Please welcome Ed Nelson and Scott Galloway.
How are you doing?
That's pretty good. That's pretty good. We're finally here. It's good to be here, Scott. It's great to see you in a Patagonia vest. So am I. Dress the part.
Yeah, I look like the chairman of a VC firm that's been asked to retire for the last 40 years. Look at me. Can we get rid of this? By the way, first and last time I'm wearing a Patagonia vest.
Ed, Ed, Ed, where did you go to school? I forget.
So, Ed, I don't know if you know this, but I have a little bit of history here in San Francisco. That's right. That's right.
Lived in Potrero Hill, then in Noe Valley, bought the house next to where Mark Zuckerberg lives now. And in addition to the fact that I sold it for $900,000 and it's probably worth about $14 million now, I would have given up the money just for the opportunity to live next to him and be just out on my porch every day showing a little midriff like when he comes home.
It had to happen when he drives.
Hey, still depressing teens.
Yeah. Yeah. Clap for that. That was impressive.
All right. And I don't know if you know this, but the real seminal experience for me in the Bay Area is while you went to Princeton, I didn't go to Princeton because I didn't have a lot of money and my SAT scores were really, really high. First part of that is true. Anyways, I don't know if you know this, but I went to this school that has in addition to... well, you may know this. What school has the most startups of any school in the world?
Most startups of any school.
Uh, that is not correct. Wrong.
It's the same school that not only has won 248 medals at the Olympics, but has also graduated more people into the Peace Corps than any school in the world. It's also the school that will graduate more low-income kids than the entire Ivy League combined. In addition, I'll give you one more hint.
There we go. There we go.
That is so emotionally manipulative. Meant to get you to like me more, isn't it? They're not nearly as cute now. They've developed these awful things called opinions. They're literally awful now. Anyways,
but based on the image, I'm going to guess that the school is Cal Berkeley.
You still don't get it. I'm going to give you one more hint. One more hint. Hit it.
Heat. Heat. Heat. Heat.
Hello to our first Prof G Markets live tour here in fantastic San Francisco.
You look great.
Today's number is 49. That's the percentage of billboards in the Bay Area that are advertising AI.
Ed, true story. I went into my doctor's office with a shoulder problem. And he said, 'Well, I need you to pee in a cup and then we have our AI look at it.' The AI looked at it and said, 'Your labrum's damaged. You need to take this medicine, and then when you come back, you're going to pee in another cup, and the AI is going to tell you how you're doing.' So he came back and he said, 'You're not taking your meds. The AI is pissed off at you. Take your meds.' I started to get pissed off. So I went home and I had my wife pee in a cup. And also, and I'm not proud of this, I jerked off into the cup. And I came back and they gave it to the AI and the doctor came back and said, 'Your wife is pregnant and the father is your friend Brett, and if you don't stop masturbating, your arm's never going to get better.'
Welcome to Prof G Markets Live.
It never ever gets old. It is so good to be here in the global capital of technology, the capital of venture capital as well.
And I'm really excited to get into this show. But before we start the show here, Scott, I just want to read you a couple of quotes that I've collected over the years that you have said about the venture capital community because I know that there are probably a lot of venture capitalists in the room right now. So I just want to make sure that we're all on the same page and I just want to hear what you have to say about this. So I found this from a podcast we did a couple years ago. You said, quote, 'I've worked with a ton of venture capitalists. They're not the sort of loving, caring people that are depicted on the website.' Okay. You later said that there are, quote, 'very few cohorts less pleasant, more self-absorbed, and more convinced they're changing the world than venture capitalists.' And then a few months later, you said that venture capitalists are, quote, 'generally speaking awful people.' And then you later clarified in the same episode that actually they are, quote, 'the absolute worst people in the world.' So, Scott, just before we start, I just want to ask you, what do you mean by these statements? What do you mean venture capitalists are the worst people in the world?
Yeah, but you left out the brightest people you've ever met that know absolutely nothing about your company would sleep with their sister for a nickel. If you meet a guy in a blazer and he brightens up a room by leaving it, chances are he's a venture capitalist.
They're already leaving out the doors. I see them now.
Yeah, this is 70% VCs. So just another thing about the Bay Area, and I love so many things, but there's a few things I don't love about the Bay Area. One, venture capitalists. But two, and this isn't in the script, I am so done with this optimization of men my age trying to optimize for their health. This is how you optimize.
And I'm being very serious here. So the fastest zero to a billion dollar companies in history. I think everything in life reverse engineers to essentially biology and astrology which is manifested in business. So I think there's a lot of life lessons in business. Fastest zero to billion dollar retailer in history was Old Navy. And it's got a very powerful axiom. It's 80% of the Gap but for 50% of the price. The fastest zero to billion dollar revenue airline, Southwest, 80% of the market leaders for 50% of the price. And I think, and I'm being serious now, that these guys who are trying, it's mostly guys trying to optimize to 97% with all these cold plunges and red light and measuring their sleep, which would just stress me out so I couldn't sleep. This is, trust me,
I'm looking for all the people who do that in this audience.
I think it's most of them.
This is the axiom. Optimize to 80%. And I'm serious. And that is all right. We all know you're supposed to be healthy. You're supposed to eat well. Manage your sleep, be fit, but manage to 80. In the other 20%, enjoy your life. Have dessert. Drink a little bit. Approach strangers and make an ass of yourself. Hang up the condom you never used. Just like have the right go to 80. Anything above that, trust me on this. It's not about lifespan. It's not about health span, it's about fun span. 80% Old Navy your life. I'm sorry. Back to the original program.
Fun span.
Great way to start the show. I totally agree. Without further ado,
Let's start with our first story. So it has been a sleepy few years for the IPO market, but it is about to come roaring back. SpaceX, OpenAI, and Anthropic are all set to go public this year at a combined valuation of roughly $4 trillion. Just for context, that is more than every dot-com IPO put together, inflation adjusted, and also equal to half of the combined value of every IPO in the 50 years before it. So the last time that we saw an IPO frenzy this dramatic was in 1999, which made a lot of Silicon Valley investors a lot richer, right before it made them actually a lot poorer. IPO mania was in many ways the beginning of the end. The NASDAQ began its collapse in March of 2000 and it eventually lost 78% of its value in two years. So we sit here tonight in San Francisco on the eve of the next IPO mania and the question that I will pose to you, Scott, is will it look like 1999?
So there's a lot of analogy. There's some similarities, but there's also some pretty stark differences, right? So there was a confusion around how this is all going to manifest or play out. So there's a digression to investing in the technology and infrastructure layer. We did it with Global Crossing and Cisco which lost 90% of its value. There was momentum euphoria. A certain technonarcissism. Back then it was the internet's going to change everything. Now it's AI is going to replace everyone. But there was a certain belief that this region and these companies were going to be the operating system for the world moving forward. There's some pretty stark differences though and that is while you had about 60% of GDP growth was from infrastructure spending back then or growth or investment in internet companies, it's now about 90% of GDP growth is from the infrastructure buildout. So it's even scarier. And typically whenever you get over 3% of GDP is being invested in any infrastructure, railroads, electricity, electrification, the highways, again, telco in the '90s, within 24 months there's a crash. But where it's different is I don't think there'll be a crash this time. I think there'll be a pretty vicious recorrection or price recalibration. But where things are different is the following. The companies now are cash juggernauts. They're incredibly profitable. Whereas in '99 it was just, I don't know if any of you remember this, the Globe that went up eightfold on its IPO. Pets.com. I mean, there was just all of these ridiculous companies and
I had to.
Dude, you were an intern here like 24 months ago. Anyways,
You got me today. You got the clips.
But these are really profitable. These are incredibly profitable companies. They're financed with their own cash flows, not with debt. But if you look back and walk down memory lane, Google was still sort of this PhD project that was run by two guys that look like Czech and Molly dealers. Amazon. Amazon was a book company that was losing a lot of money and a ton of smart internet analysts were convinced it was going to go bankrupt because it had too much debt. eBay was considered a really powerful company. It was making money selling to people in Ohio. And probably the most important tech media company, maybe even the most important media company in the world at that time was a company called Yahoo, which bought a company called Broadcast.com from Mark Cuban for $5.4 billion. So I love Mark. I think he's very smart. He's also one of the luckiest people ever. And then you had just a ton of companies that got swept off the planet. So it feels as if this time it's similar but different. But what is the same is a group of young men who are socially awkward, who are self-absorbed and think they're going to change the world and have a totally inflated sense of self. So I think that there's a certain kind of narcissism that infects this type of movement. Whereas back then it was going to change everything. Now the kind of narrative is that AI is so impressive and powerful that it's going to replace all of us. And in '99 to their credit they got it right around the internet. They just got the arc or the time span wrong. And I think the same thing is true here. I think AI will in fact replace a lot of costs and increase productivity. But again, I think we got the time or the arc. I don't think it's going to happen as quickly as everybody thinks. But more importantly, back to me, in '99, this guy named Frank Quattrone from Credit Suisse First Boston was going to take the company I'd started public, Red Envelope. And I remember a bunch of internet CEOs, we were flown to an airfield to look at Bombardier jets because they said they would take stock in a private company in exchange for a jet. And it was a bunch of 30-some-year-old, speaking of self-absorbed people who couldn't get dates to the prom. We were all out looking at these jets and picking out our jets. And even then, I had enough mindfulness to know this is not right. This doesn't feel right. And within three or four months, we were no longer looking at jets. And I remember I was in a board meeting of my company, Red Envelope, and I accused the chairman of our company, and it's been a long time, so I don't hold any grudges, Mike Morris. And I said to Mike, you're using Red Envelope as a dumping ground for the failed products of your portfolio companies. And on the way to the airport, they called me and said, 'We're kicking you off the board.' And so I got kicked out of the band I'd started. And I remember being at SFO and I had this flashback tonight. And getting out of the car, we used to rent cars back then. And I remember just being frozen. Like I had never in my life, I was 34 at the time. I'd never in my life had that kind of professional punch in the face. And I remember getting out of the car and just being paralyzed for a good five or seven minutes. Like I literally just didn't know what to do. I just didn't know, do I call a lawyer, like what do I do? I remember just sitting outside of my car and finally the lady who gives you checks in the cars came out and said, 'Sir, are you all right?' And then just to be serious for a second, for those of you who, I don't know how many of you are here living in the '90s, but it wasn't the internet that was the most dramatic thing. At least for me it wasn't in terms of what I think of as being the thing I remember most about San Francisco in the '90s that really has stuck with me. Does anyone want to guess what it is? This is not light at all.
It was, if you're under the age of 45, you probably think of COVID as being hopefully what will be the most dramatic health scare. You are literally walking around this neighborhood and there were these beautiful young men everywhere dying. I mean it was just like it was catastrophic. So and you know fortunately the warm hand of science pulled us out of that. But if you lived here in the '90s, I mean, it literally was a plague. And it was like the best and the worst of American science in terms of how we responded to it. But that's how I think of San Francisco. That's like what I remember most. Get me out of this, Ed.
Yeah, I have all of these numbers and all of these notes and now I'm not sure what to talk about.
You still ain't Mike Morris.
