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- [00:00]
Scott Galloway
It's true that some things change as we get older. But if you're a woman over 40
- [00:05]
Ed
and you're dealing with insomnia, brain fog, moodiness and weight gain, you don't have
- [00:10]
Scott Galloway
to accept it as just another part of aging. And with MITI Health, you can get
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Ed
help and stop pushing through it alone. The experts at MIDI understand that all these symptoms can be connected to the
- [00:21]
Scott Galloway
hormonal changes that happen around menopause, and
- [00:23]
Ed
MIDI can help you feel more like yourself again.
- [00:27]
Scott Galloway
Many healthcare providers aren't trained to treat or even recognize menopause symptoms. MIDI clinicians are menopause experts.
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Ed
They're dedicated to providing safe, effective, FDA
- [00:38]
Scott Galloway
approved solutions for dozens of hormonal symptoms, not just hot flashes. Most importantly, they're covered by insurance. 91% of MDI patients get relief from symptoms within just two months. You deserve to feel great.
- [00:53]
Ed
Book your virtual visit today@joinmidi.com that's join m I d I.com support for the
- [01:02]
Scott Galloway
show comes from cohere as AI advances, one thing matters more than ever staying in control. Most AI comes with strings attached, like sharing your data and infrastructure or compromising your independence. With Cohere, you don't have to give up control to gain capability. You can have both. From frontier models to out of the box tools, Cohere gives you everything you need to build and deploy secure, scalable AI, and that drives growth and delivers results. Your data decisions and competitive edge stay yours. You control your AI on your terms. To see how AI can empower your organization without compromising what matters most, visit cohere.com Vox. Support for the show comes from Aven. Aven built the first home equity line of credit on a Visa card. Same swipe as a regular credit card, a fraction of the rate, saving you hundreds a month. Americans carry over a trillion dollars in credit card debt at rates north of 23%, while homeowners sit on the largest pool of untapped equity in U.S. history. Aven fixes that asymmetry. 4.9 stars on Trustpilot from over 8,000 customers. Go to aven.com stop overpaying for capital Aven Financial Inc. NMLS number 2042345 cards issued pursuant to a license from Visa USA Inc. By Coastal Community Bank NMLS number 462289 member FDICO housing subject to approval terms apply. Visit aven.com for details. Today's number 40,000 that's how many bottles of wine are in Joseph Stalin's wine vault, which the Georgian government unsealed for the first time last month. That I don't know if you heard, but an alien race of women have been abducting men with especially large dicks. So you're safe. And also this spaceship is just fucking amaz. And I couldn't find a joke about Stalin that wasn't really, really bad.
- [03:11]
Ed
I can imagine.
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Scott Galloway
Really bad.
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Ed
You found your way to aliens and dig size, which is always a good combination. I thought it was good.
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Scott Galloway
I think it works.
- [03:19]
Ed
Little ribbing of the co host. Nothing wrong with that. That's what they come here for.
- [03:24]
Scott Galloway
My love language is giving people a hard time and then giving them money.
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Ed
That's true, that's true.
- [03:30]
Scott Galloway
How are you, Ed?
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Ed
I'm doing well. You're in Sweden, I understand. Yep.
- [03:33]
Scott Galloway
I'm in Stockholm, which has not participated in a war in 200 years. And that's why it's such a beautiful city. Something happens when you avoid the most wealth destroying events in history. You avoid wars. It is beautiful. I can see you living here. You look like you'd fit in here. You look very Swedish.
- [03:51]
Ed
100%. Yeah. I was there a couple years ago for a speaking gig and I just loved it there. It was beautiful.
- [03:55]
Scott Galloway
It really is nice. Yeah.
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Ed
Is it hot?
- [03:58]
Scott Galloway
No, it's like 60, 65 degrees. And it's. What it is, is, it's light. It's basically never gets really. It kind of feels like from 11pm to 4am it just feels like dusk. It's a little weird. I think I'm a little bit manic. And now I'm crashing. Wrong day to give up meth, Ed. Wrong day to give up meth.
- [04:18]
Ed
Well, you're missing some incredible vibes here in New York, I bet, coming off of this unbelievable win. I mean, this episode, we're recording this before game five, so who knows what happen by the time this episode goes out. But vibes are electric here. I mean, this is a whole nother reason to be in New York. It's just unbelievable. And if we continue this, if the Knicks continue to be as dominant as they appear to be, I really think that this just changes the meaning of summers in New York. I mean, this is like everyone on the streets on a random Wednesday night until 2 in the morning. You can either be upset about that or you can love it. But the point is, I mean this, this city is on fire right now and it's all because of the Knicks. So you're missing out.
- [05:07]
Scott Galloway
I so fucked up. I. I was supposed to be there this whole week. I told you this right I. I was invited to the Chanel party, to the Tribeca Film Festival, to game two or three of the Knicks. I was gonna have such a good time, and I had all these cool business meetings lined up, and then I got a little bit drunk, and I saw one of those fucking TikToks saying that 90% of the time you spend with your kids is over by the time you're 18. And I freaked out. Bombed to the airport, went home, walked in thinking I was like MacArthur returning to his loving family, or Phil from Phil Dunphy from Modern Family. I walk in, my two boys are there, and literally, this is what I got. That's it. They nodded. They kind of turned their head and looked up like, hey, bro. But no, hey, bro. Nothing. Literally nothing.
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Ed
And then what'd you do? Did you punish them? You got to punish them for that.
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Scott Galloway
I have never punished my kids once. I threatened to punish a lot. I threatened upon it. I'm tay. That's it. I'm taking your phone away. And then I realized they use their phone to order food for me and
- [06:08]
Ed
to order the five guys.
- [06:10]
Scott Galloway
Yeah. Such that I don't starve. And it's how they get on the subway with their phone now anyways. But, yeah, I don't. They didn't appear to miss. I fucked up. I would love to be in New York right now.
- [06:23]
Ed
Well, you learned your lesson. Basketball and sexy parties over kids every time.
- [06:29]
Scott Galloway
100%. What am I thinking?
- [06:31]
Ed
And now you know and can take this forward. You have some learnings, and you can change your behavior. So there's always. There's always a silver lining to messing things up.
- [06:40]
Scott Galloway
I'm going to overwhelm my imposter syndrome with sincere incompetence.
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Ed
I like that.
- [06:48]
Scott Galloway
I like that. That was clever.
- [06:50]
Ed
I'm going to think about that, too. All right, well, we have a lot to get here. Shall we get into our stories?
- [06:55]
Scott Galloway
Let's do it. Now has been time to buy.
- [07:01]
Ed
I hope you have plenty of the wherewithal. The biggest IPO in history has finally arrived. SpaceX began trading under the ticker SPCX at $150, an 11% jump from its IPO price. And as trading began, shares rose to around $160, which is close to 20% up from the original IPO price. The debut marks a historic milestone for Elon Musk, whose net worth has now surpassed $1 trillion. Elon is officially the world's first trillionaire as of this ipo. It's also a major moment for the broader market after Years of waiting for the private market's biggest winners to go public, investors are finally getting their chance. With anthropic and OpenAI expected to follow. SpaceX is the first in a wave of blockbuster IPOs that could define the next era of the public market. So, Scott, let's get into this. SpaceX was the IPO price. The issuance price was $135. We were all wondering if it would pop as soon as it started trading. My prediction, you might remember, was that the stock would pop immediately 25% as soon as it started trading. It immediately seemed like that was the case because we were hearing murmurs that the stock was going to go out at 170, maybe close to 175. But then as soon as it officially opened, it opened at around $150. That's an 11% jump. A success, but not as much of a success as many of us, including myself, predicted. And now we're discussing this during the trading day on Friday, and shares are hovering around 160, moving up to 165. It's incredibly volatile right now. Let's just start with your initial reactions. We can get into the valuation, too. Some interesting new news, also the fact that Elon is now a trillionaire. But let's start with your initial reactions to this stock finally going public.
- [09:02]
Scott Galloway
Well, if Elon Musk had a dollar for every racist and stupid tweet or thing he's ever said. Oh, wait, he does now. He does now. Ed, I try to get excited about this because a lot of people, you know, you could argue, a lot of people have been made up. I talked to someone here in Stockholm who works for one of the investment banks, taking them out, and he reminded me, he's like, look, it's great for economic growth. There's supposedly more than a dozen or a dozen and a half people just in Texas who no one's ever heard of, who became billionaires today. And they'll go, start companies, make investments, buy things, feel the economy. And you also see, you know, people excited about the markets, more capital flowing into the US Markets. They're going to spend that money. Economic growth, gdp. The problem I have is where I come back to earth here is that who is funding all this and where is that money coming from? And I still would argue this is the greatest transfer of wealth we've seen, at least in a short time, from retail investors to a small concentration of people since crypto. And I'm, you know, I'm a boomer. I just look at this and I Think it doesn't make any sense. And what I think we have here, and it hasn't gotten enough discussion, is the greatest and most scaled example of manufactured scarcity. I was walking around Stockholm today and I walked by an Hermes store and they purposely have a line. I looked in the store, it wasn't that busy. But they purposely create a line to create the sense of scarcity. And then if you go in and try and buy a Birkin bag, they put you on a waiting list and they tell you oh no, no, no. And these are not complicated things to manufacture, but they want to create the illusion of scarcity or manufactured scarcity. And what I don't think people are focused enough on here and there's been news on it, but it's really, I think the whole shooting match is that Musk threatened not to go public on the Nasdaq unless they waive the 12 month requirements for him to be included in the NASDAQ 100. So they backed down. They blinked. The S and P said no, The Dow Jones said no. But the NASDAQ blinked. And the result is they're immediately included in these indices. If it's at $2 trillion and there's 50 trillion of market cap in the Nasdaq 100, that means all the indices that track the Nasdaq 100 now have to put 4% of their assets under management into SpaceX stock, creating anywhere between 20 and call it $50 billion in additional demand that no IPO benefits from. In addition, traditional IPO rules are that you have to issue at least 10% of your shares. They didn't, they issued 5%. So massive artificial demand or demand that no one else has benefited from from constrained supply that no one else has been able to manufacture. And what you have is a population, a 20% or 25% pop on what I think is manufactured scarcity. Now the question is, where do you go from here? And I would argue someone called me and said I have access to shares, should I do it? I said, I think you should. But I would look at this as a trade, not as an investment. Because eventually that manufactured scarcity begins to leak. You know, lockups come off. After a couple earnings calls, there will be some settling around where the stock, you know, reasonably should be. But I think what we saw today was going to go down in the history books for bankers. The NASDAQ backing down Elon Musk's power in the marketplace, creating a level of manufactured scarcity the likes of which we have never seen before. And just the last Thing this, this person told me who works at one of the lead underwriters is they did no less than 500 calls with high net worth investors taking them through, taking them through the deal and why it was a good idea. So you have had some of the most talented people in finance basically crawling over anyone with a heartbeat or a pulse, high net worth, retail, et cetera, to try and create unbelievable demand. So the bankers have done their job here. I think they're going to get about a half a billion dollars in fees. I thought it was a billion, but someone corrected me and said it's half
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Ed
a billion, a little more than that, around $650 million in fees.
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Scott Galloway
Yeah, there you go. But again, the key to a luxury brand, the key to irrational margins is manufactured scarcity. And we've never seen, we've never seen
- [13:37]
Ed
it like this is the king of the markup. Let's just look at the valuation here. It's currently at around $2.1 trillion. So that means it's trading at 112 times last year's sales. We've pointed this out before, but Meta went public at 28 times trailing revenue and they were growing revenues 88% the year before the IPO. Google went public at about 10 times trailing revenues, growing revenues 240% the year before the IPO. This is more than 100, and it grew 33% last year and in its most recent quarter it grew 15%. So it has, I mean, massively lower growth than some of these other IPOs. In fact, more than an order of magnitude lower growth than many of these very successful tech IPOs. And then we can just look at the comparison to the price, to sales multiples of some of the mag. Seven companies today met is trading at 7 times sales. Microsoft's at less than 10 times sales. Alphabet's at around 11 times sales. I mean, right there you have your answer. This is wildly valued as a company. And the question of course is why are people down to pay this much? And I think Gil Luria said something really, really true and really striking on the show. When we had him on last week. He said that Elon, essentially what he does, he has this trick where he has his business that he sells for today, the business of tomorrow, and then the business that's way out in the future. In the case of Tesla, you have the cars today and then you have the robotaxis tomorrow and then you have the humanoid robots way out in the future. And in the case of SpaceX, he's done the same Thing where you have Starlink today, you have orbital space based data centers tomorrow, supposedly, and then way out in the future you have asteroid mining and you have building civilizations and populations on Mars. And all of that is a function of storytelling. That's basically all he's doing. In the same way as you described, that Hermes can mark up their handbags to these extraordinary prices because they're really good at selling the brand, creating a culture and creating an ethos around the brand and that's what allows them to do it. Elon is doing the exact same thing here. The question is, how long does this last? I mean, I, I predicted, I think you predicted, I think many of us predicted that on day one this would be a hit. And I got to say it's been a little bit, I would say underwhelmed compared to what expectations were. I thought it was going to be 25% immediately. And I, I saw a world in which it could go even higher than that. We looked at an 11% jump right at the opening. But again the question becomes what is it going to look like over the next five, six, seven, eight months? What's going to happen as the lockup periods expire? And we could also note that that has some kind of funky lockups compared to traditional IPOs, which usually there's an 180 day cliff. And instead SpaceX has opted for this rolling release valve where they essentially let you sell your stock in what is essentially 20 day increments. It starts off to 70 days and then 90 days and then under 20 days. It's, it's a kind of complicated setup which is designed to make it easier to sell your stock over the short term. And my assumption is we're going to see unprecedented selling because I think everyone knows this thing is very hot right now. It's in demand. Big day on the ipo. And that is somewhat what we're seeing. But then over time they're going to start to realize, okay, now I want to cash out, now I'm going to sell. And so my expectation is that the stock is going to get cut in half over the next six months as the lockup periods expire and as all of the hype and the excitement starts to wear off.
- [17:29]
Scott Galloway
There's just so many things here that lead to a transfer of wealth and power from the little guy to the big guy. So for example, 3.75 billion they reserve was reserved to give to like friends and family with no lockup. So why wouldn't they give those to. I don't Know journalists who say nice things about SpaceX or to Trump. Don Jr. Hey, we have worked with our bankers. We think there's going to be a 20% pop here. You know, would you like an easy 2 million bucks? Put 10 million in. Not that I'm recommending this, but you can sell on the first trade if you want. We think there's going to be at least a 20% pop. And meanwhile, the retail investor who might be subject to these weird lockups is crazy. What you're effectively doing is creating a different class of stock. You're not supposed to do that. My understanding of securities law is that when one class of stock has different trading rights than another and you're not an insider, you've created a different class of shares.
- [18:26]
Ed
By the way, I just want to just, just to clarify, the retail investors actually can sell if they want to via these brokerage apps, but supposedly if they do sell their ban, then apparently they're going to be not allowed to buy into future IPOs. So you're allowed to, but the platforms are setting it up to discourage you doing that.
- [18:45]
Scott Galloway
So call it a soft lockup.
- [18:46]
Ed
Soft lockup, yep.
- [18:48]
Scott Galloway
But when you trade, when you create different conditions on the sale and purchase of a stock, you're creating a new equity, unless you're an insider. Somehow I thought that was illegal, according to the sec, but supposedly that's. Now that's not legal.
- [19:02]
Ed
We don't have much of an SEC anymore. Yeah, yeah.
- [19:05]
Scott Galloway
So this is again, you know, it just feels like. Look out below the thing I wasn't anticipating and I'm curious to get your thoughts on it. I would have thought that the other guys would have traded up in sympathy. And according to Mia here, Rocket Lab, EchoStar and Space Mobile had declined 10, 12 and 14% respectively. I would have thought they would have traded up in sympathy with this. I don't know if it's because people had to sell that stuff to get into this.
- [19:34]
Ed
Correct. You think that's it, 100%. And this is the thing that we were saying last week in terms of the equity supply, and we've seen this with a lot of the biggest tech names. We saw this with Microsoft and the Mag 7 stocks and some of the chip stocks even, where in order to fund the incredible demand, essentially, or I guess given the massive injection of supply that has entered the markets because of the SpaceX IPO, a lot of people didn't have the money to fund that. And so what did they do? They decided to sell their positions. And this is what I said to you on the, on the show last week, if you don't have the money available to buy the SpaceX IPO, but you want in, what do you sell? You probably sell your existing tech positions. You don't sell your defensive positions, you certainly don't sell your house, but you sell all of your more speculative positions. Trim those down so that you can fund this new position. So, yes, Virgin Galactic is down, ast, Space Mobile is down, Rocket Lab is down. And in the buildup to this ipo, we saw the same thing with, with many of the tech names. So I think, and this is exactly what we said, I think that when you have OpenAI going public as well, anthropic going public, I mean, we'll see when they go public. It seems like they're going to go public very soon, perhaps around the same time, you're going to see the same dynamic in order to fund that, in order to keep up with supply. As we said, this is Econ101. When there is more supply, that results in lower prices overall. When we see that massive injection of supply, suddenly investors are going to have to think, okay, how do I get in? I'll trim my position in Tesla, I'll trim my position in these tech companies, and that way I can get into these stocks. So that is exactly what we're seeing right now in the space market itself. You also mentioned the idea of different classes of shares here, which I think is very important. And it's especially important as it relates to Elon Musk, who will retain 82% of the voting power of this company, which is now one of the top 10 most valuable companies in the world. It's more valuable than Tesla. He owns 82% of the voting power. He picks the board. He cannot be fired by anyone other than himself. He has also required shareholders to unconditionally waive the right to jury trials and class action lawsuits because he has PTSD from being sued by Tesla shareholders. And of course, he is also incorporated in Texas. And as we've discussed on the show, the Texas business court is famously weak on protecting shareholders. It's very pro founder, it's very pro CEO, it's very pro insiders and 82% of the voting power. I mean, maybe that makes you confident because you really trust Elon, but if you don't trust this guy, if you don't trust his judgment entirely, if you think that he's spending the majority of his time on ketamine or whatever, you think, that's a terrible number to see And I have noticed that some pension funds are opting out because of that number. What do you make of that from a governance perspective?
- [22:36]
Scott Galloway
Well, so corporate governance is based on governance and that is, it's supposed to be one share, one vote, like one man, one vote. Right. That's the idea that if you're, you want to attach economic sacrifice or risk to authority. So ideally what you want in a company is that if 51% of the shares vote for a certain action to fire the CEO or to sell the company or to put in place certain initiatives that they, given that they've put 51% of their capital at risk, that they get 51% of the vote. Dual class shareholder companies basically separate ownership from authority. And that is, and it initially was invented by owners of newspapers and media companies who said we're worried that a bad person's going to come in and use their economic power to buy a great media company and use it for their bad actor means. Google's founders were the first to demand a dual class shareholder company and want to maintain control with a minority position. And it actually the VCs pushed back and ultimately Larry and Sergey won out. And that created a flood of new companies with dual class shareholder structures. Everyone from Richemont, the Sulzbergers own less than 1% of the new York Times and they control it. The Ford family owns, I think single digit percentage of Ford. They control Ford. I'm not as excised by that because my sense is buyers need to do their own research. And there's a lot of companies that have a similar dual class shareholder structure and they know what they're getting into or they don't, but that's up to them. There's two sides of the straight. If you don't want Elon in charge, don't buy the stock. What I'm more worried about, and I think it's a bigger existential risk, is that we now have one man, and specifically this man who has more wealth than any man in history by any ratio. And wealth in a capitalist society and in an outdoor economy is just infinitely more powerful. So this is someone who can turn off and on Battlefield Technologies. And I've already said to you, I think the fix is in. I think that my guess is Donald Trump has had many conversations or an open dialogue with Elon Musk. And Elon Musk is now, you know, okay, so he's a trillionaire. And say he, he got, say he leaned on Trump. I mean, first off, let's talk, let's just Talk about that wealth, that amount of wealth and power, I believe results with Citizens United in an undue amount of political influence. And generally speaking, for example, most elections are kind of, you know, 4,951 or 4,753. And when you have someone who basically might say, hey, Donald, you put pressure on your SEC chair to waive all these stupid rules in exchange, I'm now a trillionaire. I put 250 million to work in your campaign and had an influence. What if I put 10 billion to work now 1% of my net worth? So I think it's just a very. I think power corrupts and absolute power absolutely corrupts. Also, I don't think Elon Musk has acquitted himself well in terms of judgment. So I think we're in a. That dual class shareholder, poor governance. That doesn't freak me out. People can decide to sell the stock. What freaks me out is having someone who doesn't live with other people, as far as I know, is estranged from, you know, one or more of his children and has got a substance abuse issue and sleeps with a loaded gun next to his bed and believes there's a white genocide taking place in South Africa is now the most powerful person to ever exist on the planet. And just to wrap up this word salad, I've now gone to where Gary Stevenson, you know, of Gary's economics is, and that is he reframed my view of taxes and then a sense that he said taxes are our protection from corruption. There are protection from people aggregating too much power. And as I sit here in Stockholm where there's higher tax rates, we have this false argument in the United States that democracy and socialism can't coexist. And that's the wrong argument. What they've settled here in Sweden, as I walk around and see GDP growth of 2% and no homeless people and really great education is that you can have billionaires and universal childcare. And so this notion that it's one or the other that you have to put up with homeless people and weirdness and corruption. Sweden has produced Spotify, Klarna, King, Ericsson. They have a GDP of $75,000 per per individual with a population of North Carolina and and deficit that is 30% of GDP versus ours at 130. And I think that the, what I'll call the billionaire classes created this argument that, no, you can't have economic growth unless you have this incredibly low taxation rate. And obviously I'm a little bit fond of Sweden right now because It's a summer day in Stockholm. But I think this country and other places say that that is just a bullshit argument from people who want to aggregate way too much fucking power. So dual class shareholder company, I'm not worried about it. One man with this much power, I think that's a risk.
- [28:09]
Ed
Yeah, but it says something about his priorities. Despite the fact that he is the richest man in the world, the richest man in America, the richest man in American history. And if we want to start figuring out, is he the richest man to ever exist on a relative basis, I'm not sure exactly, but I know for certain that that is true of the history of America, where he's worth 3.2% of US GDP. And the next richest in history was John D. Rockefeller, who was worth less than half of that on a relative basis. But he still needs that power. He still needs to have more than 80% of the voting power of this company. And it's just striking the sense in which it is actually never enough for him. He has to continue to accumulate more and more wealth, more and more power. And anytime that there are any norms placed on him, this is what usually happens. This is usually how voting power is divvied up when you go public. He has to reject them. He says, no, I'm not doing it unless I have total control over the entire thing. And let's just. I mean, a trillion dollars, we should just, like, put that into perspective. And because we're only a week away from normalizing that. I've been seeing people on Twitter, mostly Twitter, but people on social media basically getting excited for him that he's now a trillionaire. Like, he posted some meme about how he's now a trillionaire. And I see a lot of people retweeting it and being like, let's go, Elon. Like, he crushed it. Which is such a strange. I don't understand it, but it's some strange blend of, like, sycophancy with this belief that you too will eventually become a trillionaire. Or he's kind of sticking it to the man in some way, even though he is now the man, because he is literally worth a trillion dollars. I don't really know what the psychology is, but I know that we're about to normalize it. Just want to put this into perspective. This makes Elon, now that this company's gone public, richer than the bottom 46% of the entire world population combined. So he has more wealth than 3.8
- [30:17]
Scott Galloway
billion people, the Southern Hemisphere.
- [30:19]
Ed
Yes. That is crazy. And it's not socialist or communist to state that fact and to say, wow, that's a lot of power, that's a lot of money. But there's so much sensitivity about this issue. As soon as you bring it up, people go, oh, so what? You're a communist now? You just want to socialize everything, seize the means. I mean, we just need to state the facts here. This guy's worth a trillion dollars. That's absurd. That's crazy. There's no way that that is going to be efficiently allocated throughout the markets. That to me doesn't say that the markets are working as they are intended. So I 100% agree with your point. I have some other stuff in here that we could get into, but maybe I'll just pause there and see if you have any reactions.
- [31:07]
Scott Galloway
There's one of the greatest features of Americans is their optimism. Americans think they're going to be rich and it enables them or encourages them to take risks, to move, to quit their jobs, go to where they think their human capital will be better used, do startups. It encourages them to make crazy investments. And as a result we have one of the most impressive economy in history. There's a real upside to that optimism. The downside is that everybody believes their lottery ticket is going to be a winner and you end up with a trillionaire while 40% of American households have medical or dental debt. And it just strikes me that we've created this false flag or this false argument that you can't have this type of economic growth while having universal health care. Sure you can, but you have to fund it. And this rooting on, I think I can understand rooting on SpaceX. I can understand rooting on someone who makes extraordinary wealth. I guess what I would ask is, should that person be taxed at a progressive tax rate? And do we want a world in which so many people are having a difficult time making ends meet? And one person who, if they stack dollar bills or $100 bills, gets a third of the way to the moon and people say, well, that's a function of capitalism. No it's not. There's, there's capitalist countries all over the world where, you know, kids don't, you know, one in five households don't have kids who are food insecure. So I, I actually, you know, where I land on this is one distinctive offering. And you know my feelings about the manufacturer scarcity. But on the social side of things, I think it's great that someone can make a trillion dollars. What bothers me is that they're not taxed at a decent rate and we don't put the same safeguards or apply the same norms to them, thereby again reflecting Elon Musk is probably going to decide who the next President is. I think we're naive to think that he doesn't have that power now.
- [33:20]
Ed
Yeah, I think that's right. I mean, it's one thing to play the game and make a lot of money playing the game, but it's a different thing to rig the game and make a lot of rigging it. And that seems to be the direction we're headed, especially the extent to which these people like Elon appear to be buying out of politics. I mean, we've seen how billionaire spending on political campaigns has just exploded ever since Citizens United. And it does result in these regulations, which makes it easier to make huge amounts of money, particularly with this insider trading stuff. Which is why I believe that that is probably the biggest issue that we're seeing in the current administration right now is just the total collapse of investor protections and the increase of insider trading. One final point I just want to point out related to the circular deal making that we've described in the past, and this is very interesting and our research assistant Dan Shalon pointed this out and it's a really good point. After the S1 dropped for SpaceX, they announced this deal with Google where Google was going to buy $920 billion per month worth of AI compute from SpaceX. And a lot of people said, hey, SpaceX has a good business now. Like they're figuring it out. It was very strange though, because we also have to recognize that Google owns 6% of SpaceX. So once again we have a situation where the investor is the customer at the same time. And so when you think about it at the current valuation at 100 times sales, ish, when you think about it that way, for every dollar that Google spends on SpaceX Compute, they get about $6 back in shareholder value because they own 6% of the company. Now that already is like, that's weird. You're paying for something and then getting something in return in the form of higher returns for your shares. Here's where it gets weirder. Google will pay SpaceX $8,400 per GPU per month. Compare that to Anthropic. And their deal with Anthropic was announced weeks within weeks of the Google deal. Compare that to the anthropic deal with SpaceX. They're paying $3,800 per GPU per month. So Google is paying more than Double what anthropic supposedly their competitor is paying. And the deal was announced basically at the same time. And you have to wonder why. And I think the answer is they're down to pay a ridiculous price because they are a shareholder and because they know that if they pay that amount then they'll get it back. And so I think this is just more evidence of how these circular deals are distorting the AI economy. It's inflating the revenues of various companies. In this case, it's inflating SpaceX's revenues, if that is indeed what is happening. And at the same time it's inflating the valuation, which simultaneously inflates Google's valuation. It's all getting a little bit weird. So I just thought that we should just point that out. Do you have any final quick words on SpaceX before we wrap this up?
- [36:29]
Scott Galloway
I hope he goes to Mars and then Houston says this is an incredible step for mankind and then cuts off all communication from him. I don't know. So the question, rather than preaching, I think he asked people, where are they actually putting their money? I haven't shorted a stock in a long time and I don't think I'm going to short SpaceX because it's a meme stock and it's just, you know, and I wouldn't recommend that to anybody because I shorted GameStop during the meme phenomena and I shorted it at $400 and the next morning it went to 600 and I was sitting there going, but it makes no sense. It's like the markets hold my beer on what makes sense or what doesn't. Right? And fortunately I had the hold on and end up making money. What I am considering doing is looking at all these other. I thought all these different AI and space companies were all going to trade up. I think there's a lot of crap out there. I think there's a lot of AI companies trading for a billion or 3 billion that are basically. I think there's that one food delivery thing that has these little robots, old
- [37:31]
Ed
buds, the new AI company, whatever it is, right.
- [37:34]
Scott Galloway
I think there's a lot of, for the first time. And again, not financial advice, just when I'm, I'm getting a list of kind of a dozen, a dozen companies that have benefited from this I, you know, IPO mania. And I'm going to create a basket and, and do some long dated, long dated puts out of the money. Puts. All right, because this does feel, I am now confident saying this absolutely feels like 99 again. I mean, this does feel.
- [38:03]
Ed
This changed the game. The SpaceX IPO changed the game.
- [38:07]
Scott Galloway
Sure, yeah. Your thoughts? Ed?
- [38:08]
Ed
No, I think that's, I think that's interesting. I personally won't because I'm afraid of shorting and I just think that it's such a difficult game to win. But I do want to see your basket and maybe I'll change my mind once you send it to me. We'll be right back after the break, and if you're enjoying the show, send it to a friend and please follow us on YouTube, Spotify or wherever you get your podcast costs. Support for the show comes from Quint Wardrobe changes normally coincide with the changing of the seasons, and while it might be tough to put away your favorite cardigan, you're going to be happy you did when you bring out pieces that feel lighter and more breathable, that's where Quint comes in. They focus on high quality essentials that feel and look amazing. Think breathable linen and soft organic cotton. Well made basics, but without the luxury markup. Quint's European linen pants and shirts are the perfect warm weather upgrade to add to your rotation. Starting at just $34. Their tees are soft and easy to wear and their lightweight cotton sweaters are perfect for cooler summer nights. Everything at Quint's is priced 50 to 80% less than similar brands. I love my Quince items, especially their linen. I believe that everyone needs to have enough linens to get through the summer and that time is right now. So I would highly recommend going and getting yourself some affordable linen wear because a lot of it can be very expensive. So elevate your summer wardrobe. Go to quince.commarkets for free shipping on your order and 365 day returns. Now available in Canada too. That's Q U I n ce.com markets for free shipping and 365 day returns. Quints.com markets
- [39:58]
Scott Galloway
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- [42:31]
Ed
We're back with Prof. G markets inflation rose 4.2% in May from a year ago, marking the highest reading in three years. Meanwhile, real wages fell for the second straight month, meaning Americans are once again seeing prices rise faster than their incomes. That puts even more pressure on the Federal Reserve ahead of Wednesday's interest rate decision. It'll be the first meeting with Kevin Walsh Serv serving as governor, and investors are increasingly betting that the Fed may need to stay aggressive on Kalshi. The odds are they rate hike before 2027 have climbed to roughly 50%. And if you remember at the Start of the year, the odds were in the single digits. So, Scott, this inflation report, we're up to 4.2%. I'll just point out that before we had the tariffs, essentially the inflation that Trump inherited was 2.3%. Then we put on the tariffs and it rises 3% within a year. And then we add this war in Iran on top of that and a strait that remains blockaded, and we keep on hearing about a deal. But then we also see that we're striking Iran, striking missiles in Iran. Trump is now saying that he wants to take Cog Island. And so you add that war on top of it, you add on the inflation in oil prices, and we are now at 4.2%. We are above 4%. We're more than two full percentage points above the Fed's target rate. There's a lot to say here about this inflation report. Where would you like to start?
- [44:07]
Scott Galloway
So let's. Just for a reference point, let's compare it to some other G7 countries or neighbors. Mexico, we're at 4.2. Mexico's at 3.9. The Eurozone is at 3.2. Canada, our neighbor to the north, who we put these ridiculous tariffs on, despite that, and 70% of their export market being to the U.S. their inflation's at 2.8. The UK 2.8. Japan, 1.4. And China, kind of our economic rival, their inflation, 1.2%. And the problem is that most people don't understand the power of compounding. So they hear 4.2 and they think, oh, that's nothing. My mortgage is 6%. My auto loan is 8%. My interest rate on my credit card is 15%. So just to do some math, if inflation were to stay like this, and you had a baby when that kid was ready to go to college, and that may sound like a long way away, but trust me, it goes faster than you think. You know, see above, they're indifferent when you fly all the fucking way home and miss the next game. But anyway, all of a sudden, the tuition. If. If inflation were to just keep compounding the way it is now, and you had a baby, when that kid goes to, say, USC, where the tuition is $68,000, that means tuition's going to be $136,000 if we in academia don't continue to raise tuition faster than inflation, which we've done for the last 40 years. People have a tough time imagining anything in 18 years. So let's just go out. Your kid starts at USC as a freshman. If inflation were to Continue Going at 4.4%, that means a new car, which usually costs $49,000. By the time they graduate from college, it would be $60,000. People don't realize that this number may sound innocent. It's not.
- [45:50]
Ed
I think that's an important point. But it has a very big if in the statement, which is if this remains at above 4% for the next several years, what I can tell you is most people do not think that that will happen. Most people on Wall street do not think that would happen. If that did happen, it would be basically a gigantic disaster for the entire US Economy, especially if we see that the wage growth continues to be lower than the price growth. So I take your point, but there are a lot of big ifs there. And so I guess my question that I would follow up with to you is, do you believe that this is going to last? You said years.
- [46:30]
Scott Galloway
I don't. But if Trump had his way, we risk inflation go to 8 to 12% because he would vote to cut interest rate for a short term bump in his popularity, which could create a panic buying and an upward spiral of inflation. I mean, it's not unthinkable to think inflation could go to 8 or 10%. It's not a. I mean, inflation starts. Can the fear, the real panic is that people start thinking, I gotta get rid of my cash because asset prices are going up so fast. So whenever people get cash in Argentina, they don't hold onto it. They either transition it to Bitcoin or they buy something. And to think that that can't happen here is to ignore what's happened with every fiat currency in history, that eventually the political pressure to print more money and not be fiscally responsible outweighs any see about fiscal responsibility and end up with too much money chasing too few products. So will it likely happen? No. Could it? Absolutely. And what people also don't recognize is that inflation is yet another transfer of wealth from earners to owners. Inflation has been out of control in Argentina since the end of World War II. But the same wealthy families are still wealthy because if you own land, if you own assets. I'm hedged against inflation because I own a bunch of real estate and I own a bunch of stocks. And as inflation goes up, so does the price of rent, so does the price of buying an iPhone. So my Apple shares in my house goes up in value. Who gets fucked is you and everyone else on this podcast whose wages do not keep pace with inflation. So again, inflation is especially difficult on earners versus owners. And it's yet another transfer of wealth from earners to owners, thereby increasing income inequality. And when you talk about dissatisfaction and anger, again, I love that basic premise that revolutions aren't started by people who are unemployed. It's started by people who are working two jobs and are still hungry. So inflation, the Fed's job Fed, is to keep employment at a certain level or unemployment below a certain level and to ensure inflation never gets out of control. But that is the wrong order. They know that inflation is the thing that brings down nations, not unemployment.
- [48:45]
Ed
Yeah, I mean, just looking through some of the increases in prices here, I mean, obviously airfares are way up 27% year over year. Gasoline, all types of gasoline up 41%. Fuel oil up 59% year over year. But it isn't just oil prices that are causing the harm here. I think there's, I mean, there are some downstream effects and it's kind of this awful combination of the tariffs combined with the war blocking the Strait of Hormuz. So you've got non alcoholic beverage prices up almost 6%, fruit and vegetable prices up more than 6%, and meat prices up 7 and a half percent. So what we have here are exploding grocery prices, which as you say, is really a tax on lower and middle income households in America. Generally speaking, the richest households aren't all that worried about the price of groceries going up, but it really eats at your purchasing power if you are in the lower quintile of earners. So that is a real problem. I think the question, I mean, you say inflation could get to 8 or 9%. I agree. But I think anything can happen. In general, I think what we want to be doing and thinking about is what is the most likely scenario. I think that a lot of people believe or the sort of the consensus is that this is temporary and it's going to come down. And the reason for that belief is that they believe that Trump is going to resolve the issues in Iran and that we're going to come to some semblance of a deal with Iran and all of the oil that's being blocked up in the Strait of Hormuz is going to flow again and then prices are going to come back down. That is generally the consensus when you look at prices. And also when I speak with people on Wall street, when I speak with Wal analysts, when I speak with economists, that is the general belief. I'd be curious to get your views and I know you have some updated views on Iran, which I find interesting. I'd want to hear from you, your Thoughts on that? My view is we're nowhere close to being done here. And I've been saying this since it started. I mean, when he launched the attacks, he said Trump said that it was going to take four weeks. I think he then pushed it to maximum five weeks. As soon as this began, the first thing I did is I went back and I found that Donald Rumsfeld quote saying that the Iraq war would be eight weeks and pointed out a very simple fact, which was that it was eight years. And then we had the same thing with Afghanistan, where they said it would be a few months, and it ended up being two decades. So my view from the beginning was this is going to be way longer and way more drawn out than anyone would expect. Why? Because wars are extremely difficult and we have a very, very strong substantive track record of saying it's going to be this amount of time, and then it ends up being way, way longer. So as of today, we're into week 14, so we're in month three now. And still we have this assumption, oh, it's going to resolve in some way. Trump's going to kind of figure it out or he's going to taco on the wall, which I personally think is a lot more difficult to taco on. Warfare versus tariffs. I just don't see it happening. So this goes back to expectations for what inflation is going to look like over the long term. I think we're going to stick around here for a long time, and I can expand on that. But I want to hear from you and your views on what this means and what it'll look like going forward over the next few months, and then we can get into inflation expectations longer term.
- [52:25]
Scott Galloway
You made a compelling argument. You broke down, loosely speaking, that we're at 4% and we'd be at 2 if it wasn't for the war in Iran and these tariffs that literally our inflation is up from what is a target inflation rate of 2% to 4% based on self inflicted injury. And as it relates to Iran, there's two concepts. The first is when officers are evaluating subordinates in terms of decisions and they spend a lot of time, you know, analyzing decisions that were made. What they do is they say it's not, it's not the outcome that determines whether the officer made the right decision. They go back and say at that moment, given the information available, did the officer make the right decision? And going back to. So first off, in Iran, you at the very beginning said, this is a quagmire, it's a bad idea. This will go longer than anyone expects. I said, I think this could be a good idea. You were right, I was wrong. And going back, the idea of toppling a wobbling regime, neutering the Navy further, further defenestrating their missile capabilities, further staunching the flow of capital and resources to their proxies, I thought there was a real opportunity. And had we, I believe, signed up some European allies, done a better job of analyzing the threats to our Gulf neighbors, securing the Straits of Hormuz before they had an opportunity to start wreaking havoc there, and quite frankly, going in, having very strict, narrow military objectives, and then leaving. I still hold to the fact that there was an argument for this. Now, the second concept is what I call, or Hillary Clinton teaches a class. And one of the concepts is the dominion of failure. And that is when you're in an argument with someone and you make a point and then they come back aggressively at you, it's human nature to double down. And then once you double down on your argument, you're sort of invested and you're in too deep and you keep. And you can. I don't know if this has ever happened to you, but you find yourself arguing a point. I'm like, I don't even agree with what I'm saying, but it's too late. You've crossed the chasm. You've staked your reputation in that moment at dinner on whatever your point was. Right. The problem is when you're supposed to be a leader, you're supposed to be able to have the maturity and be a fiduciary for other people's responsibility to basically not fall under the trap of the dominion of failure and go, you know what? I fucked up. I was wrong. And my intentions were good, but I was wrong. We need to change policy. A step back from the wrong direction is a step in the right direction. There is no getting around that. Anyone like myself that was supportive of military action in the beginning, based on how this has played out, and the. The incredible incompetence and lack for coordination of our allies, lack of respect for briefing Congress, our inability to trust that Trump would understand anything about game theory and basically saying, I'm out of dodge, but you better do what. You better do what I say. As he's leaving, realizing that not only does he have no cards, but his cards are turned upside down and they can see our cards. This has been a fucking disaster, and anyone advocating for it has to like myself. I remember having freed Zakaria on and freed, and I agreed that this was worth the risk. Looking back on how this has been executed, this has been a mistake of epic proportions that has left us with literally no good options at this point. I understand the calls to withdraw immediately, take our licks. My attitude is at this point, point, it's.
- [56:07]
Ed
It's, quite frankly,
- [56:10]
Scott Galloway
it's hard to leave right now. And this is the quagmire, because we're gonna end up. We're gonna end up with less than nothing if we don't show a willingness to at least go some distance at the same time. I understand the calls of, like, let's just take our licks and get out. But just to summarize here, this has been an unmitigated disaster. And one of the. One of the unfortunate thing about our politics and our systems, and quite frankly, the public, is that the public appears to want leaders that will double down on something wrong rather than ever say, ever acknowledge, yeah, we think we made the right decision. Given the information we had at the time, it was the wrong decision, and we're changing course. No politician ever gets rewarded for that type of maturity right now. And so what do we see? Everyone just doubles down, doubles down and goes further down into the dominion of failure 100%.
- [57:02]
Ed
And this is what Trump's philosophy is all about. His slogan, or at least from reporting. And if you go watch the movie the Apprentice, you know this, his slogan is never admit defeat.
- [57:18]
Scott Galloway
The Roy Cohn method of communications.
- [57:20]
Ed
That was who he learned it from. And now it does appear that that philosophy is governing global geopolitics and as a result, the entire economy of America. And I think it's such an important and good point, this dominion of failure point, because I think it's such a respectable thing to change your mind and to decide and have the courage to say, I think actually there is a different path forward, and I'm gonna go back on my decision. I think that I was wrong. That is, like, a very, very difficult thing to say, especially today, especially in a world of social media where everyone's tracking what everyone's saying, and especially in a Trump era of politics. And it's something. It's a lost art form that could literally be the erasure of trillions of dollars and could mean altering the life trajectory of millions of Americans. Is our unwillingness to say, specifically from the Trump administration here, to say, I was wrong, he's never going to do it, and that is going to be such a problem. And again, to your point, this is why my belief is that this is going to go on a lot longer, because he's never. I mean, he's unwilling to admit defeat on small issues. This is the most important, difficult issue in the world. Do we really believe that he's gonna be okay with saying, actually, we're gonna pull everyone out and we're gonna call it a day and admit that we were wrong on this or that we didn't execute properly? I mean, maybe he'll try to do it and he'll lie about it and say, actually it was a win for these reasons, and then the rest of us will know. But, I mean, when you're dealing with troops on the ground, when you're dealing with missiles, when you're literally dealing with people's lives, very, very difficult to do that. And so my expectation, I don't think that he's going to make a deal with Iran or resolve it anytime soon, because I don't think that he is willing to reverse course. This is his entire principle. He never, ever wants to do this. So I think that the oil is going to remain blocked for the foreseeable future. I will note that when you look at the amount of oil that is blocked up right now, and this was research from the Institute of Energy Research, it comes out to around 6% of global oil supply. So it's actually lower than you might expect. And the reason for that is, yes, the Middle east accounts for nearly a third of the global oil supply, but about a quarter of it takes alternative routes around the strait, which leaves around 20% of it at risk. And a third of it currently is fully blocked. My expectation is that that amount will remain blocked for the foreseeable future. So my view is I don't think we're going to hit 8, 9, 10% inflation like we did in 2022. But I do think that inflation is going to continue to rise for two reasons. One, I think these oil prices that we have already seen, they still need time to funnel through the rest of the economy. And two, I think as this goes on, you're going to see higher oil price expectations, which will lead to higher oil prices outright. And so I don't know if you remember, but my prediction earlier in the year was that we would hit 4.5% inflation by the end of the year. A lot of people said that I had Trump derangement syndrome for saying that. Well, now we're at 4.2%. And I think it's. I'm pretty confident that that prediction is going to come true. I will now update that prediction. Given what we're Seeing today, I think we will hit probably at least 5% inflation. But more importantly, I think we'll remain there for at least six months. I think that this is going to be extremely drawn out, extremely problematic. There are then all the other implications that come as a result of that. For example, rate hikes. I think rate hikes are inevitable. Markets seem to think it's a coin flip. I don't see any world in which you don't raise rates at this point, especially with the unemployment data which came in better than expected, which means that the Fed has one target now which is inflation, and two, landslide victory for the Democrats at the midterms. I just think this price thing is such a problem for so many Americans. They're so angry about it. They were already so angry about it. And I think that they understand that there is one person that is responsible for all of it, as you said, self inflicted injuries. And that one person is Donald Trump. And that's going to be their message, their moment to send that message to Trump, to send that message to the Republican Party. And I do think it's going to be a landslide. What that will mean for markets, I'm not so sure. I haven't quite thought that far in the future. But there is a very, very scary sequence events that I think you can pretty much game out and we'll see. But that's where I stand on it at the moment. We'll be right back. And for a recap of everything Prof. G Media covered last week, check out our new podcast, the Week over on the Prof. G Pod feed.
- [62:37]
Scott Galloway
Support for this show comes from Odoo. Running a business is hard enough, so why make it harder with a dozen different apps that don't talk to each other? Introducing Odoo. It's the only business software you'll ever need. It's an all in one fully integrated platform that makes your work easier. CRM, accounting, inventory, E commerce, and more. And the best part, Odoo replaces multiple expensive platforms for a fraction of the cost. That's why over thousands of businesses have made the switch. So why not you try Odoo for free@odoo.com that's o d o o.com support for this show comes from Odoo. Running a business is hard enough, so why make it harder with a dozen different apps that don't talk to each other? Introducing Odoo. It's the only business software you'll ever need. It's an all in one fully integrated platform that makes your work easier. CRM accounting Inventory, e commerce, and more. And the best part, Odoo replaces multiple expensive platforms for a fraction of the cost. That's why over thousands of businesses have made the switch. So why not you try Odoo for free@odoo.com that's o d o o.com. Support for the show comes from Granola. We'd all take a slightly longer meeting if it was actually production, especially over a bunch of short ones that accomplish nothing. But the trade off is this. Our brains can only hold on to so much information and it's easy to forget the details when the meetings keep going. So when those longer meetings roll around and you're in need of clear, actually useful notes, you'll be glad to have Granola. Granola is an AI powered notepad built for the way real people actually meet. You can take notes like you normally would in the background while Granola securely transcribes the meeting. Then after you wrap up, it turns everything into clean, structured, actually useful notes. Granola also works through your device's audio, which means it integrates seamlessly into the video conferencing tools you already use. It's your standard meeting setup, but enhanced, you get to actually listen and contribute. Instead of trying to capture every word or summarize in real time, you can walk away knowing exactly what was decided, who's involved, and what comes next. If meetings are eating up your date day, Granola is a no brainer. You can try it totally free for three months. Just head to Granola AI Markets. That's Granola AI Markets. To get your time back, get three months free at Granola AI Markets.
- [65:15]
Ed
We're back with Prof. G Markets. The World cup is finally here. Over the next six weeks, millions of fans will travel across North America to watch the world's most popular sporting event. But before, before a single trophy is lifted, one thing has already grabbed the headlines and that is ticket prices. The cheapest seats for the final at MetLife Stadium are selling for more than $7,000 in several US host cities. The cheapest tickets for the tournament's later rounds cost more than the average monthly mortgage payment. So, Scott, we gotta just acknowledge how excited we are about the World Cup. Of course. But, but this has been a really interesting issue here. You've said that FIFA is one of the most corrupt organizations in the world, which I 100% agree with. I think many people would agree with that too. And now it's sort of on display, what they're doing to get and make the most amount of money. Prof. As possible. And some would say kind of grifting people who are attending the Cup. I'll just give you some numbers here. FIFA expects to generate $3 billion in ticket revenue this year. That's compared to 900 million DOL at the last World Cup. So they've increased their revenue by 230%. Adjusted for inflation. Ticket prices are up roughly 1,000% since the last time the US hosted the World cup in 1994. Ticketing historically accounts for around 10% of World cup revenue. This year, it will account for 27%. And the average resale ticket price today for the World cup is more than $1,000. There are many questions as to why prices are up so much. And one of the big reasons, which I'd love to get into here, is that FIFA, for the first time ever, is employing dynamic pricing. And what does that mean? They used to sell tickets at a fixed price, but now they are changing it and they're basically algorithmically adjusting the price based on supply and demand dynamics. That's one thing. And then two, they're also launching their own resale platform where they sell all of the tickets. And then if you want to resell your ticket, you can go on FIFA's website and you can resell your ticket and FIFA will take a 15% cut from the buyer and the seller on every sale. So some really interesting pricing strategies here. This dynamic pricing thing has also become a huge political issue. So much to get into here. I will start with your thoughts on FIFA's pricing strategy and what you make of it.
- [67:46]
Scott Galloway
If you look at FIFA as an organization, they have the right to price tickets. And, and there's two sides of the trade. If you don't, if you don't want to pay the money, then don't, don't go to the World Cup. This will be my fourth World Cup. I was a guitar where tickets were a quarter of the price that they are now. Before that I was in Moscow or Russia and St. Moscow and St. Petersburg, I don't remember. And I went to the 1994 World cup in the US and every time I go or every World Cup, I take my boys, I take a ton of pictures and it's a nice marker of time. I'm absolutely going to go this time. I make a very good living. And the tickets to the final in New York, where I was really excited about and I want to go. I went to the final. The last two times were. The cheaper ones were $7,000 ones, as far as I know, when I checked, are sold out the good seats. Like there's three categories, Tier one, tier two and tier three. Tier one seats are the final grounded. Not everyone has a birthright nor should go to the final. They're $38,000. And just to give you a sense for that, when I last, when I. The first time I went to the World cup in 1994, an average ticket cost $58. And the most expensive ticket for the final was $475. So if you ingest it, you say, well, Scott, what about inflation? Okay, that's $131 average. And the most expensive ticket, inflation adjusted in 1994 was $1,000, $1,069. Now it's 38,000. What it represents more than anything, the distinctive. Whether you think FIFA is corrupt or not, fine. They get to do what they want. In terms of dynamic pricing, it's that the 1% who goes to the World cup, superfans and the 1%, because it is expensive to fly to Monterey or Mexico or Vancouver to see a soccer game. That's a luxury item. And the reality is the 1%, and you can even argue the 10% have garnered all of the gains. And that's why you've seen. No one likes to talk about it, but inflation at high end hotels has gone crazy.
- [69:44]
Ed
Yeah, rich people, inflation.
- [69:46]
Scott Galloway
If you have an asset that appeals to rich people and you can create a sense of scarcity, your pricing power is out of control because one, the rich have exploded their wealth. Right. Two, there's a change in zeitgeist where people realize rich people are generally older. They just got through Covid and they're like, like, I'm going to be dead soon. Why wouldn't I pay $38,000 to go to the World Cup? I'm going to be dead soon and I have money. Why wouldn't I? So you have this kind of YOLO versus massive demand from people from the rich who have a lot more money. And then you have FIFA, who's made the following strategic choice and they get to make this choice. Traditionally, they have priced their tickets below the market price because 80 to 90% of the revenues come from TV. And essentially the fans in the stadium were a feature of creating electricity that would come through the TV screen. And so they would save tickets in the less aspirational places for all the Croatians that actually got on a fucking plane and came to Qatar. Because seeing those crazy Croatians in the semifinals of the World Cup, I can't tell you how much electricity they brought to the game. And that did come through on the tv. So what they've decided to say, because here's the bottom line. Anyone buying those $38,000 tickets, they're not going to paint their faces. They're just not.
- [71:15]
Ed
They're going to be like Trump at the Knicks game. They're going to fall asleep halfway through, and then they're going to leave in the third quarter.
- [71:21]
Scott Galloway
They're going to be wearing suits and sucking down Pimm's cups and saying. Saying what an interesting game.
- [71:26]
Ed
The atmosphere is awesome.
- [71:29]
Scott Galloway
And like, who is this Ronald O. Character? I mean, these are not fans. These are people who get invited by corporations, right?
- [71:36]
Ed
Yes.
- [71:37]
Scott Galloway
And so you're substituting. What FIFA's done is they've made a choice. We're going to go out to the efficient frontier. We're going to take every dollar off the table, and we're going to sacrifice vibe. Easy for me to say, but I don't think that's what a nonprofit should be doing. And what is kind of the beautiful game I think they should be giving me. I mean, so, for example, rock bands do a really good job of this. What they do is they say, if you sign up to be a super fan. So I think I'm an official fan of Empire of the sun, and they go out initially to Empire the Sun fans and say, we've reserved a certain number of tickets for you because they want hardcore fans in the audience for the vibe. So this is anyways a long winded way of saying trading. FIFA's made a strategic decision to trade off vibe that used to come through the tv where they get most of their revenues to maximize ticket revenue. I hope they get stuck with a lot of tickets. I know that's a terrible thing to say, but similar to F1 in Vegas where they vastly overestimated demand and, like, sold 40% of capacity. I kind of like to see them e crow a little bit here. I think they'll just drop the prices and probably sell out.
- [72:42]
Ed
Well, here's the thing. They've already sold out on the first round. They've sold all of their tickets. I mean, there was the headline that you might have seen that there are almost 180,000 tickets that are still yet to be sold, which, by the way, is true. But they've yet to be resold. What we've seen happen is that FIFA crushed it in terms of navigating supply and demand dynamics. And people. Some people are saying they artificially sort of misconstrued what the demand would look like. They sold all of those tickets. And now there are 180,000 tickets that other people who have already bought those original tickets are trying to now resale. And so the resale price has fallen 20% over the past month. But the most important point here is that that doesn't matter for FIFA very much because they already sold the ticket. Now what's going to happen is because they have their resale portal, they're going to sell it twice, and they're going to take the 15% cut of whatever that now discounted ticket price is. But FIFA is going to be fine from this perspective. So in terms of how they've navigated extracting the most amount of profits possible from this system, they've really done a good job here. They have crushed it for their bottom line. The question now is, which parts of this were legal? Which parts of this do we think should be illegal if they're not currently illegal? And now we're seeing a lot of investigations into FIFA. So there were 69 Congress members that signed a letter to Gianni Infantino, who's the. The president of FIFA, and they were criticizing his pricing strategy. They said that it was, quote, the most financially exclusionary and inaccessible World cup to date. That doesn't really hold that much water. They're just complaining so that they can kind of impress their constituents. But we have seen attorneys general in New York and in New Jersey and in Texas who are opening investigations into FIFA's pricing strategy. Texas is investigating whether they violated the Texas Deceptive Trade Practices Act. And the concerns that they cite are opaque pricing, artificial scarcity, and dynamic pricing that quietly raises rates. All of that, to me, sounds super valid. It sounds like that is exactly the kind of strategy that they.
- [74:55]
Scott Galloway
It's also what the airlines do.
- [74:56]
Ed
That's the thing. And Infantino said, well, if this is the problem with me, then this is a problem across the rest of America. And so this is why I think this is really important story here, because this dynamic pricing thing is becoming a huge political issue now, not just in. In the world of sports, but across everything. Grocery stores is now the big concern, because a lot of these grocery stores, like Target and Walmart and Whole Foods, they are all experimenting with these digital price labels, which allows them to adjust the price instantaneously. And they're now employing that strategy. And all of these state legislatures across the US Are now thinking, do we need to fundamentally rethink the way that we regulate dynamic and instantaneous pricing? Because with AI, with algorithms, you can essentially just jack up the prices, even based on Your personal consumer data. I mean, you could essentially realize that there's a rich person who walked into the store. Let's change the price because we know that they will be down to pay more. Really interesting regulatory questions here emerging. And it's almost as if the World cup up is kind of the case study for this larger economic debate.
- [76:07]
Scott Galloway
I'm convinced a grocery store could dynamically raise the price of a box of tampons to 40 bucks if it's a dude buying them. Because it's like, yeah, that's fine, put it in the bag. I want to. Go ahead, go ahead. But what you're talking about is most service contractors walk into a home. If it's a nice home. I mean, not that they shouldn't do this. What do you think their price estimate is when they walk into a multimillion dollar home to hang curtains or do landscaping? Right. There's dynamic pricing everywhere. The story that's been underreported. I like to talk a lot about brand management. When I went to the World cup in Russia, first off, you're supposed to get a visa to go to Russia. Even back then, we had very tense relationships with Russia. And you know what they said? They said, take a picture of you with your ticket. That's your visa. Take a picture with you next to your ticket, and we send you a visa. And I'm telling you, they were. I don't know if they threatened to imprison people or not, or they're just a very friendly people. You could not go 50ft without someone saying, welcome to St. Petersburg. Where are you from? And it was such a great. And they handled it so well. And it was such a great event. The nation of Qatar. I'm not a big fan of Qatar. $14 billion in international funding to US universities. Four have come from Qatar. I think it's a very good, important question, what do they want in exchange? I had an amazing time in Doha, and it couldn't have been better produced, better managed. And I have warm feelings or less cold feelings towards Qatar. We are harassing incredibly well respected football officials from Somali and turning them back to Istanbul. We are pulling, pulling on Iranian managers and not granting them visas. I mean, we are acting like just such. While the world's eyes are on us and people. Again, this administration fails to realize soft power is the real power here. How people feel about you. And I think a lot of people are just saying it. Do I really want to go to a nation that does? People, when I went to Russia, people said, you know, aren't you worried? Isn't it dangerous? I have never felt safer. You could just tell. Word came down, treat tourists like they're, you know, treat them really well. And I imagine a guitar. If you ever fucked with a tourist, you might. They might, you know, you might not be heard from again. And instead, in the US We've decided, oh, no, let's start harassing people at the border, including really esteemed football officials, people on teams and coaches and players from nations where we are at. Not war, at military action, whatever you want to call it. These moves, 98% of people in the world are never going to come to America. 90% of them are never going to be an American. So their decision to send their kids to a school here to invest in US stocks to maybe alert the embassy about a terrorist cell they've heard is being formed here that has plans to harm us or our troops, all of those things come down to how do people feel about the American brand and it used to be the strongest brand in the world. Yeah, they're obnoxious, yeah, they're aggressive, but their heart's in the right place. And we are losing big but there. But we are losing that goodwill through just. Anyways, I'm beside myself and saving $38,000.
- [79:44]
Ed
And by the way, it's reflected in prices. If you look at the airfare prices, which have obviously gone way up in combination with gas prices and also the World cup, the prices that are exploding aren't the transatlantic prices to the host cities. The prices that are exploding are the domestic flights between different host cities.
- [80:02]
Scott Galloway
That's interesting.
- [80:03]
Ed
So what we're seeing there is it's, it's. The Americans are going to be showing up, and it might be that we see a lot less of the foreigners showing up for many of the reasons that you point out. Just one final point. Just thinking about the. The economic impacts of this World cup, and I think it's going to be enormous. Like, we saw that in the job recent jobs report that leisure and hospitality services exploded and really carried that number. A lot of people think it's because of the World cup and all the jobs that it might create. But then there are also the costs I mentioned the airfare prices, also the hotel prices in the host C that have really, really skyrocketed up 80% year over year in 13 of those locations. But then also really interesting transportation costs, specifically public transportation costs. So a New Jersey Transit ticket from Penn station to MetLife, it usually costs about $13 for the World Cup. They hiked it up to $150. They got a lot of pushback, and they reduced it back down to around 100. But this has become a real problem for a lot of people. We're seeing it in a lot of cities, and a lot of people are now thinking and talking about genuinely about walking to the stadium as opposed to taking public transportation. And this was a clip that we saw on our social media feeds. This was a guy who was talking about this strategy. Let's play this clip and get your reaction. Is it possible to just walk from New York City to MetLife Stadium in New Jersey? I'm gonna find out. So I went on Google Maps and I found a route that was 11 miles long and would only take four and a half hours to walk, but it was all on sidewalks. So I grabbed a pair of shoes
- [81:37]
Scott Galloway
that turns out had no arch support
- [81:38]
Ed
and headed off across the George Washington Bridge, which is the only way to get from Manhattan into New Jersey. This is the only walkable bridge across the Hackensack River. And given that you can't park at MetLife Stadium and the shuttle bus is going to be $80 round trip, I think a lot of fans are going to try to make this slog. So affordability is now such a problem that we're going to walk along the highway to get to MetLife. From New York City to MetLife Stadium. What do you make of this, Scott?
- [82:04]
Scott Galloway
When my dad got divorced for the third or fourth time, he was living alone in Ocala, Florida, on a mattress, and he got half the furniture in the divorce. And he had a little one bedroom, and there was furniture everywhere. Like, he couldn't move around. Like there was furniture stacked on furniture and he was using as a blanket my NFL sleeping bag from when I was 8 years old. And I hadn't seen him in a while. He was excited to see him. And he's like, ah, let's. Let's go grab a few drinks, you know, so. And he's like, you know, we're going to be responsible. We don't want to drink and drive. We're going to walk. I went, we're walking. I'm like, let's just take a cab, dad. And he's like, no, no, no, no, no. We walked three miles to the local Red Onion to drink with some of the most unfortunate people and then walk home to where my dad went to sleep under my NFL sleeping bag from when I was 8. And I literally thought myself. I thought to myself, God, I just, just. I'm so impressed. He's like, not really depressed right now. I remember thinking, you know, I was like 22, 23 at the time. I remember thinking, what's, I need to think about this. What series of bad decisions led my father to walking three miles from the Red Onion after two for one night back to his apartment that was jammed. It was jammed full of furniture he wasn't willing to give up in the divorce. Oh God.
- [83:50]
Ed
I mean, I mean it is truly insane.
- [83:53]
Scott Galloway
Things got better though when he decided to move in with three other guys who were all prison guards at the local Ocala penitentiary. I'm like, you know when you realize your dad, your dad doesn't make great decisions all the time.
- [84:11]
Ed
Yeah. Mile two on the way to the Red Onion. Do you have a, do you have a question? Did you have a question him like, hey, I don't know if we, like maybe we shouldn't do it. Like what do you kind of just go with it?
- [84:22]
Scott Galloway
No, I don't know, I just, I, I should have, I didn't, I didn't see like my dad was not, I could tell my dad was not doing well. I don't know if he. Fortunately my dad was too self absorbed and non thoughtful to really recognize in a sober fashion the life he was leading. Like he just thank God he did not have Instagram. But I remember I was working in investment banking at Morgan Stanley and living a semi fabulous life in New York for a 23 year old. And I remember going to Ocala, Florida and thinking, Jesus Christ. Anyways, Ed, anyways, don't study hard, don't do drugs, don't get divorced four times.
- [85:04]
Ed
Yeah, exactly. So I think for probably the final message is don't walk to MetLife Stadium from New York City. I mean if you're.
- [85:12]
Scott Galloway
Yeah, I don't think that's a good idea.
- [85:13]
Ed
Yeah, I, I, I'm not sure, not sure that that is worth it. Okay, let's take a look at the week ahead, Scott. We will see the import price index and US retail sales for May. All eyes will be on Kevin Walsh for the Fed's next interest rate decision. It will be his first time delivering the address as Fed chair. Do you have any predictions?
- [85:36]
Scott Galloway
We are about to see the biggest manufactured scarcity which will result in a non price or a price disparity between price and value, the likes of which we have never seen. We are going to see the greatest transfer of wealth from consumers to an investment since crypto and it's based on manufactured scarcity. And I believe what happened was the following. Musk said you Know What? I own 40% of this company. If it goes up 20% more based on unnatural demand, by being put in the NASDAQ 100, that takes the value from 2.2 trillion to 2.4. That's an incremental 400 billion. I own 40%. I'm going to get $160 billion if I can get a waiver here. So wouldn't Musk be stupid not to call the President and say, hey, why wouldn't you let great American retail investors have access to one of the great American companies? Call your buddy Paul. And by the way, if you can see your way clear to, I don't know, getting us in the NASDAQ 100 unlike any other firm previously in history, I might take, say, 1 or 2% of my incremental gains from this gaming of the system and apply it towards midterm elections, which I'm allowed to do because of Citizens United. Wouldn't Musk be stupid not to put pressure or bribe the President to take his stock up 20%, resulting in an incremental $160 billion in wealth creation through the manufactured scarcity that is occurring right now, courtesy of a corrupt SEC and president.
- [87:08]
Ed
What's the prediction?
- [87:09]
Scott Galloway
The prediction is Musk is going to spend more on the midterms than any individual has spent on any election.
- [87:14]
Ed
Got it. Okay. Yeah, yeah, I think that, yeah, it's an interesting prediction. Just to follow up on that. Agreed on the artificial scarcity and the artificial demand. But I think what we're about to see is one of the largest selling events in market history over the next six months. I think everyone who got the allocation knows that this price is ridiculous for SpaceX. I think they need to figure out a way to sell as much of this stock as possible once they have taken their returns and gotten their pop of whatever it might be. And so I think that SpaceX stock will be cut in half over the next six months. That's my first prediction. Second prediction, I said it before. I think inflation reaches 5% and I think it is sustained at around that level for at least six months as well. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Shalon, Isabella Kinsel, Kristen o' Donoghue and Mia Silverio. Jake Fersen is our social producer. Drew Burrows is our technical director, and Catherine Dillon is our executive producer. Thank you for listening to Profit you Markets from Profit you Media. If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on the markets.
- [88:39]
Scott Galloway
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Ed
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Scott Galloway
Time for a Pure leaf.
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Ed
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