The Week: Who Does the Market Actually Work For?

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1:34George Hahn:That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. 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, July 10th. Today, the government wants a piece of open AI. Then, America turns 250 and can't seem to enjoy the party. And finally, the hottest media deal of the year is a podcast that didn't exist 18 months ago. Let's get into it. There's an old idea that companies win by building something people want. This week offered a slightly different theory.

2:24George Hahn:Get the right person to want you to win. Take Dell. On Tuesday's Prof G Markets, Ed Elson laid out what happened when the president gave the company a little free advertising. Dell stocks surged as much as 8 % yesterday, not because of any material information or any news related to the company, but instead because the president pumped it. Yes, yesterday on live television, Trump encouraged Americans to, quote, go out and buy a Dell computer. And it was exactly at that moment that shares of Dell soared. Does President Trump own any Dell shares, you might ask? The answer is, of course, yes. According to his recently released financial statements, Trump purchased nearly a million dollars worth of Dell last year, and now he is actively pumping it on TV.

3:21This is yet another example of a dynamic that we are calling the kingmaker economy. And that is the best way to increase your stock price in America today isn't to improve your product or to sell more goods and services. It is to have your stock anointed by the high priest of American markets, aka the president. If you can do that, great things will occur. You might get a shout out in a national address. You might even get a government contract. Who knows? The point is, it pays to kiss ass, not metaphorically, but literally. And that's why so many leaders are now doing it, from Tim Cook and his golden Apple trophy to now Sam Altman and his benevolent offer to sling OpenAI stock onto the balance sheet of the US government and hopefully get a bailout.

4:16Is this how free markets are supposed to work? Is this what capitalism is supposed to look like? Absolutely not. But that doesn't matter anymore.

4:28George Hahn:Now, a presidential endorsement moving a stock is one thing. The government owning part of a company is something else entirely. This week, OpenAI floated giving the federal government a 5 % stake in the company, worth around$43 billion at its latest valuation. Their idea? If AI creates enormous wealth, the American public should share in some of it. But there's an obvious complication. Once the government becomes a shareholder, it also has an interest in the company succeeding, and the government happens to write the rules. That's the part Scott focused on in Monday's Markets episode. I predicted six months ago that the biggest bailout in corporate history was about to happen and it was going to be the bailout of Nadella, Altman, Dario Amadei, and it would be dressed up as investment or growth.

5:28It's not. It's a bailout. If the government were to take a 5 % stake in open AI, great. They're going to favor open AI. They're going to overregulate their competitors and underregulate open AI. They're going to provide them with protection money and direct access to the White House. It's not even socialism. It's cronyism. It's like, you know, when things are really good, we want to capture all the gains ourselves. But when things are bad, we want to socialize the losses. That's not capitalism on the way up and socialism on the way down is cronyism.

5:59George Hahn:What happens when access itself becomes a competitive advantage? Meaning access to the president, access to regulators, access to markets. This brings us to SpaceX. This week, the company was fast-tracked into the NASDAQ 100 under new rules. Now, if you're wondering why you should care about the membership rules of a stock index, fair enough. But the NASDAQ 100 sits underneath some of the most widely held investment products in the world. When a company enters the index, funds that track it may have to buy the stock. That can create enormous demand automatically, not because millions of investors independently decided they like the company, but because the rules of the index tell their funds to buy it.

6:56George Hahn:On Wednesday's Prof G Markets, Ed asked Simplifies Michael Green what he made of that. I think it is candidly quite manipulative. We have allowed index investing to receive special treatment under the law, under which it does not have the same requirements that active management has for fiduciary standards or suitability standards. If I run a strategy that says I'm going to do X, when I suddenly unexpectedly change that, I'm allowed, my investors are allowed to sue me. We are by and large protected from that in the index world, as long as the index methodology has changed rather than simply the inclusion of a new stock.

7:38In this case, they published their intent to do this in advance of the listing, and it was open for comment period. My understanding is the comments were almost universally negative. I certainly contributed several of those myself. The big winners there are those who are seeking liquidity, the insiders who are actually looking to sell shares, whether those are investors who invested during its private period, its extended private period, or whether those are employees who have waited for liquidity, the answer is it's the insiders. And that, unfortunately, I think contributes to the general perception that the stock markets are really not set up for the average investor at this point.

8:16Although we're thrilled to see them move higher, given our participation through things like 401ks, it's a little bit of a slap in the face to see somebody become the world's first trillionaire on the basis of manipulating an index that we were all told we could trust.

8:33George Hahn:Rigged index, engineered bailout, a president who moves stocks from a podium. Scott argues these aren't separate stories. And on Raging Moderates, he took the SpaceX story one step further, to the midterms. I have said that the X factor around the midterms is, I believe, the fix is in, and that is Donald Trump agreed to figure out a way to lessen or put pressure on the SEC chairman or the NASDAQ 100 to include SpaceX early in the NASDAQ 100, thereby creating a ton of artificial demand for those shares. And if the stock went up 10 or 20 percent more than it would organically, that for him, he owns, I think, 40 percent of the company.

9:17So what is that? That's like an increase in wealth of$100 to$160 billion for him. And why wouldn't he say to him, you know how I was able to influence the election with$250 million. What if I put$10 billion into the midterms?

9:29George Hahn:Which brings us, strangely enough, to the 4th of July. America turned 250. On the eve of the anniversary, a YouGov poll found that 55 % of Americans think the country is less patriotic than it used to be. More than a third said they themselves feel less patriotic, with much of the decline coming from Democrats. We've come a long way, and yet it still somehow feels like we're falling short of where we should be. Scott and Jessica Tarloff got into that on Raging Moderates. We've built the safest, most educated America in history and convinced ourselves that America's falling apart. And I think it's a couple of things.

10:17One, a lack of trust in our institutions, social media constantly coursing our discourse, our leadership demonstrating poor and poor character, whether it's our wealthiest people demonstrating this performative, dominant, you know, batshit, weird, pathetic form of masculinity or the emergence of the Epstein class or tech brothers or a general feeling that this extreme wealth is a lot of people. is not trickling down to me. And also, your happiness is really, it's not a function of what you have. It's a function of the gap between what you have and your expectations. And I think social media has algorithmically normalized the 0.1 % life for everybody.

11:00And every day, people are constantly vomited other people's pretend life. And that we have basically a crisis of what I'd call wealth porn shoved in our faces. There is a big delta between how much America means vis-a-vis people's identities versus how they feel about their nationalism or their patriotism. And Republicans, no matter who the president is, always have the highest level of self-reported patriotism. It's just something that's built into their politics that way or, you know, how they're wired. But we now have the lowest share of U.S. adults that say that they're extremely proud to be American.

11:45And that's being driven by Democrats and independents. The biggest drop is amongst women and young Americans. And I don't think that that's all Trump derangement syndrome. And yesterday I was talking about this dilution and patriotism being linked to the fact that the system is rigged against us and the president is flouting the system so brazenly in our faces, like literally saying, well, your stocks went up, too, when he made 21 ,000 trades or this Qatari jet or making one point four billion dollars off of crypto. And I think that stuff does have a real palpable effect on how you think about the country on the 4th of July.

12:25Did you just say this wasn't what the founders wanted?

12:29George Hahn:We'll be right back after the break.

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14:29George Hahn:Welcome back. Back to OpenAI. The company may have spent this week asking the government for a backstop, but it spent the last few months on something harder to explain. Buying a podcast. TBPN is a daily tech and business show, barely 18 months old, run by John Coogan and Jordy Hayes out of Los Angeles. This spring, it became OpenAI's first ever acquisition for the low hundreds of millions. On this week's Prof G Conversations, Scott asked the obvious question. Why? I think they saw what we were doing online and wanted to partner with us in the way that our brands had. So we had a very interesting history with OpenAI in that we were sort of contrarian supporters.

15:28So going back to the fact that the show is very pro-advertising, when it was initially rumored that OpenAI was going to put ads in ChatGPT, the general response was, this is bad. We don't like ads. But we are the guys who love ads. And we think ads are a really powerful business model. And we think ads can make things free. It was like, if you want to be open AI, you're going to need an ad supported version of your product. Otherwise, like Silicon Valley, we were like looking around being like, you guys think that everyone in the world can spend$20 a month on software. And you don't realize that like, most American households will like cancel a$10 a month streaming product if they don't have a show that they love in that very, very moment.

16:16It felt like before AI was like real and before it was something that we used every single day, the technology industry and the labs like needed to use fear based marketing to raise the necessary capital to build a lot of these models. And basically by like the midpoint of last year, we were seeing that like this sort of like fear based approach to selling the product is going to just go really, really, really badly. And it has, right? Like, you know, look at public opinion around AI. People are scared of it, even though they find it very useful in their day-to-day life. And so we had been unofficially giving OpenAI advice every single day through the show, being like, hey, where's our Steve Jobs?

17:05George Hahn:And it looks like their pro-ad stance paid off. TBPN had about 11 employees. It made$5 million in ad revenue last year and was tracking toward more than$30 million this year, all while averaging around 70 ,000 viewers per episode across platforms. For comparison, Prof G Media reaches a much larger audience but expects to make around$20 million this year. So maybe the question for the rest of the media industry is, have we been too focused on how many people are watching and not enough on who they are? That's The Week. I'm George Hahn. See you next Friday.

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