Bulls vs. Bears: Who’s Right About This Market?

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27:30We're back with Prof G Markets. The blast zone is very clearly those two companies, OpenAI and Anthropic, which are based on what we know losing money. But I should add, we don't really know much at all. I mean, in OpenAI's case, Ed Zittren got his hands on the financials and he leaked them. And we learned from those financials that OpenAI lost$21 billion last year. And, you know, we can make estimates and do analyses based on that as to what we think is going on over at Anthropic. But I want to play you one more clip from this Gavin Baker interview on the Invest Like the Best podcast. And I should just clarify, you know, I'd love to have Gavin Baker on the podcast.

28:17I think we have reached out to him. And Gavin, if you're listening to this, we'd love to have you on and talk about this. But he said something that I think was really problematic in that episode. And he kind of just skipped over it. But I want to play this to you really quickly and then break it down. OpenAI has accelerated. Anthropic continues to grow really strongly and is almost certainly pumping out significant amounts of free cash flow. There is zero evidence that Anthropic has generated any free cash flows whatsoever. and they have even said by their own estimates that they don't expect to generate any free cash flows until 2028 and by the way if they had generated any free cash flows i can guarantee you we would be hearing about it because it would take the set the stock market why are they raising 36 billion dollars from the debt markets on top of the other 35 billion dollars they raised a couple of months ago from blackstone so and he just he can't you notice his language is almost certainly generating significant amounts of free cash flow.

29:25I don't know what he's thinking when he says that, but you can't just say that. Because the reality is that jump that he makes there, just deciding that almost certainly it's happening, that is what the entire AI ecosystem is depending on right now. And to me, the fact that he says that tells me that there is some serious misunderstanding in the equity markets right now as to what is actually going on in AI. Because if there are a lot of other investors who, like him, are just randomly assuming that the Anthropic business model actually works, despite there being zero evidence to support that argument, then we have a serious mismatch in terms of investor expectations and the actual reality on the ground.

30:10And granted, we don't know because Anthropic won't tell us. But we did our own analysis of Anthropic's numbers. We did it based on what we saw with OpenAI's financials. And based on our estimates, Anthropic lost around$11 billion last year. And we would expect that number to continue to go up because of the massive amounts that they're spending on training and inference. So that, to me, is the problem. Why are we pretending like OpenAI and Anthropic, like those businesses are working. I mean, how are we making that jump? Because that's the real problem.

30:46Scott Galloway:Yeah, I think if he'd said, if these companies dramatically reduce their capex, they would get to cash flow positive pretty soon. Because if you look at the top line and the sector's growth, I think that's a defensible argument. Usually though, you have to have positive gross margins. And what I've been saying is that I just signed up for, I figure it was Cloud Pro or whatever, and it's 200 bucks a month or something. And I read somewhere that it's costing them$1 ,000 a month to service my$200 a month product. But yeah, look, I think if he'd said these companies could be cash flow positive if they decided to dramatically scale back their capex because they're growing so fast, I think that's maybe a defensible argument.

31:27Scott Galloway:But I don't see any evidence that these companies are producing anything resembling free cash flow right now. And that's the whole point. And that is the whole question in this bull market is, can OpenAI's business make money? And can Anthropik's business make money? And you have the number one AI bull going on podcasts saying that they're already making money, almost certainly, quote unquote. And it's not true. And so I'm just like, what are we doing here? I have this deck or this talk I do called AI Optimist. We have such a tendency to look at everything through the lens of the success of America is the success of the S &P.

32:09Scott Galloway:It's such a damaging metric because it doesn't measure PSA. It doesn't measure obesity. It doesn't measure anxiety. It doesn't measure, you know, general sense of purpose among young people. And I believe AI is going to be a net positive for society. we're going to be i think it's going to increase productivity we're going to come up with new ideas new medical treatments faster cycle time for pharmaceuticals i think it's going to be a net positive as long as we figure out the risks and the regulation to try and start the externalities we you know we've been able to control nuclear detonation for almost 80 years with regulation and leverage and harness i believe nuclear fission to the benefit of all mankind kind.

32:52Scott Galloway:And there's a real issue around whether regulation is keeping up with this technology. But the notion that everything comes down to whether these stocks are going to continue to go up. Okay. Just because you don't think these stocks are going to get you to go up doesn't mean that technology is a failure. It doesn't mean you're wrong. It turns into, I have never received the type of pushback and hate as when I question the valuations of companies in a VC's portfolio. And that is they attack your character. They don't want to make a good faith argument back and forth. It's no, the whole world depends on whether or not open AI has a successful IPO.

33:29Scott Galloway:No, it doesn't. And also there is a positive to all this CapEx. Thank God, or it's a feature, not a bug that America is willing to get out well ahead of its skis on a regular basis. And that shareholders are willing to incur these types of drawdowns because we like risk and we're willing to take these risks. And most nations aren't willing to take these risks. And we benefit, we will benefit from this capex. It may, I believe, cause some volatility. The market might be a drawdown. I think a lot of investors, in my view, are likely to lose a lot of at least paper gains in the next 12 to 24 months.

34:05Scott Galloway:The capex that went into railroads was well ahead of where it should have been. It cost shareholders a lot of money. We have all benefited from that capex. The capex on the internet, which got hysterical and irrational from an investor standpoint, we have benefited from. So even if the S &P has the kind of drawdown I think it's going to have, I would still argue there's real societal benefits from the fact that America is a risk-aggressive culture, and we make these types of extraordinary cap backs. It's not the steel in the ground from Global Crossing or whatever, these companies that imploded from these telco infrastructure in the late 90s.

34:38Scott Galloway:We're still registering, I think, benefit from those irrational investments. There's a lot to like here. But the notion that everything about the benefit or the progress or prosperity of humanity is all linked to whether the S &P goes up or down, I don't know. I've said to you for a long time, I think your generation would benefit from what I call, I don't know, a sane correction such that you have the same entry point into great companies that I had as a younger man. because all the narrative and all the pumping and all the shaming online, if you don't say, a$44 billion acquisition of X made sense, all of the shaming is one thing, and that is the current equity holders want this thing to go higher.

35:27Scott Galloway:And the narrative is, okay, we need rational people to say, is it kind of the Michael Burry implosion? Probably not. Is it the perma bull things go up forever? No, it's probably somewhere in between. And what I can't stand is the narrative is you're a good guy and a good citizen if you're continuing to pump. But if you want to have a rational conversation about maybe shit's overvalued right now, there's something wrong with you. You're anti-American. Exactly. All we're trying to do is to get to the truth. Like, that's literally all I'm trying to do here. What is the actual value of these companies?

36:07What is the actual fair value estimate for these big tech companies? Have we considered the fact that they're relying on two companies alone for their AI growth? That's where they're getting all of their growth right now. And have we considered the fact that those companies that they're relying on aren't making money and could easily go out of business if they can't keep raising billions of dollars ad infinitum from the equity markets, which we're already starting to see. Look at Anthropic going and borrowing $36 billion from Blackstone this week. I mean, that's all we're trying to do. And as soon as you say that, I mean, you shouldn't be so offended by us doing that.

36:45It shouldn't be an offensive thing that we're trying to get an understanding of the truth. It's fine. If we're wrong, then we'll be proven wrong. But that's all we're trying to do here. We're trying to get an understanding of what actually is the value here. And it seems that everyone's so sensitive because they have these stories in their heads and they get very upset if you decide to start poking any hole in that story, because I guess they believe that this is their ticket out. But it's like, gravity's going to come at some point. So I think we should be having a rational conversation about all of these.

37:20On this point, I think it's worth asking the question, like, We're bringing up some of the AI anxiety right now. And the question that I keep asking myself is, to what extent is that anxiety priced into the markets right now? And I think that the answer is that as of basically this week, when the markets went way up, the anxiety is increasingly being ignored. So if we just look at some of the multiples, Microsoft is up to 27 times earnings, which I think at this point, it's pretty fully valued. I mean, you know that I bought the stock at 380. It's up 30 % since then. So that's great. But I mean, the benchmark that I keep trying to look at is how did these companies trade before the AI boom?

38:11And the answer is last week, Microsoft traded lower than its multiple pre-AI. This week, it trades higher. We look at Meta as an example. Meta is a company that I think the anxiety is priced in. It's trading at 22 times earnings. Pre-AI, it was trading at 31. So that's a company where I think investors are looking at the situation saying, we're not sure where the ROI is going to come from, which I think is great. I think there's some rationality built into that stock right now. But Google, Amazon, they're getting very expensive at this point, especially Google. And it does seem that investors are looking for any reason whatsoever to just kind of shirk away the possibility that this whole AI thing won't work out.

38:56And so that's really what we have to keep an eye on. I don't think that we're in totally crazy town, but I do think that it's, as you say, it's quite frothy. And that's something that we have to acknowledge.

39:07Scott Galloway:I don't know. I think we're firmly in crazy town. I know friends of yours who are talented kids raising money for their companies at billion-dollar valuations. And I get it. I was there. In 1997 or 1998, I raised money for a red envelope at$120 million valuation on revenues. I forget what it was. And at the time, I was happy to defend it and talk about why we were going to be worth a billion dollars. And Credit Suisse vs. Boston was talking about taking us public. you don't feel you're in crazy town when you're in the asylum and benefiting from it. I mean, so, but yeah, on any reasonable metric, any reasonable metrics, this does, you know, whatever you want to call it.

39:56Scott Galloway:This to me feels like, yeah, we've officially moved in and taken up residence in crazy town. It almost changes week to week. I think you're probably right. It's like this week we're in crazy town. Last week, it was a very different market. And this is part of the problem. The volatile is so insane week to week. The fact that Amazon reports its earnings and then it goes up 15 % in a single day. I mean, it's almost hard to gauge where actually we are at this point in time. But I think I will agree with you that in this week, on August 6th, Thursday, August 6th of 2026, which is when we're recording this, we are in crazy town.

40:35But I could see it swinging back tomorrow or the next week. It's very, very hard to gauge at this point. We'll be right back. And for even more markets content, sign up for our newsletter at profgmarkets.com.

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44:09We're back with Profit Markets. Last week marked SpaceX's first post-IPO lockup expiration, giving employees and early investors their first opportunity to sell shares since the company went public. In total, more than 911 million insider shares became eligible to trade, more than doubling the free float. The stock was relatively stable following the expiration. That came just days after SpaceX reported its first earnings as a public company. On the surface, the results looked impressive. Revenue surged 92 % year over year, but investors weren't satisfied and the stock fell 8 % after the report.

44:47At the time of this recording, the stock is trading around$109. It's down 52 % from its all-time high. So I'm going to take my victory lap right now. This was my prediction before the IPO. As soon as it hits the market, SpaceX stock will immediately explode 25%. However, my other prediction is that within six months, probably sooner, SpaceX stock will be cut in half. Why? Because the valuation makes no sense whatsoever. It has indeed been cut in half, 52 % down since its high of$225 per share. We'll get into the earnings as well. But maybe, Scott, your initial reactions to this stock price movement.

45:34Scott Galloway:It's a good business. The rocket business, Starlink, or the product on top of the rocket business, Starlink revenue was up 66 % to$4.3 billion. That's double what Palantir's quarterly revenue is. Subscriber growth doubled to$12 million. dollars. But the problem is great businesses that are overvalued with this thick layer of this enormous bet that may or may not be paying off. AI CapEx was up 550 % to 18 billion and one quarter. So SpaceX is now spending more on CapEx and Oracle and more than Exxon for a unit that is unproven right now, diluting a genuinely strong satellite business. And then there's just the The bottom line is the valuation is just still insane.

46:21If you didn't know this company had been cut in half, you wouldn't think it's undervalued or you would think it's overvalued.

46:28Scott Galloway:It's still ridiculous right now. In addition, I think the most negative forward-looking indicator is in addition to just the valuation is kind of a point around the fiduciary here. And that is you have the nominal CEO of three public companies and he's tweeting 20 times a day. So attention is a key resource here for a CEO running three companies and he's not allocating it correctly. So I thought my prediction was there'd be a tiny bit of a short squeeze because I thought the revenues, typically when you take a company public, when I've been on the board of companies, we go public. We know what the first quarter earnings are going to be, and we don't take the company public unless we know the first quarter earnings report is going to be really strong.

47:16Scott Galloway:This was a strong earnings report, but a strong earnings report for a company that's trading at a regular value rate. The market is looking for any reason to take this company down. And also, I think existing shareholders that have been in this thing for any distance of time are looking for any opportunity to sell because they've probably, to Elon Musk's credit, registered enormous gains. And they're like, OK, even though the stock's been cut in half, I might be up 10 or 20x. Boy, am I going to hate it if this company is at 12 bucks in six months, which it could be. If this stock was trading at$20 and you didn't know it had been at one point at$210 and you did any sort of reasonable analysis looking at the sectors it competes in, what the most successful companies in that sector trade at, it wouldn't be cheap at$20 a share.

48:11Scott Galloway:So any opportunity to sell, I would argue people are doing the math here and going, yeah. Yeah. And what you will see, I think the only thing on the demand side will people who anchored off that 230 and go, oh, it's a good entry point. Where a stock traded below, and this is one of my flaws as an investor, I always think of, okay, if, you know, I'm thinking about buying shares in Snap. I think Snap is dramatically overvalued, and I think at some point, Evan has to wake up from this decade-long hallucination where he's wasted$3.5 billion to try and prove he's Steve Jobs. He's not. He's Mark Zuckerberg, and it's a great core business.

48:54Scott Galloway:It's the easiest 5 or 10x I see in the marketplace if we can just convince this one guy to either spin the hardware unit or reduce the amount of money he's taking into the street and burning it.

49:08Scott Galloway:But you have to look at, I think, at underlying fundamentals and valuations and say, what is the asymmetric risk to the upside or the asymmetric risk to the downside? I don't see, and again, this is a mean stock, I don't see any reasonable justification for how this company, again, goes back to being worth 120 times revenues. I just don't see how you thoughtfully find demand from different shareholders to do that unless Elon again pulls a rabbit out of the hat and starts talking about, I don't know, space, you know, space data centers in space and why it works. He tried in that earnings. He tried to pull many rabbits out of the hat.

49:51And I think what we learned is that people are now calling bullshit on him. Let me just tell you some of the things he said. He said that they're going to build data centers on the moon. So it's not just orbital data centers. Now it's lunar data centers. He said that those moon-based data centers are going to be serviced by humanoid robots. and he also said that their factories will allow humanity to quote scale to 1000 times the economy of earth in terms of intelligence launched to space but probably maybe even a million times so he's trying to do what you're saying and it is the only way that they can get that stock back up to where it was in the few days after it went public is they basically just need to pull the wool over people's eyes and wave a magic wand and start talking about data centers and space and interstellar travel, all of the bullshit that we've gotten so used to coming out of him.

50:43But I think people are now getting sick of it because it's not compelling anymore. And as you say, he's spending half his time on Twitter. He's spending half his time tweeting about wokeness or about things happening in Minnesota or God knows what he's talking about. He's the CEO of two companies at the same time, Tesla and SpaceX. I guess he's also the CEO of XAI now. I guess he's also the CEO of X, formerly known as Twitter, because remember, Linda Iaccarino left. They haven't even found a replacement. And that's in addition to all of the bullshit that he was getting up to in Washington, which he now admits was a mistake.

51:22He says he got carried away with the politics. I mean, this guy's brain has genuinely rotted. He's totally lost his marbles. And we see it in the interviews. And I think we're finally reaching a point where investors are at least beginning to recognize that. They're hearing the things that come out of his mouth, and they don't sound like some crazy genius who understands things about the future. They sound just like a crazy person who's lost his grip on reality and honestly lost his grip on his sense of self. I think we're seeing that in the prices. We're seeing it in Tesla, too. It's down 30 % year to date.

51:57That's the Elon premium dying. I think that's what's happening.

52:01Scott Galloway:I wish I'd acted on this like anyone. And I still think a basket of shorts around AI and AI adjacent companies is probably a decent way to hedge right now. But the Musk meme, every meme stock eventually just becomes a stock. and it's like my son gave me this stat that i thought was so interesting he said that no one is ever able to stay um airborne for longer than a second even michael jordan it's like it's weird they can get to 0.95 0.97 maybe in 0.98 but it seems like the one second barrier ironically everyone eventually gravity wins gravity is undefeated and i still believe in the stock market over the medium and the long term, gravity is undefeated.

52:47Scott Galloway:And eventually companies trade at the high or the low end of their sector and the high or the low end of market valuations. That will eventually happen to this company. It's happening now. Tesla is an automobile company that wraps steel around an axle. It's a great company. It should trade at the top of the automobile range, which means its stock has another 70 or 80 % to fall. SpaceX is an amazing business. It's a launch business. It has a near monopoly. Great. It'll grow, you know, but it's growing 24%, or was growing 24%. Assume it doubles. There's no way to justify the valuation. It's basically Comcast and space with incredible launch capabilities, but gravity always wins.

53:33Well, they're not even a space company anymore. They don't even want to be a space company. They're an AI company, even if the space business is doing well, even if the connectivity business, which, by the way, is crushing and you and I were bullish on ages ago on Starlink, which we were excited about. I mean, I don't know if you remember when we started hearing about SpaceX going public, we were excited about this company. And it was a moment, it was a refreshing moment where we were like, we actually like this thing. This thing actually makes sense. And then they had to just stuff all the bullshit around it, specifically the AI.

54:03And now we're seeing that in the earnings, which I also want to get into.

54:07Scott Galloway:He's using the excitement and his ability to engineer what is one of the most overvalued IPOs in history at this size, if not the most overvalued given its size, to fund his vision for AI. And he might be right. The guy's a visionary. But even if he is right, you're buying essentially an AI company at a multiple to the AI companies that seem to be more successful than his company right now. I mean, if you look at what are the multiples on revenues of open AI and Anthropic based on their most recent rounds of valuation. What are they, somewhere between 10 and 20 times revenues? But he's saying, invest in my Comcast and space company that's really a bad AI, that's really a laggard in the AI business.

54:50Scott Galloway:That's where I'm spending all the money. That's what this valuation is dependent upon. And it's a horrible investment compared to the other players in the AI space with respect to valuation. So at some point, almost every stock is a good buy, regardless of the business it's in. And at some point, every stock is a bad buy, regardless of how strong the underlying business is at the valuation. This is a business, this is a failed, in my view, I won't say failed, a mediocre or meddling AI company, cosplaying, a space exploration, all these big words, rocket, meme stock. And I think people are, like you said, are calling bullshit.

55:37Scott Galloway:And most of the shareholders are thinking, I'm going to clock my 10x gain versus a 3x gain in 12 months and are getting out and selling. I can't even imagine the amount of selling pressure that's going to happen here as these unlock. And also, all of the additional incremental lockups he put in place indicate that he doesn't believe the market can support, that the current price can support the natural selling pressure if shareholders were able to sell these shares and make their own decisions. So he's made it easy to buy, but he's put in place friction around selling. What does that tell you about his confidence in the current valuation?

56:22I just want to go back to some of the numbers you brought up in the earnings, because I think at first this seemed like a pretty good quarter, like their revenue grew 92%, which was better than expected. Their operating losses narrowed to around$143 million in losses versus last quarter where it was like$2 billion. So, you know, it looked good at first, but the key number that people forgot about or didn't acknowledge and then suddenly acknowledged when they saw it was the CapEx, which was$10 billion last quarter. And this quarter, it was$18.5 billion. And almost all of that was AI. So essentially what we're seeing here is for every dollar that SpaceX is generating in revenue, they're spending$2.35 on capital expenditures.

57:18And so if they were to continue spending money at the pace that we're seeing in terms of their capital expenditures, they will burn through the entire$86 billion that they raised from their IPO in about 16 months. So they're running out of money very, very quickly here. And so whenever we look at the operating expenditures for a hyperscaler, and I think that's what we've got to start calling SpaceX at this point, anyone who's building a data center and whose story about their AI growth comes from building data centers and selling compute, operating income or operating losses don't matter. All you need to look at is the capital expenditures, because that is where all of the money is going.

57:59They're buying chips. They're buying big, long-term capital-intensive assets in order to build out these businesses. And when you look at that number, suddenly you realize, hold on, this thing doesn't work. Or at least it doesn't work right now. And it's kind of a pipe dream as to whether it'll work out in the future. By the way, the fact that they're going to burn through all of their IPO proceeds in less than a year and a half, it tells you something about what they're going to have to do next, which is they're going to have to raise a shit ton more equity and more debt issuance too. They're going to have to sell tons more debt, which tells you why the banks are being still so sycophantic about this company, because the banks know there's still huge deal-making fees that are in this company.

58:45They want to be first up to sell SpaceX's next follow-on offering or SpaceX's next debt round. I mean, they're going to have to raise so much more money. And I think that's why you saw some of these big banks actually raising their price targets, despite a quarter that was, quite frankly, pretty miserable. from a CapEx perspective.

59:05Scott Galloway:It was like how surprised I was when I found out I was colorblind. Literally, Ed, the news came out of the purple.

59:15Scott Galloway:Just thought we needed a little dad humor there. Just thought we needed to break up your, woe is me, no one appreciates my thoughtful, bearish remarks, a little dad humor there. Ed, you got SpaceX right. You're going to even be proved more right. and like I said, I was thinking about education or I've been thinking a lot about higher ed recently and Bill Maher was saying that the problem with higher ed is you guys are promoting an orthodoxy and I'm like, that's not the problem. The problem is the homogenization of higher ed and that is four out of five faculty members have said they don't think a conservative would fit into their faculty and I've seen this firsthand.

59:58Scott Galloway:And my department at NYU is just like, it's so woke, it's frightening. And I'm like, this does the kids a disservice because even if they decide to adopt progressive values, and there's evidence showing that as people learn more about history and science, they do tend to skew more progressive as they go more higher education. We're doing them a disservice if, one, we don't give them the ability to have a thoughtful conversation around opposing viewpoints, and we start teaching them that having a different political viewpoint makes other people morally deficient. And the same thing's happening here in the markets.

1:00:31Scott Galloway:And that is people are trying to say that if you're not a bull on these AI and not pumping the portfolio of the VCs who are constantly on CNBC and the entire ecosystem that benefits from an inflated market and more trading and more volatility and up and away, that somehow you're morally deficient. No, we need to have a thoughtful conversation on both sides such that people learn, are smarter, and quite frankly, protect themselves a little bit. And I wish I'd had more thoughtful conversations with people around, Scott, you are a talented, hardworking person. It makes no sense that you're raising this kind of money for these companies which have little revenue.

1:01:12You should sell more and you should diversify

1:01:16Scott Galloway:and realize a lot of this success right now is not your fault and that things can change fast. And I mean, I was thinking about, I got invited, let's bring this back to me, Ed. In 99, I got invited to Davos. I was like a rock star. I was invited to speak to the 40 largest, the CEOs of the 40 largest energy companies in the world. I was speaking to the CEOs of Saudi Aramco and Exxon and Shell, and they were asking me how to run a business. And I was all of 33. By 2001, the third year, I was invited back. I couldn't get a meeting because people literally thought I was a criminal. Oh, you're one of those fraudsters from Silicon Valley that raised money and lost it all.

1:01:57Scott Galloway:And the reality is, it's just helpful to have a thoughtful conversation on both sides, both for the entrepreneur, for investors, for everyone, just to have a rational conversation. You're not a bad person if you're a bull talking up your own stocks, fine. You're not a bad person if you think things have gotten way too frothy. But the thing I really didn't appreciate when I was your age and advice to entrepreneurs listening is market dynamics will always trump individual performance. And the mistake I made was thinking that if I just threw myself at something, be highly concentrated, it will work out.

1:02:34Scott Galloway:No, sometimes your success isn't your fault and neither is your failure. And in 91, I wasn't as smart as I thought. And by 2001, I wasn't as dumb as everyone else thought I was. But I think these conversations that are two-sided, if you will, or both sides get accurate representation are really important. And having said that, folks, there's only one side here. This shit's coming down. I'm sorry. This shit is coming down. Enjoy it while it lasts. And if you have shares in any of these companies and you're sitting on a gain, I would do everything I could to lock in some of those gains and put it in really boring shit right now that is at least an arm's distance away from the AI trade.

1:03:20Scott Galloway:But anyways, I'm doing what you're, I'm contradicting myself. Well, just to your point, though, I feel like Leopold Ashenbrenner and what happened with situational awareness is the perfect example. And this is what Michael Green was telling us when he was on the show last week, where it's like, you shouldn't be giving$20 billion to a 24-year-old. That's not going to lead to a great place. And as you often said, if you tell a 24-year-old enough times that they are Jesus, they are inclined to believe you. And I wonder what it's done to his life that his fund collapsed in the matter of a week, because he did convince himself.

1:03:58He bought the hype that a lot of the investors were trying to tell him, and he went Forex leverage on the hottest stocks in the market. And then what do you know? The whole thing comes crashing down. I think it's a perfect example of the thing that you're describing, where the pumpery actually turns out to be a negative for a lot of people. It actually does a lot of both financial damage and then also psychological damage long term. because, I mean, yeah, people now say, oh, Leopold Ashenbrenner is a fraud. He's the Sandbankman Freed. He's Elizabeth Holmes. And it's like he was just a kid who was managing money and people kept giving him money.

1:04:38And so he kept doing what he wanted to do. Leopold didn't do anything wrong.

1:04:42Scott Galloway:He might've been reckless. He might've been out over his skis. But if a 24-year-old can raise$20 billion hoping that the AI trade keeps going and he puts on massive leverage, I know the idiots here are the people who decided to invest in a fund that was 5x based on a 24-year-old supposedly insight into the. I've met geniuses. They put their pants on one leg at the same time and they're subject to the same market volatility as the rest of us. I don't care how fucking smart you are. If the S &P is off 40 % over the next month, I don't care how many Rhodes scholars, you know, whatever, whatever prizes you've earned.

1:05:22Scott Galloway:you're going to lose your shareholders, a lot of your shareholders' money. And let me tell you exactly how it feels. In 99, in late 99, about 24 of us were invited by a private jet manufacturer to an airfield to look at jets because they said they were willing to take stock in private companies in exchange for planes. And we all went to this massive airfield and we looked at different jets and all of us in our kind of 30s were going like, oh, I want that one, I want that one. And I did have enough quote-unquote awareness at that point to go, this shit won't last. I was self-aware enough to go that a bunch of 30-year-old douchebags from Silicon Valley pointing at jets they want, that that wasn't gonna last.

1:06:08Scott Galloway:By within 12 months, my accountant told me I had negative net worth and I should consider selling my house.

1:06:18Scott Galloway:and that moment, when I had that conversation, I remember exactly where I was. I was in the offices of Profit. I remember thinking, I need to go home and have a conversation with my wife around the possibility of having to sell our house. And 12 months before that, I was telling her about the plane we were gonna buy. And I remember thinking, so let me tell you, let me tell you, I mean, new wife, building a future, She's working her ass off. She's working her ass off. You're starting to think about kids. Oh, we're, honey, we're buying a Challenger 300. Oh, wait, we may need to sell our house. So let me tell you, it sucks.

1:07:03Scott Galloway:I think his situation is a little bit different because my guess is he's made so much money that he's not going to have to sell his house, that he's been able to clock enough fees. Unless he did something stupid like leveraged his own portfolio, it's a lot of reputational risk and damage, but he'll be fine because he's clearly a very intelligent person. And in our society, one of the wonderful things about America is we love to forgive. He'll have a scarlet letter on his chest for a while, but he'll be able to raise money. If Adam Neumann can raise hundreds of millions of dollars to go buy apartments and call them flow and pretend it's something new or different than just buying apartments, which is a good business, that's one of the wonderful things about America is we love to give people a second chance.

1:07:46Scott Galloway:And I hope he's not in the same financial position I was. But there's no doubt about it. It absolutely fucks with your – especially I think – I'm trying to think as a young man. In some ways, it's easier for a young man because you have more time to recover. And I was a bit sociopathic. And that is, I just wasn't that cognizant. I didn't care about risk. I almost got kicked out of UCLA three times and it didn't bother me. If I'd been kicked out, it would have been really bad. But I just kind of didn't care. It's like from zero to 30, I did not have enough anxiety. I was sleepwalking through life.

1:08:23Scott Galloway:I wasn't worried about the ramifications of my actions or risk. I was just like, oh, I'm fine. I'm telling you. Everything will be fine. It'll work out. From 30 to 40, I had just the right amount of anxiety to be aware, take some precautions, start to think about diversifying. From 40 on, I have way too much fucking anxiety. All I can think about, my son is super responsible. He doesn't drink and drive. He's super responsible. But I still find, I still create scenarios about the dangerous mean streets of Aspen for an 18-year-old. and then I worry about ridiculous scenarios that probably won't come to bear in our society and I worry that we're going to have a civil war between the red and the blue.

1:09:05Scott Galloway:I mean, my mind just goes fucking crazy places now. I don't know where I'm going with this other than a need for antidepressants. Ed, wrap us up here. It's helpful. It's helpful to know all of this. Yeah, let's get into our week ahead. I think we've uncovered all we need to uncover in the financial market. So we'll see inflation data from the consumer price and producer price indices for July. We'll also see earnings from Rocket Lab, AST Space Mobile, CoreWeave, and Super Microcomputer, all of the very hot AI or space-adjacent stocks. Scott, any predictions? I think the downdraft in SpaceX is basically forcing everyone to come to from this, I think it's Narcan or I don't know what the term is, whatever they do to bring you back to consciousness.

1:10:00Scott Galloway:I think that SpaceX is, you know, having over the last 30 days is forcing a lot of people. This isn't the canary in the coal mine. This is the blue whale in the coal mine screaming. And there's just no ignoring what is happening to SpaceX and forcing people to get out pencils, not fairy dust and magic wands, and actually look at these companies through a valuation lens and something regarding what would be a reasonable valuation for these. long-winded way of saying i just i think spacex's march down is just beginning the declining tide is going to suppress all boats here i have a very similar prediction first i'm going to take a quick victory lap because last week my prediction was that we had hit the bottom for meta uh it immediately rebounded about 10 so we'll see if it holds but i actually i think that meta is one of the only big tech stocks right now that is actually still relatively undervalued because I think so much fear and anxiety is priced into that with good reason.

1:11:13But I think that we hit the bottom. Seems like we did. My prediction for this week, same as you, I think there is so much selling pressure coming down the pipeline for SpaceX. I think this thing falls another 20 to 30 percent by the end of the year.

1:11:28This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Corti. Our research team is Dan Jelan, Kristen O'Donoghue, and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from Prof G Media. If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on the markets.

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