The Business Model of Bending Spoons

Here's a question. What if women's healthcare was actually built around women Mount Sinai is proud to answer the call Announcing our new Carolyn Rowan Center for Women's Health and Wellness, the future of Women's health care in New York City, O destination where leading specialists, evidence based medicine, and a whole person approach come together under one roof to support your health and wellness at every stage of life No more fragmented care, no more dead ends, just seamless transformative women's health carere designed around who you are and where you're going We get you And we've got you. The Carlyn Rowan Center for Women's Health and Wellness at Mount Sinai We find a way This episode brought to you by Google Chrome You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a fifty page restoration block, or finally break down that long article you've had open for weeks. 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So in case you will need to be caught up, I'm going to tell dad jokes until Michael Simbolis, the chief investment offfficer from JP Morgan accepts our apology for offending him for telling a dirty joke On the episode, he appeared. I actually find the dad jokes funnier than the sex jokes. I'm sorry, we need to fix that. Why can't you hear a pterodactyl in the bathroom? Why is that? Because the P is silent Michael Acept our apology Or don't. Release the dick jokes. Actually, that's my new position. I don't want him to accept it. I like this new direction. How are you? Doing very well. It's coming home. I don't know about that because that was a pretty shocking performance. This will come out onn Monday and we're recording before Sunday night. so we'll see if England's still in the World Cup. but Yeah, the Congo performance was not great. D they have to play in Mexico Is the next game in Mexico at Ostteeica? Yeah, Mexico Sunday. Yeah, it's going to be a tough one. Did you see Team USA? Team USA looks good. The scary part is the star of the US team So Lureren I think it's Balligan received a controversial Rd card. Yeah, so. Do you see that? That I think that's very anti American. I don't. And by the way, Discrimination against the Yanks. Do you know what Fller and Balligan and Scyt Gallay have in common? Other than exceptional athletic skill. What's that? We're both anchor babies. His mother was seven months pregnant and the airline wouldn't let her fly, and so he was born in the US. That's why he wass on Team USA And Sylvia Levine and Tom Galloway who met in Toronto at a dance. My mom was seven and a half months pregnant. Pretty sure they weren't wed. I think they' been lying to me about that. ps. Is he late to check now And they decided they couldn't endure another winter. This is a true story. And my mom wrad in the Toronto Globe and Mail that the city with the best weather in North America was the city called San Diego So they loaded up my mom's Austin Mini Metro, which is essentially a lawn mower with doors. I don't know if you've ever seen Mr. Bean. It's the go cart. And seven and a half months pregnant My mom and my dad traversed across the U S with no air conditioning in their car and landed in San Diego and five weeks later I was born Uh so had Th This ridiculous attempt to turn back the fourourteenth Amendment been in place now. Yours truly would not be an American citizen. so What I am asking is that the IRS recognize that I'm not a citizen as I want to move to Dubai, and I want the one hundred million dollars in taxes me and my company have paid over the last decade. I want it back. According to you, fucking Stehen Miller and Donald Trump. I am not a citizen, meaning I'm not obligated to pay taxes in the United States. So anchor baby here Anchor baby. Revoke my citizenship and tax status, please. love it. I'm kind of a reverse anchor baby or I guess maybe I'm anchor baby in Britain. American parents. Go to the UK, born in the UK, come back here. Oh my Godd, we're housing an undocumented worker Someone call us. C them Take me away. Oh, It's almost bonus time. I'm gonna be like that bitch that called Iice on the roofers when they were done roofing her house and she didn't want to pay them. so she called Iice. Literally december thirtieth, Merry Christmas, please meet Mr. Sanchez from Ice I'm sorry, I' I love it. We were going pay you a bonus, but it just wouldn't be right. It just wouldn't be right. Get him out. Why does that make me happy Why does that make me up? I'm calloning someone else Oh, that's hilarious. That' That's good. That's hilarious. Well you can try it. Are you a citizen? Yeah, but I'm a citizen so I've got the dual passport, so it's not really gonna to work out You could try it. Wait, so were you weren't born here. so your parents applied for your citizenship? I don't really know what they did, but they're American. I'm sure you don't, you little illegal immigrant Well? Everyone knows what's going on here. Everyone knows what's going on here Okay. All right Well, now that we've figured out our citizenship status, you will have it revoked and I apparently illegal currently Shall we get into our three big stories? We've got a lot to talk about today? Let's get to the news. Stop bantering. Let's do it There were two strange updates in the AI world last week. First OpenAI proposed giving the Trump administration a five percent stake in the company. That stake would be worth roughly forty three billion dollars Sal Atman has reportedly argued that a government stake in the company would be the best way to share in the upside of AI with the public. And there's a vision for other AI companies to potentially join in essentially creating a sovereign wealth fund And then in the second piece of news, Meta is reportedly becoming a cloud provider. The company is preparing to sell its excess AI computing capacity That is a notable shift after spending billions to build out infrastructure that it previously said would be necessary for its own AI ambitions. Investors did welcome the news though sending meta shares up nearly nine percent, but the reaction wasn't nearly as positive elsewhere. shhares of neoc clloud companies like Corwave and Nbius fell roughly twelve percent on the news So Scott, lots to get into in the AI department here. First I'm just going to take my own little personersal victory lap because if you follow me on Twitter, you know that I actually bought meta last week five hundred and sixty four dollars. Here we are. The reason I bought it is because I thought the stock was way undervalued trading twenty times earnings, S and B trading at twenty five times. So That's pretty cheap relative to the rest of the market. and this is a player that obviously is positioned for AI if we do see an AI boom Plus, the last time it traded that low was in twenty twenty two And since then revenues have grown more than seventy percent, gross margins have increased two hundred basis points. So the whole thing just looked very attractive. The market was very worried that Zuckerberg was investing all of this money into these data centers, but hadn't laid out a plan for how he was going to monetize those data centers. Well now he's given us the answer And he's basically just going to do what AWS did And what the cloud providers do we just rent out the chips and sell it to enterprises. Now there is a lot of debate over whether this is actually bullish or bearish because what we also know Is that the plan was to use all of that compute to build their own AI products Another theyre saying No, we're not going to do that anymore. We're going to sell it to someone else and someone else is going to build the AI products which begs this question Wh's going to build the AI products And why isn't Meta down to do it if they are one of the most capitalized companies in the world and they are supposedly supposed to be a leader in AI That's the bearish question. Lots to get into your reactions. This s chills down my spine are I had real dejrevu of ' ninety nine again because What do we have here? Essentially and I I don't listen to markets unless nor enjoy it unless I'm on it, but I did find That guy you had on EdZitr Citron, He's very good. And I was fascinated by what he said. He's basically saying this whole thing F That's how that's my takeaway And I was fascinated by I mean, his basic thesis and tell me if I have this right. is that all of the demand that trickles down to the trillions of dollars of CapEx and infrastructure and unbelievable valuations from construction firms to the chips guys is now basically down to demand being created by two players And that is anthropic and open AI are still growing, but meta and XAI who are planning to create demand themselves with their own customer bases needs for AI products have basically said, o, we overestimated the front end demand we could create. So we're going to lease out our infrastructure So all of a sudden, it looks like We've gone from another unbelievable pivot from a crisis of supply to a crisis of front end demand And probably the strongest evidence of that of the kind of demand shock, if you will is open AI delaying their IPO. In this market, you would think even if they'd lost some momentum, they would be Jonesing to get out and I mean, it looks as if so What did we have? We had Grok has five percent market share, Cloud S fourteen, Chat CBT forty nine, Gemini twenty And Lama had two point one And I don't think it was the market saying U Okaykay, this is this is we like the revenue that these guys are going to pick up. It's actually a drop in the bucket for these guys. I think what the market was saying is This is a Capx race that is going to be a loser And we like that Mad is beginning to look more like apple And they're not, they're basically getting out early of these CapEx wars And this all feels very ninety nine to me and that is You had So we knew the internet was going to be huge. People were confident of that. But the front end guys the application layer, the pets dot com, the ammazon. com, the UToys It was clear that they weren't going to be able to create the kind of revenue in the short term that justified their valuations. So everyone thought about, wait, let's go to B to B. So we went from open AI. B to be anthropic, which was big in the enterprise, right And then we found out, there was companies, you don't remember this, like Internet Capital Group, which was supposed to be a marketplace so Pepsi could buy sugar. And then what everyone realized was it was just total bullshit that it was much easier to pick up the phone or just send a fax B to B guys collapsed. And then I thought, well, well, hold on. okay, B to C and B to B Maybe we can't pick the winners But the internet's huge, We need infrastructure investment. So people threw in the hat on trying to pick which front end or which B to be Application of the layer was going to be huge. and they invested in infrastructure and they invested in Cisco Right? They invested in Fiber. And then Cisco from ' ninety nine to two thousand one lost ninety two percent of its market capitalization And that sort of feels like what's happening here is the front end is stressed, It's not creating the demand originally anticipated. And so we went from open AI to wit anthropic is be to B. That's where it's at. Now we're starting to see what is a token Nausea, people are saying you're spending too much in the enterprise on this shit. You need to scale it back And I think the next shoot of drop is going to be in the infrastructure layer And what people don't, and that's not to say the technology is not amazing. That's not to say these companies won't be great companies that'll be around in twenty or thirty years. Amazon lost ninety percent of its value in a twenty four month period. It's obviously recovered then Some, the internet has lived up to the hype they went through incredible volatility because the initial I mean, it's gone from not what can AI do to will AI pay And right now, it seems to me we're starting to see real cracks in the wall or in the narrative justust to go to what Meta and Mark Zuckerberg had previously said about these hundreds of billions of dollars that they were investing and spending on building all of these data centers, which again, the market didn't like because they didn't have a clear answer to the question of how are you going to monetize them But basically, here are some quotes that executives at Meta said that told us roughly what they were thinking. So Zuckerberg said in twenty twenty four quote Our goal with metaAI is to build the world's leading AI service both in quality and usage. So the idea is we're going to build our own AI stuff. In twenty twenty five, the CFO said when she was asked about the ROI question, she said, quote, Even with the capacity that we're bringing online in twenty twenty five, we are having a hard time meeting the demand that teams have for compute resources across the company. i. e, we are building all of these AI products and we can barely keep up with the demand for our own teams within the company Then this is the most important quote when asked if he would ever just start a cloud business, which he's now doing as of last week Zuckerberg said this year, quote We haven't done that yet because we think that we have a use for the compute Obviously, if we get to a point where we feel that we have overbilt, Then that is an option that we have and that is partially what gives us confidence in investing in building this out Well, they've now done the thing that they said that they would only do if they felt that they had quote O buuilt So the question is Have they over built And I think that it would be a very, very reasonable answer to say yes, they have, because look at what they're now doing So I think that you're right in pointing out the difference between The front end of AI, I e using Ch GPT, using Claud, etceter. and the backacke end, which is building the infrastructure, building the data centers. Meta clearly tried. build a front end AI business They try to do Lama, as you said, two percent market share Clearly it didn't work So now they're shifting to the backend. They say, we're not going to build those products. We're going to sell stuff to other companies we're going to build the products XAI, similar position. They tried to build a front end business. Mostly hasn't worked. GroC has like five percent market share. They're shifting to the backac endnd. they're shifting more focus on building the data centers, which they are now renting out to other companies that they should really be competing with And so now most companies are basically deciding Building the front end is a bad business, betteret to build the backac endnd, build the infrastructure and sell it to the front end AI businesses. So then the question becomes, okay Who are these front end AI businesses that they're selling to that supposedly is a good business. they've invested hundreds of billions of dollars into. and the answer is there are Tw companies It's anthropic on its open AI And that's basically it And when we look at our estimates, those two companies alone account for between sixty per to eighty percent of the AI revenues for Amazon, for Google, and for Microsoft. And according to the information, those two companies alone make up half of the entire revenue backlog of the hyperscalers, i. e the big tech companies, meaning that the backend infrastructure business only works if Oen AI and Anthropic continue to pay all this money and keep this whole thing afloat, which then begs the question, do you think they'll keep actually paying And this is where the financials are so important which were leaked by Eita who we had on And we learned that OpenAI made thirteen billion dollars in revenue last year. Okay, great, but they spent thirty four billion. So their operating loss was twenty one billion dollars. Anthropic, we don't know the financials, but we at Prof G have done some estimates that we know that they made four and a fivealf billion dollars in revenue last year. basased on our estimates, they probably spent around fifteen point a fivealf billion. That's an eleven billion dollars operating loss. Ming the front end AI business only works if the VCs continue to subsidize it to the tune of hundreds of billions of dollars, and by the way, if the hyerscalers continue to subsidize it. But if they stop doing that, then suddenly this business of building front end AI doesn't work anymore, which means the business of selling the bac endnd doesn't work anymore, which Basically means the whole thing falls apart brings us to Op AI and their recent news which is that they have decided that the best bet is to go to the government. for what seems to be something like a bailout. And that is, according to the Financial Times, they've discussed giving a five percent stake to the U.S. government And so it seems as though instead of Silicon Valley subsidizing those losses mayaybe now just the taxpayer as well And maybe that's the plan. And maybe that's a good idea becausecause that's what the banks did in two thousand eight didn't work for some of them, but worked out for most of them. And so you have to think Maybe they see this collapsing And that's why they go to the government But either way, these new pieces of news in the same week. That's very, very bearish in my view and seems to indicate that this is a growing bubble that is nearing a point of mayaybe not collapse, but certainly massive course correction. Open AI, Ive predicted six months ago that the biggest bailout in corporate history was about to happen and it was going to be the bailout Nadeela Altman Uh Dario Aamadee. And it would be dressed up as investment or growth It's not. It's a bailout If the government were to take a five percent stake in In open AI, great. they're going to favor open AI. They're going to overregulate their competitors and under reggulate open AI they're going to provide them with protection money and direct access to The White House,'s it's a It's not even socialism, it's cronyism. It's like, you know, when things are really good, we want to capture all the gains ourselves. But when things are bad, we want to socialize the losses. That's not capitalism on the way up and socialism on the way down as coronyism And that's what's being offered here. It's also evidence that things are there's something wrong in Mudville And then just as the great flippining was the reversal of fortunes in from the massive leakage of momentum from open AI to anthropic. we've seen another incredible flipping, but this is one is is geographic And that is free Chinese models went from thirty percent of AI traffic to sixty percent in six months The dominant AI models are now importmps I mean, this is The thing that rocked the automobile industry was a product called the Honda Civic That was sort of a slow moving train wreck over ten years. This has been ten weeks GPU rates are collapsing. The hyperscalers has built three hundred billion dollars of infrastructure for customers who are switching to Deep Sk for free The way to describe this historically is this is the fiber overbuild of nineteen ninety nine The Chinese model problem it iss like another problem on top of all of their other problems because I mean, as you pointed out, a lot of these large companies are now switching. I can go through a list of some of them who have switched to Chinese models, coinbase ' now using Kimmi, Csor is using Kimi, Shopify' is using Quen, Airbnb is using Quen Siemens is using Deep Sek, Microsoft is now apparently testing Deep Sek. and the reason they're all doing this is because the Chinese models are way cheaper And we talked about why is that the case Some say it's because Chinese have cheaper energy and that might be part of it, but also it seems that they're kind of just stealing the models from the U.S companies through this process of distillation. I don't think the Chinese would do that E. They hate stealing IP It's not their game. Yeah. That's probably what's happening. And unless you can do something to stop that, then this train's going to keep running here and the Chinese models are going to continue to take up market share. And the real problem is the fact that it has now sparked open AI to supposedly consider reducing their own prices And if you're a company that's making thirteen billion dollars And spending thirty four billion dollars And you're going to decide that actually, we're going to reduce the revenue number because we're being priced out by other companies that are offering not just comparable products, but literally equal products. I mean, studies have been done. These models are perfectly good on a variety of different metrics It basically means that open Ayes business is in big B Trouble and Again, they can say giving the stake to the U. S. government because they want the American people to all share in the upside What they're really saying is We want the American people to all share in the downside Because right now The business is currently all downside You haven't figured out a way to make this product profitable You haven't figured out a way to sell this product without spending literally like billions and billions of dollars on sales and marketing, almost six billion dollars. They could have bought Super Bowl ads for a decade, every single Super Bowl ad for literally a decade like This is a business that clearly hasn't proven itself and they're already going to government and saying, you guys support us. What I can't tell though is whether that I mean, Clearly I' bearish after hearing about the Matter News But now I'm wondering, okay, if the government just bails them out, then maybe it will all work out. like I don't know if I should be if we should necessarily be betting against companies that are literally going to be subsidized by the full force on the balance sheet of the U.S. government. I don't know if that's actually what's going to happen here And I don't think it's fair and I think it's honestly reprehensible And I can't believe that we can't learn from our mistakes in the past and continue to do the same thing over and over and over again. And I know it's going to create hatred of these companies among the American people, i. e. the taxpayers who are going to pay for all of this. Part of me thinks Maybe that works just getting bailed out And maybe that means that they can figure out a way to reach profitability if they can just continue to have their losses subsidized by someone who's way richer than them. It started off with Silicon Valley, Then it went to big tech like companies like Microsoft, and now it's going to literally the US government I mean, maybe that's a winning strategy I don't know. This is a common theme in America and that is My generation or the incumbents, if you will, it's not old versus young, it's not rich versus poor. it's incumbents versus entrance. But the incumbents who are sitting on top of a company recently valued at eight hundred seventy five billion It's okay. If they go to a one hundred billion dollars, they're still going to be worth twice what Ford is worth. They're still going to be one of the hundred most valuable companies in the world Com companies trading at n hundred and seventy five billion dollars shouldn't get bailouts. Now, you could argue that if Ford goes from ten billion to zero and has to lay off a couple million people in middle class jobs are lost in the Middlewest. Okay, maybe that's at least a feasible argument for government invention having Societal implications or a positive or justification any Ianropic Burn baby, burn. If all of a sudden Nvidia goes from being worth more than the entire German and Spanish stock market to just being worth what the French stock market is worth. Okay There's there's absolutely no justification for me tori whip out your credit card. in in run up our deficit such that the current owners, the private owners of anthropic and open AI shares can maintain their gains This isn't about an existential crisis where you think we would lose millions of jobs And the very existence of this category and losing this game This is about keeping the incumbents rich And that is basically curse or a virus that infects America. I have two college degrees in a bunch of homes to make it harder for everybody else to get one. such that the value of my current assets go up. No, that's not the way America iss supposed to work. And the idea that we're even talking about this for companies that are If anthropic were in Europe It was founded five years ago. It would be one of the four most valuable companies in Europe right now What company that's one of the twenty most valuable companies in Europe has any discussion of a bailout The plane is running at Mck three and doing just fine. Why do the pilots need to bail out? Why do we need to pay for these things? These things say they lose eighty percent of their value. Amazon lost ninety two percent of its value. We didn't bail them out That's fine. That's a part of that's that's part of capitalism So the fact that this is even being discussed, in my opinion is Sam Alaltman saying I have no fidelity to capitalism I did this weird fucking deal with TPG and other other private equity firms that guarantee them a sixteen per or seventeen percent pick. All that does is start to crush the previous rounds of investors because those numbers will start to add up pretty fast. But my God, if it's If they lose eighty percent of their value, so you're saying it's only worth as much as the entire US auto industry sounds Tesla. But it's almost like they want to be systemic. They want to be it's like they open AI is essentially like a zombie child that was formed by all of the big tech companies that have become systemic to the stock market. and it's like Sam Altman is trying to make the company as systemic as possible, such that eventually when things go wrong We have no choice fail to bail them out. It seems like this is almost all part of the design that he wants to be too big to fail. He wants for the US government to own a five percent stake in it. so that if anything ever goes wrong, why wouldn't the US government figure out a way to bail them out? And it's almost like all of these none of this growth is organic. Like give Chat GBT its credit On a user basis, that was organic growth. People loved the product and they started using it. But they haven't figured out how to monetize it in a realistic or sustainable way And so all of the growth that we've seen from the valuations, from the circular deals, now going to the government, all of that is basically a setu. where they are artificially growing this thing and they're trying to make it so big and so core and such a part of our lives, such that by the time the business truly does flounder will have no choice but to say, Hey, we need this thing, we're all in this together. Let's bail them out. It feels like that is the direction that they are taking that they want to become as systemic. as humanly possible. And it's like it's honestly gross. I just can't He's seeing that headline And I bet Trump is down because He basically will do anything for anyone who shows up to the White House and kisses his ass. This is what we've seen time and time again. It's more than just showing up to the White House What is the ninety three percent of GDP growth, seventy five percent of earnings growth come down to these firms continued spend So just as we have convinced ourselves it makes sense to spend seven trillion dollars on government spending with five trillion receipts just to keep the good times in the sugar high coming Trump Trump does not want the economy to slow down, especially going into the midtermss, so he will potentially be open to the notion of doing whatever's required, including pulling out your credit card to keep the music playing. But this is no different corporations You know Mitt Romney tried to tell us corporations are people. I don't think that's true. I think that corporations, you let your thoroughbs run, the idea is they pay their taxes. And then you try and fund a Navy and parks and snap payments and unemployment insurance for actual people. This really is no different than say Say someone is worth one hundred billion dollars, and they really like being worth one hundred billion dollars, and they're really good friends with Trump And they're really good for their community and they spend a lot of money everywhere I'm like, oh, no, my business is shit. And I need the government to invest in my business and give me government contracts and also maybe put some of my competitors out of business mayaybe give me government back loans such that I'm not worth s just twenty five million Is that a good use of the government's money? So if if opening our anthropic lost seventy five percent of their market cap, They'd only be worth as much as Uber. or Adobe or Charles Swad or Amjen But because This run up, this sugar high has been fueled by these you know, this new technology and the unbelievable expectations there This could this would be the absolute worst thing. economy that we could do is to decide that these thoroughbreds that are amazing companies and worth a ton of money need to be propped up. It would be absolutely no different than picking the wealthiest hundred Americans and saying We're going to use the credit card and the debt capacity of future generations to make sure you maintain that you're continue to be the top one hundred wealthiest people in the world. And to a certain extent, that's what we've been doing by weaponizing housing by weaponizing or sequestering degrees to college Again, yet another transfer to the already super fucking wealthy We'll be right back after the break, and if you're enjoying the show so far, send it to a friend and please follow us on YouTube and Spotify or wherever you get your podcasts Support for the show comes from Indeed. When the pressure is on and you need to hire the right person for the job, Indeed spponsored Jobs has got your back. and matches you with quality candidates fast so you don't need to spend tons of time searching for that elillusive new talent According to their data, sponsored job posts directly on IDD are ninety five percent more likely to report a higher than nonsponsored drums Join the three point three million employers worldwide that use Indeed to connect with quality talent that fits their needs. 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Framer d. com slash markets rules and restrictions may apply Hey,'s Ran Reynold here from Mit Mobbile Now, I was looking for fun ways to tell you that Mint's offer of unlimited Pmium wireless for fifteen dollars a month is back So I thought it would be fun if we made fifteen dollars bills, but it turns out that's very illegal. So there goes my big idea for the commercial. Give it a try at midmobile dot com slash swwitch. Upr payment forty five dollars for three months ninety dollars for six mons one hundred ninetyll for twveth plan reired fifteenllars for month equivent to taxes extra. initial plan term only greater than fif gigytes and slow netork busy term We're back with Profty Markets The Trump accounts are officially live. As a reminder, this is a program that creates government backed investment accounts for children Babies born between twenty twenty five and twenty twenty eight will receive a one time one thousand dollars contribution funded by the government to help kickst long term savings Michael and Susan Dell started a separate initiative for children born between twenty sixteen and twenty twenty four, the kids who don't qualify for the federal contribution, they are providing a two hundred fifty dollars deposit for families living in zip codes with median incomes of one hundred fifty thousand dollars or less Scott. These accounts have officially launched How do they work? As I said, if you're born between twenty twenty five and twenty twenty eight, you get one thousand dollars immediate into your investment account. It will be funded by the Treasury department. This is a pilot program. If they decide it works, then maybe they'll continue it. Every account can then receive a contribution of up to five thousand dollars per year tax deferred The money can only be invested in a qualified index fund that uses no leverage and that charges no annual fee of more than one percent And then when you turn eighteen, it converts into a traditional IRA and it basically functions just like our retirement account This, I think I've said it before is the best thing the administration has done by a mile in my opinion. I actually support this one hundred percent. I hate that they're calling it Trump accounts and that Trump had to put his fingers on this thing because now I feel like it's been politicized and people don't want this to succeed. But it really started with Brad Gerersner coming up with this thing pushing it through to the White House, going to the White House, getting Trump to agree to it. probablyroably had to say that it had to be called a Trump account for the thing to even happen in the first place. Then Michael Dell comes and gets involved. There are some caveats that we can get into, but big picture Huge fan of this thing I think this is exactly what we should be doing and what we should be using government money on. Yeah, I agree with you. I really like this in concept of a friend of mine in Los Angeles, Alexon Furstenberg was a big fan of this. and there's been a lot of different iterations I personally would have gone bigger. I would have gone seven thousand dollars which would be, I think, forty billion a year And I would infantilize and I would hold it I I would force people to be in these low cost index funds until they're sixty five. And essentially position it like the Chinese do go kind of fifty year plans. I think in thirty years, what you could say is If you gave every baby seven thousand dollars, by the time of' sixty five, they saw historically market returns end up with a million bucks And then in thirty years, I would announce that we're thirty years away from not needing social security. And I think interest rates would go down and this would start to pay for itself. I think we need another way to leverage the marketplace and compounding to replace the out of control social spending entitlement spending that is dragging our economy down and putting too much tax on young people Having said that, I would have gotone bigger and bolder with this Having said that, I think it's a good idea I think the deells should be applauded, not mocked for them doing this right. Dolly was doing something similar What I don't like is the notion that we have to count on the kindness of strangers including the Dels who are good people, but also happen to be awarded a piece of TikTok. I think that probably Elon Musk may have said, Hey, I have an idea lean on the NASDAQ one hundred in the SEC to include me and the NSAC one hundred prematurely, unlike any other company in history And I think I might give, you know, ten billion dollars, one hundred billion dollars in baby bonds. I just I don't like depending To me, this feels like a government program that the government should finance that's about long term thinking and reducing entitlements over time as opposed to just sort of this giveaway And we're depending upon the generosity of billionaires like the Dells and the Dahios of the world U So but A again, I moveved to my glass half empty pessimism on the whole I think this is a really good idea. I like the fact there's an income cap on it I like the fact that it's leveraging, the greatest, as Einstein was credited with saying, but actually didn't say, the greatest force in the universe and that's compound interest. I agree with you I think generally speaking, it's a It's a it's a really good idea Yeah, just to go through what that money will become, that first thousand dollars, if we assume ten percent annual growth, which is the SMP's average over the past several decades. by age eighteen, that will be worth five and a half thousand dollars. But if you contribute a thousand dollars a year then It will be worth fifty thousand dollars by the time you're eighteen. And if you contribute to the maximum five thousand dollars a year It'll be worth a quarter a million dollars By the time You're eighteen So I mean, it's just hard to argue with the numbers there. That would be Amazing. The problem and I find myself violently agreeing with you again is that a lot of people seem to see this and see the Dell's contribution, which is spectacular take nothing away from them They seem to see this as the catch all solution. problem of quality. uh, in America inststead of taxing people And instead of going in some direction close to a billionaire tax, we can get into what actually is the right solution. But instead of taxation We rely on voluntary philanthropy. We tell rich people, we're not going to take your money, but please please, pretty please, will you invest billions of dollars into these these child investment accounts. To be fair, some people have The deals have done it Ray Dallio did it. He committed seenty five million dollars to kids in Connecticut. Brad Gersner has done it. He's committed two hundred fifty dollars to every child under five in Indiana. That's great. We were also told that this was going to create a landslide of donations. Brad came on the show And he said, you watch, everyveryone's going to do this. I said, Is Zuckerberg going to do it? He said, Yep, Zuckerberg's going to do it. So far, only six individual donors are on record having committed to the Trump account. It's Dell, it's Dalio, it's Gerner. it's Harold Hamm, it's Nicki Minaj. and then it's an anonymous donor in San Francisco. Elon has not given anything Zuckerberg hasn't given anything. Bezos hasn't given anything. I mean, you if you were to put Elon, Sergei Bryin, Larry Page, Jeff Bezos together and they gave away five percent of their wealth, they could fund this program for nearly two decades and they haven't done it. And so I'm completely with you. if we're thinking that this is the solution, that this is how we're going to redistribute the wealth, this is how we're going to get the money back into the hands of the American people so that we don't see this crisis of faith in the American system so that young people no longer believe not only in America, but in capitalism itself. This is probably not going to do it. Unless we see some waterfall and everyone starts investing in these Trump accounts, then yeah, let's not wait on Elon Musk to suddenly like find the charitable bone in his body and give it all back to the children. What we've seen so far is he doesn't really want to give much away at all. Depending on the kindness of strangers to fund the well being of our kids when they get older is a little bit like thinking, Oh Chherl Sandberg wrote a book on gender equality, she would couldn't come up with a business model that results in teen girls cutting themselves This is the government. We elect people And by the way, this just wouldn't be that hard to f. Here's an idea. The top tax rate is thirty seven percent. You make over a million dollars a year There's no capital gains deduction that goes to twenty percent or twenty two point eight. It's thirty seven percent. Oh, and by the way That thirty seven percent tax rate is alternative minimum tax We had that brilliant woman Ray Mado off on our podcast She blew my mind with the following stat and the framing. Everybody thinks the biggest expenditure is entitlements at one point a half trillion dollars Social security. I think Medicaid's one point two. The military is now one point five. Our interest on our debts' one trillion. we said no. The biggest expenditure is a two point three trillion dollars expenditure and it's the following It's the money we give back to corporations and wealthy people in the form of tax loopholes It just blew my mind what a genius framing that is And that is we don't need to raise tax rates. We just need to enforce them The government should be giving every kid seven thousand dollars and then fantilize them and say, Nope, can't touch it u til you're sixty five. And by the way Within twenty or thirty years, the debt in the bond markets are going to go, wow, in a few decades, which will go fast, they will no longer need social security And you're going to see interest rates go down in everyone's credit card bill, auto Auto loan, everyone's mortgage will go down and this thing will pay for itself but we need to, but you know what this feels like yet? It feels like the Maribogata dononates the land But we need Pablo Escapar to pay for the grass and the nets No. If it's a civic stadium, And it's good for the people It's the government's responsibility to tax everyone equally And and then not for podcasters to say a good billionaire, bad billionaire. I'm sick of like waiting on their better angels. I don' I don't care if they're good or get bad people. I just want them to pay their fucking taxes And then we elect people who decide what to do with the money Plus the new argument from a lot of these guys is that philanthropy in general is bullshit and that the truest form of philanthropy is starting a company that's super valuable. just to quote Musk He said, quote, SpaceX, Tesla, Neuralink, and the Boring company are philanthropy. If you say philanthropy is love of humanity, they are philanthropy. There was a Twitter account that posts made this ridiculous post. They said that MackKenzie Scott's donations were, quote, making the world a worse place. He said that. Well, he responded Yes So he he goes on that statement because they've got it in their heads Mackenzie Scott is woke, liberal the rest of it. And they've said that the billions of dollars that she has given away is making the world a worse place I mean If they really want us to count on them to as you say, find their better angels redistribute the immense wealth that they have accumulated over the years and give it back. They're not doing a very good job of telllling us that they are actually going to do that because so far all we've seen is that it's not just that if you give your money to the government, it's waste fraud and abuse. They're saying that if you give money to a nonprofit or a foundation or a charity it's waste fraud and abuse because the charities are now work And the charities are lib tos. So this is the problem. It's like at a certain point I'm sorry, but I have to assume that if you're worth a trillion dollars and you can barely find it within yourself to give back a fraction of a percentage of your net worth don't believe that you have any interest in the commommonwealth or the wellbe of anyone And now you're arguing that The companies that you built are the philanthropy that you've now done your part So You can no longer make the argument and I keep on hearing people make it. peopleople who support really who are just against wealth taxes and against billionaire taxes in all forms. They say this is the way to do it, voluntary philanthropy. Stop making that argument. because no one believes it No one thinks that these people are actually going to go through it, apart from a handful of great guys like Dale and Dalio And Gusna, they are in the minority at least so far. You're being a little bit afair. like it's not like they're cutting off aid HIV positive mothers such that hundreds of children. Oh wait, never mind Never mind. I'm loing for that. Let me be very harsh right now and invite a lawsuit that'll be dismissed in court The thing that will mark this era is that the world's wealthiest man is killing the world's poorest children So folks, if you're waiting on the better angels of these people to show up and that's what our government is dependent upon Don't hold your fucking breath tax them and then elect good people who come up with systemic to address these issues We'll be right back and for even more markets content, sign up for our newsletter at propertymarkets dot com Wishing you could be there live for the big game, soaking up the atmosphere of the crowd. Too often, life gets busy or the price hld you back Priceeline is here to help you make it happen With millions of deals on flights, hotels, and rental cars, you can go see the game live Don't just dream about the trip. book it with prriceline. Download the prriceline app or visit priceline. comot Actual prices may vary limited time offer Flies crashing the cookout. Take back your space with STEM's portable flying insect fan trap. Set it down wherever flying insects show up and let it get to work. Using UV light in a fan, it attracts and traps bugs twenty four seven, like house flies, fruit flies, gnats, and mosquitoes. It's easy, mest free, and people and pet friendly when use as directed Live life neverever buugs with STEM. Visit stTEfbugs d. com to learn more This episode is brought to you by State Farm. Listening to this podcast instead of doom sccrolling? Smart Mve. Another smart move Getting help from one of State Farm's nineteen thousand local agents when you choose to bundle home and auto. Bundling. Just another way to save with the personal price plan. Prices are based on rating plans that vary by state. Coverage options are selected by the customer. Availability, amount of discounts and savings, and eligibility vary by state We're back with prorofty markarkets. Bending sppoons went public on the NSDAQ last week. Oh did it! It did it now. And it is off to It. Strong start. It raised one point six eight billion dollars in its US debut and shares jumped forty percent On their first day of tradeing and closing at forty dollars fifty cents, the Italian company has built its business by acquiring underperforming software companies, cutting staff and improving profitability. Its portfolio includes well known brands such as Vimeo and AOL N not really sure how well known those companies are anymore. Either way, many have compared its strategy to private equity companies But most importantly, Scott You called this one last week. You said you were expecting a very strong first day pop, the strongest we've seen stronger than SpaceX, which Indeed it was. let's play the clip performing one day IPO, the biggest pop of a tech company. of an IPO in June is not SpaceX at twenty two percent There's a company being taken out by JP Morgan and Goldman Sachs. I think it's pricing next week sometime Bnding spoons, my prediction. biggest first day pop of a tech company is going to be this little known company out of Italy that has found all these orphaned brands that are great businesses Ladies, watch the shoulders. Hello ladies Hello. Surrender to the dog. This deserves a little celebration. That's right That's right. So those on audio, I think you know what he's doing. He's again taking the shut off and rubbing the belly. For some reason, that's the celebration. Oh my go God Ed, my nipples are hard. My nipples are hard, Ed. Reflections How did you come up with this Petic prediction. I don't think the greatest engineer in the world is or the greatest designers in the world is Johnny Ivy L Musk. I think the greatest engineers in the world are JP Morgan and Goldman Sachs I think you just know when they're taking a company out, it's going to get at least a twenty percent pop because A, they make more money, they get their green shoe, they get their fees, their everyvery institution in the world wants in on this IPO As a result, they do business with these companies. they get a free like giftood purchase Another way of saying this is the IPO game has become totally rigged But it's legal. Yeah. And also then they get to manage the money. And so they use AI an incredible marketing team of people, some of the brightest people are JP Morgan and Goldman work and High net wororth They call these people they build an unbelievable book, they go back to the CEO and say, lookook, this is a once in a lifetime branding event. and even though you risk some additional dilution that you wouldn't have had to have taken a few price to perfection too be able to say your stock's up twenty percent or is up forty percent as Benxms was yesterday, is worth the additional dilution. So there's all this There's all these stars and moons that line up around engineering a first day pop of this sorts I thought this one was going to beat SpaceX because Um, I thought the story was good. If you look at the PE It's actually trading in a relatively you know, a relatively modest PE. If you look at the revenue per employee, it was actually greater than meta I personally wanted to pimp this stock a little bit because I'm just so sick at talking about American AI companies And I like their model and they they have a great narrative. They say that they get something like four hundred thousand applications for jobs and they hire, you eight people or you know a small point they say they're the most selective company in the world. Some of that is spin because basically what they do with these companies is they replace a forty year old making three hundred thousand dollars a year with a twenty five year old who I'm sure is very bright, making one hundred forty thousand dollars a year And they essentially like a private equity shop clean up the backke end. a lot of these companies probably overspent but it's essentially It kind of reminds me of the old WPP model pioneered by Martin Sarerell, and that is Their ability to maintain this valuation and increase it will be their ability to find good companies Trading at X x multiple of EBITDA and then present it to the market and get one point three x in the marketplace. And that's what Martin Serrel did by taking out keymand risk A little bit of synergy on the back end, not as much here But he would basically buy these key men risk ad agencies for eight times EBITDA and then turn around to the market and you would get twelve times. It was essentially a market arbitrage or consolidation arbitrage So it's a little bit of WPP, a little bit of private equity I thought the small float, the excitement coming out of the SpaceX IPO and just what felt like an insanely cheap valuation. was going to handily beat the twenty percent. and it was up, I think forty percent. It's checked back a little bit today But I thought this was a really interesting company, neat business model, kind of beloved brands, but forgotten a little bit sort of the Berkshire halfway of Boved but forgotten brands, if you will. I just liked it. You kind of sound like you own it. Do you own it? Yes, I do I do. I didn't get as much as I wanted though, to be honest Um So there's the investor disclosure. Just to be clear, I haven't really taken a look at the stock and I'm not recommending it and I'm not buying it, but Scott owns it. so takeake that. information as you will. I'm not buying more at this price I think it's a great moving forward, their challenge will be to show that this model is scalable and To their credit, I do think that I think there are a ton. I think the list of companies that are Uh didn't become Airbnb or didn't become Meta. but are good companies is really long. Andcent eighty eight percent of their revenue is recurring. anyyway I was really excited. I felt like this one was getting no attention and was a good company and I kind of I stumbled onto it just before Can. What I don't want this segment to be is a stock pumping segment where we're encouraging people to go buy it. That's not why I'm interested in this company. And I don't think that's why you're interested. I just want to be clear to anyone listening, like that's not the interesting thing and I'm no one's recommending this. But I think what is interesting about this company is the model And they've said that the idea is, quote, to be a hybrid between a private equity firm. Google And I think it's kind of I kind of like it because they're taking this sort of creative novel a strategy where they're basically They have their own software engineers and they're going up and they're buying these companies as a private equity firm would, and then they're putting those software engineers into those companies. And so that's sort of the Google meets KKR or Blackstone thing. And it's interesting because K of It's the same thing that The private equity firms would do back in the day where they say, you know what we're going to do is we're going to find these unloved companies and we're going to find synergies in between them. And what that was basically Latin for is we're going to go in and we're going to fire as many people as is physically possible And that is basically what they're doing, but they're doing it with like an AI thing. insts sort of like, oh, we're going to use AI and we're going to streamline everything. and that's a great story. But in reality, what they're mostly doing is firing people and crucially, leveraging cheap labour. in Europe. and that is they pay their software engineers around seventy five thousand dollars a year. The average software engineer at Google makes around one hundred fifty to two hundred thousand dollars a year. M, h's a little bit higher. They can do that because they're Italian company. they can go in Italy and hire these smart people and not pay them that much and you know do what you will with that information. You could say that you like that and I understand. a lot of people don't like private equity firms and the fact they just kind of go in find these companies the companany is you know, lay off all the employees and then figure out a way to fatten the bottom line. But it's a great thing for shareholders and that's kind of what they're doing And so I think it's a good bet for those reasons, but I'm sure that they're going to get a lot of heat as well when people start to kind of realize like what it is exactly that they're doing, and that is the same thing that private equity does, is the same thing that consulting firms do. they go in, they make a pitch, and then ultimately it comes down to fire as many people as possible That's basically what they're doing. D will call it efficiency But they're operating at the same revenue per play a little bit better than meta. Look I don't I think that's capitalism. I'm not a great I think your ability to lay off people and create revenue and margin creates more profitability and opportunities to start new companies that creates higher paying jobs. So I'm all about whatever you want to call it, creative destruction or what have you But This company felt like at' seven to eight times revenues it felt like a buy. Now it's a ten to twelve because of the run upp yesterday. It checked back a little bit I don't want to say it feels fully valued right now, but they're going to have to show their thesis or demonstrate their thesis that with a public currency and a list of a ton of companies like this, they can go out and kind of wash rinse and repeat. In sum, I thought this was I thought this company's business model execution and opportunity set or TAM for lack of better term was not reflected and that there was so much attention given to SpaceX that people kind of overlooked this company. And also just to be blunt When JP Morgan and Goldman take something out now They engineer a twenty percent plus pop They do. And by the way, it's not illegal. Is it rigged? Is it unfair? Is it a transfer of wealth from retail investors who don't get much access to institutions? Yeah It is Um I'll leave it there It's not a great place to live it, but that is that is Certainly What is happening and I think that we have done a good job of making that clear just how rigged that IPO game really is. A lot of people try to sort of paper over what's really happening, but that is what's happening. They don't usually let these IPOs fail and they price it such that it will get that pop. I think when we think about like Now that I know you own it, I'm going to just do a little bit of jobbing at the company. You mean like you do it my emotions I think what their advantage is I don't think if this is an AI company. I think of this is basically a private equity company And their advantage is they're in Europe They know how to operate They know how to fire people And they know how to get really top talent at really low prices And that last piece is crucial because what they're doing is they're buying these people businesses that are run. basically the product is dependent on how good your engineers are. I mean these are mostly software businesses that have gotten crushed the SASpocalypse, which if you thought that the pain that we're seeing in the public markets is bad justust go wait till you see what the pain in the private markets looks like, which spells opportunity. They're taking advantage of that. And then they're also leveraging these engineers. But we went on the Bending Soons Reddit thread. where the engineers get together and they talk about their problems, and to be fair, Reddit is a very negative place in general. But Here was something that we saw, quote, A friend of mine worked four years at Google. Then she got a job at Bending Spoons when she moved to Amsterdam and was fired after eight months because she was not working quote hard enough. You have to be autistic and probably have no life in order to resist working for them, not even anthropic who pays top of the market is this crazy. And then someone followed up and got like three hundred up votes, quote They don't even pay that well So that's kind of their advantage. You know who likes that that environment, that culture Shareholders. Yes. And here's the thing. You brought up something a couple of important things. One, one of the reasons I liked this and I tried to find shares was that The word I didn't learn as a younger man and the reason I've been rich three times, which means I've gone broke twice. The reason I've gone broke twice, is that I didn't understand the power of diversification And it's easy to become concentrated without even knowing it You know, Projectty Media is essentially an Ameran company talking about American teax. We get a lot of advertisers from AI I am over invvested in technology stocks I am so concentrated and non divested accidentally Nick, well, I'll buy some andP phones. Well, okay, forty percent of the S andP iss in ten companies now all related to AI So one of the reasons I like this company as a personal investment is I want to invest more in Europe. People have basically given up on Europe. Investors have basically given up on Europe. And that's when you buy And two, I want diversification out of anything American and tech related because Winter is coming as Daenerys and every other person from Game of Thrones said And then also the Labor arbitrage, what do you think a talented senior product manager costs in San Francisco versus Milan. especially after AI. Eactly. It's not like it's child labor. I would imagine that in Milan, If you're making one hundred twenty thousand euros, actually, Milan's gone up a lot in price. but I would imagine for one hundred twenty thousand euros, in in Milan, you can probably have a reasonable lifestyle In San Francisco, you're still living with your parents So there' The market is just a gorgeous thing. It is Europe's been left for dead. And that's the reason why I think it's an economic opportunity. And I'm spending a lot of time looking at European stocks right now Let's take a look at the week ahead We will see the minutes from the Federal Reserve's June meeting And we'll also see earnings from Pepsi and from Delta got any predictions. No, I'm just going to stand on my bending spoons one. I can't do much better than that. I'm going to bask in the glory of that. Oh, no, I do have a prediction. I think that teeam England is going to be Mexico in penalty kicks. Once again, this is coming out after because we're not at Sunday night yet. so we'll find out. So make sure you're down to do that You might be humiliated on the day it comes out. Oh, like I don't get humiliated every day. Did you just say Reddit? Have you seen my subrededdit? Oh my go Pe are so mean My I don't even go on my subreddit anymore. It's like, God, he's so old. God, he's fucking lame. Jeezus What's wrong with his face? I mean, it's just like It's so rough. You can't read the Reddit. The Reddit people are They're rough. We love you, but you're also a little bit unwell. That's a little bit of the problem. Oh my Godd. it is rough. So okay, make the prediction then. England wins? I'm not scared of humiliation. You know You want to know am I sayfe word during sexis speaking of humiliation? Not particularly, but tell me My safe word is maybe This has been a good show. Anyways U penalty team Eland wins and penalties at the Tea stadium, which by the way, Mexico, I don't think has ever lost that. They've never had a school a goal score against them. Is that what you told me? That's what I heard the commentators say, but now I'm kind of like I think they've lost twice, but only twice in their history It's going to be an amazing game It's going to be an amazing game, but I'm predicting Team England wins in a penalty shootout Or maybe I should just predict that Team England wins. How's that? I mean, it depends how bold you want to be. This is the pole A. I'm gonna say T teeam England. Less upside than that. It's not a very bold one. Where do they go? Should we go to the game? Where do they go? actually I can't afford that.ere We should go to the game. Yeah, you can. come on. Where do they Where do they go Where do they go? I'm not sure. If they end up in New York New Jersey, Oh they go to Miami Oh, how much fun would that be? It would be good.