Predictions for the Week Ahead

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How much would you have to be paid to drink the Buffalo Wild Wings espresso proteini? For some reason I got in my head that coffee was bad for you, so I never had a pill. I don't think I had I think I went to the doctor three times before the age of forty. I just no external items whatsoever. I think that's why I don't get sick now. But anyways. Never had coffee. And oh my God, what have I been missing? It's fucking amazing. Coffee is amazing. But I'm highly sensitive to it. So one, you would never find me at a Buffalo Wild Wings. Is that a restaurant? What the fuck is that? Yes. Never been to Buffalo Wild Wings? I've never been to Buffalo Wild Wings. It's a terrible place. Yeah, I've never I've never been there. I'd go to Hooters. Um but I wouldn't go to Buffalo Wild Wings. It's Hooters without the girls. Oh that okay. What what what is that's a beach without the sand. What what's the point By the way Scott, where are you? I'm in Tulum Ed. Why? Why? That's a good question. Um I started coming here um about I did an annual trip with guys, um my closest friend Adam, who I've known for fifty years, my other friend Augusto, who I've known for twenty-five years, and my friend Scott Sabah, who I had known for fifteen years, used to come here every year in March. And we stopped doing it 'cause Scott passed a f a couple of years ago and we decided to come down again. So anyways, I'm in I'm in Toulum. That's very exciting. Are you ready for the big day tomorrow? What am I missing? What's the big day? You didn't hear? It's my birthday tomorrow. Oh. You're turning twenty seven? Is that what it is? 27? That's right. 27, bab y. It's gonna be a big year. You know what I tell everybody? I'm not exaggerating. When anyone says, Oh, I love Ad, I just go, he's 26. That's the most impressive thing about you, is that you're twenty six. Let me tell you, twenty seven, it's all downhill. Your prostate starts to blow up like a grapefruit. Um your dick doesn't work nearly as well. Get ready to wake up in the middle of the night and go, Do I need to pee? I think the answer is yes. I'm actually already there. I I've been trying to figure out what it is. I think it's because I'm drinking too much coffee, but I I I'm getting up to go to pee at least once a night, sometimes twice a night. I've had nights where I'd go three times. It's quite concerning to be honest. You're peeing three times a night? It's happened. It's happened. It doesn't happen, but it has happened before. Huh. Is it after drinking or Yeah, I I it's after drinking. Well, all I gotta say is worth it. Worth it 'cause when you're your age you can go right back to sleep. When I'm up, like I get up, it's like that's it, I'm awake. I'm awake. People think old people need less sleep. We don't. We just don't sleep well. I just walk around slightly tired all the time. Yeah. I'm jealous. Constantly grumpy. Yeah. Yeah. Well nothing that Tulum can't fix. Happy birthday. I think that's very excited. You you know, it's gl I'm glad to see you finally got your professional life sort of on track. Sort of on track. We're a little worried about you, but yeah it's we're going somewhere. You're doing Ed Ed Elson, you're doing very well. And then I'm also my my final update, I'm heading to Vegas for a bachelor party and I know you're a you're a connoisseur of of Las Vegas. So any any advice, any tips? Where are you staying? We're staying at the encore. Oh that's that's the place to go. And you'll meet a bunch of rich people from Texas. It feels a little bit lame, but it's it's hands down the best. The Aria felt good, but it felt like a very modern. It felt like if you got off on the wrong floor, you might like wake up with stitches in your back and one less kidney. It feels very sort of dystopian. It's good though. It's good that you're going with I'm a big believer in guys' weekends and girls' weekends. I just think that Big guy's weekend. How many how many of you? I think it's ten of us. And here's the question. Is your girlfriend supportive or sort of making noises that she doesn't like these weekends ? She's supportive, but I'm not sure how much I believe her. She says she's supportive. Uh-oh. Just start drinking coffee from a vase. Way to bring it back. My partner literally wants me out of the house as much as possible. She's in Court Chevelle right now and I'm in where am I? Tulum. Anyways. Just be awful to be around and it gets easier for them to let you go. Okay. Wait, hold on. Claire, do you have girls weekends? Notice how I say that because I'm I'm unconsciously homophobic. Why would I even ask that? Yeah, last girls' weekend I went to was in the North Fork. It was delightful. Um, trying to get one going for Canada because I haven't been there yet. And these are friends from college? College, internships, um all over the place. Yeah. And the key is your partner does not come, right? No, that's not true. I mean that's the Then it's not a girl somewhere. Okay, no, but the f the fun thing is that we're both girls. So That's a great point. We all get to be friends together. It's kind of a hack. It's impossible for me to respond to this. This is how the podcast ends right here. Just cannot relate. This is why we need to be gay Scott. We could just do boys weekends forever. There you go. Uh so yeah, so it's uh uh should we get to the headlines? It's time to move on. Let's do it . Now is the time to buy. I hope you have plenty of the wherewithal. The Trump administration has requested funding of up to $200 billion dollars for the Iran war. Meanwhile, the US national debt soared to a record $39 trillion last week still. The clearest, most immediate impact for people at home is on actual prices. Since the strikes began, 23 days ago, fertilizer prices are up 25%, gas and diesel have both jumped more than 30%, and jet fuel has surged roughly 50%. So, Sc ott, new implication of the war, which we have been sort of hinting at before, but now it's getting very real. And that is the impact on prices. Price of gas is skyrocketing, price of diesel is skyrocketing. Americans are now spending 300$ million more on gasoline per day compared to a month ago. And it appears that this is going to start trickling down into other things too. We talked about fertilizer prices, which are up, uh, freight prices are also up around 30%. Construction materials prices are up 30% as well. I'm waiting for all of this to sort of come through in in the bills themselves at at the end of the month. We'll probably see higher food prices, potentially higher housing costs as well. In sum, it's not looking great on the inflation front. And it appears it won't improve until this Iran war is at least at an end in some capacity. What do you make of what's happening here? Yeah, as you know, I was more hopeful about military action than most people, but there's just no getting around it. It feels as if the shit is spinning out of control. And the ramifications are are pretty immediate and pretty you know how often had you heard the term fertilizer before? And now fertilizer costs are soaring. It appears that the administration didn't do any real scenario planning around what happens if the Straits of Hormones are blocked? And we were the markets were pricing in two rate cuts, that's gone away. Uh so we're gonna have higher borrowing costs for longer, elevated across the board for mortgages, car loans, credit cards, small business credit. And we're just talking about the economics here. Obviously, we're not talking about the loss of life, but this is now potentially brought up a word that you your generation has never even really had to deal with, and that's the idea of low growth and inflation. And it's called stagflation, which is nitroenglycerin. It's really a toxic cocktail. Real GDP growth has been revised down from one point four to point seven percent in Q four, twenty twenty five. At the same time, inflation is accelerating. The PPI rose three point four percent year on year last month, while core PPI jumped three point nine percent. That's the biggest increase in three years. There's just no getting around it. You've been doing a lot of good work on this. I've been following your social feed, which gets served to me a lot. Let me just say a lot. Look, the costs here are what's interesting about this war is we don't talk about it as much in human terms. We talk about it more in economic terms, which I think is important, but it kind of goes to this notion that the idolatry of dollar and everything's about money now. But I look back on previous Gulf Wars and kind of Gulf One with, you know, George Herbert Walker Bush, 30 nations, 70 billion, sixty two billion paid back by our allies, UN resolution. You know, that's what a coalition sounds like. And then W sort of had a coalition, mostly symbolic, UK troops, Australian troops, but mostly us. And then obviously that that went, you know, cost trillions of dollars and forty five hundred U.S. service men and women killed. This we've decided it's us and Israel. And and it just goes to this basic notion that I think the fundamental mistake of the Trump administration is believing that that cooperation is not the key to the West's prosperity. Anyways, your thoughts, Ed. Aaron Powell, Jr. I think the the dollars point is quite interesting that we are quite focused on the dollars. We're focused on it on this show especially because we're a markets show. But I think it's true that that's the way that a lot of people are talking about it. And I think the reason that that is happening, at least in the conversations in America, is that it seems like the loss of life as some sort of preventative measure isn't that powerful, at least to this administration or at least to our government and to Americans at large. It seems like, you know, when you see these death tolls, I mean, uh as the saying goes, it becomes a statistic and it doesn't seem to be something that really impacts people. But the point that you've been making as well is that Trump does care about money. He does care about how the markets react. And so it does seem, I mean, we're in this very interesting place where we're looking at what's happening in the markets, but we also know in the back of our minds that what happens on a dollar basis may actually fundamentally adjust and alter the trajectory of what is going to happen in the Middle East. Because if we can make the argument that this is going to be really bad for markets, this is going to be really bad for bonds, this is going to be a huge inflationary crisis. Then maybe it kind of gets through to the administration. Maybe Trump decides, as he did with the tariffs, that actually this is a bad idea, because he does seem to be so motivated by money. But that that's a it is a fundamentally ridiculous position to be in, to be having to make that argument. But let's just put arguments aside. Let's just look at it at a completely unbiased way. Let's just, you know, look at what is happening on the ground. The reality is prices are just rising. So regardless of your political views, the reality is your bills are about to get a lot more expensive. And something that I've been thinking about, and I'm not sure this is the right analogy yet, but I do think back to just a few years ago when uh in 2022 the S P erased around 25% of its value, and it was the worst year for the stock market since 2008. It was a really, really bad year. And the reason it was so bad was really because of inflation. It was because we had this COVID problem, which we thought was going to be a problem for various reasons, turned out to be kind of okay. We had a few good years coming out of COVID, but then we had this supply chain issue where we realized that supply chains were completely messed up. Everything was gunked up, as you've said in the past. And it resulted in ridiculous inflation, which caused and forced every central bank around the world to initiate this extreme rate hiking cycle, which was eventually what sucked out all the energy out of the room. And then eventually investors started to sell. That was what we saw in 2022. And I look at what is happening now. Inflation is rising. We're already at s I mean, people say two and a half, but as Mark Zandy has told us, it's actually closer to 3%. The expectation is that inflation is only going to remain elevated. And that's just assuming that everything kind of sorts itself out eventually in the next few months or so. But then again, no one really has a real hold on what the time frame on this thing actually is because it's all up to up to Trump at this point. But the point being, inflation is very much back on the table. It already was on the table, but now it's back on the table doubly so. Uh and now we're facing the possibility of we're not probably going to see as many rate cuts as we thought. Maybe we'll see no rate cuts in 2026. And now people are starting to talk about rate hikes. That is genuinely becoming a real possibility. In which case, maybe all of the tailwinds that we were expecting for 2026 in the stock market, maybe those aren't gonna materialize. I mean, the two big tailwinds that we identified, we had all these issues that we were worried about, the geopolitical issues, the AI issues, but the two big tailwinds that we identified, which is why we thought that the stock market would perform okay this year was one, big beautiful bill spending, which will still happen and we'll still pump money into the economy that way. We'll pay for it later down the line when we have to pay for our debts and deficits, but for now, it's a good thing. And two, lower interest rate environment. That might not be happening anymore. And so I do think that we're approaching a moment where we need to start considering the possibility that actually this will have a really negative impact not just on prices, but also on portfolios. I don't think we're necessarily there yet, but we are certainly approaching that point. With energy there's just a huge domino effect because fuel prices account for more than 50 percent of the total cost of shipping. I mean, ships are basically cheap containers that float, and the primary costs and they're manned by like eight people. I don't know if that's true, but it's sh there're shocking few people on the uh on a piece of equipment that big. It's fuel. And so freight prices are up thirty percent. And when freight rates double, inflation increases by another another 70 BIPS. And uh there's all sorts of costs here. War risk insurance premiums for vessels traveling through the Persian Gulf have increased by about 50 percent. Uh traffic has decreased by about three quarters, uh fertilizer costs up twenty-five percent. Who thought we were going to use the term fertilizer over and over? And what's interesting, um Gulf states produce nearly 49 percent of the world's urea, a critical nitrogen fertilizer in about 30 percent of its ammon ia. Uh ammonia's up 92 percent year-on-year in the U.S. ammonia prices are 41 percent higher than March and up more than 21 percent. And then construction material prices might go up as much as thirty percent. So so according to the NAHP, when lumber prices tripled post COVID, it caused the price of a new house to increase thirty-five thousand. So this is just um uh just ugly on every level. And America is probably this year in for a rough road. What I just asked Mark Zandy, and we talk a lot about is okay, uh what could go right? And what's interesting is if you look at the markets, the markets are sort of yawning right now in the U.S. Um, other than the price of o il, what the SP is off 5 percent since it's all-time high, it just it feels like there's a disconnect right now between the markets and what's going on. And I I don't I don't quite understand it. Uh it feels as if the market is basically saying, hold my beer. I think the market has gotten very um traumatized by their previous bouts of panic selling. And so I think that they look back at something like the tariffs as an example, where if you decided to sell because Trump decided to pursue this um this strategy, then you looked very stupid all of a sudden because then the markets rebounded and he started to start to taco and then things changed and uh and ultimately just panic selling on that news was not was not the right thing to do. So I think that what m investors are doing right now is they're in a very wait and see mentality where they're like, well, he's done this crazy thing, and it is kind of crazy. And history would tell us that yes, we're probably gonna be in there for a long, a long lot longer than they're telling us right now. But let's just find out what the conclusion actually is on this war. He told us that the war was very complete, pretty much. Maybe it is very complete. In which case, it would be a very bad idea to sell. So I think that investors are are trying to find reasons, and understandably so, to not view this as such a bad thing. Because i if you if you went with the the worst case scenario, if that was your instinct, in the past, you got kind of punished for it. So I think the question is increasingly becoming like, well, when are we going to determine what the consensus is on this Iran war? Are we going to stay there for longer? Is it going to escalate? Are we going to see uh escalations on the nuclear front? I mean, these are all very much possibilities, but I think that there has been an incentive among the investment community right now to err on the side of optimism. Because if you take the the more negative view, then you know, as the as we've seen, you get kind of you get kind of banged up in the market. So they're not doing it right now. So I think that partially explains uh the market's behavior at the moment. I think the question then becomes like, at what point is a recession actually on the table? And Mark Zandi, as you mentioned, he has the odds of a recession at forty nine percent now. Uh and it's been steadily rising. That's he can declare victory no matter what happens when you say forty nine percent. But your point I think your point is exactly the right one, and that is if you look at the history of recent conflicts or wars and the markets, what's happened is there's been a dip, oh no, it's war, and then the markets actually uh go way up the the following year. So it feels like the markets have said every time there was a dip in the markets because of the outbreak of hostilities overseas, usually caused by us, it's been a buying opportunity when the market goes down. So it feels like the market's like, let's just skip to the buying opportunity, or uh we don't buy that n no one no one wants to panic sell like they sell like they have in previous. So but again, past performance is not an indication of future performance. Exactly. And in terms of recession, even distinct of the war in Iran, I I love what Jamie Dimond said that a recession is something that happens every seven years. We haven't really had one in 17 years or 18 years. So or is that right? 2008. I mean, it's just been we're just so due. And aga in, I I I go to for you and Claire, I don't think that would be the worst thing that could happen. Uh you know, the the cost of your lives, respectively, and of other young people have gotten so crazy. And recessions, depressions, don't want a depression, a recession, an exogenous offen, they have a tendency, generally speaking, they're a healthy part of the cycle that transfers wealth from owners to earners. And so I don't, you know, you don't want to root for stocks to go down, but it it just it's basic math, folks. If you're investing, you and Cl aire are in the investing portions of your life because of an exceptionally generous 401k matching program by your employer. But you're you're in the investing part of your life. So do you want stocks up or down? Yeah, exactly. You want them down. And uh what is so dangerous about what we continue to do here is to print money and go back to and ask for Congress as if we're just drunken sailors spending more and more and racking up debt, which increases inflation, w of which the majority of that burden is shouldered by lower income households and especially the young. So I don't I'm not rooting for a recession, but at some point we have to stop propping up the market with your credit card. And if all of a sudden, I would imagine you and Claire, neither of you are homeowners, right? No . I would imagine both of you would like to be homeowners. So if the market went sideways or down substantially, and all of a sudden real estate in Brooklyn was off 20, 40 percent, is that bad? So I I don't I'm I'm of two minds on this. I don't want to see there's a lot of pain in a recession, but it feels like we're due. And quite frankly, uh recessions and down cycles are a healthy part of a cycle. Otherwise, it's not a cycle. I'm not rooting for a recession, but if it's a choice between a recession and uncontrolled inflation, I'll take the recession every time. I mean the inflation is what's gonna hit young people and lower income people the hardest. That's just you're losing your purchasing power. But I think the people in charge, specifically Trump, has decided he really likes when stocks go up. And I guess he doesn't really care that much if prices go up. He seems to pretend like he cares. He says that he, oh, I'm taking the affordability crisis seriously now. But then he does everything in his power to make it even worse. And then when it comes to housing, he says that he actually wants the price of housing to go up. That made no. So he doesn't spend all of this money to just it was just ridiculous. So he doesn't actually care about affordability. He doesn't actually care about prices. And he's gonna get absolutely clobbered for it. We have to figure out a way such that the average household income of seventy-seven thousand dollars can afford a home. It shouldn't be drill, baby, drill, which the Trump administration proposed. It should be build baby build. We absolutely need housing prices through YIMBY legislation and through tax subsidies to developers to unleash the private sector, we need a massive amount of construction. And unfortunately, back to the original story, construction costs through tariffs, anti-immigration polic y. I mean, you could almost argue if you were a bond villain saying, how do you take housing prices up even more after an unbelievable acceleration? Okay, let's make immigration nearly impossible for the people who are actually building the homes. Let's take the supplies of building a home way up, right? And let's take interest rates way up. And then let's bomb the one place where all of the oil and gas is transported through throughout the world, which is, as we're learning, literally the basis of the entire economy. I mean, that's what we're really learning. Is we we all need a oil and gas a lot more than we would like. It literally funnels through to everything. The transport to get the food from the farm to the grocery store, and then uh to for the the fuel that goes into the airplane and then the diesel that goes into the fertilizer, which is used to grow the food. I mean, we we're we rely on this for literally everything. And so yeah, we have figured out a way somehow, as you say, to snatch defeat from the drawers of victory. We had inflation going down. It was trending down. We'd figured it out. And now it's going way back up again. And it seems like that will continue. Just going to Weka Go, right? There is an argument, and it's not nearly the compensation for inflation and in and increased interest rates, but I wonder if this is going to put renewed winds in the sales of alternative energy. Yes. And someone absolutely, from a national security standpoint, right? Just okay, uh unless we start bombing our own windmills or or the sun gets blocked, uh, you know, it's it's much easier to block the Straits of Hormones than the sun. The one stat that just blew me away, my Kara Swisher's ex-wife, Megan, who's this incredibly smart person, chased me out of a session and said, I have data you're going to love. And she showed it to me. There's this incredible site that shows where at that moment where Texas is getting its electricity and the source of that electricity, is it coal, is it L and G? What is it? And at that moment at one PM on a Friday, whatever it was, Texas was getting sixty percent of its electricity from wind power and eighteen percent from solar. So the state that is you know the backdrop to landman and we always think of Exxon and oil and gas is really leading the nation in alternatives. And I thought, okay, if there's I I'd like to think there's several several linings here. I'd like to think what could go right. But one of them might be, okay, does this A get us thinking about more secure pipelines so we don't have vulnerable ships? And two, just organically basically built. I mean, if you're South Korea, I would imagine there's a lot of new solar startups being pitched right now. Right? When y it shows countries just how vulnerable they are when they don't have their own sources of ener gy. 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Generated Assets is an interactive analysis tool. Output is for informational purposes only and is not an investment recommendation or adv ice We're back with ProfDU Markets. A big criticism of OpenAI right now is that it's doing too much at once. The company is juggling a wide range of projects from SORA, its video generator to a new web browser to hardware. According to the Wall Street Journal, employees say that this do everything approach has created a lack of focus and made it harder to understand the company's strategy. That concern is now starting to surface among the leadership as well. The CEO of applications recently told employees, quote, We cannot miss this moment because we are distracted by side quests. So all of this raises a broader question: how does a company decide when to double down on its core business or when to chase new opportunities? Scott, uh, I was very interested to see this and I wanted to get your views on it because you've run multiple businesses in the past. Some have been very successful, some have been less successful. You know what it takes to either win or fail. Um what do you think of this dilemma? It's sort of a classic business strategy question that OpenAI, the number one AI company in the world right now, is facing. And that is, do we focus on the core thing or do we go have fun in these side projects and see if something good can happen. Trevor Burrus Well, the the majority of my businesses have been advising CMOs and CEOs. And the the real question every good CEO needs to ask, or the gestalt he or she needs to. When you're a junior level or mid-level employee, you're trying to think about what could we do? What could we what new markets, what new geographies? And you're trying to find areas of growth. How do I create more efficiency? How do I grow the company? What could we do? What should we do? When you become a CEO, the bigger question is not what to do, it's what not to do. Because every day you're gonna be pitched on great ideas from vendors, investment bankers, and want you to make acquisitions, new employees trying to make a uh or existing employees trying to make a name for themselves. Everyone has everyone wants to be generous and visionary with your capital. And if you look at this, it is a really good move on the part of Sam Altman and OpenAI, because the specific crowds out the general focus is the key component of almost any strategy if it wants to work. I even think on a personal level, I hate side hustles. You want to be successful? Find something you're good at and go 110% in. And the difference between being wealthy and being very wealthy is the last 10%. And that comes from extreme focus. And if you have side hustles, it means you haven't found the right main hustle. So if you have side hustles as a means of exploring something until it becomes a main hustle, fine. But if you look at Alphabet or Google, they brought in Eric Schmidt, a fantastic manager to help scale the company. But then the adult in the room who actually ended up growing shareholder value a great amount and doesn't get the credit she deserves is Ruth Pratt, the CFO. They brought her in from Morgan Stanley. And the first sh thing she did was like, what the fuck is all this shit? What are all these pet projects from Sergey and Larry that nobody wants to say no to? They literally had a project whose mission was to cure death. And and Ruth said, okay, do that with your own money and on your own time. And she killed a ton of projects and focused people on this unbelievable greatest greatest cash machine toll booth in the history of mankind called search. And then said, uh, you know, another dollar in search creates a shit ton of money. So don't bring anything to me that you can't convince me isn't going to create a shit ton of money with some reasonable timeline. So they have gone, you know, way too in way too many directions, and it's a credit to Sam and their leadership that they're focusing. And and also they have huge incentive to focus because the enterprise in the enterprise market, which I think is is is the more important part of the market here, anthropic is kicking the shit out of open AI. And so they are doing what they should be doing. They are focusing. So this is this is sort of a I think this is a really smart move for open AI. I think it's absolutely the right thing to do. And speaking of distra,ctions can we talk a little bit about the metaverse, Ed? Can we talk a little bit about the meta I don't know if you saw this, but uh it ends up that uh the good people at Meta have decided they they renamed the company Yes. And that um that this legless world is not the future. Claire, by chance, perchance, do we have a clip about my views on this? Well but before we before we play club, I just want to make sure everyone knows what we're talking about, which is that Meta's side project, I guess maybe they called it their main project, but the side project of the Metaverse, they invested eighty billion dollars into creating this metaverse platform called Horizon Worlds. People may remember from 2021 and 2022 when this is what all that Mark Zuckerberg was talking about. As of last week, they are shutting that platform down. Now let's cue the clip. What is probably the biggest strategic misstep of the last five years was Meta deciding that the new growth engine would be the metaverse. No, it's not. Doesn't matter what the name of your company is. This is not working. You got a guy who can't be controlled. He controls the company. He's all in on the metaverse. He's gonna he's already rich. He doesn't care about money. So his attitude is I'll show you I'm gonna prove everyone wrong and keep going all in and spending tens of billions of dollars on the metaverse and shareholders are in the back seat, you know, buckled in and they can't get out and the doors are locked on this this crazy nauseating ride called the the metaverse. As far as I can tell, the metaverse is just a bunch of incel panic rooms uh created online for people who have uh it just isn't working. I mean my favorite stat about Horizons World or whatever it is is that MySpace currently gets more traffic than Facebook's version of the metaverse. So look, this was the mother of all distractions and hallucinations, and it wasn't consensual hallucination, this never made any sense. And it went back to just this basic anthropological truism, and that is throughout history, the things you could eat or could eat you don't come straight at you, they come at you from your side or behind you. And so you get uneasy and even nauseous if you can't if your peripheral vision is moving too fast. And the idea that people are going to take their mixed reality headset with them and start watching. I mean, I remember Kara arguing with me about the future spatial computing. I I put one of these things on for eight seconds and I'm like, this is so fucking stupid and so nihilistic that we want to go into another universe. Our species is really used to and really fond of this universe. And this notion that these weirdos want to take us into another universe. Okay, I get immersive experiences. I like IMAX as much as the next person. It's a small business. I enjoy the sphere, but for only a couple hours and I feel like a piece of beaten flank steak by the time I live leave there in terms of sensory overload. By the way, IMAX really hasn't been a good business. Um, the sphere is supposedly still losing m oney. The the way you want to live life is you wanna have a series of experiences that are wonderful in this universe where you have control of your peripheral vision. And the reason why billboards are so incredibly still successful and get decent CPMs is despite the fact you're not reading a billboard on the side of the highway, you're very conscious of it because it's threats and opportunities. And just the most basic level of anthropological or behavioral research would have said that, okay, 40% of the people putting this nonsense, this condom on their head, that they're getting nauseous within 20 minutes. And yet he kept pouring, he poured $70 billion dollars of capital into this thing. And uh so I just think this was if it hadn't been for the fact that the guy is a business genius and has added probably two trillion dollars in shareholder value since they started this nonsense. This is an enormous thud. It went way too long. Way too long. When you're a company like Meta and you have those cash flows, you can take big swings. $1 billion, $5 billion, $10 billion. But to keep pouring mone y up to 70 billion and to rename the entire company. This is what we all forget. They renamed the whole thing. They were so confident about this. It's unbelievable. Guys, breaking as we record this horizon worlds is not shutting down after all, according to meta. Bullshit. This is them trying to have peace with honor. This thing is dead. This thing is dead. They're gonna try and make it happy and put it in hospice. Whatever. You lost pop pop a year ago. Uh m maybe it still has a catheter and there there's brainwaves there. Let me just read you what I'm seeing on TechCrunch. Quote We have decided just today in fact that we will keep Horizon Worlds working in VR, Bosworth said as part of an Instagram stories QA, after a fan of the app reached out to say they were quote, heartbroken about the decision. So let me just say goodbye to Nana, Ed. Say goodbye to Nana . The end is nigh. Yeah. It does bring up this question of what makes a good side project? Because this one was Horizon Worlds, Meta's Metaverse, clearly a very bad side project. Did not work. Apple Vision Pro looks like it's gonna be a very similar story. It's not really working. They're beginning to wind things down. Google Gloss, I mean, we're seeing a theme here that wearables are at least uh virtual reality wearables are not really great. Google Gloss was a similar story, didn't work, shut it down. Google Plus was another interesting side project. That was Google's social media competitor, which they shut down in 2019 after trying to get it off the ground for literally 10 years. There are many examples of side projects being total failures and it doesn't work. At the same time, there are some side projects that have been really successful. For example, just to stick with Google, Waymo. Waymo started out as Google project chauffeur in 2009. I think the best example probably would be the best side project in history, would have to be AWS. Great point. Which started out as this internal thing where Amazon realized, oh, it's kind of difficult to communicate across different teams's. bu Lildet this digital infrastructure. They built it. And then Andy Jassy realizes actually, let's turn this into a business. And so he started to sell it. And now it makes up more than half of the operating profit for the company. Jeff Bezos himself has called AWS, quote, the greatest piece of business luck in the history of business. That was a great side project. So I think there becomes this interesting question: like, what makes a good side project? What when does it work? When does it not work? And how can managers and executives take a framework moving forward to understand which things to green light and which things to say no to? It comes down to management and that is so one of my first clients was Levi Strauss and Co. And they launched um they launched Dockers, which was the fastest zero to billion garment industry garment brand in history. And then they launched a new thing called slates. And what happens is is that a very senior person says, This is my vision, this is my baby. And the way you please that person and perhaps get promoted over two other people qualified, is you tell them how amazing Slates is and what a visionary they are. And you start to ignore the actual data. And it it comes down to doing something really difficult. Post-it notes from 3M was a side project, right ? It comes down to holding yourself accountable and setting up reasonable metrics at the outset. We are launching new podcast s. We launched China D code. And I said, okay, we launched Raging Moderates by X date, within three months, six months, twelve months, these are the metrics that define success or not. And the problem is you talk yourself into believing that your ugly step-headed child is your child and it's beautiful. No, you have to be able to perform infanticide, uh Facebook had a phone. Amazon went into auctions. And they did it the right way. And I think Bezos is a very disciplined operator and said, okay. Amazon had a phone. They said, Yeah, they had a phone. I just remembered. They said, okay, if it doesn't get X pickup by Y date, we're pulling the plug. The key to successful side projects is not the ones that work, it's the ones you're willing to kill. Because you only have so much wood to put behind an arrow. So absolutely look for growth. Battle test the shit out of it, but also, you know, we just launched a substack strategy, subscription revenue. We have realistic, but yet at the same time aggressive benchmarks. And if we don't hit them, we're going to get together as a group and we're going to decide whether to pull the plug on it. Fortunately it's very successful so far. Uh please visit us on substaff. But but the a CEO's job is to have the stones to try new things and to have the backbone to kill them when they're not working and to say, okay, slates. That was actually a third brand from Levi's. I think it was called Slates. Okay, Slates, this was the right idea. We made the right decision. It's important we take risks. It's not working. Kill it. And you know, well, it just needs more time or it just needs more capital. Probably not. These things, the most of them that work, they may get out of the gate slowly, but usually there's a lot of blinking green lights on the shit that works. But again, what happens is a senior manager says sees it at their legacy and really appreciates anyone who's willing to go on their ayahuasca trip with them. So it just comes down to leadership, and that's to say, o kay, you know , HBO go, HBO Now, HBO Joey Bag of Donuts. All right, folks, I get all the sub brands trying to address different audiences and different technology platforms. It's not working. Let's just go back to HBO. So it comes down to leadership because people you are paying, generally speaking, most of them will say whatever the fuck makes you feel good. Because if someone makes you feel good, you're more inclined to want to promote Well, that's not the litmus test. Is this person really good for shareholder value and setting up really tangible hard metrics and and holding you and themselves um accountable? Yeah, it's such a good point. We were discussing this as a team and that w there were some basic questions that we think are pretty crucial to if you're going to launch a side project, if it makes sense. Three questions that we think are relevant here. One, do you have the money to make the bet? And that's a very important fundamental question. Like you need to have cash coming in the door. I mean, that's Amazon had figured that out before they launched AWS. They had significant cash flows at that point. And then they had the they were able to make that bet. You could argue that Meta had that positioning as well. The second question is: is it leveraging existing infrastructure. Like, are you the right person to be doing it? If you're like a clothing brand, like, no, you shouldn't launch like a candy company just because you think it's a good idea. That's not your wheelhouse. So you shouldn't be getting into that. And then the third thing, and this is the the the thing that I think Meta didn't really question that Meta did not answer correctly, or perhaps never even asked themselves. And that is, is it actually a good idea? It's not that helpful. But maybe we could put it in terms of: is it actually solving a problem, a real problem that people have? And if the answer is no, you just can't do it because no amount of capital, as we saw, will turn a very stupid idea, a very bad idea, into a good idea. The money doesn't solve the problem if the idea is stupid. And that seems to be the s mistake that Meta made is they never really thought to ask themselves, is this even a good idea? Is this, are we actually solving a problem here that people want to be solved? The answer was no. And then they invested so much money into it, probably so much pride and ego into it as well, victims of the sunk cost fallacy, to the point where they decided like we we have to keep going because we've bet the ranch, we've bet the farm on it, we've literally bet the name of the company on this working out. And here we are in 2026 and it didn't. Aaron Powell The only nuance I would add to that is that a good versus a bad idea. Sometimes the best ideas are just fucking crazy and feel like a bad idea at the same time. And sometimes logical stuff just doesn't work out. I think that you need to veer away from the subjective and the qualitative towards the objective and the quantitative. And that is, a good manager and a good CEO says, all right, what does success look like? And then put hard metrics around it. And say in 90 days, we're going to look at what we think success would look like. And also what does failure look like? And constantly reevaluate whether we're and also a basic economic term that management and CEOs understand, but they don't really live by is the notion of sunk costs. And that is we've put so much energy and so much capital into this thing. We love it, you know. No, that's gone. From this point forward, if we were at a standing start, would we put more money into this? That's the only question that matters. That money's gone. It doesn't matter. That effort gone, the time spent on it, doesn't fucking matter. From a standing start here and now, where this No affection for it. 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Just as an example, after four years of steady ratings gains, the Oscars stumbled last Sunday, with viewership on ABC falling 9% from a year earlier. So Scott, Josh DeMorrow has taken over uh as of last week. He has, you know, a steep uh road ahead. What would be your advice to the CEO? How would you get Disney back on track at this point? I think they should merge with Netfli x. I don't think that's a good idea if I were the head of the F to C or the DOJ. But you asked me for advice. Uh the parks is just an unbelievable business. I'd build from the parks out, parks in the studios. They'll they'll they'll do what they need to do. They'll shed the K the decline in cable assets so they can go good bank, bad bank. This should be an events experiential parks company with a really strong studio and a fantastic, really clear positioning around family, around streaming. I feel like Netflix and Disney Plus are kind of the only only ones I would know I think I know will be around in 10 years. Uh it's an incredible company. It kind of identified, it's sort of a bit of a proxy for how Hollywood has done the last 10 years and that is great content, products never been bet ter. Enormous disappointment from a shareholder perspective. Disney stock is lower than it was ten years ago. What is the S P the S P is what, uh I don't know, tripled since then? Or doubled and the Nasdaq's tripled. And meanwhile, if you invested in Disney or worked at Disney and have options, you know, a huge disappointment. And if Bob Iger also just to reverse engineer those two, a a learning for executiv es, you're always better off leaving too early than too late. And Bob Iger represents that in spades. Bob Iger came home from Vietnam eight years ago after a tour, medals pinned to his chest, total hero, one of the most respected people in media history. And then he got bored, started cycling from the cheap seats, performed a coup from outside of the palace, and went back to Vietnam and is coming back with, you know, uh massive injury. His reputation has really been diminished. If he had just stayed a way, he would probably be one of the people everyone's talking about to run for the uh Democratic nomination for president. He had that kind of credibility, he had that kind of luster. And to be fair, he faced a lot of headwinds in the The way you're evaluated as a CEO is on the shareholder price and the share. And the shares have vastly underperformed. You know, in the last ten years, I think Netflix is up four or five whole fold. Disney is flat. So look this is a mixed legacy. And I think at this point I called or I saw Ted Serandos at one of these fancy award shows. I'm like, okay, you save $220 billion by not buying Warner Broth ers. Your stocks up 10, 15 percent. I'm like, here's an idea. Disney's 178 billion. Why wouldn't you merge? I mean if while the FTC and the DOG are asleep, why wouldn't you which I think is a bad thing, why wouldn't you just Can you imagine Netflix and Disney? Can you imagine Disney getting to incorporate the IP of Wednesdays and Stranger Things into their parks ? Who in the world could not have a subscription that involves either Disney, Disney Plus, or Netflix? They would just they would just kind of I mean, in some that merger shouldn't shouldn't happen. But I said to I said to Ted, and I don't know Bob, and he's probably sick of me shitposting him, although he does love he does wear lovely cashmere sweaters. Um but I think that if I were him, my ultimate swan song would have been merging with um Netflix. The new guy, I think Disney's a great buy right now because um I think the parks are arguably the largest the business with the largest moat. I think Disney has real pricing power. And they're paying a conglomerate tax right now, and that is because basically the earnings call goes like this: streaming media platform finally paying off. We're getting real operating leverage there. The parks continue to be one of the most dominant dominant entertainment assets, experiential assets in the history of the business. You know, you're you c people call child services if you don't take your kid to Disney and spend twelve hundred dollars for a shitty hotel room by the time they're five, right? And then it's like, okay. And then they go on to apologize for all of their broadcast shit, ESPN, ABC, Disney Channel, et cetera . As soon as they get rid of that shit, they could sell all their broadcast and cable stuff for a dollar, and the stock would be up twenty percent in the next year. Because what happens is you pay a conglomerate tax, and that is when you have a company with multiple entities, basically the market finds the shittiest asset and assigns that multiple to the whole business. And that's what's happening to Disney. If Disney were just parks streaming in the stud io, you know, champagne, cocaine with an eight-ball of ketamine. That's a good time. That's a good time, Ed. Did I tell you I'm into loom? Did I tell you I'm into loom? Yeah, look, I mean Disney's Polk's business is that's the that's the crown jewel at this point. And it is really, really interesting how that has changed over the last few years, where there is now a premium on these uh as as Josh Brown puts it, heavy asset, low obsolescence assets. I mean, things that are in the physical world, people will pay a lot of money for. That's the premium that investors are paying for. So they have that. And as we've talked before, like Netflix wants to get into in-person experiences too. And uh probably a year ago, maybe two years ago, we had a whole conversation where Netflix was trying to open up kind of like a Netflix park, some sort of experience. I'm not sure what's happened since then, but I know that it's something that they're interested in. And if they had a strategy on that front, it is something that investors would certainly reward them for. Plus, if you can have a duopoly, you might as well take it. And it seems that the FTC and the DOJ, at least under this administration, have no interest in actually regulating monopolies and duopolies. So if you can do it, you should you should do it, you should make it happen. So I would agree with that. I do find it really interesting what happened with Oscar's viewership, where it fell 9%. It was the lowest viewership since 2022. Among the key demographic, which is 18 to 49-year-olds, it fell even harder. It was down 14%. We saw the same thing with the Golden Globes this year, we saw the same thing with the Grammys, and as everyone knows, the linear network uh is just getting crushed at the moment. But just anecdotally, something that was really interesting. I wanted to watch the Oscars. And I had dinner with my girlfriend that night. I said, let's watch the Oscars tonight. And she said, Really? And I was like, yeah, like you you don't want to watch the Oscars? She said, No, I don't really want to want to watch it. I was like, why? You love this stuff. This isn't someone she likes, she's interested in celebrity news. Like she likes this stuff. Why don't you want to watch it? And she said, because I'll just watch it tomorrow on TikT ok. I'll just watch the clips because then I don't have to watch all the bullshit uh for three hours. And that was when I suddenly realized like, I mean, this is a clip economy at this point. And that's the big problem, which is that these I mean, maybe people didn't watch the Oscars on ABC, but I know that they watched it on TikTok, I know that they watched it on Instagram, I know that they watched it on YouTube. Those are the platforms where people are consuming this information and consuming the content. And in a lot of ways, the the live Oscars on ABC, that's just sort of a Trojan horse. That that is a Trojan horse, that is a vehicle for the clips that get put out on social media the day after and the day after that. And that's where people are consuming all of this content. And so we've been looking into this, and it is becoming a lot more of a thing. I mean, you look at sports as an example, which is all about live. It's about watching the match. Only 31% of young sports fans today say they watch full-length live matches. 74% of them say that they get most of their sports content from social media platforms. I look at my own behavior, I suddenly realize I'm watching the Premier League basically on YouTube because I'm just watching the highlights. And so I think if I had to give advice to Disney, if you want to fix this Oscar's problem, you need to start investing in the clip economy. You need to start figuring out, okay, yes, we've got this live thing called the Oscars, but that doesn't really matter. What matters most is clipping it up and packaging it and spraying it all across social media the day after. That's where we're going to try to make the money. And that's where we should try to sell the ads to. We need to develop a very real ad strategy around social media that isn't so dependent on beaming this uh onto onto the linear networks. That would be my advice. Aaron Powell I did a meeting with the Academy or the Board of Governors for the Academy and they asked for advice. Everything you're saying makes sense, but unfortunately, Alphabet has other ideas and that is if you want to display their stuff on YouTube, they'll give you just enough money to kind of make it worth your while, but not enough money to any anywhere justify the amount of money that ABC used to play to broadcast the Academy Award First off, movie theat ers and it's anathema to say this and all these producers and directors talk about the collective of going to the movies. I think movie attendance is down forty percent since COVID. My kids don't go to movies. I mean, we used to go when they were little for kids' movies. I've been to two movies this year. I went and saw Roofman, because my friend produced it and I'm a huge Channing Tatum fan and it was great and I loved the paternal theme in it. And I went and saw one battle after the other, which is a good film, but it's sort of like three hundred fifty million dollar artistic masturbation. It won everything. Okay, I'd be shocked if that movie gets its money back. And what a shocker, people don't want to watch a three-hour show interrupted by commercials of a bunch of high school graduates lecturing us on geopolitics. It's just what a shocker. Uh that's not exciting. Uh uh at the Vanity Fair Oscars party I tracked down the, you know, I'm I'm I'm good at running other people's businesses. I'm even better at running other people's lives. I can't help but give advice to people. And I tracked him down. I'm like, dude, let's be honest. The magazine business was dead ten years ago. You just didn't realize it. What you should be doing, that party, that experience, they should be running live Oscar viewing parties all over the world with an aspirational guest list where they get influencers and brands to parties similar similar to what Bustle does, charge them a shit ton of money. Hey you're Patron and you want to sponsor Russell Crowe, who's in Sydney, he can't be in LA, whatever, or up and coming Australian actors, whoever they are, and we're just gonna print money. And they could make two or three million par bucks easy at different experiential events all over the world for viewing parties of the Oscars or different things. But the actual business of airing the Oscars for three hours, if you're watching the Oscars on ABC, it means you're also at that point where you need opiate-induced constipation medication. It's not a it's not a good reflection on where you are in life. And the only reason you want to watch it at is because you're in this business. So it's not and by the way, they don't want to invest in it right now because where is it going? It's going to YouTube . So that's where the world's going. You know, De Conan O'Brien, one of the most talented And he was joking, but it's kind of true. So this uh the the future for award ceremonies broadcast is going to decline. The future for experiential event s I mean, even just at a demographic level, the top ten percent of all the m oney. I don't I I don't want to go I don't want to watch the Oscars. I don't even want to go to the Osc ars. I I'd love to go to a uh going to a great viewing party and meeting interesting people and having an excuse to get dressed up and feeling interesting and fabulous, you pay a lot of money for that. And w why wouldn't the Disney Parks have like a big viewing party? Or I anyways, I think that I think there's a healthy willingness to spend real money . You know, my son was super excited, and I was super excited to do this. He he and his other buddies uh who are seniors in high school went to Universal for their Halloween night and they went for a full weekend. They did Halloween for a weekend and they I'm sure they spent a lot of money. But I love that, as opposed to watching, you know, going to a you know a movie and watching Halloween Eleven uh with Jamie Lee Curtis, the absolute hottest woman of the eighties Ed. I'm sad you're not older that you missed out on that. Um anyways, uh yeah, uh the Oscars. Uh look it's a it's a dying thing, and you're right, it'll be clipped up. But the company that can make money on those clips is the new host of the Oscars, and that's YouTube. I think this is where media companies need to get a lot more aggressive, though, in their social media strategy, which is because it's true. It's like you're gonna you' youre're playing on YouTube's terms. And we have this in our own business. We make way less money from the automatic ads that YouTube feeds the viewer uh w when when they watch one of our videos, which is why we have decided to do something a little different, which is that we own the relationship with the advertiser ourselves and we place the ads that we want directly into the video. And maybe the YouTube audience will say that's annoying, to which I would say just skip past it. So whatever. But the point is because we own that relationship, that's allowing us to negotiate the price for ourselves, which means that we're not having to throw money away to the big tech overlords over at YouTube or at Instagram or any of these other sort of social media uh neo-media platforms. And that's what all of these companies need to do.it Whout the Oscars, without Timothy Chalamet, without all of these superstars, Michael B. Jordan, no one's gonna watch anything. You need these people, and you need the Oscars, and you need Vanity Fair to get them together and get the cameras out and put it on the platforms. And then the question is: how do you monetize that? You're not going to make a lot of money if you just post the Instagram clips and they just you just get the money from Instagram, and Instagram is in control of the relationship with the advertiser, which is why unfortunately you're going to need to get a lot more aggressive on negotiating and owning the relationship with the advertiser and placing the advertisements directly into your videos. The audience isn't going to like it very much. That's on you to figure out how to make the audience okay with it. But that's what you have to do if you want to stop getting crushed by these social media companies. Because this is the future of media. It's all on these platforms. It's all in the clips. And that's where you have to make the money. I like your vision. I think it's optimistic. This is unfortunately what I think the reality is. And that is so we're on YouTube, we're getting a hundred to two hundred thousand views per per episode. AdSense we make almost no money from. It's three dollar CPMs. It's a shitty business unless you have the scale of tens of billions of people watching videos every day, which Alphabet does. I think they split the revenue with you. I think it's fifty-fifty. If you're in the podcast business, you get seventy percent by having an ad distribution network or a partner like Vox. So already Alphabet is flexing their muscles. But here's what I have seen every time when you partner with a big tech platform, and it's the following: they fuck you. And that is, you build a business, you're getting revenue, and then Alphabet, and what you say makes all the sense in the world. Bake the ads into the actual video itself. My prediction and Neil Mohan has been more generous to the creative community or not generous, but he realizes in order to inspire more and more content, we need to give more and more revenue to the creators. Eventu ally, eventually the history of big tech, give them enough money such that they will devote resources and then overnight they do a panda, they do away with brand pages, and they fuck you. Well what are we gonna do? We just gonna sit here and get fucked, or are we gonna do something about it? I mean my my my I am advocating for do something about it. We sell ads. Right. We sell ads directly to the advertiser. We insert them to our audio product of which there's no monopoly platform that can get in the way. Right? The distribution here is not controlled across this uh monopoly. We have Substack and there's several competitors to Substack where we get a subscription strategy, which is already creating real revenue. Uh newsletters, getting people to pull out their credit card and pay, whatever it might be. There are means of making money in the mediocre system. What I'm suggesting is the moment you have M eta, I was on the board of the New York Times and we were making a shit ton of money on something called about com. We did all this, we get creators to do something on Southern Cooking, optimize it for Google. Google would send a ton of traff ic and send a ton of traffic to us, and we'd have uh links to buy stuff and we made my overnight. Alphabet does a panda release, and then we wake up the next morning and our revenue is down forty to sixty percent . I I love Jessica Yellen at News Not Noise. I think it's a really important organization. I think she does incredible work. And I I'm an informal advisor to her, and I'm like, you're too dependent on Instagram. And this is what Mark Zuckerberg. The moment you have any margin, he will come for your margin. And this would be my prediction on alphabet. Neil has a different vision so far and I respect and appreciate it. We love being on YouTube and it's been great for us. At some point, if the same behavior continues to cycle through the DNA of big tech, they'll go, Oh, you're baking videos into your thing? No, fuck you, we have technology to start those out, or you have to pay us 90% of that revenue. Eventually they come for you. Eventually, they fuck you. And that has happened to almost every brand. You don't Facebook used to have brand pages and they encourage Adidas, you have to have a bigger brand page than Nike, so they spent all this money. Company like Buddy Me there was all sort there was all sorts of ecosystems around it. And as soon as your ecosystem gets big enough that it's real margin, they come for you. So I I think they've got to establish direct relationships, as you said, with the consumer. They do that in streaming media. No monopoly controls, you know, controls their access, if you will. Uh there's still a lot of bidders for their content. If I were uh so let's uh I apologize for the word salad. If I were on the board of Disney or if I were running Disney, we need something called Disney Plus Plus. What does that mean? $50 a month, $100, $100 a month. You get all the Disney properties, the ESPN, everything, all the streaming media, and you have access to Disneyland for f ree on certain days when it's only Disney Plus Plus members. And you don't have to wait in line three fucking hours for the avatar ride. And you get special, you get special products, special merch, but you are a Disney plus plus household because people think, Wow, we go to Disney once a year. We should do this. It's a great No, no, you don't. You go once every three years. It just feels like once every month because it's a seventh circle of hell. But they could wrap all of that. Special access to one of a kind merch, days at Disney that aren't a fucking nightmare, where it's like a reasonable crowd, special birthday celebrations for your kid maybe at Disney, that fair that princess that princess experience. And so many households would sign up for that. Instead they have the seven dwarves of businesses all competing with each other. They should have Disney is in a position to have the ultimate family loyalty program. And the market loves recurring revenue. The money you give up at the till at the entrance gate at Disney, the money you give up from merchandise, the money you give up in the theaters were paying twelve bucks, that revenue is valued at whatever, one to three times revenues.