The Prof G Pod with Scott Galloway - Prof G Markets: Bob Iger’s Bad Day, Trump Media’s Fraudulent Auditor, and Uber’s Venture Investments

Episode Date: May 13, 2024

Scott shares his thoughts on Disney and Warner Bros. Discovery’s latest earnings and what they mean for the streaming space. He then reflects on the implications of Trump Media’s auditing firm being charged with fraud. Finally, Scott and Ed discuss Uber’s Q1 earnings and why the company swung to a major loss in the first quarter.  Follow our new Prof G Markets feed: Apple Podcasts Spotify  Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Ready, set, grow. Go to ConstantContact.ca and start your free trial today. Go to ConstantContact.ca for your free trial. ConstantContact.ca This week's number, 461 feet. That's the record French bakers set for the world's longest baguette. Choose to it. After World War II, the French were so embarrassed,

they thought about changing the name of their country. Unfortunately, Iran was already taken. And that's not fair. I was about to scream go go go and then I remembered it was the wrong podcast welcome to Profiteer Markets today you know they don't masturbate in France they jock off Ed is that better that's good yeah there we go. Welcome to PropGMarkets. Today, we're discussing streaming earnings, Trump's media's auditing firm, and Uber's huge loss. Here with the news is PropG Media analyst Ed Elson. Ed, what is the good word? Are you basking in the glow of 34? That's actually the number we should have had. PropG, as of today, the PropG pod, is the 34th most downloaded podcast in the world. We're number 34, Ed.

PropG Markets, our new podcast, and we haven't even released our first episode. All we have as a trailer is number 21 in the world. So I think we're even better than that. Where'd you get that 34 number from? I use Chartable. The thing about, just not to diminish our achievement here, but I think it's more about momentum than actual downloads. That's probably right. And because, I don't know if you know about this, Ed, but I was actually at TED last week, where I gave what Chris Anderson described as a scorching talk. But since then, and since my appearance

on what's the name of that show? Bill Maher. Since I was on that, we have everything is kind of like the flywheel is flying, Ed. You're welcome. But Prof G Markets is doing better than the Prof G Pod, so I'm trying to think what the difference is.

I don't get that. How'd that happen? We haven't had an episode yet. Yeah, it must be something. I can't tell what it is, but it feels like it must be me, right? We sexed it up with young Ed Elson. All right, Ed, enough of that.

Get to the news. I will do that. I just want to remind everyone, if you haven't done so yet, please go subscribe to Prof G Markets. It's our separate channel. It's overtaking the Prof G pod, so please go subscribe. Okay, let's start with our weekly review of Market Vitals. The S&P 500 climbed, the dollar was stable, Bitcoin declined, and the yield on 10-year treasuries slumped.

Shifting to the headlines. Microsoft is investing more than $3 billion to build AI infrastructure in Wisconsin. The money will go towards a new data center and training programs focused on AI manufacturing. Microsoft said the new location would create more than 4,000 construction and data center jobs. FTX's lawyers announced that its creditors will receive all of the money they lost plus interest. Payouts will amount to 118% of creditors' assets based on their November 2022 value when the company filed for bankruptcy.

In its first earnings report as a public company, Reddit reported a revenue increase of 48% from last year and a 37% increase in daily active users. That beat analyst expectations. However, Reddit has yet to turn a profit, reporting a net loss of $575 million. Shares popped as much as 15%. Airbnb reported first quarter revenue that exceeded analyst expectations, growing 18% year over year. The stock fell the most in a year, however, after reporting lower than expected revenue guidance for the second quarter. The company is expecting international events like

the Summer Olympics to re-accelerate revenue growth and travel demand in the second half of the year. And finally, TikTok is suing the U.S. government over claims that the forced sale or ban violates the First Amendment. The company is arguing that the government's national security concerns are not a sufficient reason to restrict free speech. The legal proceedings will delay the timeline on the ban, meaning it could take years to go into effect. Scott, your thoughts? A lot here. So let's start with Microsoft. It's just staggering. The Infrastructure Act at the U.S. government, largest economic power in history,

$1.2 trillion. Just the three or four companies we talk about invested $32 billion, or an annual run rate of $120 billion. So the Infrastructure Act is supposed to take place, I think that's spending over probably the better part of a decade. So you could argue that these companies are kind of, at least right now, and granted it won't continue this way, but these companies are essentially spending almost on pace what the government is spending to try and reinvigorate and upgrade America. It's just staggering how much money these folks are spending on it. And it was just a long-winded way of saying, it'd be very interesting to try and figure out, are there companies that make

generators that are especially good at cooling data centers or, you know, specialize in construction or selling materials into the types of infrastructure they're going to be building. Because the amount of investment here, I mean, it's just staggering. What are your thoughts? Yeah, I just think it's fascinating how all of these big tech companies, which historically we thought of as very different, you know, Amazon is e-commerce, Google is search, Microsoft is PCs, they're all basically turning into the same company now. And that is, they're all cloud service providers. They all are building data centers and they rent those data centers out to smaller internet companies. And the greatest evidence of that is just the

operating income of these companies. So just as an example, 45% of Microsoft's business today, as measured by operating income, is cloud. And for Amazon, that number is 60%. You know, it feels like once you reach this level of scale, like these companies have, it's almost like the mission changes. The mission today isn't, okay, we're going to innovate, we're going to build great products. The mission is, we just need to own the rails. And you look at the history of markets, and it feels like exactly as you've said, that's

always been true. The largest companies have always been the ones that have owned the rails, whether that means literally the railroad, i.e. like US Steel. But in this case, I think they've identified that owning the rails means we have to supply and control the computing power. And I think that's why we're seeing all of these massive tech companies morphing into basically the same company. They want to be the next US steel or the next standard oil of the next generation. And so they're just trying to own all of the computing and processing power in America.

The hard part is, unless you have the capital to invest not tens or hundreds of millions, not even billions very hard for Japan in the 70s and 80s, right? They just don't have the natural resources. You have to sit on top of a sea of oil somewhere. These guys essentially sit on a sea of oil in the form of intellectual property. They're very smart. They have roots in cloud and AI, and they sit on a reservoir of capital. What I don't get is, I was thinking about this, the kingdom desperately wants to transition away from fossil fuels to more of a services or tech or tourism-based economy. I would have thought that they would be the second biggest investor behind Microsoft and AI and be trying to figure out a way to go all in on tomorrow's energy. And that is compute. Because

not only is the U.S. currently the biggest energy provider of traditional fossil fuel and also renewable energy in the world, we're about to become the largest producer by far of the new form of energy, and that is compute. So while we hate each other and we might tear each other apart from inside, externally, in terms of our ability to produce economic value, which unfortunately would be sequestered to a smaller and smaller group of firms and people, you know, the U.S., it just strikes me, an objective analysis, when you zoom back and look at the earth, the U.S. is pulling away from everybody. That's how I see it. I think this has really big implications geopolitically. I think it's fascinating that these companies have this kind of capital to make this type of forward-leaning investment. And in general, where I see, I'm mostly saying, what's the

investment opportunity? I would want to look at everything that's required to build a data center and what companies sell those products, what companies have some sort of differentiation or distribution or intellectual property or trademarks around that type of product, and find out if they're public companies. FTX? And that's just the context, which is you bought a bunch of FTX claims ages ago. You basically called this, that you thought that, you know, I don't think you expected 118 cents on the dollar, but I think you were shooting for something like 70 cents on the dollar. I think you bought them for 20.

How are you feeling about this? Well, all I can say is, hello, ladies. That's right. This is the story. First off, let me, I hate it when people just talk about their wins. And last year I lost $15 million shorting the market.

That was a really like a bad thing for me. I am wealthy, but that kind of money was like very upsetting. That was very upsetting, Ed. This one, I got this one right. It's super exciting. And the learning here is the following. The best investments I have ever made, and foremost low cost index funds diversification and then just holding on and making sure you're diversified and letting the american economy and demographics and productivity take over and bring you know let the rising tide lift all boats the individual best returns i've ever had that have been just incredibly outsized have been what I'll refer to as old people. And that is, what I've noticed is generally speaking, that people have a huge bias

against old people. What is the most successful small business in the world that has the lowest failure rate? There was just a study on this, senior care facilities, because nobody wants to be around seniors. They don't want to invest in them. The whole idea sounds depressing. And I can see why a lot of people think, oh, no, I want to invest in a members-only club for artists and models or whatever, right? But here's the thing. You want to run into the fire. You want to run to the least sexiest things possible. And FTX, people don't remember this. When I bought these things in June or July of last year, FTX stank. I mean, nobody wanted near it. People thought, I'm going to lose everything. This is fraud. Sam Bankman freed

crypto. When the narrative is this asset class of this company is just awful and going to zero, look at it and look at it hard and say, what if they're wrong? Because if they're wrong, the upside might be four, five, eight fold. And you can afford some zeros if you do enough of those because the returns can be so outsized. But anyways, the existential question this brings up is the following. If everyone's getting their money back, then should Sam Bankman Freed still go to prison for 25 years? And the answer is absolutely yes. What he did was fraudulent. He took money from depositors who did not think they were investing in a hedge fund. He then probably went on the worst, from a legal perspective, handled his prosecution, his defense,

I should say, worse than any defendant I have ever seen. A poor person who does not have access to top legal counsel, who gets a public defender, the public defender would have advised him much better than his parents or his lawyers, or maybe he wasn't listening to everyone, but running around the world saying, shrugging his shoulders and saying, oh, I didn't know. I'm just this sloppy eight-year-old that just got out of bed. I didn't know where all those billions went. But wait, weren't you sleeping with your co-founder and doing drugs and setting up, incorporating purposely in the Bahamas? Didn't you hire a shady auditing firm? I mean, all of these things just added up to you're lying. If he had gone to the authorities and said, you know what? I fucked up. I'm guilty.

I'm going to try and get you all your money back. I want to cop a plea deal. He probably would have gone to prison, but he would have gone to prison for one to three years. I mean, this might be a life sentence for the guy. So I find it fascinating. There's going to be a big story on him, but it doesn't in any way exonerate or make it less illegal what he did. We got to move through quickly here between Reddit, Airbnb, TikTok, any initial thoughts? The biggest question surrounding Reddit is will they be able to monetize their user base? By the way, their user base is now bigger in America than Twitter or Pinterest. And their ARPU, their average revenue per user, is now greater than Snap.

Revenue is up 48%. I mean, and at 37% increase. I mean, they're firing on all cylinders right now. So this was, and I'm a small shareholder, full disclosure, not a big shareholder. I'm a small shareholder here. Reddit is delivering. And the question they needed to answer is, can you monetize this incredible user base? The answer is yes.

In addition, they get a higher multiple because people are wondering if their content is especially rich, like, you know, light, sweet crude oil, the best kind of information for llms and they've only monetized it to the extent of 50 million but people people think this might be kind of an option that reddit might end up being able to garner or grow an exceptionally profitable revenue stream selling their data into llms airbnb i got whacked and i'm a i'm a shareholder i have a large position in airbnb and i got whacked. And I think that what's happening here is that there was a bit of a post-COVID bounce in travel. People were sick of being locked up, so they were traveling a lot. And there's fear in the market or general consensus that that post-COVID travel surge is beginning to moderate, is the way I would describe it.

Because if you look at the numbers, they grew 18% and it was their guidance that took them down. So still a great company, still trading at a solid multiple. It just felt like the air got let out here. And then TikTok, this is essentially an argument between really powerful legal constructs or orthodoxies. One is First Amendment and one is national defense. And the First Amendment says that you need to find other remedies first before you inhibit someone's free speech. But at the same time, occasionally national defense or defense concerns trump First Amendment. For example, we didn't want foreign ownership or an individual to own more than 25% of a broadcast company, so Rupert Murdoch had to become a citizen. We do, on a regular basis,

let national defense or concentration of ownership trump First Amendment. I think that as we get closer and closer to the D.C. Circuit trial, if in fact it goes to trial. I think the odds, right now the odds are 70-30. If you look at, you can bet on anything now. You can bet on this trial, they're saying it's 70% likelihood that the government wins this case, 30% that TikTok wins. Now, the thing that I think will trump to be the deciding factor here that will result in the D.C. court, D.C. Circuit winning if it goes to trial is the following. The court is typically very remiss to overturn a decision that has the backing of a bipartisan law passed in Congress. Now, having said that, having said that, Ed, and this is the interesting part, does the government win or does China win? The answer is yes. And that is,

this comes right up to the date. And I think you're going to see the likelihood of a government win go from 70 to 75 to 80. And then I think Beijing is going to decide to negotiate directly with the White House, which is a much easier way to negotiate than trying to figure out public policy or laws or negotiate through the courts. They will call the White House and they will come to some sort of accommodation that satisfies the White House and that the CCP, not by dance, let's be honest, the CCP is comfortable with as the notion, the idea, the threat that they're about to be banned if they don't divest becomes a more and more stark reality, that that threat comes into sharp relief. I think this is similar to Twitter that when Musk gets closer and closer to actually

having to get on the stand and go to trial, his lawyers say, you realize you're going to lose here, right? And the day before he decided to close, same thing's going to happen here. We're going to come right up to the trial date. I don't think it's going to go to court. I think they're going to come to an accommodation because there's two things here. There's the use as the ultimate propaganda tool, and then there's two, hundreds of billions of dollars at stake. And I think the CCP was hoping to hold on to both of those things. When it becomes increasingly clear they can only have number two, they're just not going to have number one, they will opt to hold on to number two and they'll come to some sort of accommodation

with the White House. What are your thoughts, Ed? I just find it funny that a Chinese company is suing the U.S. government for violating free speech laws. Well, you know, I don't know if you know this, Ed, but in China, they have free speech because no one has ever said otherwise.

That's good. A little geopolitical humor. We'll be right back after the break with a look at disney and warner brothers discovery we're back with Profit Markets. For the first time ever, Disney streamers turned a profit for the quarter. That is, if you don't count ESPN+. Hulu and Disney Plus together made $47 million in profits, but the sports platform dragged the streaming segment to a combined loss of $18 million. Still, that's a huge improvement from its $659 million loss a year ago.

Disney also offered weak guidance for its parks and experiences unit, citing the moderation of post-COVID travel demand. The stock fell 10%, its worst day in more than a year. Meanwhile, Warner Bros. Discovery reported earnings that missed expectations on the top and bottom lines. However, the streaming unit was profitable, and subscriber growth beat expectations and outpaced last year's quarter. The stock rose about 1%. Scott, Disney and Warner Brothers were two of your stock picks

for 2024. Disney's up 15% year to date. Warner Brothers is down around 30% year to date. What do you make of their performance so far? What I make of it is my co-host is cherry picking. I had a third stock pick, bitch. Why didn't you bring that up? You're literally like Twitter right now. You're just cherry picking something that makes me look bad. Oh, come on. No, no, no. We're discussing the two companies that released their earnings. Anyways, I also picked Google. What's Google up year to date? Let's check that. Typing into Google. Okay, year to date. Oh, it's up 23%. Oh, but we conveniently didn't mention that. Yeah, because we covered Google last week. It's up 30% since I picked it.

Anyways, look, I think it's somewhat related to Reddit because now there's even a new... If you look at advertising as a share of GDP globally, it's remarkably consistent. It's like 1.5% of GDP globally, and it has been for the last 40 or 50 years. And the massive ascent of digital platforms has come at the cost of traditional platforms. And if you think about Reddit, if Reddit grows their revenues 48%, that means they're increasing their top line every year, 500 million. That's not new economic activity. That's not new economic activity. That's all coming out of the hides of traditional advertisers. So yet there's another player

sucking oxygen out of the room. In Disney, I was shocked. This was one of Disney's worst trading days in the last decade. And I think the thing that scared them was the same thing that spooked Airbnb investors. And that is, one, it looks like the travel surge is a little bit over, and people were starting to take the parks and the $10 billion in EBITDA that the parks create for Disney a little bit for granted. And they thought, oh, shit, if the parks are going to not be the gift that keeps on giving, we really don't like this company. And that seemed to overwhelm. I was surprised. If I had saw this earnings report before the release of the market, I would not have thought that stock would have been taken to the woodshed.

But people were really disappointed. I also wonder if they look at their, you know, ABC and they look at ESPN and they say things are only going to get worse here. And did you see what Bob Iger said after the opening bell the next day on Disney? No. He said the following. Fuck. That's a joke. after the opening bell the next day on Disney? No. He said the following, fuck. That's a joke. This was a really bad day for Bob Iger because you know who might be back

in about six months? Nelson. Nelson. Because the bottom line is, with activist investing, the incumbent management team always wins at the first election unless they've done

something illegal. They usually win at the second, but if the stock isn't up, they get bounced at the third. And if his stock goes back into the double digits or gets down to like 80 bucks again, which it may or may not, I actually don't think it will, see about one of my stock picks, but if it does, he has to fly down to Florida, kiss Nelson's ass, give him a seat on the board. And all of a sudden that succession plan gets sped up. Because if the stock underperforms, if the stock were to go down from here, there's then going to be new calls to break up the company. And I don't entirely understand why it was taken down this much. I think it's related to Reddit. I think it's related to the same things around Airbnb. But I would not have thought that Disney would have had one of its worst days because, as you pointed out, the streaming service has great momentum right now. But basically how this company performs over the next two or three quarters, this is the crowning or not crowning achievement on Bob's career. He's not a young man. He's got

to announce a succession strategy probably in the next 24 months. And it's either going to be done, he's either going to take a victory lap or it's going to be done under duress, under the cloud of like, okay, Bob didn't figure it out. So I think he was crazy to come back. I mean, literally fucking crazy to come back. He was thought of as one of the most talented, successful executives in history. And instead, he's come back. I just don't get it. It's like Mike Tyson fighting again.

It's all downside. It's all downside. The other news that we should bring up is that Disney and Warner Brothers Discovery have announced that they're creating a new streaming bundle that includes Disney+, Hulu, and Max, formerly HBO Max. It's going to include content from ABC, CNN, Discovery, Disney, HBO,

Hulu, Marvel, Pixar. The list goes on. In other words, this is cable, but on a streaming platform. What are your thoughts on this? I think the streaming, what's happened to the streaming market over the last 15 years is the only industry you need to look at to kind of understand economics. Promise of the future attracts way too much capital. The unbelievable, the overinvestment results in an unbelievable but unsustainable consumer value proposition, grows the market substantially. But unless you have cheap capital, you can't keep up. So Netflix just basically used capital as a weapon, outspent everybody. And then all of a sudden, the market said, okay, fun time's over. We're not just going to give you money to acquire customers. You have to show that this is economically viable. The company begins to modulate and consolidate. It's consolidating everybody, but kind of the big two or three

is looking for a dance partner real fast. They're either going to go out of business or they're going to sell to someone else. And Netflix has not only cut its content budget, it's raised prices, which creates cloud cover for the other survivors to raise prices. And you're seeing the market just modulate, but it's just fascinating that these companies are basically now distressed assets. If you look at their multiple on, you know, Disney still trades at a decent multiple on EBITDA, but people are sort of looking at Warner Brothers as if it's going out of business. I think that's right. And I think we haven't seen the political advertising kick in yet. I mean, the TV network revenue is down for Warner Brothers.

I think that scared a lot of people, but I think it's going to come back up. The one thing I will end this story with is a quote by Jim Barksdale, who was the former CEO of Netscape. He said, there's only two ways to make money. You can make money bundling, and you can make money unbundling.

And it's just funny that that's exactly what we've seen with the streaming industry. The SEC charged the accounting firm that audited Trump Media with, quote, massive fraud. The agency found that the firm, BF Borgers, failed to actually audit its clients before putting its stamp of approval on 1,500 public company regulatory filings. The firm is now permanently barred from auditing public companies, and it must also pay a $14 million fine. Trump Media, along with all of Borgers' other clients, are now forced to find new auditors. Scott, I'm shocked that Trump's auditing firm is fraudulent. What do you think? This guy is literally a crime boss. Everyone around him is either in jail or has a reputation.

I mean, I'm trying to think. Who hasn't been? He's the definition of toxic. Who comes in contact with this guy and doesn't end up in jail with their reputation ruined. I mean, he's the definition of toxic. And this firm, what a shocker, is being massively accused of SEC. I was trying to think of opportunity. The opportunity here is to get a list of those firms that were audited and create a basket of shorts, because at some point in the next one, two, three weeks, Hindenburg or one of these short players is going to come out with a research piece showing that they don't believe a company's numbers and they're going to highlight that this company's auditors are BF Borgers or Borgers or Borgers or hi, we're going to jail soon. Big fucking deal. We lied about everything that these guys.

Yeah. I mean, my favorite status between 2019 and 2021, they doubled their client list, but didn't hire anybody. So they were just saying, congratulations, send us over what you want us to sign. And I had, as someone who's served on a bunch of boards and has served on the audit committee we work with blue chip firms usually a deloitte or wait let me see there's deloitte there's deloitte ewc this is such a consolidated market they are so worried about getting sued that they come back with the most ridiculous request for disclosure and it's like okay aren't we being a little overboard here and they charge you so much money. We keep talking about your return on your invested capital is going to be inversely correlated to how sexy an industry is. A really decent business to start is an accounting firm or an auditing firm. The tax code keeps

getting more and more complex. Hardworking, smart, honest people can make a lot of money in that business because there just isn make a lot of money in that business because there just isn't a lot of competition as far as I can tell. Yeah, I find this such an interesting dynamic here because I think what regulators are increasingly realizing about Trump, and honestly what makes him great in my view, is they basically realize that he is a honeypot for criminals. And I'll bet what probably happened here is the SEC said, hey, I wonder what accounting firm in their right mind would decide, yeah, let's associate with Trump,

let's associate with Truth Social, and let's represent them as their auditing firm. And so the SEC investigated, and what do you know, 75% of the audits this firm has ever produced over its 15-year history have been fraudulent. And it has the eighth largest client list in the US, yet it only employs, I mean, you kind of made this point earlier, it only employs 10 certified public accountants across the

whole company and operates out of this random little one-story building in a suburb in Denver. So this is a huge deal. There are 170 public companies that now need to find a new accountant. But the thing we should remember is that none of this would have been possible if it weren't for Donald Trump. I mean, whether you like him or not, he has basically been a phenomenal servant for the US justice system because he acts as a mousetrap for all these other fraudsters and criminals which are now coming to light. It's also part of a larger theme that's a really unfortunate thing in America, and that is the new superpower is

shamelessness. And, you know, that thread that sort of struck my eyes was a woman is giving testimony under oath outlining the sexual encounter in graphic detail he had with a porn star and then paying her off. And it's like not even that interesting news today because there's so much other shit going on. This is a guy running for president. Gary Hart had an affair in the election kind of 20, 30 years ago. And basically it dominated the news every day. Bill Clinton had an affair with one of his interns basically it dominated the news every day. Bill Clinton had an affair with one of his interns and it dominated the news every day. And this barely even registers as news because shamelessness is everyone's new superpower. Oh, you killed your dog and

buried it in a gravel pit and claimed you met with Kim Jong-un and you actually didn't. Just continue the lie. Don't back down. Just be totally shameless about it. I don't know entirely how to label it. It's literally the toxic shamelessness, but the market seems to be rewarding it. So it's an unfortunate thing that shamelessness has become the superpower. And any one of these things would have taken down any other presidential candidate in anything. But again, because there's so many of them, it just gets lost in the noise of this conspiracy that everyone's out to get him. No, no. Everything this guy does is usually has some connection to some sort of criminal activity. It's just, it's crazy. I don't, I don't, I don't know.

I should move to London. We'll be right back after the break with a look at Uber's earnings. We're back with Froschie Markets. First quarter bookings at Uber rose 20% from a year earlier. However, that number was below analyst expectations, and the stock fell 9%. The company also posted a $654 million loss for the quarter. Analysts had expected a profit, and that loss was largely due to the revaluation of Uber's venture investments,

which were marked down by $721 million. Scott, this is a huge hit to earnings and it's coming directly after one of Uber's best ever quarters. What do you make of this? I think Dara Khosrowshahi is a great CEO. I think Uber is one of the great turnarounds, you could argue.

They've done an amazing job. The whole space seems to be getting better. They're paying their drivers more. Revenues are up. I love the fact that the number two looks like it's going to survive. Lyft is doing really well. On the whole, I just think ride hailing is doing great. This just seems like a quarter.

It feels like a lot of these things, whether it was Airbnb or Meta or Uber, just their stocks had gotten out a little in front of their skis, if you will. And the reason that they're having this massive loss is because of this $721 million loss from revaluing their investments, their equity investments, i.e. Didi, Aurora, Grab, Kareem, all these other kind of taxi-esque startups. Now, that's huge. That's basically their entire net loss this quarter. And I want to talk about that for a moment, because you compare that to last quarter's earnings. They turned a huge profit. And the main reason for that profit was, again, revaluing their equity investments. They posted a $1 billion gain from the value of their venture investments. And I just find this kind of suspicious that we're seeing these wild swings

in the value of their investments. $1 billion billion gain one quarter to a $720 million loss the next quarter. And those investments are ultimately dictating whether their earnings, whether the bottom line is positive or negative. Well, they couldn't have done anything wrong here, Ed, because their accounting firm BF Borgers signed off on it. By the way, I don't think that's true. I don't think Uber is counting firms. How do you say that? BFBorgers? I imagine a bunch of French guys are like, oh, they're stupid. Just send them a bill. Yeah, whatever you want. We're signing off on it. Jacques Bourget.

Jacques Bourget. Okay. So technically what you're stating is this all comes down to the mark. Private equity firms and VC firms have been accused consistently of fucking around with their marks because when they go into fundraising, they want to have good numbers to raise a bunch of money or to pay themselves. Now, typically a firm that does responsible marks and has them signed up by an auditor, the responsible auditor will go, well, what are you basing your mark on? And so, for example, I donate stock to nonprofits and I have to hire a third-party firm to value that stock. And they do a pretty good job and they come back and they say, the stock is worth this and this is why we think. And they're not afraid to come back and say it's worth less than it was last year. Typically, with these kind of companies, the mark should be pretty obvious because they just look at a recent round of financing. Then they look at how the publicly traded companies compare in terms of marks. The best marks are from its valuation in the public markets. And if it's a private company, what are the last round's valuation of third-party investments, not related parties? And then they look at what's happened in that time to the whole sector.

So a responsible auditing firm will say, okay, your mark is off or we're only giving you, we're only signing off on this valuation. But I don't think, I got to think that Uber with the DARA and with the investors it has is probably got as legitimate a mark as anybody else has. The more, I think, interesting thing here is I think you're about to see a massive increase in venture capital investment from corporate venture. I think you're going to see a lot of this. I think a lot of firms, especially this size, are going to start buying stakes or making investments almost like a free option, not a free option. They're going to start buying stakes or making investments almost like a free option, not a

free option. They're going to start buying options in other companies. They get access to information. They get an inside track and acquisition. And sometimes they say, we can help this firm grow its value and recognize in the upside. There's always a cycle here. Then there'll be a bunch of losses and then external shareholders or an activist will show up and say, what are you, a VC firm or in the ride hailing business? But I think we're going to see over the next three to five years, a surge in corporate venture capital. We're already seeing it. 63% of venture funding through Q3 of last year was corporate VC. That's amazing. That's the highest percentage in history. It's all corporations. I mean, think about that. Two thirds VCs are's the highest percentage in history. It's all corporations. I mean,

think about that. Two-thirds VCs are only a third of venture investment. I mean, that's just, the people are supposedly pros at this. I mean, it's really interesting. You're probably going to see a lot of, what I see in the venture capital, what I have a lot of friends who are venture capitalists, the really big ones are raising enormous funds and everybody else is struggling. I mean, there's some niche firms that are very, very focused, but for the most part, fundraising has gotten harder and harder for everyone but the biggest funds because big is just better. I mean, there's literally a correlation between returns and the size of the firm right now. The biggest firms are just doing better. And that's also true in VCs and private equity

players. And they can diversify more and attract better talent. They have the capital to defend their positions and on and on and on. And they attract the best talent because their management fees are bigger and they can pay their people really well. So I think you're going to see increased consolidation, which isn't a good thing, but you're going to see a lot of the players from the smaller firms, really good firms, leave and go run corporate venture for General Electric or for LVMH. I mean, LVMH actually has a huge investment in a great firm called Elkatterton that has been very successful. But I think you're going to see even more of that. I think you're going to see firms that you wouldn't have thought of being in the venture business have, you know, say, okay, we're going to take $100 million, $1 billion, $3 billion, $5 billion, and we're essentially going to start a wing of Snowflake called Snowflake VC or whatever. I think do you want to be a shareholder in Uber,

or do you want to be an investor and a shareholder in Uber Ventures? And those are two very, very different things. And I think that's going to be an important question for shareholders to start asking themselves. But let's move on to the week ahead. We'll see earnings from Home Depot, Walmart, and Alibaba. And we'll also see the consumer price and producer price indices for April. Do you have any predictions? Well, what I said earlier, my prediction is that the case filed by TikTok, I think on the eve of the court case,

they come to a settlement. No one loses their TikTok. A ban doesn't happen and it never ends up in court. And just to follow on to that, the value in the secondary market of ByteDance shares skyrockets. And I predict ProfitG Markets hits top 10 in global podcasts. There you go. From your words to God's ears. Oh my God, I feel a date coming for the little dog. That's right. That's right. You should literally just have shirts printed up that say, I'm 34. Ask me why.

21. 21. That's very exciting. Congratulations, Ed. We're two ahead of Ben Shapiro. We're five behind Andrew Huberman. We're two ahead of Ben Shapiro. We're ahead of Huberman?

No, we're five behind Huberman. And I think we're about 30 ahead of Pivot. Just start saying you hate alcohol. You hate alcohol. That'll get us up. There. Let me just save you millions of hours of Huberman Lab.

Don't drink alcohol. Sunlight for 90 minutes. There you go. All right. This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producers are Jennifer Sanchez and Alison Weiss.

Our executive producers are Jason Stavis and Catherine Dillon. Mia Silvera is our research lead and Drew Burrows is our technical director. Thank you for listening to Prof G 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. And don't forget to subscribe to the new Prof G Markets channel, wherever you get your podcasts. Reunion As the world turns And the dove flies In love, love, love, love