Will Tesla’s Robotaxi Ever Arrive? + Sin Stocks and Zyn Nicotine Pouches

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1:37Ed, I just can't take much anymore. I'm divorcing my wife. First it was some guy in a drunk party. Then it was her ex-boyfriend, her boss, my best friend, even an Uber driver. I just can't stop sucking other men's cocks, Ed.

2:01That was bad even for me. Here we are, Ed. Prop G. Our producer just went off camera. She's calling her lawyer.

2:14Hello? Hey, Dina. It's Claire again. What's going on, Ed? I'm doing very well. By the way, I saw a nice headline in the news this week, which is that you're donating$12 million to UCLA and UC Berkeley. Oh, that's an interesting segue from me giving random oral sex to men. Yes, I am, Ed. I'm trying to portray you in a better light here. We definitely changed altitudes pretty quickly there. Do you want to stay on sucking dick? You want to remain there for a little bit longer? Let's try and pivot out of that. Even I'm feeling a bit cringed out right now. Even I'm feeling a bit cringed out. All right, back to me and my virtue signaling.

2:51What would you like to know, Ed? You know me, I don't like to talk much about myself. What's on your mind? Well, I think you should just talk about it. I shared it on Twitter, which you're not on, so you didn't see this, but I just sort of gave you a little shout out for putting your money where your mouth is. That's nice. That makes me feel good. And people just loved it. I mean, it's gone, I wouldn't say viral, but semi-viral. I think people are just very, very impressed with that donation. So maybe explain what it's for, what you're doing. I just like when you, yeah, follow through with your ideas, is, and that's what you've done here.

3:26Okay. Well, first of all, thanks for asking. So it's a lot of things. It's a culmination of a lot of things. One, it's an overdue nod to the generosity of California taxpayers that gave me a shot. The reason I'm here with you today is the generosity of California taxpayers and the visions of the Regents of the University of California. I'm not being humble. I'm a remarkably talented person, but without the certification contacts and job opportunities that I got from the University of California, I just wouldn't be here. And the thing about UC back in the 80s was that it was not only affordable, it was accessible.

4:01Yeah, 76 % admissions rate,$1 ,200 per year. And I feel that people who are successful and have gathered some wealth have an obligation, especially UC grads, to try and return it to that level of affordability and accessibility. In addition, I saw an opportunity, and that is we have this incredible infrastructure across the UC campuses. We don't take advantage of the facilities at night or during the summer. And also, our product hasn't evolved. Not everyone should be shoved through a traditional four-year liberal arts degree. And because five people are leaving the trades for every two that are going in over the next 10 years, we've seen a dramatic escalation in the salaries and compensation of plumbers, electricians, cybersecurity professionals, specialty nursing, specialty construction.

4:47So I approached the chancellors at UCLA and Berkeley and said, if I funded a program that was more vocational in nature, that gave maybe young adults and adults a chance to take courses, very specialized courses over the course of a year, that gave them access to this incredible upswell in compensation and job opportunities in the main street economy, would you be interested? And they were interested and they were very generous with me, even though they hate using the term vocational. So we talk about nontraditional students. Why do you think they hate the term? Does it just sound not elite enough or something?

5:19Yeah, I think they see themselves as wanting to, higher education is about giving a kid a chance to explore different disciplines such that it rounds out the kind of the brain as a muscle, whether it's history or philosophy. And that maybe our junior colleges or other trade schools are really for that, that that erodes kind of the mission and somewhat of the elite status of higher ed. So they are very, they have been, that was the hardest part about this gift was getting them to somehow move to the notion that we need to offer an opportunity here over one or two years that would help kids have the skills that foot to the main street economy right now.

5:57And my vision is I want it to be free and I want it, I don't want there to be an admissions process. I want it to be, if you're smart, not even smart, you're a good person who wants to be a part of our economy, wants to be in the middle class, wants to, or higher, wants to pay taxes, but isn't cut out like two-thirds of Americans for a traditional four-year liberal arts degree that you have opportunities. And, you know, free and accessible. Those are my two call signs here. But this is, I'm super excited about it. Both UCLA and Berkeley were really supportive of the idea. and also for me, it's not even philanthropy.

6:33It's consumption. It makes me feel really fucking awesome. I feel like a baller doing it. I think I'd have accomplished another goal, which is that many of the comments I saw on Twitter were, I didn't know Scott had$12 million. I have$12 million and one. It's all gone now. That's what I said. Someone said, how much does he have? I said, more than$12 million. It's super exciting. I'm happy to be, you know, I don't know, dad. It's like you get to a point in your life and what I want to do is I love the difference between an opinion and a principle or a value. And the difference between an opinion of which I vomit out to everybody on this and other podcasts is that, okay, are you really passionate about struggling young men?

7:17I think I am. Well, it's an opinion or is it a value? I'm really passionate about higher ed and making it more affordable and accessible. Well, is that just an opinion or is it a value? And the way you show it's a value is that you sacrifice for it. And so I'm sort of overdue closing the gap between everything I say and everything I do. I need to, you know, I definitely talk the talk. I need to walk the walk more. And this is an attempt to do that. And with that, let's share our opinions on the news. Let's start with a weekly review of Market Vitals.

7:52The S &P 500 had its worst stay since 2022. The dollar was flat, Bitcoin declined, and the yield on 10-year treasuries fell. Shifting to the headlines. Google reported second quarter earnings beating analyst expectations on the top and bottom lines. Operating profit crossed$1 billion for the first time ever. However, the stock still fell 5 % due to concerns over heavy AI spending and slowing YouTube ad sales. Louis Vuitton and Dior owner LVMH reported only a 1 % increase in sales for the second quarter. That is its lowest growth rate since 2009, excluding the pandemic. Sales for fashion and leather goods also only rose 1%, nearly half of what analysts expected.

8:31The stock fell more than 4 % following that news. And finally, Spotify hit 246 million premium subscribers in the second quarter. That's up 12 % from a year earlier. Those subscriber numbers helped deliver a record profit of just under$300 million. Spotify stock rose as much as 16%. Scott, your thoughts, starting with Google earnings. I've been thinking a lot about Alphabet, and I wonder if they're still sort of semi-stuck in the innovator's dilemma. And that is the company's LLM, Gemini, gets about an eighth of the traffic of ChatGPT. When you think about the captive audience they have between Android and search and the fact that a lot of the IP for AI was actually developed at Alphabet, have they really turned the fire hose of their, you know, three billion captive consumer base to Gemini?

9:25Or do they want to have their cake and eat it too? And that is the majority of the AI efforts I have seen from Alphabet have been in the context of a Google search and it has that kind of summary at the top. But I haven't, I don't feel like I've had that much marketing or that much incentive to use Gemini. And I wonder if it's, they're still sort of protecting or not going full force. They don't, they're not, they haven't, in other words, they haven't burned the boats, so to speak. And they're busy sending out$23 billion offers to Wiz and buying back shares and issuing dividends. Yeah. Their capbacks got hit hard this quarter.

9:57And what struck me, I immediately thought of Apple that's so smart not getting into this arms race. They're just going to make sure they own access to the billion wealthiest consumers. And then they're going to charge someone like Alphabet or OpenAI a ridiculous amount of money to be the AI of iOS. But their capbacks hit$13 billion, up 91 % from a year earlier. Their total capbacks this year could be around$50 billion, which would be 84 % higher than when the company has averaged annually over the past five years. I got to think most of that was on AI, which was mentioned, get this, 89 times on the earnings call.

10:32YouTube, you know, ad revenue still climbed 13%. So I think it's pretty striking. The thing we have to remember here is that Alphabet, and this is our big tech stock pick of 2024, so I've been tracking it. Microsoft year-to-date is up 16 % for all of the excitement about that stock. Amazon's up 21%, but Alphabet ad is up 25%. So they're doing really well. And it just strikes me when the analysts zero in on the negatives here, but the company is still doing really well. What are your thoughts? I completely agree with you. I think people are so obsessed with this idea that they're behind on AI, which is probably true when you compare it to Microsoft.

11:13But as with anything, you have to look at the big picture here. And the big picture for Google is extremely compelling. Search revenue is up 14%. People thought that chat GPT and AI would be eating into that revenue. It hasn't hurt it at all. In fact, you know, search is chugging along just fine, better than fine. Cloud revenue up 29%. I think that was expected. And as you mentioned, the YouTube revenue, people didn't like the 13 % jump in YouTube revenue. It's coming off an insanely high base. And I think they're just comparing it to the previous quarters where they were getting 20 plus percent growth, which is already insane.

11:53I just want to point this stat out. YouTube ads, just the ads alone, they are now bringing in on an annualized basis,$35 billion per year, which is higher than Netflix's total revenue last year. And it doesn't even include all the paid subscriptions that they get from YouTube Premium and YouTube TV. So I just think it's remarkable what YouTube has done. We have been saying this for a while. I continue to believe that YouTube is the most underrated media asset in the world. And I think if you just stack all those things up, there's so much reason to be optimistic about Google. Well, the market agrees with you.

12:34And I've always, the thing I've said about Alphabet for a long time is that it has the greatest concentration of IQ since NASA. And the team of the best players wins. And Alphabet consistently finds, attracts, and retains some of the best players. It's an incredible company. I think you have to admire their management and what they built there. As we went to LVMH, thoughts on these earnings that were a disappointment? LVMH is sort of the, quote unquote, bellwether for luxury. And what's ailing them is kind of it's ailing every luxury firm and that is that asia or specifically china is no longer the gift that keeps on giving and if you were overexposed to china it was champagne and cocaine from like 2000 to 2018 and estee lauder went through the roof and you know north face it took north face i think 20 years or 30 years to get to a billion in sales it took them 18 months in china i mean the shit was just selling before it even got offloaded from ships, right?

13:39And last year, it's about one in six purchases globally of luxury happened in China. But the Chinese economy is showing signs of weakness. High net worth families in China reduced their annual spending by 11 % last year. And you want to talk about just an incredible shift in fortunes. Chinese stocks have lost$6 trillion over the past three years. That's twice the GDP of the United Kingdom. The S &P over the last five years has doubled. It's up 100%. India, 65%. Japan, 25%. Europe, 24%. China is down 30%. So if, I don't know what it was, if China was 10 trillion and we were 25 trillion, we went to 50 and they went to seven.

14:20I mean, LVMH gets about a third of its revenues from China. So if that's down 15%, that means overall revenues are going to be down 5%. I wonder if it's a buying opportunity. It's such a well-run company. They have such incredible brands. But this is just simply put, their biggest customer doesn't have as much money as they used to. I'll also add, it's very interesting. I think this is another nice example of these ripple effects that we often talk about in the markets where what started out as basically a real estate crisis in China that began with Evergrande has morphed into a larger issue in China.

14:56It has reverberated throughout the world, and it's now worming its way onto the income statement of a French luxury fashion house, which is LVMH. And so it's a very interesting dynamic going on here. Having said all that, I think your point that it could be a buy is a good one, because this company is not in crisis. I mean, the stock is down this year, you know, down 10 % year to date, coming off some crazy highs where you saw, or no, becoming the wealthiest man in the world. So yeah, I don't think this is an organizational issue with LVMH. This is a regional issue. It's a problem with China. So, but let's just look at the stock.

15:36Over the last five years, the stock's up 66%. I mean, it's just, and then the one that just absolutely flummoxes me is Hermes has a market cap of 213 billion euros, which is about 240 billion. Unbelievable. So I think luxury is going to continue. I think it's ridiculous. This notion that young people aren't as fascinated by luxury as my generation and their ability to command margins once they get to sort of that iconic status. And they also, and I'll wrap up here, they have an incredible moat because the majority of luxury brands have a heritage. You just can't spin up heritage. You can have a brand like supreme that becomes aspirational for a while but these brands you know panerai was initially crafted for italian uh submariners i mean this shit is just louis vuitton trekked into paris on barefoot and said okay it makes no sense that these carriages are carrying suitcases that are rounded at the top and have leather that attracts moisture and mold so he came up, luxury is really rooted in innovation.

16:43I think it was, was it L 'Oreal or was it, I forget who initially, it was a German chemist who went to the fields of the south of France and found a way to crush these flowers and turn them into a fragrance. I mean, this shit, it really is rooted. It was innovation before there was innovation as we saw it in terms of technology was in fact luxury. Anyways, that's my rant on luxury. Coco Chanel defined luxury as the following, luxury is a necessity that begins when necessity ends. I thought that was sort of the perfect encapsulation and a great explanation of why, yes, we will always worship luxury no matter what we say.

17:22We'll find a way to find necessities when necessity ends. Yeah, she also said the opposite of luxury is not poverty, it's vulgarity, which I love. And she also said, I love that Nazi dick. She said that too and she said that too okay is that fair is that fair it's pretty easy to tell i'm no longer working for a company that caters to luxury brands by the way chanel's an amazing company with amazing people sorry about that yeah that's why you're getting sent clothes from nike and not louis vuitton i've used chanel moisturizer i use chanel blue it's what i bought actually when my son was headed back to boarding school i always do a little bit of a shopping ritual for him and I'm like, this shit is gangster.

18:05You got to put a little of this on. And I use Chanel Blue moisturizer. Anyway, it sells lovely. Masculine yet feminine at the same time. It's fascinating. I'm glad everyone's getting to hear this. Let's move on to Spotify, who had a great quarter. Monthly active users up 14%, revenue up 20%, profits up 45%, record profits for the company. Your thoughts on Spotify? If you think about what Spotify has accomplished, it's singular. They've taken an entire medium and distilled it to a single icon on your phone that is searchable and very user-friendly. No one's done that in TV. No one's done that in books.

18:44I think it's a great value. I think they do a fantastic job. In some, I think it's a great company. And they were also pretty bold. They went all in and gave the artists and labels a disproportionate amount of the revenues. They basically lost money. They were more like a collective or cooperative, just taking money and distributing it to the record labels and the artists. But once they got scale and once they kind of not consolidated the industry but had a large enough share where they could start, they had the pricing power to improve or increase prices and their subscribers didn't go down. And basically, essentially what they have figured out is that they have more pricing power than they thought.

19:17And despite increasing prices, they have increased their revenue. So revenue from premium users increased 21%. And premium subscribers accounted for 95 % of Spotify's gross profit over the last 12 months. The thing that doesn't work or the thing I saw in this earnings call or in these numbers is I think both Netflix and Spotify, I think the advertising does not work for them. And I remember being like in 2000, like the early 2000s, I think I was on a date or whatever. I had some people over and I was trying to impress these people and I was at my loft. I know it's horrifying to think of me as single.

19:57and I remember I had music on and you know things were going really well and all of a sudden it dawned on me like some really bad ad for like pets.com or something came on and I'm like oh my god no one's ever gonna have sex with the ad supported Pandora guy and I literally thought having ad supported Pandora was just gonna ruin no matter how many panoramas I had or how I was I was trying. When the pets.com ad comes on on Pandora Radio, it's over. Everyone's like, well, it's getting late. It's getting late. But what I saw in the Netflix earnings call and in this one is that it's just the ad-supported ecosystem is having a really difficult time.

20:42I think it gets in the way of storytelling. And I think this earnings shows just that basically it's subscribers that are, what, 95 % of Spotify's gross profit. One other thing I found really interesting was how the CEO, this guy Daniel Ek, announced these earnings. And that is before the official earnings call, he posted on Twitter and on Instagram what was essentially like a TikTok video. It was like a two-minute selfie video where he just spoke directly at the camera and ran through all of the headline numbers in the earnings report. I think he started doing this around Q4 of last year. This is kind of his comms strategy.

21:22I'd like to get your take. I will just say, I think it's such a good idea because in a weird way, the way most people consume earnings news, it isn't actually from the company earnings calls. It's from media companies. It's from like CNBC or the Wall Street Journal, or even you might get it from listening to this podcast. You're rarely hearing from the CEO, but this strategy is such an obvious one. Just post directly to social media. That sort of fixes it. you know it's a small detail it's a small innovation but i would predict that this is going to become the norm i think you're going to see lots more ceos posting on social media these selfie videos about their earnings in the next few months i think that's really interesting i didn't know that you can see them bypassing kind of the analyst industrial complex or the cnbc industrial complex and doing a video uh kind of timed well choreographed tweets and then maybe doing like Instagram live to do their analyst calls, right?

22:20To say, all right, I'm going live to answer your questions. There's some choreography around SEC and, you know, when you release non-public material information that they got to be careful of. But I think you're right. I think that that might be, because what you want is you want to get more people just as you want to garner more consumers. A consumer brand wants to get new consumers into the franchise, get new customers. The company wants to get new investors. And they also, what never goes out of style is they all want to be known for having an innovative product that's differentiated and that they're good at what they do and they're competent.

22:56But what they really want more than anything is they want some of that innovative pixie dust poured all over them. So communicating your earnings via a video that's posted to YouTube and then spliced up for TikTok or what have you, and then doing some of this live stuff on some of these platforms, that just sort of screams of innovation. Yeah, I can't understand how PR firms or PR teams, I should say, at these public companies haven't gotten on this. It's weird to think this, but I would bet within five years, 10 years max, a key component of your boards deciding whether they make someone CEO is how strong is their following.

23:34Basically, as the CEO, your job is to attract and retain the best talent and set a vision for the company. But as much or more than anything now, it's your ability to tell a story or craft a narrative that results in access to cheaper capital such that you can invest at a greater rate than your competitors and pull away from them. Anyways, I'm 100 % with you. And I would bet you're the next generation of CEOs are ones that come armed with pretty decent followings on social media. We'll be right back after the break with a look at Tesla.

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