The Prof G Pod with Scott Galloway - Prof G Markets: Bitcoin’s Rally, Elon’s xAI Fundraising, and Alaska Airlines Acquires Hawaiian

Episode Date: December 11, 2023

Scott breaks down his wins and loses amid crypto’s bull market this year. He also shares his thoughts on the state of the airline industry and whether or not Hawaiian Airlines could make a good merger arbitrage trade. Finally, he and Ed discuss why Elon Musk needs to raise $1 billion for his AI company. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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NMLS 1617539. This week's number, 80. That's the percentage of EL undergraduates who received A's or A-minuses last year. True story, my girlfriend in college asked for a picture of my penis, and she said it was a perfect specimen for her class. The bad news? The class was microbiology. The cheap penis jokes never get old, Ed. They never get old.

The market, the demand for these types of jokes, Ed, it's limitless. It's limitless. Catherine and Claire aren't laughing. Usually they laugh at the dirty stuff. That means this isn't very good. You got to remember it's eight in the morning over here. That might be the reason. It's eight in the morning, really?

That's right. You went to Princeton, right, Ed? I did. And what colleges did you think about other than Princeton? A bunch. That's illuminating. That's why people tune in. I'm trying to understand what you're getting at.

UVA, USC, Harvard. You said USC? Why were you interested in usc just curious uh it seems just seemed cool and california seemed cool you're half right california's cool i did not apply to ucla if that's what you're getting at why are you asking me this question i don't know i just want to know more about you i just want to feel closer to you you just want to get to know me okay that's that's very nice of you. Enough of that. I try and invest in our relationship and I'm rebuffed. You're literally like every girl I met in college since then. Every girl I met before, during, and after college.

It's like, why are you asking me that question? Anyways, thanks for the trauma. I realize I'm not worthy of love, Ed. Anyways, get to the headlines. Get to the headlines. Let's start with our weekly review of market vitals. The dollar rose, Bitcoin hit its highest level since April 2022, more on that later, and the yield on 10-year treasuries dropped. Shifting to the headlines.

U.S. job openings in October fell to their lowest levels since March 2021. That data suggests the labor market is cooling and the economy may be closer to a soft landing. India's stock market value hit $4 trillion for the first time ever. Companies in the world's fifth-largest equity market have added $1 trillion in value in less than three years. Uber was selected to join the S&P 500 later this month. Shares rose more than 2%. SEC Chair Gary Gensler warned companies against AI washing, in other words, making false claims about AI to drum up hype. Gensler likened the trend to greenwashing when companies make false representations about sustainability.

Google launched its most advanced AI model to date, called Gemini. The company expects Gemini to power its consumer apps and smartphones and serve as a true competitor to OpenAI's GPT models. And finally, the Supreme Court heard arguments for Moore versus the United States, a case that could reshape the U.S. tax code. At question is whether or not the government has the power to tax unrealized income. And if the Supreme Court decides the government does not hold that power, that ruling could preemptively block future efforts to tax the nation's wealthiest individuals with a wealth tax. Scott, any thoughts on this? U.S. job openings, that's good. It felt like the most, I don't know, the stickiest part of inflation was wage growth. And I love when Congress likes to

get the Fed or someone to admit that, yeah, we want more job openings such that the whole nation doesn't register in inflation and decide to engage in revolution. So that look, that's probably good news. It hurts some people, but it's it's good news. India, I think, is the essentially people are turning east to the Near East, I guess. And they're looking at India for the same type of disco party that China registered through the aughts. India's key stock benchmark, the Nifty 50, has increased 15% year-to-date, while the Hang Seng, Hong Kong's benchmark, has decreased 16%. Also this year, India surpassed China to become the most populous nation. We talked about that.

Uber joins the S&P 500. Look, we've said it, and I wasn't a fan of Uber for a long time. Uber is one of the best managed companies in America right now. Multiple revenue sources, cut costs while maintaining revenue growth, really good acquisition. To be included in the S&P 500, you have to have a market cap of at least $14.5 billion. The majority of your shares have to be publicly traded, and you have to demonstrate cumulatively positive earnings over the previous four quarters. And you must have been a public company for at least a year. So Google and Gemini, it just sort of, it's very strange. Google supposedly was the kind of the laboratory for a lot of the AI technology that's being leveraged now by other players. It just feels like Google has gotten blown by here, but you

never want to count them out and given their interface and their ability to bundle you got to think that google is going to be a player here what are your thoughts ed well did you watch the the release video for gemini yet i didn't it's pretty impressive i mean the thing that people are saying about it is that it's it's the best multi-modal llm and what that means is that you can provide multiple inputs. In this case, they're showing it images are actually just a video of a guy drawing things and then you see Gemini basically understanding and describing. I see you placing a piece of paper on the table.

I see a squiggly line. The contour lines are smooth and flowing with no sharp angles or jagged edges. It looks like a bird to me. I look at this, I'm like, this is the first real product that Google has produced in terms of AI that isn't just playing catch up with chat GPT. The one other thing that I thought was noteworthy is that you look at the paper for Gemini and Sergey Brin is credited as a core contributor to the product. And according to one employee, he was showing up every day to HQ and helping working on the product. And, you know, this might be Google's best product, I think, since Google. So I think, you know, when people talk about the power of having a technical founder,

the power of founder authority. Sergey Brin showing up to Gemini is sort of case in point. Before we move on, do you have any final thoughts on AI washing that Gary Gensler's talked about? Look, it makes sense, but I don't know how you would enforce that and be the arbiter of it. It feels a little like, you know, it wasn't William Sonoma in 1998. They changed the name to WilliamSonoma.com, right? I don't know if you remember that, but everyone said, add.com to your name, and it'll increase the value of your company by 20% or 30%. So I think we're getting smarter. There's so many people are talking about AI and AI-driven, and every business plan you see that you're pitched to in the world of venture is something to do with AI. But I think this is up to the media and up to smart investors. I i mean for one mentions of ai on earnings calls have tripled this year but the main example that comes

to mind for me is buzzfeed which i don't know i don't know if you remember but they announced that they were going to start using ai to generate articles it was simply just a product announcement and then the stock tripled and now i looked at the stock nine months later it's fallen more than 90 and it's actually worth less than it was before they made that announcement because it was all it was basically just all talk no action so i think yeah i think gary guns has got his finger on the pulse here and the the real question is as you have just mentioned how do you actually enforce this it hasn't really worked with greenwashing. As we wrote in No Mercy this week, greenwashing incidents are up around 80% this year, despite the fact that regulators are talking about it. So yeah, it's unclear how it would work with AI washing either. And that's what he has to figure out. You're probably right. There probably is no way to figure it out other than investors should realize if a company says, we're going to start using AI, it doesn't mean they're going to change the world. I would argue, I think we've hit peak AI and you brought up something interesting,

and that is BuzzFeed, that their stock tripled. Because about a year ago, I think there was a sense that AI could replace journalists. And I would argue that so far, it's been more a lesson in how AI does not replace journalists. It can make them more productive. And I think journalists and editors are using it just as we attempted to prove at that headline from the Wall Street Journal about Apple and Goldman parting ways. But the Supreme Court case is actually, you know, it's the boring stuff that actually has an impact. And this is both boring and probably, you know, could potentially have a big impact. The case is from the early 2000s. A couple invested $40,000 in a friend's business in India. In exchange, they received 13% ownership in the firm, a firm called Kisan Craft. They never received any payments or dividends from their stake.

And then in 2018, they were charged almost 15K in taxes on their stake based on the historical revenue of Kisan Craft. They paid the bill and then they sued for a refund. The crux of the argument is that the 16th Amendment says Congress, open quote, shall have power to lay and collect taxes on incomes from whatever source derived. And they're arguing this wasn't income as it was never realized. And the government's argument is this happens all the time. The partners of law firms or hedge funds, for example, pay taxes on their business income, whether or not they actually get the cash. I guess it's really a function of current U.S. tax practices are unconstitutional. If they rule against the Moors, that could strengthen arguments around implementing a billionaire tax. We're spending, at least in the U.S., we're spending about $7 trillion, and we're taking in, in terms of tax receipts, around $5 trillion, and we're up to about $32

or $33 in terms of our national debt. It's just not sustainable. So the question is, where are we going to get the money? And entitlements seem to be a bit, you know, kind of the third rail. No one wants to talk about that. And then you have interest on the debt, which is something we, you know, can't control. As a matter of fact, it's exploded. We'll spend more on interest on the national debt this year than on our military. It's like, well, are you going to raise taxes or cut spending? The answer is yes. We're going to have to do both. So the question is,, well, are you going to raise taxes or cut spending? The answer is yes, we're going to have to do both. So the question is, well, who are you going to raise taxes on? It's going to be very difficult to push through tax increases on lower middle-income homes.

There's been so much aggregation of wealth at the top. The number of billionaires has come from 500 to 2,500. Everything from carried interest tax loopholes to capital gains. I think capital gains tax should be eliminated. And that is everyone should pay the top tax rate for anyone should be, I think, 37.8 or whatever it is on current income. And there shouldn't be a 22.8% tax. It just doesn't, I mean, again, it's nothing, tax structure is nothing but a transfer of wealth from you to me. Specifically, you make all your money in current income and probably pay a greater tax rate than I do because I get the majority of my income from investment. And the whole point of a society is to move people towards prosperity,

not to put them in quicksand as they try to crawl towards prosperity. When you have higher taxes on younger people trying to establish economic security, you're just creating more and more friction such that fewer people get to the medal stand. But once they do get to the metal stand, they get not only the gold medal, they get the bronze and the silver. They get to collect everything. You know, America is just a different world for the wealthy than it is for the poor. That was a mouthful. We'll be right back after the break with a look at Bitcoin. Bitcoin breached $44,000 for the first time in more than a year and a half. The driving force behind this rally is the potential for a Bitcoin ETF that could receive SEC approval in early 2024. Other Bitcoin ETFs already exist, but they only track futures contracts tied to Bitcoin. This would be the first US Bitcoin ETF that invests

in Bitcoin directly. And as hopes have grown for SEC approval, the cryptocurrency's value has increased 160% year to date. Scott, what do you make of this Bitcoin ETF? And specifically, why is it having such a profound effect on the price of Bitcoin? The belief here, I believe, is this will create a broader on-ramp. People know how to buy stocks on Schwab.com and on Robinhood. So the ability to very easily from their phone, buy these assets probably is going to expand the market, increase demand, and it makes sense that the price would go up. Also, it's a bit of a good housekeeping seal of approval to have an ETF around this. This has been just staggering. The asset class of the year definitely would be crypto because of its comeback, its resurgence. By the way, I lost a shit ton of money writing calls against Coinbase, Ed, just so you know.

It's one of the best performing stocks of the year, yeah. I think it's almost quadrupled. So anyways, you know, beware, beware. The dog was hit by a car. I'm a little jittery right now. But you made a lot of money on the FDX claims, right? Can you take us through how that went down? I haven't yet because it hasn't been recognized. So don't try and tax me, Ed. But I, yeah, so earlier in the year, you know, occasionally I get it right. Occasionally I slip and fall on something right. I bought about $3 million worth of claims against a bankrupt FTX and some against Celsius. And basically just did an analysis, looked at their assets that would eventually be distributed by the court administrator or the administrator overseeing the case. They have a bunch of cryptocurrencies,

including Bitcoin and Ethereum. But what I was really excited about is they, in addition, they have a lot of cash, but they made a $500 million investment in Anthropic about two years ago, which I would imagine is worth somewhere between $3 and $5 billion now. So I kind of added it all up, and it came to about $8 billion against $9 billion in claims. So what is that? That's about 88% take a billion away for court and lawyer fees or administrative and legal fees. That's seven of nine. So that's like 70.

I'm projecting a 77% recovery rate. So I thought being able to buy these things at 25 cents on the dollar was a good deal. So I bought a bunch of these claims at 25 cents on the dollar. And last week out of the blue, I got an offer for the whole portfolio at 60 cents on the dollar and I'm not selling, I'm going to hold in. I actually now, Ed, I think it's going to be, I think the claimants are going to recover more than a hundred cents on the dollar. And some of this is luck, you know, see above Bitcoin has skyrocketed, right? Yeah. I mean, I think, I think it's the ETF. I think that you've got these big, large asset managers like BlackRock that are basically lending these companies credibility and they're lending crypto credibility. The thing I think we

should note is that, yeah, I think a lot of people are going to be looking at these numbers. They'll say, oh my God, Coinbase is up 300%, Riot Platform's up 200%, MicroStrategy up 250%. Let's just remind ourselves that nothing has actually changed about Bitcoin. I mean, this rally isn't happening because of any sort of fundamental value shift. It's happening because BlackRock is creating an ETF and lending it credibility. So it's the exact same speculative dynamic we've seen for years where people say, oh, this guy likes it and I respect him, so maybe I should like it too. And you could argue that's meaningful, but personally,

I don't see how that's any different from how SoftBank lent WeWork credibility in 2017. It's basically just an endorsement by a guy, except that by making the endorsement, the endorser also makes a shit ton of money collecting fees. But I don't see how this is a game changer. I certainly don't see how it warrants a doubling in value for Bitcoin. I think you have to acknowledge, though, that Bitcoin and Ethereum look as if they've established themselves as viable stores of value. It does feel as if they're going to be enduring. I think it's fair to say that it's a store of value. Here's a question. Do you buy gold? Do you have any interest in gold? None whatsoever. Why not? Gold for me seems very 80s and seems very doomsday, although I do buy rough cut gems

and shut them up my ass. But that's more for recreation than really anything to do with financing. That's just a good time. That's the real store of value. Okay. I don't know where that was going. I don't know where that was going. Yeah, I don't buy gold.

I find the whole thing kind of funny. It feels very like putting shit under your mattress kind of thing. Although, very like, you know, like putting shit under your mattress kind of thing. I don't, although you want to hear my gold story? Yeah. So my mom's best friend was a woman named Carson Evans. And Carson was this beautiful, entertaining, funny, like one of those personalities you were just drawn to. I remember it was the first woman I remember ever thinking, wow, I like her. I think she's really pretty. I don't know if you remember the first woman you had a crush on when you were a kid. Anyways, for me, that was Carson Evans. And she was married to Charlie Evans, a really wonderful man who was like a player. He owned a printing business that

printed greeting cards. And they had a home in the Hollywood Hills. And I'd go up there and they'd have with my mom and they'd have entertainers and cool people drinking and partying. And I remember thinking, these are just the coolest people in the world. Anyways, Charlie lost his business. He, told him she was leaving him and he went into his garage and got some antique shotguns and shot himself in the chest and killed himself. And Carson went on to become addicted to, this is a really nice story, Carson went on to become addicted to painkillers. And I stayed sort of involved in Carson's life. She helped take care of my mom with me when my mom was dying. Anyways, Carson gave me her, I was the sole benefactor or beneficiary in her will. And someone called me and said, do you know Carson Evans? The coroner's office in San Diego called me about 15 years ago and said, do you know a woman named Carson Evans? I said, of course. She said, she's passed away. There's a safe here. She didn't have any money, but there's a safe and everything in it is yours. So they went and they cut open the safe and in it was a belt of 15 Indian head $5 gold coins. And I guess they're worth about 10 or 15 grand each. So this belt was worth around 200 grand or something. And I thought, I don't know what to do here. I'm going to hide it. And so I hid it in a chest of drawers somewhere. Long story, a little bit shorter, my closest friend was going through

divorce. And so I said, I have all this furniture. Do you want it? And I shipped it out to him. And then I realized about two years later that I had put the gold belt in one of the drawers of a chest I had shipped to him. And so I called him and said, have you seen this kind of tacky belt with a bunch of gold coins on it? He's like, oh yeah. And I'm like, well, where is it? And he said, well, actually it's at the Costa Mesa or the Newport Beach junior high school right now. And I'm like, what do you mean? He's like, well, my, my youngest son, Nick has been wearing it every day to school because he thinks it makes him look like a rapper. Did you get it back? I do have it. I think I've lost it again.

So you took it from the kid? Oh, fuck yeah. I send that shit back. But yeah, if the apocalypse comes, if AI does in fact decide we all need to make paper clips and that humans should be destroyed, you'll be at my house looking for one of those Indian head gold coins that will trade beef and barley and and barley and guns and what you kind of what i'm learning from that story is

that we're not great custodians of our own assets like you just sort of misplaced where you put the gold coins that ended up being on the waist of some kid at some high school and that's usually what i mean there's all this stuff about you know you should self-ustody. You can't trust anyone to hold your assets for you. You can't trust these banks. They're going to lose your money. It's like, actually, you can't really trust yourself. It's very likely that you're going to lose your money, that you're going to invest in the wrong place, that you're going to just lose this stuff.

You're going to forget your password. You're not going to know where you put your assets. You have to really, really trust yourself. If you want to make the case that we should all be holding on to our own assets, then we should just get rid of the banks that do it for us. So let me get this, Ed. The lesson you take away from my only male role model shooting himself in the chest with a shotgun is around the self-custody of stores of value. That's what you take away from this? I'm just trying to make this show educational, Scott. Is that what they teach you at Princeton, to be this cold?

To be this cold? Alaska Airlines agreed to acquire Hawaiian Airlines for $1.9 billion in cash and debt. Alaska will pay $18 per share, a 270% premium to Hawaiian's last closing price before the announcement. Hawaiian stock nearly tripled on the news, though it remained below the purchase price. Meanwhile, Alaska's stock dropped around 15%. According to Alaska's CFO, the two airlines only overlap on 12 routes or 3% of their total seats. At the same time, the combined companies would control more than 50% of the Hawaiian market. Scott, thoughts on this acquisition? The lesson I take away from it is the specific crowds out the general. Globally, carriers are set to generate a record $23.3 billion this year.

That's more than double what trade groups expected in June and a near quintupling of the outlook at the start of this year. Despite a resurgence in travel, U.S. airlines have lagged the S&P 500 year-to-date. The S&P is up 18%. Delta's up 17%. United up 7%. American up 4%. Southwest down 17%. Alaska down 18%. JetBlue down 29%. And Hawaii, pre-merger, was down 53% for the year. And after the announcement, the stock is up 33% year to date. I feel as if I know a lot about airlines just by virtue of the fact that I've been molesting the earth for the better part of the last 30 years. I spend 180 days a year on the road. And I find that there are few industries that have progressed as slowly or innovated less than the airline industry. I don't think the food's much different,

the way you get onboard, deboard. I just find it, and not only that, the foreign airlines are just so much better, mostly because they're subsidized, because they see them as branding events, see about Qatar Airlines, Emirates, Singapore. But I just, it takes longer to get from New York to Dallas now than it did 50 years ago, which is why I invested in Boom Supersonic, because I want to get to Dallas in like an hour and a half. I'm not sure why I want to go to Dallas, but if I did, I'd want to be there in 90 minutes. So I just find the airline industry, for whatever reason, really hasn't innovated a great deal. I mean, I guess they've embraced some digital, but the experience, I mean, it's strange. I remember flying in the 70s with my father, and if I'd go with him on a business trip, we'd get to go business class.

And business on some of these airlines, it was just so sexy. They had couches. I mean, the industry was probably losing a shit ton of money, but I remember going on planes, these wide-body planes where they had, it felt like you were in a lounge. It was just so opulent, if you will. But something's just not right about airlines. It just feels like they should have progressed faster in terms of their offering. They would argue, I think, that consumers at the end of the day just value getting from point A to point B as inexpensively as possible. But I don't know. I mean, you talk about innovation. Do you think that a merger would do more to increase or decrease innovation when it comes to air travel? Well, that's the question. And I think it's a question for economists. And what they're saying is that the scale provides enough efficiency such that they

can actually lower costs. And do you consider lower costs, does that pass the bar for innovation? I think so. I think so. I think that if you can get people home to their families or let them engage in business at a lower cost, it seems to me that's good for global commerce, more GDP growth, more money to spend on other things. So yeah, I think that's part of innovation. Well, we should talk about the antitrust here. I mean, so the Department of Justice is currently looking to block JetBlue's

acquisition of Spirit Airlines. And we've discussed that on a previous podcast. I think this situation is interesting because it feels a lot different. For one, it's smaller, it's like half the price tag of the JetBlue acquisition. Two, there's less consolidation. So Alaska would only increase its market share from 6% to 8%. Meanwhile, JetBlue would go from 5% to more than 10%. But there's also this consumer side to this, which you kind of hinted at, and that is Spirit is known as the low-cost airline. And the implication of JetBlue acquiring it is that the low-cost airline will go away, and that would theoretically harm the consumer. But in this case for Alaska and Hawaiian,

both airlines are offering pretty similar pricing. So you're theoretically not affecting the consumer experience that much. With all that in mind, do you think that this deal warrants antitrust enforcement? I would argue if they get in the way of this, that they're being heavy handed with the wrong people. And that if Google can still own YouTube and then be the buyer, the seller and the market maker in

digital ads, and Meta can have two thirds of the social market, you know, I just don't see how you stop Alaska from acquiring Hawaiian Airlines. I don't, I don't think this is the beach they should die on. You having said that, do you think Hawaiian could be a good buy right now, just as a merger arbitrage play? So merger, what Ed's talking about is when a merger is announced and they say, okay, Hawaiian is going to be acquired by Alaska for 40 bucks a share. It usually continues to trade at a discount, factoring the risk that the deal doesn't go through,

and the company falls back to where it was trading before if the deal gets blocked let me just give you the give you the the discount the discount it's trading at 14 per share and they were offered 18 per share right so what is that that's almost what a 30 basically if the deal goes through you make 30 there's 30 to the upside if the deal doesn't go through it probably goes back to what seven bucks a share what was the upside. If the deal doesn't go through, it probably goes back to what, seven bucks a share? What was the trading up before the deal was announced? Five. Wow. So it would probably go back to five. So what they're saying is, effectively, what the market is saying is they think there's a two-thirds likelihood that the deal goes through.

Because they're saying if it goes through, you get upside of $4, but if it doesn't go through, you're going to probably lose about $10 a share. So the market at least is saying that they think that this is likely going to go through, but it's an entire investment strategy, what's called a merge arb or merge arbitrage. We'll be back after the break with a look at Elon's new AI company. We're back with Profit Markets. Elon Musk is seeking to raise $1 billion in funding from equity investors for his artificial intelligence company, XAI. According to a document filed with the SEC, he has already raised $135 million, though the names of those investors are not disclosed.

So far, XAI has launched one product, a chatbot called Grok, which is trained on data from X. And Musk said last month that equity investors in X will own a 25% stake in XAI. Scott, we talk a lot about Elon, but this is noteworthy. What do you make of this fundraising effort? I'm not sure I understand it. First off, I don't understand why he's raising. Why does he need a billion dollars? My sense,

the guys were too, my dad always said rich people live hand to mouth, just like poor people, but just on a higher level. And I wonder if Elon Musk is the wealthiest man in the world is cash poor. Cause why would he, why would he want to get a billion dollars from outsiders? The other thing I thought about was that this is the problem with no governance. If Twitter had a board, let's just call it Twitter for shits and giggles, they would say, wait, let me get this. You want to spin out, you want to basically take our assets, our IP, our data, spin it into an AI firm, see above AI washing, and that'll probably trade at a great valuation if we get any traction whatsoever. But you want to give us only 25%? Why wouldn't you just raise a billion dollars for X?

Say X is worth 10 or 20 billion right now. Take a 5% or 10% dilution. We own 95% or 90% of this instead of 25%. You raise the billion dollars because you're using our assets. And here's the problem or one of the many mendacious things about income inequality is an individual can not only be bad for the Commonwealth, but quite frankly, he can fuck over his shareholders because they have no seat at the table here. I have a lot of questions here. What are your thoughts, Ed? I thought there was actually a really good question on Tesla's last earnings call. And this analyst basically asked Elon if XAI is going to compete with Tesla's business. Because as we know, Tesla's trying to be a leader in AI. And Elon predictably didn't really have an answer to that question. He sort of danced around it. But this seems actually really important that there's this possibility that this new company is going to compete and maybe cannibalize Elon's other businesses.

Do you think that that's a fair concern about this company? Yeah, but what this really is, what the problem is, is that Elon said, I want to create a structure where I get 75% of the upside. If he had said to Tesla and Twitter shareholders, we're raising a billion dollars. I mean, he could raise, he could take a billion dollars out of Tesla right now. That wouldn't be a problem or raising a billion dollars and say. Well, he's already borrowed against 60% of it. So that, I mean, that, by the way, that is another question. Do you think that that's, do you think it's possible that he can't? Does he need to curb that? existing shareholders, they'd say, sorry, girlfriend, if you want to start a new company using our assets, fine, but we're going to own the vast majority of it if we're going to let you do it at all. Instead, he's like, I'm inventing new co with the assets of companies other people have

financed and other people have big ownership stakes in, but I figured out a way that I'm going to own 75% of it. Yeah. I mean, at the same time though, he owns 70% of Twitter or X. So, I mean, he still has total control over that company. So I feel like it still doesn't totally explain why he would want to do this as a separate entity. It's back to your point of AI washing, right? That he thinks a pure play in AI will likely get a much higher multiple than a media company that no one wants to advertise on. Yeah. And then finally, we've been talking a lot about this AI race, specifically the LLM race. We'll leave NVIDIA out of it. But they've hired kind of an all-star dream team of AI engineers, and they've got them from all these different, from Microsoft, from Google. We were just mentioning the big players like OpenAI, Meta, Anthropic. Do you think that, I don't know, in a year's time, we'll be talking about XAI and we'll be including XAI in the LLM race list? I think anything Elon does, you have to take seriously. He's obviously brilliant. He sees

things that other people don't. And he has what is kind of the key in a branding age, and that is an ability to create global awareness. He creates controversy. He does amazing things. He's got unbelievable following on social media. So whereas General Motors has to spend $2 billion to raise awareness of their new F-150 Lightning and all their other products, Musk doesn't have to do anything to raise global awareness of a product. So just by virtue of the fact that it's from Elon, it'll get massive awareness, trial, adoption. So I wouldn't be surprised at all. The thing I don't get here, I think you have to raise 10 or

20 billion, probably 30 in this era where people are already racing ahead of them and he has to catch up to be competitive here. So I don't, I think he's going to have to raise a lot more money, but anything Elon Musk does, it's going to be in the news. Okay, thanks, Scott. Let's take a look at the week ahead. We'll see November inflation data from the consumer price and producer price indices. And we'll also hear the last interest rate decision for the year from the Federal Reserve. Do you have any predictions for us? Yeah, my prediction is that,

and we have our predictions webinar, I think on Tuesday. By the way, 20,000 people have signed up for it, Ed. Although I see you haven't signed up for it, so you continue to not invest in our relationship. You checked the whole list? I keep staring at it, wondering when you're going to RSVP.

That's true, I haven't RSVP'd. I knew you had. And by the way, this episode comes out Monday, so the live stream is tomorrow. Oh, the live you're going to RSVP. That's true. I have an RSVP. I knew you had. And by the way, this episode comes out Monday, so the live stream is tomorrow. Oh, the live stream is tomorrow. There you go. Tune in. My prediction is that in 2024, one of the biggest stories will be AI from Apple. I think Apple's going to get into this business.

Apple defines the term second mouse, specifically the second mouse gets the cheese. That is they watch, they wait, they listen, and then they find a consumer application, a more elegant application of a technology, and they move in and they capture a ton of market share and more specifically market capitalization. They did it with the phone. They did it with MP3 devices. They've never been first around anything, but oftentimes they come in and they're the best. And they didn't do search because it ends up they were getting $20 million and 100% margin revenue from Google to stay out of the business of search. I don't see the same dynamics here though. I don't think OpenAI is going to pay them, or XAI or Anthropic is going to pay Apple a ton of money to be their default generative AI. And I think they've got to be looking at this and thinking. I think Apple

comes into something that is consumer unfriendly, if you will, and has sort of this weird, you know, kind of Gattaca, sterile hospital feel to it right now. These brands don't feel that warm or that consumer friendly or that aspirational. And I think Apple.ai would get just unbelievable trial. I think they'll pick a niche. I don't know what that niche will be. But my prediction is in 2024, one of the biggest business stories will be Apple's entry into the arms race around generative AI. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our executive producers are Jason Stavros and Catherine Dillon. Mia Saverio is our research lead and Drew Burrows is our technical director.

Thank you for listening to Property Markets from the Vox Media Podcast Network. Join us on Wednesday for Office Hours and we'll be back with a fresh take on markets every Monday. In kind reunion As the world turns And the dove flies In love, love, love, love