Prof G Markets: Tariffs Blocked by Court, U.S. Steel’s Golden Shares & Neuralink’s Funding Round

26:41And now that the AI race is happening, well, All we know is both countries are going to develop AI at an exponential pace. And that's a scary concept. So do we want to live in a world where we're friends or adversaries? What Patrick also said that kind of opened my eyes was he said that U.S. companies are run for profit, whereas the priority for Chinese companies is control. National unity as well. They're not as worried about, if we don't mint as many billionaires, that's fine. We're not in the business of minting billionaires. We want companies to be profitable. We want people to make money here.

27:21But we're in the business of what we think is best for China, which is that we stay in control. And long term, it's debatable around whether that's not the best strategy for national security. The flow of IP is one way. We need to get better at that. That's, I mean, the IP theft is unbelievable. Well, Trump's to his credit, I think his instincts are right on a lot of this stuff. I think there is trade asymmetry. I agree. And the fact that none of our media companies are allowed in there and we let TikTok into our, you know, there's just some things that just are blatantly wrong. But the way he goes about it, it doesn't make, you know, doesn't make any sense.

28:05We'll be right back after the break. And quickly, as a reminder, we are going daily starting next week. And that will only be on the Prof G Markets podcast, not on the Prof G Pod podcast. So be sure to give the Prof G Markets podcast a follow. You'll be getting the most up-to-date episodes from us. And it'll be happening every weekday, Monday through Friday.

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30:08We're back with Profit Markets. After more than 17 months of delays, the acquisition of U.S. Steel by the Japanese company Nippon Steel is finally moving forward. President Trump gave it his stamp of approval, calling the deal a, quote, partnership rather than an acquisition. And he also noted that Nippon will invest another$14 billion in U.S. Steel over the next 14 months. The deal had faced strong opposition from both Trump and Biden due to union concerns and national security risks. But support grew after the addition of a golden share provision, giving the U.S. government power to approve key board appointments and prevent cuts to production levels.

30:48Scott, we've been following this story for a while. We talked about it back in September when Biden blocked the deal. You'll remember Nippon tried to buy it and then Biden said no. He cited the national security concerns, which was fake. All the reports said, no, there's no national security risk. The reason he blocked it was because the union workers who worked for U.S. Steel, they didn't like it. They were concerned they would lose their jobs, and Biden wanted their support. So he said, no, you can't do the deal, and he blocked it. So let's listen to your comments from back then. This is a mix of xenophobia, ego, and pandering to unions.

31:27This is stupid. If they were making air filtration systems or airbags, they'd let the deal go through. But because Steel, for some reason is seen as Pittsburgh and a part of America. We need steel to build buildings. They want to get in the way of it. I'm sure unions are trying to convince them that this is a bad idea. This deal should absolutely go through. Now we're at a place, I mean, what was interesting was Trump agreed with Biden throughout all of this. He was very against Nippon buying U.S. steel, I think, for the same reasons you just outlined there. But now he's letting it go through so long as the government has some level of control.

32:01And that control is coming in the form of this golden share. So that's where we are today. The deal will happen. Nippon will buy U.S. steel, but the U.S. government gets a golden share. Your reaction, Scott? There's no reason. There's no sort of strategic threat here. And the only argument is, well, our steel industry has strategic importance in case we all of a sudden need to make tanks overnight. Fine. Japan is a very close ally. In addition, this has such outweighed rhetoric versus the actual importance of this company. This company employs 24 ,000 people. It employs - Only 14 ,000 are in America, by the way.

32:37Is that right? Okay. Lululemon employs 38 ,000 people. So it takes more people to figure out yoga pants than figure out US steel. And my understanding is Japan or Nippon Steel is talking about making huge investments, upgrading the technology, and potentially hiring tens of thousands. The number I saw is they're planning over the long term to increase employment at U.S. Steel by up to 70 ,000 people. That's what they said. So your security risks are somewhat assuaged because Japan is a fantastic ally. I mean, we're building, our steel consumption builds the Navy ships that guard much of Japan.

33:14So they have a vested interest in maintaining a very strong alliance. The other thing, in some ways, the Trump administration is more progressive and liberal than Democrats, because this one golden share thing where they get a vote, that is the definition of socialism. The notion that somehow bureaucrats know how to run individual companies. The way you have a golden share or government influence is you have systemic regulation. But to decide all of a sudden that, oh, Stephen Miller or Peter Navarro knows how to run a fucking steel conglomerate, it's the definition of socialism. It's like, If you want laws or input into how an industry or private business behaves, you pass laws that apply to everyone.

34:03But this is not, quite frankly, this is not an important company. It's just the rhetoric surrounding it and some of the jingoism here has manifested itself. And pat ourselves on the back. We got this right. We said this would eventually go through because at the end of the day, markets win. The reason that Texas now produces more wind power than any other state in the world is the economics around wind finally make sense. They make more sense in many instances than wildcatting for fossil fuels. The markets and money wins. At the end of the day, global trade will win. Tariffs will come down. There'll be some blips.

34:42But the arc of justice bends towards Benjamins. And the same thing is happening here. This made sense for both parties. And I'm glad to see it's going through. But this nonsense around a golden share that just shows that in some ways, the Trump administration is much more socialist than any Democrat out there. If Bernie Sanders said, I want to I want the government to have control over NVIDIA, that we should have a say in just this one company, their hair would be on fire. Like, oh, there goes the socialist. Just to be clear, this isn't without precedent. We have had the government stepping in and owning stakes in companies before.

35:20And I'll just go through some examples. In 2008, the government bought a 92 % stake in AIG. In 2009, they bought stakes in GM and Chrysler during COVID. They bought not stakes, but warrants in many of the airline companies like Delta and United and Southwest. But in each of those cases, the government was intervening to prevent some sort of structural collapse in the economy. Like with AIG, it was a response to the financial crisis. GM and Chrysler, it's to prevent the auto industry from going under. With the airlines, it's because we're in the middle of a pandemic and no one could fly. And so this is a very different situation where there's no real crisis at hand.

36:03The only hot button issue here is like this prospect of manufacturing jobs potentially being outsourced into, I guess, Japan. But even still, as you mentioned, Nippon made this commitment that they're going to keep the jobs in America, and actually, they're going to add jobs. They said, we're not going to outsource any of these jobs. And as you also point out, it's not that many jobs. It's 14 ,000 people. And you compare that to what we saw in 2009 with the auto industry, where it was literally millions of workers whose jobs are at stake. And in this case, it's at most a few thousand. So yeah, I guess it does beg this more libertarian question, which is when is it appropriate for the government to step in?

36:48And it's just so interesting, as you say, because this has been the big issue for the Republican Party, where they believe that Democrats, and perhaps rightly believe, that Democrats are way too quick to intervene. Something happens, business happens, and the only way they feel comfortable is if they say, well, we just want to have our hands on it. We want some level of control, i.e. we want a golden share. And here we are with a$14 billion acquisition for a company that is not even remotely systemic to the economy and the productivity of this nation. Maybe it used to be, but certainly not anymore.

37:26And the Republicans and Trump say the only way we're down for this is if government controls it. So, Scott, how would you answer that question? When is it appropriate? When is it right for the government to step in? And I assume, I mean, I guess you already said it, the government should not be stepping in here. I still believe you let businesses go out of business. The one I fucking hate is them bailing out the airlines, where the CEOs had taken about$150 million in compensation and had done all these share buybacks with their excess cash when things were going well through the odds. And then the COVID crisis comes along and they decide, we're all in this together and we need handouts.

38:08So when you have capitalism on the way up and socialism on the way down, what you have is neither. What you have is cronyism. So I'm a big fan. We have very strong bankruptcy laws of letting companies go out of business. As a matter of fact, the thing that really screwed your generation is that we didn't let more businesses go out of business in COVID. We should have let, you should have been able, granted you were too young, but your older sister should have been able to walk into a restaurant or Brooklyn real estate in Manhattan or Brooklyn and say, this is selling for 40 cents on the dollar because the baby boomer got fucked, as happens regularly in economic cycles, which transfers capital from the incumbents to the entrance.

38:54That is a natural part of the economic cycle. But instead, we said, no, bail everybody out. Do you realize I was working at, I had just started Section, our AI upskilling company for the enterprise. And we just started, we just raised, what did we raise? We raised$30 million from General Catalyst. And our CFO came in and said to me, sign this paperwork. I'm like, what is this? We're going to get$260 ,000 from the CARE Act. And I'm like, what? She said, yeah, any company, if you just sign here and agree to not lay off employees, you get a certain amount. We were going to get$260 ,000. And to my board's credit, we looked around the table and we said, We're all wealthy.

39:34This company is overfunded. We're not taking the after-school budget of a large public high school. And we said no. And granted, I'm doing a lot of virtue signaling here, but this is a true story. And guess what, folks? They never audited anybody. And then there's fucking Shake Shack taking tens of millions of dollars, and they rightfully get called out for it. But basically, they bailed out every incumbent. And the beautiful thing about the markets and capitalism is we believe in winners and losers. And with losers, there's opportunities. Specifically, there's opportunities for young people who want to come in and buy stuff on the cheap, buy houses that have gone through disruption.

40:12They want to go into Miami real estate and have their chance to pick up a condo for$100 ,000 in the design district and have it be worth$600 ,000 10 years later. But essentially since the Great Financial Recession, the incumbents, i.e. old people, refuse to let any one industry fail. In my opinion, it's nothing but, again, another transfer of wealth from the young to the old. I absolutely think you should let these companies go out of business. Or you just, I mean, in this case, just let business do its thing. I mean, don't jump at the bit to get involved as government. And the argument that you always hear whenever there's some level of government intervention, which I think is a good argument, is this is a slippery slope.

40:57You know, if you're going to justify government intervention here, then what else are you going to justify government intervention for? And if we're justifying government intervention for an ally buying a basically small to mid-cap American company because they're Japanese and because the company is old and gives off vibes of patriotic America and sort of reminds us of the golden age. And that's our justification for the intervention, not national security risk, which was proven there is none. There's no national security risk here. If that's the reason, that's really a slippery slope. Chipotle has 130 ,000 employees.

41:43So Chipotle has 10 times the number of employees as a U.S. steal. So that's the real existential threat is if something happens to Chipotle. Look, I mean, just look at history. A business, business people can't run the country or failed business people aren't very good at running the country. And then Devin Nunes, a congressperson is running True Social. How's that going? It's a different skillset. And when industry or when politicians get drunk on their power and start believing that they can run business, you lose the violence. The key here is the violence of full body contact competition where people have a vested state and they see downside and upside and they have greed and fear and they constantly make thousands of decisions every day to offer an amazing product and do their best to put their competitors out of business.

42:32That creates great companies that have appeal overseas, grow their markets, better profits, and hopefully more tax revenue that creates a base for future companies. But when governments get involved, whether it's the UK subsidizing DeLorean or Obama subsidizing, what was it, Solyndra, it usually doesn't end well. We'll be right back with a look at Neuralink's funding round. And if you've enjoyed the show so far, hit follow and leave us a review on ProfG Markets.

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46:04We're back with Profit Markets. Elon Musk's brain implant company, Neuralink, is raising$600 million in a new funding round that values the startup at$9 billion. That is more than double its$3.5 billion valuation from late 2023. The company is currently in early human trials of its implant designed to help people with spinal cord injuries. Three patients have received the implant so far and more volunteers are in the pipeline. However, the device is still far from commercial release. So Scott, just in terms of the valuation, this company is still so early, it's probably not even worth talking or thinking about the valuation.

46:45There's no real way to value a company like this that isn't generating revenue. So I think the thing that I'd like to focus on is just the technology. And I'd like to get your reaction because I think the technology is absolutely incredible. Essentially what it allows you to do as of today, this Neuralink chip. And this isn't a promise that they've made. This is something that is happening right now. Basically, instead of using your hand to move a mouse that moves a cursor on a screen, instead of using your fingers to type words on a keyboard, this technology allows you to do all of that just with your brain and with your thoughts.

47:26And what they found is, I mean, it's essentially connecting your brain directly to a computer interface. And they found that the best use case right now for this technology is to help people who are physically paralyzed. And there's this one guy, they installed this chip into this guy who has ALS, which basically means that you can't move anything except your eyes. Like he can't talk, he's completely immobile. And he put out a video explaining the experience. And I just want to play you a short clip that I think kind of demonstrates how this technology works and why I believe this is just incredible.

48:29This is my old voice narrating this video, cloned by AI from recordings before I lost my voice. The full video is on YouTube, and anyone can go search it up and check it out, and you see how this thing actually works. But in short, this guy was unable to move or speak or communicate with anyone. He has a fully functioning brain, except for he cannot move any parts of his body. And this has basically unlocked his ability to communicate with people. Um, I'm just like blown away and inspired by the technology. More of this now. Kara Swisher calls it good Elon. This is a good Elon. You want someone with this type of vision and ability to attract capital working on some of our biggest problems.

49:17This is a big problem. I have someone in my life that struggles with multiple sclerosis and it's fine now, but I wonder what's that going to be like in 10 or 20 years. and so the idea of doing you know we have technology we have a ton of technology or implants for hearts right pacemakers that send a shock that that keep you essentially keep people alive or keep them from going into v-tech so it would make sense that at some point we'll have implants into the brain by the way i had a brain implant but i got one of the cheaper ones and anytime someone turns on the microwave i piss myself that's good is there a joke I mean, why the microwave?

49:58If someone turns on the microwave, there's some sort of waves go out and I piss myself. That's good. God, yeah, Jesus. You're so big time now. You're like getting so intense. No, I'm just trying to understand you. All I want is to understand you, yeah. Yeah, we're going to need a bigger boat if your goal is to understand me. Yeah, true. Look, I think this is great and wonderful. My glass half-empty side can't help it. Um, every time I used to get excited about the X project or, uh, Peter Diamanda stuff around the singularity. And I like Peter a lot, but I remember on 60 minutes, 10 or 15 years ago, them doing a tour around this facility where they were growing ears and like, oh, no doubt within 10 years, we're going to be able to grow human limbs using stem cells.

50:47I find this stuff just takes a lot, a lot longer. I think this is more like autonomous driving from Elon than from Waymo. And that is, I think the promise is super exciting. I think it's going to take a lot longer than people think. Does that mean it's not fantastic that he's able to raise capital, cheap capital, and do things like this? Yeah. And even if it's 10, 20, 30 years out, if ever, I hope it's a wonderful thing, right? It gives people a reason to try and stay in shape and try and stay alive. and thinking, you know, at some point I might be able to walk again or, you know, use my communication skills again.

51:28So I kind of think there's nothing not to like here. I think you're right about the timeline, and that's often what happens with these moonshot technology bets is there's a lot of hype. And then, I mean, by the way, he's made a lot of these annoying claims as well. He sort of throws out stupid numbers out there. oh, in the next five years, we're going to have 30 to 40 people. And it's all bullshit. And I wish he wouldn't do that. But in terms of the timeline, it's sort of like the way you speed up the timeline is with capital. And I guess it just annoys me that there's this incredible technology out there like Neuralink.

52:10And then I compare it to all of the stupid technology out there. in my view that would be crypto you know the difference between this technology that literally transforms people's lives that gives them the ability to walk and talk again versus oh this thing allows for more transparency in the blockchain except it's actually not even creating more transparency because everyone's anonymous like it's deregulation in the form that is thinly veiled as technological innovation and i guess it's just it it's frustrating because it's like, I agree with you, the timeline, it takes a while, but the way that you fix that is by pouring capital into these kinds of projects.

52:53And I guess I just find it frustrating that there's not more attention. Why is Elon spending all of his time dealing with Twitter and, you know, whatever he's doing at Twitter and whatever he's doing at X, which is quite frankly, a gigantic waste of time. And whatever he's doing at Doge, which turned out to be completely useless, they're now just getting rid of it. $150 billion in projected cuts, which was then just reversed in the form of$150 billion in the defense budget. I mean, I like what Cara Swisher says there. This is the good Elon. Why aren't we spending more time, more capital, more attention, more effort on technology like this that has transformative and powerful effects on people's lives and things that can really, really benefit society long-term.

53:41I think it's important that we know what my DJ or personal trainer thinks about vaccines. I think X is super important. Yeah, look, you know, what's that adage? We thought we were going to fly in cars and we ended up with 140 characters. The market goes where there's money to be made. And there was money to be made in capturing people's attention, rewiring the brain of the young male or female such that they needed that constant dopa hit and could get it on a screen. That's what's essentially has, everyone calls it an attention economy. It's an addiction economy. It's just attention is the metric, as opposed to investing more and more in healthcare.

54:20Now, what the pharmaceutical industry would say is that, no, we're an example of capitalism at work because if you can turn someone HIV negative, They will pay a lot of money for that, and so will their insurance company, and that creates a tremendous amount of capital for wonderful research. And what I would argue back is that without government research through the National Institutes of Health or the CDC, you're going to see a substantial slowing in these types of breakthrough, incredible technologies that benefit humanity. Because typically, these types of breakthrough technologies don't make economic sense in the short run.

54:57and I think Neuralink wouldn't be able to raise money had it not been for the fact that Elon is attached to it. So the strongest argument I think you could make in favor of why it's important to have a guy like Elon Musk is his ability to, his brand and awareness and ability to attract capital results in a company that probably would have a difficult time getting this type of capital if he wasn't directly involved. And by the way, that's Bezos' justification for Blue Origin as well, which I actually think is the right one. He wants to get involved in the business that is the most capital intensive with the longest time horizon because as the richest guy in the world, he's the only one who can really do it.

55:38I mean, that's sort of his thinking with, it used to be that the government took on that role with NASA. He's like, well, the government isn't going to do that. I've got all this money. I'm going to be the new NASA. And I know you've had issues with that. I actually think it's a great justification. And I think it's true. Elon Musk is in the position. He's the one that can do this because he's so rich and because he can raise so much money. So they should be going after the most capital-intensive projects, which have less immediate time horizons for returns. Thought experiment, would you invest in this?

56:13Neuralink? Yeah. No, not at$7 billion. I don't understand enough about the business. I mean, it would be a trade. I think this company might change the world, but I think on an IRR basis, it's going to take a lot longer than people think. If I were to invest, it would be under the belief that in the private markets, I'd be able to double it in two years and get out. That's why they're not getting funded, because as you rightly point out, it's too long of a time horizon. I just think this stuff is so incredibly, and to a certain extent, the Bezos speech that he gave that you recited is a little bit like his speech of why he's moving to Florida because he wants to spend more time with his pop-pop.

57:02And the reality, in my opinion, in my opinion, he's sending Katy Perry and Gayle King into space to beta test his launch vehicle for satellites, and if Katy Perry blows up, no one's really going to miss her. So he gets to beta test. Can someone put that on every social media platform? I'm convinced aliens replaced her. That is not the Katy Perry I know. I don't know if you've seen her performing recently, but something's gone wrong there. Anyways, I don't think he's doing it for all mankind. I don't think Bezos is doing it for all mankind, and he's the only one that can finance it. I think he's hoping that his Project Kuiper, which we've talked about, is going to be a competitor to Starlink.

57:41I think this is, again— Rich people wanting to make money. That's fair. Yeah, and that's fine. That's an important part of capitalism. Let's take a look at the week ahead. We'll see factory orders and the U.S. trade deficit for April, and we'll also see the unemployment rate for May. Scott, any predictions? I just think this taco movement is so interesting that I think you're going to see a bunch of Trump tantrums where he'll just make these outrageous claims around tariffs and the market is going to begin to yawn. The market is going to stop. And you saw Apple go below 200. I think Apple comes back, not to where it was probably, but essentially all of the Trump trade or all of the Trump tariff reduction or hits or dents that some stocks have taken, those stocks recover.

58:30And taco, if you will, the taco phenomena, the market is wising up to it the same way as you pointed out. The market is wising up to this Bitcoin exchange ARB that really there is no ARB there. It's kind of a sleight of hands. that you're going to see a bunch of ridiculous statements around massively increasing tariffs where certain stocks should absolutely crash and, you know, they won't. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Salverio is our research lead. Isabella Kinsel is our research associate. Dan Chalon is our intern.

59:06Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Robert Armstrong, only on Prof G Markets. Taco Trade.

59:24Lifetimes

59:29You have me In kind reunion

59:40As the world turns And the dark flies Thank you.

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