Trump & Elon Break Up Over the Tax Bill

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Today is number 11.

That's the percentage of Fortune 500 companies run by women in 2025.

A record high.

True story, Ed, my first boss was a woman, and she recently passed away, and it was an open casket.

And I couldn't help muttering to her, who's thinking outside the box now, bitch?

Is that wrong, Ed?

Maybe you didn't need to add bitch at the end.

Look, who's thinking outside the box now?

I love the the word bit, but I use it, I use it androgynously.

I describe, I say, I call you bitch all the time.

You do.

That you do.

Yeah.

So it's not, for me, it's not, it's not a gender thing.

No, no, it's not.

How are you, Ed?

Have you had any really nice dinners recently?

Have you?

What have you been up to?

I did.

I had a very nice dinner with you last night on nursing hangover.

We went to your members' club and had our what is that?

Sort of like our annual company dinner?

Annual, monthly, monthly, bitch.

Annual.

yeah we never do anything fun oh my god i don't think i'm wrong when was the last time you and i had a meal together no no no no no no no no it's better you have meals paid for by me where i'm not there i'm the perfect boss

we do a lot of social stuff that's true that's true we have we have our own dinners as well when you're not there granted you live in a different country so it's fair enough but let's just call it our annual sort of celebration of the company where you ball out, take us to a nice members club.

Usually we go to Zero Bond, but now we've switched over to your new club.

And it was very fun.

We stuck around and

had some drinks.

It was good.

Yeah, it was nice.

I really enjoyed seeing everybody.

And I know you stuck around a little bit later than we did.

Well, I was in the bathroom doing an eight ball.

I was actually,

I'm such a narcissist.

Someone texted me and said, you're going viral.

So I immediately went and found one quiet place and started typing in Scott Galloway, Scott Galloway.

I'm such a fucking narcissist.

You were gone for a while.

Someone's like, you're going viral.

And I'm like, okay, is it for my gay prostitute habit?

What am I going viral for?

Or some sort of insight.

You know, when someone tells you you're going viral, you don't know if it's insight or syphilis.

You got to lock yourself away in the bathroom and find out what's happening.

But you're going viral for a good reason.

And that is you crushed it on Piers Morgan.

Well done.

I I think one of the wonderful things about being an American, and quite frankly,

for me, what it means to be a man and what I try to teach my boys is the whole point of prosperity is such that you can protect people.

And I think the two of you are more impressed with Mr.

Musk than I am, and that too many of us excuse what is abhorrent behavior.

I think his legacy.

is not going to be an EV or putting rockets into space.

I think it's going to be unnecessary death, disease, and disability of of the world's most vulnerable.

That is not what it means to be an innovator.

It's not what it means to be an American.

It's not what it means to be a man.

Wow.

You know, Ed, I don't like to talk about me.

Yeah.

Anyways, let's get to the headlines, Ed.

Let's get to the headlines.

But before I do that, I just want to remind everyone, this is a big day because this is the last time Prof G Markets will air on the ProfG podcast.

So starting tomorrow, we'll be publishing a new episode every day of the week, and it will be exclusively on the ProfG Markets podcast, not on the ProfG podcast.

If you're trying to differentiate, the ProfG podcast is the turquoise logo, ProfG Markets is the green logo with me and Scott.

Make sure you're subscribed to ProfG Markets in your podcast player right now and tune in tomorrow for our very, very first daily episode.

We're very excited for you to hear it.

We've been working on this for a long time.

We're about to start grinding every single day.

Tune in for it.

Nice.

Let's start with our weekly review of Market Vitals.

The S ⁇ P 500 climbed on the promise of trade talks between the US and China.

The dollar fell.

Bitcoin was relatively stable and the yield on tenure treasuries increased.

Shifting to the headlines.

Reddit is suing Anthropic for allegedly training its models on user data without permission.

The lawsuit says Anthropic accessed the platform more than 100,000 times after claiming it had stopped.

Reddit Reddit shares rose more than 6% on that news.

The creators of the Trump meme coin are launching a Trump-branded crypto wallet for trading digital assets, including Bitcoin.

However, soon after it was announced, Trump's sons quickly denied any knowledge of this venture.

Eric Trump then clarified that their company, World Liberty Financial, would be launching their own official wallet soon.

And finally, Warner Brothers Discovery shareholders voted against CEO David Zasloff's $52 million pay package package for 2024.

The vote was largely symbolic because it is non-binding, meaning Zaslov will, unless the board chooses otherwise, still receive his full compensation.

So Scott, let's start with Reddit suing Anthropic.

Anthropic is obviously the big AI company.

They produce Claude, their chatbot, their competitor to ChatGPT.

And Reddit is suing them.

for scraping their data.

Any initial reactions?

I think it's a great move by Reddit, and the market seems to love it.

This is that moment where they have a chance to push back on these crawlers.

My first board meeting, the New York Times, my big proposal and idea was I said, we need to turn off Google, and we need to go to Pearson, which owned the FT at the time, the Murdochs,

the Wall Street Journal, and News Corps, and to the Newhouses.

who own Condonast, the best properties, Vanity Fair, and Hearst, and we need to develop a consortium and say, this is back when they were all still trying to kind of grab share and search wasn't, you know, this was almost 20 years ago, search wasn't as big a market as it was now,

and say, all right, one of you is going to get access to this big, beautiful content, everything from GQ to the Wall Street Journal to, you know, the New York Times, whatever it might be, all these local newspapers, I said we should also bring in Gannett and present as one voice and get a licensing agreement.

And I believe that Microsoft would have, in an effort to try and catch up to Google, would have paid a lot of money for that content.

And the general view from New York Times management was, no,

they were so stuck in an eyeballs and advertising mindset, their view was, no, we need to drive as much traffic and Google is driving a decent amount of traffic.

And then within a few years, it was too late.

They didn't need, we needed them much more than they needed us.

There was no one entity or group of entities that could

shut them down.

And what Google said was, this is amazing.

This is such a symbiotic.

We send you traffic and you monetize it.

And what nobody did was the actual analysis that they were making a dollar off our content and we were making two cents.

They had figured out a way to monetize it perfectly or near perfectly.

And we were just getting a view, a banner ad on the New York Times cooking section that we could barely monetize at like CPMs of almost zero.

Anyway, we're at that moment with AI.

And I think...

The market loves that Reddit is pushing back and saying, no, you're not allowed to crawl.

They should take the next step.

They should create a consortium of all this incredible content to present a unified front.

The problem is that

the kind of Russia of being able to just throw bodies at the problem is meta, because I believe, as big as Reddit is, I think it's the

fifth or sixth most traffic site in America, it creates, I think, about 1.3 trillion tokens of information, and Meta creates about 150 or 160 across all of its platforms.

But pretty soon, AI will have so much power that that no one entity will have any real bargaining power with it.

So I think this is good news for the content community.

I applaud how aggressive they're being.

But the next step would be for them to call literally every content repository that AI is crawling and say, we need a unified front here.

We're all going to participate in some sort of economic algorithm dependent, you know, based on how much we get crawled or not crawled, and start getting some of that revenue.

I believe that Reddit did, in fact get, I think they struck a deal with OpenAI for access to their information.

Google and OpenAI.

Those deal terms haven't been disclosed, but they said that it was around 10% of their annual revenue.

So people estimate that those deals are worth between $60 and $70 million each.

To your point, they are sitting on an oil field, which is 20 years worth of conversational user data.

And that is literally oil for these AI companies.

Like these AI, these models need to train on that kind of data, on people just chatting with each other.

So if they aren't going to be super aggressive as soon as some AI company comes in and starts scraping that data, then they're not doing their job right.

I loved how aggressive the complaint was.

The opening line here was, quote, Anthropic is a company that bills itself as the white knight of the AI industry.

It is anything but.

And then the whole paragraph just keeps on going on about everything they hate about Anthropic.

It's very aggressive.

It's very sassy, but it's the right thing to do.

And I think that's why the stock rose so significantly around, I mean, more than 6%, almost 7%.

Because I think Wall Street recognizes that Steve Huffman, the CEO, he's got his head screwed on very tight.

He knows exactly what's at stake here.

He knows that if you let these guys come in and start pillaging the data as the New York Times did back when you were on the board, then you're basically just going to be left for dead.

And by the way, those numbers, 60 to 70 million, I've said it before, that feels small.

Yeah, it should go up.

I mean, I'm surprised they couldn't get more.

The key is the first deal because it establishes a gestalt where you're paying us for access.

Whereas Google and all the other crawlers have established a basic operating model where no, we don't pay to crawl your data.

We'll send you traffic, but that's it.

But this is the right thing to do.

Good for Reddit.

Let's talk about this Trump crypto wallet saga.

So basically, just to run through what happened on Tuesday, the Trump meme coin website launched this official Trump crypto wallet, which is basically just a trading app to buy and sell crypto with Trump branding.

Immediately after that announcement,

Trump's sons, so Don Jr., Eric Trump, and even Baron Trump, went out and publicly said, our family has nothing to do with this.

And they publicly denounced it.

So you might think that that would mean that this new crypto wallet was fake or wrong or some kind of hack or something like that.

But that's actually not the case.

This was a real announcement by the real issuer of the Trump meme coin.

And what you have to remember is the Trump meme coin is actually not run by Trump's children.

It's run by one of Trump's business partners, this guy named Bill Zanker.

And so essentially what is happening now,

all these different people.

who are in some way launching these Trump-branded crypto projects, they're all starting to buttheads.

And I just want to remind you of what all these stupid Trump crypto projects actually are.

So you've got Bill Zanker, who's running the Trump meme coin.

It's called Trump Coin.

You've got Eric Trump and Don Jr., who are running World Liberty Financial.

That's another crypto company.

You've got Devin Nunes, who's running Trump Media and Technology Group, which, as we've discussed, is doing the Bitcoin treasury thing.

They're also becoming a crypto company.

And you've also got this company, American Bitcoin, which is a Bitcoin mining operation that is also run by Eric Trump and Don Jr.

So all of these guys are running around trying to do the same thing, which is they're trying to leverage Trump's image to make money by slinging crypto to his fan base.

Now, the reason the Suns were so upset about this one specifically, I believe, is because they were planning to do the exact same thing over at their company, World Liberty Financial, where they wanted to launch their own Trump crypto wallet.

But then suddenly Bill Zanker at Trump Meme Coin comes in and beats them to it.

So the whole thing is confusing and extremely stupid.

But this is the state of affairs in Trump crypto land.

It's a free-for-all now where all of these different people with these different ties to the president are now competing against each other to win this game of grift.

All of this is a bit of a distraction from the following that the first family has figured out a way to let people.

And

the statement that Donald, or that I think it was Don Jr.

said, well, are you worried about the perception of a conflict that someone could be using this for grift to curry favors?

And his response was, well, you don't know who's actually doing any of these things, right?

So

it's different because it's hard to influence if you don't actually know where the stuff's coming from, right?

So I wasn't involved.

But this is part of the grift, and what's so dangerous about that.

And that is,

say, Qatar could, or someone from Qatar could reach out to Don on a secure phone

and say, we're going to deposit exactly $10,258,944 at exactly 12.02 a.m.

tomorrow.

And by the way, we would really appreciate it if you would not weigh in and not be supportive of the latest unfair

persecution and genocide taking place in Gaza.

And then, you know, Don could wink, wink to dad.

Yeah, they deposited it.

Be very easy to figure out who's depositing it.

But the thing is, no one else knows.

No one else has any idea.

There's absolutely no record.

So that's the whole point.

That's where the grift happens.

I'm surprised this hasn't gotten as much attention.

I think people still don't.

It should be getting so much more attention.

It's because it's, I mean, I think we are evolving from flood the zone with shit to flood the zone with crypto.

There are so many of these crypto companies and it's such a poorly understood industry that it's one of those things where if things start getting confusing and you don't really know what these terms really mean, eventually you just sort of put your hands up and you say, I don't really care.

And honestly, I'm a little bored by the whole thing.

I think that's what they see in crypto.

They once, they went from flood the zone with shit, where we'll just fire out so many crazy statements and confuse you.

And now it's, we're just going to fire out so many different crypto projects, so many different crypto products.

You won't even be able to keep track of what is even happening.

And in the interim, we will do any and all grift possible.

And yes, we can take bribes.

But let's move on to this

Warner Brothers Discovery news.

So 59% of the shareholders of Warner Brothers Discovery voted against David Zaslov's compensation of $52 million for 2024.

This is an increase from the year before, where it was less than 50% who voted against his compensation package.

Now the board will look at it.

They will review.

But to be clear, as I mentioned, this is a non-binding vote.

So the board can still just approve this package.

But I'm sure if they were to do that, they'd probably get a lot of pushback.

I mean, 59%.

That's a lot of shareholders.

Scott, your reactions.

I think this is arguably the worst board in media.

Shareholders since the merger have lost two-thirds of their value.

The debt has been downgraded to junk.

Whenever I see something really funky going on with management in a company I'm involved in, it can almost always be reverse engineered to compensation.

Compensation drives behavior.

This

CEO is the most overcompensated CEO in media, maybe even in media history.

I'm trying to think.

Certainly in this era of media, and I would just point to some statistics right now that would support that point.

The average compensation for S ⁇ P 500 CEOs in 2024 was $17 million.

And this guy's about to get paid 52 million.

And by the way, that's up 10%

from the year before.

So he's getting a compensation that is 200% higher than the SP 500 average.

And it's also, get this, the eighth highest CEO compensation package in the SP 500.

And this is a guy who is leading a company where in 2024, the stock returned negative 5%.

The year before that, the stock returned negative 1%.

And the year before that, from the time he took over during the merger, the stock returned negative 54%.

He's lost 60% of the value of this company.

And now he's getting paid 52 million, the eighth highest paid CEO in America.

When you're on comm committees, you can rail about how much money it is.

But really, what you're in the business of is benchmarking it relative to other companies and CEOs performing at a similar level.

And Mr.

Zaslov's pay is on par with the co-CEOs Ted Serandos and Greg Peters of Netflix, who made around $60 million.

The difference is Netflix is fucking killing it.

And Warner Brothers' discovery is in danger of going away if it's not careful or being broken up.

So Netflix stock increased by 80% in 2024.

Disney's CEO, Bob Iger, made less than Zaslov.

He made only $41 million, but the stock is up 23%.

And he can point to the parks, which is just killing it.

And it might have been that they, if you have an algorithm, they have to pay him this.

And my attitude is then fire him, sit him down and say, look, this isn't going well.

And this algorithm says we're supposed to pay you another 55 million this year.

We're not going to.

What algorithm would say that?

You have compensation formulas.

And my guess is if you look at the one piece, the pieces of the business, he's paying down debt, which means they haven't had the cash flow to probably grow the businesses.

You know, maybe they want.

Whoever built that algorithm, I would argue, built a shitty algorithm.

You shouldn't be paying this guy $52 million.

It doesn't make any sense.

I find in business, I find compensation is the most difficult part of business.

And that is you want to, you have an obligation to shareholders.

Unfortunately, you don't know the shareholders and don't play golf with them and aren't in meetings with them.

And you're not trying to get your nephew an internship

at a shareholder's company.

You're trying to get it with the CEO.

So they have a tendency.

In addition, there's this dynamic.

The one thing CEOs have in common is they're just incredibly fucking likable.

They were all the fraternity president or Rush chairman.

They're all really likable people because usually the CO isn't oftentimes the most talented person.

It's the one that's made the fewest enemies.

It's the one that people think is just a really good guy or gal.

So they're very good at weaponizing the board.

And that's why you see typically the drop-off between the CO's compensation.

I should ask you guys to do this, but I bet the drop-off between

Zaslov compensation and the number two, whether you think it's the president of the Americas or the head of Warner Brothers or the CFO, I bet no one there is making 50.

So the compensation is is dramatically lower across the rest of them.

But this is outrageous compensation.

The compensation committee, Richard Fisher, Paul Gould, Deborah Lee, Jeffrey Yang, Ken Lowe, you're not acting as a fiduciary for shareholders.

And that's what the shareholders are telling you, or at least 59% of them are telling you.

I don't understand who those 31% of shareholders are who said, oh, yeah, this is fine.

I don't get what's going through their heads.

That seems crazy to me, too.

But I think the thing that the board does have to get into their heads is like, we asked the shareholders, we asked the public, and they spoke and they said this doesn't make any sense.

So it's now on them to make a decision.

It'll be really interesting to see if they

just acquiesce to the likability of the Zaz once again.

They will absolutely say thanks.

They will act interested, thoughtful to hear from you.

Please grab free lunch at the annual meeting and go fuck yourself.

If you want to sell our stock, it's already at $9 a share.

Wow.

I just don't.

Let me go this way.

He's not giving this money back.

He's not.

The other thing here is I believe John Malone was on the board.

I don't know if he's on the board any longer, but John Malone, it's interesting.

He has a reputation, one, as being the smartest guy in the history of cable.

The guy is just a genius and saw, like, just kind of saw behind corners like no one else in the industry.

The other thing he was known for was

over-the-top compensation of his CEOs.

Like he enjoyed and fomented the reputation of being the person who paid his leadership more than anyone in the industry.

And

I think this is, I believe that the worst acquisitions or most acquisitions can be reverse engineered to one thing, and that is a midlife crisis.

And that is two-thirds of acquisitions don't make any sense, but it feels really good to be bigger.

And I can't imagine David Zaslov was the head of Discovery, kind of an interesting company, you know, Shark Week, right?

And now he's the CEO of one of the biggest media companies in history and gets to go to Warner Brothers and gets to go to, you know, The Last of Us or White Lotus Premieres and the Academy Awards.

He immediately moved to LA and bought Jack Warner's old home.

I mean, this is a midlife crisis being funded by the shareholders of Warner Brothers Discovery.

It would have been much cheaper if the shareholders had just bought the guy a canary yellow T-top Corvette and said, crash it into a hair plugs clinic.

Yeah.

Or they should just give him his own streaming show, just something to sort of pet the ego.

That wouldn't be too old.

Yeah.

Just some

research here from our SEAL Team 6 research team.

The CFO, to your point about the drop-off, the difference between the CEO, David Zasloff, versus all the other executives.

In 2024, the CFO received $17 million.

The head of global streaming received $19.

Chief Revenue and Strategy Officer, $20 million.

That's still pretty sweet compensation.

I mean, it's not as much as the co-host of Property Marcus makes, but it's pretty good compensation.

But I would

what I try to do on compensation committees, and it never works, is figure out ratios

between all the executives.

Because here's the bottom line, compensation is a function of proximity.

And this is, let's draw this to a larger learning for young people.

If you are not in the office, okay, the CEO makes the most money because the CEO has closest proximity to the decision makers.

The CFO is in the board meeting, but he's not the friend.

Crucial point.

People don't realize that you have to be close to the decision makers.

100%.

Anyone who doesn't present in board meetings has a dramatic drop-off in pay because they're invisible.

It's easy to pay people you don't know and you will don't meet a lot less.

And so your proximity to the decision makers physically, the relationships you have with them, is directly correlated to your compensation, as evidenced by the fact that you are 38% less likely to get promoted when you work remotely.

So, if you want to work remotely, just acknowledge that is compensation, meaning you will make less money for the right to work remotely.

If you are an economic animal, as I was,

I was an economic animal.

That's all I cared about.

I love that term.

People be like, What's your purpose?

What's your passion?

How do you want to change the world?

I'm like, I want to be a fucking baller.

I want to make a shit ton of Benjamins.

I want to splash the cash.

I want to fling the bling.

And I think that most people,

young people, are that way.

And if you are an economic animal, then compensation is a function of proximity.

And you see this up and down the chain.

We'll be right back after the break with a look at the mounting pushback against the big, beautiful bill.

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The Big Beautiful bill is facing resistance on Capitol Hill as several GOP senators have raised concerns about the legislation.

Trump met with the Senate Finance Committee Republicans last week to shore up support.

As Elon Musk weighed in on X, he called the bill, quote, a disgusting abomination.

The two have since feuded publicly, with Musk claiming Trump wouldn't have won the election without him.

And then Trump also said, quote, Elon and I had a great relationship.

I don't know if we will anymore.

Adding to the pressure, the Congressional Budget Office has projected that the Big Beautiful bill will add $2.42 trillion to the deficit over the next decade.

So, Scott, let's just review what's happened here.

I think what we're seeing is that in the past week, this big, beautiful bill, which you and I have criticized at length, it's becoming increasingly unpopular.

I think it was initially seen as mostly a tax cut and a Medicaid cut.

And it sort of passed in the House kind of quickly.

It was a slim margin, but I don't think the world or America got that much time to really review it.

But now people are starting to look at at it.

They're recognizing this larger economic issue, which you and I pointed out, which is that this is just going to massively inflate the deficit.

We've had several different deficit calculations from several different organizations.

The CFRB projected it would add $3 trillion in deficits over the next decade.

The Congressional Budget Office just last week, they had their calculation.

They say $2.5 trillion.

Lots of different numbers floating around.

But what is clear to everyone is that this bill will massively increase deficit spending very, very significantly.

And just about now, people are starting to speak up about it.

We had Ron Johnson, who said he won't vote for it, Rick Scott, Mike Lee, Rand Paul.

And now we're getting arguably the biggest no from Elon Musk, who has spent the past week on X.

tweeting about how bad this bill is, how destructive it will be in terms of our debt load and future interest payments, which to be clear, I wholeheartedly agree with him on.

And now it's turning into this feud with Trump.

And finally, finally, the relationship

looks to be coming to an end.

Your reaction, Scott?

This is the thing.

I don't think he gives a shit about the bill.

I don't think he's read it.

I don't think he cares about it.

I think he saw a couple of things.

One, they're cutting off some of the subsidies that make his company profitable.

What I really think happened here was I think Scott Bessant punched him in the face.

That's what Steve Bannon said.

Steve Bannon said that Scott Bessett and Elon Musk got into a physical altercation, but I don't know how he would know that because he's not on the inside.

Well, Steve Bannon is always right.

But what I'm saying is you're agreeing with him.

Elon Musk, according to the New York Times and Wall Street Journal, is a rabid drug addict.

Have you known many people with rabid alcohol or drug problems?

No.

That's great.

Maybe your co-host.

To be honest, I was trying to think of a smart joke that I couldn't squeeze it.

I control my substances.

They add to my life.

It's the only thing keeping me sane, Ed.

That's from The Falcon and the Condor, I think, Sean Penn, Gray Line.

Another movie you never saw.

Look, drug addicts, I've had,

it's weird, professionally, I've been introduced to drug addicts.

They're very inconsistent.

It is very, you do not know who you're waking up next to.

You literally, it's Jekyll and Hyde.

You just have no idea.

I think the guy is so fucking high that he's gone angry.

He's decided Trump good, Trump God.

Now Trump bad, Trump evil.

And he's tweeting like crazy.

He's mad tweeting.

He's rage tweeting.

And he has so much money and he has such a powerful platform from the political chattering class that they don't know what to do with this guy.

They don't know, you know, he's basically, I think, kind of, I don't know, Kara was talking about this.

Kara thinks that they've got to bear hug him and figure out a way to settle with him.

My attitude is I actually think they can just sort of stick up the middle finger and say, all right, just go away.

I don't see why they have to come to some sort of consolation prize with him.

I guess it would affect 26, maybe.

We should also just talk about what the market thinks of the breakup, and that is the market thinks that Trump is bigger than Musk.

And Musk getting into these wars or...

you know, shooting these flares across the bow of the SS Trump.

Tesla's down 11% today.

I I think his shareholders are saying, we don't know if it's the ketamine, we don't know if he cares about the deficit, but this is not good for us.

The thing that is so disappointing is that the holdouts,

one, I appreciate the fact that they are quote-unquote fiscal hawks and they're saying this grows the deficit too much.

What is so disappointing is none of them are talking about, okay, maybe we need to cut, maybe we need to raise revenues, maybe we need to not raise the exemption on the estate tax.

Maybe we need to lower it.

Maybe we do, in fact, need to

have some sort of alternative minimum tax on

the wealthy and on corporations.

Because on my debate yesterday with Pierce Morgan, featuring me and Kevin O'Leary, Mr.

Wonderful,

He basically said we have to have the capital is mobile and we have to have at least be in the middle of tax rates.

And I actually agree with Kevin on this, but I didn't get a chance to respond.

But here's the thing.

Our tax rates are illusory.

It's our ability to enforce them and not have a tax code that basically makes it such that the majority of wealthy people and the majority of corporations never pay what they're supposed to pay in terms of tax rates.

The tax rate is unimportant.

It's the tax code and our inability to enforce it.

But none of them, for all their outrage about

the tax on you and your generation moving forward, which is what a deficit is, and that it will ultimately begin to crowd out investments in the deficit and any forward-leaning investments in education or technology.

None of them are outraged enough to actually broach the subject of, well, maybe we need to raise revenues.

So this is, I was just on with the young Congressional Democratic Caucus, and they said, I had a list of policy ideas and they said, what would you do right away?

A lot of my policies are more longer-term, national service, changing the tax code.

They said, what would you do right away?

I think the young Democrats should propose, they have a bunch of incredibly bright staffers.

I would task them within seven days of coming up with an alternative tax bill that says, all right, hard decisions around means testing, Social Security, cutting Medicaid,

maintaining defense spending, maybe reducing it 2% a year, we're building ships that the Navy doesn't even want, come up with X in cost savings, X in reduction in spending,

but, and this is what would be different than the big beautiful, we have 1.5x in revenue increases, which I think they could find.

It wouldn't be that hard to find.

Alternative minimum tax, lowering the state tax deduction.

And then

what would happen is CNBC, MSNBC, CNN and Fox would all put the two bills next to each other.

And it would position the Democrats as the adults in the room.

Now, Mike, say you're willing to cut spending, but also you want to raise revenues.

And you're going to be the first administration since the Clinton administration to figure out a way to put us on a path over the next four, eight, 12 years towards a massive reduction in our annual deficits.

And it'll deposition them as the fiscally irresponsible ones.

And I call it the adult in the room strategy.

But all of the oxygen is Mike Johnson and Republicans grabbing the mic and saying, I'm a fiscal hawk.

And before I bend over and take it up the ass from Trump, which they will all do,

that escalated quickly.

They will all do

get some airtime.

It's interesting that you think that Elon

that all he cares about is really just what's happening with the EV tax credits,

which are going to be stripped out in this bill.

And that's what Trump has said.

He said that Elon was fine with the bill, and then suddenly I got rid of the EV tax credit, and now he's upset about it.

That's also what Mike Johnson is saying.

So the Republicans are saying this guy is

kind of lying about his concern about the deficit.

All he really cares about is this EV tax credit thing.

I actually disagree with that.

I don't, I mean,

just don't believe that that's the real problem.

I actually believe that Elon went in there.

I mean, think about what his job was.

His job was to reduce spending.

That was the whole point of him entering this government.

That was the whole point of Doge.

And this bill, which is going to increase deficits by somewhere between two to four trillion dollars over the next decade, no one really knows.

This bill has rendered Doge and Elon's entire existence in this government as

useless and irrelevant.

And I think Elon is probably,

I mean, probably rightly offended by that.

And now he's having this lash out.

And because he's a very weird guy and because he's addicted to drugs and because he has an addiction to social media, he's doing it in a crazy way where he's just lashing out like a like a maniac on social media.

But I don't, that doesn't make me think it's not genuine.

I think that he is concerned concerned or upset about this bill for the same reasons that you and I are upset about this bill, which is we're going to massively balloon our interest payments over the next 10 years.

We're going to actually double our net interest payments.

We're at 900 billion dollars per year that we're spending just servicing the debt.

That's going to double to 1.8 trillion dollars by 2034.

And already net interest payments are our second largest federal expenditure.

We spend more on the interest than we do on Medicare and on national defense.

So I think he looks at it and he's pissed off about it.

And that's why I'm sort of like,

why don't we just take that win?

It's kind of nice.

I mean, the guy has caused so much anguish for so many reasons, as you've explained, but he owns one of the largest social media platforms in the world.

And he's decided that this deficit thing is a real problem.

And if he's going to be the one to popularize it, at least among his cohort, how about it?

I just think you're giving him too much credit.

I don't, I mean, first off, I think his real objective here,

as far as I can tell, was to remove all the inspectors generals and remove all of the cases against him for safety violations, discrimination violations, and remove all the inspector generals that were forcing him to like have crash test dummies in those autonomous vehicles before they were approved.

All of those people are gone.

I'm not defending that.

But I think that was his objective.

I think that you're giving him too much credit as someone who was really concerned about the deficit, because if he was concerned about the deficit, he wouldn't be proposing a 40% cut to the IRS.

Well, he thinks you can have tax cuts and just cut a ton of other stuff.

He thinks that all of the infrastructure in government is useless and fraudulent and it's all abuse.

And so we can just get rid of all of it.

Let's get rid of all the inspector generals.

And then in addition, we can also cut taxes.

I mean, he's got like a five-year-old's view of what government is and what government does.

But that's sort of the Republican view, just a brief history of deficits, George Washington to George Bush, $7 trillion in deficits.

And then where this all really kicked off was that George W.

Bush convinced the American public, I know, we can go to war and lower taxes at the same time.

We had never done that before.

We had trained or logically inferred

or intimated or expressed to the American public that if we go to war, your taxes are going up.

And that was a decent regulator on

if and when you went to war.

So what happens when you convince the American public that we can maintain social spending and cut taxes and we can go to war and cut taxes?

You explode the deficit.

And since George W.

Bush, everyone on the left and the right has signed up to this.

And nobody wants to be the adult in the room because they think by the time I'm out of office, it just doesn't, you know, that's when they'll have to pay for it.

But the notion that he came in with a serious attempt, if anyone was serious about

deficits, they would triple the size of the IRS.

I agree.

I don't think it was a very serious or informed perspective on the deficit, but I think it was very clear to me that that

was one of his stated goals.

And now he's pointing out that they're doing the opposite.

And that's true.

Whether or not his opinion on the matter was serious or informed or legitimate,

I don't think it really was.

I think he acted like a child throughout this.

But the fact that he's speaking up about it now, to me, I'm like, let's just take the win and let's see if we can popularize this idea that we can't keep spending this much fucking money in America.

But you're assigning principle and logic and critical thinking to his actions.

I'm not.

I'm just saying that whatever,

let's embrace it.

My point is, if he was really concerned with that from the beginning, he would have approached this much differently.

He wasn't going to solve your generation's economic problems through big deficits by cutting off USAID.

If you want to have an adult conversation, if you're really philosophically committed to reducing deficits and not screwing your generation, do we have to cut spending or raise taxes?

The answer is yes.

And you're not serious if you're not talking about an increase in revenues and also going after entitlements, including Social Security, or going after defense, or raising taxes on the wealthy.

Or healthcare, as we've talked about.

That's the big one.

Yeah.

Healthcare, this was never a philosophically or an intellectually honest movement.

I totally agree with that.

I think the question now is that a lot of people are wondering: what are the chances that this bill actually goes through?

And that is an important question because of all of the economic reasons that we've just discussed.

So will it go through as it stands?

Probably not, actually.

It needs a simple majority in the Senate, which is 51 votes.

There are 47 Democrats in the Senate who are likely all going to vote no, and 53 Republicans.

So, the Republicans can only afford to lose three votes, in which case it would be a tie, and the vice president can and would break that tie.

But so far, we've seen four Republican senators who have come out and said they don't support this.

And then there are six more Republicans who haven't outright opposed it, but who have raised concerns and are pushing to reform the bill.

So what will most likely happen at this point, now that everyone's coming out of the woodwork and saying this doesn't make sense, the Senate will likely reform the bill.

Who knows what reforms they'll make?

But the bill will likely go back to the House and the process will start.

all over again.

So right now, the situation actually looks less terrible than it did a week ago.

And now the question is, what kinds of reforms will the Senate actually make?

Will they actually address the deficit problem?

Will we see a substantial decrease in spending?

Will we see a substantial decrease in tax cuts, which, as you point out, would increase our tax revenue?

These are the questions.

So we'll see.

We'll be right back after the break with a new trend that's shaking up the VC world.

If you're enjoying the show so far, hit follow and leave us a review on profiting markets.

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We're back with Profitty Markets.

Singapore's $300 billion sovereign wealth fund, Temasek, has dramatically cut its early stage investments.

The fund slashed its first round investments in unlisted companies by 88%,

dropping from 82 deals in 2021 to just 11 in 2024.

Temasek still invests in startups indirectly through VC funds, but now prioritizes later stage revenue generating companies that are closer to IPOs.

And this reflects a broader market shift away from early stage investments.

Seed stage funding as a whole has dropped 40% year over year, while late stage rounds are up up 4%.

So I think the thing to focus on here, Scott, isn't TEMSX specifically, but the venture capital industry at large, because it's highlighting this TEMSX strategy is highlighting an interesting dynamic that is happening in VC right now, where early stage investing is petering out and late stage investing is growing.

And just some stats to illustrate this.

In the past two years, seed stage deal count has fallen 30%,

seed stage funding has fallen 40%,

and Series A funding has fallen 20%.

And what's interesting is that as you progress into the later stages of startup funding, when you get to the Series C D E rounds, the trend starts to reverse.

So Series C funding, for example, is up 66% in that same period.

Series E funding has more than doubled.

So in other words, we're seeing less investment into young, early startups, more investment into older, later stage startups.

And that's reflected in the numbers and also anecdotally from what we've seen with Temasek here.

And I would also point to what's happening over at Thrive Capital, which is one of the hottest VC firms right now.

And they're starting to invest in public companies.

They're even starting to buy and operate late stage companies in the same way that a private equity firm would.

So everyone's kind of transitioning away from early stage, not as sexy, not as hot anymore.

And they're more interested in late stage.

My question to you, Scott, why is that happening?

Well, one, you have, you could argue that it's become an economy where

it's worth it to pay a premium or maybe not a premium for whoever established themselves as the market leader.

But I think this is mostly the following.

So I got pitched yesterday on a concept, a really interesting concept of essentially an AI partner that listens to all of your text messages.

And obviously you opt in and then communicates with you and gives you tips, whether it's personally, you're being passive aggressive here, stop it.

If you need relationship coaching or

can interpret business emails and give you kind of suggestions, sort of a mentor following you around.

It's a really neat idea.

It's essentially two guys and some contractors.

I think one of the guys has had an exit and they're raising $4 million at a pre or a post of $40 million.

And I just said, I'm not doing SeedStage anymore.

I think SeedStage is the worst place because people want me to invest in SeedStage and then they just want my time and it's a ton of work and you're in this thing for a decade and most of the time it doesn't work out.

And even when it does, if you don't have capital to defend your position, seed and angel investing is for men in their 50s and 60s that have made a shit ton of money, still looking to stay relevant, enjoy hanging out with young entrepreneurs, but it is a shitty part of the cap table.

It is just a really difficult place to make money.

And also, I think domestic is basically just saying an early stage investing, the valuations,

on a risk-adjusted basis, the returns are just too

low.

And I'll give you two examples.

Personally, I invested in

Post News.

Do you remember them that was going to be a competitor to Twitter?

Super impressive founder.

I co-invested with Andreessen.

Seed round, $100 million valuation, because this guy had invented Waze.

This guy was probably the most accomplished executive that wasn't working at a company.

And he took advantage of that and raised money at $100 million valuation.

I think I invested $2 or $3 million, out of business in 14 months, lost everything.

The seed investment I did make money on about two and a half, three years ago, maybe four years, three and a half, three, three and a half years ago, a friend of mine who I met at Gardner, his company was a card.

My company was a card, started a company focusing on supply chain-based research, subscription research for supply chain.

I know that business really well.

That's what I did for digital at L2.

I invested $1 million at a pre of nine.

I was a seed stage investor.

So I got 10% of the company.

And then I invested another 2 million, I think, 12 or 24 months later when it had some traction at a pre of 18.

So I ended up with 18% of the company for $3 million.

It got sold for $110 million.

So I basically got turned three into $20.

That was my best seed.

And there's been a bunch of others where I've invested like half a million, and it's just like, I don't even track them anymore because I think they've all gone sideways or gone away.

But effectively, when you hear that guys are starting companies and want to raise a Series A at a post or a pre of 40 million, it's like, I just said to these guys, I'm like, good, you know, best of luck to you, well done.

I'm not going to play in traffic like that.

That's just too expensive.

The likelihood I get the kind of return I need here versus going into a company that's in a Series C that maybe has a pre of 200, but already has 10 or 20 million in revenues and already is kind of like jamming and has product market fit and already has big investors behind it, is already a potential acquisition candidate.

That on a risk-adjusted basis is just a better place to invest right now.

In some,

seed stage investing, it's always been a bad place to invest.

It's especially bad right now because what entrepreneurs don't recognize is their valuations when they come down, they just don't believe it.

And they can talk themselves into believing, oh, on a PowerPoint presentation, my company is worth $40 million.

So, you know,

I've done a decent amount of this, and it comes down to A, investing in the right team, because these things typically pivot and end up doing something different than they originally envisioned.

And two, getting in it

a reasonable valuation.

And also, there seems to be so much dislocation and so many companies getting beat up that it probably does make sense to be opportunistic and look at some public companies.

Going into PE, I don't know if Thrive should do that.

I think that's a different skill set where you bring in operators and it's a different kind of mindset.

But I can absolutely see why later stage companies are offering a better asymmetric bet than Seed Stage or Series A.

It's always been literally my least favorite place to invest.

It is just so difficult, so expensive relative to what you're investing in.

When it works, you can make 100x,

but you have to rewire your brain such that you're ready to like invest 15 times and have it go to zero.

And at my stage,

the last fucking fucking thing I want to do is just have to take calls from some young bushy-tailed entrepreneur that is thinking about pivoting or not pivoting or what VCs do I know that I can introduce them to.

It's just a, it's not even the capital, it's the time sink.

It's literally like taking care of a baby.

Babies just take, I mean, they're just constant attention.

Anyway, I think a firm like Tomasak, the initial thinking a few years ago when they increased these investments, was they wanted access to downstream opportunities to invest capital.

So they would put 50, 100, 500 grand to work and say, call us back if things go well and we'll do your B round.

It was almost like they were buying a call option.

And I think they've decided they don't need to do that.

But I think the question is also what has changed?

Because a lot of what you said has kind of always been true of VC.

I think one thing you mentioned there that might have changed is that valuations have gotten too expensive.

And so people are just like, this is not worth it.

But I think there's got to be more to it as well.

And I think one of the things that I'm landing on

is it's just harder to succeed now.

And it's especially harder as evidenced by the lack of IPO activity that we've been seeing, where IPOs are at a historic low.

We had 225 IPOs last year, a little bit of an uptick from the year before, but still down pretty significantly when you look at it historically.

And then you've got all of these incredible private companies that are

you would think would go public.

You know, Stripe, OpenAI, SpaceX.

Instead, they're raising these E rounds, these F rounds, sometimes G H I rounds instead of going into the public markets.

And I wonder if investors look at that lack of activity, they recognize just how long it takes to get to the public markets and realize that return.

And then they look at these young little fledgling startups.

And they think, yeah, you know what?

I'm just going to go in again on Stripe because I'd rather optimize for liquidity.

I need to realize a return for my LPs.

So I'm just going to invest in the late round because the IPO, it's probably coming in like the next one or two years.

And I'd rather do that versus make this early bet where even if things go right, I'd still only realize a return in realistically 10 to 15 years.

And I think that is different.

I think that things did not used to be this way in terms of the private markets.

And I think what it really emphasizes, and this is something I've been thinking about, is just what a terrible time it is to be a new entrant in America today, in

all sectors.

I mean, whether it's you're a young person, as you've talked about at length, if you're a politician, as you've talked about with Crockett and the fact that the average age of a senator is 65 years old, and it's true of founders, if you're an early young founder, you're struggling to raise funding right now, but it's also true of investors.

And this is the point that I've been thinking a lot about recently.

And this Temasek headline really sparked that for me, where I'm realizing the crucial difference between

the internet back in like the early 2000s and AI today

is that when the internet was happening, there was so much opportunity for regular retail investors to participate because these companies were actually going public.

With AI, there's almost zero opportunity.

I mean, you've got, on the one hand, big tech just keeps on buying up these AI companies and these AI startups.

So they never get the chance to actually grow and go public.

And two, of the ones that do succeed, none of them are going public.

But 20 years ago, it would have been a very different story.

I just want to give you a few examples here.

Apple, it went public in 1980 at a $1.8 billion valuation.

And in today's dollars, that is $7.5 billion.

Not that big.

And you could have invested as a regular investor and now it's worth 3 trillion.

Amazon IPO'd at $560 million.

That's 1.1 billion in today's dollars.

That's 300 times smaller than OpenAI.

There were all of these opportunities that were happening in tech and in VC and they were allowed to go into the public markets and list.

But for some reason, that's not happening.

And in addition to that, you've got investors unwilling to make these early bets.

And it's just impossible if you're new to any of this to get in and participate in that value creation.

And that's sort of the thing that frustrates me.

AI is happening in front of our eyes.

I don't know where to invest.

I can't participate.

The reason Google and Amazon went public is not because they wanted to, it's because they needed capital.

And the private markets didn't have those capitals that deep to keep funding them.

And their employees wanted to get rich.

Now they have both those things in the private market.

You mentioned a bunch of companies.

I'm an investor in Epic Games.

Epic could go public tomorrow at probably a $20, $30, $40 billion market cap.

But they're waiting until conditions are amazing because guess what?

They can raise a shit ton of money in the private markets right now.

And the founders and folks there can do a secondary and dole out enough money such that no one's like, I want to buy a house.

Of course, well,

we'll get you your house.

In addition, you have an extension in the runway it takes to get to acquisition.

So

most studies say it takes five to seven years for a successful company to get from inception to acquisition.

I have found that to be true.

Profit got acquired.

Actually, it took me,

when did I start it in 1992?

I got an investment in 97.

So it took me like seven, nine years to get an exit with Profit in my first company.

L2, it took seven years.

We got to our first funding round in four years and our five years and our acquisition in seven years.

Red Envelope, we got to IPO in five years, but that was during the kind of dot-com explosion.

What's happened recently is it's now closer to 10 to 12 years for a company to get public.

So if it's going to take you 10 to 12 years to get to a liquidity event, and what you're seeing or what these investors are seeing is that they're in a bit of a mismatched durations cash crunch.

And that is they raise money from investors saying, all right, we should be able to get you distributions of your money back almost fully within seven years.

And they have to send out notes basically saying, sorry, we don't have any liquidity events.

This takes longer now.

And M ⁇ A is down, so you don't get those exits either.

That's right.

So the IRR is a function of not only its internal rate of return, meaning, okay, what is your return on that money discounted back based on the amount of time it took you to get there?

So essentially, companies, VCs are doing the work and saying, okay,

if the time, if the runway needed to get to an exit is much longer, then I need a much lower valuation.

That is not happening.

And also,

if you're a 48-year-old general partner at a company, do you want to be making investments you're going to recognize when you're 62?

I was going to say that I think most of these guys at this point are probably closer to 55, 60.

I mean, the real Silicon Valley legends, I feel like they're more in that range.

And they're sort of like, I don't want to wait.

Yeah, they're just, they're like, I can make, I have a lot of, if they're one of the leaders, I've raised a lot of capital.

I can get good returns investing in, you know, maybe going out and buying some private equity stubs or going out, finding, getting access to a good deal that's where they need capital, but the markets are down, so they need to do a mezzanine round or a late stage round.

They probably look at that and say, I'm going to make good money here.

Do I really want to figure out how to get, you know, Joey Bag of Donuts new startup inc on AI, like through its A, B, C, D, F round?

And what's so interesting, by the way, is just this is yet another instance where we're seeing how this old versus young dynamic is playing out.

It literally crops up in every conversation we have about anything related to markets, where you have the old rich people who mostly control the system and they're doing it,

they're doing it their way based on their preferences, but it is having a pretty substantial impact on all the young people, whether it's the young investors who want to participate in these events or it's the young founders who aren't getting any more funding or at least a lot less funding, 40% less, because these old people are like,

it's going to take too long.

Okay, but before you sprinkle cyanide on your avocado toast and just get ridiculously fucked up playing shuffleboard or whatever is you do in Gowanus, I think every millennial is in Gowanus or every Gen Z.

I've never been there.

I don't even know how to spell it.

Is that in Brooklyn?

I don't know where it is.

I just assume all young people live there.

But

you do, I do think the flip side of this is the following.

The explosion in AI technology and the ability to outsource things like fulfillment to Shopify, the cloud, you know, you don't have to, I used to have to buy servers.

Young people do have a lot of agency.

While the financial markets might not be as frothy and access to capital might not be as promiscuous right now, I do think a group of smart young people can get so far on 50 or 100 grand.

It's possible, but it's harder, is what I would say.

You can do it.

I agree.

It's not like we're all doomed, but you can't just go out and buy Apple and sit around.

That's not possible anymore.

There are no apples.

Oh, let me be clear.

From an investor standpoint, I'm talking about an entrepreneurship standpoint.

From an investor standpoint, we keep bailing out any downward cycles such that entrants are fucked.

Every bailout is a transfer of wealth from the young to the old because disruption is a transfer of wealth back through.

natural economic cycles, back from the incumbents to the entrants.

We've decided not to let that happen any longer.

So there's very hard, it's very hard to find value right now for your generation.

I'm talking about just a raw startup.

I met with your college roommate from Princeton, and his ability to scale on, granted, he's raised a lot of capital, they're very impressive, but the cost to get from letters A to E

has never been lower.

And that is, when I started Red Envelope or founded Aardvark Pet Supplies, the cost to build a website, and I had a partner who was really good and really cost effective,

it would cost us $500,000 to build a website that I think would maybe cost $3,000 to $5,000 right now.

Is it harder to access capital?

Yeah, but I do think young entrepreneurs with the cloud, with AI, do have more agency and ability to get from letters A to D for less money than before.

And to your point,

my friend who you met with, he just closed his B.

Smooth sailing now.

Everyone loves it.

At a huge number, right?

Huge.

I mean,

so, but what you said really struck me about how these old guys i remember talking to these guys yesterday nice kids and they said so we can't give you stock they literally said you don't even have to invest we just want you on the cap table

and i said no no i don't want to have to take your calls

i don't i don't i don't want to feel like i need to be supportive of you i'm I'm I want to hang out in Aspen and wait for the ass cancer.

And to be fair to you, because that makes you seem like a dick, perhaps you get a lot of of calls.

I actually completely understand why you'd say no, because you are constantly getting these calls from people.

But what you said is really true.

I don't have that much tread left on my tires.

I want to do fun things with my boys and, you know,

go to Summit, which I'm going to tomorrow.

I'm very excited about that.

Let's take a look at the week ahead.

We'll see the consumer and producer price indices for May.

We'll also see earnings from Oracle, GameStop, and Adobe.

Do you have any predictions, Scott?

Well, I have two.

I think Adobe is going to blow away earnings because they're a new sponsor and I love their products.

Don't you love them?

Adobe Express is going to turn everything around.

Ed and I, they asked us to go do this sponsorship thing.

It looked like a food truck, and we were printing out kind of Instagram-ready collateral materials.

And I am really good.

Anyone that makes me seem artistic, I really enjoyed that.

I was actually, I was, I was legitimately blown away by the product.

I think that, and it's a great company.

I used to talk about Adobe being the first company and they were to move to subscription.

It used to be Adobe Direct or whatever it was called, cost $2,500.

And then the CEO said, no, it just charged $25 a month and you'll massively broaden the market.

The stock got cut in half, and I think it's up like 40-fold since then.

They were the first one to kind of invent the SaaS model.

Anyways, I love Adobe and their products.

My prediction is the following: I love Robert Armstrong's taco trade, and he really got me thinking about the most prosperity-destroying tariff in the world is the steel tariff because it takes the prices up massively.

And a few employees, yes, you've noted the literally single thousands of people involved in the steel industry, they make more money.

The union does better.

The small number of shareholders that invest in U.S.

steel companies do really well.

You saw Cleveland Cliffs, I think, up 23 or 24%.

I think once those costs start rippling through the auto-mobile industry and the home building industry, Trump is is going to chicken out again, back off.

So my prediction is the run-up or the surge or the bump in the equity value of the U.S.

steel industry is about to come back to its pre-tariff levels.

This episode was produced by Claire Miller and engineered by Benjamin Spencer.

Our associate producer is Allison Weiss.

Mia Silverio is our research lead.

Isabella Kinsel is our research associate.

Dan Shallon is our intern.

Drew Burroughs is our technical director.

And Catherine Dillon is our executive producer.

Thank you for listening to Prof G Markets from the Vox Media Podcast Network.

And again, if you haven't subscribed to Prof G Markets, you will not be getting this podcast.

So go subscribe to Prof G Markets.

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