What this reflects is a broader trend that the S&P 500 is no longer really diversification, as you're concentrated now amongst 10 companies. And what does that mean for you? You know, you don't like Chick-fil-A, don't eat at Chick-fil-A. You don't want to be an enforced investor in SpaceX, Anthropic, and OpenAI, then sell your S&P index funds and go into other funds. I think the learning here is that to believe you're diversified in an S&P or SPY index fund, you're not. You're all in America. You're mostly in tech, and you may want to think about other index funds that look at other asset classes and other geographies.
In today's office hours, we discuss whether Wall Street is rigging the game for SpaceX, how to thrive in a fully remote world, and what investment banking actually teaches you. Question number one, our first question comes from a listener who emailed us. Why aren't more alarm bells going off about the rule changes such that SpaceX can get into the NASDAQ and the next month will be forced to buy shares? It seems like corruption to me. Also, the fact that there's no recourse against Elon, no matter how atrocious his behavior may become. Thanks.
Okay, some context here. Major stock indices are rewriting their inclusion rules, specifically if not explicitly, to accommodate blockbuster IPOs. SpaceX most immediately, but OpenAI and Anthropic are also in the pipeline for 2026. For the NASDAQ 100, their new fast entry rules mean mega cap stocks can be added to the index just 15 trading days after their IPO, down from the historic seasoning period of 3 months. This applies to companies with market cap ranking within the top 40 members of the NASDAQ 100, and fast entry inclusions won't require an already listed security to be dropped, allowing the index to temporarily exceed 100 constituents.
FTSE Russell also changed rules to allow faster inclusion of mega cap IPOs in the S&P 500. The S&P considered shortening the seasoning period, waiving minimum float requirements, and removing its profitability requirement, but ultimately said it wasn't making any changes, dealing a setback to SpaceX. They're keeping the traditional bar: 12 months public plus four consecutive quarters of GAAP profitability. What is some of the impact of this change? More than 30 trillion in assets are benchmarked in the S&P 500, Dow Jones, NASDAQ Composite, and FTSE Russell indices. Goldman Sachs analysts estimated the NASDAQ fast entry rule change alone could trigger up to 60 billion in forced buying across NASDAQ 100.
Look, I'm a hammer. Everything I see is a nail. I think it's income inequality. I think people are just so sick of these people and the amount of money they're making, and when they see these outrageous valuations that are difficult to justify, and that all of the shareholder gains from zero to a trillion have been captured, or in the case of SpaceX trying to go out to retail investors at 1.8 and 8 trillion, that all of that juice has been squeezed by private institutional investors, and the IPO market has in fact become sort of the last stop on the chump train. And that is, when Google went public, I think it was an $80 billion market cap, it's up, you know, 500-fold. Retail investors have had a chance to garner a tremendous, you know, 500x return. If you were to get that from SpaceX after it goes public, what would that be? Two trillion? That'd be, I don't even know what that is. What is that, a gazillion? I don't know what that is. So I think people are naturally pissed off, and they vent their anger anyway.
Any change is an opportunity to shitpost these companies. I don't think waiving the rules here is necessary. I'm not exercised about that because at the end of the day, these indices are meant to be a reflection of the most important, largest market cap companies. And all three of these companies already are that. If Anthropic was founded five years ago, if it had been founded in Europe, it'd be one of the five most valuable companies in Europe. So I think including them in these indices, I think you can make a pretty rational reason for it. And being forced to buy these companies like you're some victim, well, you're forced to buy Monsanto who brought us Agent Orange. At least I think you are. I wonder if Philip Morris is in the S&P 500. Anyways, my point is these indices probably include a lot of companies that on your own you wouldn't buy shares in. That's why it's an index.
It does bring up an interesting point in that is it unfair that a new public company gets juiced beyond its public market reception because it's automatically included in these indices? Should it go through a hazing period where it shows its fair value once retail investors have some time to play with it before you decide whether it should go into the index? I think that's a viable argument. I worry this is another technique to get a first pop out of the gates. I would like to see sort of a cooling off period before you decide whether it should go into the index. But essentially, companies used to take seven years to go public. Now they take 12, and these companies have gone faster. But having the most important companies, and these are important, valuable companies, in the indices, that doesn't, I think on balance, this kind of makes sense. I probably still would have waited a little bit just to see what that first trade is, because it does feel like this is a convenient means of creating demand that hasn't been there for other IPOs, thereby creating a false print on the first print. Like if these companies are getting that additional demand right out of the gates that every other company going public hasn't enjoyed.
At the same time, you know, one of the big complaints is that retail investors haven't had access to these companies. And also, if you're in S&P indices or index funds and you don't want to own these companies, then sell your S&P index fund and go into, I'm sure there's a lot of funds that don't include the Magnificent 10. My guess is there's probably even an ETF that is the S&P minus these 10 companies, because a lot of people think they've been overweighted and now they're responsible for 40% of the S&P. So when you buy the S&P, you're effectively buying the Magnificent 10 to almost 40 or 43%.
I think that is not dangerous but not smart. And that is the whole point of buying index funds was diversification, and the S&P is becoming dramatically less diversified. So in sum, these indices are supposed to reflect the most valuable and important companies. These are those companies, even distinct of the fact they're not public yet. But the idea of creating artificial demand upfront, which doesn't give you a fair litmus test on the initial trade, I can see some concern there. I would have asked for at least a 30 or 60 day cooling off period to make sure that these companies still qualify. But what this reflects is a broader trend that the S&P 500 is no longer really diversification, as you're concentrated now amongst 10 companies. And what does that mean for you? If you don't like, you know, you don't like Chick-fil-A, don't eat at Chick-fil-A. You don't want to be an enforced investor in SpaceX, Anthropic, and OpenAI, then sell your S&P index funds and go into other funds, which I'm sure there's a ton of them that avoid these companies. But really, I think the learning here is that to believe you're diversified in an S&P or SPY index fund, you're not. You're all in America. You're mostly in tech, and you may want to think about other index funds that look at other asset classes and other geographies.
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Question number two comes from Reddit. Spellsad8352 says, "Hi, Scott. I'm 27 years old and have spent the last three and a half years in construction equipment sales and had lots of success. In a few weeks, I will be starting a new job also in sales at a software startup working fully remote. What advice would you give to someone, number one, on transitioning to a fully remote role, specifically sales, and number two, working at a startup?" Gosh. Okay. At 27, boss, I would argue the office is a feature, not a bug, and do everything you can to get around other co-workers. There's evidence saying you're 40% more likely to get promoted if you're in the office. I think you're in the kill zone, and that is, I think you're in the exact wrong demographic to be working remotely. I think you want mentors, you want to find friends, mates. One, HR hates this, but one in three relationships begin at work, and 99.9% of them have been consensual. So I think the office is a feature, not a bug, for a 27-year-old male.
Now, having said that, working remotely, I think you got to be pretty disciplined about a schedule and deadlines, setting up deadlines for the number of new business calls you're going to make, number of meetings you're going to go to in person. You know, you got to come out of the gate strong because you're going to have to impress everybody, and they're going to have very, very anodyne metrics: number of calls you make, number of deals or conversations you set up, and your close rate. I think you want to figure out a way to be in person with clients and co-workers as much as possible. I think just being at home, just trolling LinkedIn trying to set up meetings, I don't think that's good for a 27-year-old man. So I think that one, try and figure out a way to get out of the office or get out of your home as much as possible such that you can meet with clients face to face, meet with your boss, meet with your co-workers as often as possible. I think that's hugely important. I would have been a disaster at remote work at your age, home alone. I just would have been really good at walking my dog and, you know, getting more exercise in, which isn't necessarily a bad thing. But I don't, you're going to have to be very disciplined and set metrics for yourself every night before you go to bed or whenever, saying, 'I need to do the following things.' And I guess in sales, especially with remote work, they're good at creating metrics for you. I would be careful not to fall into a world of making good money. Again, I'm preaching here because my way isn't necessarily the right way, but it's my way. But I think the only way you really get ahead is through relationships, and remote work doesn't set yourself up for relationships or strong relationships.
So the reality is, I say the glass is half empty here. And I would try and figure out a way to show a certain level of performance, and then such that you can get to a position that involves more peer-to-peer contact and peer-to-line contact. And if you're going to be at home, you just got to set up the schedule and deadlines to hold yourself accountable, which is difficult, I find, at your age. I find it difficult at my age. Anyway, sorry I'm not more optimistic there, but congratulations on the job. If you know how to sell, you can always make more money than you deserve. The most overcompensated people in any company are the salespeople, and everyone resents them because they're willing to do one thing other people aren't, and that is get out a big spoon and eat shit. And that is call people who don't want to hear from you. And when they say, 'Don't call me again,' you say, 'Oh, I think that means I should call you back in three months.' And just have, I don't know if salespeople played with the right toys or the wrong toys, or if they have exceptionally high or exceptionally low self-esteem. It doesn't matter. If you can sell, you can always make a good living, and you develop the ultimate skill set, which is the ability to endure rejection. So clearly, you have that skill set if you're doing well in sales. Anyways, congratulations to you and best of luck. We'll be right back after a quick break.
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Welcome back. Question number three. Hey, Scott. I heard you tell somebody on a recent podcast that the value of an investment banking experience basically was learning to work hard, attention to detail, getting along with others, and you also referred to an approach to work. From my perspective, if you came out of college and did investment banking for a few years and those were really the primary skills that you walked away with, that just feels sort of redundant and maybe even a loss or a waste of time relative to learning something more applied that you could use in the rest of your life. Now, maybe you do learn some really important applied skills. Maybe there's something about, in your case, doing fixed income that actually is useful for the rest of your career, whether it's spreadsheets or balance sheets or other economic considerations. But I would love for you to clarify that, like, which is it? Is it the soft skills? Is it the hard skills? But what makes the value of an investment banking career?
Thanks for the question. So I'm trying to increasingly recognize that at my age, a lot of times I don't know what I don't know because the world has obviously changed a lot. I was 21 when I showed up at Morgan Stanley in 1987, and my only skill set was I interviewed. Well, why did I go into investment banking? The only reason I even went into, if you asked me what investment banking was the day I showed up, I don't think I could have told you. But I had a roommate my senior year, as a lot of young men are. I was very competitive with him and him with me, and his dream was to be an investment banker. So I thought, if he wants to do it, I'm going to do it. That's why I wanted to be an investment banker. Also, I thought it would impress my mom, and I thought it would impress strange women. I had no fucking idea what I wanted to do. So I thought, 'Oh, I'll just be awesome and be an investment banker.' And got the job.
And I think you're right. I think if you have a really strong skill set around finance and discipline, then you wouldn't have registered, or there wouldn't be the same upside as I received. I didn't have those things at UCLA. My primary skill set garnered was how to make bongs out of household items. And I was not disciplined. You know, I didn't work hard. And so Morgan Stanley was kind of like the Marines for me. And that was really sort of a swift kick in the ass. And also just learning about the capital markets. You can't learn that strictly from a book. When I showed up, I think two months later or six weeks later, it was Black Friday, October, I forget, it was the 19th, 1987, and one of the MDs in the investment bank group said, 'We should go down to the trading floor because, you know, it was a big day.' And it was just mayhem on the trading floor, and trying to understand what was going on. I think the S&P went from, you know, 1,400 to 900 in one morning, and everyone thought it was the end of the world, but just trying to understand what was happening and how humans reacted to it. Then there was some layoffs in the trading department.
You just got a feel for business, and then meeting with the county commissioners for LA and proposing and trying to understand how a quarter-percent increase in sales tax was going to fund this subway in LA that is now still opening stops. You start to connect, at least I did, finance and the bond market to capital formation and building things, and tax-free bonds versus bonds for real estate and the credit market. So I think I learned a lot, and there's nothing about the hierarchy of the corporate sector that you can replicate in school. I don't think, could you have shown up with stronger skills if you went to a, you know, a better school or took school more seriously? Absolutely. But I think those kind of, it was a two-year program when I went. You went two years and then went back to business school. There was 87 analysts in my class, and literally I think 84 of us went back to business school. I think that path or that sort of mentorship or trainee program where you work your ass off and you get decent pay or good pay and you get that stamp on your forehead, I like that model. And unfortunately, I think a lot of investment banks, Goldman doesn't even hire out of business school anymore. They find people out of undergrad and they'd say, don't go back to business school because we'd rather just, you know, train you in the two years here. We'll give you more skills.
So I look back, it's the only kind of job I've ever had since then. I wasn't very good at it, and I wasn't very successful at it, and I didn't have the skills to navigate a large organization. What do I mean by that? I was literally too insecure. People would go into a conference room and I would think they were talking about me. I resented anybody senior to me that I think was as smart as me. And the reality is they were probably as smart or smarter. I was just too immature to navigate a corporate environment. And if you can navigate a corporate environment on a risk-adjusted basis, it's a better place to get wealthy. You know, the guy who was my boss is now the vice chairman. And I think he's probably made hundreds of millions of dollars and had much less tumult and indigestion than I've had as an entrepreneur. Up and down and up and down. So the American corporation is still the greatest wealth generator in history. And you do need skills to navigate it. You've got to be mature. Occasionally there's going to be injustice. Someone not as smart or talented as you is going to get promoted over you. You're going to have to put up with shit. You're going to have to get emails telling you that we've changed this approach. You don't even know why, and it makes no sense. There's that. In exchange, they'll remove that mole for you. They'll give you health insurance. You get rich slowly. They're incredible platforms for creating shareholder value. You meet a lot of smart people.
So I think that entrepreneurship is vastly overrated and the corporate world is vastly underrated because it's just cooler and sexier to start your own business, ignoring the fact that six out of seven businesses aren't around in about seven years, or small businesses. So I got a lot out of it. I still think that working for a corporation right out of school, if they have some sort of formal training program, is a fantastic way to meet peers, get a good training, get a good swift kick in the ass, deepen your skills, and if you're like me and you don't like it, that's a blessing too. I think your 20s are about figuring out not only what you like, but what you don't like. You want to workshop your 20s to figure out what you're good at. The basic compact with those companies and young people is: we own your ass. You're going to have no balance in your life. You're going to work insanely. It's almost borderline abusive. But in exchange, we're going to pay you more than your parents made when they were 10 years older than you. And guess what? A lot of young people will raise their hand and they want that. They want that trade-off. I wanted that. I just wanted to make money, and I wanted to have developed a skill set and contacts so I could make more money.
So the most successful organizations in the world typically have that type, at least economically, have that compact with their employees. And that is, you're going to sacrifice a lot, and we're going to move you further faster here. And there's a lot of people that sign up for that. I don't care if it's Disney, Goldman Sachs, McKinsey, you know, these are, you know, go to Meta and see what your hours are like, at least in the growth stages or the early days. Is that sustainable? Typically, not over the long term, is it? I don't know. It's just a different culture. It's just what you're looking for. But I think that apprentice culture, going to work for a great brand, if you have access to those platforms, if you can get into a JP Morgan or a Bain, quite frankly, I think you need to opt towards yes because you're not going to go do a two-year analyst program at Bain when you're 40. It's a unique time. You don't have dogs or kids or spouses. You can work your ass off, get a lot of experience. And I've carried that brand on my forehead for several decades now. And I think it's served me well. I think people take me more seriously when I talk about the credit markets because I did work in fixed income at an investment bank.
That was a word salad. That's all for this episode. If you'd like to submit a question, please email a voice recording to
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