Investors Are Turning Against Data Centers (Here's Why)

23:40But I do think that that's going to be the dynamic to watch. And you also brought up the durability of forward earnings, the credibility of forward earnings. That, to me, is a really big question. I feel like we take forward earnings as a given. We just assume that it always happens and that we should trust it. But I think with numbers this large, and when you do have Oracle going to its largest developer and saying like, hey, if something happens, just count us out, please. And what actually is the definition of an extraordinary exogenous event? Yeah, it could be like an earthquake, could be a pandemic, or as you say, it could be related to their credit rating.

24:22It could be something that actually is not that extraordinary given the circumstances that we're seeing financially with the company. When you have all of that, that really calls into the question the credibility of the earnings that we're supposed to see in the future. And so I think that there's a lot of uncertainty with this right now, a lot of risk, but it might be priced in. Investors might, that might be why the multiples come down so significantly. But it's definitely a toss up and it's really interesting. We'll be right back after the break. And if you're enjoying the show so far, send it to a friend and please follow us on YouTube, Spotify, or wherever you get your podcasts.

25:27Scott Galloway:stock market. It didn't matter whether you were a factory worker in Detroit or a farmer in Omaha, anyone can own a piece of the great American companies. But now that's changed. Today, our most innovative companies are staying private rather than going public. The result is that everyday Americans are excluded from investing and getting left further behind while a select few reap all the benefits. Until now. Introducing VCX, the public ticker for private tech, now available wherever you buy stocks. VCX by Fundrise gives everyone the opportunity to invest in the next generation of innovation, including the companies leading the AI revolution, space exploration, defense tech, and more.

26:02Scott Galloway:Visit GetVCX.com for more info. That's GetVCX.com. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the fund's prospectus at GetVCX.com. This is a paid sponsorship.

26:22When you need to build up your team to handle the growing chaos at work, Use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. Support for the show comes from Alphaspace by Yahoo Finance. Instead of bouncing between countless tools and tabs to manage your portfolio, Alphaspace by Yahoo Finance brings your entire investment workflow into one easy-to-use platform.

27:06Alphaspace by Yahoo Finance utilizes a Yahoo Scout-powered assistant to build a personalized view around exactly what you want to analyze, then syncs it with your portfolio for real-time tracking. You can compare multiple tickers, explore everything from candlestick and line charts to fundamental data, and layer in indicators like moving averages, Bollinger Bands, RSI, MACD, and more. My co-host Scott Galloway is a fan of the platform. What did you think of it, Scott?

27:34Scott Galloway:I have been using Yahoo Finance as my homepage for finance, or for the web, actually, for 30 years. And as someone who has advised hedge funds, run my own money, prides themselves on being good at investing, and it takes up a big part of my life, I think they do a fantastic job. You can explore Alphaspace with 50 % off your first year of Yahoo Finance Gold at yahoofinance.com slash profg. That's yahoofinance.com slash profg. Bill, there's$239.70 for the first year, then$479.40 thereafter. Offer valid for new subscribers in the US. Offer ends October 31st, 2026.

28:26We're back with ProfG Markets. There has always been one company that seemed destined to win the streaming wars, and that company is Netflix. But this year, that certainty has faded. Netflix stock is down more than 40 % over the past year. And the company just received two analyst downgrades within a week. Both analysts said growing competition from YouTube and declining engagement were weighing on the stock. Meanwhile, Disney Plus and Hulu are raising their prices for the full time in four years. The biggest increase will be to the ad-free tiers, which will cost 13 % more than they did last year.

29:00It's the latest example of what people are calling streamflation. as streaming services continue to raise prices while consumers have more options than ever. So Scott, Netflix has gotten crushed down more than 40 % in the past year, down more than 20 % year to date. It just received two downgrades on Wall Street in the span of a week. Wells Fargo cut its price target to 57. It's at 71 right now. HSBC cut it to 76. So actually, that's a hold. but they still cut. This has been a disastrous 2026 for Netflix. And of course, this is happening while Paramount has just settled and essentially has gotten the green light to go ahead and acquire Warner Brothers Discovery, which Netflix wanted at one point.

29:52And they seem to be in that auction. Now they're out for sure. What do you make of Netflix getting punished?

29:58Scott Galloway:I got this wrong when I saw Ted Sarandos and the head of, oh gosh, I'm blanking on her last name, Bella Love, a super impressive woman who oversees the$17 billion content budget. And I said to them, you dodged a bullet here. You've now got$120 billion to go acquire Disney or massively increase your content creation calendar. And the stock is just plummeted, which caught me off guard. I think that essentially this isn't about Netflix's underperformance. It's about that this indicates what I believe is just a structural shift in the way we consume content and the subsequent shareholder value that's able to be captured.

30:47Scott Galloway:Specifically, their problems can be summarized in two words. The first is you and the second is Tube. YouTube is now the most important media company in the world. Doesn't make any content. it commands 14 % of US TV usage. I mean, think about what YouTube's done. They've built the world's largest studio, but managed to outsource the payroll to 20 million creators. I mean, this business model is just, it's very hard to compete with. And you want to talk about a decline in fortunes. Netflix has lost more market capitalization from its high than Paramount is paying for all of Warner Brothers Discovery twice over.

31:29Scott Galloway:The market, while we're all obsessed with the Ellisons and Warner Brothers Discovery and Rob Bonta announcing he's running for governor with this Pyrrhic stupid regulatory theater of trying to like block them or all that distraction. The market just erased two Hollywood studios from Netflix's market capitalization. And ours are up 2%, but content is up, spend is up 10%. So that's a negative arbitrage. when you spend 10 % more to get 2 % more attention, your attention arbitrage is negative, right? And then what you have is 58, with Gen Z, 58 % spend more time on social video than streaming. So the competitor here isn't Disney Plus.

32:13Scott Galloway:It's a 19-year-old with a ring light. And streamflation, you mentioned that word, it's kind of like bundle recidivism. We cut the cord to avoid, I for some reason I ended up paying three hundred dollars for my cable bill in New York but we've we've rebuilt the bundle one app at a time with worse user interface and force four price hikes in a year and it seems to have hit hit a wall I've always believed these guys have pricing power but what it may be is that it's like a restaurant raising prices as the as the room empties. And I still think Netflix has probably the strongest management team in what I'd call traditional media, but there is a structural shift that they can't, I don't care if they come up with the next K-pop demon hunters or whatever the, uh, whatever the, you know, the next hit is.

33:08Scott Galloway:And the way we consume media is moving towards a model of shorter form content with a host, with millions of creators who all have their own trailer, their own production values. It's just such an unbelievable model to figure out a way to get other people to pay for your content. And you just put a thick layer of innovation on top of it. And again, my idea, and I pitched it to Ted Sarandos three years ago, was something called Net Vibes. and I said, take the 98 % of your content that gets 2 % of the watch time, you know, it's a hit-driven business, and make it open source and let creators slice and dice, add different music, create different storylines, and then repost it.

33:59Scott Galloway:But they need to do something that feels more YouTube and TikTok because I think going to the hits of trying to come up with the next Game of Thrones, I think that's going to be a tough one. I have long felt that traditional streaming is just a terrible investment for a lot of the reasons that you describe. And you know this about me, I've said on the podcast, I mean, I've been bullish on YouTube for years now because it has this very different identity. its genetics are very different from Netflix in that it benefits from network effects it is in a lot of ways a user forward social media platform where they as you say that they're not paying to create all of the original content the users are doing all of the original content for free and you all YouTube has to do is sit there make sure that their algorithm works and by the way their algorithm is excellent and I think that is a big reason for why a lot of people are watching on YouTube.

34:56And we're users or creators on the platform. It works for us. I mean, we have invested significantly in YouTube and it pays off for us. We're increasing our downloads. We're increasing our views. We're still able to monetize that. And so the YouTube model works for us. And yeah, we pay a pretty significant cut on the AdSense revenue, but it still works for us because we're monetizing in video ads at the same time. So to me, I think YouTube has just crushed it on every level. And the way I think about streaming, I don't see any moats in traditional streaming aside from having better, more original content.

35:39And to me, that is an almost impossible moat to operationalize. So I've long felt we should only be investing in these companies at valuations that reflect that lack of moat. I think that we should be demanding significantly lower multiples. And I'm going to take a semi-victory lap here because last year, I officially realized like Netflix was overvalued. And I don't know if you remember this, but there was that article that came out that Netflix was internally talking about how they wanted a trillion dollar valuation. And I don't know if you remember what happened after that, but the stock ripped because suddenly investors were like, oh my God, look how ambitious the management at Netflix is.

36:22They want to go for a trillion. What does that mean? What does that say? I was looking at the stock at$120 per share in July of 2025. Here is what I said about it. Netflix is now valued at roughly the same multiple as NVIDIA, and a higher multiple than Apple and Google and Meta. But Netflix, unlike those companies, isn't diversified. It doesn't have a hardware business or an ad empire or a cloud platform. It has one product, streaming. And in that world, it's even being outcompeted where it matters most, time spent. In the past year, YouTube has increased its total share of US streaming views by roughly three percentage points.

37:07Meanwhile, Netflix's share actually declined slightly. And now we're trading at $70 a share. So it's come down basically 40 % since we put that episode out. I think the question now is like, has it been punished enough? I mean, we're looking at 22 times trailing earnings. There are other banks that are actually overweight. Netflix, Evercore, their price target is 110. BMO's price target is 135. The average on Wall Street now is 94. So that would imply more than 30 % upside from here. So, you know, maybe now's the time. My personal view is, I think that it still has room to come down. I just, I'm not excited by this business.

37:59And I just think it's such a tough business to be in. The churn rates, the fact that you have to spend all of this money on original content, the fact that they're not benefiting from the network effects that YouTube clearly is. I just don't see them in a structurally sound position to grow in the way that Wall Street wants them to.

38:17Scott Galloway:So what I sense in your comments is what I suffer from. And one of my biggest flaws as an investor is no matter how cheap something gets, I think it's going to get cheaper. I look at it. Stocks get cheap because they're facing structural or cyclical headwinds. And you think, wow, it's going to get cheaper. I didn't want to buy a house in Delray Beach because I'm like, oh, a recession is coming and my partner forced me to buy it and it's tripled. You know, it's just, it is very hard to pick the bottom. The reason why I'm actually looking at Netflix stock is that you always got to look at valuation.

38:50Scott Galloway:You basically made this, made the case of like, look, it's a great business and it's overvalued. It's trading like a growth software company and it's not, and it's more vulnerable than the valuation would imply. And you were right. The stock's almost been cut in half since then. The multiple has compressed from 12 to six times sales. And it's essentially one of the best media companies in the world, or arguably the best media company in the world, if you think of media companies actually creating content. And it's trading like a cable company. and in more broadly i think of netflix as the best run company that is essentially the operating system for entertainment and that is it is the home screen for so many tvs now that they just have so much influence when i when i heard they were getting the podcasting business i thought Okay, how's that going to impact us?

39:45Scott Galloway:Because effectively, any podcast they put on their home screen becomes one of the 10 biggest podcast companies in the world. And similar to Apple or Instagram's become an operating system, they are kind of the starting point or the homepage for entertainment. They have an incredible management team and an incredible content machine. They're going to have to do something. They're going to have to come up with some sort of product innovation around the clippable economy or clip economy, what you call it. Their ad sales business has been stronger than I think I'd anticipated and is now, I think, responsible for a large portion of their signups at a lower cost.

40:28Scott Galloway:Yeah, that was a good move. I just don't think you want to bet against this management team and those 350 million households that start their relaxation time on their home screen. I actually am quite bullish, I think, on Netflix right now. Okay. I like it. We disagree, but I see your point, and I think it's fair. You think it's got further to go down? I'm not super confident, but what I know is that I don't want to buy it. There you go. I just don't like the long-term prospects of the company. I could see, but, you know, I don't think that it's got much more. I don't think it's going to increase significantly this year.

41:06I'll say that. Maybe we can check in at the end of the year. But the more interesting conversation is,

41:10Scott Galloway:can you link your bare sentiments on Netflix to the fact that your parents don't love you?

41:19I've been waiting for several minutes for an opening there. There are all these internal biases that I need to figure out before I start assigning Christoggers. Oh, trust me, boss.

41:28Scott Galloway:You're going to need a bigger boat. When I try to suss out all the dysfunction in my life from the bad decisions I make, that is a long walk through a crowded forest. Maybe I need to go to therapy before I start talking about stocks again. Maybe that's what... I went out to dinner last night. I'm in Aspen, and I'm walking home, and there's a bear. And I honestly had to ask myself, have I finally lost it? Am I hallucinating? is this like is this that moment where they take away my driver's license and that's even scarier than thinking it's a real bear that's a terrifying thought that's what I thought I thought okay is that really a bear or am I finally just fucking lost it that's amazing and it was a real bear good that's great news there's bears everywhere over this town right now I'm so glad it wasn't an illusion just the final comments here um we're about to see a different world in media because paramount is going to buy warner brothers discovery here um because we saw this paramount settlement uh essentially david ellison won i'm just yeah define one talk about the dog catching the car anyways go ahead that might mean something for netflix i think you made an interesting point which is your point to netflix was like okay now you have like$100 billion to spend on something else.

42:52I think that one of the reasons they've been punished so much is because investors hated what seemed like a lack of ideas from Netflix and the fact that they lost in a battle that they wanted to pursue. I think investors said, why are you doing that? We thought that you were so confident that you're going to become a trillion dollar company, and now you want to go spend$100 billion trying to buy Warner Brothers discovery what does that say about your vision for the future probably nothing good um but these things are all related paramount they're going to merge so how does that change things for you if

43:30Scott Galloway:i don't think netflix's competition is a warner brothers paramount i think it's youtube and if first off rob bonta trying to block this thing is ridiculous all of a sudden he's decided he's lena khan and he should be evaluating and my favor was the settlement have you did we talk about this they have to put together an editorial board we you and i did not talk about it but talk about it because it's it's fucking ridiculous well i want to announce that prof g media is putting together an editorial board of leah my great dame who will have more impact and influence on my editorial decisions than this board he said you can't sell your two lots, that's fucking socialism.

44:12Scott Galloway:Owners get to decide and companies get to decide whether they buy and sell. There was no reason to block this merger. If he had blocked this merger, Paramount would become a distressed asset, probably sold for parts. I mean, CBS News has no future as an independent company. It's just producing quality journalism, which CBS mostly does, is a terrible value proposition. And it doesn't matter how good Landman is, this is now a business to scale. Warner Brothers Discovery is a great company with incredible IP that would have been fine, but it didn't have much of a future. They need, these guys need to bulk up against an already bulky Netflix and a bulkiest of the bulky YouTube.

44:53Scott Galloway:So that was ridiculous, regulatory theater trying to get in the way of this merger and asking them, my favorite was, we want you to make more movies, guarantee to make more movies. Well, okay, that's like, if JP Morgan and Goldman merge, do you force them to have more ATMs? Maybe they shouldn't make more movies. And also, they're allowed to fire people. That's part of capitalism. So, I think that was total BS. I totally agree. You know, I would have been okay with it if he'd actually achieved a decent outcome. But the fact that he goes out there, he says, this can't happen, and then gets basically nothing and then parades around as if he won something.

45:31It's like, oh, oh, great, we're going to get editorial oversight. And who's going to be in charge of the editorial oversight? David Ellison and Redbird Capital, the two entities that already control the company. So no, we're not getting any editorial insight. That's not a brag. You didn't win anything for free speech or democracy in any dimension. And then, yeah, then they just bring up this kind of BS stuff about, oh, now we're going to make sure that you spend more in California, as if that's something that ever mattered to Paramount in the first place. Like, none of that mattered. It was just such a dismal failure on the part of Bonter and the AGs trying to act big, trying to act tough, losing and then pretending that they still won at the end of it.

46:15So I totally agree with you.

46:16Scott Galloway:I think Governor Newsom played a role here. I would imagine the governor stepped in and said, boss, California just can't be an AI story. We need our media ecosystem as healthy as possible. and Allison started making noises about moving to Nashville, which I thought was probably also bullshit. But no billionaire son is going to hang in Nashville. Not when he can live large without Allison at Shea Margot or go to San Vicente Bungalows in LA. Anyways, but this was, I'm glad the merger went through. You're glad it went through. There's no reason. I believe in capitalism. These companies need to bulk up to compete against YouTube and Meta.

46:51Scott Galloway:They're not, they don't work as independent companies. so I'm I don't like media consolidation but I'm also a realist and a capitalist they get to buy this this combined company did not trigger monopoly law they get to buy shit and the faster the only way you get people to hire is you let them fire if they want so and this was pure pure theater I I'm you know I hope that I hope that they can compete against YouTube and Netflix. We want a robust third player. And so I don't, I wonder how the, also, I don't know if you saw, but my other sister wife, podcast co-host, Kara Swisher, is all over the news because she's like, I'm out of here.

47:32Scott Galloway:She's like, I'm leaving. I hate the elephants. I feel like she always announces that she's about to leave. When is she going to actually leave? I'm leaving. I'm like, wait, she's back. I'm leaving again. I'm like, she's leaving. I love Kara. She can just leave. Stop talking about it. I'm sure. Yeah. Or she knows that it's a great story. That's probably what's going on. Well, I can't get over how much media coverage it's received. It is a fun story. But I want to see her actually leave. Cara, leave. Let's see you leave. What I've said to her is, the Ellisons might fuck with 60 Minutes because, quite frankly, 60 Minutes doesn't— I mean, journalists who all think they're really precious think that 60 Minutes is some iconic asset.

48:13Scott Galloway:Not really. 60 Minutes could go away. It doesn't really matter. It's a small business. It's$60 million. It doesn't make, I don't think it makes a lot of money. Certainly making less money now with Ross in charge, but yeah. They can't fuck with CNN. CNN does$1.8 billion in revenue and$600 or$800 million in EBITDA. And when dad has$50 billion, is on the hook for$50 billion in debt, you got to leave for Reed and Anderson and Smirconish and Danabat. Do you think that'll happen? Will you lock in that prediction that there will not be a massive shakeup in personnel? Oh, no way. CNN is going to look surprisingly— He did it with CBS and he was down.

48:57You think CBS is less iconic and therefore he won't touch CNN?

49:00Scott Galloway:My guess is he offers Mark Thompson a lot of money to up his contract and says to everybody, call me if you need me, but I'm hands off here. if he starts fucking with CNN I mean the thing is as difficult a business as CNN has been and it has gone down it is still a cash gusher and if they move away from that center left positioning someone else will fill the void and just take those ad dollars. The Ellisons I'm almost entirely convinced like money more than they do GOP politics I don't know. There are much less expensive ways with$50 billion. They spent$120 billion on this thing. With a billion dollars, they could swing three Senate seats in the midterms and have a lot more impact on politics.

49:54Scott Galloway:I think they're capitalists at the end of the day. And I had the kid. I just don't think that he's necessarily a very good one. I agree with you that I don't think this is his grand plan to take over the political conversation and spin things in his direction. But I do think that he thinks that traditional media is bad in its current iteration and is willing to do dramatic things to shake things up. That's different. And I think that that's what we saw at CBS. I think he is going to do something dramatic at CNN. I don't think it's going to be necessarily cynical or pernicious. I'm sure it will be reported that way.

50:24But I think that he'll probably go in there and say, we don't need Anderson Cooper. We don't need these. Anderson might be a bit. Not Anderson. I'm going to take back Anderson. But I would imagine that he would, because he's too iconic. But I would imagine that he does shake things up in the name of not political reasons, but in the name of innovation and a new frontier. And I would bet that it doesn't go down well.

50:47Scott Galloway:There's two things. There's product innovation. If he comes in and says, you know, we need to spend more capital on increasing the subscription model, I don't think he's going to mess with the content. My prediction is he ups Mark Thompson's contract and tries to say, look, you know, I'm going to go make superhero films and go to Oscar parties with hot women. I think the kid is center left. I don't think he's— Yeah, he's donated to the Democrats. He's not— Again, we live in such a politically charged time that we see everything through the lens of politics. Journalists think they're sacred. They want the upside.

51:22Scott Galloway:They want private market economics with government or nonprofit prestige and protection. This is a business. The Ellisons have massively levered up. They overpaid. They cannot—they cannot fuck with Fareed. I mean, that's the bottom line. They've got to hit, in my opinion, they're going to be hands-off because they need that cash flow. Let's make it a bet. Should we say within six months of the close, I would bet, I don't know who, but I would say that there would be a significant shakeup in the CNN talent pool. Should we make that bet? Well, describe significant. A couple of dream team superstars, I would say.

52:04Scott Galloway:Not by their doing. Those people might leave of their own volition, but I don't, okay, I'll make that bet. The Ellisons aren't going to fire any of those people, in my view, no way. Okay, all right. I think they will. All right. Let's lock it in. Six months from the close. I'm leaving. I've had it. Wait, she's here again. I'm leaving again. God. And I'm not saying anything I didn't say two hours ago on Pivot. Talk about a diva. Just leave. Okay, we get it. You're out. You don't like us. Do it. Do it. Do it, Cara. I respect it, but do it. We'll be right back. And for even more markets content, sign up for our newsletter at profgmarkets.com.

53:05job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. Brussels clean up nicely at Sweetgreen. Maple glazed, roasted, and edges perfectly caramelized. Sweetgreen's fall harvest is back on the menu, and the season's most overlooked little green vegetable is dressed to be devoured.

53:43You know what to do. Order on the Sweetgreen app.

53:48Scott Galloway:Push your limits. Train with precision. See the results. At Equinox, that's high-performance loving. Everything you need to lock in and unlock your potential at Equinox. Start today at equinox.com.

54:08We're back with ProfG Markets. Aura, the maker of the popular smart ring, is planning to go public this week at a$15.6 billion valuation. The company is looking to raise$2.2 billion, and the offering will be an important test for the broader IPO market. A weak debut could signal that investor sentiment is turning. If Aura succeeds, it could be a bellwether for another trend, growing consumer interest in health and fitness data tracking. The CEO of Whoop, the maker of the fitness tracking bracelet, recently said that his company is also targeting an IPO within the next 18 months. Meanwhile, Apple is reportedly developing a fitness wearable that could compete directly with Whoop.

54:52So, Scott, Aura is going public. I know that you have been looking into this company a lot. What do you make of this?

55:02Scott Galloway:Well, you know, do as I do, not as I say. I'm desperately trying to find shares in the IPO. I think this is, and this will be my prediction, I think this is going to be really well received in the marketplace. I went to dinner last night. Everyone around the table for half an hour talked about how much money we are spending on quote-unquote wellness, whether it's red light therapy or the Wolverine stack or saunas. I mean, people are spending so much money on fractal lasers and athletic greens and probiotics. Even people your age, young people rank mental and physical health above marriage and kids as goals by 35.

55:46Scott Galloway:and if you think about wellness being the new luxury and just a booming industry how do you play wellness as a retail stock investor there's just very few ways to play it and aura in my view is doing it correctly it's whereas metas try to put a computer on your face and pretend it's jewelry or as jewelry. And its customers are mostly women. Three quarters are women. And two thirds earn over$100 ,000. Women who earn over$100 ,000 are the premier cohort, or they're the most valuable consumer cohort on earth, and the one that makes all the household purchasing decisions. 40 % of subscribers come from word of mouth, which leads to really reasonable, attractive customer acquisition costs.

56:38Scott Galloway:Its valuation is fair. It's not cheap, but it's basically going out at about eight times revenue, somewhere between Garmin and Apple. But you're paying a multiple, a Garmin or Apple multiple for a company that's growing 123 % and has 83 % renewal on its monthly subscription business, which is$6 a month. So in addition, and I wrote this up in No Mercy, No Malice, there is no company in the world that I can think of that has the fluidity of what I'll call first party data. The most valuable companies in the world have first party data. YouTube gets first party data from you. Netflix gets first party.

57:17Scott Galloway:Instagram gets direct first party data. What other company in the world gets first party data from its customers 23 hours a day? Woop. But yeah. I imagine a thin or a thick layer of innovation of AI on top that says, okay, Scott, we've detected a 14 % chance you develop pre-diabetes in the next five years. Here are the following health. It's really interesting. The Apple Watch, I didn't know this, but a ring on your finger is a much more robust collection mechanism of health data than a wristwatch. And this is anecdotal evidence, and I'm curious if you feel the same way, but the people I know who own an aura are obsessed with it.

57:59Scott Galloway:Absolutely obsessed with it. So what do you have? You have renewal rates that are like software. You have a company doubling its revenue. You have what I would argue is one of the few hardware companies in history that have first party data 23 hours a day. Feels like a reasonable valuation that is tapped into, their killer app is fertility tracking for women. So I love this company. I think hardware is really difficult. There's a small number, a handful of companies that have been able to build a really solid hardware company. I love the growth. I think it's going out at a reasonable valuation.

58:35Scott Galloway:So see above. I'm trying to find shares. Yeah, I think I agree with all of that. I think I agree with a lot of the bull case here. I'm going to try to get access to the IPO myself. We'll see what happens when it actually goes out public. But if we can get in, that would be great. Because I do think that the wellness trend is a big deal. And you pointed to some of the statistics there about Gen Z and millennials and young people being so obsessed with this stuff. They are so obsessed with mental health, with physical health. This is tapping into that. The financials are pretty strong. I do think what happens in the long run is a different story because I think that there are some significant risks here that they do really need to focus on and think about.

59:15One will be the competition. You've got Whoop, you've got Garmin, you've got Fitbit, which is cheaper. you've got Apple which is reportedly developing a health tracker that is similar to Whoop and while I would acknowledge that Aura is kind of has a luxury positioning I think because they've they've really dialed into it being fashionable and it looking good which I think is really important in the wearables industry and you've talked about this a lot this is the thing that Meta did not recognize when they were going all in on the headset is that you look like a fool when you wear it. You don't look stupid when you wear an Aura.

59:50You look kind of cool. You look kind of health conscious. It is a style statement as far as wearables go. But I think Apple is just as able to do that as Aura is. And I think that there is a significant question about, can the competition beat Aura? There is another question of efficacy. And the reason I bring this up is because there is a lawsuit that is accusing Aura and their sleep tracking features of not being accurate. They say that the claims that Aura makes about the sleep health, that it's not possible with the current technology. Aura says, no, it is. I have no idea. I'm not a tech expert.

1:00:28But that's something to think about because that's an ongoing lawsuit. And that'll be a problem if they win that. Final thing I think is the most important. Is this a fad? Because fads happen, especially in style especially in wellness i mean we all thought that peloton was going to be ubiquitous across the world back in 2020 and 2021 they got absolutely pilloried in the markets the stock has come down like 99 since then uh there there are there are health feds this this is what happens and can aura protect itself from being just a thing that was cool for a few years and become something that is actually systemic to the health world?

1:01:13And can it actually live the test of time? I'm not so sure right now, which is why I'm a little hesitant, but that's what I want to hear from them. I want to hear how they're addressing that problem. Do you have any thoughts on that?

1:01:25Scott Galloway:Yeah, I'll go from what I think are the least valid concerns to the most. I think the lawsuit itself is pretty weak sauce. I've read it and I don't think it presents much of a risk. I I think it was mostly a nuisance lawsuit taking advantage of the fact that trying to go public, thinking they could extract a pound of flesh. The elephant in the room is Peloton, right? A hardware device, huge IPO, huge valuation, crashes. I would describe Peloton as a COVID stock. And when people were stuck at home and couldn't go to the gym, you know, this is different. This is on your person 23 hours a day. Peloton was three, four, five times a week maybe for an hour a day.

1:02:05Scott Galloway:and a much larger initial price point. This company's grown every year for 10 years. I don't think it's a fad. It could be.

1:02:17Scott Galloway:I think this is inextricably tied to wellness, not as a fad itself. And to your point, what the tech guys get wrong is that people won't put anything on a visible part of themselves, their hands or their face, unless they think it makes them more attractive to potential mates. and I think the aura ring, that's true. Look how handsome I look in these. I always laugh at the way you phrase it. I agree with you. Look how handsome I look in these things. You wear the mixed reality headset and it's like you're basically deciding to end the DNA branch that is your company. I'm always caught off guard by two potential mates as a phrase and I shouldn't be because I hear it all the time.

1:02:58That's what it's all about, Ed.

1:03:00Scott Galloway:The answer's in each other. Partner with someone, have kids, that's everything. I agree, I agree. And then, you know, and then call them every day at school. Anyways, I don't think it's a faddish. I mean, everyone has that drawer of fuel bans, you know, jaw bones. This has between 83 and 80 percent renewal rates, meaning after 12 months, eight to nine out of 10 people still have it and decide not only to keep wearing it, but to sign up for another year of$6 a month recurring revenue. Which is higher retention rates, by the way, than Netflix, which is crazy, right? Yeah. The things that I think, the things I don't like about this, the majority of the proceeds are buying, are going out to secondary, are buying out existing shareholders.

1:03:46Scott Galloway:Yeah, not a great sign. That's not a good sign. And a lot of people, a lot of people say, well, it's VCs who went early or are cashing out. Fine. Okay, maybe. I personally would like to see that capital going into the company for growth. That's not, that's not a good sign. anytime Apple is near you on anything, it's an existential threat. Supposedly, Apple isn't thinking about a ring. I was shocked. My prediction was when that company filed that Apple or Samsung was going to buy them. They just don't buy anything. They never do it. Yeah, that's not their culture. Having said that, I do think this is an existential threat to the watch.

1:04:26Scott Galloway:My sense is this has better data and greater loyalty, greater renewal than the watch itself. But anytime Apple gets near, is potentially like one reach away from your business, that is a real risk. But yeah, there's definite risks here, but looking at the potential upside versus the risks, I really like this one. The ring itself is unique. Other companies are not building rings. Apple's building a watch. type thing or a wristband, same with Whoop. I think that's a good point of differentiation. The financial growth is pretty strong. I think the thing that we want to hear from Aura is what actually is the growth story.

1:05:14Like, we can talk about how are you going to deal with the risks, but how are you going to double in the next couple of years in terms of your valuation? How are you going to significantly increase your footprint? You're at 5 million subscribers. How are you going to get that up? Are you going to expand into new products? Do you have a plan for new products? What will those products look like? Do you have a plan for expanding the subscription business, which, as it stands, is weak compared to the hardware business? I don't think that's a bad thing, but is that the place where you're going to see the growth?

1:05:48Those are the questions that I want to see them really tackling because I do think that there's a lot of promise here. It's rare for hardware wearables to break through. It's really, really hard. Some of the biggest, most profitable, most well-capitalized companies in the world have tried to do it, and very few have figured out how to do it in the way that Aura has. And to make it, by the way, profitable. They are profitable right now, which is a lot more than you can say about any of these AI companies, which are burning billions of dollars a year. So there's a lot of potential here, but I can see a lot of worlds in which they screw it up.

1:06:27And I want to see them show us how they're going to make sure that that doesn't happen.

1:06:31Scott Galloway:I'll give you one example. There are GLP-1 companies. I think Eli Lilly are sending out aura rings with certain programs. It's being attached to GLP-1 fitness and sleep. I mean, so I think that I think for the next few years, I mean, the company doubled this year. What other non-AI companies are doubling? Anyway, point taken. My piece of advice in terms, and I want to hear what you would think about this in terms of new products. This is something that we were all debating as a research team, which is that there is a growing sector of baby wellness tech products. For example, there is a company called Owlet that has started producing a$300 oximetry tracker, who knows what that is, that is attached to the baby's sock.

1:07:20There is Huckleberry, which is a$120 membership program for, quote, optimized nap predictions. There is a company called Cubo AI, which is a smart baby monitor with, quote, AI scheduled lullabies. I think all of this stuff is a little bit ridiculous, but I also think that we are a generation that is neurotic when it comes to health. and we're especially neurotic when it probably comes to our children. So I could see that, for example, as a potential pathway. Maybe you get into different markets. Maybe you look at wellness products for babies. Maybe you look at trying to expand your footprint with men.

1:07:56As you mentioned, three quarters of the customers are women. If you had to recommend a new product or a new product line for Aura, what would it be?

1:08:04Scott Galloway:Something that is the third leg of the stool around GLP-1s. What I've been reading about GLP-1s, which, as you know, is my favorite technology, the success is not about the GLP-1. It's about pairing it with fitness and nutrition. And I think that GLP-1's success is dependent upon support around the actual medication. And I think the Oura Ring will be seen as part of the support or success of GLP-1s. and some of the stuff you're talking about with babies, I think there's all kinds of product ideas. I think you can get maybe with the Apple Watch, with AI and Aura to a point where it's gonna say, Scott, your risk of stroke has gone way up.

1:08:48Scott Galloway:You need to talk to your doctor about this. I think we're obsessed with our health. Women are obsessed as they should be with their fertility. I see, and it's only 2 % of the wearable market right now. So it has a lot of room to grow. If I were on that board, I would be the discipline we need is not what to do, but what not to do. Because I think their current business model has a lot of juice left to squeeze. Aura, hit up Scott Galloway. Give him some shares. There you go. Okay, let's take a look at the week ahead. We'll see earnings from Micron and Nike. We'll also see inflation data from the Personal Consumption Expenditures Index for August.

1:09:28And finally, we'll see consumer confidence and the employment report for September. Scott, do you have any predictions?

1:09:34Scott Galloway:Micron beats. Memory is the AI trade nobody talks about because every GPU needs high bandwidth memory. So I think that NVIDIA gets all the headlines, but Micron kind of cashes a lot of the checks. So I think Micron's going to beat. Aura prices first trade, 30 plus percent on the first trade from the IPO pricing. and I get the sense that just going off the tech stuff, I think Nike is still in turnaround purgatory and they're still paying the price for... Such an interesting stock. ...for opting for DTC over being in touch, quote unquote, with their retail athletes and brands or I'm sorry, the retail stores and brands.

1:10:15Scott Galloway:So I think Micron and Aura to the upside, Nike to the downside. Wow. But yeah, those are my predictions. All right. My prediction in light of what we're seeing in Treasury yields, which keep going up the 10-year and the 30-year, this entire administration is a complete shit show. I made the prediction earlier on in the year that I thought the midterms would be a sweep. I just want to double down on that. I think the Democrats are going to take the House and the Senate, which people thought was not possible earlier in the year. But I think it is possible now. I think we're seeing it in the markets.

1:10:51This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carti. Our research team is Dan Chalon, Chris Nodonohue 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.

1:11:46We'll see you next time.

1:11:51Scott Galloway:push your limits train with precision see the results at equinox that's high performance loving iconic spaces that inspire personal training backed by real data unlimited group fitness classes from yoga and pilates to strength and conditioning elevate your post-performance ritual with saunas steam rooms cold plunges and more everything you need to lock in and unlock your potential at Equinox. Start today at equinox.com.

1:12:22Scott Galloway:Fall has never looked or tasted this good. Sweet Greens Fall Harvest Menu is back with seasonal favorites dressed to impress and made to be devoured. Warm roasted sweet potatoes, crisp apples, maple glazed Brussels, and crave worthy flavors in the autumn harvest bowl, maple glazed salmon plate, and roasted bacon Brussels side. The season's most desirable menu has returned to Sweetgreen, featuring Fall's best dressed. Make your move. Order on the Sweetgreen app. Close your eyes, exhale, feel your body relax, and let go of whatever you're carrying today. Well, I'm letting go of the worry that I wouldn't get my new contacts in time for this class.

1:13:03Scott Galloway:I got them delivered free from 1-800-CONTACTS. Oh my gosh, they're so fast. And breathe. Oh, sorry. I almost couldn't breathe when I saw the discount they gave me on my first order. Oh, sorry. Namaste. Visit 1-800-CONTACTS.com today to save on your first order. 1-800-CONTACTS