Prof G Markets: Is Reddit Undervalued? + Netflix Goes After Podcasts

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Speaker 4 Today's number, 0.004%. That's the chance of being born with a genetic mutation that allows you to sleep less than six and a half hours each night without any ill effects.
True story, Ed.

Speaker 4 Last night I had six hours of straight sleep. The other two were gay, but I woke up fulfilled.

Speaker 4 That's wrong. Let's enjoy it while it lasts.
Today's discussion on profit markets. I'm out of breath, by the way, because I did about seven minutes of working out.
Yeah, I can tell. I can hear it.

Speaker 4 Oh, my gosh.

Speaker 5 What was that? Some push-ups?

Speaker 5 I saw you doing something off my.

Speaker 4 Secretary Hagseth said that he did five rounds of 47 push-ups. So I've committed doing five rounds of 48 because I'm already very excited about whoever's going to be 48.
And I did two sets of 48.

Speaker 4 So I'm trying to figure out, I'm on TikTok and YouTube trying to figure out how to increase your push-up

Speaker 4 strength. But anyways, Ed, what's going on with you? What's going on with you as I try to out-push up

Speaker 4 the DUI DUI hire Secretary Hegseth what's going on with you

Speaker 4 yeah I'm doing pretty well I'm in Mexico City heading to Puerto Escondido tomorrow hola El Duardo don't destada biblioteca where are you staying that looks like a nice hotel casa miraval it's not that nice it's okay

Speaker 5 it'll do yeah i'm heading out tomorrow we're going to puerto escondido it's going to be great

Speaker 5 I had tacos for breakfast, lunch, and dinner yesterday.

Speaker 4 That's the five food groups. What's Mexico City City like? It's a hot city right now.
It's great.

Speaker 5 I haven't seen that much of it yet. One thing I did notice was kind of interesting is there are BYD stores and BYD ads everywhere.
I haven't seen a BYD vehicle yet, but it is interesting. I mean,

Speaker 5 I've seen it at least five times, and you never see that in America.

Speaker 5 So clearly China's trying to

Speaker 5 push that in Mexico. It's kind of interesting.

Speaker 4 But yeah, it's a beautiful city.

Speaker 5 It's a good time. Going to Contra Mar later tonight.

Speaker 4 Apparently, that's the great restaurant.

Speaker 5 Maybe we'll check out the Soho House.

Speaker 4 It'll be good. Ask me what my favorite place to vacation in the world is.
As someone who's been literally everywhere.

Speaker 5 What is your favorite place to vacation in the world?

Speaker 4 Mexico. If I could only vacation one place.

Speaker 4 What did it Mexico? I think it might be Mexico. Maybe Italy.
Mexico, yeah. Really? Yeah, it's fantastic.

Speaker 5 Over France, over Italy, over Greece, Mexico wins. Oh, yeah.

Speaker 4 You have it all in Mexico. You have culture, you have amazing food.

Speaker 5 The pricing is crazy. I mean, everything's been crazy cheap.
I've had like great meals and it's been, you know, it's like getting sweet green, practically.

Speaker 4 It's got sort of that Mickinos amazing beach, beautiful water vibe for about 40% of the price.

Speaker 4 And the people are friendlier. Also, it's got extraordinary architecture, incredible food.
I just absolutely adore

Speaker 4 Mexico. Anyways, I'm glad you're there.

Speaker 5 Glad you're glad. And before we get into the show, I just want to promote the markets newsletter.
So we've expanded this show into a new weekly newsletter.

Speaker 5 We're breaking down key market moves with data-driven analysis and crisp visuals every Monday. So please subscribe now at profgmarkets.com.
I think the newsletter is pretty great. It's kind of

Speaker 5 everything in the podcast, and you get to read it in about two minutes. It's sort of exactly what you need on a Monday.

Speaker 4 I wasn't a big fan of it at first, and then I saw the first one. You weren't?

Speaker 5 I thought this was your idea, no?

Speaker 4 It was my idea. And then

Speaker 4 I thought, okay,

Speaker 4 we spend so much time on our No Mercy, No Malice newsletter. It's taken us 10 years to get to half a million subscribers.
We really haven't figured out a way to monetize it, quite frankly.

Speaker 4 That's not why we started it.

Speaker 4 But it's just this monkey on my back mostly come Thursday night when I'm like, okay, what am I going to write about that people would actually want to read and doesn't embarrass everybody?

Speaker 4 And then I thought, okay, the notion of another newsletter. And then when I saw the work that Mia and team had done on the design and we have already sent out a test batch and

Speaker 4 people seem to really like it I think we're going to be close to 200 or 250,000 subscribers right out of the gate so now now I like it and yes it was my idea

Speaker 5 I think it's a great newsletter I'm excited about it let's start with our weekly review of market vitals

Speaker 5 the SP 500 was volatile the dollar declined Bitcoin dropped the yield on 10-year treasuries jumped shifting to the headlines inflation came in hotter than expected, with the consumer price index rising 3% in January from a year earlier.

Speaker 5 Prices jumped 0.5% from December, which was the biggest monthly increase since the summer. All three major indices fell on that news.

Speaker 5 Average tuition at US private schools surged to nearly $50,000 this year, marking the biggest increase in at least a decade.

Speaker 5 Schools kept tuition steady during the pandemic, but rising teacher salaries and material costs are now pushing prices higher.

Speaker 5 And finally, the European Union has committed to mobilizing 200 billion euros for AI investments.

Speaker 5 50 billion euro will come directly from the EU, while more than 20 investors, including Blackstone and KKR, have pledged the remaining amount.

Speaker 5 20 billion euros will be set aside to fund four AI giga factories dedicated to training large language models. So let's just start with this inflation read.

Speaker 5 Let's just go over the important numbers really quick. So the CPI rose 3% year over year.
Core CPI, which strips out food and energy.

Speaker 5 And as we've discussed, the reason you want to want to use core CPI as opposed to CPI is because food and energy prices are very volatile. So it can sometimes sort of distort what's really happening.

Speaker 5 And that rose 3.3%.

Speaker 5 So even higher.

Speaker 5 This was not a very good report. The big drivers were shelter, transportation, medical care.

Speaker 5 But the item that's getting the most attention here is the price of eggs, which has risen 15% in the past month alone and 53%

Speaker 5 in the past year. So, a carton of 12 eggs now costs more than $8 on average.
A year ago, it was less than $5.

Speaker 5 And the reason this is happening is kind of interesting. It's because of this outbreak of bird flu, which, you know, is a common problem in the industry.

Speaker 5 But apparently, right now, the outbreak we're seeing is one of the worst we've ever seen.

Speaker 5 And this is a huge problem for farmers because if you find one single case of bird flu, it means you have to kill your entire flock.

Speaker 5 So in the past four months, American farmers have killed 15% of all of the chickens in America. So supply is really low, which is why prices are really high.

Speaker 5 Your reaction, Scott, to this inflation data and perhaps eggs specifically?

Speaker 4 I would say probably the biggest impact it's going to have, with the exception of consumers who really feel it, especially those who, you know, energy, housing, and food takes up the disproportionate amount of their income, which is 80 or 90% of the American consumer,

Speaker 4 it's that the market is going to have to absorb the fact that the expected interest rates probably aren't coming as quickly as they thought or in the foreseeable future.

Speaker 4 The number that pops out to me, and I had someone who basically ran Obama's campaign call me because I was just on CNN, where, by the way, I dropped an F-bomb, no joke, on CNN. That's not good.

Speaker 4 And Dan Abash, who I think should be president if we're going to start picking cable news hosts to be presidents and secretaries, asked me what the Democratic Party needs to do.

Speaker 4 And I listed all these things, and I said, and some, we need to be the party of tomorrow and not fucking around. And then I said that, I'm like, oh, no, I'm not on a podcast on it.

Speaker 4 And literally, Dana and the other hosts looked at me like they just got me masturbating. They did not know what to do.
They've never had that before? Oh, it's happened several times.

Speaker 4 I was raised by a single mother, and I was like, oh, wait, you mean dropping an F-bomb? I'm sorry. That was good.

Speaker 4 That's why you come here. Subscribe to our markets newsletter now.

Speaker 5 I don't think you're going to be on CNN again after this.

Speaker 4 Well, if I don't get another show on CNN Plus, as far as I'm concerned, my life is over. That's it.

Speaker 4 Anyway,

Speaker 4 but I was talking, one of the Obama, senior Obama people called me and said, I liked what you had to say. And he specifically zeroed in on, I think, the big idea that the Democrats need.

Speaker 4 We need to move from being.

Speaker 4 the party of complaints and whining and the

Speaker 4 seniors who changed jell-o-night outrage to the party of the future.

Speaker 4 And I think one of the really interesting ideas that one or both political parties should forward is just a massive program to provide subsidies to the private sector and decreases the ability to reject housing permits such that we have a massive influx and creation of millions of units of new housing stock.

Speaker 4 And I think this would help level up young people and it's just psychologically so important, employ a ton of people, especially a lot of young people, especially a lot of young men who over-index around construction and vocational jobs.

Speaker 4 But what you're seeing every month is an increase in housing costs. I mean, do you know what's about to happen? I have a buddy in L.A.

Speaker 4 who had his house on the market, like a nice little bungalow for $1.1 million, which basically means it was a shack if it was in Santa Monica.

Speaker 4 And he just got an offer for 1.8 because something like 13 or 15,000 dwellings have been taken immediately out of the market in L.A. because of the wildfires.
So

Speaker 4 I zero in on the housing, but this isn't a surprise. The question is whether it sticks to Trump or not, as most things don't.

Speaker 4 But when you combined an incredibly aggressive anti-immigration policy, tariffs, and then massive deficit or a fiscal plan that probably indicates an explosion in our deficits, this all adds up.

Speaker 4 to inflation. I would predict it's actually going to get worse.
What are your thoughts?

Speaker 5 Certainly going to get worse the way we're headed so far. I mean, you mentioned the shelter costs.
It's up 4.5% or 4.4% year over year. The housing accounts for nearly a third of the overall CPI rise.

Speaker 5 And we keep on seeing this with every single inflation print. It's like it's very high.
What was the problem?

Speaker 4 It was housing.

Speaker 5 The way we're headed in terms of immigration and tariffs, this is all only going to get worse. I think the question is, can Trump

Speaker 5 sort of vaccinate himself from being associated from this whole inflation thing?

Speaker 5 Because Biden, we know, I mean, after COVID, you had all these supply chain issues around the world, which sent prices skyrocketing, not just in America, but everywhere in the world.

Speaker 5 Every single government was dealing with inflation. Biden did a terrible job of making clear to the American people that actually it doesn't really have anything to do with him or his policies.

Speaker 5 This was a global global problem. But it's very hard to convince the American public of that when you go to the gas station and prices are up 10%.

Speaker 5 And the same might be true here with eggs. I mean, people could be showing up to the supermarket.
Eggs are up 53% in the past year.

Speaker 5 And usually when something like that happens, the first person you blame is the president. Now, the question for Trump is, is he going to do a better job of pushing the blame somewhere else?

Speaker 5 And I think the answer is probably yes. I think he's going to be talking a lot about bird flu.
By the way, he's blamed this inflation print on Biden already. He said, this isn't my fault.

Speaker 5 And I honestly, I think that's actually a fair assessment. I think inflation is, you know,

Speaker 5 sort of a lagging indicator. But if this continues, it's going to be a big problem for him because this was really the big issue that was on the ballot in November.

Speaker 5 Speaking of inflation, let's talk about the cost of private schools in America up to $50,000, thousand dollars up seven percent i find this so interesting because you know you talk a lot about this issue in higher education specifically where you have colleges driving down supply with lower and lower admissions rates at the same time driving up prices and it's all culminated in what we call kind of the emezification of higher ed where they're basically adopting the same go-to-market strategy as an MMEZ or a Louis Vuitton.

Speaker 5 College degrees are becoming increasingly luxury items. Well, now we're seeing that same dynamic, not just at colleges, but in high schools and in middle schools and even elementary schools.

Speaker 5 And I just want to point out this crazy stat that I saw in New York.

Speaker 5 And granted, New York is an exception, but in New York, the average tuition for a private elementary school, so this is grades K through five, these kids are like six years old.

Speaker 5 The average tuition is $22,000 per year.

Speaker 5 And, you know, then you look across America, the fact that it's now up to $50,000 for private schools from elementary to high school. For boarding schools, it's $73,000.

Speaker 5 And meanwhile, the admissions rates continue to go down, i.e., there are still incredible amounts of demand.

Speaker 5 People are still down to pay for this, but it's only a very specific cohort in America who can actually do that. So, what does this say about America? What does this say about our education system?

Speaker 5 Where is this all headed?

Speaker 4 I left Manhattan because when my kids were applying to school, I think it was pre-K, I think my oldest was four years old or three years old. And let me be clear, the story ends well.

Speaker 4 He's a star now and doing incredibly well. But when he was three or four, he was speech delayed.

Speaker 4 And they have something called a play date, which is really just an interview where they invite a bunch of the kids who are applicants to play with each other. And then there's these three

Speaker 4 young gestapo stasi people in the room pretending to like your kid taking notes, which is really comfortable.

Speaker 4 And they did this game where they go around a circle and they hit their hands on the floor and go, danta da da, I like daisies, my name is Lisa. And the next one, dun da da da.

Speaker 4 My name, you know, I like ice cream and my name is Bob. And then they get to my son and he hits his hands on the floor and he's like, that's it.
He's just looking around.

Speaker 4 And I'm like, he's not getting in. And we applied to seven schools and they all send out the the letters on the same day.

Speaker 4 And I was told by a friend of ours who was coaching us around this one school we want to go to, make sure you drop off muffins to the admissions director. I drop off muffins.

Speaker 4 And I'm like, I'm not fucking dropping off muffins. That's where I draw the line at muffins.
And I was under the illusion, oh, I'm a big-time professor, podcaster.

Speaker 4 We'll get into three or four, if not five or six, of schools. We got into zero of the seven.

Speaker 4 And I was so upset that no one was going to let me pay $58,000 for my kid to play with blocks that

Speaker 4 I said to my partner, I said, I've been single and an entrepreneur my whole life or most of my life. I'm used to rejection.
I am not used to it for my four-year-old. And we left New York.

Speaker 4 The issue with K through 12 is the following. I have no problem with tuition going up.
And my proposal would be the following.

Speaker 4 I would like tuition to go up another $10,000 in the form of a tax on every kid's family that is in private school, such such that they can pour more money back into public schools.

Speaker 4 Because here's the problem. I went to a public school and it was in the 70s in LA and it was the year they started integration or busing.
And this isn't a hallmark story. Overnight, 40%

Speaker 4 of our class was black kids who were on a bus from Compton for an hour each day. And the idea would be we'd all get along and have great empathy for each other.
And we fucking hated each other.

Speaker 4 And we used to have black against white softball games and the faculty allowed it. That's the bad news.
The good news was that by the time we got to high school, we were getting along.

Speaker 4 And I think, I genuinely believe that over the long term, I've established a lot more empathy for people not born with pale skin and outdoor plumbing and got to grow up in Westwood. But the...

Speaker 4 My two best friends, Adam and David, immediately, their parents pulled them out of school and sent them to this Tony private school called Wynward, where they'd go to Catalina Island and study marine biology.

Speaker 4 And I went home and said to my mom, I need to go to private school. And she said, I had one of those, what I call talks, where she sat me down and said, we're different.

Speaker 4 What we need to do in private schools, quite frankly, is tax the shit out of them and reinvest in public schools. So the fact that private schools are going up in costs, that doesn't bother me at all.

Speaker 4 I would like to see them go up more in costs in the form of taxation and then reinvested in public schools because the key signal or the key metric of success of K-12 schools isn't even resources.

Speaker 4 It's parental involvement. And dual parent households typically have one or two parents who can spend more time being involved in the school.

Speaker 4 But when you pull out all of those wealthy parents, all of those typically dual income dual parent households, the amount of parental involvement in that school declines and the quality of the education spirals down.

Speaker 4 Yeah, exactly.

Speaker 5 Let's talk about this new initiative from the EU, Invest AI. This is sort of their version of Stargate.
This is a 200 billion Euro,

Speaker 5 which is roughly around 200 billion dollars at this point, to invest in AI across Europe. This seems like a pretty good idea, I would say.

Speaker 5 I mean, I feel like Europe and the EU generally get shitposted for not being ahead of the curve on tech or AI. And just some pretty staggering numbers here to reference.

Speaker 5 The US raised $209 billion in VC funding last year. Europe raised only $62 billion.
So America's share of global venture capital is 57%.

Speaker 5 This is last year. Europe's was only 16%.

Speaker 5 If you look at AI VC funding specifically,

Speaker 5 US makes up 74% of funding. Europe makes up 9%.
So Europe is way, way behind the puck when it comes to AI and generally speaking, technological progress.

Speaker 5 So now it looks like they're trying to rectify that with this AI initiative. Do you have any reactions to what the EU is doing?

Speaker 4 A lot of it comes down to this. The number you skipped over that Mia pulled together for us was that AI-specific VC funding, you got it in percentages, was $97 billion in the United States.

Speaker 4 It was 9 billion in Europe. And keep in mind, the U.S.
and Europe actually have similar size economies. It really all comes down to a risk complexion.

Speaker 4 And the way I summarize it when I'm speaking to a European audience is that You're the ones that stayed. And that is, think about who went to America.
They were risk takers.

Speaker 4 And that DNA just carries through.

Speaker 5 You think that's why Americans are more risk aggressive? It's genetic. Oh, my God.
Are you kidding?

Speaker 4 Look at what is the most innovative part of America?

Speaker 5 California? Yeah.

Speaker 4 And who went to California? The people with a nice, nice, cozy life on the East Coast?

Speaker 4 Who went to the West Coast? I'm with you.

Speaker 5 I'm with you. I want to hear more.

Speaker 4 When you talk about success, this is true in life.

Speaker 4 If you want to score above your weight class professionally and romantically, it's a function of how much risk you're willing to take. I agree with that.

Speaker 5 I'm just surprised that you're making the genetic argument.

Speaker 5 I'm down to hear it out. It's the first time I've heard this from you, that Americans are genetically predisposed to taking risks, and perhaps that is the explanation behind their vast wealth.

Speaker 4 My parents came to the U.S.

Speaker 4 on a steamship with like $300 or $400. That was enormous risk.
And also, that's why immigrants are so incredibly powerful.

Speaker 4 They not only work harder, they're like, I just fucking crawled under a fence and avoided dogs and I

Speaker 4 and left my family and left my sick mother to come here. That risk-taking DNA is everywhere in our gene pool.
And it's not, it's not in Europe. So the fact they're doing this.

Speaker 5 Yeah, culturally, I think Europe feels and has felt for generations that they have more to lose. They've basically just rested on their laurels.

Speaker 5 And it's interesting to see that this is happening only after America did it. It's also happening only after China came out with DeepSeek.

Speaker 5 The fact that, you know, I think everyone is surprised to see, oh, wow, Europe is committing to AI, but they're only down to do it once America did it.

Speaker 5 And then once China basically showed them you guys are behind the curve. So

Speaker 5 they're taking the risk, but after everyone else did.

Speaker 4 Well, Europe has to do something because Europe, if you look at the rise of China, It actually, so China has grown its economy much faster than the global economy.

Speaker 4 And it has the second most billionaires behind the U.S. And it hasn't come at the cost of the U.S., though.
The U.S. has maintained its share of GDP, its share of billionaires, its share of growth.

Speaker 4 It's come at the cost of Europe. And so Europe needs to take a page out of that hardworking playbook of China and that risk-taking playbook of the United States.

Speaker 4 And without government subsidies that encourage people to take these risks, it's just not going to happen.

Speaker 5 We'll be right back after the break with a look at Reddit. And if you're enjoying the show so far, be sure to give ProfDue Markets a follow wherever you get your podcasts.

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Speaker 5 We're back with Profit Markets. Reddit reported fourth-quarter earnings that largely beat analyst expectations, with sales up 71% from a year earlier.

Speaker 5 It also posted its second quarterly profit since going public. However, the stock dropped more than 13%

Speaker 5 after user growth missed expectations.

Speaker 5 CEO Steve Huffman explained that a change in Google search algorithm led to quote volatility in user growth, but assured investors that traffic has since recovered.

Speaker 5 Scott, you are a Reddit, pretty significant Reddit shareholder. Um,

Speaker 5 what are your initial reactions here?

Speaker 4 Look, I'm just pissed off now. After this drawdown today, I'm only up 500%, not 600.

Speaker 5 So, is that true? Is that the number?

Speaker 4 Uh, well,

Speaker 4 price at $35.

Speaker 5 Let's find out the number.

Speaker 4 Price at $35, it's at 200. So, what is that? Up about 450%,

Speaker 4 yeah, okay, and that's in seven months. Yep, look,

Speaker 4 this was a fucking layup. This was,

Speaker 4 if you believe we're in an attention economy and you can, you can transition or arbitrage or turn, convert attention into dollars, this company still has a long way to go.

Speaker 4 And that is, I mean, it was up 71% year on year. Average revenue was up 28%.
Net income quadrupled to 71 million.

Speaker 4 I think that a lot of people just said, okay, with this kind of valuation, maybe it's gotten out over at skis, but I think it's already recovered some of those losses today.

Speaker 4 It's an asset-like company. It's got sort of meta-like margins of 93%.

Speaker 4 Meta's gross margins were 82% because they keep making these ridiculous capex investments in things like headsets.

Speaker 4 Get this because of Alphabet's big investments in cloud and AI, their gross margins are 58%. Apple's was 47%, which makes sense because they're on hardware.

Speaker 4 But gross margins margins at the fourth or fifth most traffic site in the world are 93%.

Speaker 4 So

Speaker 4 I would argue, and see above, shareholder, I mean,

Speaker 4 it's still,

Speaker 4 I don't want to say it looks cheap. It's hard to think of something up four and a half full that looks cheap, but its worth is between 50 and 60.
It's 150th the value. of sites above and behind it.

Speaker 4 So now the problem is it hasn't been able to monetize as well, but with year-on-year revenue increases of 70 plus percent, it appears that it's doing

Speaker 4 pretty well. The problem is,

Speaker 4 unless its monetization comes up, its average revenue per user was $4.20,

Speaker 4 but Meta is about three and a half times higher. So, on a book level, it looks expensive.
Their key is very straightforward. They got the traffic.
That's usually the hard part.

Speaker 4 They have to show their ability to continue to increase ARPU. But

Speaker 4 the takeaway also going second order effect, we've said that as it relates to podcasting, that there's going to be this incredible dynamism in the podcasting space over the next 12 months where you're going to see of the top 100 podcasts, you're going to see 50 new ones and you're going to see 50 drop out.

Speaker 4 And the arbiter of that churn is going to be YouTube, which is now the largest distribution platform for podcasts. People spending more time listening to podcasts on YouTube than on Apple or Spotify.

Speaker 4 I think in 2026,

Speaker 4 the arbiter of podcasts and the biggest growing distribution mechanism of podcasts is going to be Reddit. I think Reddit is so perfect for podcasting.

Speaker 4 Think about the discussions, the threads, and the audience.

Speaker 4 I think if you could figure out a way to distribute clips, full podcasts, live podcasts, to me, it's just out of central casting to become the Spotify or the YouTube of podcasting.

Speaker 5 That's very interesting. I didn't.
I didn't expect you to say that. I mean,

Speaker 5 you mentioned the valuation there, that perhaps it's undervalued. I'm with you.
I think this is still undervalued.

Speaker 5 And I think, you know, dropping 13% after that quarter, I don't think was warranted. The thing that Wall Street was upset about clearly was the user number.
So users grew 39% to 101.7 million.

Speaker 5 Investors were expecting 103 million. And I think what really freaked them out was what Reddit said about this change in the Google search algorithm.

Speaker 5 So you might remember last year, Reddit got this big boost because Google changed how it ranks search results. It was called the hidden gems update.

Speaker 5 And the new Google algorithm basically prioritized what they called authentic content. So that is content that is user-generated, that you find on forums, that you find on chat rooms, i.e., Reddit.
So

Speaker 5 this was a great thing for Reddit last year. Now, according to the CEO, this quarter, or this last quarter, Google changed the algorithm again.

Speaker 5 And we don't really know why or what exactly changed, but that was why you saw this, quote, volatility in the user growth.

Speaker 5 And I think that's what upset Wall Street here: this idea that Reddit is too reliant on Google. They're not growing organically on their own.

Speaker 5 And so when Google changes their algorithm, suddenly that causes a problem for their growth. I think that's a fair criticism.

Speaker 5 I think the bigger criticism of Reddit, though, and this is a bull case, is they just they just punch below their weight on everything. Ninth most visited website in the world is higher than Netflix.

Speaker 5 It's higher than Amazon. You've got 100 million daily active users.
So these are people who are using it every single day.

Speaker 5 They don't release the monthly active users, but it's estimated to be around a billion. A billion people using this once a month, at least.
And yet the company is worth only $35 billion.

Speaker 5 It's less than a tenth of the value of Netflix. And so we were talking about this as a team,

Speaker 5 and Mia did this really interesting analysis. So we were discussing the cultural significance of Reddit.
You know, the idea,

Speaker 5 how important is Reddit to society? And we landed on this term mind share.

Speaker 5 And we wanted to figure out a way to kind of quantify that for Reddit.

Speaker 5 Is there a way to come up with a score for the amount of mind share that Reddit has in people's minds and their conversations in society at large. So, Mia did this analysis.

Speaker 5 She looked at website visits, she looked at mentions on TV, Wikipedia page views,

Speaker 5 job search volume, you know, how many analysts track the stock, et cetera, et cetera. All these different metrics to kind of get a gauge for this mind share.

Speaker 5 And then she came out with a weighted average, and we called it the mind share score. And what she found is that Reddit's mind share rating is only four times lower than Google's.

Speaker 5 But if you look at the market cap, it's more than 60 times lower. So in other words, if you were to look at Reddit as a multiple of mindshare, and let's be clear, this is very non-gap.

Speaker 5 We came up with these metrics on our own. But if you looked at it as a multiple of mindshare, Reddit is severely undervalued.

Speaker 5 And so this begs the question, like, what does Reddit need to start doing to start punching above its weight, or at least to live up to the expectations that come with the fact that you are a top 10 website in the world that everyone knows who you are everyone who uses the internet is using reddit in some sense we use it all the time i mean we have our reddit page uh which i love and and we love engaging on that but the company is still very small relative to its peers so what do you think it would take i guess you mentioned the podcast there but what else do you think it would take for reddit to start punching at least in line with or above its weight my father peaked at the age of about 48 or 49 professionally, and then he was the national sales manager for OM Scotts, a fertilizer company, which I realize is a kind of a weak flex.

Speaker 4 But he used to roam around to like the equivalent of Lowe's and Home Depots and Sears and

Speaker 4 become buddies with the person in charge of Lawn Care. the lawn care outdoor department there.
And my dad is super fucking charming. I mean, ridiculously charming.

Speaker 4 And then then sell them basically bags of shit.

Speaker 4 And

Speaker 4 anyways,

Speaker 4 but that was when he'd peaked. And then he went on, you know, and then he'd started a string of four or five divorces and then left me.
Hold me.

Speaker 4 Hold me. Anyways, he used to say to me, he had all these like tests to decide if I'd be a good salesperson or not.

Speaker 4 And I remember we used to sell subscriptions and whatever.

Speaker 5 Sorry, to test if you would be a good salesperson?

Speaker 4 Yeah. he thought sales was everything

Speaker 4 and he used to sign me up for stuff like

Speaker 4 um selling magazine subscriptions and he used to give me a thing and he'd say this is this is your wrap and he'd practice with me at the door and he'd send me out on a saturday and basically like mothers used to say they're Roman warriors, come home with your shield or on it.

Speaker 4 And he's like, how many subscriptions do you think you're going to get? He'd give me a quota. I'm like eight fucking years old.
I kind of love this. I was eight.

Speaker 5 I'm sure it it was dramatizing. I was eight.

Speaker 4 I love that. And

Speaker 4 I'd roam around the shores community in Laguna and Nigel and I knock on doors and I'd say, hi, I'm Scott Galloway.

Speaker 4 I met whatever it was, Emelita, and we're doing a magazine drive to try and raise money for our school. I live down the road.
And he'd say, throw in your interest.

Speaker 4 And I'm like, I like the big wheel and I like I dream a genie.

Speaker 4 And he'd be like, no, don't say I dream a genie. And I'm like, he'd say something else.
I'm like, Brady Bunch, like, better, more wholesome.

Speaker 4 And I'd roam around the neighborhood.

Speaker 5 This explains so much.

Speaker 4 I'd roam around the neighborhood, and I'm not exaggerating it. I sold more subscriptions to Life and Reader's Digest than any nine-year-old in Emelita Elementary School history.

Speaker 4 And he used to have all these tests for me around whether I'd be a good sales person or not. Who am I kidding? Salesmen.
They didn't have any women back there.

Speaker 4 And one of his tests that I remember is he used to, or this adage he used to have is that a salesman, a shoe salesman goes to Africa.

Speaker 4 two salesmen go to africa and one comes back and says yeah it's never going to work here nobody wears any shoes and then the second comes back and goes oh my god this is amazing nobody has any shoes

Speaker 4 and it reminds me a bit of what you're saying because the fact that their

Speaker 4 valuation and arpu are so low relative to the space they command

Speaker 4 That's this is amazing. No one has any shoes.
And that is, you kind of answered your own question. There's a lot of upside here.

Speaker 4 And if they keep growing revenues 73% a year, they're going to catch up pretty quick.

Speaker 5 If there is this much room to run, as you say, and which, by the way, I agree with, I think there's huge opportunity.

Speaker 5 Shouldn't they be burning money? I mean, this is the other thing that stood out to me is that they are now profitable. They were profitable.

Speaker 5 the quarter before this and then they were profitable last quarter.

Speaker 5 And it feels like they've now tethered themselves to earning a profit.

Speaker 5 But I feel like what we're describing is a nascent company that should arguably be losing money, trying to invest in growth, trying to get more users, trying to acquire customers, trying to figure out a monetization strategy.

Speaker 5 But instead, they're churning out $71 million in net income at a $35 billion market cap. And I look at that and I see bigger things with this company.

Speaker 5 Couldn't they think bigger and just lose money at least for a couple more years until they really get some traction?

Speaker 4 I think you're right. My advice to Stephen Huffman would be and is growth.
At this point, just growth. And the problem is when you go profitable, it's hard to go back.

Speaker 4 And because everyone will say, you know, Reddit slips into back into losing money. And

Speaker 4 for them, it's all about, at this point, it's all about growth and closing that delta you're talking about

Speaker 4 where market cap and revenue is equivalent to attention. I would have found ways to spend that money, more partnerships, more salespeople, more content, more original content.

Speaker 4 That's eventually where they will go.

Speaker 4 This is, I mean, when you think about it, Reddit was probably would have been one of the better acquisitions before they'd gone public for any one of a number of companies, right?

Speaker 4 But they, I agree with you, I wouldn't have gone, I would have spent more aggressively to get growth from 72% to 80 or 90% or extend it longer.

Speaker 5 I don't think shareholders want dividends at this point. I think they want to see 100% user growth.

Speaker 4 Yeah, they want growth.

Speaker 5 And whatever if you're losing money.

Speaker 4 Yeah, I think that's right.

Speaker 5 We'll be right back. And by the way, we'll be taping this podcast live at South by Southwest on March 10th.
Head to voxmedia.com slash SXSW to learn how to join us. Hope to see you there.

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Speaker 5 We're back with Prof G Markets. Netflix is exploring the possibility of expanding into video podcasts.

Speaker 5 The streaming giant has reportedly reached out to high-profile podcasters, including Alex Cooper of Call Her Daddy, to create talk-based video shows, though Cooper is currently under a three-year deal with SiriusXM.

Speaker 5 While still in the early stages, Netflix is reportedly considering two strategies, securing exclusive content from top podcasters or providing access to existing shows without ads.

Speaker 5 Scott, let's get your take on this potential move. But I think the real question is, I mean, I'm just reading out this headline, reportedly reached out to high-profile podcasters.

Speaker 5 Have you gotten a phone call?

Speaker 4 So Amy Atkins was this woman in high school. I had this enormous crush on.

Speaker 5 I just want to point out, I love that the answer, which I expect to be no, it must be delivered as a parable.

Speaker 4 Let's hear it. I was so in love with Amy Atkins and she kind of pretended to like me and da da da.
And then she shows up one day and says, oh, this is my boyfriend, Sean.

Speaker 4 And I'm like, oh, and I wanted to strangle him. And

Speaker 4 I'm like, that's terrible. You got a boyfriend, and it's not me.

Speaker 4 And anyways, I'm not exaggerating. I sent an email to Ted Serranos last night.
And I'm like, fucking Alex Cooper?

Speaker 4 Alex Cooper?

Speaker 5 What did you say?

Speaker 4 What exactly did you say?

Speaker 4 I don't know Ted well, but I know him. And by the way, he's like a, he's an incredibly decent, nice, thoughtful man.

Speaker 4 And obviously built this amazing company. But I got to be honest, I felt a little like, Who's this guy, Sean? I'm like, I'm I find out in Business Insider, your Instagram podcast.
I got nothing.

Speaker 4 He didn't call me, yeah, he didn't call me for advice.

Speaker 4 He didn't send me a message saying, Oh, you and Ed and Kara's name came up, but we decided we don't want to be in news, or you dropped too many F-bombs on CNN.

Speaker 5 Nothing, just

Speaker 4 news that he's he's dating Alex Cooper. Right.

Speaker 4 So, no, we did not hear from Netflix. And

Speaker 4 I read about it and it just kind of, so back to the actual story here, it makes all the sense in the world. And people are constantly saying, okay, will Netflix go into sports?

Speaker 4 No, well, what do you know? They go to sports. Will Netflix go into, you know, live? Will they go into gaming? They're going into, they're going.

Speaker 4 If there's a tension there and a chance to get subscriptions and differentiate their offering,

Speaker 4 you should assume they're going to go there. And it makes all the sense in the world because the primary arbiter of the next evolution of the fastest growing ad supported medium podcasts is video.

Speaker 4 And the guy who's about to displace, or one of our predictions, is the guy who's going to displace Joe Rogan as the biggest podcaster in the world is this guy, Stephen Bartlett, because he got very serious about video, production quality, optimizing Mr.

Speaker 4 Beasting, his

Speaker 4 thumbnails, different titles. He called me, I was on with Constantine, I forget his name, this thoughtful, conservative kid.

Speaker 5 Constantine Kisson.

Speaker 4 And then this third guy, whose name I forget, who was also very thoughtful, Stephen Bartlett

Speaker 4 brought us on to talk about the state of the world. And I was supposed to represent America and every comment was, that douchebag prof does not represent America.
Anyways,

Speaker 4 he called me, or no, he didn't call me. He texted me, left me a voice memo the next day.

Speaker 4 and said, this is going to be, this will do 4 million views. This is amazing.
Congratulations. And I immediately went to YouTube and it was like at 63,000.
I'm like, it's at 63,000.

Speaker 4 He's like, oh, no, our algorithms have already figured out it's going to be around 4 million.

Speaker 4 That's how sophisticated he is around video is that within a half an hour of putting it on YouTube, he knows how big the video is going to be. And they do all these A-B testing.

Speaker 4 And what he does on his pod is he will go to New York for a month, go to LA for a month, and he does, he demands in-person interviews.

Speaker 4 The thing I did with Constantine was the first time they had ever done a a podcast remotely. He demands for, again, for video production quality.

Speaker 4 While everyone is trying to get rid of the studio, he's going the other way. And Rich Roll does the same thing.
Rich Roll forces you go out to Agura Hills, which is not fun. Shout out Rich.

Speaker 4 Oh, he's fantastic. He's the kind of guy you want as a big brother.
He's so thoughtful and soulful and handsome. And you're like, I'm coming back as Rich Roll.

Speaker 4 But he makes you go out to Agura Hills and he has all these, like Stephen Barlett, he has all these cameramen.

Speaker 4 And he must have spent a ton of money early on, gave up all his profits and poured it into video. That is the new arbiter.

Speaker 4 And when you think about the premier video platform, YouTube, number two is Netflix.

Speaker 4 And I imagine Netflix will go high-end and they'll say to someone like, fucking caller Daddy or some other bullshit, he'll say, we'll make this really cool and interesting.

Speaker 4 And by the way, if you're looking to be the number one podcast in the world, we can do that with a simple tweak of the algorithm.

Speaker 4 And in 36 hours, by putting you on the homepage of Netflix for 36 hours, it's one of those things I wish I'd thought of.

Speaker 4 And that is Netflix will overnight be able to take, they'll own a bunch of podcasts. They might start early by just being a distribution platform, learning about it, making some ad revenue.

Speaker 4 And then they will go vertical and either launch their own or buy some.

Speaker 4 And they will make, I would bet within 24 to 36 months, three of the 10 biggest podcasts in the world are owned by Netflix because they have the platform.

Speaker 4 They can put it everywhere and then they can maybe distribute it to YouTube, put it on Apple and Spotify a week later. Members get it a week early, whatever it might be.

Speaker 4 But this just makes, this is right as rain. Yeah,

Speaker 5 I think it's right as rain. I don't think it's going to play out the way you've described it.
I mean,

Speaker 5 I think the question is like, what is this going to actually look like? And I think the

Speaker 5 scenario you're describing is Netflix takes kind of the Spotify strategy where you reach out to these podcasters and you offer them these exclusive deals to be the exclusive platform for that podcast.

Speaker 5 I'd call that like the Spotify Joe Rogan strategy. I personally don't think it's going to look like that.
I think it's going to look a little bit more like the Mr.

Speaker 5 Beast Amazon deal, where Amazon paid Mr. Beast $100 million

Speaker 5 to create just one TV series with Mr. Beast, which is now out and you can watch it right now.
Meanwhile, Mr. Beast is free to keep posting his videos on YouTube.

Speaker 5 So in other words, I think Netflix isn't necessarily going after podcast sting the medium. I think they're going after podcast stirs the talent.

Speaker 5 And that's going to be an incredible thing for people like Alex Cooper and for Joe Rogan and Theo Vaughan and all these people, all of these people who've kind of become like the new Hollywood superstars.

Speaker 5 I mean, you think about how it's changed. These people are the Jennifer Annistons and the Ben Stillers of our time.
And I think that's what Netflix is really excited about.

Speaker 5 And they want to capitalize on that.

Speaker 5 Not necessarily to be the new podcast platform, but certainly to be the platform that owns or at least has some level of relationship with the biggest stars in the world.

Speaker 5 And it just so happens, the biggest stars in the world today, they're making podcasts. That's kind of what they do now.

Speaker 4 Yeah, the name. I love your take.
And the name that just jumps out and makes all kinds of sense is Theo Vaughn, because he's also a comedian. I mean, they can say to Theo,

Speaker 4 we'll double or triple the size of your podcast audience. And by the way, we're going to sign you up for a four one-hour comedy special on Netflix.
And

Speaker 4 we're going to pay you a crazy amount of money. And basically,

Speaker 4 if you want access to Theo Vaughn, which tens of millions of people do, he's got such a nice, authentic vibe about him. Where can you find Theo Vaughan? On Netflix.

Speaker 4 I think you wrote about this in a No Mercy, No Malice post, which got a little too much attention for my liking.

Speaker 4 But you talked about it's no longer about brands it's about people people are the new brands or people you know people are the new brands i mean i just think about the potential my mind's spinning the guys from smartless by the way i was on their podcast but i haven't put it out yet i don't know it's been i was i recorded like three weeks ago but anyways those guys are just so good on tv and they're so funny they're interesting because they already were hollywood stars that's right then they switched they could come back again that's right but they're all really appealing on camera and let's be clear i think you would be amazing too i'm sorry what did you say Ed?

Speaker 4 I'm sorry. Go ahead.

Speaker 5 I'm not going to repeat it. I said it once.
I think that would be an incredible idea. I don't think that it should be CNN Plus.
I don't think it should be.

Speaker 5 I mean, maybe let's take this opportunity to think about it.

Speaker 4 I mean, if. You're talking your own book here because when we go out, people come up to you.
They're like, oh, hi, Scott. And they literally run over me to.

Speaker 4 Ed, I have my, I'd like, are you taking, I have a daughter at SMU?

Speaker 5 It's always, I have a daughter.

Speaker 4 Cool. Yeah.

Speaker 4 Is there anything wrong with that? Wait, they want to. Yeah,

Speaker 4 you're.

Speaker 4 I'm like, we're that movie, The Substance, and I'm definitely Demi Moore. And you're like the hot young chick that emerged from my body.
Anyways,

Speaker 4 have you seen The Substance?

Speaker 5 I haven't seen it, but that makes sense. But let's just think about it for a second.
Like, what do you think? a Scott Galloway Netflix show should look like?

Speaker 5 And I think that this is an opportunity to think, like, imagine we are

Speaker 5 a Netflix producer. Like, what kind of content do you think people are looking from podcasters? Because I will say, I don't think it's just a video podcast.
They can already get that on YouTube.

Speaker 5 They can already get that on Spotify. I also don't think it's whatever the fuck CNN Plus was.
Something about that didn't work. It was maybe Jake Tapper's Book Club.

Speaker 4 Exactly. That wasn't riveting content.

Speaker 5 It's too, it's too produced. You lose all of the authentic feel that you get with the podcast and with that relationship with podcasters.

Speaker 4 Like, what do you think a good Netflix show for a podcaster would look like well it would be scotted so i i think i think eventually netflix goes into news and they do a loop where they so a daily business update where it's where it's more highly produced more graphics more visuals and also if you were going to do a long uh regular podcast every week what i think you'd want to do if if you're talking about your guest is richard reeves you take 15 or 20 minutes and you go talk to parents and young men you just quite frankly you take podcasting and you just massively increase the production value.

Speaker 4 Because right now, the means of production are, and this is the thing I love about podcasting and

Speaker 4 the thing that scares me about this, is the means of production are basically what looks like a toiletry kit for me. And that is Drew, who's our tech wizard, puts together this little dock kit for me.

Speaker 4 And it's, it's the size, it's smaller than a lunch pail or like literally like a toiletry kit. And I can take it anywhere and pull out my mic, plug it into my laptop, and boom, I'm podcasting.

Speaker 4 The game is going to be upped. And you're going to see podcasts where it's an hour-long podcast, but they'll do breakouts.

Speaker 4 And when we're talking about Reddit, it breaks to like a three-minute thing where they're interviewing the CEO or they use amazing visuals to go online and talk about Reddit and what's interesting about it.

Speaker 4 But the game, the bar is going to be raised.

Speaker 4 And they have such incredible depth of talent that they'll be able to say, okay, Scott and Ed, if you want to do a daily market show, we have have an unbelievable production team and not only in New Jersey, but in Madrid.

Speaker 4 And when you're done recording

Speaker 4 at 7 p.m., we have our folks in L.A. take it over, then they throw it over the wall to the folks in Madrid at 3 in the morning, where it's 8 in the morning their time.

Speaker 4 And they produce just this really impressive

Speaker 4 podcast Meets Hollywood, if you will.

Speaker 4 Let me put it, the days of me just tapping in from the Dolphin Hotel and Walt Disney World and getting a quarter of a million people to listen that day with the bad curtains in the background, I'm not sure that shit's going to survive.

Speaker 5 Well, that is the big question. Can you do that? Can you invest that much, bring in that many people and maintain the level of authenticity that you get on podcasts? So I would argue, I don't think

Speaker 5 it's possible to do that. I think the more highly produced you get, the less real things start to feel.
And there's something interesting.

Speaker 5 There's something nice about you being in a hotel and there's a curtain curtain behind you and we can actually see what is happening in your life.

Speaker 5 Because as I've said, I think the thing that people crave most is connection with people. This is what I wrote about in that blog post.
People are the new brands.

Speaker 5 They crave connection with real people because of this issue with loneliness that we keep on seeing.

Speaker 5 And I don't think that a highly produced Netflix series is going to be the kind of thing that addresses that level of connectivity and authenticity that you get with podcasts.

Speaker 4 We should tease. We're thinking, well, we're not thinking, we've decided Prop G Markets, which is the fastest growing part of our podcast empire, we're going to go to daily.

Speaker 4 And one of the things we're talking about is, all right, Scott's traveling all the time. Scott doesn't want to work that hard.
And how do we incorporate Scott into a daily show?

Speaker 4 And you guys came up with this notion of, and it's being to our authenticity, that it's like, where in the world is Scott?

Speaker 4 And I would literally tap in on my phone wherever I am and just provide a viewpoint.

Speaker 4 And your view and Claire's view, and I thought it was really insightful, was rather than trying to mimic 80% of the production value when I'm in studio, just put it on your phone and it's just wherever you are at that moment.

Speaker 4 And Ed is asking questions or you're giving your view, but go the other way and make it very raw. Like live from the bar at Maison Estelle or wherever I'm getting drunk.

Speaker 4 You know, Scott, go into a bathroom stall and tell us what you think about the Reddit earnings.

Speaker 4 But I thought that was really really interesting. But whatever Netflix does, everything is sort of colliding back to where what's old is new again, right? We're kind of reassembling the cable bundle.

Speaker 4 It's advertising, but it's also subscription. But I think that podcasts are going to become more like TV than TV is going to become like podcasts.

Speaker 4 Anyways, I think it's going to be fascinating to see, but it's just, you hear this and you just know in 24 months,

Speaker 4 there's a non-zero probability that what everyone's talking about YouTube and podcasts, people are going to start talking about Netflix and podcasts.

Speaker 4 I also think Reddit, it's about who controls, who has custody of the consumer, who has the trust and the direct vertical interface with the consumer.

Speaker 5 Okay, let's take a look at the week ahead. We'll see earnings from Walmart and Alibaba.
We'll also see consumer sentiment data for February. Do you have any predictions for us, Scott?

Speaker 4 I can't help it. I'm a broken clock here.
Tesla is imploding. It's absolutely imploding.
Its sales are off between 10 and 60% across European nations. It was off, I believe they're off 11% in China

Speaker 4 in a growing market. BYD is producing as good a car for 40% of the price.
They haven't had a new vehicle, a new kind of mass vehicle introduction in over six years.

Speaker 4 When I'm getting into Teslas, and I'm biased, but I think they just feel stale. I think the competition has caught up and even surpassed them.

Speaker 4 And then I think about what he's done with the brand, just trashing it with Nazi salutes like

Speaker 4 the model Tesla SS and changing his pronouns to he and Himmler. I just think this is going to catch up.
It already is.

Speaker 4 And you're seeing sales imploding. Meanwhile, it has this just ridiculous fucking multiple.
And I've always said this, that stock prices. are like Michael Jordan jumping from the free throw line.

Speaker 4 It feels like he's never going to come down and he always does.

Speaker 4 And fundamentals, I don't care if you're GameStop. I don't care if you're true social.
At some point, Michael Jordan hits the hardwood again. I think the stock is below 200 in the next six months.

Speaker 4 Good luck.

Speaker 5 We've said this before.

Speaker 5 They always find a way to justify it. I mean, I agree with everything you said, and yet I don't think it'll happen because the market always somehow, this company, they just love this company.

Speaker 5 They always figure out a way to say, no, no, there's still more, more room to run.

Speaker 4 But we'll see. Yeah, I'm sticking sticking to my guns here.
It is, it is time. It is time.

Speaker 5 This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss.
Mia Silverio is our research lead. Isabella Kinsel is our research associate.

Speaker 5 Drew Burrows is our technical director, and Catherine Dylan is our executive producer. Thank you for listening to Prof G Markets from the Vox Media Podcast Network.

Speaker 5 Join us on Thursday for our conversation with Kyla Scanlon, only on Prof G Markets.

Speaker 4 Do you want to hear my other movie, Impression? Yes, please. And I'll ask you to guess who it is.
Okay. You ready?

Speaker 4 How about no?

Speaker 4 Who is that? Who is that?

Speaker 5 Mike Myers. What's the guy's name? That's right.

Speaker 4 That's right.

Speaker 5 What is that movie?

Speaker 4 The Spy I Love Me. You're Getting Warner.
You're Getting Warmer. Mike Meyer.

Speaker 4 Austin Powers. There you go.
Very good. Anyways, that's good.
Inflation.

Speaker 4 Yeah.

Speaker 5 Speaking of inflation, let's talk about the cost of private schools in America.

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Speaker 10 Plus, the Venture X business card has no preset spending limit, so your purchasing power can adapt to meet your business needs.

Speaker 6 Capital One.

Speaker 10 What's in your wallet?