Prof G Markets - LA Fires, Trump Trades, TikTok, and Legacy Media’s Fate — ft. Andrew Ross Sorkin

Episode Date: January 16, 2025

Scott and Ed open the show by discussing Kalshi’s decision to appoint Donald Trump Jr. as its new advisor, a decline in tipping across America, and the economic impact of the wildfires in Los Angeles. Then Andrew Ross Sorkin, editor-at-large of DealBook at the New York Times and co-anchor of CNBC’s Squawk Box, joins the show to discuss the key economic trends he’s watching for Trump’s second term. He explains why he thinks the private equity space is broken right now, analyzes the changing landscape of the AI industry, and shares his thoughts on the rumors that China is considering selling TikTok to Elon Musk. Andrew also offers his perspective on how journalists and legacy media should adapt to a social media era that lacks fact-checking and trust.  Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices

Support for the show comes from the Fundrise Innovation Fund. One thing really matters in venture capital, investing in the best companies. And that's exactly what the Fundrise Innovation Fund is aiming to do, amassing a $150 million portfolio with some of the biggest names in tech and AI. Visit fundrise.com slash profg to check out their portfolio and start investing in minutes. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the Innovation Fund's prospectus at fundrise.com slash innovation. This is a paid sponsorship. Today's number, 2.4 billion pounds. That's the record amount Brit spent on music last year, which includes subscription and vinyl. People in the UK haven't spent this much

on music since 2001, when CD sales peaked. Ed, just another story about British media. What did the American say when he was watching the UK porno? What? The British are coming, the British are coming. It's funny because it's simple. Welcome to Prop G Markets. This episode is presented by Funrise. You can't imagine they're going to stick around for long. And we're speaking with Andrew Rastorkin. This will be the last time he's here after he hears that.

Editor-at-large of Dealbook at the New York Times We're speaking with Andrew Ross Sorkin. This will be the last time he's here after he hears that. Editor-at-large of Dealbook at the New York Times and co-anchor of CNBC's Squam Box. I would argue, I think, well, I'm curious, I think he and Anderson Cooper are the two most trusted journalists in the world right now. Your thoughts? I think Andrew Ross Sorkin might beat him out on that. Anderson's got the CNN mark. A lot of people don't like CNN, but CNBC is pretty neutral.

Yeah, Anderson's so dreamy though. He is dreamy. Andrew's pretty dreamy as well though. He's a good looking guy too. Yeah. It's a close competition. How are you, Scott? I'm great.

I'm back in New York, excited to be here. I was in, I think I told you, I was at the Finea in Miami for a while. Yeah, what were you doing there? I had a conference Friday at Jeffreys in Boca and then I just fell off the wagon. I haven't been drinking and I just went. You're doing dry Jan?

Well, I'm not doing dry Jan. I'm doing trying to drink less Scott. And I just totally slipped and I went out. I went to Palm Beach, got fucked up, had the best time and I'm like, oh my God. You went out to Palm, you would have had to like take maybe a serious drive there, you know, just sort of slip out to Palm Beach, right?

Well, I was in Boca, I was in Boca and I was gonna go to Miami and I didn't have anything going on in Miami and then a friend of mine said, oh, we're having dinner in Palm Beach. And then I ran into another guy, I'm on name drop, although I'm dying to because they're both really cool, famous people.

Please do, please do. I can't do it. I've been doing too much lately. Elon Musk, got it, okay. Yeah. And then I went down to Miami and Saturday night, I'm like, oh my God, this alcohol thing. I forgot how great this alcohol thing is.

And I went out with my friend Pablo Doritas and we went to this great restaurant called Sparrow Italia, which actually has a London sister, which I didn't know about. I had a great time there. Then I went to Houston yesterday for a hot minute. Not as much fun. I was there for a total of like 90 minutes and I made this. I was spoke in front of

this great organization that brings together event planners. And you can imagine when event planners are at an event, they're so cheery and so nice and so mutually supportive and I was their keynote. And I got up and the woman came out at the end and asked me a question and I broke into my song about young men and mentoring and And I immediately got, you know, I was jet lagged and upset and hungover. And I go, Michael Jackson and the Catholic Church

have fucked it up for all of us. And men want to be involved in young men's lives. And it doesn't mean there's anything wrong with them. And she was sort of like, okay. That's sort of part of the course with you. And then unfortunate programming note, immediately following me was the Houston Boys Latino Choir. And I'm like, did I just talk about pedophilia before like nine,

eight-year-olds rolled out here to sing? I mean, it was so, I'm literally like, I was in the back. That was poor programming on that part. No, no. You don't follow Scott Galloway with a choir. Yeah. And I'm sitting sitting there back in the green room with my head in my hands, and they're supposed to have this VIP gathering for me where I sign books.

I'm like, no one's gonna come to my VIP gathering. Anyway, so let's get to work and make some money here. Get on with the news, Ed. Now is the time to cry. I hope you have plenty of the world at all. Prediction market Cal-She has named Donald Trump Jr. as its new advisor. The company said Trump Jr. will play a key role in expanding its reach and building strategic partnerships. Tipping in America has hit a six-year low, with the average tip at full-service restaurants

falling to 19.3%. Meanwhile, only 38% of consumers reported tipping restaurants 20% or more, and that's down from 56% of consumers in 2021. And finally, the wildfires in Los Angeles could become the most expensive in US history, with total economic losses estimated to reach up to $275 billion. Analysts have estimated that insured losses from the fire could exceed $30 billion. Scott, your thoughts, starting with Kelshe, the prediction market, hiring Don Jr. to the board. Well, I mean, he's a very thoughtful, experienced business person who brings a lot of gravitas and insight to platforms and technology companies.

So I just think this is a great, look, this is more kleptocracy and people would throw back in my face, well, okay, now do Hunter Biden. Yeah, I don't think it's like, it's not that unusual. It's not the biggest story. Obviously, Don has, Don Jr., through no fault of his own, has very strong political connections. It's pure nepotism, but we live in a, we live in a world in nepotism. You know, Donald, Donald Trump Jr. going on the board of Kalashii, who gives a fuck? I don't, I, you know, put a, put a jacket on and go to Greenland. I don't, I don't care.

I think, I think what I found strange was, I mean, you made the comparison to Hunter Biden, which I think is the correct one, but I find it strange that you're framing it as like a defense of Don Jr. When in reality, I mean, these guys have been criticizing Hunter Biden for years about the time when he was an advisor to this energy company in Ukraine. And I've always thought that criticism was completely valid. Like we shouldn't be having the children of elected officials selling access to their parents. Well, here we are a week before inauguration day. That's exactly what Don Jr. is doing. So I think the comparison to Don Jr. and Hunter Biden is the correct one. He is the new Hunter, but that's not a defense of Don Jr. I mean, these guys shouldn't

be doing this in the first place. At the same time, credit to Kelshe in my view, because as I've said over and over, if you can buy access to this administration, it is your fiduciary duty to do that. Because as you've said, this economy is turning into a kleptocracy. I think CEOs need to get wise on that and figure out how to capitalize on that if they wanna create shareholder value.

Well, look at this. Unusual Machines, a drone parts manufacturer, and PSQ Holdings, an anti-woke e-commerce platform, popped more than 200%, tripled after adding Donald Trump Jr. to their boards post-election. I mean, shares of Liberty Energy surged 12% the week after Trump named its CEO, Chris Wright, as his energy secretary.

Tesla surged over 60% between the election and the end of 2024. And it's a race to the bottom. What are you going to see? You're going to see Democrats and other people say, fuck it, I'm going to put my family members on boards with the, under the auspices ofices of they can and they can buy stocks. And by the way, our elected representatives, Speaker Pelosi, can still buy stocks because

the punishment is almost non-existent. If you could make tens of millions of dollars investing in a defense contractor the day before it's publicly announced that they're about to get an enormous contract to build multi-billion dollar nuclear class submarines, tell your husband to go buy it. And he says, well, isn't that illegal? Yeah, but we're not, you know, we're not, so what? We'll be out of here. We'll be out of here by the time it's illegal

and we'll have to pay, we'll get slapped on the wrist. And nobody cares. The guys at the SEC are our friends anyway. And nobody cares because, and Pam, the attorney general is not gonna go after any Republican, and nobody cares because, and Pam, the attorney general is not gonna go after any Republican, and nobody cares because everybody instead is looking at the real, you know, all caps kleptocracy in on Pennsylvania Avenue.

So this is a downward spiral where we all engage, no one wants to disarm unilaterally. No one wants to not engage in tax avoidance to be a good guy or good gal. They're like, well, everyone else is doing it, I'm gonna do it. Let's go to this tipping story where tipping is declining. Lois, it's been six years in America.

I find this so interesting because the whole point of all of these digital tipping platforms that you see at the coffee shop, you know, those tablets where it gives you all of your options, the whole pitch with those technologies was that it was going gonna make tipping easier. It was gonna make it frictionless, seamless, et cetera. And in theory, that should have increased tipping.

But it's so fascinating that like many other technologies, it's actually having the opposite effect. Instead, because everywhere we go, we get this prompts to tip, it's made people resentful of tipping. And now instead of feeling that you want to thank your server, it feels like you're just paying this tax. And so in response to all of that negative sentiment around tipping,

it looks like tipping is actually now decreasing. So what is your reaction to this decline in tipping and perhaps tipping culture is ending in America? It's really interesting and I can't figure out if it's an indicator on the economy where people just don't feel as generous because they're having to tighten their belts. Sure, that's part of it. Or as you said, it's a cultural, or it's pushed back on the zeitgeist. I was at a Heckfield place, which I love, and I spent time there with my dogs and my boys.

In my bill, I stayed there for the better part of a week. My bill was 50,500 pounds, which is a lot of money, and I saw this 550 pound charge that said service charge. I said, what's a service charge? They said, well, it's a gratuity for the staff. They said, but it's optional. I'm like, well, it's not optional if you didn't point it out.

I have to ask about it. It's uncomfortable for me to say to you, to ask you what it is. They said, I don't have a problem with take it off. I'm like, I'm a big boy. I know how to tip people. I'm not afraid to tip people. And as a matter of fact,

because I grew up in services jobs, ranging from box boy to waiter to bartender to parking cars, I love to tip. It's fun. It makes me feel strong. I'm an outstanding tipper. The moment I see service charged included, that's it, I'm done. I don't, nothing more.

Because my attitude is, well, if you, if you have decided the service was excellent and it used to be the general rule is 15%. So 20% was for good slash great service. I did not know that. When did it change? When I was a kid, the general math you did was 15%. Wow. And in Europe, you remember. It's like, you remember, they didn't tip it.

In Europe, when I was your age, the general consent, if you had a restaurant, you'd leave some change. You wouldn't tip 10%. No way. You'd leave a few shillings or quid or whatever the fuck you guys call your, your monkey money. I don't think, I don't think anyone's giving shillings back then. It happens.

What did they call it? Um, unfortunately you'd like to think, and there's probably some truth to this, is increased wages at the low end. And at the low end, you have seen a dramatic increase in wages post COVID, not because anyone's more ethical about it, but because people have decided I'm, I have had it with the general public. And if you want me to work at Panera, you better pay me 20 bucks an hour, not 12, right?

People have had it. If I gotta wear a mask to work and be one of the few people that actually has to get my ass out of bed and get into work, they've had to pay. And this is a wonderful thing, they have to pay more money. But what I worry about, and I'm wondering if there's any data on this,

it's a transfer of wealth, mostly to the host institution that is now paying people less because they say you're making more in tips and so they're paying them less. So I don't- Oh, definitely. Let's stop calling it tip.

Let's just say it's a charge and you have no choice. It's not a tip. And I do find it obnoxious Let's just say it's a charge and you have no choice. It's not a tip. And I do find it obnoxious when I'm getting a coffee and they just flip it around and then stare at you. And it's like 20%, 30% are herpes, you pick. I mean, it's like, okay, what am I supposed to do here? But that's not the barista's fault.

That's Square's fault for making those the default options or the restaurant's fault. 100%. And now we have to take it out on the baristas and you look at that look on their face and you assume it's them who's imposing this tax on you. It's not them. Well, here, and this is my latest pet peeve,

tipping is now even offered as an option on GoFundMe on top of transaction fees. The transaction automatically defaults to a 14% tip for any donation under $200. And I've been looking at, again, I'm never one to not virtue signal, I'm doing a bunch of GoFundMe's for people in Los Angeles. It is so, they take such extraordinary fees. 14% default tip is what GoFundMe is for people in Los Angeles. It is so, they take such extraordinary fees.

14% default tip is what GoFundMe is charging. So in other words, this is like a huge business opportunity. And let's use this as a way to segue into the LA fires headline. This is like a huge business for them. But wait real quick, let's change. Let's just do some branding here. Instead of GoFundMe, I wanna say,

oh, I'm doing a GoFuck Yourself. Good people at GoFundMe, let's just do some branding here. Instead of GoFundMe, I want to say, oh, I'm doing a GoFuck yourself. Good people at GoFundMe. Let's wrap ourselves in a virtue blanket as we charge people to get money to people suffering from the fires. And call it a tip. I just can't believe that. Who are we tipping here?

Tips are for servers, not for software engineers. Who exactly are we tipping? Yeah, exactly. That's all I have to say on the GoFundMe point, but what is your reaction to just all of the amounting damages that are piling up in LA right now? Any thoughts on the wildfires before we get into the conversation with Andrew Ross Orkin? It's fascinating.

The second order effects here around what happens are going to be fascinating. First off, I think the Pacific Palisades in five years is going to be arguably the best neighborhood in the nation. Very hot take. Well, it's- No pun intended. There you go. It's, A, it's blessed with the geography that is some of the most beautiful collision of sea sky and earth. That is the California coast.

It's a beautiful neighborhood, but quite frankly, some of it is this kind of bad 70s architecture. Also, a lot of it is tinder boxes. We don't have these super fires on the East Coast, obviously because of weather, but a lot of it is the materials we use to build our homes. But there's gonna be a lot of second order effects here and a lot of really interesting discussions.

And the insurance market, I mean, I've told you, I go naked on insurance because you get 55 cents on the dollar. Insurance is such a fascinating industry. Cause what it convinces people to do is enter into a relationship where you're going to have a series of guaranteed losses in exchange for hopefully not having a tragic loss. It's like deciding to have a relationship with

someone who's just awful every day such that she don't date a murderer. You know? And I just made that up. I like that. A very boring, safe partner. Yeah, this is kind of awful and passive aggressive, but she's not a murderer.

Yeah. I like that a lot. Anyways, what this is gonna inspire is a healthy conversation because I think generally what happened was insurance companies are only in the business of assessing risk. That's all they do.

And the risk assessments they did, I imagine, are getting better and better in terms of calibration because of AI. They said the Palisades or Southern California, fuck that. What they've had to do though, is that California said, well, okay, if people need have to have insurance or they might need to move or whatever. So they implemented something,

a state supported property insurance plan called FAIR to increase its total policy holdings or to basically back certain insurance companies because they put caps on how much they could raise the rates. So a lot of insurance companies said, okay, girlfriend, we're out of here. The fair plan still exposure is almost half a trillion dollars, a 61% year on year increase because the people who are profit motivated said, we're out of here. We've done the math.

They only have about 200 million in cash and two and a half billion in reinsurance. So the question inspires is the following, and I'm a bit of a capitalist or right wing on this, and that is I live on the ocean in Florida. I don't think I have a birthright to do that. And as climate change becomes more of a reality, I think I should have to bear the costs of additional insurance

or the cost of my house going down, but I don't think taxpayers in California should have to bail out people who decide it's their birthright to live in fire-prone areas. And that will be, people will not like that because they see it as the government has a responsibility, people shouldn't have to leave their homes. My attitude is look Los Angeles is an accident. This meteorological anomaly of a high

pressure system colliding with a low pressure system all funneling through a series of mountains creates the mother-of-all hot air blow dryers where certain times a year you get a 60 or 80 mile an hour hot wind that can take a match and spread it across, turn it into embers that spread, you know, a hundred feet every three seconds. Anyways, what are your thoughts? The thing I've been obsessing over maybe wrongly, but I've just been thinking about a lot is this DEI conversation that this has created. Elon's saying that this is all a result of DEI programs. He said DEI means

people die, people calling the mayor of LA a diversity hire. Basically this big conversation that the reason this has all happened and the reason it was not managed as it should have been managed is that we have all these DEI policies and it's making California terrible. You know, there's such a simple explanation for why this has all happened. And the answer is climate change. 2024 was the hottest year in recorded history. The next hottest year in history was 2023.

So the earth is rapidly overheating. It's resulting in droughts, mass heat waves, and yes, wildfires. And this isn't like a question of correlation. This is pure causation. This has been empirically proven to be a catalyst of wildfires. And that is why we've seen the number of wildfires in the US double in the past 40 years. So I think this is an important moment for America because we have a choice again. Do we want to subscribe to this cultic religion of anti-DEI, which has totally devolved into groupthink? It's the same groupthink that the entire movement was supposed to dismantle in the first place. Or do we want to actually do the research and figure out what the problems in our society actually are?

And in this case, it's very, very simple. If you do the research, you will come to a conclusion quite swiftly, this was a direct result of the earth getting too hot. Well, just as the pendulum on a clock, you can never visually spot it at the bottom, at the middle. America has become unable to spot nuance and have any middle ground. But when you immediately leap to bigotry and hate-filled,

invective around a tragedy and you use it as a means of separating people. Or if you use it as a means to just completely not address the elephant in the room, which is the fact that climate change is causing mass wildfires around the world. I mean, the fact that the conversation has not been about climate change is crazy, because this is like, what worse situation do we need to be thrown into our faces to basically tell us,

okay, we should probably start to take this thing seriously? What you're doing is a bit of the same, but it's diet coke. It's not as mendacious. That is you're leaping to an assumption. I think the thesis that climate change played a role here is a fair thesis. But the honest answer is we don't know yet. No, we know. It's possible that this might have happened without climate change. Now, having said that, nine out of 10 super fires

in California in the last century have taken place in the last 10 years. Something is going on. But what I would argue is in the middle of a crisis, it's not helpful to go there, nor is it helpful to go to bigotry under DEI. Where should we go? Where is this conversation in your view

supposed to be going? All eyes, all efforts, all hands on deck should be to the following. How do we save lives and property? And what people don't want to acknowledge about this crisis or isn't getting enough news is that the job of the government and of the community is to save lives and property in that order. And while 13,000 houses have been destroyed, and there'll be massive economic loss, and there's a reckoning and time to look at it, if the government and the community's responsibility is to protect lives,

they've done an A plus fucking job here. And that doesn't get any recognition. So my thinking around this stuff is I've tried not to go on social as I do a lot and assign blame and use it as a means of cementing, sanctifying, validating my political beliefs. I think climate change is real, but to be focused on all right,

what can we do to be as supportive as possible, get people out of harm's way, try and reduce these fires, bring attention to the incredible aerial firefighters. And by the way, I'm announcing our next trip and event, our next live whatever is gonna be in Los Angeles. We are going to LA. Me and Scott are buying a house in Pacific Palisades and we're gonna live together.

We're going to Pacific Palisades. We'll be right back after the break for our conversation with Andrew Ross Sorkin. And if you're enjoying the show so far, hit follow and leave us a review on Proffesy Markets, wherever you get your podcasts. Support for the show comes from the Fundrise Innovation Fund. The investing world seems to be bending towards democratization, but venture capital always felt like it may be one of the last ivory towers to fall. It requires a lot of capital, the right relationships, et cetera, et cetera. That's probably why when the Fundrise Innovation Fund launched promising to democratize venture

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Relevant disclaimers can be found at the end of the show and at fundrise.com slash innovation. Welcome back. Here's a conversation with Andrew Ross Sorkin, editor at Lodge of Dealbook at the New York Times and co-anchor of CNBC's Squawk Box. Andrew, thank you so much for joining us on ProfG Markets. Thank you for having me. As you know, I'm a huge Scott fan and I'm a huge Ed fan. So here we are. You're an Ed fan. That's amazing. So I just want to start with Inauguration Day, which is next week. Just to get started, what are some of the main economic themes you're watching as we

head into Trump's second term now? Oh goodness. I think I'm focused on probably two or three biggies. It's all the stuff everybody knows though. It's inflation, inflation, inflation. I'm fascinated right this particular moment about the idea that we have, you know, rates that are supposed to be down in the twos, but happen in reality to be close to five now.

And what that really means and how the market may become sort of a governor on this next administration away. We'll talk about that, I'm sure. I am fascinated by tariffs, which of course have an direct and interconnected relationship with inflation. And we'll see where that goes. And I'm fascinated as I think we all are by AI and what that's ultimately going to do, not just to our economy, but to our way of life.

So I think all three of those things are probably going to intersect in unique, bizarre, and complicated ways over the next four years. You said the markets would be a governor of this administration. I find that a very interesting statement. What do you mean by that? So we're walking into a four year period, or at least the next two years where. This is a red country, right? We are going to have a Republican in the white house or Republicans that are

going to control the Senate Republicans that are going to control the house. Normally you'd say that they're going to run everything. If there is any blockade to this administration's efforts and the Republicans to get what they want over the next, call it two years, because we'll see what happens in two years in the midterms, the only potential governor on them is oddly enough the bond market. If in fact the investor class around the world says, you know what, we're just not doing it this way. We don't like what's going on here. They can vote with their wallet and they can say, we are not going to be buying your bonds unless you're going

to pay us a lot more for them, in which case everything becomes a lot more expensive for all of us. And that is the only thing, frankly, that I can even imagine that is a governor on the politics of our country over the next, call it two years. Good to see you, Andrew. So, US stocks now represent half of total market cap globally. They're trading, I think, at P in the 30s. They're sort of at a store.

It's historically expensive right now. Do you think there's a chance 2025 might be the year we see sort of the rivers reverse and we might see flows out of the US, out of tech into non-US markets. I think we've been waiting for that for a long time. And so I fear that if I tell you, this is the year, I probably would have told you this was the year in 21, in 22, in 23, in 24, 25. We are, what do they say? What's the phrase? We're the cleanest shirt in the hamper.

I think we are still probably in a better place than much of the rest of the world. I don't see that actually reversing itself in the next year necessarily, but I do think these valuations are clearly, I don't know if they're at the top top of the range, but they are high. It is very hard

to not to look around and go, this whole situation is relatively priced for perfection. And then you start to think about all the things that could go wrong. And you look at the fact just historically that we just had a banner year in the stock market, 24, go back to 23, same thing. And so at some point, go back to 23, same thing. And so at some point, just history will tell you that it's gotta go and it should go the other way. I remember many, many years ago, this is actually during the financial crisis, Jamie Dimon's daughter,

who I think was in high school at the time, said to him, daddy, what's a financial crisis? And he said, it's something that happens every eight years. Well, if that's the case, we're long overdue. Yeah, it's nuts. What trends, if any, do you see? I mean, 90% of active managers have underperformed their respective indices. The way I would describe the alternative investments sector right now is expensive but bad. Do you think there's a shakeout coming, or do you think this is, we're about to enter an era of stock picking again?

Like talk about your industry, not media, but the alternative investments ecosystem. What do you see coming down the pike? Okay, well, so right now, the alternative investment ecosystem, and particularly private equity, you could argue is actually broken. There have been so few exits in the private equity space right now that actually most

US pension funds have no cash to give. It's actually a very interesting phenomenon. So all of these private equity firms are running around the country trying to raise money from various pension funds. And they're all saying, you guys haven't had exits in years. We don't have cash to hand you because you still have our cash. Every year you're marking up these investments as if they're worth more, but you haven't exited. And so then as you know, over the past couple of years, in part because the US was tapped out,

all these guys ran to the Middle East and started trying to raise money in Saudi and everywhere else. Well, guess what's happened over there? All of a sudden, they're saying to themselves, you know, we've got to start investing in Saudi and in the Middle East ourselves. So actually, we're going to get a little tapped out too. So unless there is a break in the market in a good way, meaning things

have to break the right way for there to be a series of exits. So that a lot of the sort of VC private equity world, which has been holding onto these assets, writing them these assets up, up, up, up, up, up, up with these valuations that may be real, but may be marked to make believe, depending on who you believe. If it works, they'll get out and maybe this whole thing can work again. At the moment, we're like in a little bit of like a almost like a stuck moment. Why do you think that is? Is that a regulatory issue? What argument would they make as to why we haven't seen so many exits in the past few years? I think there's a combination of things going on. One is in venture capital, something changed.

And I can't put my finger on specifically what it is, but just the duration, the whole time for venture capital investments has shifted materially. People have said they almost want to enjoy the ride longer. And I think you saw it like Stripe is a good example of that. But there were so many companies where I think you saw them stay private for longer,

and that has sort of changed the mindset. On the private equity side, I think it's literally that they have not found these markets hospitable to actually be able to get out of these investments at the kind of multiples they want over the last couple of years. And as a result, their view is let's not sell. Now, one of the things that they often talk about,

and they're not wrong, but it's really a little bit of semantics, they say, you know, private equity is a lot less volatile than the public markets. Well, it's a lot less volatile than the public markets because you don't look at the price every day. Exactly. So at some point, the rubber is gonna meet the the road and we'll see. Do the valuations

with which they've been holding these assets actually correlate to the quote unquote market in the context of the public market? Yeah. Just in the theme of getting kind of a temp check on Wall Street, we've seen a somewhat significant decline in the markets over the past few weeks. At least the headline this week is that the S&P 500 has erased almost all of its gains since Trump was elected. How do you think investors on Wall Street are feeling right now going into Inauguration Day? We talked a little bit about what you're paying attention to. What do you think they are paying attention to right now?

I think they're paying a lot of attention to the 10-year note, which as I said has gone up, which means that our costs are going to go up and that becomes more complicated for just about any business that relies on any type of credit. And frankly, the entire economy, if you think about it like that. I think there was a lot of excitement, as you know, in the fall about this sort of idea that Trump was going to come in and this Trump trade and all of that. And at some point, I think people actually started to think, like think clearly or a little more clearly about just what kind of challenges and headwinds we face, and they're

real. I think there was almost a, I don't want to say a delusion, but there was lots of commentary about the complications of what was going to come next after Biden, what Trump could bring, what he couldn't bring. The market for the most part, most people in the markets I think are professional optimists.

They have to be. And by the way, being optimistic has been a good thing over time. It's very hard to be a short seller. I'm a journalist. I'm supposed to be a professional skeptic. So I'm at almost at odds with this whole theory of the case. But I do think that there was an optimism. I think there still is an optimism.

I don't want to say the optimism has gone away, but I think there's a recognition that by default there's going to be greater challenges. Yeah, what do you think was that optimism when he was elected? I mean, you talked about the Trump trade. We've gone over a few of those in the past. Maybe the defense industry was something that could be a beneficiary of this administration. But what was fueling that optimism, do you think, in the markets? Was it sort of a regulatory optimism? Was it just,

we have a new lease on life in America? What fueled that? I think it's probably best represented by the view of what Scott has talked about on this broadcast and in other places, sort of the tech bros. This view that Silicon Valley was being reined in by Washington DC, they're being reined in by the European Union, that all of a sudden they were going to have someone who had their back. Now it's very hard to quantify what that actually means, but the concept was that the Lena cons of the world and the Gary Genslers running the SEC were going to be completely hands

off or a lot more hands off and that they were going to be able to do lots more things that they have been up until now, unable to do. I don't know if that's true. And I really don't know how you quantify that. And I think that's the hardest part. So you had, I think people this sort of animal spirits excitement period. I also think by the way, mergers and acquisitions,

there's going to be a lot more deal making over the next couple of years. There's no question the backlog, the pipeline that I hear from talking to bankers and lawyers who are working literally around the clock right now trying to actually get deals announced, even today knowing that in two weeks it's going to be a different administration. That's real.

I want to pivot just for a moment to a sector you must be talking so much about on CNBC and AI and valuations. Consumer and retail companies trade at 0.5 to 3 times revenues. SaaS trade at 6 times revenues. And OpenAI and Anthropic are trading at somewhere between 60 and 80 times revenues.

And while no doubt it's intoxicating, exciting, your mind spins with potential when you use these LLMs. I mean, there's a lot of expectation around intoxicating, exciting, your mind spins with potential when you use these LLMs. I mean, there's a lot of expectation around revenue growth built into these valuations. What's your sense of the AI market? Are you a bull here, cautiously pessimistic? Do you think it's overvalued? What are your thoughts on AI and valuations right now?

So on the valuation front, I still think the chip makers, anybody in the world of infrastructure, frankly anyone in the world of energy, I think there's a long road ahead. I don't think this, I think from a directional perspective, just the path is that there's going to be more and more AI, if you will, and more and more need for chips, energy, and everything else. You could make the argument maybe that from a technological perspective, at some point we'll hopefully figure out the energy piece of this meeting. We'll figure out a way to make chips that require less energy.

My bigger question is really on the software side when it comes to evaluations. I wonder whether all of these large language models become somewhat commoditized. I would argue that some of them seem relatively similar to each other. You know, every month one's better than the other, but they're all sort of playing in the same place. It's shocking to me even that when you think about

what Elon Musk is doing with XAI, that in a year, if you have enough money and enough Nvidia chips, you too can create a large language model that is relatively competitive with others. And look, I give their team an enormous amount of credit. I think there's some very smart folks there. But if you had told me that Google and Microsoft and OpenAI and everybody else was working on these things for years and years and years and years and years and all of a sudden, literally, what Elon's done is spun this up in 12 months. It's incredible. And what does that say about the defensibility and the sort of the moat around the large language model? So then the question is, what are these large language models really worth?

And are they just a feature? Is it just a feature of everything else? I also think it raises some real questions. If it's so great talking about evaluations, what kind of moat is around every other business? Meaning you either have to take the position that the large language models are amazing, in which case they should have crazy valuations and everything else should be relatively destroyed and worthless because you and I will be able to make an app that competes with any of these things at any moment in time. Or you have to believe that the large language models are really not where the action is and it's going to be everything else. It's probably somewhere in between.

Stay with us. Support for the show comes from the Fundrise Innovation Fund. Think of the five biggest names in AI today. How many of these companies do you own shares of? Probably not many. Maybe one, maybe two. Why is that? Because the open AIs and anthropics of the world are still private. That means unless you're an employee or a VC, you're out of luck. So it isn't hard to see why venture capital has been one of the most prized asset classes in the world, but unless you're worth eight or nine figures, you

likely don't have access to these funds. The Fundrise Innovation Fund is different. It's already raised more than $150 million. It holds a portfolio of pre-IPO tech companies that are valued at tens or even hundreds of billions of dollars. And most importantly, it's open to investors of all sizes. Visit fundrise.com slash propg to check out the Innovation Funds portfolio and start investing today. Relevant disclaimers can be found at the end of the show and at fundrise.com slash innovation. We're back with ProfGMarkets. Yeah, I just want to pivot us to TikTok, which is on the chopping block right now.

It's set to be banned before Trump is inaugurated. And now there are rumors that it's set to be banned before Trump is inaugurated. And now there are rumors that it's going to be sold to Elon Musk. This is apparently what Beijing officials are talking about. I just love to get your view. Do you have any thoughts on how this TikTok saga will play out? Well, the idea that it would be sold to Elon Musk, I think is fascinating. There's a great irony in that, in that, by the way, there were a lot of Democrats that were pushing to have TikTok banned, if you remember. And so all of a sudden, this would get pushed into the hands of Elon Musk.

And whatever algos they're running, or that he's running, I think they wouldn't ultimately be happy with. At the same time, I think there are Republicans, I'm thinking of Steve Bannon and others, even within the party that would say they don't want Elon Musk having control of these things. There's probably an even larger question about just concentration and power, and I don't know where Donald Trump would land there. And then to layer on top of all of that, there's a real question, which is, if China is prepared to sell to Elon Musk and only to Elon Musk, what does that say

about the leverage and influence that China must think that they have over Elon Musk by dint of his factories and Tesla business in the nation state that is China. And then it probably raises a whole secondary order of questions, which is if China feels this way, how should we as Americans feel that people are calling him the co-president of the United States? Yes, exactly. Yeah, how do you think that dynamic between Elon Musk and President Trump will play out? I think this is a big question many of us are asking ourselves. Scaramucci, who we had on, says Elon's going to get stabbed in the back and then he's going to be thrown out.

I mean, that's his view on anyone who works with Trump. But it is beginning to maybe feel that way. The more that people say that Elon Musk is our co-president, and the more that people might assume that as you're pointing out, perhaps he's compromised in certain ways because of his ties to China, how do you think our relationship with Trump will play out? First of all, I don't know if he's compromised or not. I like to think the best of folks. I do want to say that. I don't want to put words in your mouth. All of these people, there's like a betting line on how quickly this relationship is going

to end. I actually don't think it ends so quickly and I'm not sure it ends at all. And the reason is, prior to the election, Trump actually needed Elon. By the way, he needed Elon's money, right? That was what tied them together. Now that Trump is president, Elon needs Trump, given his businesses, both Tesla, particularly SpaceX and the like. So I think that there's lots of, if you always just follow the money and think about the incentives,

you have to say to yourself that Elon would want to align himself with the President now. And I think it would actually be hard to extricate himself, meaning if the President pushes him away, that's a problem for him. Yeah. So I was on your sister network, MSNBC, and I said that-

You were awesome, by the way, I watched it. Oh, thanks, Andrew. And I loved it. And I'm not pandering to you. You were so good. Go on. Anyways, the part you probably didn't see, because MSNBC clipped it, was I said that for the first time in a nation's history, a 30-year-old isn't doing as well as his

or her parents, which is why we put an insurrectionist and a rapist in office in the White House. And Mika took the time at the end of the show to say, to fact check me and said he was found liable of sexual abuse. I think she was doing her job. I, what I said was technically inaccurate and she did her job. If I had said that, if they had posted the full clip on social media, social media would have loved it and circulated it,

and they would have made more money. But instead, traditional media, Comcast, under the auspices of being sued, has to hire bright people to fact check me. And I appreciate it. I get it wrong all the time. And not put it out there. And as a result, traditional media under the, quote unquote, auspices of moderation or censorship, if you're, if you're left or right is shrinking because they have to their means of production and fact checking, they are basically trying to run, you know, run a race with one foot tied behind their back. And meanwhile, social media is playing tennis without a net. So this long-winded way and a word salad of asking,

what do you think of this decision to no longer moderate or censor from meta? And are you worried that traditional media just can't compete when they are subject to a set of standards and liability that the medium where two two thirds of people now get their news no longer needs to fact check, no longer needs to have anything resembling liability. I mean, quite frankly, let me put it this way,

isn't Comcast just fucked? Well, I hope not, and I don't think so. I actually do think that people come to established news organizations that hopefully do have credibility. And I know people have lots of questions about it. And I recognize that. I recognize that. But I think there's a distinction between journalists who hopefully are trying to act in good faith

and institutions that can put resources behind real news gathering. I mean, you go look at this LA wildfire and some of the folks who've been out there on the ground. Now, you could argue that there's classic sort of legacy, traditional news reporters out there doing that work. And then there's all sorts of other people. Some of it is great citizenry journalism, right? And you're seeing it right off the phone. And that's great. And some others are making up stuff left and right. And the big question that I have is, as a society,

just how we're going to contend with that piece of it. If we are not holding the social media companies effectively accountable for some form of truth, and again, I know there's debates about what truth is today, but if right now it's blue, the sky is blue here in New York and- No, it's not, it's DEI. But that's the point.

If we can't agree that the sky is blue, if we can't agree the sky is blue today and there is not a cloud in the sky, we've got a problem. And so I think on the basics, we need to actually at least make sure that those things are taken care of. They are not today. And clearly the worst part is that the most sensational news, which is often wrong, gets the most attention. And by the time there's even an opportunity to quote unquote, correct it, nobody sees it. And that is to me the scariest part about what's happening in the social media sphere.

But this has been a perennial problem for more than a decade now. I've been thinking about this a lot as someone who is kind of in the media, especially now that we've got Trump coming in on January 20th, I've been trying to think about how to maintain trust and how to just stay on top of this cultural shift that really antagonizes people like you. I feel like you're kind of the most, in my view, the most sober, you're the most sober figure in the traditional legacy establishment media engine, whatever we want to call it. And so I was very interested to hear just how you are dealing with that.

And perhaps if you have a plan or if you have any ideas for how you're going to deal with the news in the next four years. You know, look, ultimately, I think this is an issue. It's it's it's this age old question of trust and who do you trust? And I think that actually one of the things that this medium, by the way, podcasts and social media and everything else, while social media can undo trust very quickly, it can also create trust and clearly has created trusted brands and trusted people. And I think that, I hate the word authentic, but I do think that you, Ed and Scott are super authentic and the people who follow you, if you will, genuinely trust you.

And it's not necessarily that they trust every word that you're saying is accurate. They trust, hopefully, that they believe that what you're saying is in good faith. that they believe that what you're saying is in good faith. It's that you believe what you're saying is true, that you've done the homework, that you've thought about these things, that you've spent time with other smart people debating these things. And so while they may not agree with your conclusion, they look at both of you and say, these guys are trying. I think that matters. I think the traditional legacy media business, we all need to do a better job of

connecting with the reader, viewer, listener in that way. Because oftentimes, I think in the TV business or in the newspaper business, it comes across as more two dimensional, right? You're reading it on a page, you're seeing it on TV with bright lights and fancy graphics and all sorts of stuff happening. And it's harder to connect in that way. But I do look, I'm somebody when I read a newspaper today or watch a television program, I'm usually reading the byline. Meaning I read the byline, then I decide whether I'm going to continue with the story. And I think big media companies are now trying to hopefully and will have to continue to try to collect, they have to become people collectors.

hopefully, and will have to continue to try to collect, they have to become people collectors. They're going to have to collect the trusted people that have those relationships with an audience. One last question from me. If it wasn't clear, you are one of my heroes professionally. When I think about how I'd like my career to end up, you're one of the first people that comes to mind. My final question to you,

do you have any heroes of your own? Is there anyone you look up to professionally with someone who you have drawn inspiration from? So many people. You know, I started my career at the New York Times when I was 18 years old. I think Scott knows this story, working for a guy named Stuart Elliot, who is still my hero. He was the advertising columnist at the New York Times when I was 18 years old. I think Scott knows this story, working for a guy named Stuart Elliott,

who is still my hero. He was the advertising columnist at the New York Times. And what he had was what I just described, trust with a particular audience. At the time he covered the advertising industry, but that industry read him like a religion. They believed in what he was writing because he was so in it, he was so deep in it. And he demonstrated his care for the art of it and how much he

both loved that world, but also held that world accountable. And I think people really, you could feel that. By the way, Scott is going to think I'm pandering to him. I remember when Scott, long before he was a podcaster and a great speaker and a great writer, he was trying to take on the New York Times, actually, as an activist investor. Do you remember this, Scott, back in the day? Yeah, I remember, Andrew. as an activist investor. Do you remember this Scott, back in the day? Yeah, I remember, Andrew. You remember.

And I have watched with great admiration and more than that actually, the career that Scott's had and what he's been able to do and describe in sort of the public space as almost a public intellectual. I don't know if you think of yourself as a public intellectual, Scott,

but I think you've forced and created lots of important conversations and discourse in this country that has been super important. So, you know, it's not a long list, but there's a couple of people who I've really admired. By the way, authors, there's some great authors that I've admired and TV writers and all sorts of things. So just before I get to my last question,

this is a true story. I was on the board of the New York Times and we go over compensation for the top people in succession plan in, this was in 2008. So what, 17 years ago. So you must've been like five, I don't know how old you were, but you were a big name. I was probably like 29, maybe 30.

29, 30 probably. And your name came up. And everyone we're talking about, I guess they were thinking about giving you some role, and we were trying to cut costs or whatever it was. And someone brought up your name. And I'm not exaggerating, everyone around the table, from the publisher Arthur Salzburger to Janet Robinson

to every board member went, pay him whatever he wants. Everyone was like, this kid is our LeBron James. It's like the entire board room was, Pam, everyone's like, fuck him, cut his salary 20%, let her walk, let her go to the pub. Oh, oh, that kid, Pam, whatever he wants. I love that. You were literally the Cole Palmer of journalism.

Anyway, my last question. I think of you as an entrepreneur. You've started kind of these businesses within platforms and you've got obviously media, you've got TV, you've got newsletters, you've got events, you do books. If you were to pick kind of one business or which businesses are you planning to over invest in and which might you under invest?

Like what side of your business flywheel do you think holds the most potential for you and which do you think are probably going to decline in terms of your own human capital? That's such a great question. I imagine, look, I still think that journalism is the core of everything I do. Interviewing people, talking to people, reporting into the night, working the phones last night on the TikTok story and trying to talk to insiders

who are involved. I still think that is for me the coin of the realm and that's where I learn the most. And that ultimately infuses any kind of side project, whether it be a book or a TV show or this or that. So to me, that is always in my career, I think, going to be the core. I would have told you a decade ago that the entertainment space seemed like that's where the riches of the business might be because you know folks who were Producing movies or television shows, you know, there was back end points and this and that and all sorts of things

I don't know whether I think given streaming and just what's happened to that whole business I'm not sure economically that that is you know that Jerry Seinfeld they say is you know made $1 billion or whatever it is. I don't think that can be accomplished in the same way that it used to be. I think potentially that the news business could actually, especially with AI, I know everybody's scared of AI in the news business, and maybe it'll accrue only to, you know, a sort of winners and losers cast. But I actually do think that there's still huge opportunity in journalism, especially because of this trust question. Because the trust question exists, I think it represents

an opportunity from a business perspective and hopefully from a national discourse one too. Andrew R. Sorkin is a financial columnist for the New York Times and the editor at Lodge of Dealbook. He's also the co-anchor of Squawk Box, CNBC's signature morning program, and the author of the bestselling book, Too Big to Fail. Andrew, it was an honor having you on. Thank you so much for joining us.

It was an honor to be on. God bless you. Ed's professional hero. I'm not jealous at all, but let's see if he pays your bonus bitch this year. Jesus Christ. There you go. Andrew. I love you, man.

Canadian spy. No one should forget that. Canadian spy. No one should forget that. Hold on. Now I thought I'm an American spy, part of the 51st state. That's right. Oh, there you go.

Well played, sir. Touche. Touche. Andrew, we're obviously huge fans. Thanks so much for your time. Me too. I'll talk obviously huge fans. Thanks so much for your time. Me too. I'll talk to you soon. Thanks.

This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Allison Weiss. Mia Silverio is our research lead. Jessica Lang is our research associate. Drew Burrows is our technical director. And Catherine Dillon is our executive producer. Thank you for listening to ProfG Markets from the Vox Media

Podcast Network. If you liked what you heard, give us a follow and join us for a fresh take on markets on Monday. In kind reunion As the water And the drop flies In love, love, love, love Support for the show comes from the Fundrise Innovation Fund. You've heard me talk about the Fundrise Innovation Fund before, so I'll keep this short. Venture Capital was, and to a certain extent is, still an old boys club. You had either to be filthy rich or an insider to get access.

The Innovation Fund is trying to change that, building a blue chip portfolio making it available to everyone, and with 150 million raised from tens of thousands of investors, it's just getting started. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the Innovation Fund's prospectus at