Prof G Markets - OpenAI Wants A Government Bailout

Episode Date: July 6, 2026

Scott Galloway and Ed Elson unpack reports that Meta is launching a cloud business and explain why they see it as a bearish signal. They also discuss why they don’t think there’s any justification for a government bailout of OpenAI. Then, they break down why the new Trump accounts are a step in the right direction, but argue that reducing inequality shouldn't depend on the generosity of billionaires. Finally, Scott explains the investment thesis behind his bullish call on the Bending Spoons IPO and why he decided to invest in the company. Subscribe to the Prof G Markets Youtube Channel  Subscribe to the Prof G Markets newsletter  Order "Notes on Being a Man," out now Note: We may earn revenue from some of the links we provide. Follow the podcast across socials @profgmarkets Follow Scott on Instagram Follow Ed on Instagram, X and Substack Send us your questions or comments by emailing [e-mail] Learn more about your ad choices. Visit podcastchoices.com/adchoices

One day, with the help of science, you might be able to live forever. Forever. Your body will just need a couple tune-ups. Injecting bone marrow in your 40s, your kidney in your 50s, your heart in your 60s, and so on, and then potentially a whole body transplant by the time that you were 90. This week on Explain It to Me, The Quest for Longevity. Find new episodes, Sundays, wherever you get your podcasts. Here's something most wellness influencers won't tell you.

Obsessing over supplements, powders, cold plunges, wearables, and hacks, that's going to undermine your goals. I call it majoring in the minors, and it is one of the five mistakes I see people make most on their wellness journeys. I'm Rapid-OgeSung, VP and Head Instructor at Peloton, and this week on my podcast Project Swagger, I'm sharing all of those mistakes and what I want to see you do instead. Follow Project Starger Now, wherever you get your podcasts. Today's number 26.2 million dollars.

That's how much the citizens of Atlanta spent on only fans last year, the most of any U.S. city. Ed, why did the Scarecrow win an award? Why? Because he was outstanding in his field. So in case you are, we need to be caught up, I'm going to tell dad jokes until Michael Simballis, the chief investment officer from J.P. Morgan accepts our apology for offense. for telling a dirty joke on the episode he appeared. I actually find the dad jokes funnier than the sex jokes. I'm sorry, we need to fix that.

Why can't you hear a pterodactal in the bathroom? Why is that? Because the pee is silent. Michael, accept our apology. Or don't? Release the dick jokes. Actually, that's my new position. I don't want him to accept it.

I like this new direction. How are you? Doing very well. It's coming home. I don't know about that, because that was a pretty shocking performance. This will come out on Monday, and we're recording before Sunday night, so we'll see if England's still in the World Cup.

But, yeah, the Congo performance was not great. Do they have to play Mexico? They have to play, is the next game, Mexico, at Azteca? Yeah, Mexico Sunday. Yeah, it's going to be a tough one. Did you see Team USA? Team USA looks good. The scary part is the star of the U.S. team.

Philharin, I think it's Balagan, received a controversial red card. Yeah, yeah, I saw. Do you see that? I think that's very anti-American. I don't know. And by the way, do you... Discrimination against the Yanks? Do you know what?

Follaren Belligan and Scott Galloway have in common? Other than exceptional athletic skill. What's that? We're both anchor babies. His mother was seven months pregnant and the airline wouldn't let her fly. And so he was born in the U.S. That's why I was on Team USA.

And Sylvia Levine and Tom Galloway, who met in Toronto at a dance, my mom was seven and a half months pregnant. Pretty sure they went wed. I think they've been lying to me about that. And too late to check now, and they decided they couldn't endure another winter. This is a true story. And my mom read in the Toronto Globe and Mail that the city with the best weather in North America was the city called San Diego.

So they loaded up my mom's Austin Mini Metro, which is essentially a lawnmower with doors. I don't know if you've ever seen Mr. Bean. it's a go-kart. And seven and a half months pregnant, my mom and my dad traversed across the U.S. with no air conditioning in their car and landed in San Diego and five weeks later I was born. So had this ridiculous attempt to turn back the 14th Amendment been in place now, yours truly would not be an American citizen. So what I am asking is that the IRS recognized that I'm not a citizen as I want to move to Dubai and I want the $100 million. and taxes me and my company have paid over the last decade. I want it back. According to you,

fucking Stephen Miller and Donald Trump, I am not a citizen, meaning I'm not obligated to pay taxes in the United States. So anchor baby here, anchor baby, revoke my citizenship and tax status, please. I love that. I'm kind of a reverse anchor baby, or I guess maybe I'm an anchor baby in Britain. American parents, go to the UK, born in the UK, come back here. Oh my God. Or how's an undocumented worker. Someone call ICE. Call them. Take me away.

It's almost bonus time. I'm going to be like that bitch that called ice on the roofers when they were done roofing her house and she didn't want to pay them so she called ICE. Literally December 30th. Merry Christmas.

Please meet Mr. Sanchez from ICE. I'm sorry, Ed. I love it. We were going to pay you a bonus, but it just wouldn't be right. It just wouldn't be right. Get them out of here. Why does that make me happy?

Why does that make me happy? I'm colonized on Ed Elson. Oh, that's hilarious. That's good. That's hilarious. You can try it. Are you a citizen? Yeah, but I'm a citizen, so I've got the dual passport, so it's not really going to work out.

But you can try it. Wait, so you weren't born here, so your parents applied for your citizenship? I don't really know what they did, but they're American. Oh, sure you don't, you little illegal immigrant. Right? All right. Everyone knows what's going on here. Everyone knows what's going on here. Okay.

All right. Well, now that we've figured out our citizenship status, you will have it revoked, and I apparently am illegal currently. Shall we get into our three big stories? We've got a lot to talk about today. Let's get to the news. Stop bantering. Let's do it. Now is the time to fly.

I hope you have plenty of the wear of all. There were two strange updates in the AI world last week. First, Open AI proposed giving the Trump administration a 5% stake in the company. That stake would be worth roughly $43 billion. Sam Altman has reportedly argued that a government stake in the company would be the best way to share in the upside of AI with the public. And there's a vision for other AI companies to potentially join in, essentially creating a sovereign wealth fund. And then in the second piece of news, meta is reportedly becoming a cloud provider. The company is preparing to sell its excess AI computing capacity.

That is a notable shift after spending billions to build out infrastructure that it previously said would be necessary for its own AI ambitions. Investors did welcome the news, though, sending meta shares up nearly 9%, but the reaction wasn't nearly as positive elsewhere. shares of neocloud companies like Corweave and Nebius fell roughly 12% on the news. So, Scott, lots to get into in the AI department here. First, I'm just going to take my own little personal victory lap because if you follow me on Twitter, you know that I actually bought Meta last week at $564.

Here we are. The reason I bought is because I thought that the stock was way undervalued, trading in 20 times earnings, S&B trading at 25 times. So that's pretty cheap relative to the rest of the market. And this is a player that obviously is positioned for AI if we do see an AI boom. Plus, the last time it traded that low was in 2022. And since then, revenues have grown more than 70%. Gross margins have increased 200 basis points.

So the whole thing just looked very attractive. The market was very worried that Zuckerberg was investing all of this money into these data centers, but hadn't laid out a plan for how he was going to monetize those data centers. Well, now he's given us. the answer, and he's basically just going to do what AWS did and what the cloud providers do, we just rent out the chips and sell it to enterprises. Now, there is a lot of debate over whether this is actually bullish or bearish, because what we also know is that the plan was to use all of that compute to build their own AI products. And now they're saying, no, we're not going to do

that anymore. We're going to sell it to someone else, and someone else is going to build the AI products, which begs this question, who's going to build the AI products? And why isn't meta down to do it? If they're one of the most capitalized companies in the world and they are supposedly supposed to be a leader in AI, that's the bearish question. Lots to get into your reactions. This sent chills down my spine.

I had real deja vu of 99 again because what do we have here? essentially, and I don't listen to markets nor enjoy it unless I'm on it, but I did find that guy you had out Ed Zitrin, Citrin, he's very good. And I was fascinated by what he said. He's basically saying, this whole thing's crumbling.

That's my takeaway. And I was fascinated by, I mean, his basic thesis and tell me if I have this right, is that all of the demand that trickles down to the trillions of dollars of CAPEX and infrastructure and unbelievable valuations from construction firms to the chips guys is now basically down to demand being created by two players and that is Anthropic and Open AI are still growing but meta and XAI who are

planning to create demand themselves with their own customer basis needs for AI products have basically said, oh, we overestimated the front-end demand we could create, so we're going to lease out our infrastructure. So all of a sudden, it looks like we've gone from another unbelievable pivot from a crisis of supply to a crisis of front-end demand. And probably the strongest evidence of that of the kind of demand shock, if you will, is OpenAI delaying their IPO. In this, market, you would think, even if they'd lost some momentum, they would be Jonesing to get out. And, I mean, it looks as if, so what did we have? We had, um, Grock has 5% market share,

Cloud S-14, Chatsch, BT 49, Gemini 20, and Lama had 2.1. And I, I don't think it was the market saying, uh, okay, this is, this is, this is, we like the revenue that these guys are going to pick up. It's actually a drop in the bucket for these guys. I think they, what the market was saying is, this is a KAPX race that is going to be a loser. And we like that meta's beginning to look more like Apple, and they're not, they're basically getting out early of these KAPX wars. And this all feels very 99 to me, and that is you had, so we knew the Internet was going to be huge. People were confident of that.

But the front end guy, it's the application layer, the Pets.com, the Amazon.coms, the E-Toys, it was clear that they weren't going to be able to create the kind of revenue in the short term that justified their valuations. So everyone thought, wait, let's go to B2B. So we went from OpenAI to B-to-B Anthropic, which was big in the enterprise, right? And then we found out there was companies, you know, remember this, like Internet Capital Group, which was supposed to be a marketplace so Pepsi could buy sugar. And then what everyone realized was it was just total bullshit that it was much easier. or to pick up the phone or just send a fax.

And the B2B guys collapsed. And then they thought, well, hold on, okay, B2C and B2B, maybe we can't pick the winners. But the Internet's huge. We need infrastructure investment. So people threw in the hat on trying to pick which front end or which B2B application of the layer was going to be huge. And they invested in infrastructure and they invested in Cisco, right?

They invested in fiber. And then Cisco from 99 to 2001 lost 92% of its market capitalization. And that sort of feels like what's happening here is the front end is stressed, is not creating the demand originally anticipated. So we went from open AI to wait, anthropic, it's B2B. That's where it's at. Now we're starting to see what is it token nausea. People are saying you're spending too much in the enterprise on this shit.

You need to scale it back. And I think the next shoot-a-drop is going to be in the infrastructure layer. And what people don't, and that's not to say the technology is not amazing. That's not to say these companies won't be great companies that'll be around in 20 or 30 years. Amazon lost 90% of its value in a 24-month period. It's obviously recovered then in some. The Internet has lived up to the hype. But they went through incredible volatility because the initial is, I mean, it's gone from not what can AI do to will AI pay.

And right now, it seems to me, we're starting to see real cracks in the wall or in the narrative. Just to go to what Meta and Mark Zuckerberg had previously said about these hundreds of billions of dollars that they were investing and spending on building all of these data centers, which again, the market didn't like because they didn't have a clear answer to the question of how are you going to monetize them. But basically, here are some quotes that executives at Meta said that told us roughly what they were thinking. So Zuckerberg said in 2024, quote, our goal with MetaI is to build the world's leading AI service. us both in quality and usage. So the idea was, we're going to build our own AI stuff. In 2025, the CFO said when she was asked about the ROI question, he said, quote, even with the capacity that we're bringing online in 2025, we are having a hard time meeting the demand that teams have for compute resources across the company, i.e., we are building all of these AI products, and we can barely keep up with the demand for our own teams within the company. Then, this is the most important quote, when asked if he would ever just start a cloud business, which he's now doing

as of last week, Zuckerberg said this year, quote, we haven't done that yet because we think that we have a use for the compute. Obviously, if we get to a point where we feel that we have overbuilt, then that is an option that we have, and that is partially what gives us confidence in investing in building this out. Well, they've now done the thing that they said that they would only do if they felt that they had, quote, overbuilt. So the question is, have they overbuilt? And I think that it would be a very, very reasonable answer to say, yes, they have, because look at what they're now doing. So I think that you're right in pointing out the difference between the front end of AI, i.e. using chat GPT, using Claude, et cetera, and the back end, which is building the infrastructure, building the

data centers. Meta clearly tried to build a front-end AI business. They tried to do Lama, as you said, 2% market share. Clearly it didn't work. So now they're shifting to the back end. They say, we're not going to build those products. We're going to sell stuff to other companies. We're going to build the products. X-AI similar position. They tried to build a front-end business. Mostly hasn't worked. GROC has like 5% market share. They're shifting to the back-end. They're shifting more focus on building the data centers, which they are now renting out to other companies that they should really be competing with. And so now most companies are basically deciding building the front end is a bad business, better to build the back end, build the infrastructure,

and sell it to the front end AI businesses. So then the question becomes, okay, who are these front-end AI businesses that they're selling to? That supposedly is a good business. They've invested hundreds of billions of dollars into. And the answer is there are two companies. it's anthropic, and it's open AI, and that's basically it. And when we look at our estimates, those two companies alone account for between 60 to 80% of the AI revenues for Amazon, for Google, and for Microsoft, and according to the information, those two companies alone make up half of the entire revenue backlog of the hypers, i.e., the big tech companies, meaning that the back-end infrastructure business only works

if Open AI and Anthropic continue to pay all this money and keep this whole thing afloat, which then begs the question, do you think they'll keep actually paying? And this is where the financials is so important, which were leaked by Ed Zittran, who we had on, and we learned that Open AI made $13 billion in revenue last year,

okay, great, but they spent $34 billion. So their operating loss was $21 billion. Anthropic, we don't know the financials, but we at Prof G have done some mess. estimates. We know that they made four and a half billion dollars in revenue last year. Based on our estimates, they probably spent around 15 and a half billion. That's an $11 billion operating loss, meaning the front-end AI business only works if the VCs continue to subsidize it to the tune of hundreds of billions of dollars. And by the way, if the hyperscalers continue

to subsidize it. But if they stop doing that, then suddenly this business of building front-end AI doesn't work anymore, which means the business of selling the back end doesn't work anymore, which basically means the whole thing falls apart, which brings us to Open AI and their recent news, which is that they have decided that the best bet is to go to the government for what seems to be something like a bailout. And that is, according to the financial times, they've discussed giving a 5% stake to the US government. And so it seems as though instead of Silicon Valley subsidizing those losses, maybe now just the taxpayers will. And maybe that's the plan. And maybe that's a good idea, because that's what the banks did in 2008. And it didn't work

for some of them, but it worked out for most of them. And so you have to think, maybe they see this collapsing. And that's why they go to the government. But either way, both of these pieces of news in the same week, that's very, very bearish, in my view. And, and, and seems to indicate that this is a growing bubble that is nearing a point of maybe not a collapse, but certainly massive course correction. Open AI, I predicted this six months ago, that the biggest bailout in corporate history was about to happen, and it was going to be the bailout of Nadella, Altman, Dario Amadeh, and it would be dressed up as investment or growth. It's not. It's a bailout.

If the government were to take a 5% stake in Open AI, great. They're going to favor Open AI. They're going to overregulate their competitors and underregulate Open AI. They're going to provide them with protection money and direct access to the White House. It's not even socialism. It's cronyism. It's like, you know, when things are really good, we want to capture all the gains ourselves. But when things are bad, we want to socialize the losses.

That's not capitalism on the way up and socialism on the way down is cronyism. And that's what's being offered here. It's also evidence that things are, there's something wrong in Mudville. And then just as the great flippinging was the reversal of fortunes in from the massive leakage of momentum from open AI to anthropic, we've seen another incredible flippinging, but this is one is geographic. And that is free Chinese models went from 30% of AI traffic to 60% in six months. The dominant AI models are now imports. I mean, this is the thing that rocked the automobile industry was a product called the Honda Civic. That was sort of a slow-moving train wreck over 10 years.

This has been 10 weeks. GPU rates are collapsing. The hyperscalers built $300 billion of infrastructure for customers who are switching to DeepSeek for free. The way to describe this historically is this is the, the fiber overbuild of 1999. The Chinese model problem is like another problem on top of all of their other problems, because, I mean, as you pointed out, a lot of these large companies are now switching. I can go through a list of some of them who have switched to Chinese models.

Coinbase is now using Kimi, cursor is using Kimi, Shopify is using Kwan, Airbnb is using Kwan, AirB is using Kwan, Simmons is using Deepseek. Microsoft is now apparently testing Deepseek. And the reason they're all doing this is because the Chinese models are way cheaper. And we talked about why is that the case. Some say it's because Chinese have cheaper energy and that might be part of it. But also it seems that they're kind of just stealing the models from the U.S. companies through this process of distillation. I don't think the Chinese would do that, Ed.

They hate stealing IP. It's not their game. Yeah, that's probably what's happening. And unless you can do something to stop that, then this train's going to keep running here. And the Chinese models are going to continue to take up market share. And the real problem is the fact that it has now sparked OpenAI to supposedly consider reducing their own prices. And if you're a company that's making $13 billion and spending $34 billion, and you're going to decide that actually we're going to reduce the revenue number because we're being priced out by other companies that are offering not just comparable products,

but literally equal products. I mean, studies have been done. These models are perfectly good on a variety of different metrics. That basically means that OpenAI's business is in big, big trouble. And again, they can say that they're giving the stake to the US government

because they want the American people to all share in the upside. But what they're really saying is, we want the American people to all share in the downside. Because right now, the business is currently all downside. You haven't figured out a way to make this product profitable. You haven't figured out a way to sell this product without spending literally like billions and billions of dollars on sales and marketing, almost six billion dollars. They could have bought Super Bowl ads for a decade, every single Super Bowl ad for literally a decade.

Like this is a business that clearly hasn't proven itself and they're already going to government and saying, you guys, support us. What I can't tell, though, is whether that, I mean, clearly I'm bearish after hearing about the meta news, but now I'm wondering, okay, if the government just bails them out, then maybe it will all work out. Like, I don't know if I should be, if we should necessarily be betting events against companies that are literally going to be subsidized by the full force in the balance sheet of the U.S. government. know if that's actually what's going to happen here. And I don't think it's fair and I think it's honestly reprehensible. And I can't believe that we can't learn from our mistakes in the past

and continue to do the same thing over and over and over again. And I know it's going to create hatred of these companies among the American people, i.e. the taxpayers who are going to pay for all of this. But part of me thinks maybe that works, just getting bailed out. And maybe that means that they can figure out a way to reach profitability, if they can just continue to have their losses subsidized by someone who's way richer than them. It started off with Silicon Valley. Then it went to big tech, like companies like Microsoft, and now it's going to literally the U.S. government. I mean, maybe that's a winning strategy. I don't know. This is a common theme in America, and that is my generation or the incumbents, if you will, it's not old versus young. It's not

rich versus poor. It's incumbents versus entrance. But the incumbents who are sitting on top, of a company recently valued at $875 billion, it's okay. If they go to $100 billion, they're still going to be worth twice what Ford is worth. They're still going to be one of the 100 most valuable companies in the world. Companies trading at $875 billion shouldn't get bailouts. Now, you could argue that if Ford goes from $10 billion to zero

and has to lay off a couple million people in middle class jobs are lost in the Midwest, okay, maybe that's at least a feasible argument for government invention, having societal implications or a positive or justification. Open a. Ianthropic, burn baby, burn. If all of a sudden, Nvidia goes from being worth more than the entire German and Spanish stock market to just being worth what the French stock market is worth, okay. There's absolutely no justification for me to whip out your credit card and run up our deficit such that the current owners, the private owners of Anthropic and Open AI shares can maintain their gains.

This isn't about an existential crisis where you think we would lose millions of jobs and the very existence of this category and losing this game. This is about keeping the incumbents rich. And that is basically a curse or a virus that infects America. I have two college degrees in a bunch of homes. I'm going to make it harder for everybody else to get one, such that the value of my current assets go up. No, that's not the way America's supposed to work.

And the idea that we're even talking about this for companies that are, if Anthropic were in Europe, it was founded five years ago, it would be one of the four most valuable companies in Europe right now. What company that's one of the 20 most valuable companies in Europe has any discussion of a bailout. The plane is running at Mach 3 and doing just fine. Why do the pilots need to bail out? Why do we need to pay for these things? These things say they lose 80% of their value. Amazon less 92% of its value. We didn't bail them out. That's fine. That's a part of, that's part of capitalism. So the fact that this is even being discussed, in my opinion, is Sam Altman saying,

I have no fidelity to capitalism. I did this weird fucking deal with TPG and O.E., other private equity firms that guaranteed them a 16 or a 17% pick, all that does is start to crush the previous rounds of investors because those numbers will start to add up pretty fast. But my God, if they lose 80% of their values, so you're saying it's only worth as much as the entire U.S. auto industry, sounds Tesla. But it's almost like they want to be systemic. They want to be, it's like Open AI is essentially like a zombie child that was, formed by all of the big tech companies that have become systemic to the stock market. And it's like Sam Altman is trying to make the company as systemic as possible such that eventually when

things go wrong, we have no choice to bail them out. It seems like this is almost all part of the design that he wants to be too big to fail. He wants for the US government to own a 5% stake in it so that if anything ever goes wrong, why wouldn't the US government figure out of a way to bail them out. And it's almost like all of these, none of this growth is organic. Like, give ChatGBT, GBT, it's credit on a user basis. That was organic growth. People loved the product and they started using it. But they haven't figured out how to monetize it in a realistic or sustainable way. And so all of the growth that we've seen from the valuations, from the circular deals, now going to the government, all of that is basically a setup where they are

artificially growing this thing, and they're trying to make it so big and so core in such a part of our lives, such that by the time the business truly does flounder, we'll have no choice but to say, hey, we need this thing, we're all on this together, let's bail them out. It feels like that is the direction that they are taking, that they want to become as systemic as humanly possible. And it's like, it's honestly gross. I just can't, I, that, seeing that headline, And I bet Trump is down because he basically will do anything for anyone who shows up to the White House and kisses his ass. This is what we've seen time and time again. It's more than just showing up to the White House.

What is it, 93% of GDP growth, 75% of earnings growth, come down to these firms continued spend. So just as we have convinced ourselves, it makes sense to spend $7 trillion on government spending with $5 trillion receipts just to keep the good times in the sugar-hot companies. coming, Trump does not want the economy to slow down, especially going into the midterms, so he will potentially be open to the notion of doing whatever's required, including pulling out your credit card, to keep the music playing. But this is no different. Corporations, you know, Mitt Romney tried to tell us corporations are people. I don't think that's true. I think the corporations, you let your thoroughbreds run, the idea is they pay their taxes, and then you try and fund a Navy in parks and SNAP payments and unemployment insurance for actual people. But this really is no different

than say someone is worth $100 million, and they really like being worth $100 million, and they're really good friends with Trump. And they're really good for their community, and they spend a lot of money everywhere. I'm like, oh, no, my business is shit. And I need the government to invest in my business and give me government contracts and also maybe put some of my competitors out of business, maybe give me government-backed loans, such that I'm not worth just $25 million. Is that a good use of the government's money? So if OpenA.R. Anthropic lost 75% of the market cap, they'd only be worth as much as Uber or Adobe or Charles Schwatt or Amgen.

But because this run-up, this sugar high, has been fueled by this new technology and the unbelievable expectations there, this could, this would be the absolute, worst thing for our economy that we could do is to decide that these thoroughbreds that are amazing companies and worth a ton of money need to be propped up. It would be absolutely no different than picking the wealthiest 100 Americans and saying, we're going to use the credit card and the debt capacity of future generations to make sure you maintain that you continue to be the top 100 wealthiest people in the world. And to a certain extent, that's what we've been doing by weaponizing housing, by weaponizing or sequest,

transferring degrees to college. Again, yet another transfer to the already super fucking wealthy. We'll be right back after the break. And if you're enjoying the show so far, send it to a friend. And please follow us on YouTube and Spotify or wherever you get your podcasts. Is Donald Trump still cool? Well, at first, there was what he was promising to America. He was promising change. Yeah, he's a big change. Has he lived up to that? No. No. I wouldn't say so. I'm disappointed. We're in Washington, D.C. for one of the events that Donald Trump is throwing for America's 250th anniversary, and it's U.F.C. night. Pride to be American. We got free tickets. It's just going to be a great time. That's about it.

It's an opportunity to talk to a group that was central in the 2024 election, young men. Why do we think Trump and men seem to have a connection? I feel like he just knows how to advertise himself to the younger priority. It aligns with masculinity, I feel like, to a certain extent. But if they don't like Donald Trump, what do they prefer political? politically otherwise. I care about my family. I care about my country.

I want people to be safe and happy where they live. I care about my wallet too, man. I'm a Sted Herndon, and this is America Actually. Catch us every Saturday on YouTube or wherever you get your podcast. Support for the show comes from Framer. If your team wants a website that looks and feels handcrafted but is still fast to ship, Framer is built for that. You design on a visual canvas with responsive layouts hosting and a CMS built-in,

so the work is production ready from day of one. agents work alongside you to draft pages and polish sections, then you review and publish what goes live. Framer is the pro-site builder for creators, teams, and businesses that want a professional site and care enough to get every detail right. Agents solve the gap between AI-generated ideas and production-ready website work. The agent works in the same place where the real site is designed, managed, reviewed, and published. It lands on the canvas, stays editable, and can be published when the team is ready. agents and Framer work alongside teams to streamline collaboration on the same canvas, build custom code components, create a managed CMS content, optimize SEO settings, and ship everything all in one place. Learn how you can get more out of your site from a Framer specialist or get started building for free today at Framer.com slash Markets for 30% off.

That's Framer.com slash Markets for 30% off. Framer.com slash markets rules and restrictions may apply. I'm stand-up comedian John Marcos Sarasi And I'm actor-penis model Russell Daniels The Downside is our podcast where we bring on guests to talk about how miserable their lives are Because let's face it, things are not getting better Every episode we talk about what's wrong with our lives, our guest lives, the world But in a fun way

Bottom line is you're going to walk away feeling better about your life We've had so many cool guests, Caleb here on Busy Phillips. Stavros Halkius. Laverne Cox. Hassan Piker. Alana Glazer. I promise you're going to have a good time.

Now on the Vox Media Podcast Network, this is the downside. We're back with Profi Markets. The Trump accounts are officially live. As a reminder, this is a program that creates government-backed investment accounts for children. Babies born between 2025 and 28 will receive a one-time $1,000 contribution funded by by the government to help kickstart long-term savings. Michael and Susan Dell started a separate initiative for children born between 2016 and 24, the kids who don't qualify for the federal contribution.

They are providing a $250 deposit for families living in zip codes with median incomes of $150,000 or less. So, Scott, these accounts have officially launched. How do they work? as I said, if you're born between 2025 and 2028, you get $1,000 immediate into your investment account. It will be funded by the Treasury Department. This is a pilot program. If they decide it works, then maybe they'll continue it.

Every account can then receive a contribution of up to $5,000 per year tax deferred. The money can only be invested in a qualified index fund that uses no leverage and that charges no annual fee of more than 0.1%. And then when you turn 18, it converts into a traditional IRA, and it basically functions just like a retirement account. This, I think I've said it before, is the best thing the administration has done by a mile, in my opinion. I actually support this 100%. I hate that they're calling it Trump accounts and that Trump had to put his fingers on this thing because now I feel like it's been politicized and people don't want this to succeed. but it really started with Brad Gersner coming up with this thing, pushing it through to the White House,

going to the White House, getting Trump to agree to it, probably had to say that it had to be called a Trump account for the thing to even happen in the first place. Then Michael Dell comes and gets involved. There are some caveats that we can get into, but big picture, huge fan of this thing, I think this is exactly what we should be doing and what we should be using government money on.

Yeah, I agree with you. I really like this in concept of a friend of mine in Los Angeles, Alex von Furstenberg was a big fan of this. And there's been a lot of different iterations. I personally would have gone bigger. I would have gone $7,000, which would be, I think, $40 billion a year. And I would infantilize, and I would hold it, I would force people to be in these low-cost index funds until they're 65. And essentially position it, like the Chinese do, go kind of 50-year plans.

I think in 30 years, what you could say is, if you gave every baby $7,000, by the time they're 65, based on historical, market returns end up with a million bucks. And then in 30 years, I would announce that we're 30 years away from not needing Social Security. And I think interest rates would go down and this would start to pay for itself. I think we need another way to leverage the marketplace and compounding to replace the out of control social spending, entitlement spending that is dragging our economy down and putting too much tax on young people. Having said that, I would have gotten bigger and bolder with this. Having said that, I think that's a good idea. I think the Dells should be applauded, not mocked for them doing this.

Ray Dalio is doing something similar. What I don't like is the notion that we have to count on the kindness of strangers, including the DELs who are good people, but also happen to be awarded a piece of TikTok. I think that probably Elon Musk may have said, hey, I have an idea. Lean on the NASDAQ 100 in the SEC

to include me and the NASDAQ 100 prematurely, unlike any other company in history. And I think I might give, you know, $10 billion, $100 billion in baby bonds. I just, I don't like depending, to me, this feels like a government program that the government should finance that's about long-term thinking and reducing entitlements over time, as opposed to just sort of this giveaway, and we're depending upon the generosity of billionaires like the Dells and the Dahlios of the world.

So, but again, I moved to my glass half empty pessimism on the whole. I think this is a really good idea. I like the fact there's a income cap on it. I like the fact that it's leveraging, you know, the greatest, as Einstein was credited with saying, but actually didn't say, the greatest force in the universe and that's compound interest. So I agree with you. I think generally speaking, it's a, it's a really good idea. Yeah, just to go through what that money will become, that first $1,000, if we assume 10% annual growth, which is the S&P's average over the past several decades, by age 18, that will be worth $5,000 and a half thousand dollars. But if you contribute $1,000 a year, then it will be worth $50,000 by the time you're 18. And if you contribute to the maximum $5,000 a year, it'll be worth a quarter of a million dollars by the time you're 18. So, I mean, it's just hard to argue with the numbers there. That would be amazing.

The problem, and I found myself violently agreeing with you again, is that a lot of people seem to see this and see the Dell's contribution, which is spectacular. take nothing away from them. They seem to see this as the catch-all solution to the problem of inequality in America. That instead of taxing people and instead of going in some direction close to a billionaire tax, we can get into what actually is the right solution. But instead of taxation, we rely on voluntary philanthropy. We tell rich people, We're not going to take your money, but please, please, pretty please, will you invest billions of dollars into these child investment accounts? And to be fair, some people have. The Dells have done it.

Ray Dalio did it. He committed $75 million to kids in Connecticut. Brad Gerson has done it. He's committed $250 to every child under five in Indiana. That's great. However, we were also told that this was going to create a landslide. of donations. Brad came on the show, and he said, you watch, everyone's going to do this. I said, is Zuckerberg going to do it? He said, yep, Zuckerberg's going to do it. So far, only six

individual donors are on record having committed to the Trump accounts. It's Dell, it's Dahlia, it's Gersner, it's Harold Hamm, it's Nikki Minaj, and then it's an anonymous donor in San Francisco. Elon has not given anything. Zuckerberg hasn't given anything. Bezos hasn't given anything. I mean, if you were, if you were to put Elon, Sergey Brin, Larry Page, Jeff Bezos together, and they gave away 5% of their wealth, they could fund this program for nearly two decades. And they haven't done it. And so I'm completely with you. If we're thinking that this is the solution, that this is how we're going to redistribute the wealth, this is how we're going to get the money back into the hands of the American people so that we don't see this crisis of faith in the American system so that young people no longer believe. not only in America, but in capitalism itself, this isn't probably not going to do it. Unless we see some waterfall and everyone starts investing in these Trump accounts, then, yeah, let's not wait on Elon Musk to suddenly, like, find the charitable bone in his body

and give it all back to the children. What we've seen so far is he doesn't really want to give much away at all. Depending on the kindness of strangers to fund the well-being of our kids when they get older is a little bit like thinking, oh, Cheryl Sandberg wrote a book on gender equality. She couldn't come up with a business model, the results in teen girls cutting themselves. This is the government. We elect people, and by the way, this just wouldn't be that hard to fund. Here's an idea. The top tax rate is 37%. You make over a million dollars a year. There's no capital gains deduction that goes to 20% or 22.8. It's 37%. Oh, and by the way, that 37% tax rate is alternative of minimum tax. We had that brilliant woman, Ray Madoff, on our podcast. She blew my mind with the

following stat and the framing. Everybody thinks the biggest expenditure is entitlements at one and a half trillion dollar Social Security. I think Medicaid's 1.2. The military is now 1.5. Our interest on our debt's $1 trillion. She said no. The biggest expenditure is a $2.3 trillion expenditure, and it's the following. It's the money we give back to corporations and wealthy people in the form of tax loopholes. And it just blew my mind what a genius framing that is. And that is we don't need to raise tax rates. We just need to enforce them. And the government should be giving every kid $7,000 and then infantilize them and say, nope, can't touch it until you're 65. And by the way, within 20 or 30 years, the debt in the bond markets are going to go, wow, in a few decades,

which will go fast, they will no longer need Social Security. And you're going to see interest rates go down and everyone's credit card bill, auto loan, everyone's mortgage will go down, and this thing will pay for itself. But we need to, but you know what this feels like, Ed? It feels like the mayor of Bogota donates the land, but we need Pablo Escobar to pay for the grass and the nets. No, if it's a civic stadium and it's good for the people, it's the government's responsibility to tax everyone equally. And then not for podcasters. to say a good billionaire, bad billionaire. I'm sick of like waiting on their

better angels. I don't care if they're good or bad people. I just want them to pay their fucking taxes. And then we elect people who decide what to do with the money. Plus the new argument from a lot of these guys is that philanthropy in general is bullshit

and that the truest form of philanthropy is starting a company that's super valuable. Just to quote Musk, he said, quote, SpaceX, Tesla, NeurLink, and the boring company are philanthropy. If you say philanthropy is love of humanity, they are philanthropy. There was a Twitter account that post made this ridiculous post. They said that McKenzie Scott's donations were, quote, making the world a worse place. He said that. Well, he responded, yes. So

he co-signed that statement because they've got it in their heads that McKenzie Scott is woke, liberal, the rest of it. And they've said that the billions of dollars that she has given away is making the world a worse place. So, I mean, if they really want us to count on them to, as you say, find their better angels, redistribute the immense wealth that they have accumulated over the years and give it back, they're not doing a very good job of selling us

that they are actually going to do that. Because so far all we've seen is that it's not just that if you give your money to the government, it's waste, fraud, and abuse. They're saying that if you give money to a non-profit or a foundation or a charity, it's waste, fraud, and abuse, because the charities are now woke, and the charities are libtads.

So this is the problem. It's like, at a certain point, I'm sorry, but I have to assume that if you're worth a trillion dollars and you can barely find it within yourself to give back a fraction of a percentage of your net worth, I don't believe that you have any interest in the Commonwealth or the well-being of anyone. And now you're arguing that the companies that you built are the philanthropy, that you've now done your part. So you can no longer make the argument, and I keep on hearing people make it, people who support, really who are just against wealth taxes and against billionaire taxes in all forms. They say this is the way to do it, voluntary philanthropy.

Stop making that argument because no one believes it. no one thinks that these people are actually going to go through with it. Apart from a handful of great guys like Del and Dahlio and Gersner, they are in the minority, at least so far. You're being a little bit of fair. It's not like they're cutting off aid to HIV-positive mothers such at hundreds of children. Oh, wait, never mind. Never mind.

I think that I'm laughing at it. Let me be very harsh right now and invite a lawsuit that'll be dismissed in court. The thing that will mark this era is that the world's wealthiest man is killing the world. world's poorest children. So folks, if you're waiting on the better angels of these people to show up and that's what our government is dependent upon, don't hold your fucking breath. Tax them and then elect good people who come up with systemic ways to address these issues. We'll be right back. And for even more markets content, sign up for our newsletter at profcgmarkets.com. We're back with profsie markets. Bending spoons went public on the NASDA

last week. Oh, did it? Did it now. And it is off to a strong start. It raised $1.68 billion in its U.S. debut and shares jumped 40% on their first day of trading closing at $40.50. The Italian company has built its business by acquiring underperforming software companies, cutting staff, and improving profitability. Its portfolio includes well-known brands such as Vimeo and AOL. I'm not really sure how well-known those companies are anymore. Either way, many have compared its strategy to private equity companies. But most importantly, Scott, you called this one last week. You said you were expecting a very strong first day pop,

the strongest we've seen stronger than SpaceX, which indeed it was. Let's play the clip. The best performing one-day IPO, the biggest pop of a tech company of an IPO in June is not SpaceX at 22%. There's a company being taken out, by J.P. Morgan and Goldman Sachs.

I think it's pricing next week sometime. Bending spoons, my prediction, the biggest first-day pop of a tech company is going to be this little-known company out of Italy that has found all these orphaned brands that are great businesses. Thank you. Ladies, watch the shoulders.

Hello, ladies. Hello. Surrender to the dog. This deserves a little celebration. That's right. That's right. So on audio, I think you know what he's doing. He's again taking the shirt off and rubbing the belly. For some reason, that's the celebration. Oh, my God, Ed. My nipples are hard. My nipples are hard, Ed.

Reflections. How did you come up with this prophetic prediction? I don't think the greatest engineer in the world is, or the greatest designers in the world, is Johnny Ivery, Mr. Musk. I think the greatest engineers in the world are J.P. Morgan and Goldman Sachs. I think you just know when they're taking a company out, it's going to get at least a 20% pop because, A, they make more money, they get their green shoe, they get their fees. Every institution in the world wants in on this IPO. As a result, they do business with these companies. They get a free, like, gift with purchase. Another way of saying this is the IPO game has become totally rigged. But it's legal. Yeah. And also then they get to manage the money. And so they use AI and incredible. incredible marketing team of people, some of the brightest people at J.P. Morgan and Goldman working in high net worth. They call these people. They build an unbelievable book. They go back to the CEO and say, look, this is a once-in-a-lifetime branding event. And even though you risk some

additional dilution that you wouldn't have had to have taken if you priced it to perfection, to be able to say your stock's up 20 percent or is up 40 percent, as Benix spoons was yesterday, is worth the additional dilution. So there's all this, there's all these stars and moons that line up around engineering a first day pop of this sort. I thought this one was going to beat SpaceX because I thought the story was good. If you look at the PE, it's actually trading it a relatively, you know, a relatively modest PE. If you look at the revenue per employee, it was actually greater than meta.

I personally wanted to pimp this stock a little bit because I'm just so sick of talking about American AI companies. and I like their model, and they have a great narrative. They say that they get something like 400,000 applications for jobs, and they hire, you know, eight people or, you know, a small point of if they say they're the most selective company in the world. Some of that is spin because basically what they do with these companies is they replace a 40-year-old making $300,000 a year with a 25-year old, who I'm sure is very bright, making $140,000 a year. And they essentially, like a private equity shop, clean up to back-in. a lot of these companies probably overspent, but it's essentially, it kind of reminds me the old WPP model pioneered by Martin Sorrell, and that is their ability to maintain this valuation and

increase it will be their ability to find good companies trading at X, X multiple of EBITA, and then present it to the market and get 1.3X in the marketplace. And that's what Martin Sorrell did by taking out key man risk, a little bit of synergy on the back end, not as much here. But he would basically buy these Keman risk ad agencies for eight times EBITDA and then turn around to the market, and he would get 12 times. It was essentially a market arbitrage or consolidation arbitrage. So it's a little bit of WPP, a little bit of private equity. I thought the small float, the excitement coming out of the SpaceX IPO and just what felt like an insanely cheap valuation was going to handily beat the 20%. And it was up, I think, 40%. It's checked back a little bit

today. But I thought this was a really interesting company, neat business model, kind of beloved brands but forgotten a little bit, sort of the Berkshire halfway of beloved but forgotten brands, if you will. I just liked it. You kind of sound like you own it. Do you own it? Yes, I do. Okay. I do. I didn't get as much as I wanted, though, to be honest. So that's the invested disclosure. Just to be clear, I haven't really taken a look at the stock, and I'm not recommending it and I'm not buying it, but Scott owns it. So take that information as you will. I'm not buying more at this price. I think it's a great. Moving forward, their challenge will be to show that this model is scalable. And to their credit, I do think that I think there are a ton. I think

the list of companies that are didn't become Airbnb or didn't become meta. but are good companies is really long. And 88% of their revenue is recurring. Anyway, I was really excited. I felt like this one was getting no attention and was a good company, and I kind of stumbled onto it just before it can. What I don't want this segment to be

is a stock pumping segment where we're encouraging people to go buy it. That's not why I'm interested in this company. And I don't think that's why you're interested. I just want to be clear to anyone listening, like that's not the interesting thing, and I'm not, no one's recommending this. But I think what is interesting about this company is the model.

And they've said that the idea is, quote, to be a hybrid between a private equity firm and Google. And I think it's kind of, I kind of like it because they're taking this sort of creative novel strategy where they're basically, they have their own software engineers and they're going up and they're buying these companies as a private equity firm would,

and then they're putting those software engineers into those companies, and so that's sort of the Google meets KKR or Blackstone thing. And it's interesting because they're kind of, it's the same thing that the private equity firms would do back in the day where they say, you know, what we're going to do is we're going to find these unloved companies and we're going to find synergies in between them.

And what that was basically Latin for is we're going to go in and we're going to fire as many people as physically possible. And that is basically what they're doing, but they're doing it with like an AI thing. It's sort of like, oh, we're going to use AI and we're going to streamline everything. And that's a great story. But in reality, what they're mostly doing is firing people and, crucially, leveraging cheap labor in Europe. And that is they pay their software engineers around $75,000 a year. The average software engineer at Google makes around $150,000 to $200,000 a year.

Met hits a little bit higher. They can do that because they're Italian. company, they can go in Italy and hire these smart people and not pay them that much and, you know, do what you will with that information. You could say that, you know, like that, and I'd understand a lot of people don't like private equity firms and the fact they just kind of go in, find these companies, gut the companies, you know, lay off all the employees and then figure out a way to fatten the bottom line. But it's a great thing for shareholders, and that's kind of what they're doing. And so I think it's a good bet for those reasons, but I'm sure that's

that they're going to get a lot of heat as well when people start to kind of realize, like, what it is exactly that they're doing, and that is the same thing that private equity does, the same thing that consulting firms do, they go in, they make a pitch, and then ultimately it comes down to fire as many people as possible. It's basically what they're doing. They will call it efficiency, but they're operating in the same revenue from play a little bit better than meta. Like, I don't, I think that's capitalism. I'm not. I'm not, I think, I think your ability to lay off people and create revenue and margin creates more profitability and opportunity to start new companies that creates higher paying jobs.

So I'm all about whatever you want to call it, creative destruction or what have you. But this company felt like at seven to eight times revenues, it felt like a buy. Now it's a 10 to 12 because of the run up yesterday. I checked back a little bit. I don't want to say it feels fully valued right now, but they are going to have to show their thesis or demonstrate their thesis that with a public currency in a list of a ton of companies like this, they can. and go out and kind of wash, rinse, and repeat. But in some, I thought this was,

I thought this company's business model execution and opportunity set, or Tam, for lack of a better term, was not reflected, and that there was so much attention given to SpaceX that people kind of overlooked this company. And also, just to be blunt, when J.P. Morgan and Goldman take something out now, they engineer a 20% plus pop.

That they do. And by the way, it's not illegal. Is it rigged? Is it unfair? Is it a transfer of wealth from retail investors who don't get much access to institutions? Yeah, it is. I'll leave it there. It's not a great place to leave it, but that is certainly what is happening. And I think that we have done a good job of making that clear, just how rigged that IPO game really is. A lot of people try to sort of paper over what's really happening, but that is what's happening.

they don't usually let these IPOs fail, and they price it such that it will get that pop. I think when we think about, like, I mean, now that I know you own it, I'm going to just do a little bit of jabbing at the company. You mean like you do it in my emotions? I think what their advantage is, I don't think if this is an AI company,

I think of this is basically a private equity company. And their advantage is they're in Europe, they know how to operate, they know how to fire people, and they know how to get really top talent at really low prices. And that last piece is crucial, because what they're doing is they're buying these people businesses that are run. Basically, the product is dependent on how good your engineers are.

I mean, these are mostly software businesses that have gotten crushed after the SaaSpocalypse, which if you thought that the pain that we're seeing in the public markets is bad, just go wait till you see what the pain in the private markets looks like. which spells opportunity, they're taking advantage of that, and then they're also leveraging these engineers. But we went on the Bending Spoons Reddit thread, where the engineers get together and they talk about their problems,

and to be fair, Reddit is a very negative place in general. But here was something that we saw, quote, a friend of mine worked four years at Google. Then she got a job at Bending Spoons when she moved to Amsterdam and was fired after eight months because she was not working, quote, hard enough. You have to be autistic and probably have no. No life in order to resist working for them, not even Anthropic, who pays top of the market, is this crazy? And then someone followed up and got like 300 upvotes, quote, they don't even pay that well.

So that's kind of their advantage. You know who likes that environment, that culture? Shareholders. Yes. And here's the thing. You brought up something, a couple important things. One of the reasons I like this and I tried to find shares was that the word I did learn as a younger man, and the reason I've been rich three times, which means I've gone broke twice.

The reason I've gone broke twice is that I didn't understand the power of diversification. And it's easy to become concentrated without even knowing it. You know, ProfG Media is essentially an American company talking about American tech. We get a lot of advertisers from AI. I am over-invested in technology stocks. I am so concentrated and non-divested accidentally. Make, well, I'll buy some S&P funds. Well, okay, 40% of the S&Ps in 10 companies now, all related to AI.

So one of the reasons I like this company as a personal investment is I want to invest more in Europe. People have basically given up on Europe. Investors have basically given up on Europe. And that's when you buy. And two, I want diversification out of anything American and tech related because winter is coming, as Dineris and every other person from Game of Thrones said. And then also the labor arbitrage. What do you think a talented senior product manager costs in San Francisco versus Milan?

Especially after AI. Exactly. It's not like it's child labor. I would imagine that in Milan, if you're making 120,000 euros, actually Milan's gone a lot, a lot in price. But I would imagine for 120,000 euros in Milan, you can probably have a reasonable lifestyle in San Francisco. You're still living with your parents. So the market is just a gorgeous thing. It is Europe's been left for dead, and that's the reason why I think it's an economic opportunity.

And I'm spending a lot of time looking at European stocks right now. Let's take a look at the week ahead. We will see the minutes from the Federal Reserve's June meeting, and we'll also see earnings from Pepsi and from Delta. Scott, any predictions? No, I'm just going to stand on my bending spoons one. I can't do much better than that. I'm going to bask in the glory of that. Oh, no, I do have a prediction.

I think that Team England is going to beat Mexico in penalty kicks. Once again, this is coming out after because we're not at Sunday night yet. So we'll find out. So just make sure you're down to do that. You might be humiliated on the day it comes out. Oh, like I don't get humiliated every day. Did you just say Reddit? Have you seen my subreddit?

Oh, my God. You are so mean. Why, I don't even go on my subreddit anymore. It's like, God, he's so old. God, he's fucking lame. Jesus. Oh, what's wrong with his face? I mean, it's just like, so rough.

You can't read the Reddit. The Reddit people are rough. We love you, but you're also a little bit unwell. That's a little bit of the problem. Oh, my God. It is rough. So, okay, make the prediction then. England wins?

I'm not scared of humiliation. You want to know what my say for it during sex is, speaking of humiliation. Not particularly, but tell me. My safe word is maybe. This has been a good show. It has. Penalty, Team England wins and penalties at the Azteca Stadium, which, by the way, Mexico, I don't think has ever lost that. They've never had a goal scored against them.

Is that what you told me? That's what I heard the commentators say, but now I'm kind of like... I think they've lost twice. but only twice in their history. It's going to be an amazing game. It's going to be an amazing game. But I'm predicting Team England wins in a penalty shootout. Or maybe I should just predict that Team England wins.

How's that? I mean, it depends how bold you want to be. It's just the polo. I'm going to say Team England. Less upside in that. It's not a very bold one. Where do they go? Should we go to the game?

Where do they go? Actually, I can't afford that. We should go to the game. Yeah, you can. Come on. Where do they go? Where do they go? Where do they go?

I'm not sure. If they end up in New York, New Jersey. Oh, they go to Miami. How much fun would that be? It would be good. Everyone loves to roll with a dog at Miami. It would be good. I would like that.

My prediction, well, I had previously made a prediction that if the AI bubble pops, it will be because Open AI implodes. That was about a year ago, I think. Oh, it'll pop before that. It'll pop well before that. Well, no, I hold to that. I hold to the Open AI implode. My new thinking on Open AI, two paths for Open AI. Either it implodes or it gets a bailout.

Those are the two paths. So that's my prediction. There you go. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Jorge Carty. Our research team is Dan Chalon, Chris O'Donohue, and Mia Silverio. Jake McPherson is our social producer. Drew Burrows is our technical director

and Catherine Dillon is our executive producer. Thank you for listening to Property Markets from Property Media. If you liked what you heard, give us a follow and tune in tomorrow for a fresh take on the markets.