Podcast Summary: Prof G Markets – "Is Reddit Undervalued? + Netflix Goes After Podcasts"

Podcast Information:

• Title: Prof G Markets: Is Reddit Undervalued? + Netflix Goes After Podcasts
• Host/Author: Vox Media Podcast Network
• Release Date: February 17, 2025
• Description: In this episode of Prof G Markets, bestselling author, professor, and entrepreneur Scott Galloway delves into the valuation of Reddit and explores Netflix's strategic foray into the podcasting landscape. Joined by co-anchor Ed Hyman, they analyze recent market trends, discuss the rising costs in education, and speculate on the future of major tech companies.

1. Introduction and Small Talk (00:01 – 05:17)

The episode begins with Scott Galloway and Ed Hyman exchanging casual banter about personal activities and upcoming travels. Ed mentions being in Mexico City and heading to Puerto Escondido, while Scott shares his affinity for Mexico as his favorite vacation spot.

Notable Quotes:

• Scott Galloway [00:01]: "Your brain can hold around 2.5 million gigabytes of data, but that doesn't mean you should waste any of it on something you don't need to..."
• Scott Galloway [04:06]: "Mexico. If I could only vacation one place, would it be Mexico? I think it might be Mexico. Maybe Italy. Mexico? Yeah, it's fantastic."

2. Market Highlights and Inflation Overview (05:17 – 11:56)

Ed introduces the week's market highlights, noting the volatility in the S&P 500, decline in the dollar, drop in Bitcoin, and a significant jump in the yield on 10-year Treasuries. The discussion shifts to the Consumer Price Index (CPI) rising 3% year-over-year in January, the largest monthly increase since summer, driven by shelter, transportation, and medical care costs. A notable spike in egg prices—up 53% year-over-year—is attributed to a severe bird flu outbreak impacting poultry supply.

Notable Quotes:

• Ed Hyman [05:17]: "The CPI rose 3% year over year... the price of eggs has risen 15% in the past month alone and 53% in the past year."
• Scott Galloway [08:50]: "...the market is going to have to absorb the fact that the expected interest rates probably aren't coming as quickly as they thought or in the foreseeable future."

3. Political Implications of Inflation (11:56 – 19:19)

Scott reflects on a conversation with a senior Obama campaign member, emphasizing the need for the Democratic Party to transition into "the party of tomorrow." He proposes a massive program to subsidize the private sector and streamline housing permits to increase housing stock, aiming to alleviate rising housing costs and employ young people in construction and vocational jobs.

Notable Quotes:

• Scott Galloway [11:56]: "We need to move from being the party of complaints and whining... to the party of the future."
• Scott Galloway [15:31]: "The average tuition for a private elementary school is $22,000 per year... the admissions rates continue to go down."

4. Rising Costs of Private Education (19:19 – 26:28)

Scott and Ed discuss the surge in private school tuition in the U.S., highlighting that average costs at private schools have soared to nearly $50,000 annually. Scott shares a personal anecdote about his son's experience with private school admissions and advocates for taxing private schools to reinvest in public education, arguing that reduced parental involvement in private institutions correlates with declining educational quality.

Notable Quotes:

• Scott Galloway [19:19]: "Parental involvement in that school declines and the quality of the education spirals down."
• Scott Galloway [22:47]: "My father peaked at the age of about 48 or 49 professionally... but he went on."

5. EU's $200 Billion AI Investment Initiative (26:28 – 34:33)

Ed introduces the European Union's commitment to mobilizing 200 billion euros for AI investments, aiming to bridge the funding gap with the U.S. and China. Scott analyzes Europe’s historical risk aversion compared to American and Chinese counterparts, attributing the U.S.'s superior venture capital figures to a cultural inclination towards risk-taking.

Notable Quotes:

• Scott Galloway [20:30]: "It's all about how much risk you're willing to take."
• Scott Galloway [21:00]: "The risk-taking DNA is everywhere in our gene pool and it's not in Europe."

6. Reddit's Valuation and Future Prospects (34:33 – 39:55)

The core discussion revolves around Reddit's fourth-quarter earnings, which surpassed analyst expectations in sales and profitability but fell short in user growth, leading to a 13% stock drop. Scott argues that Reddit is significantly undervalued, citing its high traffic and potential in the podcasting space. He suggests that Reddit could evolve into a major podcast distribution platform, comparable to Spotify or YouTube, leveraging its extensive user base and engagement.

Notable Quotes:

• Scott Galloway [27:14]: "This company still has a long way to go..."
• Ed Hyman [30:29]: "Reddit is severely undervalued."
• Scott Galloway [34:33]: "There’s a lot of upside here... if they keep growing, revenue is 73% a year, they're going to catch up pretty quick."

7. Netflix's Strategic Move into Podcasting (39:53 – 56:44)

Ed reports on Netflix's potential expansion into video podcasts, targeting high-profile podcasters like Alex Cooper. Scott speculates that Netflix aims to dominate the podcasting industry by enhancing production quality and securing exclusive content, potentially transforming popular podcasters into Netflix's own media stars. They debate whether Netflix can maintain the authenticity of traditional podcasts while increasing production value.

Notable Quotes:

• Scott Galloway [42:49]: "Netflix will overnight be able to take, they'll own a bunch of podcasts."
• Ed Hyman [51:50]: "People crave connection with real people... not the highly produced Netflix series."

8. Predictions and Final Thoughts (56:44 – End)

Scott provides his bearish outlook on Tesla, predicting a significant decline in sales and stock value due to increased competition and brand missteps. Ed remains skeptical, highlighting the company's resilient market presence despite warnings. The episode concludes with credits and a brief discussion on upcoming live taping at South by Southwest.

Notable Quotes:

• Scott Galloway [56:54]: "Tesla is imploding... I think the stock is below 200 in the next six months."
• Ed Hyman [58:31]: "They always figure out a way to say, no, no, there's still more room to run, but we'll see."

Key Takeaways:

1. Reddit's Undervalued Position: Despite strong sales and profitability, Reddit's user growth volatility presents challenges. However, its high traffic and engagement suggest significant undervaluation with potential for growth, especially in the evolving podcasting landscape.

2. Netflix's Podcast Ambitions: Netflix is exploring the integration of video podcasts, targeting exclusive content and high-production formats. This move could redefine podcast distribution and elevate popular podcasters to mainstream media status.

3. Rising Inflation and Education Costs: The surge in CPI, driven by essential sectors like housing and food, coupled with skyrocketing private school tuition, underscores pressing economic and social challenges in the U.S.

4. EU's AI Investment: The European Union's substantial investment in AI aims to narrow the technological and venture capital gap with the U.S., emphasizing a shift towards greater risk-taking and innovation.

5. Tesla's Future Uncertain: Scott Galloway remains pessimistic about Tesla's stock performance and market position, citing increased competition and brand management issues as critical threats.

This episode offers a deep dive into significant market movements, strategic corporate decisions, and their broader economic and social implications. Scott Galloway and Ed Hyman provide insightful analysis, blending personal anecdotes with expert commentary to engage listeners in understanding the complexities of today's financial landscape.