The Week: SpaceX, Iran, and the World's First Trillionaire

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1:45George Hahn:Welcome to The Week from Prof G Media, where we break down what mattered and what it all means. I'm George Hahn, and it's Friday, June 19th. Today, the biggest IPO in history finally landed, minting the world's first trillionaire. Then, is the Iran war over? And finally, historian Heather Cox Richardson on expertise, power, and America's future at 250. Let's get into it. SpaceX went public this week. After years of waiting, the largest IPO in American history finally landed, opening at$150 a share, an 11 % jump from its offering price, and climbing from there. By day three, SpaceX was briefly worth more than Amazon.

2:41George Hahn:Elon Musk is now the world's first trillionaire. But Scott wasn't celebrating. His argument? What happened this week wasn't a market event. It was financial engineering. And what I don't think people are focused enough on here, and there's been news on it, but it's really, I think, the whole shooting match, is that Musk threatened not to go public on the NASDAQ unless they waived the 12-month requirements for him to be included in the NASDAQ 100. So they backed down. They blinked. The S &P said no. The Dow Jones said no. but the Nasdaq blinked and the result is they're immediately included in these indices.

3:21If it's at$2 trillion and there's$50 trillion of market cap in the Nasdaq 100, that means all the indices that track the Nasdaq 100 now have to put 4 % of their assets under management into SpaceX stock, creating anywhere between 20 and call it$50 billion in additional demand that no IPO benefits from. In addition, traditional IPO rules are that you have to issue at least 10 % of your shares. They didn't, they issued 5%. So massive artificial demand or demand that no one else has benefited from, from constrained supply that no one else has been able to manufacture. And what you have is a pop, a 20 % or 25 % pop on what I think is manufactured scarcity.

4:13Now, the question is, where do you go from here? And I would argue, someone called me and said, I have access to shares, should I do it? I said, I think you should, but I would look at this as a trade, not as an investment. Because eventually that manufactured scarcity begins to leak.

4:29George Hahn:When the dust settled, SpaceX was trading at 112 times last year's sales. For context, Meta went public at 28 times trailing revenue, Google at 10. And just as investors were digesting the biggest IPO in history, another piece of the AI story emerged. OpenAI's financials leaked, and the numbers were staggering. Here's self-proclaimed AI skeptic Ed Zetron, who first reported on the leak. so last year open ai spent about 34 billion dollars to make about 13.01 uh sorry 07 billion dollars and uh had about 22 billion dollars in cash at the end of the year lost about 21 billion dollars that 38 39 billion dollar number is what i would describe as gap voodoo there is some very strange stuff and i'll be going into this in future episodes going on in the balance sheet and everything with this company.

5:30They turned from a non-profit to a for-profit, though they've remained profitless last year, which means that their net loss is quite strange. It's like$38.5 billion. But the number I'd like to come back to is they lost$21 billion from operations. And they spent astronomical amounts on sales and marketing. They spent$7.5 billion on cost of revenue,$19.18 billion in R &D. But that sales and marketing cost, that$5.73 billion, is one I really like to hammer on because what?

6:02George Hahn:It's like, excuse me, how much did you spend? How much of today's AI boom is being driven by fundamentals? And how much is being driven by the belief that someone else will pay even more tomorrow? Morningstar recently estimated SpaceX's fair value at roughly$780 billion, dollars, less than a third of where it's currently trading. And on markets this week, Howard Marks, co-founder and co-chairman of Oak Tree Capital Management, put the moment in historical perspective. So I wrote in a memo recently this year, and I think it's true, that if this technological innovation with its exuberance doesn't produce a money-losing bubble, it'll be the first.

7:01And now it could happen. You know, you can't rule these things out. And, you know, maybe this is a good time for me to introduce the rejoinder of the optimist. What do they say? This time it's different. Okay, that was true about the railroads. It was true about radio. It was true about computers and the internet. But this time it's different. And this time we have a development of incalculable, unlimitable value. So this time it's really true that there's no price too high. That's what they say. But the problem with that, Ed, is they always say that. this time it's different is never different.

7:47And they've said it in each of those bubbles that I mentioned, I think. So nobody, including me, should say definitively that this is a bubble, that the people who invest in these early stages of AI will lose their money, that the people who invest in the companies you named will pay prices that they'll never see again. But you must be alert to the possibility.

8:17George Hahn:The Shiller P.E. ratio, a measure of how expensive stocks are relative to long-term earnings, now sits above 40. The last time it got this high was 1999. Back then, investors believed the Internet had changed the rules. Now maybe AI has. We are officially in dot-com territory. We'll be right back after the break.

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11:56George Hahn:Welcome back. After 107 days of war, the United States and Iran announced what the White House called a breakthrough. The problem? It's not exactly a deal. It's a framework, or, as Scott says, a memorandum of understanding. A 60-day negotiating period meant to produce an actual agreement later. The hardest questions, nuclear enrichment, sanctions relief, frozen assets, remain unresolved. On Raging Moderates this week, Scott and Jessica Tarlov discuss. And then the uncomfortable truth that no one wants to own up to is that Iran has way more leverage after the escalation than before it. We come out of this weaker.

12:47They come out of it stronger. Let me just repeat that. Any honest analysis of this, Iran comes out of this stronger. We come out of it weaker. Your thoughts? I wholeheartedly agree with you and would just add that even if they got exactly the same deal, the fact that they know that they can shut down the Strait of Hormuz whenever they want and hold the world hostage is an enormous bargaining chip. And, you know, we're quibbling over the Iranians basically saying, no, we're not. It's not going to be toll free. Right. Like we can work towards that, perhaps, but it's not going to go from, you know, 60 to zero.

13:30Right. And when this reopens tomorrow or when the blockade gets lifted.

13:35George Hahn:Ian Bremmer joined the show earlier this week and made a similar point. His argument? Even if the final terms resemble the old nuclear agreement, the geopolitical context has changed dramatically. Well, first, one obvious thing is that the JCPOA was not a unilateral U.S. deal. It involved the Europeans. It also involved the Chinese and the Russians. So you had a lot of countries that had various degrees of influence and equities in their relationships with Iran that had a stake in ensuring that the deal actually held up, that the inspections actually went ahead, that the sanctions that remained on Iran remained on Iran, all of these things.

14:17So that's one point is that this new deal, it's only gonna be the Americans. And if the Iranians feel like they have more leverage going forward, then breaking an agreement that's only with the United States is less consequential than breaking a deal that involves countries like Russia and China that Iran really does not want to antagonize for other reasons.

14:36George Hahn:The broader concern isn't just what's in the deal, but what the war accomplished. After months of escalation, billions spent, and global energy markets repeatedly thrown into turmoil, we're left with an uncomfortable question. Did the United States end up with a better outcome than the one it started with? On this week's Conversations episode, Scott spoke with historian Heather Cox Richardson. As America prepares to celebrate its 250th birthday, they reflected on power, expertise, and why so many voters have become skeptical of institutions. Here's Heather. And one of the things that jumps out to me about the people in power right now is the degree to which they have simply said, well, I'm going to put the best people in charge, Or I read a book.

15:29I then can go in and I can negotiate Middle East peace in a way that nobody who's studied this and been trained and so on has been able to do for 40 years. And the thing about that is we have never put those people at the highest levels of our government before. The idea that you just have a hotline to the universe or God or to intelligence. And in this moment, it seems to me that that idea overlaps strongly with Trump's sort of fascist traditional ideas about some people being better than others. And that, I think, is interesting because that's one of the reasons that evangelicals adhere to him as closely as they do.

16:11And I don't really know how to grapple with that. What do you think about that? I think in America it has become a national pastime of being critical of our government. And I would argue our government is the best performing organization in history. And I think we have just taken for granted at every level how thoughtful and credentialed people in the CDC are and the diplomats who try and hammer out and cross the T's and dot the I's of an incredibly complex deal like this. and that we have essentially gutted and neutered the competence of the best organization in the world. And Americans have taken for granted believing that these things just operate on some sort of autopilot.

16:55And I think we're about to figure out in a very painful way that, no, there were very smart people working at the TSA. There were very smart people working in the IRS. The CDC, those people were there for a reason. and when we decide to take out our entire Iranian diplomatic corps, staff our intelligence agencies and our security apparatus with loyalists as opposed to people who have any background, that eventually you end up with poor execution. And I think a lot of this is our fault. I think a lot of Americans have taken for granted the commitment and expertise that is resident in our government.

17:36And I think that those chickens are coming home to roost.

17:39George Hahn:We spent the week talking about big promises. That AI will change everything. That a fragile peace will hold. That the right leader can succeed where institutions have failed. Maybe all of that turns out to be true. But history has a way of separating confidence from competence. And eventually, the results speak for themselves. We'll be back next Friday with a fresh edition of The Week from Prof G Media, breaking down what mattered and what it all means. I'm George Hahn. Have a bangin' weekend.

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