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Speaker 1: world shittiest oscar speech. Anyway, onto the episode today, I
Speaker 1: am joined by the incredible ed Elson of Prof g Markets.
Speaker 1: Ed how are you doing.
Speaker 2: I'm doing very well.
Speaker 3: I'm very excited to contribute to the Zitron empire, which
Speaker 3: is growing by the minute.
Speaker 1: Yes, it's it is. It's a dangerous empire. Not terrible ideas.
Speaker 1: But let's talk about a specific terrible idea. You've been
Speaker 1: going outrageous over the SpaceX IPO, and I feel like
Speaker 1: I haven't done the listeners just this talking about how
Speaker 1: insane this company is, so please lead us in.
Speaker 3: Yeah, well we could probably start with their proposed valuation,
Speaker 3: which was supposed to you was supposed to go public
Speaker 3: at around two trillion dollars. It eventually came down to
Speaker 3: around one point seventy five trillion dollars, which was just
Speaker 3: flat out insane from the get go because it values
Speaker 3: the company at more than one hundred times sales. And
Speaker 3: you know, if the if the point of a company
Speaker 3: is to make money or to make you know, more
Speaker 3: money than it spends, then this is just a very
Speaker 3: bad company. It lost five billion dollars last year. It
Speaker 3: lost more than four billion dollars in the first quarter
Speaker 3: of this year. And if the idea is that you know,
Speaker 3: your revenues are going to grow faster than your expenditures,
Speaker 3: well that's currently not the case because their revenue grew
Speaker 3: only fifteen percent in the first quarter and their losses
Speaker 3: grew seven hundred percent. So this is like by all
Speaker 3: forms of standard accounting, this is like genuinely a bad business,
Speaker 3: and you really have to kind of cross your fingers
Speaker 3: and hope that something works out in order to believe
Speaker 3: that this is a viable investment, especially at the valuation
Speaker 3: that they were pushing for. And that's basically what we
Speaker 3: learned in that IPO filing that it was basically just
Speaker 3: a giant message to tell investors heges don't worry about it.
Speaker 3: Elon Musk is a genius. Just kind of cross your
Speaker 3: fingers and hope for the best. And there's a lot
Speaker 3: in that filing that we can get into, kind of
Speaker 3: a lot of ridiculous language that we could unpack. But
Speaker 3: essentially that is the problem. It's something that I pointed
Speaker 3: out as soon as the company went public. My prediction
Speaker 3: was that it was going to the stock was going
Speaker 3: to pop twenty five percent on the first day because
Speaker 3: of the amount of momentum and the amount of hype
Speaker 3: and the fact that IPOs are in a lot of
Speaker 3: ways a rigged game. It's kind of rigged by the
Speaker 3: Wall Street banks to make that these things go well
Speaker 3: and that you have a quote unquote successful ipo. That
Speaker 3: is what happened. But the second bottom, my prediction was
Speaker 3: that the stock would get cut in half. I think
Speaker 3: we're down to forty five percent off it's high, so
Speaker 3: we're not there yet, but we are getting close.
Speaker 1: So it feels like the Musk industrial complex that has
Speaker 1: kept Tesla afloat just didn't happen here. Because as I
Speaker 1: look at this number now, and it'll be different by
Speaker 1: the time this goes like it's what one hundred and
Speaker 1: twenty one point nine normal way of reading the stock
Speaker 1: price moving on uh way down from one hundred and
Speaker 1: thirty five, which is what it listed at. It popped
Speaker 1: like one hundred and fifty, went over two hundred at
Speaker 1: one point. But the Muskian bullshit complex that kept Tesla
Speaker 1: inflat it just hasn't happened here. Why do you think
Speaker 1: that is?
Speaker 3: Well, I think it can only last for so long.
Speaker 3: Like you look at Tesla, for example, which is already
Speaker 3: kind of commanding a pretty ridiculous valuation, and that is
Speaker 3: because of the cult of Elon and of the obsession
Speaker 3: with his brain and the fact that you know, he's
Speaker 3: gonna figure out how to build humanoid robots and all
Speaker 3: of this stuff. So the Tesla evaluation is kind of insane.
Speaker 3: But somehow it has been able to sustain itself for
Speaker 3: long enough. SpaceX was like otherworldly no pun intended here
Speaker 3: in terms of its valuation. At some point that has
Speaker 3: to end, at least that is my belief. When it
Speaker 3: comes to markets, I think that when you look at
Speaker 3: what the story that they were actually selling to investors,
Speaker 3: you look at what they said that in that disclosure
Speaker 3: in that filing. One of the things that kind of
Speaker 3: convinced investors that this might be remotely worth it was
Speaker 3: this idea that SpaceX had claimed and identified what they
Speaker 3: call quote the largest actionable total addressable market in human.
Speaker 1: History, right, And what market was was that exactly?
Speaker 3: So that market was launching rockets one, putting satellites into
Speaker 3: space two, but then the biggest one. And to be clear,
Speaker 3: they said that this total addressable market was twenty eight
Speaker 3: and a half trillion dollars, which would mean that the
Speaker 3: size of this market is larger than the GDP of
Speaker 3: Europe or the GDP of China, which is insane. What
Speaker 3: actually contributes to that market, as I said, rockets, satellites,
Speaker 3: but twenty six trillion dollars of that was AI.
Speaker 2: And of course this is not sorry, go ahead, no, no, no.
Speaker 1: I mean is that AI data centers? Are the AI
Speaker 1: data centers on Earth?
Speaker 3: That's that's the real question. So it is AI data centers.
Speaker 3: But supposedly the next theory, the next stage of AI,
Speaker 3: is that we're going to put these AI data centers
Speaker 3: out into space and they're going to orbit around the Earth.
Speaker 3: And that's why the AI opportunity is so massive, So obviously,
Speaker 3: I mean anyone who isn't sort of brought into the
Speaker 3: cult of Elon, anyone who isn't suffering from what I
Speaker 3: believe is Elon derangement syndrome, where you buy into this
Speaker 3: stuff and you believe that any price is worth it
Speaker 3: because it's Elon. Anyone who has their head screwed on
Speaker 3: correctly can understand that that doesn't really make any sense,
Speaker 3: or at least that you can't expect that you're going
Speaker 3: to get real returns from that if they haven't even
Speaker 3: proven that this makes sense both physically in terms of
Speaker 3: like the laws of physics, but also financially and economically,
Speaker 3: they haven't proven that you can get any real return here,
Speaker 3: And that's where all of the language becomes so misleading.
Speaker 3: Like they use this phrase the light of consciousness in
Speaker 3: their est, does that mean that? So that is what
Speaker 3: they say is their mission statement as a company Consciousness.
Speaker 3: To extend the light of consciousness to the stars is
Speaker 3: what their mission is. So it's not about actually delivering
Speaker 3: payloads into space. It's not about delivering broad broadband through
Speaker 3: their satellite business, which is what they should be saying,
Speaker 3: because that's what they do currently, But to get that
Speaker 3: crazy valuation, they need to hype up the scale of
Speaker 3: the project here, and so they have expanded that scale
Speaker 3: not just to the orbital data centers, which they haven't
Speaker 3: proven yet whatsoever, but also to interplanetary travel, interstellar travel,
Speaker 3: I mean, and.
Speaker 1: They were actually promising or suggesting that they would build
Speaker 1: interstellar travel.
Speaker 3: Well, they say that they want to extend the life
Speaker 3: of consciousness to the stars. And if that is their
Speaker 3: mission statement, then I'm going to take that literally and say, Okay,
Speaker 3: what you're saying then is that you want to accomplish
Speaker 3: interstellar travel. That's only what that could possibly mean. They're
Speaker 3: basically saying, we want to take humanity and bring them
Speaker 3: out to the stars. So that's if that's your missions. Again,
Speaker 3: they're not promising that that's what they're going to do.
Speaker 3: They're just saying, this is what we are trying to do.
Speaker 3: And then as soon as you say that, suddenly all
Speaker 3: of the investors, all the people on Wall Street go,
Speaker 3: oh my god, this is a company that is that
Speaker 3: is trying to do something bigger than any any company
Speaker 3: has ever done in history. You look at what Deutsche
Speaker 3: Bank called SpaceX. They call this company in their note
Speaker 3: quote the apex of civilizational ambition. They said that SpaceX
Speaker 3: is quote bending the arc of history. So when you
Speaker 3: talk like that, suddenly people's greed glands get going and
Speaker 3: you start to think about, oh my gosh, what if
Speaker 3: they do it, what if they pull this off? And
Speaker 3: then you kind of forget about the numbers. You forget
Speaker 3: about the fact that they are losing money. You forget
Speaker 3: you forget about the fact that the AI business that
Speaker 3: they say is going to generate, you know, ninety percent
Speaker 3: of their revenues down the line. You forget that it
Speaker 3: doesn't work at all. You forget that it's right, two
Speaker 3: selve billion dollars in losses.
Speaker 1: So there's two assumptions there. There's one that they'll build
Speaker 1: aye data centers in space, which is somewhere between wang
Speaker 1: and bullshit. And then there's the other one, which is
Speaker 1: that the data center demand exists for that. So just
Speaker 1: two of them, two of them at the same time,
Speaker 1: for this data center thing they haven't proven. All right,
Speaker 1: maybe this is a more direct question. You kind of
Speaker 1: hinted it this earlier. What's in it for the banks? Like,
Speaker 1: just on a very very basic level, why what's in
Speaker 1: it for like a Deutsche Bank or a Goldman or
Speaker 1: what have you. To say this stuff that if a
Speaker 1: homeless person screamed it at you, you'd run away.
Speaker 3: So that's the really interesting question. This is where I
Speaker 3: start to kind of put on my tin foil hat
Speaker 3: and get a little bit con that's what it's about exactly,
Speaker 3: and we do it in a data driven way. And
Speaker 3: to be honest, I'll just say this, I'm right. Here's
Speaker 3: why they're doing it. The reason that Wall Street has
Speaker 3: to be nice to SpaceX is because there is a
Speaker 3: very very significant financial incentive to do so. And that
Speaker 3: is this is one of the large IPOs in history
Speaker 3: and one of the most important ways that banks generate revenue.
Speaker 3: The way that they make their money is they take
Speaker 3: companies public. So if SpaceX decides to choose the ed
Speaker 3: Zitron Bank as their underwriter for the IPO, then that
Speaker 3: means that when SpaceX goes public, ed Zitron Bank will
Speaker 3: get a cut of the fees that were generated from this,
Speaker 3: and so.
Speaker 1: Those the fees on the trades. Right, So when someone
Speaker 1: trades there's like what are the fees that they make?
Speaker 3: They take a percentage of the amount of equities of
Speaker 3: the company that were sold, and it depends the percentages
Speaker 3: can change. For SpaceX, it was slightly smaller as a
Speaker 3: percentage of the average IPO offering, but that's because the
Speaker 3: actual amount that was being raised was so gigantic. So
Speaker 3: you look at the banks that reported their earnings last week,
Speaker 3: they made literally billions of dollars off the SpaceX IPO
Speaker 3: because so many of them took this company public. So
Speaker 3: that's the first thing that you need to know is
Speaker 3: that Wall Street, you know, has an incentive to be
Speaker 3: nice to the banks. We actually had an example of
Speaker 3: this back in our favorite era of market history, which
Speaker 3: was the dot com boom, where there was this guy
Speaker 3: named Henry Blodgett who was an analyst Maryland business insider
Speaker 3: himself exactly so who went on to actually create Business Insider,
Speaker 3: and so he actually had a decent career, but he
Speaker 3: got a lot of trouble back in the dot com
Speaker 3: era because he had spoken publicly, very optimistically about a
Speaker 3: lot of these Internet companies that were going public. He
Speaker 3: said that they were all buys. He said that he
Speaker 3: publicly recommended them, and that was kind of his job,
Speaker 3: is to talk about these companies, give price targets and
Speaker 3: say this is what I expected the company. After the
Speaker 3: dot com crash, it was then learned there was an
Speaker 3: investigation into Henry Blodgett and they found out that actually,
Speaker 3: in private, he had been saying that a lot of
Speaker 3: these companies were trash or as you like to call them, wank.
Speaker 3: That was, he said that they were junk, he said
Speaker 3: that they were dogs. He said they were pos's translation
Speaker 3: pieces of shit. And so the question is why was
Speaker 3: he saying one thing privately and then you know, out
Speaker 3: of the other side of his mouth going out to
Speaker 3: the public and saying this company is a bye. And
Speaker 3: the reason is what I said, which is that he
Speaker 3: needed to. He had a financial incentive to make these
Speaker 3: companies like them so that they would be choosing his bank,
Speaker 3: Merrill Lynch, to underwrite their IPOs. In that way, Merrill
Speaker 3: Lynch makes money. So this turned out to be a
Speaker 3: huge scandal, and there were a lot of other analysts
Speaker 3: and a lot of other Wall Street banks that were
Speaker 3: revealed to be doing the same thing. And so the
Speaker 3: SEC looked at this and they thought, Okay, this is
Speaker 3: kind of a problem. We can't have these guys publishing
Speaker 3: this research where they're basically lying about these companies, and
Speaker 3: at the same time we learned that, you know, they
Speaker 3: actually don't believe in these companies.
Speaker 2: So they came up with this law.
Speaker 3: Called the Global Research Analyst Settlement of two thousand and three,
Speaker 3: and this was basically an agreement that was created by
Speaker 3: the SEC to address the conflict of interest between the
Speaker 3: investment banking arms and the equity research arms. The team
Speaker 3: that Henry Blodgett was on at the Wall Street banks,
Speaker 3: and they basically said that what we're going to do
Speaker 3: is we're going to separate you too, from one another,
Speaker 3: and we're going to say, you guys, actually, if you
Speaker 3: work in investment banking, you're actually not allowed to talk
Speaker 3: to anyone on equity research at your bank unless we
Speaker 3: have a chaperone present. Because what we've learned is that
Speaker 3: if you guys start to collude with one another, then
Speaker 3: we're going to start to run into conflicts of interest.
Speaker 3: Then we're going to have the banks and they're going
Speaker 3: to start pumping these shitty stocks that are going to
Speaker 3: lose people a lot of money, because that is exactly
Speaker 3: what happened in the dotcom crash. So they created this
Speaker 3: thing and you'd think, Okay, problem solved.
Speaker 1: Then I go not really, well, it seems like you'd
Speaker 1: have a bloat from just another person in the room
Speaker 1: with you.
Speaker 3: Yes, so that I mean that that's an important point.
Speaker 3: But at the least you could say that they tried
Speaker 3: to address the problem, and the least you could say, Okay,
Speaker 3: we've created a rule that is attempting to make this
Speaker 3: less of a problem than it has been. And maybe
Speaker 3: maybe at most you put a scare into the research
Speaker 3: analyst and you say, hey, guys, this is a big deal,
Speaker 3: and if you start pumping things up, then that's going
Speaker 3: to be a problem. Another thing they did, by the way,
Speaker 3: is they made a law that the equity research analysts
Speaker 3: compensation had to be completely divorced from the investment banking revenues.
Speaker 3: So that way you could sort of argue that if
Speaker 3: you work on equity research, then you don't actually have
Speaker 3: a financial incentive anymore to talk up stocks. Now you
Speaker 3: can just do your research and give your honest recommendations.
Speaker 3: Whether you believe that that actually solved the problem is
Speaker 3: another question, but let it be known they tried to
Speaker 3: and that was the law that they put into effect.
Speaker 1: That just feels like the least effectual way to do
Speaker 1: this though, because I don't know. I read byside analysts
Speaker 1: all the time, and I've never seen them say anything negative.
Speaker 3: Well, here's where I'm going to kind of burst the
Speaker 3: bubble here, which is seven months ago that law was terminated.
Speaker 1: Oh okay, Oh.
Speaker 3: December TWE twenty twenty five. This was the headline from
Speaker 3: the SEC. Quote, the SEC agrees to terminate Global Research
Speaker 3: Analyst Settlement. So they basically decided that we don't need
Speaker 3: to have this law anymore. And their argument the SEC,
Speaker 3: the same SEC which has lost about a fifth of
Speaker 3: its workforce, which is seeing some of the lowest settlements
Speaker 3: in the history of the agency, because they have basically
Speaker 3: made it their mo at this point not to protect investors,
Speaker 3: but to protect white collar crime, which is why we're
Speaker 3: seeing all of the inside trading which has just exploded
Speaker 3: over the past year.
Speaker 2: They said that.
Speaker 3: We don't need to have this law anymore because there
Speaker 3: are other laws that kind of do the job for you.
Speaker 3: Do they come even remotely close to the laws that
Speaker 3: existed beforehand in that initial Global Research Analyst settlement? Do
Speaker 3: they have the laws, for example, where you have to
Speaker 3: have a chaperone in the room for these units to
Speaker 3: be talking to each other.
Speaker 2: No, they don't.
Speaker 3: The laws are a lot weaker, they're a lot more flexible,
Speaker 3: they're a lot less stringent.
Speaker 2: So that happened.
Speaker 1: We don't even have the half hearted one anymore.
Speaker 3: Exactly, there's basically nothing good stuff that happens. SpaceX then
Speaker 3: files its IPO, and then I go and I look
Speaker 3: at the Wall Street price targets that we saw, and unanimously,
Speaker 3: every single bank that underwrote this IPO has said, even
Speaker 3: at that ridiculous valuation that was initially floated, they've said,
Speaker 3: this is a bye so Yeah, Gobin Sachs. They said
Speaker 3: it's worth two hundred and five dollars a share. That's
Speaker 3: a two point seven trillion dollar market cap. Yeah, JP
Speaker 3: Morgan they said that this company is worth three trillion
Speaker 3: dollars Morgan Stanley, four trillion dollars, my favorite, Raymond James,
Speaker 3: a lesser known investment bank. They say the company is
Speaker 3: worth ten and a half trillion dollars, which would mean
Speaker 3: that this company should be trading at a price to
Speaker 3: sales multiple of five hundred and forty two times sales.
Speaker 3: It would mean that this company is the most valuable
Speaker 3: company on Earth, more valuable than Meta and Microsoft combined,
Speaker 3: more valuable than in Video.
Speaker 1: More val Apple and Apple combined.
Speaker 3: Than Apple and Video combined. And at that point you
Speaker 3: have to ask yourself, Okay, what are these guys smoking
Speaker 3: or two? Who's paying that?
Speaker 1: Yeah?
Speaker 3: And the answer is SpaceX is paying that. And then
Speaker 3: you might say, well, they've already done the IPO, so
Speaker 3: haven't they already gotten their fees. Haven't they already collected
Speaker 3: their revenue? Why would they be incentivized to be pumping
Speaker 3: the stock now after the company has already gone public.
Speaker 3: And this is the part that I'm sure you will enjoy,
Speaker 3: which is this company still needs to raise hundreds of
Speaker 3: billions of dollars to achieve all of the things that.
Speaker 1: They need to achieve, and that through the banks.
Speaker 3: They have to do it through the banks, so they
Speaker 3: have to do that. There was the debt offering that
Speaker 3: they recently did, which was somehow people bought, but now
Speaker 3: are seeing that SpaceX bonds are absolutely tanking. But they're
Speaker 3: going to have to raise more equity and they're going
Speaker 3: to have to raise more debt. That's close to I
Speaker 3: think it was two hundred billion dollars of morphinancing that
Speaker 3: they'll need later down the pipeline, which means that's tens
Speaker 3: of billions of dollars in future revenue for the investment banks.
Speaker 3: That's revenue that they have literally a fi fiduciary obligation
Speaker 3: to pursue. So when you ask me, okay, why is
Speaker 3: everyone smoking crack when it comes to SpaceX, this is why.
Speaker 3: And the only analysts who have said that the company
Speaker 3: is a sell morning Star for example, they're analysts who've
Speaker 3: had on my show, Nicholas Owens. The only anlysts who
Speaker 3: are saying that this isn't worth what it is currently
Speaker 3: are analysts who don't have a financial incentive. I mean
Speaker 3: morning Star is an example. They're not taking this company public.
Speaker 3: They have no incentive to get these underwriting fees on
Speaker 3: all of the debt and the equity offerings. So that's
Speaker 3: the problem here, and I think that investors are beginning
Speaker 3: to come to their senses. You're seeing a lot of
Speaker 3: fear now as that that line goes down and down
Speaker 3: and down and redder and redder and redder. My projection,
Speaker 3: my expectation is that that number will continue to go down,
Speaker 3: especially as investors start to lose faith in these price
Speaker 3: targets and these revenue projections from the Wall Street banks.
Speaker 3: I mean, you look at like the Raymond James estimates
Speaker 3: as an example, they estimate the revenue is going to
Speaker 3: rise from nineteen billion dollars last year. That was the
Speaker 3: number that SpaceX that's how much revenue they generated last
Speaker 3: year to in twenty thirty five five point two trillion dollars.
Speaker 1: Goldman Sex said that SpaceX's revenue will surge one hundred
Speaker 1: x yes by twenty thirty.
Speaker 3: Which, by the way, is conservative compared to some of
Speaker 3: these other estimates from legal.
Speaker 1: The reason I asked that is is this not again,
Speaker 1: like I guess the is it that they have financial
Speaker 1: models that they can point to that say the things
Speaker 1: they want them to say. Is it that there is
Speaker 1: a mathematical basis or be it a rotten one? Or
Speaker 1: are they just nobody bothers to check them.
Speaker 3: I think that what we know about numbers and statistics
Speaker 3: is that there's a lot of bullshitting and massaging that
Speaker 3: you can do. And the trouble with numbers is that
Speaker 3: they kind of they lend a level of objectivity and
Speaker 3: validity on the surface, but the deeper you dig into them,
Speaker 3: the more you start to realize that numbers can be
Speaker 3: completely fabricated and bullshitted out of thin air.
Speaker 2: And you know this very.
Speaker 3: Well because of the work that you've done investigating the
Speaker 3: finances of an open AI, investigating the finances about Throbbing,
Speaker 3: investigating the finances of a lot of these AI companies,
Speaker 3: which a lot of people are starting to get very
Speaker 3: worried about. I think credit to a lot of the
Speaker 3: work that you have been doing. But the same is
Speaker 3: true of SpaceX. And it's especially true when you have
Speaker 3: a company that whose entire value proposition is predicated on
Speaker 3: a distant dream that is an't and close.
Speaker 2: To being realized.
Speaker 3: So as soon as you say, you know, our total
Speaker 3: addressable market is twenty eight and a half trillion dollars,
Speaker 3: because we're not only going to pursue orbital data centers,
Speaker 3: but we're also going to pursue asteroid mining, and we're
Speaker 3: also going to build a colony of civilization on Mars.
Speaker 3: And as soon as you start saying things that are
Speaker 3: legitimately I mean, currently as we speak that not real,
Speaker 3: then you can apply any number you want to it.
Speaker 3: You can basically say, oh, I don't know. I think
Speaker 3: asteroid mining is going to be like a one hundred
Speaker 3: trillion dollar business, gazillion, a gazillion. Why because if we
Speaker 3: calculate the amount of asteroids in existence, and calculate the
Speaker 3: amount of critical minerals that may or may not be
Speaker 3: lying within those asteroids, then we look at the total
Speaker 3: addressable market, then we can project it out into not
Speaker 3: just twenty thirty five, but twenty forty five, twenty fifty five,
Speaker 3: twenty sixty five. I estimate that it's a bazillion dollar opportunity.
Speaker 1: And there's and so this is outside of SpaceX as well.
Speaker 1: All of these It goes to any kind of analyst
Speaker 1: letter about projections for let's say the AI industry or
Speaker 1: any CAPEX stuff. It's just all of these projections, despite
Speaker 1: them being through an investment bank, can be basically manipulated
Speaker 1: to whatever they want them to say.
Speaker 2: Yes, you can, you can.
Speaker 3: You can basically set any price target you want, and
Speaker 3: so long as you come as long as you back
Speaker 3: it up with like some semblance of a model which
Speaker 3: you can go as crazy as you want. You can
Speaker 3: say that, and so long as the SEC doesn't find
Speaker 3: evidence in your emails or in your correspondence with your
Speaker 3: colleagues that you were lying, then technically you're good.
Speaker 1: You can just convince you and just to be specific,
Speaker 1: being wrong is not a problem.
Speaker 2: Being wrong is not a problem. You can be wrong
Speaker 2: as much as you like. What I would.
Speaker 3: Against though, to these guys, I mean, for anyone who's
Speaker 3: listening to this and thinking the whole system has rigged
Speaker 3: the Wall Street banks so they can just do whatever
Speaker 3: they want. Their equity research is completely compromise, which I'm
Speaker 3: not disagreeing with what I Eventually, at some point, I
Speaker 3: think these people have to lose their credibility. And you
Speaker 3: and I have discussed this in the past, but when
Speaker 3: you have a draw down like the one we've seen
Speaker 3: with SpaceX, which we're down forty five, but I think
Speaker 3: it could go a lot lower. I think that this
Speaker 3: thing could could fall, you know, seventy or eighty percent.
Speaker 3: When that happens, there are going to be a lot
Speaker 3: of investors out there, a lot of capital allocators who
Speaker 3: read that Raymond James equity research report on SpaceX, and
Speaker 3: they'll think, hold on, this guy is a fucking idiot.
Speaker 3: And at that point they're going to start to realize
Speaker 3: I don't trust the stuff that comes out of these
Speaker 3: banks anymore. I don't think that any of this really
Speaker 3: makes any sense. And you know, it seems as though
Speaker 3: this was compromised to begin with, because it seems as
Speaker 3: though this was incentivized by this ridiculous fee structure that
Speaker 3: related to the IPOs and the deal making process. And
Speaker 3: at that point, I think that the banks will have
Speaker 3: to do a lot of work to win back their credibility.
Speaker 3: And if this bubble bursts in the way that you
Speaker 3: have been warning about, then the same thing will be
Speaker 3: true for all of the Wall Street banks, not just
Speaker 3: as it relates to SpaceX, but as it relates to
Speaker 3: all of their research surrounding AI companies. The same will
Speaker 3: be true of the financial media, which I know that
Speaker 3: you've been talking about. At some point, the chickens do
Speaker 3: have must come home to roost here, and I think
Speaker 3: that eventually the credibility will deteriorate two a level that
Speaker 3: is not sustainable, at which point it'll be on them
Speaker 3: to win the credibility back. That's what happened after two
Speaker 3: thousand and we created the regulations a period.
Speaker 1: I don't know. The thing is, the analysts who were
Speaker 1: pro Enron still have jobs like the people that like.
Speaker 1: Though there were the there were some of the software
Speaker 1: run ones around the dot com bubble and around dan
Speaker 1: Ron who gave bad recommendations, but a lot of them
Speaker 1: got away with it by just saying, yeah, well, we
Speaker 1: just believed the companies and I've the The only cope
Speaker 1: I have with this is that social media was perhaps
Speaker 1: not as it was not a thing at the same
Speaker 1: scale back then, and that might hold it because it
Speaker 1: goes so much further than SpaceX, though it goes into
Speaker 1: I've now read I think I've read my third straight
Speaker 1: what is it?
Speaker 2: T Cohen?
Speaker 1: One of the Yeah, another thing from them saying, oh, yeah,
Speaker 1: we've got all of these channel checks and we've seen
Speaker 1: all of these data centers are being built. They are
Speaker 1: talking about twenty gigawats of data centers being under construction,
Speaker 1: while another fella out, what was it one of the
Speaker 1: climate ones, Sieline Climate. They're saying, oh, only five gigawats
Speaker 1: is under construction. And it's just it feels like an
Speaker 1: alarming amount of analysis is just pulling things out of
Speaker 1: your ass and saying it's analysis at this point. But
Speaker 1: you work at an analyst group, so it's kind of established.
Speaker 1: It's just very weird because who is going who are
Speaker 1: the actually, yeah, this is a good way to take
Speaker 1: it back to main question. Who are the actual customers
Speaker 1: for these analyst letters. Is it retail investors, so regular
Speaker 1: people with Robinhood account or what have you. Or is
Speaker 1: it institutional investors because I think the victim there is
Speaker 1: going to directly inform whether anything changes.
Speaker 3: The big money is the institutional investors. So I think
Speaker 3: those are the priority clients. But as we're beginning to
Speaker 3: see there's a lot more money coming into retail, and
Speaker 3: I think a lot of these banks and a lot
Speaker 3: of these financial institutions are doing a lot of work
Speaker 3: to offer more and more retail products and retail funds
Speaker 3: because they know how much money is gushing into that
Speaker 3: side of the industry. So, I mean the way to
Speaker 3: think about it is, I mean, you would hope that
Speaker 3: the job of an equity research analyst is to a
Speaker 3: sell side analyst is to sell their research. It's to
Speaker 3: sell the stuff, the information that they have gathered. But
Speaker 3: increasingly what it seems like it is being sort of
Speaker 3: morphed into which it was supposed to be. It was
Speaker 3: supposed to be solved by that global research analyst settlement
Speaker 3: is it's now just getting into selling the securities themselves,
Speaker 3: or at the very least selling optimism about a given
Speaker 3: company that you know is about to go out and
Speaker 3: pursue a lot of deals.
Speaker 2: That that's really that.
Speaker 3: I mean, it's nothing inside of trading, though I think
Speaker 3: it's I think it's pretty much insider trading. But I
Speaker 3: think one thing, one thing we've learned about the past
Speaker 3: year or so is that insider trading is legal now.
Speaker 2: I mean, here's just.
Speaker 1: Want to be clear that it's not legal advice, but
Speaker 1: that people are acting as if it is. I mean
Speaker 1: the fact that someone seems to get ahead of oil
Speaker 1: prices every time that there's Donald Trump says there is
Speaker 1: or is not a cease fire.
Speaker 3: I mean, it's it's one of the most egregious periods
Speaker 3: of financial corruption, probably the most egregious period of financial
Speaker 3: corruption in the history of the United States. And that
Speaker 3: is saying something, and it is coming from the top down.
Speaker 3: It is coming from an administration that has not only
Speaker 3: normalized it, but they have gutted any semblance of regulation
Speaker 3: and protection that we used to have to prevent this
Speaker 3: kind of stuff from happening. I mean, for anyone who
Speaker 3: who doesn't believe that the SEC is compromised, I would
Speaker 3: just encourage you to search up the name Margaret Ryan.
Speaker 3: And Margaret Ryan was the enforcement director for the SEC,
Speaker 3: who seemed to be one of the only people at
Speaker 3: the agency who was actually interested in enforcement. She started
Speaker 3: to pursue what was some very obvious leads on insider
Speaker 3: trading and essentially criminal behavior among the Trump family. She
Speaker 3: started to pursue these leads and then suddenly she got
Speaker 3: message from someone higher up than her saying, hey, you
Speaker 3: have to stop doing this. You're not allowed to do this.
Speaker 3: She got into a little bit of a fight, and
Speaker 3: then the next thing you know, she was mysteriously disappeared
Speaker 3: from the SEC. And it's not just her. We saw
Speaker 3: the same thing with the DOJ. We saw the same
Speaker 3: thing with Gail Slater, who tried to pursue what she
Speaker 3: believed to be some fixing in the Anti Truss Department
Speaker 3: that was being done by the Trump administration. What do
Speaker 3: you know, she got a mean letter from her bosses
Speaker 3: and then suddenly she's ousted as well. And you just
Speaker 3: look at the the the amount of people that have
Speaker 3: been laid off at the SEC, not just the SEC,
Speaker 3: but the CFTC, the DOJ, I mean, all of the
Speaker 3: white collar crime enforcement agencies in our government. They've all
Speaker 3: been gutted. And then you look at the fact that
Speaker 3: Trump made one and a half billion dollars on crypto
Speaker 3: last year. He made more on crypto personally than any
Speaker 3: of the largest crypto firms in the United States. He
Speaker 3: made more money on crypto last year than coinbase made
Speaker 3: on crypt.
Speaker 1: That's fucking insane, It's unbelievable.
Speaker 3: It's it's it's it's to a level that we've never
Speaker 3: ever seen in our lives. It's it's it's I mean,
Speaker 3: to me, the the stamp of approval on what is
Speaker 3: actually happening here, the ratification is the fact that last
Speaker 3: week he decided, or his team decided, they're going to
Speaker 3: start putting his face on one dollar coins. And you
Speaker 3: look at who's done that in history. No US sitting
Speaker 3: president has done that, but there have been other leaders
Speaker 3: who have done it, namely Saddam Hussein Mohamma Gaddafi, Francisco Franca.
Speaker 3: I mean, these are corrupt authoritarian dictators who have done
Speaker 3: the same thing. It's a very very small and specific
Speaker 3: group of people who have done this kind of thing.
Speaker 3: And the reason that it matters is because of the
Speaker 3: things that we're describing, or at least the reason it
Speaker 3: matters for investors, The reason it matters for markets is
Speaker 3: because it encourages and normalizes this level of insider trading
Speaker 3: and corruption where people are realizing, like, this is the
Speaker 3: fastest and easiest way to get rich, this is how
Speaker 3: I'm going to do it his teleprompter and making one
Speaker 3: hundred thousand dollars predicting what he's going to say in
Speaker 3: his speeches.
Speaker 1: I mean, well, that's the thing. Though I think it
Speaker 1: extends even further than Trump. I fully agree, by the way,
Speaker 1: into this realm of if we do not have enforcement,
Speaker 1: if we do not have enforcement of rules, if we
Speaker 1: don't even have basic responsibility on the parts of the
Speaker 1: media and regulators, then liars will always profit. Because I've
Speaker 1: been writing something, I've been writing something today where it's
Speaker 1: just like it shocks me how little people are actually
Speaker 1: trying to justify the AI bubble beyond saying it's big, right,
Speaker 1: and the actual under of Nixon. Essho's coming on the
Speaker 1: show next week. He did a great piece about how
Speaker 1: like global decision making is being destroyed by AI, because
Speaker 1: nothing is really based on what AI can do, just
Speaker 1: on what people will tell you it can do, because
Speaker 1: we don't. I would say regulation of fact is what
Speaker 1: the job of journalism is, or at least some degree
Speaker 1: of that. And I think that, I know it's harsh
Speaker 1: to say, I think tech and business journalism is to
Speaker 1: blame just as much for this. I think that the
Speaker 1: way that Musk has been treated, I think the way
Speaker 1: that AI has been inflated, and the fact that even
Speaker 1: I supposedly objective journalism outlets the world over, I saw
Speaker 1: so many stories about like, oh, I guess Elon Musk
Speaker 1: is talking about orbital data centers. What the fuck you
Speaker 1: if I went and said that Donald Duck was going
Speaker 1: to become president of America tomorrow, but I have a
Speaker 1: big following, Is that true now? Because I think Donald
Speaker 1: Duck has a better chance of becoming president than we
Speaker 1: have fucking data centers in space. But no journalists sit
Speaker 1: there and they go, well, you know, it's okay, It's
Speaker 1: it's just we're just saying what they're saying. We're not
Speaker 1: going to not going to come down with an opinion
Speaker 1: about it. Despite the fact that the reason that people
Speaker 1: are sinking money into AI is because they keep reading
Speaker 1: in the media that AI can do stuff it can't do,
Speaker 1: and it's just we're watching as just no one thinks
Speaker 1: they have responsibility for anything, and thus grifters are just
Speaker 1: running wild.
Speaker 2: That's exactly be great.
Speaker 3: I think, I think you've you've put your finger on
Speaker 3: the pulse of what is arguably the largest problem in
Speaker 3: America right now and perhaps in the world, which is
Speaker 3: that no one seems to.
Speaker 2: Have a spine.
Speaker 3: Anyway you look. No one seems to have an ability
Speaker 3: to come out and speak with integrity and speak with
Speaker 3: honesty about what it is that they actually believe is true.
Speaker 3: Anyone can say whatever they want, and so long as
Speaker 3: they put a couple of numbers behind it, or even
Speaker 3: if they don't put a couple of numbers behind it,
Speaker 3: anything's fair game. And I do think again, it's if
Speaker 3: we were trying to reverse engineer why people seem to
Speaker 3: believe that this is acceptable and why this has become
Speaker 3: so pervasive in our society. I think a decent argument
Speaker 3: would be the fact that the father of the country,
Speaker 3: the role model the president, has demonstrated that this kind
Speaker 3: of behavior can yield results not only in the financial markets,
Speaker 3: but also in polers too, that lying actually works, that
Speaker 3: lying is actually okay, and that you can do that.
Speaker 3: I mean, I'll just say to your point about financial journalism,
Speaker 3: business journalism, I've been shocked by how I will go
Speaker 3: on on various shows and the amount of times that
Speaker 3: people have said to me kind of taken me aside
Speaker 3: and said, hey, by the way, is it okay if
Speaker 3: we ask you about the president? Is it okay? It
Speaker 3: is that fine? As if we're hitting some sort of
Speaker 3: third rail where I might not be able to speak
Speaker 3: with any truth or transparency or honesty about what I
Speaker 3: actually believe is happening in the country. And this is
Speaker 3: a real problem. I think you're right. I think it
Speaker 3: pervades our politics, and I also think it pervades the
Speaker 3: technology industry. Well, we've seen its own generation of grifters
Speaker 3: and carnival barkers and pumpers who have gotten rich from
Speaker 3: just pumping whatever it is that they believe, whether it's
Speaker 3: the crypto grifters or the spac pumpers like Tremath Palahapatia,
Speaker 3: and none of them actually get their come up, and
Speaker 3: none of them are actually punished at the end of
Speaker 3: the day, because of what we have done to our
Speaker 3: regulatory institutions, which means that it incentivizes even more bad behavior,
Speaker 3: even more dishonesty in the financial markets.
Speaker 1: I think there's an abstraction higher as well, and I
Speaker 1: think it's the I don't know if a lot of
Speaker 1: journalism wants to cause problems. And I don't just think
Speaker 1: it's like, oh, can I say that or not. I
Speaker 1: think they kind of want the companies to win. I
Speaker 1: think that they see this as sports team stuff. I
Speaker 1: think that they judge. Look at Google Search, it's dog shit.
Speaker 1: Look at microsof off teams, look at Facebook, these broken platforms.
Speaker 1: I read pretty much every article in every major tech company.
Speaker 1: I don't think I have seen in the last year
Speaker 1: more than a couple pieces that talk about the actual
Speaker 1: experience of using these products, which is bad now. And
Speaker 1: it's because and I think that this is a combination
Speaker 1: of both regulatory authorities dying dying a death and Trump
Speaker 1: to some extent, But it was a problem before Trump
Speaker 1: as well, where it's what is considered successful in a
Speaker 1: company is purely numbers, its growth at all cost, throat
Speaker 1: kind of what you've been right about for years and
Speaker 1: this sense that like, well, Meta isn't a bad was
Speaker 1: at a conference and I said someone that Meta was
Speaker 1: an awful company and the person looked at me. He
Speaker 1: was a host from a TV show, and they looked
Speaker 1: at me and went, but Met as one of the
Speaker 1: most profitable companies all time.
Speaker 2: They looked.
Speaker 1: They looked at me, like like a crazy person. I'm like, yes,
Speaker 1: but if you used the product, and they went and
Speaker 1: not recently, it's just like you are a fucking like
Speaker 1: But this is that is the standard earth.
Speaker 3: The Sarah Eisen comment on CNBC reacting to our attack
Speaker 3: on Iran and Trump's threats on Iran said, is threatening
Speaker 3: to end a civilization?
Speaker 2: Is that? Is that bullish for markets? Or is that bearish?
Speaker 1: Hell? Yeah, that's just like your soul is gone at
Speaker 1: that point. Is you don't care about you, You're not
Speaker 1: thinking of human beings all. But that's the thing. I
Speaker 1: don't think most of this coverage thinks of human beings,
Speaker 1: and that certain like AI coverage does not connect with
Speaker 1: reality at all. And it's weird. It's like you can
Speaker 1: either Sometimes I wonder if when you join the tech
Speaker 1: media officially through the official channels, whether you get a choice.
Speaker 1: It's either like you can go insane about AI, where
Speaker 1: you just commit yourself fully to everything they say, like gospel,
Speaker 1: or you can only write completely objectively. You could just
Speaker 1: repeat what they've said and nothing else.
Speaker 3: Well, I think this, I mean one of my favorite
Speaker 3: quotes from f. Scott Fitzgerald is that his definition of
Speaker 3: intelligence is the ability to hold two opposing thoughts in
Speaker 3: your head at the same time. And I think that
Speaker 3: what we are experiencing is a variety of industries that
Speaker 3: are being led by people who are and not in
Speaker 3: all cases, but in many cases, who are frankly not
Speaker 3: very intelligent, who cannot understand this notion that a company
Speaker 3: could at once be incredibly profitable, one of the most
Speaker 3: profitable businesses of all time, and also be very bad
Speaker 3: for humanity in terms of what it's done to our
Speaker 3: addictive tendencies and what it's done to the mental health
Speaker 3: of a generation of children. Those two things, Yeah, none,
Speaker 3: those two things can be true at the same time.
Speaker 3: And if you were to say Meta is if you
Speaker 3: say Meta is evil for this reason or Meta is
Speaker 3: problematic for this reason, that can be true while the
Speaker 3: company still is a very profitable company and is a
Speaker 3: very investible asset. Those things can be true at the
Speaker 3: same time, and that's what they're struggling to grapple with.
Speaker 1: Sure. But there's also the other thing of if a
Speaker 1: city had great tax revenue and the economy was booming,
Speaker 1: but every single street was just bathing piss, I mean,
Speaker 1: without exception, and the mayor was doing coke with the
Speaker 1: CEO of Lockheed Martin every day and throwing dogs and
Speaker 1: giraffes into wood chippers on camera. Would the media look
Speaker 1: at it and say, well, you know what, the city's
Speaker 1: doing great? Though, No, they'd say crime rates are blah blah,
Speaker 1: this piss everywhere, yaddy yady, yadda. They don't do the
Speaker 1: same thing with tech, despite the fact that I think
Speaker 1: we spend more of our lives online than we do
Speaker 1: in the real world these days. And it's just and
Speaker 1: I think that what that does this is obviously a
Speaker 1: long term theory. I think what it means is they
Speaker 1: don't include that in the analysis because it doesn't matter
Speaker 1: to the price for now. But at some point I
Speaker 1: think it has to because the reason, like what's missing
Speaker 1: is no one wants to discuss the reason that they're
Speaker 1: growing so fast, which is or not growing even that fast,
Speaker 1: growing reliably. But the products it's because of monopolies. It's
Speaker 1: because they've not got any other business. There's no one
Speaker 1: else that's really competing meaningfully with Metal or Google or
Speaker 1: Microsoft or Amazon other than those four companies, which don't
Speaker 1: really compete with each other.
Speaker 2: Correct.
Speaker 3: And it's just, by the way, that's not a bearish statement,
Speaker 3: that's a bullish statement. Monopolies are incredibly profitable businesses. The
Speaker 3: more that you can maintain a monopoly, the more profits
Speaker 3: you can yield over the long term. So I mean,
Speaker 3: I look at those things. I think it's a bad
Speaker 3: thing for the long term economic health of America. I
Speaker 3: think that it is generally a bad thing for markets.
Speaker 3: And I don't like the fact that we are so
Speaker 3: increasingly reliant on the profits or this market is so
Speaker 3: increasingly reliant on the profits of a handful of companies.
Speaker 3: But what you also know is that it's really good
Speaker 3: to be a monopoly, and it's really good to be
Speaker 3: a shareholder of a monopoly. And I think that's part
Speaker 3: of the trouble for financial journalists and people who are
Speaker 3: in financial media is that you know, if you were
Speaker 3: to say that, I mean, let's take the bubble as
Speaker 3: an example. If you were to say six months ago,
Speaker 3: this is a bubble, and by the way, six months ago,
Speaker 3: I think that was a true statement. I think that
Speaker 3: it is a true statement today as well. If you
Speaker 3: were to say that six months ago, as an investor,
Speaker 3: you have not performed well. You have massively underperformed your peers.
Speaker 3: If you are a capital allocator, it is problematic for
Speaker 3: you to go out six months ago and say this
Speaker 3: is a bubble, and therefore I'm going to sell my
Speaker 3: assets and I'm going to rotate into other assets that
Speaker 3: have nothing to do with AI. Why because the only
Speaker 3: assets that have yielded the returns that are using this
Speaker 3: market are the assets that are tied to AI. And
Speaker 3: it's not the big tech companies. It's actually all of
Speaker 3: those crazy names that we're seeing in semiconduct semiconductors and
Speaker 3: materials and all of the infrastructure play and AI. And
Speaker 3: so that's what people are so scared of is if
Speaker 3: you call it a bubble, if you say if you
Speaker 3: say that in any sense that you think that maybe
Speaker 3: this might be a time to sell, then you are
Speaker 3: making a bold claim that you will then be compared
Speaker 3: against for the rest of your career, and so that's
Speaker 3: part of the fear I think that a lot of
Speaker 3: these people have. It shouldn't be the case, It shouldn't
Speaker 3: be as pervasive as it is in financial journalism because
Speaker 3: actually your job is just to call balls and strikes
Speaker 3: if you're covering this stuff. But if you're an investor,
Speaker 3: that's what you're really frightened of.
Speaker 1: But how much of the price action though, and maybe
Speaker 1: with the semiconductors it's Hyperscalar spending all this money. Well,
Speaker 1: I think there's a chicken and egg problem here where
Speaker 1: it's like, would hyperscalers have been able to spend that
Speaker 1: much money? If if investors would have dumped the stock
Speaker 1: when they saw all the cap x because the media
Speaker 1: had pushed back on AI.
Speaker 3: Well that probably this is where you come in. Yeah,
Speaker 3: and this is where it starts to get ugly. And
Speaker 3: by the way, we're starting to see signals of this.
Speaker 3: We're starting to see a massive unwinding out of the
Speaker 3: AI trade, out of the semiconductor trade. There was some
Speaker 3: report of reporting or some research from Golbin Sachs recently
Speaker 3: showing that the amount of they're seeing some of the
Speaker 3: highest outflows by hedge funds out of the tech sector
Speaker 3: in the history of their coverage of technology, because at
Speaker 3: a certain point, I think the music is going well,
Speaker 3: and then eventually the music starts to stop and they
Speaker 3: are starting to pay attention to the stuff that you
Speaker 3: have been talking about, because, Yeah, the reliance on open AI,
Speaker 3: the reliance on anthropic is unsustainable. And how is it
Speaker 3: that those two companies have so much money to spend.
Speaker 3: It's not because they're generating cash flows and generating profits.
Speaker 3: Quite the opposite, they're losing money. The reason they have
Speaker 3: the money to spend that is, as you have pointed out,
Speaker 3: because they have been capitalized by a handful of wealthy investors,
Speaker 3: venture investors in Silicon Valley and then also some tech
Speaker 3: companies who happen to also be their customers. Cue the
Speaker 3: issue with the circular financing, which I'm not sure how
Speaker 3: people didn't pay more attention to it.
Speaker 1: Well, it's because it because it's there's a childish nature
Speaker 1: to it. It didn't break yet, right, it didn't. It
Speaker 1: didn't break it. And I think that you said the
Speaker 1: recently we're hanging out, it was like that this is
Speaker 1: what happens when you orient the market around rich people
Speaker 1: and rich people ideas. And the reason the Microsoft, Google,
Speaker 1: Meta Amazon feel emboldened to spend over a trillion dollars
Speaker 1: in four years is because they know they won't get
Speaker 1: pushed back. And also so I don't know if you
Speaker 1: exist in this world where every idea you have is
Speaker 1: a good idea and every idea against yours is a
Speaker 1: bad idea. Because the media says that the stock number
Speaker 1: went up, revenue went up, everything good, you're going to
Speaker 1: start believing it. You're just going to believe you can
Speaker 1: manifest everything. And I think that there is something. The
Speaker 1: thing that people the mistake that I think people really
Speaker 1: need to stop making is they're like, well, the richest
Speaker 1: companies in the world couldn't be wrong, and it's like,
Speaker 1: why do you think that? What's the underlying thing? And
Speaker 1: the answer is no matter what the person says, because
Speaker 1: they've yet to explode. It's just like they've yet to explode,
Speaker 1: They've yet to fall apart, they've yet to really experience
Speaker 1: any consequences. Because I guess the media is talking about
Speaker 1: the AI bubble now, yes, but this is fairly new.
Speaker 1: And even then everywhere everywhere in it's still people are
Speaker 1: still doing the well, the dot com bubble, the dot
Speaker 1: com bubbles, there's worked out. The dot com bubb was
Speaker 1: fine and well looked. I looked at history, I looked
Speaker 1: at the Wikipedia for dot com bubble.
Speaker 3: By the way, I'm not sure why that's supposed to
Speaker 3: inspire confidence. I mean, that was a period where the
Speaker 3: nasdak lost around eighty percent of its value. That's yeah,
Speaker 3: a very bad stretch of time.
Speaker 1: Yeah, but you know afterwards it was good. Right, No
Speaker 1: one knows what any of this means. But again, media narrative.
Speaker 1: Look up the amount of times I fucking read someone saying, well,
Speaker 1: the dot com bubble, after the dot com bubble, useful,
Speaker 1: fiber useful this, and it's I'm I'm only slightly joking
Speaker 1: with how colloquial I'm being, because some of them really
Speaker 1: are just like, hey, you know, after the dot com bubble,
Speaker 1: everything that the fiber was used at some point? Is
Speaker 1: that true? Only partially? A lot of the fiber was used.
Speaker 1: Lot the copper wasn't. Like there's there's plenty of times
Speaker 1: where it didn't work out. And also many companies died,
Speaker 1: many people got washed out, many people lost everything. Yes,
Speaker 1: and it was also much much, much smaller, like the
Speaker 1: American stock market was smaller, the companies were smaller.
Speaker 3: Well, I think that this I think that this gets
Speaker 3: to a cultural issue where we have become we have
Speaker 3: a cultic worship of wealth. Yeah, not only because we
Speaker 3: all want to be rich and we all want to
Speaker 3: be billionaires, but we believe that if you are a billionaire,
Speaker 3: if you are a CEO of a large company, if
Speaker 3: you are wealthy, that must mean you are intelligent. That
Speaker 3: must mean you understand how things work, how economies.
Speaker 2: Work, how the world works.
Speaker 3: That must mean you must have some insight into the future.
Speaker 3: And that's not a hyperbolic statement. This is what a
Speaker 3: lot of people actually believe. This is actually what this
Speaker 3: is what fundraising is really all about. It's I I
Speaker 3: have a degree from Stanford and I studied computer science,
Speaker 3: and I understand how these things work and these things work,
Speaker 3: and therefore you should allocate hundreds of millions of dollars
Speaker 3: to my fund because I have a vision of the future.
Speaker 3: I have an understanding the future that is going to
Speaker 3: be more correct than anyone and I'm going to.
Speaker 2: Make you money.
Speaker 3: That's kind of how capital allocating works. And the trouble is,
Speaker 3: we've become so obsessed and so reliant on the visions
Speaker 3: of rich people that we have decided to offset all
Speaker 3: of the cognitive thinking, all of the cognitive work that
Speaker 3: you need to be to do yourself that you have
Speaker 3: done in recognizing hold on this whole thing is dependent
Speaker 3: on two companies and they're going to run out of
Speaker 3: money eventually.
Speaker 2: All of that you shirk that.
Speaker 3: You shirk your responsibility to do that, and you say,
Speaker 3: you know what, I'm going to leave it to Sati
Speaker 3: Nadella and Sam Altman, and they're going to do all
Speaker 3: of the thinking for me because they're smarter than I am,
Speaker 3: because they are rich. That is kind of the philosophy
Speaker 3: that has become pervasive.
Speaker 2: Now.
Speaker 3: The trouble will come once they turn out to be wrong,
Speaker 3: and they're going to have to be wrong in a
Speaker 3: big way for the narrative to shift. I believe we
Speaker 3: are on the precipice of that happening with Sam Altman
Speaker 3: and open Ai. I believe that we have seen him
Speaker 3: make a lot of mistakes, and I think that he
Speaker 3: has flown too close to the sun, and I think
Speaker 3: that he is going to go down in flames, and
Speaker 3: that is going to remind people hold on. Rich people
Speaker 3: aren't always correct. Rich people aren't always right about the future,
Speaker 3: at which point that will puncture the narrative and make
Speaker 3: it a lot more difficult to just believe these people
Speaker 3: without doing any of the homework, any of the thinking
Speaker 3: on your own. At that point, I think we'll see
Speaker 3: expectations start to shift. We did see it after the
Speaker 3: dot com crash. Suddenly there was a lot less trust
Speaker 3: in these people. A lot of you mentioned the people
Speaker 3: who are recommending Enron. I haven't studied those guys, but
Speaker 3: I would guess that it was a lot harder for
Speaker 3: them to get a job post to en Run collapse
Speaker 3: than it was pre en Run collapse. And I think
Speaker 3: that we saw with the financial crisis too. Yes, some
Speaker 3: people made out like bandits, but overall, there was a
Speaker 3: shift in the way people think about markets, in the
Speaker 3: way they think about Wall Street. There was a sense
Speaker 3: of mistrust, There was a sense that these people actually
Speaker 3: didn't really know what they were doing. And it lasted
Speaker 3: for a few years. But of course these things happen
Speaker 3: in cycles, and so I think that we are kind
Speaker 3: of at the peak rich people worship phase, and eventually,
Speaker 3: once something collapses, and I think it will, we'll start
Speaker 3: to reset our expectations and we'll decide, Actually, maybe I
Speaker 3: should do some thinking of my own. Maybe I should
Speaker 3: listen to that guy who has a newsletter and an
Speaker 3: interesting podcast. Maybe he was right about it all along.
Speaker 1: Yeah, And I mean I think as we wrap up
Speaker 1: this beautiful episode, I think the thing that might be
Speaker 1: different here is how balkanized everything. Like everything's very tribal now,
Speaker 1: everyone's very aggressive, everyone's like you will if this Nick's
Speaker 1: a rash piece I mentioned earlier, a big thing he's finding.
Speaker 1: He's a one for software engineer and he talking to
Speaker 1: works as a consultant as well. He talked with various
Speaker 1: firms and he's found this thing where not being pro
Speaker 1: AI is considered dangerous to one's health. Like's if you
Speaker 1: are not pro AI within an organization, if you are
Speaker 1: not supportive of AI initiatives and indeed the greater religious
Speaker 1: thing of AI providing x percent or one hundred x productivity,
Speaker 1: you are upsetting to the people around you because there
Speaker 1: are all these interlinking things that people just believing that
Speaker 1: AI is the future and agreeing to things and saying
Speaker 1: things about it that's not true. And I think that
Speaker 1: that's where the real authority crisis is going to break down,
Speaker 1: because we are I think when this burst, we are
Speaker 1: looking at something that could reduce how many LMS we
Speaker 1: see on a day to day basis. But also there
Speaker 1: are people who have staked their entire careers on l
Speaker 1: EM's being like ten times the size they are today.
Speaker 1: Not just like lms will continue to exist, but they're
Speaker 1: like lms will literally be the future of everything, everything, everywhere.
Speaker 1: And I'm not sure how you come back from this,
Speaker 1: like Jim Kramer came back from it because he I
Speaker 1: think he forgets everything he says, the moment he says
Speaker 1: it just just like Dory from finding Nemo or finding Dori,
Speaker 1: I guess, and coming to Jim, but I think the
Speaker 1: I think that other than Kramer, there is going to
Speaker 1: be a certain degree of I don't know. I don't
Speaker 1: know how you listen to somebody who has been pro
Speaker 1: AI after this. I don't know how you take someone
Speaker 1: seriously who has been pro SpaceX, who ignored the things
Speaker 1: that Sam Altman had been promising that went along with it.
Speaker 1: I don't know how anyone. And I've been trying to
Speaker 1: warn Jealous about this, like this will be an authority crisis.
Speaker 3: Yes, this will all depend on the price. Right now,
Speaker 3: I look smart because of my SpaceX prediction, and everyone says, oh,
Speaker 3: ED was right, ED got it right, Ed was correct,
Speaker 3: and the people who are pumping the stock looks stupid.
Speaker 3: And so the authority crisis there. It has flipped. If SpaceX,
Speaker 3: for whatever reason, skyrockets to two hundred dollars a share,
Speaker 3: everyone will say ED is an idiot, Ed was wrong.
Speaker 3: They will go wherever the wind blows. The only thing
Speaker 3: that really matters in terms of the authority, in terms
Speaker 3: of who to listen to. And this goes back to
Speaker 3: the cult of worship around wealth. The only thing that
Speaker 3: matters is the price, right And so once that price
Speaker 3: comes down, and I agree that it's going to have
Speaker 3: to happen for at least a handful of companies. I
Speaker 3: believe Open a Eye is going to implode in some
Speaker 3: in some way, and it'll be full it into some
Speaker 3: other company, probably Microsoft.
Speaker 2: I think you again, Yeah.
Speaker 1: That's that's kind of what And I think anthropic has
Speaker 1: passed between Google and Amazon.
Speaker 3: I think that's highly possible too. Once that happens, then
Speaker 3: suddenly Sam Altman is the idiot, and he will be
Speaker 3: remembered in history as such. But be clear, people don't
Speaker 3: have a lot of conviction about what they actually believe
Speaker 3: when it comes to this stuff. All they really care
Speaker 3: about is what happened to the price, and we saw
Speaker 3: it with Sam Bagman Freed and the Crypto saga as
Speaker 3: soon as I mean, Sam Bagman Freed was only a
Speaker 3: criminal once he lost the money. Yes, that was that
Speaker 3: was when they decided, oh, he's a criminal, always a
Speaker 3: bad guy. Put him in jail because he lost the money.
Speaker 3: Same was true of the Henry Blodgett thing. He was
Speaker 3: only punished once the dot com bubble imploded and prices
Speaker 3: went down. Then they decided he's the bad guy. So
Speaker 3: it all that matters here.
Speaker 2: Is the price, and that is people lose money. That's
Speaker 2: exactly right.
Speaker 1: Well Ed, it's been such a pleasure to have you.
Speaker 1: We'll have links to your stuff and then in the
Speaker 1: show notes, thank you so much for joining us.
Speaker 3: Thank you so much. I enjoyed it and I can't
Speaker 3: wait to have you on my show.
Speaker 1: Hell yeah, do that soon enough. That's right, the Ed Exchange,
Speaker 1: I'm of course ed Zeitron. I'll be back with the
Speaker 1: monologue this Friday. Thank you for listening as ever, subscribing newsletter,
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