Prof G Markets - Why is Silicon Valley Backing Trump? + A Glasses Company Acquires Supreme

Episode Date: July 22, 2024

Scott shares his thoughts on why Trump has attracted some of Silicon Valley’s most powerful donors. He also explains why he doesn’t recognize America anymore, especially since his move to London. Then, Scott and Ed discuss possible motives for EssilorLuxottica acquiring Supreme and explain how the eyewear company’s monopoly on glasses has flown under the radar for so long.  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

Join Capital Group CEO Mike Gitlin on the Capital Ideas Podcast. In unscripted conversations with investment professionals, you'll hear real stories about successes and lessons learned, informed by decades of experience. It's your look inside one of the world's most experienced active investment managers. Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Support for this show comes from Constant Contact.

If you struggle just to get your customers to notice you, Constant Contact has what you need to grab their attention. Constant Contact's award-winning marketing platform offers all the automation, integration, and reporting tools that get your marketing running seamlessly. Thank you. Go to ConstantContact.ca and start your free trial today. Go to ConstantContact.ca for your free trial. ConstantContact.ca Today's number, $45 million. That's how much Ken Griffin paid for, get this, a Stegosaurus skeleton. True story.

When I was 14, me and my buddy were masturbating to some hardcore dinosaur pornography. Unfortunately, my mother saw us. Get it, dad? Get it? That's like a dad joke that's also a little bit pornographic. Welcome to Prop G Markets. Today, we're discussing Trump's Silicon Valley backers and Supreme's latest buyer. But first, first, here with the news is Prop G analyst Ed Elson. Ed, what is the good word? What's going on with you? I'm pretty good, Scott. I want to get your honest reaction to Ken Griffin paying $45 million for a stegosaurus. What does that say about the state of the United States right now? Well, that too few people have too much fucking money. I mean, what else is there to say about it?

There's a hot market in dinosaur exoskeletons. I mean, look, good for him. Although, speaking of along the lines of having too much money, I actually contemplating bidding on Einstein's letter

to Truman, I think, warning him about the dangers of the atomic bomb. He has a, I think it's, I don't know if it's

a written or a type letter, but they think it's going to go for three to four million. So this is how you know you're an old person is when you start bidding millions of dollars on handwritten letters.

That's how you know you're getting old. The other way is for the first time in my life, someone says, do you want to go on a cruise? And I think, yeah, that sounds kind of nice. Or I started thinking, I don't believe you. Anytime someone says the word pee, I need to pee. It's like I could be walking out of a urinal, and if someone says, did you just pee? I'm like, I have to stop and go back and pee again.

And you find like, I took a walk. Let's get back to me. I took a walk through the Rose Garden in Hyde. Was it Hyde Park or Regents Park? I have no interest in roses. And I'm like, this is so beautiful. And I forced my sons to sit down and take a moment to smell the flowers. And I'm like, oh my God, I've become my grandmother. Anyways, this is what you have to look forward to.

It's good. It's a nice change for you. What do you think it would have means when Ken Griffin spends that kind of money on a stegosaurus skeleton? Oh yeah. I just think, I think it's a really efficient use of capital i think it i think it says a good thing about our economy that you know there are people out there who have this much money to buy skeletons i just think it it shows that the markets are working and i yeah i think it's good you feel good about it you're one of these anti-capitalists you think we need to move to a collective and communism i think it's good he's spending it let me go so i

think it's better that he's spending it than hoarding it. I don't know. Whoever owned that skeleton now has, now is living large. Like, ooh. That's true. Did you hear Bob?

He's bought a new boat. How do you do that? Well, he had some fucking dinosaur skeleton that he sold to some stupid white guy from Chicago. I like that story. That's a good point, actually. Yeah, why not? That makes me feel better.

Should we get to the headlines? Yes. Let's start with our weekly review of market vitals. The S&P 500 hit a new record, then dropped sharply amid a tech sell-off. The Nasdaq had its worst day since 2022. The dollar declined, Bitcoin rose, and the yield on 10-year treasuries fell. Shifting to the headlines. The Biden administration proposed a new plan for national rent control, which will force landlords who own 50 or more units to either cap rent increases at

5% or give up their tax credits. The proposal would apply to roughly 20 million rental units. And some late breaking news. President Joe Biden has dropped out of the race. We'll take a look at how the markets are reacting on Thursday's episode. Universal, Sony, and Warner are suing Verizon for $2.6 billion over claims that the wireless provider has ignored piracy. The lawsuit alleges that the label sent more than 340,000 infringement notices to Verizon, but the company has refused to remove repeat offenders because they pay for better internet service. And finally, the UK's Competition and Markets Authority is investigating Microsoft over its hiring of inflection employees.

The agency is in the first phase of an antitrust probe into the partnership and will decide in early September whether or not to launch an in-depth investigation. Scott, your thoughts? Let's start from the top. Rent control doesn't work. It ends up reducing housing stock and increasing prices, and it's nothing but a giveaway to essentially rich white people. When I was right out of UCLA, I had a job at Morgan Stanley, and my best friend Lee, who had a job at Great Western Financial, a bank, and we were making good money, he said we should apply for, we should rent a home in Santa Monica and see if we can get rent control. I'm like, those are impossible to get because everybody wants them, right? And he said, no, we're both, you know, these kind of high-income earning yuppies. And those are who the landlords want. The landlords are like, okay, if I'm going

to get 80 applications for this, I'm going to pick the person who doesn't need a rent control department. They have so much money that I have absolutely no risk of non-payment. And so the result is that with rent control, you end up with a dearth of housing stock because nobody wants to build because they can't get a return on their investment because there's going to be rent control placed on this asset they build. So it decreases supply. And all you end up doing is giving a gift to rich, you know, mostly rich, mostly white people who the landlord, you know, picks the safest bet in terms of economic security. It doesn't work. What they should be doing is figuring out legislation that makes it very difficult for local review boards to kill housing permits. They should be

providing if they need to economic subsidies that encourage more and more building. This is straight, I mean, this is simple fucking economics. So this is all a long-winded way of saying we should move on to the next story. Verizon. I find this really interesting. I think in general, what you have is a group of people, a sector that has had the shit kicked out of it, specifically the traditional creative community. They have slowly but surely seen their economics get worse and worse. And in addition, there's been a genie coefficient here, and that is Taylor Swift now sells more albums than all of jazz or all of classical music combined. So she's bigger than entire genres. That's a good sign.

And everybody thought that online music was going to create this long tail, That's a good set. Muslim countries, she's like the fourth biggest or the sixth biggest artist. She has made, I think, hundreds of millions if not billions of dollars. And by the way, she deserves it. That shit is buttery and sexy. I've never even heard of her. When you're fortunate enough, like every five years, when you're fortunate enough to get a lady back to your apartment, just trust me on this, it's Sade and Chardonnay. Boom, it's go time.

Anyways, little tip, little tip. All right. So, don't know how I got there. But these artists are, they're pushing back and they're saying we're just sick of platforms injecting themselves in between us and the consumer and starching most of the margin and i think that they're basically lowering lawyering up and saying go after everybody because we need a bigger piece of this pie because spending, I believe, on music has actually gone up. But I think that it's gotten harder and harder for all but the top 1%. Supposedly, the U.S. economy loses about $13 billion annually as a result of music theft.

And visits to music piracy sites increased 13% last year to more than $13 billion annually as a result of music theft. And visits to music piracy sites increased 13% last year to more than $17 billion. And I think they're bet up and they're trying to find ways to restore kind of an economic structure that helps them. I don't know much about the case itself. Do you have any thoughts here? Well, yeah, let's just go through what they're actually saying in this lawsuit. They're not saying that Verizon committed any copyright infringements. They're saying that Verizon customers committed copyright infringements and that Verizon didn't do anything about it. So this is quite different from the other lawsuits we've been seeing and that we've been covering without all these other AI companies that were actually stealing the content. They were stealing the music. And those lawsuits, to me, were totally legitimate.

And I think they'll win those lawsuits. This, on the other hand, is kind of a stretch. Like they're sort of, as far as lawsuits go, they're sort of scraping the barrel here. I don't really think they'll win. Having said that, I do think it says something bigger about where the music industry is headed, which is that after several years of getting pretty badly messed around with, mostly by tech companies,

these music labels have said, okay, fuck this. We're taking everyone to court. And from a shareholder perspective, I think it is the way to do it because this isn't like a normal business. This isn't like, they're not going to make money cutting costs or increasing production, all the stuff that we usually talk about, usually when we're talking about tech companies, this is an intellectual property business. And so the way they're going to make money is by lawyering up, just amassing an army of lawyers and winning as many cases in court as possible. So I don't think this lawsuit in particular makes much sense. I don't think that they'll win, but directionally speaking, going to court, I think that's a good idea. Yeah, agreed. I think you said it perfectly.

Inflection? You should take this, Ed, this has sort of been your story and you called this early. What are your thoughts here? I talked about this specific arrangement with inflection and Microsoft last week. And if you want my views on that, you can go listen to our previous episode. The most important story in AI that I think no one is really talking about is this surreptitious consolidation of power from the startup scene to big tech. Because this one, this inflection Microsoft deal, this one was obvious. It was right there in the headlines. Microsoft hires co-founder of inflection and takes half of the staff, which means to me that this is the tip of the iceberg. Because if big tech has gotten comfortable enough to do that right out in the open and even put out a press release about it and call it an organizational update, then what else are they comfortable with?

What else are they doing to influence the startup industry and to basically swallow all of AI whole? But I do think that as we dig further and as more of these investigations proceed, I think we're going to find out just how deep the collusion in AI really goes and also just how big, big tech has gotten. you know typically new technologies either go to the existing players or the new ones right the phone kind of went to existing players search search and social went to new players this is going to the existing players in an environment where the existing players are already too powerful and they have tried to kind of do this jazz hands misdirect and say, oh no, it's not Microsoft AI, it's OpenAI. And this case is really, really weird. Everybody basically, they take the heart and lungs of inflection, they go over cooperatively in a pre-planned kind of weirdness to Microsoft, but supposedly inflection is still a company. I mean, I interviewed Reid Hoffman and he said, oh, well, we just had a board meeting. It's just very strange.

I've never seen it before. Yeah, what was his opinion? I know the episodes are, I haven't listened to it, but what was his opinion on all of this? Well, he basically said that, no, it's still a company. We just had a board meeting and that he thinks there's going to be, I think he was worried that episode

was going to end up in a court as evidence. But he said, no, I think there's going to be—I said, Trump administration, and this kind of leads into our next story, I think, that will choose law and regulation based on personal relationships as opposed to the actual systemic law. Right. So it'll be like, well, I like him. Leave them alone. But anyways, I think you were right here. We'll be right back after the break with a look at Trump's new donors in Silicon Valley. Fox Creative. This is advertiser content from Zelle. When you picture an online scammer, what do you see?

For the longest time, we have these images of somebody sitting crouched over their computer with a hoodie on, just kind of typing away in the middle of the night. And honestly, that's not what it is anymore. That's Ian Mitchell, a banker turned fraud fighter. These days, online scams look more like crime syndicates than individual con artists. And they're making bank. Last year, scammers made off with more than $10 billion. It's mind-blowing to see the kind of infrastructure that's been built to facilitate scamming at scale.

There are hundreds, if not thousands, of scam centers all around the world. These are very savvy business people. These are organized criminal rings. And so once we understand the magnitude of this problem, we can protect people better. One challenge that fraud fighters like Ian face is that scam victims sometimes feel too ashamed to discuss what happened to them. But Ian says one of our best defenses is simple. We need to talk to each other. We need to have those awkward conversations around what do you do if you have text messages you don't recognize? What do you do if you start getting asked to send

information that's more sensitive? Even my own father fell victim to a, thank goodness, a smaller dollar scam, but he fell victim and we have these conversations all the time. So we are all at risk and we all need to work together to protect each other. Learn more about how to protect yourself at vox.com slash Zelle. And when using digital payment platforms, remember to only send money to people you know and trust. Support for this show comes from Grammarly. 88% of the work week is spent communicating, typing, talking, and going back and forth on topics until everyone is on the same page. It's time for a change. It's time for Grammarly. Grammarly's AI ensures your team gets their points across the first time, eliminating misunderstandings and streamlining

collaboration. It goes beyond basic grammar to help tailor writing to specific audiences, whether that means adding an executive summary, fine-tuning tone, or cutting out jargon in just one click. Plus, it surfaces relevant information as employees type, so they don't waste time digging through documents. Four out of five professionals say Grammarly's AI boosts buy-in and moves work forward. It integrates seamlessly with over 500,000 apps and websites. It's implemented in just days, and it's IT approved. Join the 70,000 teams and 30 million people who trust Grammarly to elevate their communication. Visit grammarly.com slash enterprise to learn more. Grammarly. Enterprise ready AI.

Thumbtack presents the ins and outs of caring for your home. Out. Indecision. Overthinking. Second-guessing every choice you make. In. Plans and guides that make it easy to get home projects done. Out. Beige on beige on beige. In. Knowing what to do, when to do it, and who to hire. Start caring for your home with confidence. Download Thumbtack today. We're back with Profiteer Markets. It appears Silicon Valley may be turning red. Following his endorsement of Donald Trump, Elon Musk announced he'll be donating $45 million per month to AmericaPAC, a pro-Trump political action

committee. The SuperPAC also has the backing of a number of high-profile investors and venture capitalists, including a pair of Sequoia Capital partners. Meanwhile, Marc Andreessen and Ben Horowitz told employees at their firm that they plan to donate personal funds to pro-Trump organizations. Reportedly, they told staffers they think Trump can do more to support startups than Biden. Scott, initial reactions to Silicon Valley appearing to go red. It's really strange because Silicon Valley used to be kind of deep, incandescent blue. In 2012, 83% of the top tech firms' contributions went to Obama's election campaign. I mean, that's striking. 83% of the powerful were vastly over-indexing blue. But look, it appears that Trump's kind of pro-business policies appeal to the Silicon Valley elite. The scary thing about

an autocracy where there is not rule of law, It becomes who he likes. And so if you're a billionaire, chances are you're very focused on economic value. You're very excited about your companies. That's kind of what you, you know, the kind of commitment and passion for required for your business dealings to get to that point, make you obviously very invested in the success of that business. And I think they have figured out that the way we're going to be uber successful is to kiss this guy's ass, give money to the campaign, and laws be damned. I mean, Donald Trump put out a tweet about Elon Musk saying, he literally said in the tweet, if I asked him to get on his knees and beg, he would have. He was incredibly insulting, incredibly non-presidential, making a personal attack against Elon Musk.

But Elon Musk is, well, the way I go from $120 billion to a quarter of a billion in net worth and get Starlink and tariffs against those Chinese players or EV companies like BYD. And no one gets worried that I control 70, 80% of low orbit satellites is if I kiss this guy's ass and announce publicly that I am donating $45 million a month to this campaign. And I find the concentration of wealth, you know, the scarier, it's much scarier than buying an exoskeleton of a dinosaur. What's scarier is that an individual can donate $45 million a month to a presidential campaign, especially when you have a guy that doesn't have any principles. There's not an ideologue in any way. And I'll just be like, all right. Oh, okay, Elon wants this. He gave me a quarter of a billion dollars.

He can have, you know, fine, put tariffs on BYD and young people won't have access to affordable EVs. Or, you know, he's – and the flip is true too. I think that companies that have stayed neutral or maybe have CEOs who have donated to Democratic campaigns, I think he's going to decide, oh, sorry, you don't get any government. Boeing, you can't bid on government contracts. This is just becoming pure pay to play. And also, I find it so gross that some of the people who are most fortunate in our society don't want to pay it forward. They just want a low tax regime with no regulation that just, at the end of the day, that just gets them richer at the expense of what I would argue are. I'm really shocked is kind of one word and disappointed that we're seeing this kind of massive influx of capital across it. I'm kind of flummoxed by it.

I was really, really surprised. Do you have any thoughts? I think the thing that's getting to me is I feel like the thing that everyone loves about Trump is he's anti-establishment. He's sticking it to the media. He's sticking it to the man. He's draining out the swamp, etc. But let's just go through this list of the guys who have announced they are supporting Trump in the past month or so. So it's Elon Musk, Marc Andreessen, founder of Andreessen Horowitz, Ben Horowitz, also founder of Andreessen Horowitz,

Doug Leone, founder of Sequoia, Joe Lonsdale, founder of Palantir, Bill Ackman, Pershing Square, David Sachs, Antonio Gracias, Valor Equity, Cameron and Tyler Winklevoss. The list goes on, but we should be clear, that is the most establishment list of people you'll see. I mean, these guys run the most powerful venture capital firms in the world, the most powerful private equity firms in the world, the most powerful tech companies in the world. It wouldn't be hyperbole to say that these guys run the country. They are the establishment. And I think the thing that bugs me is how they've branded themselves as these underdogs. Like they're these Davids fighting against the establishment Goliath. And the thing that perplexes me even more is the fact that

people actually believe that crap. And, you know, again, we're talking about politics because we have to right now. And I will acknowledge that there are also a lot of billionaires who donate to the Democratic Party too. I mean, we just talked about Reid Hoffman. He's one of the main guys behind that. He's not donating $45 million a month. But yes, sure, he's on the list too. But the idea that Marc Andreessen and David Sachs and Bill Ackman

are out there fighting for working class people and, you know, fighting against the powers that be. They're taking on the big dogs as opposed to basically just supporting the guy who's going to make them even richer, as you have just said, and who at this point will likely throw them in his cabinet because he'll take whoever gives the most amount of money. He is, I mean, this is how the mafia works. He's a mob boss. So I just, I hope people can understand that this isn't about free speech. This isn't about DEI.

This isn't about patriotism. This is about what it's always been. And that is its money and its power. Yeah, you're right. It becomes the mob is the right analogy. Also, on a risk-adjusted basis, you go quiet on criticizing Trump because you get the sense he will try and levy or engage in retribution against his perceived political enemies. And he may even weaponize the Department of Justice and try and put otherwise innocent people in jail, or at least he's making hints at that.

So the upside of shitposting Trump or the downside is much greater than shitposting Biden. People who criticize Biden still feel licensed to, as they should in a democratic society, criticize him. Whereas I think people start feeling like they need to be more tempered in their criticism of Trump. And that's how you digress into an autocracy is that people are like, well, just don't say anything because he will in fact come for you and use the full weight of these institutions that can put you in jail or make impoverish you that he's not above. I mean, basically some of these court cases have said he's going to be essentially have a dictatorial powers. I say this as someone who's lived in London now for two years and I was starting to feel this way when I left, but it's gotten

just much more severe. I kind of don't recognize America. I always thought at the end of the day, it was about the law, about a group of people passing laws and having a voice, and some people trying to think long term. And slowly but surely, money has become more important. But this is now, and these two parties competing on ideologies around limited government and freedoms, personal freedom, the Republican Party, and the importance of good government and civil rights. That was, it used to be actually Republicans and it was Democrats. Now the Republicans have gone full, no, it's about money and kissing Trump's ass. That's it.

That's it. I want to just give one example of that before we move on. Going back to the conviction, the Trump conviction earlier this year, he was found guilty and the following day, the donations went through the roof. And then there was this big announcement from the Trump campaign. They're like, we've raised $53 million in 24 hours. And I remember reading that. I'm like, wow, like a lot of people are

donating to Trump. And that was sort of the narrative. He's just rallied up the base and everyone's going all in. They're all donating. A lot of people. Turns out, it actually wasn't a lot of people. It turns out of that $53 million, $50 million was given by one guy. And that guy was this guy named Timothy Mellon, who was a longtime GOP donor. And he is the heir to the Mellon banking fortune. He's like his great, great granddad who was some banking billionaire. That's the story of the Trump campaign. That's how they're raising their money. It's all billionaires controlling the whole story. On the left to an extent, but certainly on the right at this point.

Newsom 2024. That's all I have to say. I'm ready for the new guy or the gal. Let's get on it. We'll be right back after the break with a look at Luxottica's acquisition of Supreme. Food insecurity still affects millions of individuals around the globe. And Nestle, a global leader in nutrition, Thank you. seasoning for food banks, Nestle and their partners actively engage with local communities, listening to their needs, and working together to find innovative solutions. Nestle is committed to helping support thriving, resilient communities today and for generations to come. Together,

we can help to build stronger, healthier communities. Learn more at Nestle.com. Autograph Collection Hotels offer over 300 independent hotels around the world, each exactly like nothing else. Hand-selected for their inherent craft, each hotel tells its own unique story through distinctive design and immersive experiences, from medieval falconry to volcanic wine tasting. Autograph Collection is part of the Marriott Bonvoy portfolio

of over 30 hotel brands around the world. Find the unforgettable at autographcollection.com. Do you feel like your leads never lead anywhere? And you're making content that no one sees, and it takes forever to build a campaign well that's why we built HubSpot it's an AI powered customer platform that builds campaigns for you tells you which leads are worth knowing and makes writing blogs creating videos and posting on social a breeze so now it's easier than ever to be a marketer get started at HubSpot.com

marketers So now, it's easier than ever to be a marketer. Get started at HubSpot.com slash marketers. We're back with Property Markets. Ray-Ban maker Esselor Luxottica is acquiring Supreme, the iconic streetwear brand, for $1.5 billion. That's nearly 30% lower than Supreme's last sale price in 2020. Luxottica's stock fell 4% on the news as the deal struck analysts as a bit of a mismatch. Luxottica is an eyewear company and Supreme makes limited run t-shirts and hoodies. As one analyst put it, quote, an investment in the consumer brand with no eyewear DNA needed further explanation.

Luxottica is presenting the acquisition as a means of expanding its customer base, but Supreme's current owner, VF Corporation, appears eager to offload the company after finding a lack of synergy between the brand and its portfolio. By the way, VF owns the North Face, Dickies, and Vans. Scott, reactions to Luxottica, an eyewear company, buying Supreme? So first off, VF, who acquired Supreme, has a reputation as being one of the best acquirers in history. They bought Vans for a song and turned it into just a global brand. It did hugely well in China. I think they've had huge success with North Face.

It's a really well-run company, and they're a great acquirer. This was sort of a pretty unusual and public stubbed toe, if you will, buying it for $2.1 billion and then selling it. What are they selling it for? One and a half. Yeah. And then if you take into account time, four years, this is a terrible investment. The person who probably talked them into this at BF has probably moved on and is no longer running corporate development at BF. This is a pretty big, it's a pretty big stub toe, if you will. I've never understood the brand, to be honest. I'm just not in this category, but I've never quite understood it.

The revenue growth has stagnated. In 2023, it was a half a billion dollars was down 10% year on year and Supreme's revenues for fiscal year 2024 were not reported. But the implied revenue multiple in 2020 was 4.2. In 2024, it's 2.9. I still think they paid too much. And I think VF is smart to be disciplined and say, this didn't work. Our thesis hasn't played out. And they're going to take a $600 million write-off, but that's not terrible. And I would bet that this is going to end up being like, I don't want to call it chapter 12, but two bad acquisitions in a row. I don't think this brand is resonating, and I don't know if it has the scale and half a billion dollars in revenue to kind of, I don't know, endure, if you will. This to me feels like a company that could go into just sort of a doom loop. Any thoughts? You're young. What's going on here? following wasn't particularly successful until 2014, 2015, you know, it would be lines around the block, hundreds of people waiting in line to get their hands on these things. And the reason that it worked so well is because they were just obsessively diligent about limiting the supply. I mean, you couldn't buy anything. I remember I went to the store, I was like, you know,

thought I was going to get myself something cool, and there I went to the store. I was like, you know, thought I was going to get myself something cool. And there was nothing in the store. So the whole thing was sort of like an economics lesson in supply and demand. What's interesting though is who first acquired them. It was the Carlyle Group. They caught on to this. And in 2017, they bought 50% of Supreme for half a billion dollars. So it was a $1 billion valuation. And then they flipped it three years later to VF for 2.1. And now VF is flipping it on for one and a half. So the real winner here is actually the Carlyle Group, who got in at the exact right time, 2017, got out at the exact right time, 2, 2020, and they doubled their money in the

process. I'm just wondering if you have any insight into how they nailed this one in particular. I remember Warren Hellman was one of my mentors, and Warren was the co-founder with Tully Friedman of Hellman Friedman, which is arguably the most prestigious private equity firm in the world, and one of the most successful and probably the most prestigious, kind of the original gangster of private equity. And Warren said, whenever we look back over our winners and losers, it kind of came down, the distinction between the winners and losers, it just came down to three things. One, did they get in at a good price? I mean, at some point, almost any investment is going to be a good one if you get it cheap enough.

And at some point, I'm on the board of a great company that's growing like crazy. I don't think I'm going to make any money because I invested in 2021 when the market was fucking hysterical around this shit. So even though the company's performed really well, I think I'm just probably going to get my money back. Two, is it growing? They only invest in growing companies, which I thought was interesting. So no distress credit. It's like, it's got to be growing. Growth kind of solves in business almost all problems.

As long as you have positive margins and you're growing, if you just keep growing, eventually almost all your problems go away. And then the third thing is, did they have the right guy or gal running it? Those were the three things that distinguished their winners from their losers. Just focus on Luxottica's strategy here and try to justify it. Those were the three things that distinguished their winners from their losers. Just focus on Luxottica's strategy here and try to justify it. I mean, this is the first time they're going outside of eyewear. They own a bunch of fashion brands, but they're all glasses. It's like Ray-Bans, Persol, Oliver Peoples, et cetera. It feels like to me, what they're doing is something like a, like an LVMH strategy. And that is LVMH was a leather goods company until it wasn't.

They realized they could leverage that brand to sell a whole bunch of other stuff. So, you know, they, they merged with Moet Hennessy, they bought up a bunch of assets and now they sell everything. And it's a 100 billion dollar per year business i just wonder if luxottica is looking at that they're looking at lvmh and omez and caring and all these other sort of luxury conglomerates and they're thinking we want a piece of that action and so we're going to start by buying up these sort of upper tier to premium, not quite luxury brands, something like a Supreme, and perhaps they have a lot more acquisition ideas of the company. And so as the company gets bigger and bigger, they can say, well, fuck it, I'm the CEO

of a $10 billion company, I should be making this much. And it's the idea of paying for something that gives you massive growth, as opposed to trying to build organic growth, which is more difficult, is very intoxicating. And so a lot of CEOs will talk their boards into paying. And good companies are smart. They know they can only sell once, so they're comfortable if it's a good company holding out or saying no. So two-thirds

of acquisitions don't work, meaning that that first criteria for Hellman and Friedman doesn't work out. They overpaid. The imagined synergies and upside are usually not inflated, but unrealistic as to how long it will take to recognize that growth and those synergies. What they're probably thinking is this is a new distribution channel for their eyeglasses. And they also, I would imagine, that they have the kind of relationships with some really incredible up-and-coming brands that might be great brands to license for eyewear. And Luxottica, obviously, is very good. Luxottica, I think, produces not only their own and operating brands, but I think they make a lot of sunglasses for other, you know, I wouldn't be surprised if like Prada, Prada

doesn't manufacture sunglasses. I would imagine that Luxottica produces the branded glasses for Prada. That's right. Luxottica does manufacture for Prada. I wouldn't be surprised if Luxottica said this company has a lot of great relationships with emerging hot brands that will give us a leg up in terms of licensing agreements,

be a new channel of distribution for us. So there'll be a flow, you know, we can help them operationally, a new distribution point for our existing brands and the reverse flow

of the river will be, we will have access to a bunch of cool hip brands that we will produce glasses for. Luxottica, it's really interesting, Luxottica is sort of a little bit of a monopoly. river will be we will have access to a bunch of cool hip brands that we will produce uh glasses for luxottica it's really interesting luxottica is sort of a little bit of a monopoly it controls a huge it's just so fucking ridiculous that you go in and you pay this kind of money for eyeglasses i remember you know buying ray-bans were like 30 bucks when i was in college aviators now they're

200 or 300 bucks i mean this this is definitely outpaced inflation. And they have kind of a near monopoly on glasses. This is a very dominant company. As you know, Meta has a partnership with Ray-Bans. They have these AR, VR Ray-Bans that are sort of the kind of more mobile version of the headset. Hence why this deal is probably happening. But do you have any reactions to that news? Meta potentially buying a stake in Luxottica? I think it's smart. Zuckerberg said that, I mean, he realizes that the Oculus is a giant fucking thud. But what he said, and it makes sense to me, is that their glasses,

my son bought their glasses and he's not using them anymore, but he used them kind of nonstop when he was skiing. The Ray-Bans? Yeah. You say, whatever it was, Meta, take a picture. Meta, play music. They're actually really, I tried them on. I thought this is actually pretty cool technology. And in 10 years, the Oculus technology, the dream of Oculus might be realized with micro cameras and smaller, more powerful chips that can seamlessly go into a pair of glasses. And I think that's his vision. And he wants a leg up in terms of manufacturing and the style. And so I think given Meta has whatever, a $700 or $800 billion market cap or whatever it is, or is it over a trillion? I can't keep track.

So it's 1.2 trillion. Okay, 1.2 trillion. So Meta's contemplating, according to the news here, a $5 million investment at a valuation of $100 million. That gives them 5%. They don't care about the financial return here. They don't want to lose money, but that's spare change for them. That's a couple of weeks of free cash flow. And what they really want is to be one of the largest shareholders, individual shareholders in an agreement to be involved in the development or have access to proprietary manufacturing and supply chain that helps give them an edge around producing kind of a metaverse

or AR or VR-enabled sunglasses or glasses. This is going to happen. The metaverse or what his vision of the headset is going to be realized, it's going to be realized in glasses. And when I put on my kid's glasses, it just clicked on me. I see the potential here. It's just, and he's stated this, that the technology is about a decade away. That decade will go really quickly. And I love what Bill Gates said, that what's supposed to take a decade takes three years, what's supposed to take three years takes 10. This might be one of those technologies in three years, there is pretty good glasses offering 70 or 80% of your VR or AR or metaverse experience. The other thing that's sort of interesting about Luxottica is because they had such a monopoly, they kept raising prices faster than inflation, which created opportunity for a new entrant. And that new entrant are the iconic glasses that the dog wears that emphasizes his cheekbones and awkwardly shaped nose that veers to the right because I got kicked in the face by Bobby Henderson in my junior year of playing soccer. I thought it was because you

got punched in the face in a boxing match. That made it worse. He couldn't have punched the other way. Literally. You'd think he'd have, if he was going to knock me out, that he would have punched it and put it symmetrical again. Instead, he punched it the way it was already bending. Anyway. That is one of the underrated facts about you is that you took up boxing.

Dude, I was bored. I also took up yoga. I just didn't have a lot going on. I was at that point in my life yoga. I just didn't have a lot going on. And I was at that point in my life where I discovered creatine and working out, and I was going through an early midlife crisis, and I was getting ripped. And I'm like, all right, I'll start boxing because I heard it's what you do. I went to this place called Dog Pound Gym or something. It was just fucking ridiculous. Anyways, so Warby Parker came in at 99 bucks. I absolutely love it because I remember specifically one experience. I went to this one of these little boutique, these little boutique eyeglass places with this very attractive man who, you know, tried on all these glasses for me. And, you know, and then I got my prescription and I got Tom Ford glasses and it was $900 for my glasses by the time I was at the door. And I literally got them,

went and picked them up, got in a cab and left them in the cab. And I'm like, fuck it, hey. So, and then Warby comes along and these glasses are 80% of Tom Ford for 12% of the price. And I think they do an amazing job. Luxottica has always been, I always thought Luxottica was an example of a monopoly that kind of flew under the radar. Let's take a look at the week ahead. We'll see data on the personal consumption expenditures index for June. We'll also see earnings from Microsoft, Google, and Tesla. Do you have any predictions for us, Scott? Yeah. So Donald J. Trump Media, just a ridiculous fucking company that has a $7 billion market cap, despite the fact it makes no money and no one's on there other than total crazies. It got a huge boost. Was it after the assassination attempt?

Yeah, it was right after. I think it was a 30% jump. huge jump because the stock trades a little bit. It's like a little bit of a tracking stock for the likelihood that Trump is going to be reelected. Because I think the market's saying, if he gets reelected, he'll just figure out a way to like have the defense department, you know, buy Donald Trump technology group or something. Make it mandated. Every government employee has to get on that. Has to be on, has to get on. of a core business at the end of the day, as does GameStop. Anyways, the stock popped to about 46 bucks last Monday, and now it's come back to 37, but I think you're going to see the stock go sub 30. This is not financial advice. I just think it's fun to track

because I think Biden is going to step down and that will send a signal to the market that there's a greater likelihood that the Democrats will hold on to the White House than there is right now. And I think that the way that people trade this stock is based on the likelihood that Trump is reelected. And so when the likelihood of Trump being reelected goes from like 70 or 75% back down to like, I don't know, 55, you're going to see the stock go sub 30 again. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our executive producers are Jason Stavis and Catherine Dillon.

Mia Silverio is our research lead and Drew Burrows is our technical director. Thank you for listening to Profit G Markets from the Vox Media Podcast Network. Join us on Thursday for a conversation with Robert Armstrong, only on Profit Markets. Reunion As the world turns And the dove flies In love, love, love, love