Tokenizing the Private Market & NYC’s Housing Shortage 7/1/25

0:00Bring in show music, please. This is Squawk Pod and I'm CNBC producer Cameron Costa. On today's episode, New York real estate developers are nervous about mayoral candidate Mamdani's agenda. But RxR CEO Scott Reckler is one developer still not convinced that he'll win. New Yorkers who come here for opportunity that this is the capital of capitalism. I think, you know, they're going to come out and say, I don't want a socialist for mayor. Apple weighing AI partners for Siri. Steve Kovach explains the future of tech assistants and tech giants. This is the stickier ecosystem. That's what I'm going to say right now.

0:41If you ask me that right now. Right. You're going to ask Siri more than you're going to go in and open the ChatGPT app. Plus, the push to expand trading beyond the public markets and open private companies like SpaceX up to retail investors. Co-CEO of Republic Andrew Durgey is doing just that, and he's using the blockchain. We are giving people an opportunity to participate in a very limited capacity in something that they've been kept out of previously. But there could be a legal reason why pre-IPO access for unaccredited investors isn't more common. What you're doing is effectively at odds with what the law is intended to do.

1:21It's Tuesday, July 1st, and Squawk Pod begins right now. Stand Becky by in three, two, one, cue, please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. We're live from the NASDAQ market site in Times Square. I'm Becky Quick, along with Andrew Ross Sorkin. Joe is out today. The Senate working all night on President Trump's tax and spending bill, voting on dozens of amendments as GOP lawmakers raced the clock to try to get things done. By Independence Day at the end of this week, Emily Wilkins is with us. Have you been up all night? You know, Andrew, I did get a couple hours of sleep, but I have been up for a few hours now just reviewing everything.

2:03Because we actually did kind of expect that there could have been that final vote by now. Instead, we got the voterama entering its 21st hour. As Senate Majority Leader John Thune and GOP leaders, they're continuing to negotiate with a handful of holdouts, trying to make sure that they're able to actually pass this. Now, concerns remain both from fiscal hawks like Ron Johnson, who are very worried about the cost of the almost$3.3 trillion bill, as well as from senators who want to protect Medicaid. Your Susan Collins, your Lisa Murkowski's. Murkowski was actually just in Thune's office chatting with him.

2:37Now, so far, there's been one major change to the bill, that AI moratorium on states that is out now. The end of the ban came after Senator Marsha Blackburn. If you remember yesterday, she struck an agreement to soften the limit. But last night, she changed course, announcing she could not go forward with that new language that has been stripped from the bill at this point. Now, we are still waiting to see if several other amendments get offered. They could also change the outlook on the bill. One from Senator Rick Scott would shift some federal Medicaid costs to states. And then another from Senator Joni Ernst would allow more wind and solar projects to potentially qualify for some of these tax credits.

3:17Also, an amendment from Mike Lee that was a bit related. It would have completely stripped wind and solar tax credits. It was actually voted down by Democrats and a majority of GOP lawmakers. So maybe some interesting writing on the wall there. Of course, further complicating all of this is Elon Musk. He has continued to rail against the bill. He tweeted yesterday that every member of Congress who campaigned on reducing government spending and then immediately voted for what he's calling the biggest debt increase in history should hang their head in shame. He then went on to say they will lose their primary next year if it is the last thing I do on this earth.

3:56And look, apparently Elon Musk has been up all night, according to his ex. He says he's starting to make good on his word that he donated or will donate to Thomas Massey's campaign in the House, of course, someone who's been a big holdout on this bill. And that's even a reminder that if the Senate is able to pass this bill today, they still need to get this over in the House, where we know there are more concerns over there. So, guys, a lot to do between now and July 4th. And I think some serious doubts creeping in whether or not they're going to be able to get this done in that timeline. So we have two issues.

4:29We have the timeline issue. And then there's a secondary question which relates to the timeline issue. With an Elon Musk out there saying effectively that he's going to help try to primary people, does that actually change the dynamic at all? You know, I think perhaps for some of the fiscal hawks in the House, particularly House members, that something like this can really make or break it. You have to be cognizant of that if they find a primary challenger to back, if there's someone that Musk is really willing to put a lot of money forward on. I think it depends how much Musk actually wants to get involved.

5:00Because, of course, as we've seen previously, when it comes between Musk and Trump, members have tended to stick with Trump, which is also another question. How much does Trump ratchet up the pressure on lawmakers to get this done? Does he come to the Capitol? So I think a lot of dynamics that still could play out within the next 48 to 72 hours. But that's kind of the case. Some of these are caught in a damned if you do, damned if you don't. If you vote for this, Elon Musk is threatening to primary you. If you don't, the president is threatening to primary you. Yeah, Becky, it's kind of a tough situation right now.

5:34And I think one that some Republicans, I'm thinking of Mike Johnson, were really hoping to avoid on this particular bill. I think, to be honest, a lot of lawmakers, they do want to get this done. That's what I've heard from folks, including for some of the holdouts on this one. But the fact of the matter is that if you're really passionate about a particular issue, be it making sure that Medicaid is in place or really lowering the debt, this, if you're a Republican, is really your one big last chance for years, potentially, to be able to make this kind of a change. And with margins this narrow, again, it really does not take that many lawmakers to dig in their heels and to actually delay things.

6:14And again, I've heard from a number of folks on Capitol Hill who would be perfectly fine with bringing this past the past the July 4th deadline, debating this and negotiating throughout the month of July and then trying to get something done before they go into recess. Remember, this July 4th deadline, it's it's been touted a lot. It's been talked about a lot. But at the end of the day, the real deadline is when we hit that X date on the debt limit. And that's likely not coming until August or September. Emily, just just to belabor the point, maybe when I asked about the Musk piece, not so much.

6:47Will he be able to primary them? Is what he's saying publicly today going to have any effect on them? It's a good question, Andrew. And I think at this point, the people who we know are the holdouts, we kind of knew we're going to be raising some concerns about this before. So there's not anyone who I've seen so far who has actually been swayed by Musk into voting no when they might have voted yes. However, knowing that they might have the backing and support of Musk might lead for some of these lawmakers to dig in a little bit more. I think this is particularly a dynamic that I'm watching for more in the House rather than the Senate.

7:23There's just a different dynamic there when it comes to reelection campaigns. And so for Musk, it might have more of an impact on House members. But I also think a lot of House members are just waiting to see what the Senate does. Obviously, if that Rick Scott amendment on Medicaid gets through, that's going to change a lot of the math around this bill. But it could also change a lot of the math around the votes. And I think members in the House know this. And so there are a lot of folks who might have concerns, but they're not being public right now. We can't really see exactly what impact Musk is having because we haven't actually seen the final bill.

7:58Emily, I want to thank you. We'll be talking to you a lot more over the next, well, not just 24 hours, but sounds like the rest of the week. And we'll see whether it continues. Elon Musk also highlighting a post from billionaire investor Ray Dalio. Dalio wrote on X last night. There's no way that the deficit and debt bond problem can be sustainably dealt with unless there is a mix of tax revenue increases and spending decreases that are determined in a bipartisan way. Our representatives in Washington, D.C., both Republicans and Democrats, know that this is true. Dalio goes on to say that today's lawmakers feel that they can't agree to a bipartisan solution of tax revenue increases and spending cuts because their constituents and their parties would throw them out of office.

8:41He said, to me, that's a tragedy. But it is kind of interesting how all the negotiating that's taking place is bipartisanship within a party, right? Trying to pull one side of the party together. It's not just today. This was the same thing that happened when Obamacare was passed. You have seen over the last 12, 15 years or so a much bigger swing where there's not a whole lot of bipartisan activity. Seems to be the case. Wrangling the ends of your own party spectrum. Ends of your own group. Yeah. Meantime, talking about Elon Musk, his artificial intelligence company, XAI, raising a combined$10 billion that's both in debt and equity.

9:21Morgan Stanley saying that$5 billion was raised through some secured notes and term loans. Another$5 billion coming in from strategic equity investments. In March, you might remember, XAI was valued at$80 billion. Morgan Stanley saying the new debt offering was, quote, oversubscribed and included prominent global debt investors. Apple shares jumping yesterday on reports that the iPhone maker is considering using outside partners to help power Siri. This could be a big reversal after AI-powered updates to the personal assistant were delayed until 2026. Steve Kovach joins us right now with more on this.

9:58This is a huge issue just historically, what it is for Apple to not develop this in-house if that's what's going to happen. Yeah, and I have a different way of looking at it. Like, yes, you can look at it if they have to go this route, Becky, that maybe you could say they're falling behind and they couldn't do it in-house. That's all true. But also the reason why we saw the stock go up 2 % on this news yesterday was that this kind of gives them insurance. If they can't build it in-house, they can still meet their new deadline of 2026 and kind of avoid another embarrassing delay. So what Bloomberg is reporting, that if they can't build out this model, Apple's going to look to third-party partners.

10:31Right now, it sounds like Anthropic is the leading contender to power the engine underneath this AI Siri to replace that Apple LLM that they've been working on for a number of years. Now, OpenAI is another option there. And this would also just give Apple a little bit more breathing room to get this out on time. The last thing they need to do right now is miss another deadline. We saw what that did to the stock. Tariffs, of course, hurting the shares this year as well. It also helps Apple do this in a sort of less capital intensive way. We just learned overnight that XAI is raising$10 billion.

11:06And then we also heard yesterday that big investment that Meta is putting in AI, spending$14 billion to bring over the CEO of Scale AI to run that new group. And just all the billions they're spending on CapEx, all the other peers and big tech spending the billions as well. this would just be a sort of discount on all that. Well, can I ask you about this discount issue? Yeah. So if, of course, Claude, for example, which is Anthropics service, is the model, there's going to have to be an enormous investment to license it. And not just to license the software, but to actually run it. Right. Because the actual processing costs of running every single query and every prompt is a real thing.

11:48Yes. So when people say it's a discount, I'm sort of always at a little bit of a loss because I don't really understand. You need the same number of data centers. And by the way, you may need even more given with a billion iPhones out there. And who's going to pick up that cost? Well, I look at it a different way because look at what Perplexity is doing. Perplexity also builds its app on top of the technology from Anthropic and OpenAI. They're not, yes, they charge you a little bit for it, but they're not spending enormous amounts of money on capital expenditures and so forth as well. So I look at it more like that relationship.

12:21You take the technology foundation and put your own little magic on top of it, so to speak. That's what Microsoft's doing that with Copilot. We see it being open AI models. We see it done with perplexity. Perhaps Apple thinks you can do it here. And by the way, run it on its own servers. Apple's not going to want to run this thing on a server from Amazon or Google. They're going to want to run it on their own. Exactly. They have their private cloud system. So there's two other related questions. One is a privacy question, which is one of the things that Apple's been trying to do quite unsuccessfully is do all this on device.

12:54Part of what it's wanted to do the whole time is on device. Which is impossible right now, by the way, for everything. And so the question is, how are they going to live up to the quote-unquote promise of on-device style privacy in a cloud world? Yeah, and that's what they do. That's the private cloud system. They announced this last year, and they did launch it. So to their credit, it's doable. It's happening right now. So when you use Apple intelligence right now and stuff that's running in the cloud, that is done in a private way. And if you don't believe them, they're actually letting third party researchers come in and test their test, whether or not that's true.

13:27And then the second piece is assuming it's clawed and not open. Yeah, that seems to me to be a big quandary for a company like an open AI for the following reason. Right now, for example, I use ChatGPT a lot. It has memory. I'm a paid customer. There's a lot of benefits to being in the ecosystem because it's able to pull from all the things that I've been doing. If I start using Claude, I imagine, or if I'm using Siri, I imagine I won't be using OpenAI. Right, you'll switch. There's a binary situation here. It comes with the ecosystem. So you're going to have to convert some of those people over.

14:07But at the same time, the way I'm interpreting it. Do it now, and OpenAI loses its big edge. It does, but I don't see this as so much a bolt-on. Right now, ChatGPT is a bolt-on to the iPhone, right? If you ask Siri a question, it gets confused. It kind of kicks you to ChatGPT. This would be kind of the underlying foundational model, again, like you see with perplexity. Right, but my question is, therefore, what happens to all... Oh, all those OpenAI users, you mean? What I'm saying is all the OpenAI users who are on ChatGPT, if they decide for whatever reason, you know what, I like living in the Apple ecosystem, it's easier for me to say, hey Siri, I shouldn't have done that.

14:41I apologize to everybody who's watching if I just lit up your phone. That's not a good thing. No, it's not. And by the way, ChatGPT had that huge benefit of working on the iPhone, having that huge exposure. It's not a good product, though. It's not a good integration. So they need something that could be better. By the way, they started with ChatGPT, that integration. They said it's the best one out there. That's why we're starting with it. We'll eventually open it up to more models. They haven't done that yet. All right, let me ask you both this. How much of an edge does OpenAI have right now?

15:11And how cemented is that edge? Well, it's by far the most used. If you look at the user numbers compared to Claude and OpenAI, I mean, it's not even close. But how cemented is that, I guess? Right. I think at this very moment, and part of it is the memory, it's a better product today because, again, there's a network effect. The more you use it, the more you use it. The better it gets. And that's Apple's proposition, too, by the way, because you have all that on your phone already. That is the issue. And then you have Johnny Ive. Well, we'll see what Johnny Ive does with this other device. I mean, that's the other piece of it.

15:45Which is the stickier ecosystem, I guess, would be my question. I think this is the stickier ecosystem. That's what I'm going to say right now. If you ask me that right now. You're going to ask Siri more than you're going to go in and open the ChatGPT app and do all that. What if it's just right there in Siri? Just push one button and talk to it. I don't feel like leaving this because of music and photos and everything else. And again, that's the proposition because all your stuff is either on your phone or in this private iCloud, and it can kind of tap into that. And by the way, third-party apps as well.

16:12Now, we're old. If you're younger, maybe you're a more open audience. That's possible as well. Because you haven't built up the fortune that you're using. Yeah, but you still have all your contacts. You still have all your photos. Here's my only other question. You know, when you've talked to the folks, for example, at Amazon with Alexa, they were always very nervous about using one of these big LLMs that's not their own. Because their view is, if you ask it a question and it turns all the lights off in your house, or if you ask it a question and you ask it to buy you batteries and it sends you the wrong batteries, that's like an actual problem.

16:45And that people have come to expect a certain level of excellence. And anything less than that, a hallucination, something going wrong, is something that would be considered unacceptable given the history that people have had with the product. And I guarantee you Apple is hyper-aware of that. And so that is part of the reason why it's never launched in the first place. And so that's the question. Even when Siri doesn't work, right, there's a time when Siri isn't great. Yeah. But it's not doing things that are great. But there's very few times it's doing something that's, like, fundamentally wrong.

17:16Right. Or give you the wrong answer. Well, sometimes it does give you the wrong answer. But whereas these do, yes, you're correct, they hallucinate. They kind of have a sycophantic posture where they try to tell you what you want to know. Do you think that the public, the Apple public, if you will, would accept more of the kind of answers and whatever challenges those answers pose coming out of a chat GPT? It'll be less accepting, I think. I think that the standard is higher on an Apple product. I'm kind of used to it when I'm using any of these large language models. I'm used to a certain amount of it.

17:47I think I might have a little more. To double check it, you mean? But most people, people use this thing as their therapist and their best friend and, you know, fall in love with it and stuff like that. I mean, but so, I mean, people view these as gods almost. And so you've got to kind of, you've got to take that. I know you shouldn't. What is wrong with us? Do not use this as your therapist. Use your therapist as your therapist. Do not use it as your best friend. Right, exactly. But people do that. And so there is that level of trust because it's like AI. It's supposed to know everything. But it doesn't.

18:14You've got to double check it. I have a little prompt I can help everybody with. that's actually, I did it a couple weeks ago and it's changed a lot for me. I say, tell it, if you are a paid user in ChatGPT, tell it, remember this. Oh, I do that, yeah. No, but all answers must come with a citation and a link. Okay. Oh, I like that. If you do that for any fact. Yeah, you get a lot less garbage. So I do that. I tell it. It changes a lot of things. I say directly, search the web for yada, yada, yada, whatever I ask it. I do that. But I like that moving forward. just do that. That's really good. And I've done that.

18:50And I will tell you, it's a, it always does it. It listens to you as long as it's a, it's looking for facts. If you're asking about facts, it seems to know the difference. You have to say, yeah, I usually just direct it, say, give me links on the web. I like in my query, but that's, but to do it all the time. Yeah. Just tell it all the time. And then it starts to do it. I'm going to do that in the commercial break. Okay. Thank you. Thanks guys. Cheese will be next. Next on Squawk Pod, real estate and real consequences of Mamdani's platform. Real estate developer Scott Reckler weighs in on the Democratic mayoral candidate and whether higher taxes could mean more departures from wealthy New Yorkers.

19:29I'm not leaving the city. I'm here. I think under fringes, you will lose some people that might leave the city, and we've seen that. It's basically our top 1 % makes up 40 % of our income taxes, so you've got to be sensitive. Well, that's what I'm saying. It's the billionaires you're losing. That's a big problem. That's a big problem. Plus, how many of Mamdani's campaign promises can he really deliver? We'll be right back after this break.

19:57You're listening to Squawk Pod from CNBC with Becky Quick and Andrew Ross Sorkin. Joining us right now for a conversation about real estate, local New York City, mayoral politics, and so much more, RxR Chairman and CEO, Scott Reckler. Good morning to you. I think we're all trying to figure out what's going on with the real estate market in New York City. But I think the overhang or overlay to all of this is what's just happened in this mayoral election. And I think a lot of people are surprised about it. And I know a lot of people in your business seem to be anxious about it. So what's your take?

20:30I'm not really anxious about it. I was surprised about it. But you've got to put it in perspective. And there's really two things. One, Mdani, he won the primary, right? And he was actually able to appeal to a very passionate, disenfranchised group that came out in big numbers. Now we have a general election, which is going to broaden the amount of people that actually vote in this election. And I think New Yorkers who come here for opportunity that this is the capital of capitalism, I think they're going to come out and say, I don't want a socialist for mayor. So you think he's going to lose?

20:58I think that when the general election, I think he's going to have a very hard time. Here's a city that has more Jews in the world than anywhere else but Israel. and we have a mayor candidate, a Merrill candidate, who basically has condoned anti-Semitic remarks and is anti-Israel. I don't think New Yorkers won vote that up. He won almost half a million votes in the primary. In the last general election, only 1.1 million votes. And I think this... You think there's going to be a 2 million turnout? I think what's going to happen, I think there'll be more passionate people that will come out for this election than they have in the past because this is very different than what New Yorkers have had before.

21:30What's so interesting is you had basically white, wealthy voters in New York voting for him. So it's a very interesting dynamic. There's no doubt. But I think, you know, I think part of it is was the nature of the campaign. We've seen this, by the way, throughout the country. Right. And I believe it. Right. There's there's a level of disenfranchisement for a lot of young people. The cost of living has gotten, you know, way over the top here. Right. You know, the widening inequalities. These are real issues. Right. So I agree with his diagnosis, but I don't agree with his prescribed policy. I actually want to ask you about the I'm going to prescribe policies for a second because we were talking about this yesterday, and I've always said that I would love to make this city more affordable.

22:09I think everybody wants this city to be more affordable. By the way, there are a lot of cities that need to become more affordable. The question is, to your point, how do you get there? Right. I think it's building more. I think you just need a lot more buildings, which I assume means a lot more permitting, which means getting a lot of the red tape out of the way, allowing certain buildings that people don't want to go down to go down and go up, the whole thing. That's right. What is your prescription, given the business you're in? And how much could that actually change the dynamic? And you're 100 percent right.

22:40The way you deal with the housing shortage is you need to add more supply. And if you look around the country, places like Austin, Texas, you haven't seen the spike in rent that we have here. We have a one and a half percent vacancy rate. You need to build, build, build, and you need to build at every level. You need to build for public housing. You need young professional housing, luxury housing. And the problem is that most people in your business would prefer right now, to the extent they can build it all, they want to build luxury housing. Right. But there's a higher margin. There's good policies that could be put in place to change that.