Big Tech Is Now Advising the White House — What Could Go Wrong?

0:00Today's number, four. That's how many car accidents Tiger Woods has now been involved in after he rolled his car over in Jupiter Island, Florida last week. Today's other number is 20. That's how many dollars it would cost you, Tiger, if you simply ordered an Uber. Money market's mad. If money is evil, then that building is hell. The show goes on! The folks in there are ones that show, show! Welcome to Prof G Markets. I'm Ed Elson. It is March 31st. Let's check in on yesterday's market vitals. The Nasdaq fell as a tech sell-off deepened. The index is firmly in correction territory, heading into its final day of the quarter, down 13 % from its October peak.

0:48Meanwhile, the S &P also declined and the Dow was flat. Treasury yields dropped after Jerome Powell indicated the Federal Reserve will look past the oil shock and keep rates steady. His comments came as Brent crude prices rose to more than$116 per barrel. Okay, what else is happening? Some of the most powerful people in tech are now formally advising the White House. President Trump has named 13 industry leaders to the President's Council of Advisors on Science and Technology, also known as PCAST. Appointees include Marc Andreessen, Jensen Huang, Mark Zuckerberg, and Larry Ellison. Their mandate is to advise the White House on science and tech policy, and their goal is to ensure that, quote, all Americans thrive in the golden age of innovation.

1:38Co-chairing that council is David Sachs, whose time as AI and cryptozar has come to an end, and also Michael Kratzios, director of the White House Office of Science and Technology Policy, joining us to discuss this council and what it means for AI policy. We're speaking with Liz Hoffman, Semaphore business and finance editor and host of Compound Interest. Liz, welcome back. So I want to get right into this. These councils have existed for a long time. FDR had his first one in 1933. Historically, it seems like they've usually been academics. But this time, it's really industry leaders. It's the people who are actually building this technology, people like Zuckerberg, Jensen Huang, Marc Andreessen, etc.

2:29What do you make of this council? And is it surprising in any way to you?

2:34Liz Hoffman:First, I think there was a missed opportunity in not getting the acronym to be podcast. I don't think you'd have to try that hard. The presidential order directoring a council of whatever, because that is that is the crew here. Yeah. No, I think you're right. And that's extremely intentional. There was, you know, David Sachs was talking about this and said, I think, quote, these are doers and you can, you know, feel however you feel about the politics here. But, you know, one complaint that was really widely felt in the private sector about the Biden administration was less the sort of policies they were pursuing than the personnel pursuing them and the sort of access that private sector people had.

3:13Liz Hoffman:Like, say what you want, even Trump's first term, he would say something that, you know, the private sector didn't like. But they would call up Steve Mnuchin. They would call up Gary Cohn. And there would be this back and forth. And that totally went away during the Biden administration in the sense that people were making decisions who would never run a P &L, who would never run a balance sheet, never really underwritten risk for a business, you know, for a living. That has obviously come back. So that, I think, is the most charitable and sort of least politicized view of all of this and, like, seems fine to me.

3:41Liz Hoffman:AI is really important. It's really important economically. It's really important for national security. And I think, you know, we'll all remember that Senate hearing, you know, where a bunch of the big tech executives were being questioned by senators who clearly just had no idea how they made money. I mean, that knowledge gap between people doing the regulating and writing the laws and the industries they're regulating has been pernicious before. And so, you know, that's one way to look at it. The other is this is just another sort of corridor of power that is cropping up and that there are a lot of asks from the industry and they now have a more direct line to people who can give them what they want.

4:16Wouldn't the conflict of interest here, though, to play devil's advocate, wouldn't it be that the people who are supposedly going to regulate this technology are also the people who are most heavily invested in this technology. They're the ones who are incentivized to profit from this technology. I mean, it would be one thing if you had a council of people with whom technology leaders could speak with and maybe who had some background in technology, but it's literally Jensen Huang. It's literally Marc Andreessen. It's literally the people who are most invested who want to profit off of this thing.

4:54Is that not a conflict?

4:56Liz Hoffman:It's absolutely a conflict. But I mean, this administration is full of them. I think, you know, and it's a slightly less pernicious one than like people's kids making a lot of money on crypto deals and Trump selling half of his family business to the Middle East. I mean, you don't have to look far and wide for, you know, things that are genuinely problematic. I'm not that bothered by this one because I guess what's the alternative, right? Again, you have this being regulated by people who have no idea what it is. I would also say that there is a surprising and actually slightly comforting range of ideas and viewpoints within the AI community about actually how best to regulate this.

5:34Liz Hoffman:I would be more concerned if everyone was just full steam ahead. But there are real like, you know, Anthropic has put out a different version of how this technology ought to be used and regulated. There are states that sort of have their own point of view. I don't know, but I don't think that the the argument or the alternative is a whole lot better where you have got a bunch of like octogenarian senators trying to oversee this. I would also say and look David Sachs has been a real lightning rod he's the the presidential advisor sort of chairing a lot of this stuff I think it's hard to argue that he is richer now being in the White House than he would be if he was in Silicon Valley like actually investing in this stuff so I don't know yes it is you got to be worried about it but as the knowledge gap between the people regulating huge sections of the economy and the people in them gets wider I'm not really sure there's a better option than to bring people to the table.

6:30Liz Hoffman:By the way, the one people, one group of people not in this are the big, the big AI models themselves. So you wonder whether there isn't, this isn't going to end up being some kind of, you know, origin story where like Elon Musk's turned to the right. A lot of it kind of goes back to his snub from the Biden EV council. I don't know. I was surprised to see that, um, that group, Sam Altman, those folks not included here. Right. Elon Musk wasn't in it. I guess he had his fallout with the president. That one's a little less surprising. But yeah, you would expect to see Sam or Dario or other folks who are running these models.

7:05Right. But I guess I just want to push back for a moment because, I mean, with David Sachs as the example, it seems as though his policy, his approach to AI regulation has been, let's not really regulate AI. Let's make it kind of a free-for-all. And at the same time, he was still invested through his investment firm, Croft Ventures, in a lot of companies that were building in the AI space. And it does seem that that is kind of the risk here. I agree with you, having a bunch of oxygenarian senators who don't really know what they're talking about on this council advising on things that they've literally never built products in seems like a bad idea.

7:44But it also seems like a little bit of a bad idea to have the individuals who are most incentivized to build policy, not that necessarily protects Americans, but that allows them to profit as much as possible. And it just makes me think, can we not find some sort of happy medium? Can we not find some people who aren't balancing their other job as a VC in Silicon Valley and being a special employee for the government? People who could actually do the job of regulating, but who also have some fluency in the language of business. I don't know, someone like you. Could we not get people in there who know what this is about, but who also aren't going to be totally incentivized to simply get as little regulation as possible to profit as much as possible?

8:32Liz Hoffman:I was not invited, nor was my colleague, Rita Borghadi, who actually knows a lot about this stuff. Sure, obviously, yes. There's like a million AI safety groups and having them included would be the normal thing to do. That's not generally how this administration operates. So they don't have a lot of respect for precedents and how we've kind of consistently done things. Yes, I agree. But, you know, I do think that, you know, there's always been this gap between regulators and the people they're regulating. But like, for example, the Federal Energy Regulatory Commission, FERC, regulates utilities.

9:06Liz Hoffman:Like there's this sort of price of having people who understand the industry in the regulatory seat is kind of allowing that revolving door over time, right? Letting people come in and come out and get paid in the private sector. That's how you get them there in the first place. This one, they don't need that, right? These guys are so wealthy and there's not a lot of incentive to bring them in to a true regulatory role. And so I really do worry that this is that that knowledge gap is just going to be incredibly wide here for a technology that is very powerful and developing really quickly. I guess the thing that would make me maybe a little bit more comfortable is this is an advisory council.

9:46They're not actually writing the laws, but they're going to have some sort of advisory role and maybe they'll shape things in some capacity. I guess the question then becomes, how significant are these councils really? Do they really influence policy in a way that is meaningful?

10:02Liz Hoffman:You'd be hard pressed to find one, you know, during the Biden administration and probably and certainly Trump won when you remember, by the way, like no CEOs really wanted to be kind of anywhere near that that administration from an advisory perspective. You know, they tend to crop up kind of around national emergencies and go back to 08. And there was obviously some a lot of private sector input into how that that problem would be solved. Or honestly, even the pandemic, right. Warp Speed had a had an advisory council with a bunch of pharma CEOs. It was a huge win. And I often say, like, it's weird.

10:34Liz Hoffman:Warp Speed was one of the biggest wins from Trump's first administration that he completely walked away from. Right. It totally worked. It was, in fact, very popular, but he never took any credit for it because of the politics had shifted around it. So we'll see. I think there's a balance to be struck between sort of being regulators being in opposition to the industry they regulate while trying to sort of tap their expertise or at least have some open lines of communication, I think often is helpful. this one seems fairly lopsided in that respect. But there's just, you know, I hate saying AI is different.

11:13Liz Hoffman:This time is different. This technology does fundamentally feel different to me. And so I think that having private sector involved is probably helpful and understanding that not all of them want necessarily exactly the same thing. They are competing with each other very aggressively, which is not where I like to put my eggs, but could be a little bit of a check on this sort of one-way push. All right. Liz Hoffman, Semaphore Business and Finance Editor, and also host of Compound Interest. Liz, thank you. Always appreciate your time. Always fun, Ed. After the break, SpaceX is filing for Liftoff.

11:51And if you're enjoying the show, please follow our new Prof G Markets YouTube channel starting next week. That is where you will find all of our content on YouTube.

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12:43Liz Hoffman:What do you say to that, Rumi? It's not a battle. So glad the Saja Boys could take breakfast and give our meal the rest of the day. It is an honor to share. No, it's our honor. It is our larger honor. No, really. stop. You can really feel the respect in this battle. Pick a meal to pick a side. And participate in McDonald's while supplies last. Zootopia 2 has come home to Disney+. Let's go! Get ready for a new case. We're gonna crack this case and prove we're the greatest partners of all time! New friends. You are Gary the Snake. And your last name? The Snake. Dream Team. New habitats. Zootopia has a secret reptile population.

13:26You can watch the record-breaking phenomenon at home. You're clearly working at it. Zootopia 2, now available on Disney Plus Rated PG.

13:40We're back with ProfG Markets. SpaceX is preparing for its biggest launch yet. According to the information, the company aims to file its IPO prospectus imminently. It's reportedly targeting a valuation of$1.75 trillion and hopes to raise$75 billion in the offering. That would make it the largest IPO in history. Earlier this year, Musk merged XAI into SpaceX, which had already absorbed the social media platform X, which begs the question, will Tesla be the next Musk property to join the SpaceX conglomerate? Lots of questions here. Here to help us break it down, we are joined by John McNeil, CEO of DVX Ventures, former Tesla president, GM board member, and author of the new book, The Algorithm.

14:31John, good to see you. I'm going to get right into this here. You just published a book called The Algorithm. It's basically about how Elon built both Tesla and SpaceX. And now SpaceX could be going public. It could be the largest IPO in history. As someone who has worked with Elon and someone who's written about this company, what do you make of this company now going public? The basis of the approach in the algorithm is simplicity. And that's Elon's organizing principle is simplicity. So I think there might be three reasons why Tesla may become a part of SpaceX and these entities might combine.

15:08I don't have any inside knowledge, but these three reasons are pretty significant. So the first is it's easier to run one public company than two. And so that is that simplicity argument number one. But I think beneath that, it solves a couple of problems. Tesla is essentially becoming an autonomy company in terms of humanoid robots and car robots. And so both of those things rely on AI as their operating system. And so Tesla, as you know, invested$2 billion into X earlier this year. But combining the entities of Tesla, SpaceX, and X into one entity would put the AI resources closer to the application at Tesla.

15:57So I think that's a second reason. And a third reason is, you know, there's been a lot of talk about Elon's frustration with his portion of the cap table at Tesla. He wants more. And this would seemingly help to solve that problem of combining Tesla in. Given a significant SpaceX ownership, he would sort of solve the problem of who the majority shareholder is at Tesla when one moves. So I think those three things probably point to this being a higher than 50 percent chance of happening. You took Lyft public. You were the company's COO. So you were there for an IPO. I mean, just as an observer here, if you're trying to combine SpaceX with Tesla, is it not going to be a lot harder if SpaceX is its own public company?

16:48It has all of its new regulations. You've got all these retail investors in the mix at that point. Why wouldn't they just combine the two things now? Why take it public first? And will that not make things more complicated down the road? You're right, Ed. It makes it more complicated to do it post the SpaceX IPO. Not impossible, but more complicated. You invite in, I think, an extra layer of regulators, whereas you have one company to look at now versus two then. So I think it is easier now to do, but I'm not sure they want to slow this down because Elon's got this line in the sand where he wants this done by his birthday.

17:26Just on the valuation here,$1.75 trillion, that would make it the seventh most valuable company in the world. It would make it more valuable than Meta. It would also make it more valuable than Tesla, which is quite striking. I'd love to get your reactions to this valuation target that they're shooting for,$1.75 trillion. Does that make sense to you? If you break it down first and say, let's add up the pieces, you've got the SpaceX business, which has got 90 % market share in launch and call it 99 % market share in satellite internet. So two kind of monopoly positions in that business. And then you've got XAI, which is competing in the world of the kind of trillion dollar valuations of open AI and then maybe three quarters of a trillion for Anthropic.

18:18So putting those two pieces together, you've got to depend, I think, a lot on retail investors to look past any fundamental financial metrics on what would justify that valuation, which I think is why they're reserving a third of the IPO for retail. I think they need that retail demand not only for the valuation, but to your early point, this is going to be the largest capital raise in history with$75 billion. So they're going to need everybody from institutions to retail investors coming to the table to fill in that book. That's a big, big order book. It seems to me that, I mean, Elon is clearly a master of a lot of things.

19:01But this is kind of a criticism here incoming is that he's kind of a master of getting us to not look at the fundamentals, which is exactly what is happening with SpaceX here. I mean, you look at the fundamentals, the fact that they've, I think they did around$15 billion in revenue. They wanted$1.75 trillion valuation. At which point you say, yes, because this is an entirely different business. This is space. This is going to change the world. And then when we start to talk about the idea of merging SpaceX with Tesla, to me, it starts to sound like we're doing a lot of fundamentals laundering of some kind to basically make us forget about the fact that Tesla sales are not that great right now and make us start to look into the future and get all excited about all these things such that we are down to pay extraordinary multiples for these shares.

19:52Would you not say that that is perhaps what is happening here? And does that not make you, I don't know, a little bit uncomfortable, maybe? I would say I've never met somebody as good at the promote as Elon. He is incredible. And to your point, like Tesla is a declining car business with declining margins. Margins have fallen by half in the last two years. And yet it's worth twice as much as all other car companies combined. And so he has got an ability to get people to defy financial logic around these valuations. And I think, you know, there are plenty of people that have lost a lot of money saying I'm either short or I'm not participating in Tesla.

20:42and i've learned not to bet against the guy but he is unique in his ability to to get people to look past financial metrics and financial fundamentals what do you think this means for the automobile industry obviously that's really your expertise here uh if tesla were to merge with spacex i mean if we're really combining those two things does that have any downstream implications for the other players for, say, GM? I can't see any in the sense that we're all kind of racing towards the same existential issue, which is autonomous cars and factory automation to compete with the Chinese. Those are the two issues that ought to be on every car manufacturer's mind.

21:28And I don't think it changes that dynamic at all. And those are clearly the two things that Elon's got Tesla pointed at as well. All right. John McNeil, CEO of DVX Ventures. author of the new book, The Algorithm. I got a copy. I don't have it with me, but I have it at my apartment. I appreciate you sending it to me, John. Really appreciate your time. Great to talk to you, Ed. Before we end, a quick update on the Iran war. As of this week, we have officially been at war for more than a month. This is week five of the conflict. And just as a reminder, we are now officially over the amount of time Trump said this war would last.

22:07On day two, Trump told us this would take, quote, four weeks or less. He then separately told the New York Times that it would take four to five weeks. Pete Hegseth also followed up and said, quote, this is not Iraq. This is not endless. Well, here we are in week five. We are now breaching the original estimations of the duration of this war, very similar to what happened with Iraq. And there is still no indication that we are anywhere close to ending this. In fact, yesterday we learned that our military presence in the region had grown by roughly 10 ,000 troops. We also learned that Houthi rebels in Yemen are now joining in on this war.

22:48Iran is also now making threats to attack American university campuses in the Middle East. And Trump is threatening to, quote, completely obliterate Cog Island, while the Pentagon makes arrangements for even more ground operations. In sum, this war is far from over. Which also means we must now brace for even more economic impact. Here is just a quick update on how prices have risen since we invaded Iran. We'll start with oil, the price of which has now risen nearly 60%. As a result, gas prices in the US are now up more than 30%. And over in Europe, that number is now 75%. We also discussed how this affects the price of fertilizer.

23:33A couple of weeks ago, I mentioned how fertilizer prices had risen roughly 25 percent. Well, now that number is almost 50 percent. Fertilizer is, of course, essential for growing food, which means that grocery prices will also be affected, but many other goods will be affected too. Things like construction materials and therefore housing costs, also consumer packaging, home electronics and many, many more. And as a result, inflation expectations are now rising even higher. Just last week, the OECD raised its 2026 inflation forecast to 4.2%. That is more than a full percentage point higher than what they had previously estimated in December.

24:16Let's also check in on how this war has affected the markets. Since we invaded, the S &P has fallen roughly 7%. The Dow has also fallen roughly 7%. Shout out to Pam Bondi, who literally called the top in her Senate hearing. European stocks are down 8%. Japanese stocks are down 12%. In fact, global stocks as a whole have lost roughly 9 % of their value since the start of the war. That is more than$10 trillion in market value, which has evaporated over the course of a month. As for the direct costs to the government, well, the bill has now risen to more than$25 billion. That is money coming directly out of the federal budget.

24:59It's also enough money to cover health insurance for 2.7 million Americans. That was a lot of numbers, I know. But the reason I'm highlighting these numbers is because we are now getting to a point in this war where we are actually starting to lose track of them. The longer this goes on, the more we forget just how expensive this is, not just in terms of dollars, but also in terms of lives. I can also give you the death toll. We are up to more than 4 ,500. So it's now getting to that stage where we start to view this not as a tragedy, but as a statistic. We are becoming desensitized to the destruction that is happening in Iran, which is why we have to keep track of it.