The Rate Hikes Are Coming

22:43Scott Galloway:They're not as volatile typically. And with a company like Apple, unless shit gets really real at Apple, like unimaginably real, it's hard to imagine they would not have the assets and the cash flow to pay the interest on their bonds. Right. So I do think, and by the way, I have never been a big debt investor. I don't understand it. I've never been interested in it. I've always deluded myself into thinking I can outperform what feel like fairly paltry returns. But I do think still a mixed portfolio of stocks and bonds makes sense. Just going back to the markets, we said that there's always a transfer of wealth and winners and losers.

23:19Scott Galloway:Some of the winners with$100-plus oil, Shell's up 27%, ExxonMobil 34%, Chevron 37. Norway's Equinor is up 84%. They supply 30 % of all the natural gas consumed in the EU. Home sellers, okay, home prices, as we talked about, up 2 % nationally, up 77 % in Odessa, Texas. And then railroads, which are much more efficient from an energy standpoint, point. Canadian Pacific, Kansas City, plus 21 percent. Union Pacific, 23 percent. CSX, up 34 percent. So a transfer of wealth from consumers who have to pay higher prices at the grocery store and at the pump. And whose wages are now trending negative because the wage growth is being outpaced by the inflation.

24:16Just to your point, consumers, but also earners, people who are making their money, making their living through income.

24:21Scott Galloway:Here's a stat I just never contemplated. 15 % to 30 % of grocery costs are diesel fuel. Groceries are heavy, and the vehicle that brought them there is powered by diesel fuel. 90 % of the nation's school buses run on diesel, and 40 % of the school districts are consolidating their bus routes, and 20 % are limiting non-required trips, including field trips. Think about this. $100 oil is going to start reducing the number of field trips that kids take. Drive-thrus. A$1 increase in gas prices means roughly six fewer customers per day at the average drive-thru. That might not sound like a lot, but for a location averaging 300 transactions a day, that's about$22 ,000 in lost annual sales in some energy costs.

25:14Scott Galloway:And something else I found was just fascinating. There's now, I just saw a huge investment in data centers in Finland. And the impetus was that Finland has its own sources of renewable energy and it's cold. So whereas the AI market used to be chasing GPUs, it's now chasing climate. So people have said just for a long time that if you want to understand the world and geopolitics and economics and how societies rise and fall, it kind of comes down to energy. Some people are making or putting forward the thesis that now it's coming down to compute, which is the new energy. but it's still you still need the energy for the compute so but you're the inflation here i think it's going to be fascinating to see what worse does um uh what is your bet do you think by the end of the year interest rates he increases interest rates yeah 100 by the end of the year is my view and i i've said that on this i mean i said it in june that i thought it was inevitable and I think I've, we'll see if I got it right, but I think I'm going to have gotten it right.

26:26And that was back when people were saying that it was basically a coin toss as to whether we would see rates. I mean, they back to the beginning of the year when the markets are pricing in rate cuts. And remember that those were the conversations you and I were having was what it means to be in a lower interest rate environment. That was what we were sort of, what investors were all expecting. It's just remarkable how quickly things have flipped and how bad things have gotten on the inflation front. And I do, just to your debt point, I think it's true what you're saying. I think that, you know, what we are seeing now is that the debt markets are actually rewarding investors for the risk that they're taking on when they're buying these bonds.

27:09But I just think it's very important to think in your calculation about what inflation might look like and the extent to which it will eat into your yield, eat into your returns, and how sustained you think this inflation will really be. I think at the very least, and a lot of other commentators have talked about this and investors have talked about this, at the very least, it does call into question the 60-40 portfolio of 40 % bonds because at least in the past decade, that portfolio structure has not been rewarded at all, even on a risk-adjusted basis. But I do take your point. It's like, okay, well, yields are rising now.

27:48so is it worth it and perhaps it is i think we'd probably want to see yields rise even even further um to reflect the level of inflation that we might be seeing over the next few years it's fascinating stuff and we'll see what kevin walsh does this week it'll be interesting

28:08we'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

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32:06We're back with Prof G Markets. As we head into the fall, we have two blockbuster IPOs on the horizon, OpenAI and Anthropic. Both companies are reportedly preparing to go public, and they could be the largest IPOs ever. But before either company even hits the public markets, there is plenty of news that is shaping the discourse around them. So, Scott, we are going to go through some of the biggest headlines from the past couple of weeks in AI. and we'll discuss what they mean for the company and the narratives that they are now contending with as they prepare to go public. And the first headline that we clearly have to talk about is this tweet from a now former Anthropic researcher who tweeted about how he resigned from the company.

32:53He said, I resigned from Anthropic today. I spent the last three years doing pre-training research at both OpenAI and Anthropic. Neither company is acting responsibly. He went on to say that the people building AI believed that it could, quote, kill us all by the end of the decade. That was an extremely viral tweet that got more than 100 million views on Twitter or on X. But it was then endorsed by a current anthropic researcher, this guy Evan Hubinger, or Hubinger, I don't know how to pronounce it. But he is the alignment science lead. And he said, quote, Jacob is correct. we really do earnestly believe ai could kill all humans i personally think it is a greater than 10 chance within the next decade jacob coxson the guy who put this tweet out originally then did kind of a media tour he went on cnn uh he went on fox he went on all of these different outlets uh let's just listen to what he said to anderson cooper on cnn last week what's just crazy is to look at the the rate of progress and there is a very real possibility that in the immediate future These are years that, like, next year, the year after, recursive self-improvement will happen and we'll enter the phase of Evan's post where he argues that there's a chance we could all die.

34:10Like, that is coming soon. We could all die, apparently. Scott, your reactions?

34:15Scott Galloway:Well, we need to bifurcate or separate the existential risk of AI or threat to humanity and the IPO or the financials.

34:28Scott Galloway:I'm so exhausted by all that I said. If, in fact, you were to believe that this was more powerful, the nuclear bombs are more dangerous, and there was a greater than 10 % chance of a wipeout of humanity, all right, let's take them at their word. We wouldn't let Oppenheimer form an LLC, raise money from Andreessen Horowitz, and go public. We wouldn't let Oppenheimer reach out to bankers from J.P. Morgan. So, okay, you win. Government needs to take control of these companies and put in place massive regulation and have all sorts of safety checks. I still don't understand why we wouldn't at a minimum have, and this is a failure of the Trump administration, and I do believe the companies are earnest saying they do want some form of regulation that can help set rules such that it is an out-of-control race to the bottom or to some sort of existential threat.

35:20Scott Galloway:But having said that, I do not buy it. And that is the following. Atoms don't decide to run into each other and release energy and set the atmosphere ablaze on their own. Someone decides to build the bomb. Someone decides to drop it. Someone decides how to detonate it. And for me, it all comes back to an incentives and a fraternity. Now, what do I mean by that? In college, I was president of the Interfraternity Council, king of the jarheads. And during rush week, the local community said, we have to do something around noise. The music is playing till 1 a.m. You have to stop it at midnight. And I said, there's nothing I can do.

36:10Scott Galloway:I can't go to each of these fraternities and they're just going to ignore me if I ask them to turn off the music. And so we met with UCPD and UCPD said, I have an idea. And I said, what is it? And they said, we're not going to tell you. You'll just learn about it. And the next night of rush week at 12 or 1 a.m., they went to all the houses that were still playing music and they arrested the president of the fraternity and put him in jail for the night. And what do you know? the next night at midnight, it was dead quiet. There is always a wizard behind the curtain. And what the media gets wrong and what these companies are doing in their leadership is absolving them of any responsibility by claiming these things are sentient.

36:53Scott Galloway:If you said to Sam Altman, you are liable for anything these things do, and you started putting these people in jail, if in fact they started stealing IP or doing anything that causes harm, I would bet they'll figure out a way to plant narcs and detectives as some of these bots hanging out by the water cooler trying to come up with different ways to hack companies. If these things can be trained to jump the lab and go and find ways to hack into other organizations, they can be trained to narc on each other and alert the humans when things are getting spicy. And so this notion somehow that they're sentient and that there isn't a wizard behind the curtain, which in my view, there always is.

37:41Scott Galloway:And a lot of philosophers will disagree with me. But my view is the moment you create incentives that say you're responsible, there was a woman who was a gay activist in San Francisco who was mauled and killed by two vicious pit bulls that were off leash. And the owner of those dogs was convicted of manslaughter. We are now holding parents liable if they have semi-automatic rifles in the household and a minor who has been diagnosed with mental illness and they do not secure those weapons. And what do you know? People now keep their pit bulls on leashes. By the way, pit bulls actually get a bad reputation.

38:18Scott Galloway:They're actually a a lovely, friendly dog. And I think people are finally or hopefully starting to get serious, and there are a lot of responsible gun owners, but there need to be more, that if you are not a responsible gun owner and someone in your house kills someone, you are responsible. I believe this whole notion that they're sentient, that these CEOs don't have control is nothing but continuing excuses for them to run unfettered, to be totally focused on shareholder growth with absolutely no admission, no adherence, no tethering to any social responsibility. I also don't buy it. I think that we've heard this kind of thing many times before.

38:58We've heard it from Sam Altman. We've heard it from Dario Amadei. There was that viral blog post, something big is happening at the beginning of the year, which said that we were going to see an apocalypse, not in human civilization, but in basically the job market, that everyone was going to lose their jobs. imminently. And then that was sort of the beginning of the SaaSpocalypse. And we had that crisis, which unfolded. There has been statements from Dario Amadei saying that there was a 25 % chance of civilizational destruction. And every time they say this stuff, and then eventually it gets walked back as we start to realize, okay, that seemed like a little bit hyperbolic, didn't really make sense.

39:34And they were kind of stoking some panic and some fear and creating a lot of buzz and headlines around their technology. And then eventually they say, yeah, like that, That wasn't exactly right, but still, you know, there are these caveats and these nuances, et cetera. So I've heard the story over and over again. And so when I see this tweet, I'm like, yeah, it's another guy saying that AI is going to kill us all. And yeah, it's another guy who works for one of these companies or did work for one of these companies. At the same time, though, as you point out, it would be very stupid if we were to not take it seriously, because if we're wrong, then we're risking the lives of millions of people.

40:09So we kind of have to take it seriously. I think the thing that kind of pisses me off, it's one thing for a former Anthropic employee to come out and say this and basically be the whistleblower. It's another thing for a current Anthropic employee, the alignment science lead, to come out and say, yeah, this is true. And yeah, we all think this within the company. We all think there's a 10 % chance that our technology is going to destroy the world, destroy civilization. That, to me, is a corporate communication. That is a message coming from within the company by a representative of the company saying, hey, we're very worried about this technology.

40:49And if that's true, then we have to take it seriously. It's not just a tweet by a random tech bro who's saying something online. That is something for the company, which means that now we need to investigate the company. Now we need to hand the company a subpoena and tell them, okay, you think that you're going to destroy America? Show us the documentation. show us the evidence, give us everything available at your disposal to walk us through exactly what the problem is. And if we find out that they were just being alarmist or not being alarmist, but bullshitting us and being hyperbolic and perhaps trying to get everyone hyped or worried about this technology such that they can have a very, very explosive IPO, maybe even dry up the stock price, well, then we need to start talking about different issues like securities fraud.

41:36We need to talk about issues about public deception because then you're misleading the public and it is material public information and that stuff matters. But this business of just like, oh, just listen to us. We know what's best because we're the AI guys and this stuff is really scary. And then expect that we're not going to take it any further, that we're not going to investigate them, that we're not going to use the federal government to actually understand what exactly their claims are, bring them in front of Congress, have a congressional testimony, testify, etc. That's where I start to get lost on this issue.

42:09So I'd rather us either not take it seriously or we take it fully seriously and we actually start to investigate these people. That is my take on the situation.

42:21Scott Galloway:Well, the question I would have is, let's imagine the CEO of Boeing saying that there's a 10 % chance that any 737 MAX will crash. What would we do? This is a company offering a product. And what if one of their lead engineers said, yeah, there's about a 10 % chance these planes are going to crash? The FAA would say, okay, ground all planes. But the difference here is, but wait, this might be a$2 trillion IPO. And they're claiming if you don't let our thoroughbreds run free, China's going to surpass us. That China's going to build, or Airbus is going to build a better plane that creates more shareholder value.

42:59Scott Galloway:As far as I can tell, we have decided to ignore these existential risks because they might be worth$2 trillion. And because there's absolutely no regulation, or it appears to me, nobody within the Trump administration actually has the domain expertise to even begin to talk about thoughtful. I mean, why on earth wouldn't we have a kind of a blue ribbon panel that there's a 90-day waiting period for any new product, it takes a drug to get a decade to get through the FDA. Why wouldn't we have a 90-day waiting period where some of the most talented people in the world bang the shit out of the new model and test it and ask it to create a bioweapon and see if it coordinates?

43:44Scott Galloway:I mean, just do all sorts of shit before letting anything into the marketplace. I mean, that to me just seems like step one. Well, the argument that a lot of people make is because we need to beat China. We can't put these regulations on AI because then China's going to run ahead of us and then China's going to take over the world, etc. I don't think it's necessarily a bad argument. The thing that they're forgetting, though, is that China has some of the strictest AI regulations in the world. It's 100 times stricter than ours. I mean, they have restrictions on all forms of AI-generated content and information.

44:20You have to register before you create it. They have labeling requirements. They have ID laws on who can actually use deep fake software and what can be produced. They have very strict child protection laws against virtual relationships, something we talk about all the time. They're doing a lot to regulate AI, to restrict AI, and to protect its people from the harmful consequences of AI. And by the way, it shows in the polling because 33 % of Americans say they're not excited about AI, and 83 % of Chinese say they are excited about AI. So there's a completely different vibe when it comes to AI over in China.

44:57And I think it's because they are strict and aggressive when it comes to regulation. But we've decided that that is a reason why we cannot do it, because we're so afraid of the Chinese, despite the fact that they're doing exactly what we're advocating for right here.

45:11Scott Galloway:That would be tantamount to Ford and General Motors saying you should not regulate us or force us to have airbags because it's going to make us less competitive against Chinese companies that aren't forced to have airbags. That's exactly right. No, we're going to have regulation. And by the way, American automobile companies made those arguments around emission standards. They said, okay, so European and Asian companies aren't going to have emission standards. They're going to pull out way ahead of us. They're going to be able to offer a better product for a lower price. This whole catastrophizing, I don't know how seriously to take it.

45:45Scott Galloway:I'm very skeptical of it. One of the things I still hold to is the shit you're most worried about does not happen. It's the shit you're not expecting. Plane slamming into a skyscraper or a virus jumping the lab. It's the things you're not expecting to get you. And that's what leads me to believe that AI becoming sentient and turning us all into paperclips or data centers ruining the quality of life in America. I just don't buy it because I find whenever there's hysteria or worry about something, that means it's not going to happen. because it means you start preparing for it and looking out for it and you're just incredibly paranoid about it and it just you know it doesn't happen so i find all of this to your point though they should basically sit these guys down and say all right anthropic oh you're not going public unless you tell us a what is going on here what the fuck is your employee saying why you think this might end humanity.

46:43Scott Galloway:And if it is, you need to work with us. But congratulations, you've convinced us that there's a 10 % chance you're going to end humanity. By the way, can I get in your friends and family share purchase program? I mean, this literally is sort of, we've decided we monetize healthcare in the United States. We monetize loneliness. And now I've said, I know, let's monetize the end of the species. Let's make the threat of the end of the species sound so dramatic that it connotes power of this technology and creates a hunger to invest. Or if that's not true, then they need to explain why it's not true.

47:24They need to give us an explanation. And the responsibility lies with Anthropic, which means that the responsibility lies with Dario Amadei. He has to say something. It is, the ball is in his court right now. They think that the ball is in our court. Like, we need to react to what his employee said and we need to do something. No, he needs to explain what his employee said. He needs to do something about it. I doubt he will, because he hasn't really been doing any media recently. And I think it's because he's been sort of not doing a very good job. I think that Anthropic is sort of ceding ground when it comes to the public perception of the company.

48:01but this guy works for anthropic he said something that is extremely inflammatory extremely insane in my view it's on anthropic now to explain exactly what he means and if the guy was making shit up well then maybe they need to fire the guy or maybe they need to adjust the way that they deal with corporate communications but you can't have these ai researchers going around on twitter saying these ridiculous things or if they're not ridiculous saying these extremely inflammatory things about what the company is doing and how it might literally end civilization. It's just, it's getting out of control.

48:36Going on to some other AI news, we learned in Dealbook last week that OpenAI is projecting to spend$750 billion in compute through 2030. We didn't get much new context other than the fact that the number used to be closer to$1.4 trillion. We didn't have a real timeline for what that would be, but the point being, it appears maybe OpenAI is bringing down their compute spending, which I think is honestly a really good sign for the business. Because as we know, AI so far is incredibly unprofitable, at least on the frontier end of things. OpenAI said that their Q2 revenue grew to$6.7 billion, which disappointed investors actually, because the quarter over quarter growth was only 18%.

49:21And in the AI world, these people want like triple digit growth every quarter, but their operating loss widened from$9.3 billion in Q1 to$12.3 billion in Q2. So these are incredibly unprofitable businesses. Anthropic is saying that they have hit adjusted operating profitability, which is a good sign, but personally, I don't really believe it. It's not really clear what adjustments they're making. and my instinct would be that it is kind of BS accounting, but we will find out when the S1 is released, which I'm hearing is going to be very, very soon. And I think that that document is really going to be the pivotal moment in the AI story.

50:03We will finally see what the economics of AI actually look like. And that will be sort of the watershed moment, I think. So that's where we are in the AI business landscape. Scott, do you have any thoughts on the Anthropic S1, what we might see, the profitability of AI from the data that we are aware of, the AI business at large.

50:26Scott Galloway:For better or for worse, and I get it wrong a lot, but I usually have a view where I think I'm mostly right and mostly understand what's going on. As it relates to the revenue numbers, the IPO, and the shareholder value increases, I look at the existential threat posed by these things. I look at the capex, which is just so extraordinary that the numbers I've heard is so far, the total revenue of AI is about 150 to 200 billion they're spending. And their CapEx means it needs to get to two and a half trillion, which is bigger than all the revenues or greater than all the revenues of tech. And I think, okay, this is like every other technology.

51:02Scott Galloway:It's exciting. The technology will persevere. It'll result in incredible productivity and incredible companies, similar to railroads, the electric grid, the internet. We're going to have an enormous correction down. I can make an argument for that narrative. And then I hear that OpenAI in seven months has increased its ARR from 9 billion to 65 billion. I mean, that's just extraordinary. And when you hear them say that actually on, you know, quote, unquote, adjusted EBITDA, when you think about the gross margins they have, you think, wow, maybe it could be worth$10 trillion. dollars. Depending on what day you talk to me, I'm more because I think I'm more biased towards being a bear and a bit more glass half empty kind of guy.

51:49Scott Galloway:I'm more the, this looks more like the railroads and the internet, and that is the technology will survive these valuations. But these valuations are going to have real volatility, which is Latin for there's going to be an enormous correction. But then you do hear that I have friends who have nested in these companies who have access to their numbers. And they've said, the numbers are just absolutely staggering and show no slow. When I say the numbers, the revenue numbers - They always focus on the revenue. Are staggering and show no signs of slowing. So I think the S1 is going to be fascinating.

52:20Scott Galloway:What will be interesting about the S1 though, is that you can bet that the S1 will have been battle tested a million times. And what I mean by that is they will have uploaded the S1 to every LLM and say, please distill this. And they're going to write the S1 to make sure that when AI distills it down to a series of bullet points, it reflects well on the valuation. So it's no matter, you know, I'm, I mainly think, well, once the anthropic valuation gets out, I'm going to Claude and I'm saying, is this a good or a bad idea? Please summarize this 400 page S1. You can bet that that distillation has been run a couple thousand times every which way by, but loose by the folks at good, the folks at anthropic.

53:01Scott Galloway:So I, anyway, I'm regardless, I am fascinated to see the S1 here. For me, it's going to be a lot of analysis around what the gross margins are because WeWork was growing really fast, but the faster it grew, the more money it lost. And is there a tipping point where CapEx costs begin to come down, the gross margins go up because they have so much pricing power, and they're selling so much into business, which tends to be more price inelastic. And once these things go profitable, if they maintain anything resembling the growth rates they have, they're going to be the most profitable companies in history within a few years.

53:35Scott Galloway:There's a scenario where that is viable. I mean, so far, the arguments that I've heard from, I guess, the bears, the arguments that I've heard about why the AI economics don't make sense have been very, very justified, backed up and compelling, particularly the arguments made by that Ed Zittrain has been making. The arguments that I've heard as to why the AI economics do make sense have been, in my view, not very compelling at all. Usually it's just talks about ARR that is growing into the future, but not actually acknowledging the elephant in the room, which is that they're paying more to get that revenue.

54:14And it's growing every day. I mean, the losses continue to expand. I also hear people say, no, but Anthropic has figured it out. To me, I'll believe it when I see it. I'll believe it when I see in the S1 that the economics actually do make sense, the unit economics of being a frontier AI lab. But so far, I haven't seen any evidence of that. And I would have thought that if people really wanted to put the bears to bed on this and to end this profitability question, if Anthropik supposedly does have operating profitability or adjusted operating profitability, then why wouldn't they just show it to us?

54:49Why wouldn't we actually see it? Why wouldn't those investors just say, yeah, this is what they've got. I mean, they seem to be very happy to gloat about these other numbers, but they're very silent, hush-hush about certain other numbers. So to me, I think this profitability question is enormous. So far, I believe that neither company is even close to profitable. That's my puzzle belief. We don't really know, and we'll have to see when we get that S1. The only thing we do know about the S1, according to the Wall Street Journal, is that Anthropic is going to tell investors that their total addressable market is$30 trillion, which would be higher than SpaceX's total addressable market claim of$28.5 trillion, which they said was the largest in, quote, human history.

55:41$30 trillion, that would be roughly equal to the GDP of America. That makes me think that what we might see in this S1 is a lot of massaging of numbers and frankly, a lot of BS. And it's disappointing because I actually want to like this company. I think that compared to Open AI, they have executed AI quite well from the business side and from the technology side. But then I hear the stuff like that. I'm like, can we give it a rest with the pumping and the BS? Can we just state truthfully what actually is going on with these businesses? But we'll see. We'll see when it comes out. Hopefully it comes out soon.

56:23We'll be right back. And for even more markets content, sign up for our newsletter at profgmarkets.com.

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58:45We're back with Prof G Markets. A new era is underway at Apple. John Ternus has officially taken over as CEO, and last week he introduced Apple's latest major product, the foldable iPhone. It is the biggest change to the phone in nearly a decade, and one of the first major signals of what Apple might look like under John Ternus. So, as he takes the reins, let's take a look at what is next for Apple, And it starts with the foldable iPhone, the iPhone Duo. Scott, this device costs$2 ,000 at the low end,$3 ,000, more than$3 ,000 at the high end. It is the size of a passport. It's 80 % larger than the iPhone 18.

59:30What do you make of the iPhone Duo?

59:32Scott Galloway:I like it because some people call it multitasking, but I like to think of it as ignoring two responsibilities at once. I like the idea that I can scroll and ignore my emails at the same time. By the way, I don't even check my emails anymore. I've noticed. We've got to call you to get your attention. Yeah. So even texting, it's fucking Charles Schumer calls me with one more urgent request for$5. I'm going to have had it. Look, I don't. So right now, it's super interesting. It's a niche market. Your point's the right one. This has nothing to do with Ternus. Maybe he was involved in it. But anything that happens for the next 12 or 18 months is basically remnant decisions made by Cook.

1:00:14Scott Galloway:This is exciting. I think that this was good of Cook. I think it shows his responsibility as a leader. I mean, just think about the ego. He could have easily negotiated. I want to be around. I want to announce this and leave in a blaze of glory, right? But he said, no, it's more important for the company to have a new innovative product under the auspices of a new exciting announcement about a new CEO. So the first thing I thought about was this speaks well to Cook's ego. I think most CEOs would have wanted to stick around and made this their swan song because I do think it's an exciting product.

1:00:46Scott Galloway:One of my colleagues at NYU Stern, a guy named Peter Golder, who's now at the Tuck School, had this really, really what I felt was a remarkable insight. And it's changed the way I've thought about the term innovation, which is overused. Innovators almost always lose money. and that is the true innovator, the one that's first, ends up with mud on their face and arrows in their back. And Apple was not first in MP3s. They were not first in laptops. They were not first in touchscreen. They were certainly not first in smartphones. Foldable phones have been out for seven years. It's a niche market, but what Apple typically does is they are the world's best, most profitable second mouse in history.

1:01:24Scott Galloway:And that is they wait, they watch, they learn, and they come in and they make something more elegant, more utile, more aspirational, And people weigh in and do what I tried to do last night. I tried to buy one and I was all pissed off and thought it was sold out. And then someone reminded me they're not available. You can't buy them for another two weeks. But that didn't stop me from spending an hour on the Apple side thinking I could figure out how to order one. I think this product, I think Samsung is just gonna be so pissed off because I think Apple is gonna come in and sell more foldable phones in the first 60 days that have been sold in the last seven years across the entire market.

1:02:00Scott Galloway:it. I told you in the editorial call, I want you and Claire and Mia to do sort of a no mercy, no malice product review. But the way I see it is everyone is saying$2 ,000.

1:02:15Scott Galloway:This is too expensive. The way I see it is it's less expensive than your iPhone and your laptop. And I think the vision of this thing is that it combines the two. It obviates the need for both. that with one of these, you'll no longer need your laptop. And so I think it could be, I think Apple does just such an amazing job with hardware. I think this could be a hit for them. I also think it signals innovation. So if I had to bet, I'm not a product review person. I was saying on Pivot with Carrot, it's too bad that Walt isn't still active. It'd be very curious to get a true product review from somebody more thoughtful than me about hardware.

1:02:57Scott Galloway:But I think this is a, I think it's an interesting move. I think, and my bet is just as I was, I was way more bearish. I mean, I thought the mixed reality headset was just, which is fucking ridiculous. And we got that one right. I am cautiously optimistic about this one. Your thoughts? Yeah, I'm less optimistic. I just think it looked, I think it's too large and too cumbersome. And I don't, I mean, they've called it the most, they've called it, quote, the most transformational iPhone experience since the original. It feels as if they're trying to present this as like, this is the Apple future.

1:03:32And I just don't find it cool or compelling enough. Having said that, though, I have been publicly kind of bearish on Apple for a while. Last year, I said I thought that the stock was going to have a sluggish outlook and potentially even go down. And that isn't what we've seen. Apple has been the outperformer of big tech, up 19 % year to date, up 40 % over the past year. And, you know, I have been wrong about this so far, but I mean, I've told you this before, I look at their growth prospects and their technological innovation, I don't find it that impressive. And when you look at this company trading at 36 times earnings compared to the S &P at around 26.

1:04:21Yes, they are spending less money on CapEx, significantly less,$11 billion compared to, say, Alphabet spending more than$200 billion on CapEx because they are joining the AI race. You know, that's good, but it's like, okay, well, what else are you building? What are you taking those savings and doing with? What are you doing with those savings that you are collecting in that war chest that you are building by not joining the AI race. And if you're building a foldable iPhone, I'm not impressed. I would be more bullish actually on building a data center than selling a foldable iPhone, especially considering, as you point out, this has been done for a long time.

1:05:01Samsung did it. Motorola did it. I think Google did one as well. I mean, people have been doing the foldable phone. It's a thing that exists and it hasn't really taken the world by storm. I think it's been like a mildly successful product. So I'd want to see more from Apple. I'd want to see something that really blows me away. And to be honest, this doesn't really do it for me.

1:05:27Scott Galloway:Well, I don't know if you heard, but John Ternus speculates that there's an 11 % chance that the folding phone will destroy humanity. That would be interesting. I mean, that would get my attention. That'd make you sit up and buy more stock. Exactly. I want to hear how you're going to crush society and ruin the world. Yeah, that's what real leadership is. Tell us how you're going to end humanity. Exactly. Do they make that dress for a man?

1:05:59It's a strangely accurate statement that you're making.

1:06:02Scott Galloway:Apple feels like a Disney film compared to this fucking AI shit right now. Yeah, exactly. It's like, oh, we're going to end humanity. Oh, it's a foldable phone. Foldable phone. I'll buy a foldable. Actually, as I think about it, I'm hoping it wins. I like the idea of watching Friends and Neighbors and Euphoria and Sidney Sweeney on two screens while pretending I'm taking pictures of my kids versus a one in 10 chance that humanity ends. That's Apple's future. Well, on that point, John Ternus, this is the beginning of his tenure. We don't really know that much about him. He hasn't spoken publicly very much.

1:06:42So I think it's hard for anyone to tell really who he is or what he's going for. But, you know, it's early days. But he's taken over a$4.7 trillion company. He's leading the second most valuable company in the world. He has some very big shoes to fill following Tim Cook, who was arguably the greatest operator CEO in American history. And then before him, Steve Jobs, who is arguably the greatest visionary. in, I would say, maybe modern American history. On that note, let's just take a look at some of Apple's most iconic moments from their CEOs over the past several decades. Here is a little compilation that we're going to play.

1:07:23So, iPod, a thousand songs in your pocket. There's been nothing like this before. And I don't think there's another company that could do this. What we want to do is make a leapfrog product that is way smarter than any mobile device has ever been and super easy to use. This is what iPhone is. Okay? So, we're going to reinvent the phone. What would happen if a MacBook and an iPad hooked up?

1:08:01Well, this is the result. It's one of the most amazing things we've ever created. It is our new MacBook Air, and we think it's the future of notebooks.

1:08:14Scott Galloway:We have one more thing. Apple Watch is the most personal device we've ever created. We set out to make the best watch in the world. John Ternus has a lot to live up to. Scott, what do you think his legacy will be? Will he make up? Will he live up to the legacy of his predecessors? Oh, I don't know. But the odds are no, because he's filling the biggest shoes that were filled by the biggest shoes in history to people. So Steve Jobs sort of changed the world, kind of defined this era of the idolatry of innovators. Tim Cook added more shareholder value to a company than any CEO in history. When he took over Apple, I think it was a$350 billion market cap company.

1:09:04Scott Galloway:Now it's, what,$4 or$5 trillion? So I think he's sort of neck and neck with Jensen for who's out of the most shareholder value. He also just acquitted himself really well. You just knew that you weren't going to find Tim Cook in the Epstein files. He just wasn't that—he just—he was restrained. He was dignified. He did not shitpost or criticize other people. I think he fucked up at the end, being a little too obsequious to Trump. But, you know, the 34 the 34 frames of the 35 millimeter film here of Tim Cook is unprecedented. So it's just unlikely that you have what is largely considered the greatest innovator in history.

1:09:44Scott Galloway:Then you have the person who's out of the most shareholder value in history that you hit a trifecta with a third CEO who's able to do anything resembling the first two is something just taking it to private investments. I was reviewing my private investments. I haven't made much money in the last two years. And a lot of my privates have just not done well. And what I have determined, I was trying to go through, it is very rare that a founder hits two wins in a row. I have yet to invest in a guy who had a big win and then his next company. He's able to raise a lot of money for his next company and almost always never works.

1:10:24Scott Galloway:So many moons have to line up. for the kind of shareholder gains and the kind of success you need for success in technology, that just the likelihood it goes from$300 billion to$4 trillion and then continues to roll from there, I just statistically think the deck is a bit stacked against him. But having said that, he's sitting on top of what is the world's greatest consumer brand in the world. I would argue MIT and Stanford are the greatest consumer brands in the world, but in terms of what people would qualify as a true consumer brand, it is, in my view, unprecedented. What Apple has done, and people get it wrong.

1:11:05Scott Galloway:Let's say it's a tech product. It's not. It's a luxury product, in that as iOS identifies you or signals that you're one of the billion most worthwhile or worthy mates in the world. If you're carrying an Android phone, it means things haven't panned out for you, and that your DNA should probably, that branch should probably end. You should probably not be allowed to reproduce. iPhone says, I'm creative. I'm so good at what I do. I make enough money to spend three months of the average Turkish household salary on iOS. You can basically get an Android phone for free. This product is wildly overpriced, but the brand itself, iOS, sends such a strong signal.

1:11:47Scott Galloway:I think they're going to sell a lot of these things for pure signaling. I think a A lot of people are going to be excited to be at dinner and fold out their new Apple phone and have everyone go, ooh, you're creative. You're an innovator. And you clearly have$2 ,000 in disposable income to drop on a foldable phone. But going to Ternus, his legacy, this is a company that has an incredible bench. I am sure he's a talented guy. I'd be shocked if he didn't acquit himself well. The likelihood, if you look back in history at the most valuable companies at that moment, they very rarely go more than one or two decades.

1:12:23Scott Galloway:General Electric was the most valuable company. Walmart was the most valuable company. Saudi Aramco for a while was the most valuable. It is very rare that you stay at the top of the heap for very long. All right, let's take a look at the week ahead. All eyes will be on Kevin Walsh as he delivers his next interest rate decision on Wednesday on Calci, the odds that he will raise rates are currently above 60%. Scott, any predictions? I think he's going to raise. We'll see. I think I've heard some weird brumblings about him personally, but I come back to, it's a 12-year appointment. There's not a lot that Trump can do.

1:13:06Scott Galloway:Trump will be batshit furious, but I don't see what he can do. And this would be a profile and courage moment. I'm worried about inflation, oil's over$100, I'm going to raise rates a quarter of a point. I think he would be hugely lauded in the marketplace if he raised rates. And I think his ego and the Kevlar of a 12-year appointment, what did Chairman Powell prove to us that as angry as Trump is, as powerful as he is, he can't remove the Fed chairman. So I'm going to say I think he raises. I was going to do the same. I think he raises. I'm honestly very tentative about it because I also think this guy likes to surprise people.

1:13:50I think if not this month, then the next one. But I feel very confident that it happens in 2027. I mean, I think the thing, I mean, the midterms are obviously a big question mark and the extent to which there's going to be a relationship between the two. But if he is a independent Fed chair, if he truly cares about Fed independence, if he truly cares about interest rate policy, monetary policy, as much as he says he does, then I think the only answer here is raise. So I'm going to tentatively say I think so too. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer.

1:14:31Our video editor is Jorge Carty. 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.

1:14:56Lifetimes

1:15:02You help me In kind reunion As the world turns And the dark flies

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