PivotParamount Beats Netflix in Battle for Warner Bros. | Pivot
EVERY SPOKEN WORD
70 min read · 13,860 words- 0:00 – 0:25
Intro
- SGScott Galloway
You sound smarter when you catastrophize. It sounds scarier and more interesting, and you put some bar charts around, you're talking about the zombie apocalypse in a downward spiral doom loop. [upbeat music]
- KSKara Swisher
Hi, everyone. This is Pivot from New York Magazine and the Vox Media Podcast Network. I'm Kara Swisher.
- SGScott Galloway
And I'm Scott Galloway.
- KSKara Swisher
Why don't you give us an update? Because February is coming to an end. You've had over
- 0:25 – 3:58
Resist and Unsubscribe Update
- KSKara Swisher
twenty million views across social media and over one point five million cites. This obviously has a lot of momentum. People mention it to me all the time. Your website touts two hundred and forty-two million dollar loss in market cap. Talk a little bit about how it's gone, because we have something to announce, but first, give me a little update, and then you can do the big announcement.
- SGScott Galloway
Yeah, uh, it, it-- look, um, uh, the, the honest truth is I'm struggling-
- KSKara Swisher
Mm
- SGScott Galloway
... because it's taken a lot of time and a lot of effort, and it feels as if it's, the momentum is actually cumulative and building.
- KSKara Swisher
Mm.
- SGScott Galloway
And I've had a lot of different kind of smaller, I don't know, resistance programs reach out and say: What are we gonna do in March? Should March be, should it be Meta March, where we focus on one company or-
- KSKara Swisher
Oh
- SGScott Galloway
... focus on OpenAI? Should it-
- KSKara Swisher
[chuckles] Got it.
- SGScott Galloway
Right. So, uh, and how do we keep it going?
- KSKara Swisher
Yeah.
- SGScott Galloway
Because it does feel like it's, it's building momentum, and to just shut it down at the end of the month feels like a loss of effort-
- KSKara Swisher
Yeah
- SGScott Galloway
... and momentum. So-
- KSKara Swisher
Yeah
- SGScott Galloway
... I'm, quite frankly, Kara, and-
- KSKara Swisher
Mm
- SGScott Galloway
... I want your advice.
- KSKara Swisher
Mm-hmm.
- SGScott Galloway
I'm trying to figure out what to do with it going into March.
- KSKara Swisher
Well, as I said, uh, first of all, let me, uh, well, uh, before I say what we're gonna do to, in March, um, is, uh, I think you should hire someone t- specifically, de- not part of your team, but really-
- SGScott Galloway
Yeah, dedicated, yeah
- KSKara Swisher
... uh, hire someone to really keep it going. And-
- SGScott Galloway
Someone who wears Birkenstocks-
- KSKara Swisher
Yes
- SGScott Galloway
... lives in Brooklyn.
- KSKara Swisher
A lesbian, uh-
- SGScott Galloway
Someone with rich parents, putting them s-
- KSKara Swisher
Yes
- SGScott Galloway
... putting them through nonprofit.
- 3:58 – 7:15
Kara and Scott: Live in Minneapolis!
- KSKara Swisher
talked about it on the show, and then we made it so, along with our great team here, and you can see us live. We're gonna celebrate, Resist and Unsubscribe, and keep the momentum going. We're gonna do a live show at the... Is it the Pantages Theatre? Pa-
- SGScott Galloway
Pantages, I bet.
- KSKara Swisher
Pantages Theatre. On Sunday, March 8, we will be there.
- SGScott Galloway
I wanna meet Rhoda from Mary Tyler Moore. That's why I'm going. That's wh- and you know what? I hope she's wearing a raspberry beret.
- KSKara Swisher
[chuckles]
- SGScott Galloway
Get it? Get it, Kara?
- KSKara Swisher
I get it. [chuckles]
- SGScott Galloway
Little local, little local humor there.
- KSKara Swisher
Talk about the tickets. They're not available yet, right?
- SGScott Galloway
They go on sale, I think by the time this airs, they're on sale.
- KSKara Swisher
Yeah.
- SGScott Galloway
We're gonna be donating all proceeds to the Minneapolis Immigration Center, I believe it's called.
- KSKara Swisher
Mm-hmm.
- SGScott Galloway
But we wanna do something... Well, AI said this, "You've been very supportive, and we've decided..." I won't say "we". I've decided I want a fra- I want my efforts off the fucking keyboard and off my, to be a fraction of the virtue signaling and action I claim, I claim to, you know, wanna have. And so I pitched you on this idea, and we thought, "Let's go to Minneapolis." We wanna bring some economic activity. We wanna salute them. We want to basically say over and over that they fucked with the wrong cowboy when they came to Minneapolis. It's gonna be a nice event. You, of course, are totally well connected. We're gonna have a bunch of fun and famous surprise guests.
- KSKara Swisher
Hopefully. Yes.
- SGScott Galloway
And we're gonna do-
- KSKara Swisher
Yes, working on it
- SGScott Galloway
... we're gonna do a live show and basically nod to the, to the incredible Americans known as Minneapolians.
- KSKara Swisher
We love the Minneapolians. And l- w- the, the, if you jump straight to the website, uh, the, the, you can find a link to buy them when the tickets are available. We think they're gonna be available on Friday, uh, at resistandunsubscribe.com. We've got a thousand tickets. Uh, again, the money goes straight to charity. We will do-- we're gonna run this show on Pivot, too, so we'll talk about some current events, but we're gonna focus on what's happening here with Resist and Unsubscribe. And we know we have a lot of fans there, and we love Minneapolis. We love what the city has done, and we wanna give back in some way, and this is one of the many ways, because what happened to you was heinous. And at the same time, tech companies have a lot [chuckles] to do with this. Like, let's be clear. Um, and so we really, what Scott is doing here is giving... You guys have resisted, and we are gonna do our little part, and it's a little part compared to what Minneapolis has done. But tech is n- not, it's not the only reason, obviously, but it's played a part in where we are today, and so, um, we're gonna resist and unsubscribe, and everyone's gonna unsubscribe. Speaking of unsubscribe, Scott, I unsubscribed from One Medical, which is an Amazon, uh, product. Um, and-
- SGScott Galloway
Did you have the ninety-nine a year or one ninety-nine a year?
- KSKara Swisher
One ninety-nine a year.
- SGScott Galloway
... and were you using it?
- KSKara Swisher
I, a little bit, yeah, absolutely, and I loved it.
- SGScott Galloway
I love the service, I just hadn't used it in several years.
- KSKara Swisher
Yeah, I, I, I use it when I get, like, an ear infec-- every time I get an ear infection or something like that, or clean out my ears, or a cold or a flu.
- SGScott Galloway
That's a little too much information.
- KSKara Swisher
Okay [chuckles]
- SGScott Galloway
Tell us about the ear cleaning.
- KSKara Swisher
[chuckles] Okay.
- SGScott Galloway
Tell us about the ear cleaning.
- 7:15 – 12:47
SOTU Reactions
- KSKara Swisher
President Trump delivered the longest State of the Union ever on Tuesday, one hour and forty-eight minutes, where he, of course, said Americans were telling him, "We're winning too much." Uh, did, did you watch, Scott? Thoughts?
- SGScott Galloway
I was on too late. I watched... I did what I did with almost all media broadcast on traditional cable-
- KSKara Swisher
Mm-hmm
- SGScott Galloway
... and that was I watched it in bits and pieces on, you know, TikTok and Reels the next day. I felt like, uh, for Republicans, I felt as if they were attending their ex-wife's wedding when you're still on her health insurance-
- KSKara Swisher
[chuckles]
- SGScott Galloway
... and, but he con- but she controls the military.
- KSKara Swisher
[chuckles]
- SGScott Galloway
It felt like dear leader in the Duma, where they thought-
- KSKara Swisher
Yeah
- SGScott Galloway
... "I better stand and applaud, or I risk execution."
- KSKara Swisher
Yeah, totally.
- SGScott Galloway
So I found it, I don't know. I, I, quite frankly, I thought it was a bit of a nothing burger. I, he didn't-
- KSKara Swisher
I agree
- SGScott Galloway
... he didn't say a hell of a lot. I thought he came across as quite robust, to be fair.
- KSKara Swisher
He came across as robust, but he moved very quickly by the end into very deflated. Like, it was really... If you watched the whole thing, he started off real, like, energetic, and then he got mean. He was normal-ish for him, and, um, that's a-
- SGScott Galloway
Yeah
- KSKara Swisher
... that's a very low bar.
- SGScott Galloway
Mm-hmm.
- KSKara Swisher
But he, as you, as the night progressed, he got super mean, calling the Democrats crazy, and then that fucking idiot in the back, Jod- J.D. Vance, was like [laughing] Like, he looked like such a dope. He is, he has no right being, to be president. Sorry, I'm gonna... He's just such a dope. Um, the Supreme Court went and stony-faced, and every time Trump did something like, "The Democrats are crazy," the Republicans, as you said, jumped up like a bunch of, like, like, dancing monkeys, essentially. The Supreme Court sat down. The military looked straight ahead, which was really interesting, and of course, the Democrats sat down, and they wanted the Democrat- to have photos of the Democrats not agreeing with, "Immigrants shouldn't kill American citizens." They wanted photos like that. I thought it was mendacious, uh, and if you look at any of the lie stuff, there's a lot of it. I thought it was-- it veered into cruel, as usual, and then the worst part it was, it was dull. It was actually dull, and that's, to me, the worst part, and of course, the numbers show much less people watch, at twenty-eight million versus thirty-six. It's like, um, doesn't have any staying power, and he denied Americans were suffering. That's one of the things which I thought was a mistake, so...
- SGScott Galloway
I thought from a political standpoint, is it Abby Spanberger? Is that her name?
- KSKara Swisher
Yeah, Abigail Spanberger. Mm-hmm.
- SGScott Galloway
Uh, Abigail Span-
- KSKara Swisher
Governor of M- Virginia.
- SGScott Galloway
I thought her rebuttal was outstanding, and I, I came up with an idea I wanna pitch to you, and I'm serious now, and I actually called one of our favorite senators, and I said, "I have an idea. Uh, I think they should hire..." [exhales] If you think about, essentially, the Democratic response should turn into what the halftime show is to the Super Bowl, and that is the halftime show had almost no relevance forty years ago. Now, it's bigger than the Super Bowl.
- KSKara Swisher
Mm-hmm.
- SGScott Galloway
I said, "Hire Jay-Z's Rock Nation-
- KSKara Swisher
Oh, [chuckles]
- SGScott Galloway
... fill a stadium with 10,000 rabid Democrats-
- KSKara Swisher
Yeah, and then you get all excited
- SGScott Galloway
... music, cool, c- cool intro, amazing artists, uh, graphics, visuals, great lighting," 'cause the problem is the follow-up, whether it's Marco Rubio responding, the response always comes across as flat 'cause it lacks the sex and the majesty-
- 12:47 – 29:09
Paramount Wins WB Bid
- KSKara Swisher
has won the Warner Brothers Discovery bidding war, at least for now. Netflix has released a statement saying the deal is, quote, "no longer financially attractive." It never was, and it was, quote, "Always nice to have at the right price, not a must-have at any price." Paramount had upped its offer to buy all of the company for thirty-one dollars a share and added all kinds of bells and whistles, and Warner determined the offer was superior to Netflix, 'cause it was, actually. So I'm joined now by Puck's Bill Cohan to break this all down. Bill, we- you and I have been texting about this for a long time. You thought it would be quick and Paramount would get her way. I said this was gonna go on, on, and on, and it has. It's really been a, like, since December, I think we've been-- whenever-
- BCBill Cohan
Right
- KSKara Swisher
... it sort of broke.
- BCBill Cohan
Yep.
- KSKara Swisher
But talk a little bit about your overarching things, and we'll talk about a few other things.
- BCBill Cohan
[exhales] Oh, look, I think this, uh, Kara, is the outcome that had to happen. Uh, you know, uh, whereas Netflix was saying it was nice to have at the right price, it was getting to be nosebleed territory. Paramount, this is existential. I mean, without this, they're just like a, an eleven-billion-dollar company, which once upon a time would be nothing to sneeze at, but now is a pipsqueak in this landscape.
- KSKara Swisher
Right.
- BCBill Cohan
If, if they hadn't done this, then their, their, uh, original premise for the Paramount deal wouldn't have made much sense, and their equity wouldn't do anything. So-
- KSKara Swisher
Right, right
- BCBill Cohan
... uh, this is kind of existential for them. They had to pay up. They had to win, and kudos to David Zaslav for running one of the best-
- KSKara Swisher
I know
- BCBill Cohan
... M&A processes I, I've seen in a long time.
- KSKara Swisher
You know, people forget, um, uh, yesterday, as I had tweeted that Netflix had to walk away from this because it was just ridiculous. It was an, an insane price, and Warner was at, uh, was at ten dollars a share recently, and it popped to thirty-one. Was there twenty-one dollars of, of excellence that had been created? Not at all. From nothing, right? It's like whipped cream or something.
- BCBill Cohan
Well, it, it, it actually got as low as seven dollars a share, and, uh-
- KSKara Swisher
Yeah. Yeah, remember?
- BCBill Cohan
Right, I do remember. Um, I was-
- KSKara Swisher
And it was expensive at that [chuckles]
- BCBill Cohan
... recommending people, you know, buy at that price, but 'cause I thought-
- KSKara Swisher
Yeah
- BCBill Cohan
... they would pay down the debt and make something of it. But, you know, he's, you know, ever since September 11th, when Paramount first began to hint that it was interested in buying this, and it offered nine, uh, nineteen dollars a share-
- KSKara Swisher
Mm-hmm
- BCBill Cohan
... uh, we've gone from seven to thirty-one, and, and it's-
- KSKara Swisher
Mm-hmm
- BCBill Cohan
... uh, and what? Uh, uh, not, not because the companies have, uh, performed, uh, particularly that much better. I mean, they've performed fine, and, a- and Warner Brothers has some hit movies. But it's just because of the scarcity value, the fact that he ran an in-- Zaslav ran an incredible auction process, kept them on both sides on their toes the whole way, and, uh, especially this last bit of, uh, o- of, of jujitsu was just beautiful to watch, uh-
- KSKara Swisher
Yeah, yeah.
- BCBill Cohan
And-
- KSKara Swisher
I, I said he won the Jeff Bewkes Award for turning chicken shit into chicken salad and feeding it to a Nepo billionaire. [chuckles] Like-
- BCBill Cohan
That's, you know-
- KSKara Swisher
I feel like that-
- BCBill Cohan
... Jeff Bewkes was the last guy at, uh, at Warner Brothers to, you know, make a fortune selling the company to AT&T, and now Zas has done it again.
- 29:09 – 33:10
Nvidia Earnings
- KSKara Swisher
better-than-expected fourth quarter earnings, with a profit hitting one hundred and twenty billion. [chuckles] Only a handful... theirs was revenue. Only a handful of other companies, including Alphabet, Microsoft, and Apple, have made over a hundred billion dollars in profit in a, in a year. Uh, net income for the company doubled to forty-three billion dollars. Revenue in the data center business rose seventy-five percent. Um, uh, talk about that, because Wall Street was also rattled this week by a viral memo from market an- analysis firm, Citrini Research, very good research group. The memo laid out a scenario where the AI systems trigger mass white-collar layoffs, push unemployment above ten percent, and ultimately lead to a stock market crash. Citrini said the post was designed to prepare investors for potential, uh, left-tail risks as AI makes the economy increasingly weird, stressing that it's a scenario, not a prediction. Even so, the S&P dropped one percent on Monday, though some of it was over concerns about tariffs. The companies specifically named in the memo included Uber, DoorDash, American Express, IBM, all saw steep declines. Um, it was an interesting memo, and I thought it was a thought experience. And the markets were already rattled by Blue Owl Capital, a major private credit lender, announced it's halting of quarterly redemption for one of its funds and selling, uh, one point four billion dollars in loan ads as the company's stock fell. We'll get to that in a second. I'll talk a little bit about that more, but stick with the first, with first, with, with the Citrini and, um, and the NVIDIA earns.
- BCBill Cohan
Well, I'll talk about-
- SGScott Galloway
... Nvidia, before I talk about Citrini, revenue, uh, sixty-eight billion versus sixty-six expected, up seventy-three percent year on year, [chuckles] up twenty percent quarter on quarter. Non-GAAP earnings, buck sixty-two versus a dollar fifty-three, up eighty-two percent year on year. Data center revenue, sixty-two billion, up seventy-five percent year on year.
- KSKara Swisher
Yeah.
- SGScott Galloway
The gross margins, seventy-five percent?
- KSKara Swisher
Yeah.
- SGScott Galloway
Their fiscal-
- KSKara Swisher
Huge
- SGScott Galloway
... twenty twenty-six revenues-
- KSKara Swisher
Margins were crazy.
- SGScott Galloway
Two hundred and sixteen billion, up sixty-five percent. I think that's-- that may be more revenue than, like, every streaming media company and movie studio combined.
- KSKara Swisher
Yeah.
- SGScott Galloway
Since the launch of ChatGPT, Nvidia has grown its data center business roughly thirteen-fold, and this quarter marked the best revenue growth rate of the entire fiscal year. So its revenue growth on the law of big numbers, it seems to be more like network effects.
- KSKara Swisher
Yeah.
- SGScott Galloway
It keeps getting better. It's scaling. Q4, seventy-three percent year on year growth, beat Q3 at sixty-two, Q2 at fifty-six, and Q1-- As they get bigger, they're growing faster. They're literally defying gr, uh, you know, gravity. Uh, notably, they're leaving out China from its future guidance. According to the CFO, "While small amounts of H200 products for China-based customers were approved by the US government, we have yet to generate any revenue, and we do not know whether any imports will be allowed into China." China was previously twenty, almost a quarter of Nvidia's data center revenue, but that's now gone, and it doesn't seem to have hurt them. And the thing is, it's still not expensive. It trades at roughly twenty-four times forward earnings, which is only slightly higher than the S&P. So you have a company that's the most dom-- arguably, the most dominant company in history at, at that moment, is trading at what the S&P is trading at. And because of the fears around AI, and maybe because of the stock acceleration, it's only up... It's basically flat. It's up four percent this year.
- KSKara Swisher
Yeah, it was. I noticed that, flat.
- SGScott Galloway
And then you have all these companies announcing they're spending two-thirds or three-quarters of a trillion dollars on CapEx this year, and most of it's, or a lot of it, is going to Nvidia. Alphabet is flat, Amazon's down seven percent year to date, Meta's flat, Microsoft is down fifteen percent year to date. But big tech is getting punished, uh, for spending money, and Nvidia is getting punished, uh, for collecting it, or Nvidia's on the right side of that CapEx. So one of those, one of those m- must be wrong. Either these companies are making good investments, um, or I guess maybe the thesis is they're overspending and it'll slow down.
- KSKara Swisher
Yeah, yeah.
- SGScott Galloway
Should we talk about Citrini?
- 33:10 – 45:21
AI Memo Rattles Markets
- KSKara Swisher
Yeah, Citrini was interesting. I, I-- You know, there was the other one a couple of weeks ago. That was another thing, like, everything's gonna change, that one, Schumer, Matt Schumer, or whatever his name is. Um, there's been a couple of these that have a- actually had real impact, um, w- as they've been written. So because pe- they're thought experiments in many ways, um, but they're interesting. But go ahead, Citrini.
- SGScott Galloway
Well, e- essentially, I would describe it as an A-plus creative writing project from a super bright high school student, and it is really... It's written in the past tense. It says, "Okay, this is how we hit this massive recession, and the market lost a third of its value." And I think it's a really interesting thought experiment. What, what they're essentially saying is that AI is gonna create this negative feedback loop, where w- it makes white-collar workers so much more productive so quickly that companies can do layoffs and hire fewer workers, which results in an employment spike, less consumer spending, and because companies fall under revenue pressure, they're forced to cut costs. And how do they cut costs? More AI, and it creates this downward doom loop. Now, you could make the same argument for any technology, right? At one point, ninety percent of us were working in agriculture, now it's less than two percent, but that happened over two hundred years. These guys are saying this is gonna happen over, over two ye- uh, over twenty-four months.
- KSKara Swisher
Six months. Yeah.
- SGScott Galloway
And what's happened is, it's really cut-- Obviously, we talked about last week, it's gone after the SaaS companies, the software companies, who they believe you'll be able to replace, uh-
- KSKara Swisher
Easily
- SGScott Galloway
... Adobe, Figma, or Salesforce, just with thoughtful internal prompts. And they, the-- It's really well written, and it's got great branding. They coined the term ghost GDP, and that is economic output can grow while the benefits of that growth never actually reach most people. And then the other, the surprising-- the other surprising victims here, and this will, uh, come back to my prediction, is a lot of publicly traded PE or private credit companies, whether it's Apollo or TPG or Blackstone, have been-- th- their stocks are down twenty, thirty percent because they own a lot of software companies, and there's a fear that as private credit lenders, basically, they act like banks to companies who are non-traditional borrowers, that a lot of those companies might not be able to make good on the money they borrowed. So-
- KSKara Swisher
Let me just throw in some stats-
- SGScott Galloway
Yep
- KSKara Swisher
... for the, the, this, you're talking about Blue Owl, which is a-
- SGScott Galloway
Yeah
- KSKara Swisher
... major private credit lender. The company's stock fell ten percent on the news last week because-
- SGScott Galloway
Yeah
- KSKara Swisher
... of these, these sell-offs. Shares are at a fifty-two-week low. The sell-off, it did then rippled across the whole private credit sector, which probably wasn't fair, Apollo, Ares, Blackstone, and others sliding. Blue Owl said it is not halting investor liquidity, it's accelerating the return of capital. [chuckles] I love how they do that. Um, Mohamed and it's, uh, El-Erian, former CEO of Pimco, suggested this could be a canary in a coal mine moment, comparing it to the early warning signs for the twenty-- two thousand and eight financial crisis. Um, so there, this is all linked together, this, this idea of worries, worry for all of these, these things, especially private credit lenders. Um, some are not as concerned; some are more concerned. Um, it, it, it, we've got a lot of letters from people saying, what-- should they be concerned of what's going on here? But they are definitely... As you're noting, they're linked, correct? All this is linked to this spending, this massive spending by the tech companies.
- SGScott Galloway
The way I would try and describe the dynamic here, and to understand if you're at risk and where you want to think about investing your own human capital and your own financial capital, is the following.... My mom used to run the secretarial pool at Southwestern University, uh, School of Law in downtown Los Angeles, where I actually worked in the mailroom in high school. And she oversaw twenty secretaries who would write up the exams and the, the legal research of all the professors. That's gone. Word processing has taken that away. At the same time, my mom then became an executive assistant because she has good EQ, and she's smart and reliable and can write well. If you look at truckers, the-- AI will be a substitute for truckers. Truck drivers, via autonomous, are in real trouble. At the same time, accountants, you're going to see a lot of their rote accounting work go away, but they, there are now more accountants than ever because they move upstream into things like tax, wealth planning, and estate planning.
- KSKara Swisher
Yep. Yeah.
- SGScott Galloway
So the question is, do you-
- KSKara Swisher
Which presumably AI eventually be able to help you with, that I don't have to-- I call my accountant, Mamie, who's amazing, all the time for little and big things, right? So presumably, at some day, I won't be talking to anybody, but-
- SGScott Galloway
Yeah, see, I don't, I, I-
- KSKara Swisher
It seems very artisanal on my part. It seems like a lot of work by Kara. It's like pumping gas. I kind of like having-
- SGScott Galloway
That's, that's the right example.
- KSKara Swisher
Right.
- SGScott Galloway
I use a lot of lawyers.
- KSKara Swisher
Right.
- SGScott Galloway
I used to send every agreement I did, uh, you know, advertising contract, wh- whatever it was, a employment contract, I sent to our lawyers. They charged me a thousand, two thousand, three thousand dollars to have an associate review it. Now I said to-- now I say to our chief growth officer, "No, use AI, review it, and you do it. I trust you more than... With AI, you're as smart as a, as a low-level lawyer." At the same time, I'm spending dramatically more on a very talented lawyer at a firm that's actually called Citrin, uh, on this incredibly smart woman named Lucy Lee, who figures out everything from immigration to tax strategies to my estate plan, 'cause that shit is complicated.
- KSKara Swisher
'Cause you want her to be using AI for, on your behalf, right? 'Cause presumably, she's also using it.
- SGScott Galloway
Yeah, but she can call me and say, "Scott, have you thought about turning this company into an S corp so you, so you can, in five years, uh, qualify for twelve oh two?" She's incredibly strategic and smart and charges fifteen hundred bucks an hour. So the bottom line is, wherever you are in the world, do you have an opportunity to use AI to go upstream, or is AI basically gonna take everything you're doing, and you have nowhere to go upstream? But the story of technology disruption is the same, and I don't think it's any different here. And that is, it will take out the boring rote work, and you either take that additional margin and go upstream and invent new jobs, new higher-paying jobs, or you get outsourced. The V here, or the correction, might be more severe, and America's bad at taking, at, at taking care of those people. Again, we spend point two percent on retraining. Denmark spends two percent of GDP on retraining.
- KSKara Swisher
We also don't do it well when we try to do it. It doesn't quite work right.
- SGScott Galloway
But look at what we... We're in the business-- I would have thought... So, for example, I've been writing books, and I thought of my latest book, I'm starting my newest book. I thought, "Oh, AI is gonna play a huge role." It plays a role in research and improving-
- KSKara Swisher
Mm-hmm
- SGScott Galloway
... and in fact-checking, but the writing is still-
- 45:21 – 52:20
Anthropic Pushes Back on Pentagon
- KSKara Swisher
back. Anthropic has rejected the Pentagon's demands for unfettered access to Claude, as we thought they might. Defense Secretary Pete Hegseth had given the company a deadline to roll back certain safeguards or risk losing a two hundred million dollar Pentagon contract. Anthropic's CEO, Dario Amodei, said in a blog post that the, quote, "Threats do not change our position," and that the company, quote, "cannot in good conscience accede to the request." Good for you, Dario, not to accede to a moron. On the other hand, the AI company that's been all about safety is dropping its core [chuckles] safety pledge, too. It announced this week that it won't stop training, uh, potentially dangerous AI models if a competitor releases something comparable or more advanced. Uh, they're doing other things, but they, they, they say the move reflects the speed of AI progress and the lack of federal regulation, not a political pressure. Thoughts?
- SGScott Galloway
The best-performing organization in history is the US military. A close second is the US corporation. It's created more wealth in the last-- Christ, in the last seventeen years, US corporations have created more shareholder value than all of Europe, um, since probably the '60s. Well, one company, Nvidia, is worth more than every publicly traded company in Germany and Spain. Now, why is that? One, we have incredible research universities, we have a very risk-aggressive culture, and we have the deepest pools of capital in the world. We have five million dollars per startup versus one million per startup in Europe. And why do we have such deep pools of capital? Because when people invest here, they know the rules that that company will have to play by, and when governments start interfering and picking winners and losers and saying, "Oh, the rules have changed," you're gonna have an absence or a flight of capital, which by the way, has happened. And this bullshit, sclerotic, blood sugar-level socialism, where the government is deciding who should get to acquire Warner Brothers, or that we should own a share, a golden share in a steel company, or which microchip companies the governments can invest in because a failed casino owner and talk show or rate, reality show host seems to believe he understands business better than the private sector, and we are already... This isn't, this isn't a theoretical lesson in why I hate Trump, reflecting my biases. This has already happened. They point to ye- over the last year, the S&P is up fourteen percent, but it's not. On a dollar-adjusted basis, the dollar has weakened so much, it's more of mid-single digits. And by the way, every single-
- KSKara Swisher
Europe is up more, as you noted.
- SGScott Galloway
Every single major market, from South Korea to Germany to the FTSE to the Kospi in South Korea, has massively outperformed the S&P, and one of the reasons is, when you now invest in a US company, there's unnecessary risk from the government if you, for whatever reason, the Pentagon decides that we don't like you. And guess what? Anduril and, and Palantir are working very closely with the government to help them track down spies, to maybe even track down immigrants using social media. A lot of people would say that's a violation of privacy rights. A lot of people don't want to work for a weapons company. Well, guess what? I love your saying: You don't like Chick, Chick-fil-A? You don't have to eat at Chick-fil-A. Maybe you don't work there, maybe you don't invest there, but guess what? They get to do-... what they want-
- KSKara Swisher
So-
- SGScott Galloway
Regulated competition.
- KSKara Swisher
Anthropic. Yep.
- SGScott Galloway
And, and you get to decide what business you're in or not in, just as Anthropic might decide that we are not comfortable working and providing data and computing power to help surveil US citizens. They get to make that decision.
- KSKara Swisher
That's right, and they c- get to make-- By the way, I think they'll do better. Like, everyone's like: "Oh, they're gonna get, like, blacklisted." I'm like: "I think this is good for them." Are you kidding?
- SGScott Galloway
It might be good branding.
- KSKara Swisher
It might be good branding.
- SGScott Galloway
It might be good branding.
- KSKara Swisher
It might be good... By the way, that they can do what they want and decide what they wanna do, uh, on everything, and then you, the consumer, as we know, decide what you wanna do. And one of the things that, uh, [chuckles] Hegseth is always, like, he's either doing, like, pull-ups or this, this nonsense. Another person never run a successful business, just so you know. A lot of these, these people in the Trump administration never run a successful business, including the president himself, really, really has driven so many businesses into the ground. Let Dario Amodei do what he wants, and if he, uh... But to, like, threaten him?
- SGScott Galloway
It's called the private regulated competition.
- KSKara Swisher
You have other choices.
- SGScott Galloway
And everyone has to play by the-- everyone gets to and has to play by the same rules.
- KSKara Swisher
Elon will take it, uh, for you. Just go to Elon. And by the way, the reason why it's a problem is 'cause most of the people in the Defense Department think Claude is better, right? That's the issue. They don't wanna give their better product to do what they want. Uh, this, to me, is ridiculous. And by the way, the, on the safety thing, you know all these people are gonna do whatever it takes, and they may be more safe, Anthropic, but they will do whatever it takes to compete, right? Correct.
- SGScott Galloway
Look, I, I think the reality is, and this is the danger, and this has been my-- one of my core theses all along, is that we have fallen under the assumption that every breakthrough in technology results in a small number of companies that are able to ring-fence distribution, capital, or IP and create trillions of dollars for their shareholders. I wonder if AI is more like jet manufacturers or vaccines, and that is, it will be an enormous innovation that will change society for the better, I'd like to think. But there aren't going to be a small number of companies that capture a ton of value, that the real winners will be stakeholders, but those stakeholders will be citizens. I think we have massively benefited from vaccines. Moderna is now ninety-- down ninety percent. There's no one company that's made hundreds of billions of dollars from vaccines. Uh, if you added up all of the sha- all of the profits and losses of all airlines and Boeing and Amber and Airbus, it's barely even a break even. And yet, skirting along the atmosphere at seven-tenths the speed of sound is, in my view, for my life, the greatest b-- greatest breakthrough in history. Now, I-- my general impression is people ask me all the time: "Which LLM do you like?" I have favorites, but it only lasts for two weeks. I think AI is putting AI out of business, and that is, if you look at the data, they're all getting to technical parity.
- KSKara Swisher
They are.
- SGScott Galloway
It is so hard to maintain-
- KSKara Swisher
You know, Yann LeCun said this exact- [chuckles] he says they're all the same. They're commodities. They're commodity.
- SGScott Galloway
I, I, I, I use both ChatGPT and Claude, and, and then for, like, seventy-two hours, I'll be like: "Oh, ChatGPT is better. It's less politically correct." And then I go: "Wait, Claude is better at editing." A- a- and then I go back and forth, and here's the thing, AI is reverse engineering every other [chuckles] LLM.
- KSKara Swisher
Right.
- SGScott Galloway
So it's gonna be about things like UI, it's gonna be margin compression, and I wonder if we're gonna be the big winners.
- KSKara Swisher
And services.
- SGScott Galloway
And these companies-
- KSKara Swisher
And services
- SGScott Galloway
... are, are these companies are gonna spend a massive amount of capital-
- KSKara Swisher
I know, I agree. We're getting a lot of free. We're getting a lot of free.
- SGScott Galloway
Hundred percent!
- 52:20 – 59:31
Epstein Fallout Continues
- KSKara Swisher
of, uh, of FBI witness interview summaries appear to be missing from the DOJ's latest Epstein files release. Some of those are missing interviews that are tied to a woman who accused Donald Trump of sexually assaulting her decades ago. The DOJ said in a statement that: "The only materials we have been withheld were either privileged or duplicates." This is nonsense. Democrats in the House Oversight Committee are now investigating whether DOJ purposely withheld materials. The New York Times followed this, so did-- NPR broke it, and, a- and an independent journalist broke it. New York Times has followed it. This is really a bad cover-up, and what they've done here is kept, uh... They should just put it out there or investigate Donald Trump, one or the other. He's certainly not exonerated. By the way, other people are taking, uh, a lot of fallout from Epstein this week. This is not stopping, folks, until-- it, it's not over till it's over. Bill Gates apologized to the Gates Foundation for his ties to Epstein and also two affairs he had. He talked about them publicly finally. Um, he kept stressing they were older, uh, just old enough, at least. Um, Larry Summers is resigning from Harvard over his Epstein connection. The World Economic Forum president is also resigning. Peter Mandelson, former UK ambassador to the US, was arrested over allegations that he shared confidential government information. The former Norwegian, I think, Prime Minister, was hospitalized with suspicion of suicide over it. There's a Columbia professor who's, who's, who-- very prominent, um, uh, neurologist, I think. Uh, all these people are paying the price, let's just say, either related or nearby. Um, Trump obviously didn't say anything in the Epstein files in his State of the Union. I- I don't think he can ignore this. I think this is not going away. It is chasing him, and it will not happen until they do, as you say, they have to deal with the per- the perpetrators. And if he is one of them, he, uh, he, he has, he has the right to be investigated, and he should be investigated, so should all of these people. There's still gonna be repercussions for everybody in this world. It's just... There just is, whether your judgment was bad or whatever. Very quick thought?
- SGScott Galloway
You know how I feel about this, and it's an unpopular take. I don't think the files should have been released. I think the agency that aggregated the information should have reviewed it with the help of outside, uh, litigation counsel, and they should have communicated in one way to the general public, and that is with the grand jury indictments and announcements that the-
- KSKara Swisher
This administration wasn't gonna do that because their own president was possibly involved.
- SGScott Galloway
And so what have they done? They've created weapons of mass distraction, and-
- KSKara Swisher
I don't know.
- SGScott Galloway
This-
- KSKara Swisher
I think there's repercussions here. I don't-- Look, I'm gonna go the different way.
- SGScott Galloway
Because you're focused on it. There-- The, the reality is the following: there appears to be enough evidence-... that, that, that warrant an investigation by, and again, to your, to, to, to your point, unfortunately, we don't have the institutions to do this correctly. But the way this should play out is the following: the attorney general should be announcing, or the Department of Justice, that they are forming a special counsel because there are credible accusations of rape against several people, including the president of the United States. And all this other bullshit, Larry Sumner sending stupid fucking emails 'cause he's pathetic to Jeffrey Epstont- Epstein, I think that's a distraction, Kara.
- KSKara Swisher
Uh, a- again, I, I know. I know you do. I don't. I think it shows about judgment, and we can decide who we want to affiliate with. I think it's fine-
- SGScott Galloway
Okay
- KSKara Swisher
... to do both.
- SGScott Galloway
So and, and if, if I had AI go through every one of your texts and emails, I couldn't reflect you as having poor judgment?
- KSKara Swisher
Oh, come... Not, not to the extent of what... Look, Jeffrey Epstein's a unique figure here. You know that, and he represents something bigger, which is-
- SGScott Galloway
Did they commit crimes?
- KSKara Swisher
I get it, but our whole world-
- SGScott Galloway
By going after everyone that hasn't committed a crime, because America loves to shame people, we are losing focus on the people who raped children.
- KSKara Swisher
Yeah, but, you know, y- w- all kinds of people got in trouble 'cause of shaming things, and some people got in trouble because of, of whatever. We've have a history of this. Like, a- actors back in the '50s lost their jobs. Like, the, sometimes-
- SGScott Galloway
But that's fine, but that wasn't the FBI investigate-
- KSKara Swisher
Yeah
- SGScott Galloway
... going on a fishing expedition for real crimes, and then shaming-
- KSKara Swisher
Neither is this.
- SGScott Galloway
This is what's gonna happen. This is TMZ's wet dream, and unfortunately, we're not creating the incentives such that if you're a single mother and your daughter ends up on an island, that there's le- there's, there's less chance she'll be raped.
- KSKara Swisher
We're not protecting women. That is a hundred-
- SGScott Galloway
We're not protecting children and women here.
- KSKara Swisher
We're not protecting women and children. You're absolutely right. I think it's hard to hold-
- SGScott Galloway
Instead, every celebrity is just gonna start using Signal now.
- KSKara Swisher
No, uh, I don't know. I don't know about that. I don't know about that. I think it, it is linked to the feeling [sighs] that the rich are, have no impunity-
- SGScott Galloway
Hundred percent
- KSKara Swisher
... which you talk about.
- SGScott Galloway
I, I get that.
- 59:31 – 1:06:20
Predictions
- KSKara Swisher
a prediction.
- SGScott Galloway
I, I wrap my predictions in what I'm doing personally in terms of my own finances, and this is not financial adva- advice, I'm just telling you what I'm doing. I think that just as SaaS companies have been oversold, uh, some of these PE or what they call business development or private credit companies have been oversold. So just some of the ones, again, I'm gonna create a basket 'cause I'm about diversification at this, at this point. But for example, Apollo, which has taken a huge hit, is trading at 14 to 17 times earnings. So a company with double-digit earnings growth and double-digit, uh, assets under management growth, which is the capital they deploy and how they make money, uh, the S&P is trading at a PE of 20, and Apollo's trading at 14 to 17 times. TPG is trading at about a one-third discount, but, uh, to fair value estimates, it's got unbelievable fundraising, and it's expanding their fee earnings. And again, the price reflects pessimism, uh, more than growth trajectory. And by the way, there's absolutely no evidence, other than creative writing, that any of these companies are experiencing... I work or co-invest with some of these companies. They're fucking juggernauts. They're raising more money than ever. Bl-
- KSKara Swisher
But it's public feeling about it, investor nervousness.
- SGScott Galloway
Sentiments.
- KSKara Swisher
Yeah, sentiments.
- SGScott Galloway
But o- uh, I... There's narrative in their numbers, and I believe over the medium and long term, the numbers win out.
- KSKara Swisher
So it's an opportunity. It's an opportunity! is what it is.
- SGScott Galloway
These companies have shed between 20 and 40% of their value in the last 12 months-
- KSKara Swisher
I like this one
- SGScott Galloway
... while continuing to grow their AUM and their fees. Blue Owl, uh-... um, it's got a seven to eight percent dividend yield, and, you know, this- b- because of market discounting private credit fears. So there's a growth versus valuation, in my view, mismatch, in that all of these companies are growing their assets under management and their fees, which is what essentially is their revenues, and the sector has had multiple contraction or compression due to private credit liquidity fears because of some of these creative writing projects. And the- in my view, the market pricing risks are more- the market is pricing risks more aggressively than current earnings trends justify.
- KSKara Swisher
All right.
- SGScott Galloway
That's my-
- KSKara Swisher
All right, I like it.
- SGScott Galloway
That's my thesis. So let me-
- KSKara Swisher
I like it.
- SGScott Galloway
I'll just wrap it up.
- KSKara Swisher
Okay.
- SGScott Galloway
My, my one-line thesis is the following: compressed multiples and, and, a- and durable fee growth, plus strong fundraising, and I know these companies-
- KSKara Swisher
Mm-hmm.
- SGScott Galloway
They're, they're really well run.
- KSKara Swisher
Yeah.
- SGScott Galloway
In my view, all adds up to potential relative undervaluation versus the broader market.
- KSKara Swisher
All right. I like it. That's a re- yeah, it's the same thing you were talking about last week. Okay, look for opportunities! Just so you know, next week, we'll, we'll be talking about Hillary Clinton's testifying for, about Epstein. By the way, Bill Clinton will testify on Friday. Anyway, we'll, we'll be talking about that, but I want to actually get our, our listeners to write us in. Jeff Bezos and Lauren San- give their own prediction. Jeff Bezos and Lauren Sanchez have been named honorary chairs of the y- year's Met Gala. They essentially are paying for it, and that's how that happened. The dress code is Fashion is Art. Uh, I want to know what you think Lauren and Jeff will dress up as. What art thing will they dress up as? I would like-
- SGScott Galloway
There's only two things I'm certain about their-
- KSKara Swisher
What?
- SGScott Galloway
... wardrobe.
- KSKara Swisher
Boobs?
- SGScott Galloway
Hundred percent. Whatever she's wearing-
- KSKara Swisher
Both of them. Both of them, boobs.
- SGScott Galloway
She's not wearing an outfit, her breasts are.
Episode duration: 1:06:20
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