galloway]

I was. I don't want to say I was flailing, but I was definitely doing what you're supposed to be doing in your 20s. I was workshopping my career, trying to figure out what to do. So you're.

[Ed Elson]

I was thinking, though, 26 is the age that you started. It was profit, right?

[Scott Galloway]

Profit, yeah, yeah, yeah.

[Ed Elson]

Which turned out to be a massive success. I feel like 26 was kind of a big. That was a big year for you. No, I haven't started a company. I mean, I've sort of semi started a podcast, but.

[Scott Galloway]

Well, I don't know, you kind of own this little business and you're. You're extracting the majority of the Margin by telling me you're having coffees with Andrew Ross Sorkin. But don't be threatened as we're going into bonus season. I love how you dropped that little gem.

[Ed Elson]

Boom.

[Scott Galloway]

But, yeah, 26 was a huge year for me on a lot of levels because I moved in with my girlfriend, I got a dog, which is the first time anything was dependent upon me for, like, I remember thinking at one point, you know, my friends were like, I got one out and we got ridiculous fucking truck. And we're like, let's go to Vegas. And I'm like, yeah. And then I'm like, oh, wait, if I do this, my dog will die. If I head to Vegas right now for two days, there's a living being at home that is dependent upon me. And also my mom. That was the year my mom got very sick. That kind of changed my life. Yeah, that was a big.

[Ed Elson]

That was a. Wow. Yeah, that was a lot of big things.

[Scott Galloway]

Yeah, it was the early 90s. We were coming out of recession. Get this. When I graduated from business school, from the House school of business, 40% of the graduates had a job on graduation day. And now when the kids graduate from Stern, they like, it's whether they have three offers or five offers. I wonder if that's going to change because all the things we've been talking about in AI.

[Ed Elson]

Yeah, exactly. I think that's just about just beginning to change now in the last year or so, I would say.

[Scott Galloway]

There you go. Maybe that's a good segment. Segue into what? Why people actually listen to this podcast. Should we get.

[Ed Elson]

That's a good idea. Yeah. Let's talk about what we're supposed to talk about.

[Scott Galloway]

Now is the time to buy.

[Ed Elson]

I hope you have plenty of the wherewithal. It was a week of red flags for OpenAI. First off, the deposition of OpenAI's co founder, Ilya Sitskiva was released, which shed new light on his time at the company and the drama around Sam Altman's firing. In the deposition, Ilia referenced a memo stating that Altman was fired due to a, quote, loss of confidence and also alleging a, quote, consistent pattern of lying. So that was not good for OpenAI. Meanwhile, Sam Altman appeared on Brad Gerstner's podcast. We've, of course, had Brad on our podcast, too. And Brad Gerstner pressed him about OpenAI's financial commitments, their spending plans, and he was quite visibly frustrated. Let's look at the clip. You know, how can the company, with.

[Scott Galloway]

13 billion in revenues, make 1.4 trillion of spend commitments. And you've heard the criticism. First of all, we're doing well. More revenue than that. Second of all, Brad, if you want to sell your shares, I'll find you a buyer. I just enough like, you know, people are. I think there's a lot of people who would love to buy OpenAI shares. I don't, I don't think you. Including myself. Including myself who talk with a lot of, like, breathless concern about our compute stuff or whatever, that would be thrilled to buy shares. So I think we could sell, you know, your shares or anybody else's to some of the people who are making the most noise on Twitter, whatever, about this, very quickly.

[Ed Elson]

So that wasn't great. And then after that, the company's cfo, Sarah Fryer, she went viral after she told the Wall street journal that OpenAI is seeking support from the federal government to help finance future data centers. She later kind of walked those comments back, but that is what she said in this interview. So, Scott, we've discussed OpenAI's precarious financial situation, and we've discussed that at length. The fact that they're generating, as Brad said, around $13 billion in ARR, according to the most recent reports. Sam Altman says it's more than that, but they're also spending more than double of that currently, and the plan is to spend more than a trillion dollars over the next several years. So the question we've been asking repeatedly on this podcast, how on earth are they going to pay for all of this? Well, Brad Gerstner asked that question directly to Sam Altman. You would think that he would have at least a canned or rehearsed answer. His answer was, I think, horrendous. I mean, I couldn't think of a more defensive, frantic kind of sociopathic response is what I would say. If you're trying to shake investors confidence in OpenAI, I would say this is how you do it. Flustered, concerned, very triggered, et cetera. First, let's just start with your reactions to those three things. The deposition, what we learned about the firing, the appearance on Brad Gerstner's podcast, and then, of course, the CFO saying that they are going to need a. A federal backstop.

[Scott Galloway]

All of this is a signal headed towards an ipo. The company is definitely going to file, in my opinion, sometime in 26, because the valuation based on the revenue multiple, it's getting to the point where no institutional investor is probably going to want to buy more. So they stop at the last stop of where it could potentially become a meme. Stock and that is disconnect from any underlying valuation metrics and that is the retail market. So I do think they're going to go public. When you are on an earnings call and someone asks you a fair question, no CEO that I've heard who holds onto his job, turns around and says well if you don't like it, you can sell your shares. That could not be. That's a rare misstep for Sam and I think it probably reflects some of the stress he's under right now. Probably having to get subpoenas and depositions where his co founder is saying that he's can't be trusted, that he lies and created a chaotic environment. That can't be fun for the guy when he's trying to, you know, justify a half a trillion dollar valuation. Getting incoming from the press is somehow trying to wallpaper over the fact they said they weren't going to do porn. But wait, someone told me I can increase usage by 20% if I offer. I mean the guy has got to be under a lot of pressure right now and this was a moment where he lost his shit. From an investor standpoint, you don't tell investors, well, sell your shares because guess what, they will if you can't answer. That is a fair question. And it should have been something along the lines of well actually if you look at other companies that have become trillion dollar companies, we're further ahead in terms of zero to a million users. We're faster zero to 10 billion than any company in history. Our ability to raise capital. He could have come up with a bunch of responses that said actually we are trading in a multiple of revenues. That is extraordinary. I want to acknowledge that. But it's not unprecedented. What is unprecedented is some of the metrics we're delivering against. He had a chance to respond in a thoughtful, metric driven way. Even if it was hard to justify the valuation. He could have said no, this is a self fulfilling prophecy. We're the fastest zero to $10 billion company in history. This technology is going to make everything else look like small ball. And some evidence that we can in fact justify this valuation is X, Y and Z. And this has happened before. And even at these valuations, other investors who have invested in these type of valuation at similar companies at similar points in their life cycle have made money. He could have and should have had that teed up. This isn't like an unexpected question that your valuation and multiple on revenues is really rich.

[Ed Elson]

That question, not only is it a fair question, but it is the most important question in the markets right now, because the answer to that question, how are you going to pay for it? Is the question that determines the entire stock market right now. The fact that the stock market has returned, that AI has been responsible for 80% of the stock market returns since ChatGPT was launched. The fact that the valuations of Nvidia and Oracle and AMD and Microsoft, all of the best performing companies right now, the fact that those valuations are determined by these contracts that have been not signed but handshake agreed upon with OpenAI, the $300 billion that they say that they're going to pay to Oracle. I mean, this question, not only is it like fair and an obvious question that's going to come up, but you have to have an answer to that question. Sam Altman is the high priest of AI right now. And AI is essentially, as we've discussed many times on the podcast, AI is what is holding the stock market together and also holding the economy together. And we've discussed the stats about how if you didn't have AI, GDP would be flat this year. He was asked the question, he completely fumbled the answer. And you say, well, it's a tell that he's under a lot of stress. Agreed. But also maybe it's a tell that he doesn't have an answer. Maybe it's a tell that when he got that question, how are you going to pay for it? The answer is he doesn't fucking know how he's going to pay for it. And he doesn't even believe that he's going to be able to pay for it. And that is the question that we have been proposing on this podcast constantly. I mean, we added up all of the investments that they have in the pipeline, the cash that they have on the balance sheet, it's about $150 billion. So they're short $1.2 trillion. And yes, they're going to go IPO and they're going to raise money in the public markets. You can't raise a trillion dollars in an ipo. It's not going to happen. So what they have to do at this point is they have to go out and they have to find different forms of financing. We had another tell where the CFO says, oh, maybe we'll get a backstop. Maybe the government will bail us out. Maybe the taxpayers will be the ones who pay for this gigantic AI buildout that is holding the entire stock market together. Or, and this is my belief, they're going to have to go for some debt and not just Some debt, but a fuck ton of debt. And that could be the beginning of the end for the AI bubble. That could be how the whole thing unravels. And when we look throughout history, that is generally how it goes. And we've discussed that as well. We talked about it with the railroads and the electric grid and we talked about it with the Internet. But I think that this was a big moment in the AI story where he had his chance. And maybe he wasn't that well prepared because, you know, it was just a podcast with his buddy, but he had his chance to, to assuage investors and be like, no, no, don't worry, I know what I'm doing here. I know what this looks like. I know how everything that you guys are talking about, but just, just trust me, everything's under control. He did the total opposite. He had a meltdown. And what wasn't included in that recording is the fact that a few minutes after that, he randomly bailed on the podcast and left the zoom.

[Scott Galloway]

Poor little Sam. Sam's like, I'm out of here. You're not being nice to me. It's like when Trump left, left poor Leslie Stall. He couldn't, he couldn't handle the hard hitting questions from an 83 year old journalist. I mean, a couple things here, this is super interesting. So Sarah Fryer, the cfo, she had some splaining to do. She's had a bad day because she clearly communicated that OpenAI is seeking federal support to backstop. She said that the depreciation rates of AI chips remain uncertain. Raising debt to purchase them is costly. Government or private sector guarantees can really drop the cost of the financing. They might be able to secure government backing. Trump loves this shit. He loves thinking he's innovative and using your credit card to sustain or to juice these companies that right now are driving the S and P. America's a giant bet on these 10 companies. So Trump has a vested interest in keeping the, you know, the music spinning. And also, to be fair, if you look at Apple, if you look at Google, if you look at Amazon, they're built on the backs of taxpayer subsidies. Apple is built on a technology that costs tens of billions of dollars that taxpayers paid for such that we could deliver an ICBM missile into the Kremlin. GPS was initially conceived to give missiles the ability to go, like to hit its target within four feet. And then they said, oh wait, maybe we could use this technology to triangulate off of satellites and do things like help cars get where they need to be and help people get cell coverage everywhere in the world. Apple's been massively subsidized by public taxpayers.

[Ed Elson]

Well, I think, I mean if we're making the comparison, what you're describing, there is government money that was used to create technologies which were then used to build the products that we're describing. But it wasn't a bailout. It wasn't just here's hundreds of billions of dollars for you to do the thing that you're going to do. It was like here's technology that we've built as the government and you can now use it in your products. Right.

[Scott Galloway]

Ed, I just want you to know it's going to impact your future earnings if you thoughtfully contradict my logic. Okay, fair point, fair point. Let me skip to what I'm doing. I'm not giving investment advice. What I'm doing, I have been for a long time thinking about do you know, I think it's called direction. They do all these kind of innovative ETFs where they figure out a way to short things or have triple the exposure and their fees are higher, which I don't like to pay, but they're very innovative. So the ETF X Mag by Defiance ETFs is, is not as short of the Magnificent 7, but a large cap X Magnificent 7. So it basically holds large cap stocks including the 40% of the Mega Caps. Because at some point The S&P 490 will have their day. So the QQ QD by direction is a bear 1x ETF targeting the inverse. So it's minus 100% of the return of the Magnum 7 index. I am trying to figure out a way to go short the Magnificent Ten. Why? For some of the reasons you're talking about. They just gotten out way over their skis and these circular deals feel like late stage. I don't know if it's 98 or 99, but I feel like if I can hold on to these things, these short vehicles long enough, I want to hedge my exposure right now. Because if these things come down, there's going to be nowhere to hide. Everything is going to come down. When 40% of the S&P is riding on 10 companies, if they get cut in half, nobody gets out alive. The strafe and shrapnel here is going to be extraordinary. The moment there's any sort of check back or slowdown or the consumer base enterprises who are all signing up for these expensive site licenses from OpenAI are anthropic. The moment they announced their. The moment PepsiCo CEO says we made these huge 10, 20, 50, $100 million investments in AI and in the LLMs site licenses, chips, whatever. And we're scaling it back dramatically because it hasn't offered the RI we expected. If a bunch of other companies jump in and say, yeah, actually, it seems true here. These companies, I mean, if the music stops, there's not only. Not any chairs, there's like hot coals they're all gonna sit on. It's gonna be ugly.

[Ed Elson]

It is a house of cards, which is built on AI, which is built on OpenAI, which is built on Sam Altman and his response to that question, which again is why that question is so important, and it's just so phenomenal how bad the answer was when it's not just AI resting on this, but America. It's actually the presidency. I mean, so much is riding on this. But just go into how the bubble would pop. You're saying that you think the bubble would pop, and so you're saying you're thinking about shorting some of the big tech stocks. I mean, my view, markets can stay irrational longer than you can stay solvent. And as we've discussed, I just don't think there's actually that much alpha in going short. I just think my recommendation is to stay away from that stuff. But, you know, have at it. And there are people who've made a lot of money.

[Scott Galloway]

I want to be clear, though, I'm not Jim Chanos. I'm not trying to find alpha here. I'm not that guy, Michael Burrier, the big short guy, who, by the way, just took a huge position shorting Palantir. What I would. What I'm considering doing is, quite frankly, just as a hedge, I don't like to short either. The natural trajectory of the market over the medium long term is up, and you constantly have to ask yourself what could go right, as our friend Josh says. But I do think, I feel like no matter what we do right now, if you're invested in the markets almost anywhere, you're uncomfortably levered to the magnificent 10.

[Ed Elson]

That's right.

[Scott Galloway]

And so I like the idea of putting 1% of my net worth in a short basket. And that way, if shit really gets real and my whole thing goes down 40%, I'll get 10 or 15% of it back.

[Ed Elson]

I like that. I think that's a good idea. And you're uncomfortably leveraged to OpenAI as well. But just going to how the bubble could pop, how the whole thing could come crashing down. I think one thing that is important to Recognize is the way that these things happen. It's not like you see a sequence of bad earnings calls and earnings reports and then suddenly everyone realizes, oh, it wasn't what we thought it was. What has to happen. And Josh Brown has talked about this with us before. There needs to be some narrative shock to the system. You need to have some spectacular story, some spectacular event which hits people all at once, causes this massive shock to sentiment and then suddenly everyone starts pulling their money out and it starts this chain reaction. That's how this always goes down. Like just the most recent example would be fdx, you know, Sam Bankman Fried, who was the high priest of crypto at the time. He has this big blow up, everyone says he's fraudulent, he goes to jail. This unbelievable story that captures the imagination of millions and that's what brings the crypto markets down. Another good example would be Evergrande in China, another recent example where they had this massive blow up, they went InSolvent, they had $300 billion in liabilities. And then that was sort of the moment where suddenly all the investors in China freak out and then you see this big, big correction in the Chinese stock market. So for the bubble to pop in AI, you're going to need a story. You're going to need something that is spectacular, that captures the imaginations of the investment community. If you had to bet on a story happening, it is the implosion of OpenAI. There is nothing else.

[Scott Galloway]

Well, Nvidia, if they announced that purchases of chips, if somebody, if again a Chinese manufacturer or someone else or a northern European or a US manufacturer or even Amazon which is now producing AI chip says we've come up with a comparable chip at 60% of the price. And Jensen for the first time has to announce that sales seem to be slowing. There's points the attack surface here of vulnerability is pretty broad because when the bubble gets this inflated, it doesn't take a lot to pop it. Right, right. And what we forget is that's not to say this isn't an amazing company.

[Ed Elson]

That's right.

[Scott Galloway]

And leaders in a technology that will change the world. A standard unavoidable part of the cycle is the following. A major 12 month destruction in value. And that's why it's dangerous to lever up and buy these things on margin. Because as long as you can wait out these things and in fact it's a great company that in the technology that ends up being a similar technology, you can hold on, you know, hold on for dear life. Right. So for example, Amazon and Cisco from 99 to 2001 lost 90% of their value. Amazon, if you held onto your Amazon shares, you recovered. And then and Some it's up whatever 100x and sen. But let me just go through some these are one year declines of these companies. In 2022 Meta lost 2/3 of its value. That was crazy, right? In that one year real recently why post Apple iOS privacy changes they crushed their ad targeting. Remember that they turned off whatever it was opt in or opt off. And also the reality labs Metaverse losses ballooned and investor confidence credit lost 2/3 of their value. By the way since then up three or five fold. Nvidia in 2022 lost 58% of its value. It was a chip cycle downturn, crypto mining bust, export controls to China. It rebounded massively the following year as the AI boom took off. Netflix just three years ago, just three years ago, Netflix saw a drawdown, a destruction in the value of its shares of 70% in a 12 month period. Subscriber loss for the first time in a decade. Growth devalue RA growth to value re rating and rate hikes. What is every amazing company in the midst of a technology boom that has done incredibly well? The best performing long term holds. What do they all have in common? In a 12 month period they were down at some point between 50 and 70%. But the problem is if these guys go down 50 to 70%, if they follow the cycle of every other tech company in history that has reached these types of valuations and they come down 50 to 70% in a 12 month period, hold on tight, says the global economy because it's no longer a company worth, you know, Netflix at the time was worth probably 100 billion going to or 150 billion going to 50 billion. It's a company worth 5 trillion going to 2 trillion. It's a $3 trillion destruction in value. They're going to lose the GDP of Germany. One company that will send a chill across another dangerous concentration in our economy and that is the consumer confidence of the top 10% who are now responsible for 50% of consumer spending. And I go, I don't feel as rich as I used to. I can take my spending down, my discretionary spending down 50 or 80%. You can't add, you're spending the majority of your income on rent and trying to do a little investing and living in the cost of living in Manhattan. You could take it down 10 or 20%. You can't take it down 70 or 80. So what do we have at some point these companies are going to experience this type of drawdown, except it is now so much more. This isn't the ripple effect of a stone. This is the ripple effect of the Millennium Falcon or a starship cruiser crashing into a lake. Starship, That's a, I think that's a Star wars reference. Are they called starship cruisers, Ed?

[Ed Elson]

I think that's right, yeah.

[Scott Galloway]

My ability or my desire to short some, even if it's a little amount, I just want mental health insurance because what I see here, and by the way, these companies could double in the next 12 months. I don't know. But if these companies get whacked and go through the same cycle as every other great technology company, the impact it's going to have on everything is going to be much more dramatic. There's going to be no P and G is going to be off 20%. I mean everybody. There's going to be nowhere to hide.

[Ed Elson]

I would also add though that the difference between a company seeing like a 50 to 60% drawdown versus a 99% drawdown and going out of business, the difference between those two companies is always leverage. It's which company was financially managed such that they were able to withstand a downturn. And this is exactly what Andrew Ross Sorkin talks about when we had him on and he talked about what went wrong in 1929. The companies that go bankrupt that just get completely wiped out, it's always leverage. I mean, Evergrande, which I just used as an example, great example of that. The most indebted company in the world, $300 billion in liabilities, lost 99% of its market value. Lehman Brothers is another good example. I mean, some banks made it out alive, but Lehman Brothers was so overly leveraged, 30 to 1 at some points. And so when they started to see the defaults on the CDOs and all the mortgage backed securities, they were insolvent, they couldn't pay back their creditors. And then it started the chain reaction. And again, this was too much debt, too much leverage and long term financial mismanagement. So I think for sure every company is going to be susceptible to a downturn. But I think the question when that happens is which of these companies are being responsible about the amount of debt that they're taking on? Which of them are making accurate and responsible projections about how they can cover their losses in the future if there is a downturn, if there is a drop off in demand? I think you look at many of the big tech companies, I think you look at Nvidia and Meta and Microsoft and Google and Amazon. These companies are expertly managed from a balance sheet perspective. So yes, they might see some drawdowns, but they're not going to get wiped out. I mean, these companies, they have incredible technology teams, but also incredible financial teams. OpenAI is a fucking train wreck from a financial management perspective.

[Scott Galloway]

Whoa, it is. Ed's going gangster. Why would you say it's a train wreck?

[Ed Elson]

Look at the numbers. They want to spend $1.4 trillion. They've got $13 billion in revenue.

[Scott Galloway]

How much of that though, do you think is just marketing?

[Ed Elson]

It probably is, but the market is pricing off of it. The market is pricing in a $300 billion contract to Oracle. So even if it's just marketing, the market believes it isn't. The market believes it's real. And Sam Altman is going around and saying it's real. I don't know if you saw the Financial Times report, but the Financial Times learned that they're not even seeking legal counsel on these deals. They're having their head of product lead these deals with AMD and Nvidia. They're having Greg Brockman figure out the paperwork. They don't have a financial team. And then of course, they brought in Sarah Fryer, the cfo. She said, in order for this to work, we're going to need a backstop from the government that is like all of the red flags of a company that is not figuring out how to manage their balance sheet in a responsible and reasonable manner. I mean, this is the biggest red flag in AI by far. And that says nothing about the technology, says nothing about the product, which is amazing and which I use and everyone uses. But the question being who, who gets wiped out in a downturn? It's the companies that are over leveraged and OpenAI is that company.

[Scott Galloway]

I wonder how much of it, quite frankly is trying to this fake signal and manifest success that the market will believe that. If this guy is willing to sign a contract for 300 billion, I'd love to see the terms and conditions of this contract, please.

[Ed Elson]

Well, exactly.

[Scott Galloway]

You gotta think I wouldn't be surprised If Oracle and OpenAI said this is more like Trump's favorite word, a framework. It's a framework. And that if, if quote unquote, they don't need it or they have a little bit opt out, they got to give them notice. I think that agreement is basically they said, I know, let's announce that you're, you're buying $300 billion worth of Oracle. Compute. It'll send my stock up, it'll increase my net worth by $93 billion. It'll signal to the market that you, as someone who has insight into your revenue growth and the subsequent demand it inspires. I don't know. The more I listen to you, Ed, quite frankly, I think you're right. I think this is the mother of all fucking jazz hands, these agreements.

[Ed Elson]

And this week was our proof. I mean, he was offered the opportunity to correct that, and he bailed. He freaked out. He said, sell our stock then. And then he left the room.

[Scott Galloway]

When Trump comes back from a meeting with Xi and says, okay, they've agreed to continue to ship rare earth materials or delay the suspension of rare earth mineral exports by a year. And he comes back, which means it's still. They're still like, pointing at us with a gun cocked, basically. He comes back and he says, oh, it's him and Besant. Go on. All this shows an amazing agreement, historic leadership. And the reality is he didn't get dick. Basically, she knows.

[Ed Elson]

He's.

[Scott Galloway]

She's like, look, this is bad for us, but what we have that you don't have is I can starve tens of millions of people and I'm still going to be in power. If fucking Nvidia gets cut in half, you're going to have real trouble. You're going to lose Congress, right? And probably your Vance or Rubio or whoever you anoint is going to lose. So again, his big error was she. I'm getting off script here, was not understanding their willingness to sacrifice. But I'm kind of with you as we kind of on, I don't know, unfold all of this stuff. It does appear like there's a lot, a lot of jazz hands going on.

[Ed Elson]

But what's funny is what happened with Trump is that the markets originally priced everything in, and then the taco, the talk of the came in and then they said, screw it, we're not going to price this anymore because we don't believe it. The question is, when does that happen with AI? When is the tokification of AI happen? Where you start seeing these press releases and these handshake deals. We're going to spend $100 billion on AI. At what point does the market just go, you know what, dude? We don't really. We don't really buy it. So far, not happening at all. You could announce a multibillion dollar contract with a hyperscaler tomorrow, and the stock will go up, invariably at least 5%. That's just how it works right now. But the question is, when does that run out? What is going to be the moment? I'll tell you my prediction, then let's move on because we got more to get into. But if the bubble pops, my prediction is the reason it will pop is because of an implosion. At OpenAI, it was because they said they were going to spend one and a half trillion. They made all these commitments. They borrowed money. They haven't borrowed that much yet, but they will. And that will be their downfall, as it has been for many companies throughout history. We'll be right back after the break and if you're enjoying the show so far, send it to a friend and please give us a follow if you haven't already.

[Scott Galloway]

Support for Profit G Markets comes from Found. Does it ever feel like keeping up with your business? Finance is a whole second job. That's where Found can help you out. Found is a business making platform to make a makes it simple to track expenses and manage invoices. You can even stash money for specific goals and keep spending in check with customizable virtual cards. Found doesn't just bring your finances under one roof, it also takes repetitive tasks off your plate. You can even automatically spot tax write offs. And the best part? There are no hidden fees, no maintenance costs, no minimum balance, and signing up is completely free. With Found, your financial world is streamlined and your time is freed up so you can put your energy into growing your business. Oh and by the way, other small businesses are loving Found too. This Found user said Found is going to save me so much headache. It makes everything so much easier. Expenses, income, profits, taxes, invoices even. And found has 30,000 five star reviews just like this. You can open a Found account for free at F o u n d.com found is a financial technology company, not a bank. Banking services are provided by Piermont bank member fdic.

[Ed Elson]

See?

[Scott Galloway]

Don't put this one off. Join thousands of small business owners who have streamlined their finances with Found. Support for the show comes from Framer. If you run a business, you need a website. And sure, you could pay for one of those cookie cutter site builders, but you'll end up with a website that looks like everyone else's. Or if you want to go beyond a typical site builder and get into something with a true aesthetic design, you could try Framer. Framer already built the fastest way to publish beautiful production ready websites and now it's redefining how we design for the web with the recent launch of Design Pages, a free canvas based design tool, Framer is more than a site builder. It's a true all in one design platform. From social assets to campaign visuals to vectors and icons all the way to a live site. Framer is where ideas go live, start to finish. Framer even helps you design more than websites create social assets, campaign visuals, icons and even site resources all in one place. Framer Framer stands above the others because it's not just a site builder. Framer is a true design tool that also publishes professional production ready sites ready to design, iterate and publish all in one tool. Start creating for [e-mail] design and use code markets for a free month of framer pro. That's framer.com design and use promo code markets framer.com design promo code markets Rules and restrictions may apply.

[Ed Elson]

Support for the show comes from Quince Cold mornings, shorter days, holiday plans. This is when I just want my wardrobe to be simple. Stuff that looks sharp, feels good and things I'll actually wear. Luckily, there's Quince, and the bonus pieces from Quince can make great gifts too. This season's lineup is simple but smart and Easy with quince. $50 Mongolian cashmere sweaters that feel like an everyday luxury and wool coats that are equal parts stylish and durable. The best part? All Quint's Items are priced 50 to 80% less than similar brands. By partnering directly with top factories, Quints cuts out the cost of the middleman and passes the savings on to us. I've tried Quint for myself. I wear their linen shirts, which I love, give and get timeless holiday staples that last this season with quince. Go to quince.com markets for free shipping on your order and 365 day returns now available in Canada too. That's quincee.com markets free shipping and 365 day returns. Quints.com markets we're back with Prof. G Markets. The Supreme Court heard arguments in the tariff case last week. Multiple justices expressed deep skepticism that a 1970s emergency powers law gives the President sweeping authority to impose tariffs. Here's just some of what they said.

[Scott Galloway]

It's a congressional power, not a presidential power to tax. And you want to say tariffs are not taxes, but that's exactly what they are. Degenerating money from American citizens revenue. IPA is a sanctioned statute. It's not a tax statute where Congress gave away the store. Congress knows exactly how to delegate its tariff powers every time for 238 years. It's done so explicitly, always with real limits. IPA looks nothing like those laws it uses regulate which Congress has used hundreds of times, never once to include tariffs and it lacks the limits of every other tariff statute. You're admitting that there is some non delegation principle at play here and therefore major questions as well. Very limited. Very, very deferential.

[Ed Elson]

Limited is what.

[Scott Galloway]

And again, the phrase that Justice Jackson uses, it just does not apply, at least I know, but that's where you started off and now you've retreated from that, as I understand it. Well, I think we would, as our frontline position, assert a stronger position. But if the court doesn't accept it, then if there is a highly. Can you give me a reason to accept it, though? That's what I'm struggling and waiting for. What's the reason to accept the notion that Congress can hand off the power to declare war to the president? Well, we don't contend that. Again, that. Would you. Do you say it's unreviewable, there's no manageable standard, nothing to be done. And now you're. I think you tell me if I'm wrong. You backed off that position. Maybe that's fair to say.

[Ed Elson]

So it wasn't a great showing for Trump's legal team and we know that because by the end of the week, markets were pricing just a 23% chance of the court ruling in his favor. Before the hearing, it was closer to 45%. This is perfect prediction markets. So just to kind of like go over the arguments that are being made here, basically, generally it's agreed that you need Congress to approve major policy, economic policy decisions. But the government is saying that doesn't apply to foreign affairs. It's a foreign issue. The plaintiffs are saying no, it is a domestic issue because as Sotomayor was saying that tariffs are attacks on US Citizens. There are some other arguments at play here, but the summary here, the TLDR is didn't go great for Trump and for Trump's legal team. And then if you just look at the prediction markets on Kalsheet, the chances that SCOTUS will rule in favor of Trump, they have gone from 45% to now 23%.

[Scott Galloway]

In a weird way we talked about on this pivot and Ker's view was this actually would be good for Trump. It would give him an elegant way out of this mess. That it would basically. Well, the Supreme Court, I don't agree with him, but basically unwind what is probably the worst economic decision in all long, long time. Well, let me just say what I'm doing.

[Ed Elson]

You're not buying the refund claims, are you?

[Scott Galloway]

I feel Shamed.

[Ed Elson]

No, no, no. Because that's an amazing investment trade. I was going to bring that up. Is that what you're doing?

[Scott Galloway]

That's what I'm trying to do. A market is developing in the private markets to purchase claims. So if you're Mercedes of Wisconsin and you're importing or made Mercedes USA say they do a two and a half billion dollar business in Mercedes, I don't know what it is in the us so they're importing in and some of them are domestically made. So maybe that's the, maybe that's not the right analogy, but you get the point. If it's 15% and they're bringing in 200 million of Mercedes a month from Germany, they're paying a $30 million tariff. If this court case ends up going against Trump, then essentially the Trump administration is going to owe Mercedes of USA $30 million a month or say the tariffs have been. When did Liberation Day happen? I forget, April 2nd. Okay, so they call it, call it six months of tariffs, then the government owes Mercedes USA $120 million.

[Ed Elson]

That's the important thing here. If Trump loses, not only does he have to revoke the tariffs, he actually has to return the tariff revenue that he brought in. He's going to have to issue refunds to all the people who paid the tariffs.

[Scott Galloway]

Well, there's some question here, and that is it's not immediately A equals B, even if they rule against them, that there could be nuance where maybe the government doesn't have to pay it back. Maybe the government, and we've seen Trump do this, refuses to pay it. So even if the case is ruled against them, we don't know the nuance of the remedy. It might be you can't continue to do this. Right. Or they might say, all right, they have a legal claim and then the individual companies have to sue the government, which, I mean, anyways, it's not immediately a Fed accompli. I think if, in fact, I've been thinking a lot about this, trying to game theory it out, but there's a private market developing, but unfortunately you have to. Right now it looks at least the stuff I've seen that I've been shown, you have to invest at least $10 million. So you have to put together an SPV if you don't have the 10 million yourself. And these claims are trading in the private market for anywhere from 5 to 30%. And I think the greater likelihood is somehow these people don't get their money back. But I think there's a greater than 1 in 10 chance they get their money back. So if I can pick these things up, these claims against the Trump administration for tariffs that were charged illegally based on the Supreme Court decision, if that, in fact, if they deem them as illegal, that I think there's a greater, at this point, 1 in 10 chance that, that this claim will be, will be refunded. It might take a couple years, it might take two or three years in court. But I like the asymmetric upside here.

[Ed Elson]

And very similar to the FTX claims that you made a killing on back in the day. But just to sort of explain how this is working here, so if you're a company and let's say you owe a dollar in, or you paid a dollar in in tariff revenue, now there's a question of do you have a claim now to receive a dollar back? And what Scott is going and doing is he's buying that claim from you for 5 cents or that's the plan. There is a market right now where people say, I don't think I'm going to get my money back. I want a little bit of money right now. So I'll sell you the claim for 5 cents. And so I think it's an incredible arbitrage opportunity. But I was going to bring this up to you. I was going to say, maybe you should look at this. You took the words out of my mouth. You already are looking at it.

[Scott Galloway]

And I like these deals because they're hard. And that is. So it's unlikely would be a claim. It's unlikely Mercedes USA would sell the claim. What's a more likely seller is a chain of 14 hardware stores in the Southeast has been paying, you know, over the last six months, has paid $7 million in tariffs. And if you show up and say, I'll give you a million dollars for these claims, they're like, fuck it. I don't, yeah, fine, give me the million bucks I need to operate my business. And I've already paid the money and I've already sort of incorporated into my cost, this guy's going to give us a million bucks. And yeah, good luck to you trying to get that money back. So my guess is though, since the Skoda scrolling and quite frankly, after this podcast, you're going to see, you're going to see this is the kind of thing that a Diameter Capital or an Apollo come in with a team of 12 analysts and NBA interns and they just crawl all over the US trying to find these claims and make really big bets. So I'm wondering. I'm trying to figure out if I can connect with a fund that's already doing this and call them and say, hey, remember me? I advised you on the Yahoo deal.

[Ed Elson]

I was your keynote speaker in 2014.

[Scott Galloway]

Remember when I was talking about happiness and how relationships are everything back in 2019? Remember me at your that conference you held in August in Tucson? Wow. That was great.

[Ed Elson]

No, I think it's an amazing train. As Scott Goodwin Diameter Guy said on the podcast, the whole game is finding forced self sellers. And to your point, there are a lot of small companies, small to medium sized companies that have been put under so much pressure because of the tariffs. I mean you look at the difference in the way that the small caps are returning right now versus the large and mega caps in the stock market. Tariffs have fucked one group in particular and it's small and medium sized businesses who are going to need some liquidity soon. So the idea that they would. I mean I'm sure there is a market where these smaller companies are down to sell these claims for cents on the dollar. So I think it's a great trade. We'll be right back. And for even more markets content, sign up for our [e-mail] subscribe.

[Scott Galloway]

Support for the show comes from Grunds. Even when you do your best to eat right, it's tough to get all the nutrition you need from diet alone. That's why you need to know about Grunds. Gruins isn't a multivitamin, a green scummy or a prebiotic. It's all of those things and then some at a fraction of the price. And bonus, it tastes great. All Gruens Daily Gummy snack Packs are vegan nut gluten, dairy free but no artificial flavors or colors and they're packed with more than 20 vitamins and minerals made with more than 60 nutrient dense ingredients and whole food grunts. Ingredients are backed by over 35,000 research publications and the flavor tastes just like sweet tart green apple candy. And for a limited time you can try their Gruni Smith apple flavor just in time for fall. It's got all the same snackable, packable full body benefits you've come to expect. But this time these taste like you're walking through an apple orchard and a cable knit sweater, warm apple cider in hand. Grab your limited edition Gruny Smith Apple Gruns, available only through October. Stock up because they will sell out. Get up to 52% off when you go to Gruns. Go and use the code markets. Hi, this is Bella Freud. Each week on Fashion Neurosis, I invite guests from the world of fashion, art, sport, music and literature to lie on my couch and explore the connection between fashion and identity. This week on the show, I welcome the presenter and model Alexa Chung.

[Ed Elson]

To me, it's now funny to dress in a more kind of kinky way.

[Scott Galloway]

Because I think I'm more associated with like dungarees and smock tops and the slightly more sexist tomboy vibe. Find fashion neurosis on YouTube or wherever you get your podcasts. My friends, we have toppled a political dynasty.

[Ed Elson]

Zoram Hamdani will be New York City's 111th mayor. He celebrated his win last night by thanking some of his constituents.

[Scott Galloway]

I speak of Yemeni bodega owners and Mexican abuelas, Senegalese taxi drivers and Uzbek nurses.

[Ed Elson]

Trinidadian line cooks and Ethiopian aunties. In other races last night in New Jersey and Virginia, the Democratic candidates weren't firebrands like Mamdani, but they won anyway. Reporters asked President Trump about the little blue wave this morning.

[Scott Galloway]

We had an interesting evening and we learned a lot. Have the Democrats learned how to stop losing?

[Ed Elson]

That's on today, explained every weekday afternoon. We're back with Prof. G Markets. Robinhood posted earnings that topped expectations after doubling revenue year over year. The stock is one of the best performers in the S and P this year. It has soared 450% since Trump's election. A key driver of that momentum is prediction markets. Events contracts traded on Robinhood more than doubled quarter over quarter to 2.3 billion as election speculation pushed volumes to all time highs. Kalshi and Polymarket also saw record volumes in the past month, surpassing the presidential election of last year. And now Truth Social, Trump's social media company is rolling out its its own crypto based predictions platform. So Scott, we've been talking about the gambling economy. You talked about it with Kyla Scanlon. All of these trading apps, these platforms which facilitate gambling betting, you've got Robinhood and yes, people are investing properly on Robinhood. But also there's a ton of options trading, a ton of crypto trading as we discussed, events contracts trading, people betting on prediction markets. That Stock is up 230% this year. Coinbase stock is up 50% in the past six months. Kalshi's trading volumes are up 150x since last year. There has been an explosion in what we would call the casino economy over the past few months and much of it is certainly to do with Trump and his sort of pro casino economy policies. I just want to get your reactions here. What do you make of the proliferation of this market? Crypto plus prediction markets, sports betting, options trading, all of this stuff that is.

[Scott Galloway]

Exploding right now, I just think it's out of control. And now the problem is I don't think you're going to vandalize a 22 year old. I think they get to make decisions, including stupid decisions, But I think they need to be educated about the risks they're taking. So gambling has the highest suicide rate of all addictions because most people ed, if you developed a meth addiction, we'd figure it out and we would try and move in. You could get on your phone and get addicted to gambling and lose everything. You know, guy spends his kids college fund, mortgages his house, no one has any idea, and he decides, okay, I'm in too deep. Highest addiction rate. Yet there's no dedicated federal budget for gambling addiction treatment or research. By comparison, the national institute for drug abuse allocated 1.6 billion for drug addiction research, and the CDC allocates about 310 million to tobacco control. And because there's so much money in this, it runs unregulated. Personal bankruptcy filings increase by 28% in states where sports betting gets legalized. So basically, bankruptcies surge by almost a third the moment you legalize gambling. It also disproportionately affects young men and low income people. Approximately 15% of U.S. adults age 18 to 34 have problematic gambling behaviors, compared to only 2% of people age 55. Plus 20% of male gamblers have a gambling problem, compared to just 8% of the female gamblers. Gamblers again, see above. Immature prefrontal cortex. Households with lower Savings balances spend 32% more on gambling as a share of their income than high savings households looking for a way out. But it's increasingly difficult to regulate this because we no longer call it gambling. It's been rebranded as a prediction market. And these are casinos. They're more interesting. They might feel more substantive to bet on the outcome of the mayoral race. But be clear, folks, this is gambling. According to Cal state, prediction markets are not gambling, but a form of financial market exchange. Yeah, you, we're not that stupid. This is gambling. Whether you're gambling on the jets or momdani, it's gambling. So the most profitable companies in the world all do the same thing. They tap into an instinctual flaw and they start monetizing this flaw, despite the impact it has on consumers, Whether it's tobacco companies getting people Addicted to tobacco and then spending a ton of money to try and argue that nicotine wasn't addictive. And then when our mothers and our sisters continue to die, we finally figured this out. The same thing is happening here. And the thing that got me initially kind of inspired is the wrong word, but very interested in this is Alex Kearns. And that is this young man, a 19 year old. I think he was a sophomore at Oklahoma State. Nice kid, no history of mental illness, good family. You know, you see this kid and you just see your son. I don't care who you are, you see your kid and you see like, okay, there by the grace of God, go my kids. Bought options on Robinhood. Got messages saying he was down $60,000. He wasn't. They were errant messages, spent all night sleepless, emailing Robinhood to try and get some sort of response from customer service because, you know, they're in the business of hyperscaling. And because they didn't place any sort of regulation or any sort of safeguards, they didn't get back to the kid. And the kid leaves a note for his parents saying, I don't want to leave this debt for you, and throws himself in front of a train. These are the people we want to trust with an addiction. These are the people. So we have Trump, the crime family Trump, and we have the mendacious fox at Robinhood deploying at scale, using technology, a drug that is highly addictive. So I'm, I'm horrified by this. And I think if Congress had any stones or anyone under the age of 95 years old that actually understood what is going on with young people and especially young men here, they would do their goddamn jobs and prevent a tragedy of the commons and weigh in with legislation or at least age gate the shit. So this is, I think this is hugely distressing. I think this is the next major opioid scandal.

[Ed Elson]

I mean, gambling is pretty bad for society. I mean, like, it's pretty indisputable. I mean, consistently leads to financial ruin. As you've said, one of the most common causes of bankruptcy. As you said, in states where sports betting is legalized, bankruptcy filings have risen 28%. Disproportionately affects poor people, disproportionately affects young men. One of the most predictive causes of domestic violence. Also one of the most common causes of suicide. But we kind of like it because it's fun. Now, I think one of the big questions is what counts as gambling? Clearly we agree mostly that there should be some form of Regulation or at the very least we should draw some line in the sand as to what is gambling and what isn't. I had the founder and CEO of Kalshi on first time founders and we talked about this for a long time and he has a very interesting perspective. Of course he's biased because he runs Kalshi. His view is it's gambling when the house is involved and Kalshi isn't really gambling because you're not betting against the house, you're betting against other people in the system. You're matching traders up with other traders similar to the way the stock market works. But my view on gambling is, you know, it's gambling when you see it. I mean day trading, options trading, especially very short term like zero day options trading, sports betting, crypto trading, meme stocks, meme coins, prediction markets, all of this stuff is gambling. It's gambling in one sense or another. And we could talk about the very specifics of how actually the transaction works. But when you're just kind of betting on something happening or something going one way or the other versus investing over the long term, putting your money and letting it sit there and building an asset base, those are just by nature very, very different things. Things. And I think it is clear that people are interested and very excited by the gambling stuff right now. Many reasons why that could be. I'm sure the fact that young people just don't have the economic prospects that their parents and grandparents did, that certainly plays into it in large part. That sort of explains the crypto obsession and the meme stock obsession. But I think the thing that is so interesting and what has changed this year is, is now the government is behind it. There is a very obvious support system for all of these types of gambling platforms and gambling mechanisms. I mean, Don Jr. Is an advisor to Kalshi and to Polymarket. Trump Media is launching their own prediction market. Trump is getting into crypto. He's pardoning Changpeng Zhao who pled guilty or Binance, his company pled guilty to money laundering. He's pardoning Justin sun, he's launching his meme coins. So the government and the administration is deciding for one reason or another that we like this stuff and we should have more of it. We should deregulate and defund the cftc. We should deregulate and defund the sec. We should invest in prediction markets. We should create our own prediction markets. We should have society gamble more. And I think the big question for US citizens is why do they want that? I mean most, most people are in agreement that this stuff is dangerous. And many Americans say it's, it's flat out a problem. Actually, 43% of Americans say that sports betting should not. Or they say that the fact that sports betting is legal, they say that it's bad for society and it's gone up and up and up in recent years. So we're all kind of in agreement like this is at the very least kind of dangerous. And yet the administration is pushing it. I guess my question to you, why do you think that Trump and the administration has decided pro gambling, pro casino economy, pro prediction markets, pro crypto, pro meme coins, all of these things that while, yes, they can be kind of fun every now and then, in a lot of cases they lead to the financial ruin of thousands, in some cases millions.

[Scott Galloway]

Well, I'm going to go out on a limb here and say that perhaps his own economic enrichment supersedes his concern for the public. I know that's a stretch, but look, we know why he's doing it. He's doing it for money. And what I would say to young men is that sacrificing and investing is a means of having less anxiety and more relationships in your life, more healthy relationships. Gambling is going to reduce your mental well being. It's going to make you be seen as undependable by friends and potential mates and it's going to result in a level of self loathing if you're not careful. That oftentimes leads to extreme depression and even self harm in some. You know, if you're listening to Andrew Huberman and Peter Attia and taking the right supplements and creatine and getting the right sleep, it's all for fucking. Not if you wake up one day and you're broke because of really stupid decisions you made in search of dopa and have convinced yourself that you're investing, not gambling. No, no, you're gambling. And I'm not going to infantilize you. If you want to gamble, gamble, but call it what it is and assume you're going to lose it all. You want to do these things, you need to assume you're going to lose it all. The danger is when you think this is investing and you're going to make money, you're not. These companies aren't building anything. The reason they're worth so much money is that over time, everybody loses. Everybody. No one beats this market, these markets.

[Ed Elson]

Over the long term, unless you're on.

[Scott Galloway]

The platform, there you go, those are the winners. So if you're gonna gamble, buy Calci or polymarket stock. You could argue that's investing even. But these companies are preying on young people and instinct that hasn't caught up to industrial production. So anyways, just be honest with yourself. Are you gambling or are you investing?

[Ed Elson]

There's this quote from Alexander Hamilton, 1792, which I love. He said, quote, there should be a line of separation between respectable stockholders and mere unprincipled gamblers. I just find it hilarious that this has been around for hundreds of years and we know where Alexander Hamilton stands on it. Let's take a look at the week ahead, Scott. We'll see earnings from Rocket Lab, ast, Space Mobile. So these are these space companies that we've discussed in the past. Also Paramount, Skydance and Disney. Any predictions?

[Scott Galloway]

Well, I already said it. I think the market for claims against tariffs paid is going to become an active investment market and I think it's going to do well for those. The price may already. I mean, I get the sense I've been working on this for a few weeks. I get the sense my guys are going to call me back and say, oh, prices have doubled. Like sellers have caught onto this and I've jacked up their prices. But I think this is going to become a really interesting market that we're going to hear about that's going to be actively traded. And I actually think that even if before the decision, I think there's going to be a lot of people who trade who I think these things are going to go up even before the decision or the collection of revenues, I think they're going to start to trade up. So I think the best stock right now or the best investment and granted most people don't have access to it because there's certain minimums and it takes time.

[Ed Elson]

10 million minimum. Put me in the SPV.

[Scott Galloway]

Okay, but this is what will happen. A bunch of people will create SPVs and charge fees and give access to retail investors. You're about to see claims against tariffs become an active private asset class.

[Ed Elson]

This episode was produced by Claire Miller and engineer by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead. Our research associates are Isabella Kinsel, Dan Shalon and Kristen o'. Donoghue. Drew Burrows is our technical director and Catherine Dillon is our executive producer. Thank you for listening to Prof. G Markets from Prof. G Media. Tune in tomorrow for a fresh take on markets.

[Scott Galloway]

Young.

[Ed Elson]

At the Water.

[Scott Galloway]

And the.