Podcast Episode Summary: Prof G Markets – "Google’s Quantum Breakthrough & The World Cup Goes to Saudi Arabia"

Hosted by Scott Galloway | Released on December 16, 2024

In this episode of Prof G Markets, Scott Galloway delves into two major headlines shaping the business and global landscape: Google's latest quantum computing advancement and Saudi Arabia's announcement as the host of the 2034 FIFA World Cup. The discussion spans market dynamics, technological breakthroughs, and geopolitical strategies, providing listeners with in-depth analysis and insightful commentary.

1. Market Overview

a. Kroger's Abortive Acquisition of Albertsons

At the outset ([01:47]), Galloway addresses the halted $25 billion merger between grocery giants Kroger and Albertsons. A federal judge sided with the Federal Trade Commission (FTC), citing concerns over reduced competition and potential consumer harm. Albertsons subsequently terminated the deal and launched a lawsuit against Kroger for insufficient regulatory approval efforts.

Quote:
"Today's number $400 billion. That's Elon Musk's record high net worth as of last week... But first, here with oh wait, banter."
— Scott Galloway [01:47]

Galloway's Analysis ([05:23]):
He critiques the anti-merger stance as "populist bullshit," arguing that Kroger and Albertsons aren't formidable competitors to industry behemoths like Amazon and Walmart. Galloway emphasizes that the real threat lies with these online and large-format retailers, not the merging supermarkets. He points out that supermarket mergers can lead to lower prices due to economies of scale, contradicting the FTC's concerns about consumer harm.

Quote:
"My fear was when you look at Albertsons or Kroger, it's not like these guys are lighting up the business world. This is specifically their existential threat is Amazon."
— Scott Galloway [05:23]

b. Warner Brothers Discovery's Strategic Split

The second major headline is Warner Brothers Discovery's decision to split into two distinct units: one for streaming and studio operations and another for linear TV networks ([06:52]). This restructuring aims to pave the way for a potential spinoff or sale of its TV business, leading to a significant stock reaction with a 14% surge.

Galloway's Insights ([12:23]):
He interprets this move as setting the stage for a future spin-off, comparing it to Comcast's similar strategies. Galloway suggests that such splits can enhance shareholder value by allowing distinct businesses to operate independently, potentially attracting higher valuations for each segment.

Quote:
"He's setting the table for a spin... I think this is a good move."
— Scott Galloway [12:23]

c. Eli Lilly's GLP1 Drugs and the Alcohol Industry

Eli Lilly's upcoming trials of GLP1 drugs (Zepbound) for treating drug, alcohol, and tobacco addiction ([15:12]) is another focal point. Galloway discusses the profound implications for the alcohol industry, predicting significant downturns as these drugs reduce addiction rates.

Quote:
"These things are scaffolding on our instincts... I think you're just going to see gambling addiction. Anyway. I'm very excited about this."
— Scott Galloway [16:03]

2. Implications of Kroger-Albertsons Cancellation

Galloway critiques the FTC's intervention as lacking a true antitrust foundation, emphasizing that the merger posed little threat compared to the dominance of Amazon and Walmart. He underscores the importance of fostering competition against major players rather than obstructing smaller, less impactful mergers.

Quote:
"I think there's still quite a bit of competition here. This is populist bullshit because just as diapers weigh diapers and gas prices kind of weigh on people's sort of view of the world."
— Scott Galloway [05:23]

3. Warner Brothers Discovery’s Split and Shareholders' Implications

The strategic division of Warner Brothers Discovery is seen as a precursor to an eventual spin-off, aiming to unlock shareholder value by segregating profitable and growth-oriented segments. Galloway anticipates that this could lead to more focused and agile operations within each unit.

Quote:
"Based on what the market said today, this is Zaslav prettying up the company for a spin... That will be the ugly stepchild that still brings home money but is not very popular."
— Scott Galloway [12:23]

4. GLP1 Drugs and Impact on the Alcohol Industry

The introduction of GLP1 drugs by Eli Lilly is projected to disrupt the alcohol sector significantly. Galloway highlights that even a small reduction in alcohol consumption among heavy drinkers could lead to substantial declines in sales for major alcohol brands.

Quote:
"If you think about who's going to get GLP1 first it's the person whose doctor said if you keep drinking you're going to die. And when you take out those rabid alcoholics, the drinks industrial complex, if it loses the 1% of the alcoholics, its business is going to be off 20 or 30%, which spells restructuring, massive layoffs."
— Scott Galloway [16:19]

5. Google's Quantum Computing Breakthrough

a. Understanding Quantum Computing

Galloway breaks down the fundamentals of quantum computing, explaining how it differs from classical computing through the use of qubits, which can represent both 0 and 1 simultaneously. This allows quantum computers to process information exponentially faster for certain tasks.

Quote:
"The key difference between quantum computing and regular computing is in how they process information... a 0 or a 1, and these ones and zeros are known as bits."
— Scott Galloway [26:43]

b. Google's Willow Chip

Google's new quantum chip, Willow, reportedly outperforms the world's most advanced supercomputers, solving complex problems in minutes that would take classical supercomputers longer than the universe's age. Importantly, Willow addresses the prevalent issue of error rates in quantum computing by improving accuracy as more qubits are added.

Quote:
"With the Willow chip, this new chip they've come out with, the more qubits you add to the computation, the more accurate the computation gets."
— Scott Galloway [26:43]

c. Implications for Businesses and Cryptography

Galloway explores potential applications of quantum computing in healthcare, particularly in simulating molecular developments for pharmaceutical advances, and in cryptography, where it could revolutionize encryption systems, posing threats to current technologies like Bitcoin.

Quote:
"There exist some business use cases that Google hasn't really talked about... healthcare and encryption are two areas that could see massive impacts."
— Scott Galloway [31:25]

Galloway's Take ([30:23]):
He views Google's announcement as a significant branding event, reinforcing Alphabet's position as a leader in innovation despite unclear immediate applications. Galloway anticipates a surge in corporate buzz around quantum computing, likening it to the hype cycles seen with AI and cryptocurrency.

Quote:
"I predict a huge hurricane of corporate bullshit that is going to come rolling in hard. And I think the name of that hurricane will be quantum."
— Scott Galloway [33:17]

6. Saudi Arabia Hosting the 2034 World Cup

a. Economic and Branding Significance

Saudi Arabia's successful bid to host the 2034 FIFA World Cup marks a strategic move to position itself as a global sports leader. Investing billions in sports infrastructure aims to transition the kingdom towards a knowledge-based economy, reduce reliance on fossil fuels, and enhance its international image.

Quote:
"Saudi Arabia will host the 2034 World Cup, marking a key step in the country's plan to establish itself as a global leader in sports through its sovereign wealth fund."
— Scott Galloway [40:03]

b. Soft Power and Human Rights Considerations

Galloway discusses the complexities of Saudi Arabia's human rights record juxtaposed with its economic ambitions. He argues that while criticisms exist regarding human rights abuses, the kingdom's ongoing reforms, particularly in women's rights, indicate a trajectory towards improvement. Galloway believes that the World Cup will serve as a catalyst for further positive changes, enhancing Saudi Arabia's soft power.

Quote:
"I think when they are on a global stage that they have more motivation and incentive to improve, to continue to improve and head in the right direction."
— Scott Galloway [54:17]

c. Future Implications for Saudi Arabia

The podcast examines the potential long-term economic benefits versus the immediate financial costs of hosting the World Cup. Citing studies that show most global sports events are not profitable directly, Galloway emphasizes the intangible benefits of international visibility and increased foreign investment.

Quote:
"I'd bet that if Qatar spent a quarter of a trillion dollars or 250 billion, I wouldn't be surprised if the Kingdom spends half a trillion dollars on these Games. All I know is we are going at. And it's gonna be amazing."
— Scott Galloway [50:14]

Further Discussion ([52:10]):
Galloway defends Saudi Arabia's strategic use of global sports events as essential for economic diversification, despite controversies. He posits that the Kingdom's investments in sports are part of a broader vision to attract global talent and investment, ultimately fostering sustainable economic growth.

7. Predictions on Meta’s Earnings

Towards the episode's conclusion, Galloway shifts focus to Meta (Facebook), predicting a significant earnings beat in their upcoming February report. He attributes this to Meta's mastery in monetizing societal rage and polarization, which he believes has reached unprecedented levels in the United States.

Quote:
"My prediction is that Meta's next earnings call... is going to be just blow away again, expectations."
— Scott Galloway [58:49]

8. Conclusion

Scott Galloway wraps up the episode by highlighting the intertwined nature of technological advancements, corporate strategies, and geopolitical maneuvers. He underscores the importance of understanding these dynamics to anticipate future market movements and societal shifts.

Notable Quotes with Timestamps:

• "I'd hate to say it, I would enjoy that [Bitcoin being hackable]."
  — Scott Galloway [33:05]

• "Brand building is a little bit about taking a leap of faith, believing that if the intangible association surrounding a product, a service or even a nation will create more awareness, more trial."
  — Scott Galloway [53:31]

• "They have what feels like infinite capital right now. The bad news is it's running out in 30 or 40 or 50 years."
  — Scott Galloway [50:14]

• "These events are basically like a giant ad. Essentially, it's awareness, unearned margin."
  — Scott Galloway [51:27]

Final Thoughts:

This episode offers a comprehensive analysis of significant developments in the corporate and global arenas. Galloway's expertise provides listeners with a nuanced understanding of how mergers impact market competition, the transformative potential of quantum computing, and the strategic use of international sports events for economic and geopolitical gains. His candid commentary and forward-thinking predictions make this episode a valuable resource for anyone seeking to navigate the complexities of modern markets and global strategies.