Musk's "innovation engine"

0:00Wake Up To Money from BBC5 Live. Hello, welcome to Wake Up To Money. Blimey, today we have got the biggest merger between two companies on record. That's what's being reported as SpaceX, one of Elon Musk's businesses, takes over another one of his businesses, XAI, merging the rockets, the space internet, the social media platforms and the chatbots like Grok as well. We'll talk about what his plan is for this trillion dollar and more company. We're going to talk about the government unveiling its first ever plan to tackle PFA, so-called Forever Chemicals. We'll look at outdoor wear businesses that are phasing them out.

0:42We'll hear who will become perhaps the new Disney chief executive this week. We're waiting for that. We'll discuss where the company might be heading there. And does this remind you of somewhere? Three coins in the fountain. The Trevi Fountain in Rome has started charging two euros to get up close. On top of the coins tourists typically throw into the fountain for good luck, we'll hear from a tourism expert about this controversial decision. Wake Up To Money with Sean Farrington. Good morning to you. Welcome. Wake Up To Money on BBC Five Live on this Tuesday morning, the 3rd of February. It's just after five o 'clock and we are digesting this mega deal.

1:26Always wondering what Elon Musk is thinking, how it might impact the world of tech, the way we work, internet services, the future of artificial intelligence, moving from car manufacturing to robotics, all of this. And when we wake up to trillion dollar deals being done, we need to get into the detail of all this. So fortunately, we have Hargreaves Lansdale's Chief Investment Strategist, Emma Wall, with us this morning. Emma, very good morning to you. Good morning. And in the world of tech and AI, David Keane is the Chief Executive of Origo, which develops and makes a range of automated baggage handling systems and vehicles for use in airports.

2:06David, good morning to you. Good morning, Sean. Good to be back. Yes, thank you for coming back, David, as ever. And same to you, Emma. It's always appreciated when people return, isn't it, when you offer an invite again. Emma, let's get into what this is really all about. When you see this headline this morning, SpaceX taking over XAI, what's the first thing that springs to mind for you? I think Elon Musk is not done yet. You know, it's interesting. When you ever see, you see trillion in a headline, it's often related to Elon Musk. So you may remember tail end of last year, he had his trillion dollar pay approved.

2:45And it's because of the sway and the influence that he has in this area and the belief that his investors have in him that he's able to do these mega pay deals and mega business deals. This is a lot to do with integration and it's a lot to do with control. When you invest in a business that Elon Musk runs, you really are investing in his genius. And he has long spoke about his intention to take SpaceX public with an IPO. And so this combined entity makes for a more efficient, a more profitable potentially, and definitely a more valuable IPO as he looks forward to kind of taking the business public.

3:26So what do investors make of this? I certainly get lost in the trillion here, trillion there. You can't quite fathom how much that actually is. But for investors, it's really important what these companies are worth. And for people who have their money being invested into various businesses where big investors around the world are sort of deciding what to do with individuals' money. Are these good deals? Are they worth what the numbers we're going to be reading about today say? SpaceX is worth about a trillion dollars. This deal tells us XAI, which is his artificial intelligence company that has the chatbot Grok.

4:05It also owns that social media platform X, formerly Twitter. Remember that as well as part of that. That's worth about a quarter of a trillion dollars. Do these numbers add up? Do investors have confidence in him? It's a really good question. And it's one of the challenges with privately owned businesses. So if these two were public listed businesses, as soon as this deal was announced, you and I would be able to look at the stock market and see what global investors thought of the deal, because invariably what would happen to the publicly listed shares is they would go up or down in value. When you'd have two privately owned businesses, even those as ginormous as this, the information availability is just not as great.

4:46And obviously the liquidity, as in the number of people trading these shares, is much smaller. So Elon Musk is not the only one who owns parts of these businesses. You do have other quite high profile private investors. So you have people like Cathie Wood, who is a long term kind of frontier technology investor who has spoken quite publicly about the genius of Elon Musk, who's invested in SpaceX, but it's all done privately. And so these valuations, really, we do have to take Elon, his valuers, his auditor's word for it, because there is no yet public market way of valuing these businesses. But as I said, The intention is very much from Elon Musk to IPO, this combined mega entity, potentially even later this year.

5:31David, when you see this deal being done, it's been mooted a bit in recent days. We've got confirmation of it now. From somebody who very much, you know, you're at the heart of a world of merging technology and productivity and actually implementing it in our day-to-day lives for businesses to use. What do you make of what he's trying to do here? Well, I think it's a really smart move, actually, because one thing that Elon does is he looks forward. And if you look at what's happening in his car business currently, he was way ahead and has been ahead for a very long time. But unfortunately now, with Chinese manufacturing vehicles at much lower prices and also a little bit of brand problem with Tesla, with his involvement with political activities he's been doing recently.

6:26I think he's seen that cars are quite tricky to do. There's a lot more competition. And actually, he's way ahead in the space race, way ahead of the Chinese or indeed anybody else. And he's obviously looked at all of this and thought, you know, the future of massive revenue, massive profits is going to come out of space and AI. And it's a smart move putting data centres into space because you don't need as much energy. It's pretty cold in space. And therefore, it is possible to run those far better than it is on the ground. So he's staying ahead. And I think he sees the future there and not potentially in the car business.

7:08How do these businesses, David, maybe they already have some link to what you do already, or even the concept of what he's trying to do here, merging a space business with an AI business. How might that have a ripple effect and affect a company like Origo and how you go about what you do? Well, I think our company, Origo, obviously is developing and deploying these autonomous vehicles for baggage, cargo and people movement, particularly at airports. And one of the things that we rely on is large amounts of data being moved around, whether it's from vehicle to vehicle or vehicle back to some sort of central control.

7:51Now, most of it is done locally at the airport for cyber and security reasons. But we do have a situation where we need a lot of data crunching and that's only going to increase. And if you look at companies like us, we are really hungry for data centers to crunch or hold data. So that's only going to be a massively growing market. And I think if you look at any ground based data center, it's going to need a tremendous amount of energy. And where is that energy going to come from? So and you need that energy because these things run hot. you need a lot of cooling and that's a lot easier if you can do it in space.

8:38And as I say, he's ahead of the race in that particular department. So, you know, providing that for companies like us, connectivity, data, massive amount of storage is going to be the future. Where are the data centres that you rely upon at the moment? Well, we have multiple data centres. So pretty much every area around the world that we operate, We have a local data center. And at the moment, that's been provided by Amazon Web Services or a local telco like Singtel or Rogers or whatever in the country, you know, working with one of those data providers. and at the moment it's good enough but as companies like us develop I mean you can imagine at the moment we've got one or two vehicles in different locations around the world on these proof of concept trials wait till the airports are running 500 or 1000 vehicles each and that is a lot of requirement for data and data storage so that this world is coming and it's coming really quickly.

9:46So I think it's a smart move. How he implements it, I don't know right this minute. But if there's one thing Elon does, he breaks through those barriers and he has an ability to raise large amounts of capital. And, you know, IPO-ing the company will allow him to do that. I was just wondering, as you were describing that, where we were at with nuclear power in space at at the moment and just seeing that the Telegraph have been reporting this week that Rolls-Royce actually is stalling on its moon nuclear reactor plans. It's quite something, David, for us to get our head around and Elon Musk has very much got his head around it.

10:28He's plotting future communities on other planets and in space and having industries dotted around our solar system, it But the idea that this, David, can be done in space and can be done safely, and actually this isn't that long away. No, I think that's right. The notion of having people on different planets and all that sort of stuff. Yeah, that's great. But actually, I'll be long gone before any of that materialises. But I won't be long gone before we have data centres in space. And you raise a very good point on small nuclear reactors. That is going to be the way that we can provide the amount of energy that we need.

11:19So although he talks about solar in space, you know, to run a big data center or multiple data centers still requires a lot of energy. And actually, you know, utilizing small nuclear reactors is probably the way to go. And you can see in America that the American government has already started to put a large amount of money into bringing small nuclear reactors up as fast as possible. So I think that's really good for the UK. You know, companies like Rolls-Royce who are in the vanguard of that, I think that's really a massive opportunity. Emma, all of this stuff costs a lot of money. And we hear about potential long-term ambitions of what this might bring, reducing costs for data centres and the energy around it.

12:10But for the end user, for people who, whether it's the energy bills on their home or the cost of doing business, the cost of the products that they're buying, Is there any prospect anytime soon that this is going to help alleviate the price increases that people have seen in recent times? Is there anything in this that households might think, great, this could actually take that weight off of the cost of everything being so much more than it once was? I mean, the short and flippant answer is no, because you're right, the benefits are not going to be coming for multi-decade. And we've seen this with Elon Musk's other ventures as well.

12:51You know, Tesla was incredibly ahead of the curve, but the valuation preceded the reality. So, you know, the market believed in him before we saw the benefits of EVs. You know, the market believed in his autonomous vehicles before we saw them on the roads. I mean, and that is the kind of, you know, he's a complicated character with quite a lot of complicated emotions towards him. But that is part of his genius, his ability to look, unlike many CEOs who exist in a sort of three to five year business cycle, he looks multi-decades ahead. That does mean, however, from in terms of, you know, the real life benefit that we look to experience, as you say, in terms of household energy bills, it is multi-decades ahead.

13:36But also that valuation is multi-decades ahead. And so actually, you know, when SpaceX lists later this year, and it's rumoured to be June because, and here's another insight into the complexity of his character, that is the month that the planets of Jupiter, Venus and Mercury align, which is very rare. And he likes that sort of thing. You know, that valuation will be based on a vision that is multi-decades out. And, you know, depending on what's going on in the market at the time, at the moment, you know, investors are willing to pay for that vision because they've seen him execute it before.

14:10But it is definitely not your typical business cycle. And Emma, the issue that David mentioned with Elon Musk around his political activities and how that may well have hit the Tesla brand at times. When you talk about investors backing, what they're effectively doing is backing the genius of Elon Musk. Does anybody raise large concerns and do any big investors think we're not going to back him because we don't particularly agree with his political approach? which we've, you know, just within the last year, we've seen him address rallies organised by right-wing activist Tommy Robinson here in the UK.

14:53He's had many controversial comments about the United Kingdom Elon Musk has. Besides, does that ever play into investors' decision making? Yeah, very much so. So if you look at sort of the publicly listed shares of Tesla, which is sort of the biggest way that we can test investor sentiment, Tesla is one of the largest businesses in the world and part of that Mag 7. But it did have a rather different experience to the rest of the Mag 7. So those are those magnificent seven large AI and digitally enabled US companies, the largest of which being Nvidia, particularly outside of the US. So it actually began prior to the election of Donald Trump on his campaign rally, where you had some sort of, you know, very high profile rallies.

15:45As you're talking about, there's the chainsaw incident. There's some of his comments about Democrats. He's also had hold some pretty right wing views around, you know, he's been rumoured to be sort of anti-trans. Affected less so sales in the US, but certainly we did see sales of the actual electric vehicles and comments around whether people would be buying the shares in Europe and the UK. And at one point, sort of Tesla sold, you know, hardly any units in Europe. And a lot of that was reported to be down to sort of change in sentiment. That has improved since he's distanced himself from the sort of MAGA community and Donald Trump.

16:28They obviously had quite a high profile X-based falling out last year. And, you know, so that has sort of improved global sentiment towards him. But we definitely did see an impact. Richard's been in touch, Emma, asking, where does this leave Tesla? Once Musk moves on, he says. I don't know what he means by moves on necessarily, but what does it mean for Tesla? Yeah, well, I mean, the reason why people invest in Tesla, you know, is Elon Musk in the same way that the reason people will invest in SpaceX. What I would say is he has been running multiple companies, multiple large companies with highly ambitious roadmaps for decades.

17:11This is what he does. So I don't think the IPO of SpaceX and the combination of these two businesses necessarily means he will not have the bandwidth for Tesla. But it is an interesting point because if we find out through the IPO that he has any intention to step back from Tesla or have any succession planning at Tesla because he does feel that his energies are best placed at this new$1 trillion company or$1.25 trillion company, then that could impact the market sentiment towards Tesla. And you might see an impact on the share price. So it will be interesting to see what happens to the share price of Tesla when it opens later this afternoon, kind of UK time.

17:54But so far, he has proved that he has had the bandwidth and the ability to run multiple businesses. So it's only if he signals intent to step back that I think that there will be any impact on Tesla. David, will all this improve our lives? Well, not in the short term, I don't think, unless you're going to invest into SpaceX and you might make some money out of it. But I don't think it will. I think this is more of a long-term play and it's part of the evolution of where we're going with all sorts of things, whether it's space exploration or adaptation of industry into space or whether it's AI in general.

18:40But I think at the moment it's a watching brief on all of this. 85058, please keep your thoughts coming in on this. Some really interesting questions coming in, messages, thoughts and says SpaceX and XAI and trillions of dollars. Is this science fiction or reality of life on Earth? Gavin saying that describing Tesla as a car company is wrong. It's a robotics company. Elon Musk has even stated this himself. He's more clever than people think. Cars and humanoid robots are to get people used to them. But the form factor of these is not the most efficient. And I'm sure these form factors will change in the next five to ten years.

19:18Gavin says 85058. What do you think? Another saying, who's this Will in Brighton saying, like him or not, as he's a divisive character, the world needs Elon Musk. Seems the planet is going to need much more energy, says Will. Thank you. Do keep those thoughts coming. I mean, fascinating developments as Elon Musk merges a couple of his biggest businesses. Sounds like a very casual thing to say, doesn't it, Will? And then you say, oh, it's a trillion dollar space business that puts rockets up into space. gets internet services from their Starlink. Some people might be familiar with that. And then he's just merged that with his AI business that's worth a quarter of a trillion dollars and has the Grok chatbot, the X social media platform in it as well.

20:07I mean, Emma, what does it mean for X and social media? We've forgotten all about that. That used to be the big controversial story about his plans for it. I think it still is pretty controversial, particularly in the UK, as we're kind of working out what regulation, it may or may not have fallen foul of. But it is all part of his plan. You know, the technologies that he utilizes on X are the same underlying technologies that he uses across many different of his businesses. And I do think this is part of the reason why he is such a successful businessman is he uses different entities to sort of test, you know, robotics, test algorithms, test, you know, technologies, which then benefit kind of the multi-sphere, the multi-businesses.

20:52So, you know, the AI implementation that you've seen in X, which has been very controversial, you know, is the sort of AI technology that you'll see him utilise to build efficiencies across all of his businesses. So I wouldn't count out X. I think it's still part of his kind of core strategy. Right, more to come from Emma and David. A few weeks ago, Disney's Zootropolis 2 became Hollywood's highest grossing animated film of all time, crossing the£1.3 billion mark. There's a snake! Stop in the name of the law! I'm really sorry. Stop pulling my ears, stop pulling my ears. Never pull a bunny's ears.

21:34There was much excitement in the library at the weekend when the kids spotted a Zootropolis 2 book on the shelves. Yesterday, Disney beat market expectations for their first quarter results for the first three months of its financial year. It didn't stop the stock price falling after the announcement. So apparently softer than anticipated guidance for the second quarter of the year. So maybe not the enthusiasm that some were hoping for. And people expecting Disney to be in the news plenty later this week. The company preparing to announce its new chief executive. So the veteran Bob Iger set to step down.

22:07Luke Stillman is the managing director at Madison & Wall Strategic Advisories and Advertising and Media Analyst. Luke, morning to you. Where's Disney at at the moment then? Good morning. So I think the key takeaway here is that Disney's results on the ad front were pretty good. From our perspective, we are in a structurally weak TV ad environment. So flat is the new up for most TV broadcasters. In that environment, Disney's 5 % underlying ad revenue growth is surprisingly strong. What is it that they've been doing that has meant they've surprised a few people? I think there are a few dynamics going on here.

22:51Number one, sports leading the way for them, 10 % ad revenue growth. Sports is increasingly the anchor of all TV consumption. It's all consumers want to watch. Sports content rights are one of the last truly valuable TV assets. So that's certainly driving growth. And just on that, Luke, just to keep you on the sport thing for a moment. Here in the UK, if people think Disney, they think Disney Plus, and in terms of how they might consume this stuff. And they wouldn't necessarily, in the UK, associate that with sports. So can you just explain how it is so important to Disney and where in the business it is?

23:32Yeah, so I mean, Disney, of course, owns ESPN, which is a huge portion of their sports advertising revenues. But they have properties all over the world. I think everywhere what we're seeing is the same dynamic for consumers where entertainment properties see less and less viewing as people shift to streaming, shift to social media. And sports is really one of the last big live events holding attention on TV. Incredible that. And so when you look at what Bob Iger has done, because he's had a bit of a story with Disney over the years as well, what changes has he made after returning to the business?

24:14Is it fair to say turned it around? Would this have happened without him? I don't know if it's fair to say turned it around. I feel like what we've seen over the past few years is Disney focusing on investing in content, trying to reinvigorate the TV and film production businesses. But it's a tough underlying environment there. Most of the positive performance in Disney comes from the experience part of the business now, the parks, the resorts, the cruises and the consumer products. And how would Disney be impacted by what's going on with Warner Brothers and Netflix potentially being the buyer of Warner Brothers, something we've much discussed on this program, this huge blockbuster deal that could well be being confirmed in the next coming weeks and months.

25:14Is Disney in a strong position to go up against whatever happens there? it's certainly going to concentrate the competitive landscape but i think the thing that disney's most watching there is really the consumer appetite for even more expensive streaming bundles if net if netflix and warner have a netflix hbo combination for 40 a month or 50 a month you know how many consumers actually bite at that that'll tell disney how hard it can pushed the prices on its bundles of Disney Plus and Hulu and ESPN. Feels like, Luke, I don't know if it was the same in the US, but those days of a$4.99 subscription, whether it's in pounds or dollars, could well be in the distant past.

26:03Well, one thing we've seen actually is on the streaming front, ad revenues really aren't growing the pie. They just cannibalize those dollars that would have been spent on linear TV advertising. But subscription prices keep going up. They grew by 13 % this quarter. And we think there's a big misconception out there that streaming growth has to come from ad growth. We think it's just the opposite, that ad growth is going to be really tough, but there's plenty of room to run on prices. Streaming platforms are still one of the best bang for the buck cost per hour of entertainment products out there for consumers.

26:47So everybody complains about price increases, but we think there's more to come on that front. Do people complain much about the adverts once they've already paid a subscription? Because again, there was a bit of a thinking as a household that if you were paying for something and actually subscribing to a platform, that you wouldn't have adverts. Whereas now, sometimes you get really caught out you you stick your film on or your episode on that you wonder that you've already subscribed to and whatever streaming platform it might be and then you've got to sit through a two-minute ad or 10 minutes in there's an ad and then the other 10 minutes in there's an ad are we grumbling about that i certainly everybody's grumbling but i think consumers consumers speak with their wallets and every time prices go up or a platform cracks down on password sharing.

27:36Everybody complains, but nobody cuts their subscription. So I think more prices to come and we expect consumers to continue to absorb them. Luke, great to talk to you. Thanks for your time. Luke Stillman, their managing director at Madison and Wall Strategic Advisory. Your thoughts, 85058. Are you up for spending a bit more on those streaming services if you spend any at all at the moment? Do let me know what you're thinking is on that. Much more discussion to come about over tourism, talking about what's going on in Rome a little bit later, but a conversation that we've certainly had about places around the UK as well.

28:14It can be a hot topic in certain parts. And any more thoughts on artificial intelligence and what Elon Musk wants to somehow achieve by merging his trillion-dollar rockets business with his just a quarter of a trillion-dollar AI Grok social media platform X business as well? a mega deal. I've been hearing on Wake Up To Money this morning what that actually might mean. Wake Up To Money from BBC Radio 5 Live. Good morning. Wake Up To Money on BBC 5 Live. Your thoughts on the future of artificial intelligence, where we get our energy, industries in space, life on Mars, all of that ambitions of Elon Musk as he merges his multi-billion, multi-trillion dollar companies that we're waking up to this morning, his space business merging with the AI business as well.

29:05We've chatted about that at length on Wake Up To Money. Have a subscribe on BBC Sounds if you missed that a little bit earlier. Let's hear some interesting comments from the commissioner, the EU's economy commissioner, in the strongest signal yet of a post-Brexit reset. He has been saying that the EU is open to the UK for a reapplication to a major defence industries fund. Valdis Dombrovskis told the BBC the EU also had an open mind on the UK debate about rejoining the customs union as well. The comments follow talks in London hosted by the Chancellor, Rachel Reeves, who said the UK and the EU should speak with one voice on global economic issues.