Prof G Markets: What Killed the Apple Car? Shein Eyes a London IPO, and The Granolas

25:31Because you're freaky. You're both freaky. And I think you're a freaky, I think you're one of those young Republicans. And those are the scariest ones. I'm a radicalized young man. Those are the scary ones. Why do you think I'm Republican? Because you agree with me. You always take kind of the conservative, not the conservative side of this. I shouldn't say that. Well, I'm trying to make this a balanced podcast. I appreciate it. I think I'm center left. I think you're center right, which is maybe why this works or doesn't work. Anyways, and you have a very handsome voice. All right, let's move on.

26:00We'll be right back after the break with a look at the Apple call.

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27:22You might save some nickels and dimes, but what are you even anymore? What even is your brand anymore? I'm Peter Kafka, the host of Channels. And that was James Ponowozik, the TV critic for The New York Times. This week, we're talking about Trump and Kimmel, free speech, and a TV format that's remained surprisingly durable for now. That's This Week on Channels, wherever you get your favorite podcasts.

27:56We're back with Prof G Markets. Apple is pulling the plug on its effort to build an electric car. The car's development has been the subject of rumors and anticipation for about a decade, but now the company has told its team of 2 ,000 employees working on the project that it's time to wind down. Many of those employees will be moved over to a different division, which has become a higher priority for Apple, artificial intelligence. scott you've been bullish on the apple car for a long time now you also said that you would buy it in a heartbeat as soon as it got released how do you feel about this news this is a really interesting story and i i think it's a it's an important lesson in corporate strategy and how to be a good ceo and that is let me be clear two years ago i said i can't wait for the apple car it's coming the auto industry is one of the few industries that's big enough that could move the needle for what was then a$2 trillion market cap company, Apple.

28:52Apple can't own niches. They have to go big game hunting, right, to move the needle. And I said, they wrap steel around four tires. It's going to be the most valuable waiting list in the world, including it'll have my name on it. I thought this just made a ton of sense. And I made a lot of predictions that the moment Apple launched or pulled some dolphin-friendly mesh tuna thing, environmentally hand-woven by Native Americans cloth off the car, that you were going to have 50 ,000 douchebags like myself get on that wait list and can't wait for the Apple car. So I thought it was a great idea. And the reputation for design, the self-expressive benefit of the brand, and just the size of the auto market.

29:38and I said, they're gonna announce this thing and overnight, a quarter of a trillion dollars is gonna go from Tesla to Apple. Now, here's the thing. That was the right strategy. It was the right vision. But strategy and vision are meant to be unifying. They're meant to be guideposts, right? They're meant to illuminate a path. They're not a suicide pact. And when the data changes, you can't be afraid to change your strategy. And the data and the atmospherics have changed dramatically this year. One, the market vastly overestimated the demand and how quickly the transition to EVs would be. Prices on used EVs have plummeted.

30:20Tesla, kind of the leader in the space, is coming under huge margin pressure. Toyota is now being seen as the visionary because they invested in hybrids. They didn't go all in, like GM making these big statements that they were going to be all electric. And those companies have scaled back. They've said, just kidding. In addition, there's another enormous competitor, which is the biggest company that no one's ever heard of, called BYD, that has figured out a way to make a really outstanding electric car at a much lower price point. So Apple is sitting here looking at, okay, the market is slowing down.

30:57This, generally speaking, is a capital-intensive, low-margin, shitty business called Auto. We have Tesla that still has a$600 billion market cap but is facing headwinds for the first time. And we have this other Leviathan coming into the market. They thought, you know what? This market has gotten, or the prospects for this market have gotten a lot worse, and there's this new market that we may be as well or better suited to attack, specifically generative AI. So the term I would use is that a step back from the wrong direction is a step in the right direction. So was exploring and working on an Apple car the right move?

31:38Yeah, it was. And was canceling it the right move? Yeah, it was. You bring up BYD, which came up in the news last week because it announced its first luxury supercar, which is going to cost$233 ,000, zero to 60 in 2.3 seconds, top speed of 190 miles per hour. Awesome car, but it's all window dressing on the main point, which is that BYD is now, as of Q4, the number one EV company in the world, as measured by vehicles sold. It sold 530 ,000 cars in Q4. Tesla sold 480 ,000. So it's number one now. In addition, it's probably worth talking about the valuation. This is a$76 billion market cap company trading at around 18 times earnings.

32:26Compare that to Tesla. $650 billion market cap, 47 times earnings. BYD did$80 billion in sales in the past 12 months. Tesla did 97. but that basically means that its revenue is trailing by around 15%, but its multiple is trailing by 60%. So we should be clear, this is a Chinese company, and as we've discussed, there's risk there. But as Aswath Damodaran told us, his advice is pick a couple companies where the company is established, it has a clear business model, you understand the business, you understand how it makes money. surely byd is the china buy right now like one of two things is going on here based on the metrics you just outlined either tesla is dramatically overvalued or byd is dramatically undervalued i mean this company you know let me get this it's growing faster has similar margins and trades at about what's a sixth of the market cap it just tesla trades at seven times sales byd trades at 0.9.

33:32So, you know, this is a tough one. I mean, it's so hard to bet against Tesla, but this company, I mean, think about it. This company is producing more EVs than Tesla, and no one's ever heard of it. You know, it's dangerous to talk about what's going to happen to either of those stocks. What's fairly certain is you're going to hear BYD a lot more moving forward. And again, this is, the automobile industry is just a manufacturing-intensive business. And China is really good at that. They are really good at that. They have the most sophisticated supply chain in the world. I wonder if this was kind of the last nail in the, I think they were calling it Project Titan, if this was the last nail in the Titan coffin where they said, wait, we not only have to compete with Tesla, we have to compete with BYD.

34:21And then the other thing that was probably, you know, the second to last nail was Rivian. I mean, the stats you guys, you guys presented last week were striking. So I'm getting my Rivian, right? I'm trying to convince everyone I live with to move back to America. So I bought a home in Aspen. If this sounds like the story of entitlement and prestige and a total douchebag, trust your instincts. Wait, when did, when did you buy a home? Sorry. When did you buy a home in Aspen? About six months ago. Oh, you sort of kept that kind of quiet now. Are you embarrassed by that? Ed, no. Ed, I'm very transparent.

34:56My strategy is to take all my money and put them in beautiful homes where I can sit in the backyard and just wait for the ass cancer. That is my entire focus right now. Not lose all my money again, which I have done two times now in my life. Hold on to what I have, buy really nice homes, and then I'm going to speak every year at the Aspen Ideas Festival. Although they've never invited me to speak, I envision myself speaking at that. I'm going to roll down in my Rivian with my Great Dane to Cash Cash and Casa Tua, and I'm just going to live a life of privilege and just be literally all caps douchebag in Aspen.

35:33I love that. Stop by. I'd love to. Yeah. And when you invite me, I'd love to come. The Rivian, I'm supposed to configure this thing. And I said, okay, I want ocean foam green or whatever it is. I'm going to get, I don't think, I think I'm going to get the pickup because occasionally or once a year I'll ski when my kids are in town. I don't understand. You've already ordered this thing. I've ordered it. I just haven't configured it. I got on the waiting list and they keep calling me saying configure it, but I haven't convinced. The problem is my family has opinions. If it were up to me, I'd be in Aspen right now.

36:05I'd love it there. Anyways, but back to the Rivian. I think they have executed almost perfectly. And then you guys found this data for every Rivian that sold, I think I bought the fancy one or whatever. I think I paid 70 or 80 grand for it. It's costing them 122 grand to produce the thing. They lose$42 ,000 on every car they sell. So I got to think Apple looks at that and says, wow, they've done pretty well. It's a beautiful car. It works well. It gets great reviews and they're losing$42 ,000 a car. Now, Gene Munster, The analyst who's kind of the Apple Yoda, he had a really interesting idea. He said that Apple should buy Rivian.

36:48Because Rivian, I think, only now has like an$8 or$12 billion market cap or something. But does Apple really want to buy a company that's hemorrhaging that kind of money? But it kind of makes sense, right? I can see Apple buying Rivian. The only thing is culturally Apple doesn't like to make acquisitions. By the way, quick story about the dog. So, you know, I used to get invited to go on CNBC every Wednesday. I'd haul my ass down to the NYSE and I'd be on there with all the really smart guys. I really liked people there And then I did that for two years and then one wednesday they stopped inviting me never called me never said hey Thanks, but we don't like you or whatever But I was on with gene munster probably six or seven times whenever we they'd talk about apple They'd invite me on and they'd invite gene on and I was literally like let me let me talk more about me when I was on bill maher the last time I was on with this woman and Jess Harlov.

37:36I'm trying to track what story we're talking about. I was so bummed out. I was so bummed out because she was so much better than me. I was like, God damn it. Every time she said something, I'm like, oh, that was a better take. I got used to that with Gene Munster. Every time they'd ask a question, I'd give some song and dance about Apple and self-expressive benefit. And, you know, it's the ultimate tool for mating. And then Gene would actually show up with data. And I'd literally think, oh, my God, can anyone see what a fucking idiot I feel like right now anyway that guy that guy understands apple and i think it's a really you don't feel that way on this podcast sounds oh no no i'm i'm still sensei here i'm still sense one day one day i'll be the gene monster to your scott galah now occasionally you leave you leave awful village and you kind of kind of threaten to come into mediocre land but no i'm not i'm not uh i'm not that threatened yeah okay good

38:39fast fashion company shein is exploring an ipo in london to avoid potential sec scrutiny with u.s listing as we discussed back in december the chinese company has faced criticism for its lack of sustainability and alleged forced labor practices while shein is still working on its application to list on the New York Stock Exchange, it appears the company is losing confidence that it will be approved. Scott, we'll get to what this would mean for the UK stock market in a moment. But first, what do you think this news says about Xi 'an? First off, I just need to disclose, I'm doing everything I can to try and find a way to invest in this company.

39:16You described it as a Chinese company. It's actually based in Singapore. I would argue, I would argue that Apple is more a Chinese company right now than Xi 'an. So what percentage of business does Xi 'an do in China? Tell me. Zero. They do no business in China. 90 % of their supply chain is in China, similar to Apple. Apple does 20 % of its revenues in China. Xi 'an does zero. In addition, the fact that they are contemplating, and I read this like you did doing a London stock exchange, what I've seen is a bunch of fairly right-wing congressmen come on and say, Xi 'an, we can't have the Chinese come here, and they haven't done their homework.

39:55They're about to lose the biggest IPO of 2024. And let me talk a little bit about Shein. First off, they've had some legitimate complaints about labor practices and sustainability. And I want to be clear, the entire apparel industry needs to be thoughtful about sustainability and ESG. The bottom line is, it's just there's too much waste. There's a lot of opportunity for exploitive labor. Xi 'an is working with a bunch of people around fair labor practices and went through their supply chain and went and closed down or stopped working with 300 suppliers and factories in China. In addition, let's just talk about the company and the reason why I'm trying to find a way to invest.

40:40I think they did about 30, the data I found about 30 or 35 billion last year. They're going to do 45 billion this year. They're growing 30 to 40%. And if they continue to grow this way, they're going to be the biggest apparel company in the world. And a couple other things about them, their business model. It's this asset light business model we love. They don't own any stores. They don't own any planes. They use software and AI machine learning to do something called on-demand fashion. There was regular fashion, then there was fast fashion. Now they've embraced this notion of on-demand fashion.

41:14And that is if Ed Elson goes on to the Shein site, it tracks you very closely and it starts to merchandise around you and try to build a brand of one and anticipate your needs. and they have literally no waste or no leakage. In other words, everything they produce has either been ordered or they have near 99.9 % certainty it's gonna be ordered right away. So their turns are huge. In other words, they don't have any inventory. I think it's gonna be a monster. Not only is it growing 30 % or 40 % a year, it's profitable. It's actually got decent EBITDA margins. So I can't imagine how every exchange in the world has rolled out the red carpet for these guys.

41:56It's like, what's the biggest IPO of 2024? It's gonna be Shein. You gotta bet the London Stock Exchange where seven of the 10 IPOs, seven of 10 IPOs that have gone public in the last 10 years are below their offering price. Where Apple is bigger than the entire exchange is like, oh, we would love to have you. We would love to have you. So it's interesting. I think the big losers here, if in fact it ends up going public on a non-American exchange, are the NYSE and NASDAQ. I'm just going to play devil's advocate for a second. So you mentioned the Republicans who are pushing against this thing, listening, which is true.

42:33And I read Marco Rubio's opinion, who's kind of spearheading this movement. He believes that this is a Chinese company in disguise. He says, quote, Xi 'an presents itself as a global company to hide its considerable ties to the PRC. Why does he think that? As you mentioned, basically the entire supply chain is based in China. It was founded by a Chinese national who's the current CEO. It employs thousands of people in China, sources, manufactures, ships, all of its apparel, it released almost all of its apparel from Chinese factories. And the other thing that he's worried about that happened recently is that Xi 'an approached the CCP, I think it was last month or a couple months ago, they approached Beijing to get clearance to list their stock overseas.

43:18And if they were truly a global company, as they say they are, then you'd think that they wouldn't actually need to. So they kind of just did this out of courtesy. So I think that would be the Rubio argument for, no, actually, this is a Chinese company. The other side of this is the line on human rights, because there is pretty decent evidence to suggest that Xi 'an is relying on forced labor for its supply chain. Specifically, they did these lab tests on the clothes, and it showed that the cotton that Xi 'an was using came from Xinjiang. And according to most experts, anything that comes from Xinjiang, you can pretty much assume forced labor was involved.

44:00Now, to be fair, that's a low amount, and as you've said, they are eliminating those products from their inventory. But I think the main thing here is that what Rubio and the SEC have asked is greater disclosures. That's what Rubio is asking for. He's saying, you must demand greater additional disclosures from Shein about how they make their products. And if they fail to do that, then we're not going to let them list. we have yet to see hard forceful evidence from shein to show that they do not and will not engage with any xinjiang-based supply chains and in addition i think the fact that they've been so quick and so willing to go to london as soon as they started asking these questions to me that says that they're scared of a full cavity search from the sec because they're afraid of what they might uncover when they start digging.

44:57I think what they probably would uncover, but again, this is speculation and I'm being paranoid, but I think that you'd uncover some what we call unfair labor practices, which is a very nice way of saying slave labor, which is what's going on in Xinjiang. And when I look at the price of these clothes, it's honestly kind of hard to believe that they don't rely on that. I think those are all really valid points and points that are, should raise concerns and should be investigated. The reason why they went and asked for that approval is that if they don't get that approval overnight, and this is, in my opinion, why China's economy is under so much stress right now, because the rule of law and the rule of fair play is so important.

45:38If the CCP decides to shut down Xi 'an and this is an investment risk, they can. They can go, they can basically shut down, they can just call. They can call the factories and say, hi, this is your local Communist Party leader. Stop producing. Why? We don't need to tell you why. Stop producing. So I think they're trying to play nice. I think they're trying to thread the needle. My impression based on the research I've done around the sustainability practices is I think those are important questions. But what I would push back on is apply the same standards to Nike or The Gap or any one of a number of people or Apple who produce products in China.

46:19My impression is that they have decided, or at least what they've said, and it might be jazz hands, but I don't think it is, is that they've said, it's good business and we will get a higher multiple if we are seen as a good actor. And what I would argue is that Senator Rubio, in his never-ending quest to be president says, China bad, and this can get me on TikTok, which makes there's some irony there, and so decides to go after any Chinese company trying to list. But I think if the NYSE and the SEC said, we're going to apply the same standards to you and same disclosure requirements as a Nike or Zara or Inditex, I think they're ready for it Because they're, I mean, let me put it this way.

47:07They're either posturing a lot or they are, in fact, doing as well or better as any other company. Them becoming a public company on a Western exchange will create more visibility. And also, it'll be easier to put pressure on them to, in fact, make sure they have fair labor practices. Just a very quick question on London, then we should move on. But, you know, London's super happy about this. They've said, well, here's exactly what they said. We aren't pushing them, but of course we would welcome an IPO. and it reminds me of the Arm IPO last year where Arm is a UK company, but they decided that they're going to list in New York instead of London.

47:48And so now London is initiating all of this deregulation to try to attract companies to come and list on the London Stock Exchange versus in New York on the NYSE or on the NASDAQ. Potentially a dumb question. What is so great about having a company list on your country's exchange? What does London actually stand to gain if Sheehan chooses London over New York? Well, they get fees. These exchanges get a small fee for every stock that changes hands. And as more liquid, bigger market cap companies that attract capital from around the world, more people pay attention. And if Sheehan goes public and it goes well and they raise a couple billion dollars in the stock, I mean, this thing should be huge, right?

48:33Right. Timu is a publicly traded company or PDD Holdings. Timu's parent company has a market cap of 166 billion and trades at seven times sales. If if Shein does 45 billion this year, 40 billion, that would connote, you know, a two to three hundred billion dollar market cap. That would make it overnight. One of the biggest companies listed in the UK in history that creates more liquidity, more fees. I mean, there's all sorts of stuff. Right. All of a sudden, all these people from Shein are in London more often and they need banking service. businesses they would most likely i got to believe they'd open an office here an investor relations office and finally the prime minister gets to say you know our exchange is relevant right so and not only that it's sort of like do you remember when the prime minister here put out a press release and made a big deal out of over andreason horowitz like hiring nine people to be in london i mean yeah this is going to generate a lot of attention it'll be an enormous feather in the cap of the exchange that takes this thing public.

49:32And there'll be a lot of downstream fees. I think this is going to be really interesting to watch. We'll be right back after the break with a look at Europe's hottest stocks.

49:55We'll see you next time.

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51:32We're back with Prof G Markets. If you're a regular listener, it's safe to say you're well acquainted with the term the Magnificent Seven. Those are the seven US companies that have carried the stock market in the past year. Well, we've got a new term for you to learn, the granolas. The granolas represent the 11 largest European stocks, which, as of last week, have pushed the European stock market to a record high. Companies on that list include Novo Nordisk, L 'Oreal, and LVMH. And in the past year, they have accounted for 60 % of the gains in the overall European stock market. Scott, it feels like there's a new acronym every year.

52:11We've had FANG, FANGAM, GAFAM, MAMA. Now this. What do you make of this new term, the granolas? I just think it's genius branding. I mean, I got to think that the amount of attention, remember the BRICS? What was it, Brazil, Russia, India, China? That's great branding because it immediately connoted these are the growth markets. And if you want to invest in, I got to imagine, and ETFs and hedge funds started around the bricks. And then the seven samurai or the magnificent seven, you gotta bet that a lot of kids or a lot of investors, it's like, okay, I'm giving little Rachel a gift for her bat mitzvah.

52:50I'll give her one share in each of these seven companies. Or I'm just going to, I'm an investor and I like tech. I'm just gonna buy these seven companies. So this type of branding, I think is really powerful. In addition, Europe is the largest economy in the world. And while they haven't had the same sort of explosive growth as some of these tech platforms, they're really good companies. And some, I think this is sort of what I'd call mild genius. And that is, they said, hey, what about us? I know, let's brand it. My guess is there's a company in there that didn't, you know, like Danone should have been in there, but they did want to call it Grandola or something.

53:26Or, you know, they said they tried to find a name. But this is powerful, right? In the press and in a lot of analyst notes, there has just been a lot of comparison to the Magnificent Seven between the Granadas. And what people are saying is, oh, these baskets are very similar. Specifically, they're similar in the way that they're carrying the rest of the market. So as I mentioned, they accounted for 60 % of European stock market gains in the past year, kind of for half of all European M &A activity for the past five years. and those companies in the granolas are trading at an average of 31 times earnings 31 times forward earnings and that's about double the european average the same dynamic is happening between the magnificent seven and the rest of the u.s stock market now where they differ the granolas had a good year they gained around 18 in the past 12 months stocks europe 600 is up around 7 percent magnificent sevens 12 month returns 91 other place they differ scale if you combine the market cap of these companies they're worth three trillion dollars the combined market cap of the mag seven 13 trillion dollars so i look at this and to me these are two very different beasts do you think it makes sense for analysts and the media to be comparing them?

54:54Are they even remotely comparable? Well, it's a basket of amazing companies in the US and a basket of amazing companies in Europe. One is more tech-focused, one is more consumer and pharma-focused. The piece of data you left out is that the granolas are two times less volatile than the Magnificent 7. In other words, if in 2025, if you had a crystal ball and it said either the granolas or the Magnificent Seven are down 70%, you would know that it was a Magnificent Seven. It's just unlikely that these companies, these consumer companies that trade more on EBITDA and more on performance than promise are going to decline 70%.

55:32They don't have probably the same upside potential because they don't have the scale and the network effects of technology and the hype of AI. But this is, it's great branding. I think it's, you watch, these companies are probably going to go up in market cap just because there's a tension now to the granolas. Well, who's the R, right? Everybody wants to know. It's Roche, right? Who are these folks and why are they performing so well? There's actually, I mean, people don't spend, if you want to be a great investor, I think you have to understand the markets, but I think you also understand biology and you want to understand psychology.

56:03And then I would actually say branding is pretty important, but the notion of fluency is a psychological concept and it dictates that people tend to prefer easily processed information. Here are these 11 companies that make up the granolas, and now I'm going to do research on the 11. And it's sort of a halo of credibility. Researchers at Princeton actually found that companies with easier to pronounce names or ticker symbols perform better immediately after the IPO than companies with harder to pronounce names, even after controlling for other variables. So simplicity, nomenclature, whatever, you know, The design language, whatever you want to call this, is really important.

56:41For example, if you started with$1 ,000 and invested in companies with the 10 most fluent names, you would have earned$333 more than you would have had you invested in the 10 with the least fluent. When I ran Profit, a brand strategy firm, and people would task us with naming and finding a website, I'm like, the most important thing is that it's easy to spell and easy to remember. I mean, I remember, do you remember the newspaper company that rebranded itself, Tronk? I love that, Tronk. This stuff's important and it sounds really simple and sort of superfluous. It's really powerful. You also mentioned volatility, which I feel like we rarely talk about on this podcast.

57:23Is that something that you like to look at when you're evaluating a stock? Is that something you take seriously? Yeah, it is, especially at my stage because, well, one, I don't want to, I mean, And as I've told you, I've been wealthy before and then not wealthy and then got wealthy again and then got not wealthy again. And now I'm wealthy again and I don't want to round trip again. I want to stay in this part of town now. And part of that is ensuring or looking at sharp ratios and volatility across your portfolio. My mistake was that, and sometimes I didn't have any choice, but I was always so concentrated in tech and specifically private tech or a couple public tech companies that when the market for tech got hit, I just got killed.

58:08And also tech is just very volatile. So I'm in a lot of, one of the reasons I like investing in private companies is I love that they don't get marked every day. I find that very stressful. I hate having a scorecard every day. I like investing in private companies that are good companies and knowing that or believing that over two or three years, they'll be worth more. That doesn't know what's happened. I'm going to have a couple of zeros this year, which is really disappointing. But on the whole, it pans out. I find public stocks stressful because every day they go up and they go down. In addition, tech stocks, I mean, NVIDIA literally could go down 50 % in the next three months.

58:46And the majority of smart analysts would go, well, of course it did. Of course it did. Look at the thing, right? And if you're one of those people now that has FOMO and you want to get in and you just hold your nose and you go in and you lose half your capital, that's just rough, right? That's just rough. So yeah, I do look at volatility. If I were going to go into these companies, and again, this lends itself to index investing, I'd want to buy a basket because you get to a point where one, as you get older, you don't want to take those sorts of risks. And two, you don't need to take those sorts of risks because on the whole, the market's trajectory is naturally up over the medium and the long term.

59:25And a way to play in these stocks sort of, or dip your toe in, is to buy an index fund because you automatically have to play because they have such a big weighting now in the index. But the way I reduce volatility is through diversification. And that is my individual investments can be quite volatile. But if I invest in enough of them and never have more than, say, 3 % or 4 % of my net worth in any one thing, and I put it in different sectors, in different companies, in different asset classes, that smooths out the volatility of the portfolio as a whole. All right, let's take a look at the week ahead.

1:00:02We'll see earnings from Target, Costco, and Kroger. We'll also see the unemployment rate for February, and Fed Chair Jerome Powell will be testifying before Congress on the state of U.S. monetary policy. Scott any predictions before our event on friday. I just think we're gonna have a great time. I don't have a prediction So i'm going all pretending to be a good boss, but what my Advice to other entrepreneurs that have a small firm is take the money you would spend on an office and we do this And do fun stuff and and I don't do it because I like you. I want you guys to be happy That's that's you know, that's nice, but that's not why I do it The number one source of retention the number one source of retention.

1:00:43Do you know what it is? Ed, what is the one thing I could do to make it less likely that you leave and go do something else? I would say pay me a lot, but I have a feeling you're going to say something else. What would you say? Well, I do that. If paying you more than you're worth is paying you a lot, I do that. So check. But that's not even, that's like number two or three, compensation. Number one is if you have a friend at work. People are much less likely to leave their job if they have a friend. And the way you facilitate relationships and friendships is you try to hire nice people that seem like they're enjoyable to be around.

1:01:18But also, if you don't have an office, and I do this with you guys, you take them on fun trips and let them do fun things. By the way, everybody, we're all going to South by Southwest. The whole team will be there. And it's nice. My sense is, at least you're fooling me, you guys all genuinely look forward to seeing each other and you have a lot of fun and you like each other. Yeah, for sure. And I think that makes it a lot less likely that I'm going to have to hire some other graduate of Princeton to do this podcast with. So anyways, my prediction. So what are we going to do? What are we going to do for fun?

1:01:49Well, who is we, white man? I don't know what you guys are doing for fun. You're going to spend my money. I'm going to go to the Soho House and sit at the bar and drink bourbon. Yeah, but alone. I like to drink alone. Alone. Yeah, alone. No, we're going to go out. Aren't we going out Thursday night? We're going out Thursday night, right? We're actually going to Soho House. Oh, there you go. There you go. That's going to be great. Yeah, I'm really looking forward to seeing everybody. It's going to be nice. So sorry, I interrupted your prediction. It's that we're going to have a good time? My prediction, because I don't have one, is just advice to entrepreneurs.

1:02:21Take the money you spend on office space and use it for events and helping people create social connections. The retention is the key to growing a firm because the most expensive form of friction and complexity you can have is a lot of turnover. Unless, of course, you're using AI to fire everybody. But I don't know. Which is next? I'm trying to save this prediction here. Anyways, I'm looking forward to seeing everybody in Austin, Ed. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our executive producers are Jason Stavis and Catherine Dillon. Mia Silverio is our research lead and Drew Burrows is our technical director.

1:02:59Thank you for listening to Prof G Markets from the Vox Media Podcast Network. Join us on Wednesday for Office Hours. and we'll be back with a fresh take on markets every Monday.

1:03:35And the dark flies In love, love, love, love