The Prof G Pod with Scott Galloway - The Week: The Hidden Debt Behind the AI Boom

Episode Date: July 31, 2026

George Hahn connects the dots across the week’s biggest stories: how hidden debt is fueling America’s AI buildout, why China is spreading cheap, open-source AI around the world, and what the rise of solo founders reveals about the new creator economy. Plus, No Mercy / No Malice turns ten. We’d love your feedback as we build this show! Let us know what you think: [e-mail]. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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that matter most. Learn more at Accenture.com slash Spotify. The 2006 Chevrolet Equinox awarded the most dependable compact SUV in the U.S. by J.D. Power is designed for your everyday. And with available all-wheel drive, you can handle your to-do list with total confidence. Start your build at Chevrolet.ca. Details at JD.Power.com. Welcome to the week from PropG Media, where we break down what mattered and what it all means. I'm George Hahn, and it's Friday, July 31st. Today, the hidden debt financing the AI boom and why the market turned this week.

Then, China's push to spread cheap, open-source AI around the world. And finally, the reality behind the creator economy and the rise of the solo founder. Let's get into it. This week, the debt underneath the AI boom came into view, and the market didn't like what it saw. An investigation from Nika Asia found that the five biggest companies in AI, Alphabet, Microsoft, Amazon, meta, and Oracle, are now carrying more debt off their balance sheets than on them. On Monday's Profi Markets episode, Scott walked through what that means. There is a sweet spot of leverage in the economy, both in the banking system and corporate debt and even personally a certain amount of leverage. But big tax 1.7 trillion an off-balance sheet debt versus 1.4 trillion reported.

That gap is sort of the story because when you're hiding a bigger number than what you're reporting, that's not accounting. It's concealment. And meta's off-balance debt is $420 billion, which is $3.X what they report. That's not a rounding error. That's the second company hiding live. inside of the first company. And the mechanism is that shell companies will fund the data centers, private credit funds the shell companies, and pension funds and insurance annuities fund the private credit. If you reach far enough into the barrel where you're a reverse engineer far enough, what you find is that a teacher's retirement account is underwriting Zuckerberg's GPU bill. And, you know, Bernankeo has said this. We're obsessed. 90% of the air, time on this show or on CNBC is about equities because they're more interesting and they have a daily

scorecard and the movement's more dramatic. We're just in stock. Stocks are just more fun. They have more personality. They're more interesting to track. But whether it's whether it's the depression, whether it's a great financial recession, whether it's a dot-com implosion, nothing rings the bell of a beginning of a crisis like leverage. The hidden debt wasn't the only warning. Invitya had lined up more than $750 billion in new AI commitments, including a quarter trillion dollar guarantee for open AI, and the cost of ensuring its debt posted its biggest one-day jump on record. Just another iteration of the circular financing Prof G markets has flagged for months. On Wednesday, the markets stopped ignoring it.

The NASDAQ fell into correction territory. Chip stocks got crushed. Torsten Slocke, chief economist at Apollo, explained what the market was suddenly pricing in. The challenge at the moment is that the hypers and those who are building the infrastructure, they are changing their financing, which used to be mainly from the equity side of the balance sheet,

to now being on the debt side of the balance sheet. And the amount of debt that has come to the market from the hyperscalers, meaning the companies that are building out the infrastructure, has just been enormous. So as a result, we've seen very, very significant increase in supplier of investment grade credit that is in the hyperscaler space. And the consequence of that is that we have started to see spreads in credit widened out on that hyperscaler debt.

And this has resulted, of course, in a number of questions being asked, namely, are spreads widening out on hyperscaler debt because of worries about the underlying credit of these companies, meaning their ability to pay back their debt? Or is it simply just because of demand and supply that there's just a lot of supply that there's small supply at the moment? Here's what makes that debt harder to carry. The American bet, hundreds of billions borrowed against a buildout, assumes the companies doing the building can eventually charge enough to pay it back. And China is attacking exactly that. Not by building better models, but by making cheap ones the whole world can download for free. This week,

Xi Jinping stood up at an AI conference in Shanghai and made it official. On China decode, James King laid out the scale of the plan. And so China doesn't want to miss the boat. It doesn't want the U.S. to win AI

as well. And in fact, it wants to win AI so that in 20 years time, whoever is doing this version of this podcast will be talking about the fact that China won AI. And that's what this whole plan is all about. And I think the political

nature of the plan comes over really clearly when you see how the training that you mentioned is organized. So China's going to be training thousands of people and the focus is going to be on the global south. The training's going to be on how to use Chinese open weight models. And there are going to be six major regional AI centers that are set up within regional groupings so that the training will be delivered through the hospital. of these regional groupings, and so that we can see that China is getting behind this strategy in a very major way. We'll be right back after the break. Support for the show comes from SOFI. Whether you're buying your first home or just looking for

ways to make your current mortgage work better for you, the process can feel overwhelming. The good news, you have more options than you might think, and the right home loan can really make a difference helping you reach your financial goals. That's where SOFI can help. Whether you're buying, refinancing, or planning your next move, SOFI offers a tech-forward human-backed mortgage experience designed to make the process simpler. You can apply online in minutes while still having access to a dedicated mortgage loan officer to answer your questions and guide you through every step of the way. SoFi, no matter where you are in your homeownership journey, SOFi has solutions designed to help you move forward with confidence. Head to SOFI.com slash propG loan to explore your options today. That's sophy.com slash propG loan.

Mortgages originated by SOFI Bank, NA member FDIC, NMLS, 696891. Terms and conditions apply, equal housing lender, verified pre-approval letter, terms apply, see conditional pre-approval letter for details, not a final loan approval and not a commitment to lend. If you'll allow it, I'm going to throw some numbers at you. According to some recent polling from the good people at Pew, about half of Americans now use AI chatbots for something in their lives, whether it's work or personal. That's a dramatic increase from just two years ago

when it was more like 30% of the country. But here's the funny thing. Only 16% of the country thinks AI will have a positive impact on society. Two-thirds of Americans think AI technology is advancing too quickly. And most Americans, especially young Americans, don't trust AI nor the people in charge of it. And all this polling was done before an over. Open AI agent went rogue and hacked another company.

On today, explained from Vox, isn't that the thing science fiction warned us about for all those years? Yes. And what can we do about it? Welcome back. There's risk at the top of the economy. But this week also brought a story about risk at the bottom of it. The record number of Americans calling themselves founders. Last year, Americans filed nearly six million applications to start a business, the most on record.

But only about a third intend to hire a single employee. And on LinkedIn, the number of people calling themselves a founder jumped 69%. On Monday's profsci markets, Scott made the case that most of them aren't founders at all. Okay, I have a real BMI bonnet around the whole founder thing. And let me, if you typed in the name on LinkedIn of every company I've started, you're going to find there are 30 or 40 co-founders of all these companies. Everyone has decided they're a co-founder of red envelope, a profit. And people would call themselves co-founders and I'd be like, fine, have at it. Titles are cheap, have at it. But here's what a founder is.

A founder signs the front of checks, not the back of checks. And the reality is the vast majority of people are not willing to put their own money. Here's what it means, you know, L2 amazing, great company, smart people, we sold for 160 million. I got very lucky, extraordinary. All the moons lined up. The first two years of L2 was me going home and telling, my girlfriend who had just giving birth to our second son in about 36 months, oh, business is good.

And I apologize, I can't be home for bath time. I am working 14 fucking hours a day, and I've got to work all day Sunday and just go in on Sunday to be emotionally supportive of the people who showed up on Sunday. And in exchange for that, on the first or the 31st of every month, we've got to take $100,000 out of our savings and put it into the company. And my girlfriend would literally look at me with this look of, fear like what the fuck are you doing to our family and i would have to sit there for an hour and

explain to her why hopefully it was going to pay off and not once but twice i came within a hair of losing it all couldn't pay my my my lease on my office was going to have to shut the whole thing down and go home and not only lay off a bunch of people but go home and tell my girlfriend and the mother of my children, oh, the $1.2 million, or basically the majority of our savings, is gone. That's what entrepreneurship is, folks. And by the way, that's a good story. It worked out. Ed also gave us his take on the side hustle economy. So that leads me to one conclusion that makes a lot of sense, which is that these are all kind of bullshit sidegicks. This is, I'm bored at work, I'm still employed at work, but I work remotely, and I kind of want to start like a lifestyle brand, and I'm going to make an Instagram account, and maybe I'm going to make a substack, and maybe if I'm feeling really excited about it, I'll also create an LLC, because I'm interested in doing that. But to be clear, that's not a business that is actually contributing to the economy. It's basically like a, it's basically a hot.

It's basically like a more legit vehicle to express yourself based out of the boredom that you feel in your real job. But economic anxiety isn't the whole story. A lot of people, especially younger people, aren't turning to solo work only because traditional employment feels less secure. They're also betting that the internet has made it possible to build something meaningful without more. millions in capital or hundreds of employees. Jack Rames, author of the newsletter Young Money, joined Scott this week to discuss the business model behind that bet. On the media industry, I think this might be a hot take.

I actually think it's a very good time to start a media brand because you can just do stuff a lot leaner now. Like, if you look at the radio industry, it's like there was so much infrastructure. You had so many people working in the studio versus now, you can launch a podcast and hit publish and effectively get distributed to the entire world immediately. Like, I know you have a whole team that works with you. That team is still probably way leaner than it would have been 40 years ago to try to have the same level of distribution, right?

So there's a lot of like, what I would say is like bloated media companies that didn't really adapt to social media and now kind of influence your creator first stuff that like their revenue model and their cost structure just doesn't really make sense. But for like individuals or lean teams, whether they're building subscription model, ad model, whatever, I think there's like a lot of value building in niches with like a pretty low cost basis and low headcount.

On the creator front specifically, like the fund I'm at, slow ventures, we actually have a, like we have our fund that invest in startups, like tech, AI for whatever, yada, yada, yada, like Silicon Valley, New York, we do everything. We have a separate fund that invest in creators

and creator-led businesses where the bet that we're making there is that the internet is getting more and more silo. where like I have my internet, you have your internet, like algorithms and interests drive everything. People that are kind of like cult leaders in different pockets have interesting opportunities to build businesses around like their niche or their audience where if you're kind of seen as the like market or industry leader on your thing and you have hundreds of thousands or millions of followers, like can you build businesses on top of that platform? We think so.

And that trust still takes time. This week, no mercy, no malice turned 10.000. 10, 10 years of Scott writing the same newsletter every Friday, and four years of me narrating his words for the audio edition. While the cost of publishing has fallen toward zero, the cost of building a voice people care about hasn't. It takes consistency, vulnerability, and a willingness to keep showing up. In this week's anniversary essay, Scott explained the reason he keeps writing. Here's what he wrote. I write a lot about the end, death, believing that I'll go first, and that someday I'll look into my son's eyes and know our relationship is coming to an end. This has been an unlock. All the fear of shaming, worrying what other people think, and reticence to tell people, I love them,

melts as the light at the end of the tunnel draws nearer. My boys have little interest in my work. I doubt they've ever read a post. But they will. It will transport them back to this era, the good and bad, and cement what they feel but may not know, how much I think about and love them.

Platforms change, markets turn, business models come and go, but a voice worth remembering can outlast all of them. That's the week. I'm George Hahn. We'll see you next Friday.