$109,700

That’s the threshold the San Francisco Housing Authority considers “low income” for a single person annually.

1. The hidden costs of AI efficiency

2. Can Netflix survive the clip economy? Ft. Netflix Co-CEO Ted Sarandos

The Markets team is on tour! We’ve hit San Francisco, Los Angeles, and Miami so far, and we’re in Chicago tonight and New York tomorrow. Follow along on X (Twitter), Instagram, and Substack.

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Is AI More Expensive Than the Humans It’s Replacing?

Nearly 50,000 workers have been laid off this year — (supposedly) because of AI. That’s almost as many as in all of 2025. For companies adopting AI, the thesis is simple: AI will do much of the work that humans do.

In recent weeks, however, that thesis has hit a roadblock. More and more companies are reporting that, despite the enormous power of AI, the technology is actually more expensive than the humans it’s supposed to replace.

Uber, for example, just blew through its entire 2026 AI budget in four months. According to the COO, it’s now getting harder to justify AI costs within the company. Microsoft is canceling its Claude Code licenses across multiple divisions because it’s simply gotten too expensive.

At Nvidia, one executive said that the cost of compute is now “far beyond the costs of employees.” Meta, Pinterest, and Spotify all cited rising inference costs as a drag on their margins in the first quarter.

How much are enterprise AI budgets? Some 45% of firms surveyed by cloud cost company CloudZero said they spent more than $100,000 per month on AI in 2025, up from 20% the year before.

At Anthropic, a single employee used $150,000 worth of Claude Code in one month. To justify this bill, that engineer would have had to do the work of more than 11 average engineers.

In this market, the appearance of efficiency has been so consistently rewarded that actually calculating it hasn’t been necessary. Seventy-nine percent of S&P 500 companies talked about AI on their most recent earnings call, but only 8% disclosed any AI revenue.

The same CloudZero report found that only half of organizations surveyed said they could confidently evaluate the return on their AI investments. Spencer Rascoff, Match Group CEO, said AI is costing the company between $5 million and $10 million per year. When asked about ROI, he said, “I think we’re benefiting from it, but it’s hard to feel it.”

Here’s what I think is gonna happen: companies will start to resort to the cheapest models, which are Chinese LLMs. Chinese models are 10x to 30x cheaper than U.S. models. We’re already seeing evidence of this: Chinese models went from about 1% of developer usage in 2024 to more than 60% in May, and 80% of U.S. AI startups are now using Chinese open-source AI models.

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Netflix vs. the Clip Economy

Long-form content is under siege. The new competitor? Short-form video. Since 2019, the amount of time Americans spend watching short-form video has more than doubled. TikTok’s revenues have grown tenfold, YouTube now beats Netflix on TV watch time, and Reels now account for 50% of all time spent on Instagram. For more on the clip economy, check out Ed’s piece in his newsletter, Simply Put.

No company has more to lose from this shift than Netflix. With 325 million subscribers and $45 billion in annual revenue, it is the world’s dominant long-form streaming platform — and investors are starting to worry about this new threat.

Despite reporting strong revenue growth and profitability gains, Netflix has underperformed the market over the past year and now trades at a 25% discount to its 5-year average price-to-earnings multiple.

The question is, how will the largest streaming service in the world respond?

Netflix is expanding beyond its traditional business model. Its ad tier now has 250 million subscribers, up 30% from November, and the company is on track to double its ad revenue to $3 billion in 2026.

It’s also building out a suite of more than 30 video podcasts. Just last week it announced a joint $100 million deal with Spotify for Jay Shetty’s self-help podcast, On Purpose.

Thirteen percent of U.S. Netflix households have watched at least a minute of a podcast on the platform. For context, 21% of Netflix households watched KPop Demon Hunters within 30 days of its release.

Note: This interview with Ted Sarandos, co-CEO of Netflix, is condensed for clarity.

Ed: Netflix is competing with YouTube for TV time, but, increasingly, people aren’t even turning on the TV. They’re taking their phones out and scrolling. For Gen Z, we’re spending around eight hours a day on our phones. How are you thinking about competing with short-form content?

Ted: What’s really remarkable is that through the entire advent of the internet, phones, YouTube, and all these free options — television consumption and movie watching on bigger screens is remarkably stable. How is that possible? People are multitasking.

There’s this idea that people don’t have the attention span for TV anymore — well, wait till the new season of Wednesday comes out. People will sit in front of their TVs and watch eight hours straight. It happens every season.

Netflix provides entertainment worth paying for. Our big mantra was always that our content has to be better than free.

Scott: You made a big bet on advertising back in 2022. A lot of people said Netflix needs to stay premium. How did you think about that decision?

Ted: The one part of the audience we were not addressing was the one who wanted a lower price point and didn’t care about ads — and there’s a lot of them, it turns out.

The reason we were not in the advertising business at the beginning was that “no ads” was a counterposition. When we got into streaming, our competition was TV. What didn’t people like about TV? Advertising, and having to wait till next week for an episode. So we were the no-ads company.

When we first got into DVD, our competition was Blockbuster Video. What did people hate about video stores? Late fees. So we were the no-late-fee company.

Scott: What is your counterposition today?

Ted: People are already complaining about AI slop, so I think people will increasingly value high-quality production.

You also have to remember everything is being viewed through the lens of affordability. And I’d say we have the highest-quality programming at [an] unbelievably low price. If you take what you spend for Netflix every month and how much time you spend watching it, it ends up costing about 30 cents an hour. It’s probably one of the greatest values in the history of entertainment. So the counterposition really is: You can afford it.

Trump is going to ban or restrict Chinese LLMs. He has too much to lose if the American AI trade collapses.

1. Ferrari’s new EV sparks Italian angst

2. Five emerging themes for US stock investors

3. Research shows the World Cup brings countries together

80%

Women account for 80% of all fiction sales in the U.S., U.K., and Canada.

1. SpaceX filed to go public; the numbers are ugly

2. Bond yields just hit a 19-year high. Why does that matter?

3. What the $300 million Vox sale says about the future of media

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Starlink Is a Great Business. SpaceX Is Asking You To Ignore Everything Else

One of the most anticipated IPOs in years is finally happening. SpaceX officially filed to go public last week, giving investors their first detailed look at the company’s financials ahead of its planned June 12 debut.

The company is looking to raise at least $75 billion at a valuation of up to $2 trillion, which would make it the largest IPO in history.

SpaceX made $18.7 billion in revenue in 2025, up 33% from the previous year. But losses have ballooned from a profit of $791 million in 2024 to a loss of $4.94 billion last year.

The company’s new AI division is to blame. Out of SpaceX’s nearly $21 billion in capex spending last year, $12.7 billion went to building out data centers for xAI — that’s more than the company spent building rockets or satellites.

Sixty percent of SpaceX’s revenue comes from Starlink, its satellite internet business that now has more than 10 million subscribers. Its core rocket launching business accounted for 22% of total revenues.

SpaceX’s target valuation is hard to square with the reality of its financial statement. At $1.75 trillion, the low end of the target, SpaceX would trade at 94x sales. To understand how high that is, Palantir has the highest trailing P/S multiple in the S&P 500 — and it trades at 67x sales.

If investors take the sum of the three business lines — space, connectivity, and AI — and assume that each segment will command a multiple that is twice as high as competitors, the sum of those parts equals about $1 trillion.

So how are SpaceX’s bankers explaining the target $1.75 trillion valuation? By telling investors that the company’s total addressable market (TAM) is the size of the entire U.S. economy — $28 trillion. That target market includes an estimated $22.7 trillion in revenue from enterprise applications. That is 30x larger than the entire existing enterprise software market.

• It also assumes that every single household in the world will start using Starlink for WiFi.

The implied growth is so ambitious that SpaceX is targeting a valuation higher than Meta, Broadcom, and Berkshire Hathaway — while having lower revenues than Macy’s.

SpaceX’s governance is also unusual. Elon Musk, who will likely become the world’s first trillionaire after the IPO, will be CEO, CTO, and chairman of the board. With 85% of total voting power, Musk essentially cannot be fired without his own consent.

This feels like an amazing company with bags of sh*t strapped onto it.

Start with the S-1, which reads like an ayahuasca trip. The first 14 pages are pictures of rockets. A direct quote from the filing: “We do not want humans to have the same fate as dinosaurs.” Well, thank God you’re here.

Here’s the reality: Starlink is genuinely excellent — $3.3 billion in revenue in a single quarter, $1.2 billion in operating income, a 36% margin, no serious competitor. If that were the whole company, it would be one of the great businesses of our era.

But stapled onto that rocket ship is xAI, which is — clinically speaking — a money furnace.

This valuation doesn’t hold up against the IPO comparables. When Meta went public, it was growing 88% and traded at 28x trailing revenue. Google was growing 240% and traded at 10x. Saudi Aramco — not exactly a growth darling — traded at 5x trailing revenue and was actually growing faster than SpaceX is today.

Most IPOs allocate between 5% and 10% of shares to retail investors. SpaceX is making as much as 30% of shares available to retail investors through Robinhood, Charles Schwab, and Fidelity.

Musk isn’t doing this out of the goodness of his heart. He knows that the only way SpaceX gets to this valuation is if it becomes a meme stock. He’s betting that the same retail investors who have stanned Tesla will buy SpaceX shares at any cost.

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Bond Markets Are Flashing Red, and This Time, Trump Can’t Tweet His Way Out

Inflation fears drove the yield on 30-year Treasurys to the highest level since 2007 last week, and 10-year notes hit a 15-month peak of 4.613%.

Surging yields weren’t just an American story: The average 10-year yield across the Group of Seven (G7) nations (Canada, France, Germany, Italy, Japan, United Kingdom, and the United States) hit the highest since 2004.

Why is this happening? Conflict in the Middle East is driving prices higher, and when inflation rises, bond yields rise. Inflation also increases the likelihood that the Federal Reserve will have to hike interest rates — which will only push bond yields higher.

• On Kalshi, the odds of a Fed rate hike before year-end have climbed from 15% a month ago, to above 42% last week. At the beginning of the year, investors were expecting rate cuts.

Gas prices are up 45% year over year, and there’s still no end in sight for the Iran war. President Trump has now promised that it is almost over on 28 separate days since the war began; but without any real progress, his assurances have become … less reassuring.

Higher yields don’t just impact bond investors; they can have a significant impact on the equity market and consumers. This is because the 10-year Treasury yield serves as a benchmark for lending rates across the economy. So, when Treasury yields rise, banks charge higher interest rates on mortgages, student loans, car loans, and business loans.

A bond yield is the annual return you earn based on the price you pay for the bond. If you buy a 10‑year bond for $100 and its yield is 5%, you earn $5 per year for 10 years. Bond yields and bond prices move in opposite directions: when prices go up, yields go down, and vice versa.

Three main factors cause bond yields to move: recession risk, inflation, and expectations of Fed rate cuts or hikes.

• If investors believe the economy is headed for a recession, there’s more demand for bonds (they’re safer than stocks), and that demand pushes prices up and yields down.

• If investors believe the economy is going to experience higher inflation, they’re going to demand a higher yield to compensate for the loss of purchasing power over time.

If investors believe the Fed is going to keep interest rates high for the next few years (because inflation is sticky), they’re going to demand higher yields.

A year ago, the bond market was the adult in the room. Trump dropped his tariffs after the 10-year yield jumped more than 50 basis points in three days — the biggest three-day move in over two decades.

The question now is whether the same mechanism works with Iran. And the honest answer is probably not. We’ve already spent north of $25 billion, lost 13 lives, nearly 400 wounded. Trump’s already requested $1.5 trillion for next year’s defense budget. This isn’t a tariff you can pause with a tweet.

The difference between now and last year is that the escape hatch is gone, and that’s what makes this potentially more dangerous — not just economically, but structurally.

When interest rates go up, the first casualty is speculation, and right now, the market is basically all speculation — 75% of S&P gains have come from AI companies.

Here’s the thing about growth stocks: These companies aren’t making much money today. The entire bet is that in five or 10 years, they’ll be generating Microsoft-level revenue. But that future revenue is only valuable if you can translate it back to what it’s worth right now. And that’s where interest rates come in.

Higher rates and higher inflation make future money worth less — and growth stocks are essentially just a pile of future money. So when interest rates spike, their valuations get cut in half.

But here’s the thing — and this is why capitalism is such a gorgeous organism — rate spikes are painful because they’re supposed to be. It’s the economy destroying excess and repricing risk. It’s the cold shower we’ve all needed to take for a while.

Why Did James Murdoch Buy Half of Vox Media?

There’s a shake-up happening in the media industry. James Murdoch is acquiring the Vox Media Podcast Network, along with New York magazine and the Vox news site, in a deal reportedly worth around $300 million.

The sale reflects the realities of the changing media landscape. Google’s AI overviews are cutting off traffic to digital media outlets, and, at the same time, consumers increasingly favor podcasts and video formats. The result is that organic search traffic has plummeted for written publications. Vox’s properties that are primarily text-based, including The Verge, Popsugar, and SB Nation, are not included in the deal.

Media executives have been frank about the impact of AI overviews going forward. The Atlantic’s CEO, Nicholas Thompson, told staff to assume Google traffic would “drop toward zero.”

Podcasts are a different story. Last year, podcast advertising grew nearly 18% and 55% of Americans reported watching or listening to a podcast monthly. That’s up from 17% in 2015.

Vox’s podcasts, which generated about $80 million in revenues last year and together have almost 15 million subscribers on YouTube, were a major driver of the deal.

The Vox Media Podcast Network sells advertising for Pivot and Prof G Media’s pods.

New York magazine is a trophy asset. It punches above its weight — it’s like the HBO of magazines. But at the end of the day it’s a magazine business. It’s like the New York Jets: Nobody makes money owning it, but there’s always someone who wants to.

James Murdoch seems genuinely civic-minded, so part of the draw was probably the cultural influence and the ability to punch out stories that actually matter.

I’ve said this before: Billionaire Republicans buy football teams. Billionaire Democrats buy media properties.

The crown jewel, though, is the podcast business. That’s what Murdoch actually wanted.

SpaceX does not price at $2 trillion. This thing is a $600 billion company.

1. Tech Bros Are Going to Etiquette School

2. What Jeff Bezos Got Wrong About Billionaire Taxes

3. Why IPO Mania Could Signal the Top of the Market

$109 billion

That’s how much Americans spent on lottery tickets last year, which is more than they spent on movies, books, concerts, and sports tickets combined.

1. Trump’s inflation problem is now worse than Biden’s

2. Is Cerebras the Pets.com of the AI boom?

3. Is dating too expensive — or has AI just made it too easy to quit?

This Wednesday, May 20, at 12:30 p.m. ET, Ed debuts a new presentation exclusively for Prof G+ subscribers. He’ll cover how loneliness is producing the next generation of billion-dollar businesses, how the “inheritocracy” is rewriting the rules of economic mobility, and the erosion of “brand America.” Subscribe here for access.

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Could Inflation Be What Finally Bursts the AI Bubble?

For the first time in three years, American wages are not keeping pace with inflation. Two new inflation reports last week painted a discouraging picture: Consumer prices rose 3.8% in April from a year ago, marking the highest inflation reading in three years, and producer prices, which measure wholesale inflation, climbed 6% year over year. That was not only hotter than expected, but the biggest increase since 2022.

The conflict in Iran is partly to blame. Higher energy prices accounted for over 40% of the total increase in inflation last month. Nationally, gas costs more than $4.50 per gallon, up more than 40% from a year ago.

Despite increasing prices, overall consumer spending stayed resilient; however, the most recent University of Michigan consumer survey showed sentiment has plunged to the lowest level on record going back to 1952. Why?

According to Federal Reserve economists, consumers put more weight on higher prices than on higher incomes when assessing their current economic conditions.

Inflation is also influencing how Americans view the president. President Trump won reelection in 2024 in large part because of his promise to reduce prices, but now his approval on how he’s handling the economy is worse than President Biden’s ever was

We are underestimating the impact that lower consumer spending could have on the stock market.

This is what happened in 2022. Consumer spending growth fell 70%, and suddenly because consumers didn’t have as much money to spend, advertisers decided to stop spending too.

This was what really killed the tech sector in 2022, which by the way, fell around 30% that year — a bigger drop than the S&P, which fell around 20%. These companies are still very dependent on advertising as a business. Advertising makes up 97% of Meta’s revenues; for Google, it’s about 75%. These companies still need regular people to spend money such that advertisers go out there and buy ad inventory.

To summarize, inflation had a material impact on consumer spending, which had a material impact on advertising budgets, which had a material impact on the businesses of Big Tech.

This feels very much like what could happen this year. The entire market is dependent on the capex guidance of a few tech companies that happen to get their cash from digital advertising.

The narrative Ed outlines is a logical one, but there are two reasons why I disagree.

First, the AI companies are gonna spend tens of billions of dollars on marketing, and that’s money that didn’t exist three years ago.

OpenAI and Anthropic are in a celebrity death match, and in the next 12 or 24 months, I think some marketing executives will talk Dario and Sam into spending $10 billion on branding.

In addition, we’re about to see the most obnoxious, unhealthy, antidemocratic tsunami of money going to the midterm elections. For example, two or three years ago, Andreessen Horowitz spent $0 on elections. This year, they’re gonna spend $115 million.

All this spending is going to flow through podcasts, print ads, direct mail, and local news stations. So I’m actually less bearish on the ad market than Ed is.

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Cerebras Keeps the Chip Rally Going With the Biggest IPO of the Year

AI chipmaker Cerebras pulled off the biggest IPO of the year so far. Shares were priced at $185, but opened at $350 – an 89% pop. That’s the biggest since 2000 for a listing raising more than $2 billion. On Friday, the day after the IPO, Cerebras shares declined 10%.

Cerebras’ market cap is now more than $60 billion. On just $510 million in revenues, it’s trading at a price-to-sales multiple far above its competition.

It’s hard to imagine a better time to IPO as a small, unprofitable chip company. The Philadelphia Semiconductor Index (PHLX) is up more than 150% over the past year, and now, semiconductor stocks account for more than 15% of the S&P 500.

• That kind of concentration has only happened to a few sectors in history — tech hardware during the dot-com bubble, energy companies around the financial crisis, and software firms in the late 2010s.

Still, Cerebras doesn’t have it easy. Breaking into the highly competitive chip market means taking on Nvidia, which still dominates with 85% market share. In fact, Nvidia’s AI chip business is more than 400x larger than Cerebras’ and is growing almost as quickly.

However, Cerebras products are meaningfully different: Unlike most postage-stamp-sized semiconductor chips, Cerebras’ are about the size of dinner plates. For context: 57 H100s (Nvidia’s premium GPUs) can fit onto each one. Their size, in addition to other, more complex factors, makes them more powerful than traditional GPUs.

Most AI workloads are powered by groups of chips strapped together. Some chips handle memory, while others handle processing. With Cerebras, all of that happens on the same chip, making them, reportedly, 15x faster than other GPUs for standard tasks.

Last year, Scott and I discussed this company and we pointed out that they were getting 85% of their revenue from G42, which is this UAE state-backed AI firm. Investors agreed that this was risky, and there was scrutiny from CFIUS, The Committee on Foreign Investment in the United States.

They ultimately got cleared, and this year, they said, don’t worry, we’ve reduced our G42 revenue exposure to 24%. But 62% of revenue now comes from Mohamed bin Zayed University of AI — another UAE state-backed entity, which means 86% of their revenue is still coming from one customer, which is the sovereign wealth fund of the UAE. So they didn’t fix the problem, and the part that really bugs me is that they’re lying about it.

The finances aren’t great either. Revenue doubled, but in AI, that’s not that impressive.

The exciting part, supposedly, is OpenAI. They have a deal where OpenAI deploys 750 megawatts of Cerebras chips — at full capacity, that’s roughly $7 billion in annual revenue, more than 13x their 2025 total. However, they have an exclusivity agreement in there, which says that you can’t sell your chips to these other competitors.

The real issue is who Cerebras is asking investors to trust. The stock only makes sense if OpenAI pays. And if Altman is who they say he is (a serial liar), that’s not a bet I’d make.

I f*cking hate this company. And it’s not just revenue mix; it’s the quality and incentives of the customer base.

Both customers are UAE government entities. When I sold L2 and Prophet, the reason we got extra turns on revenue was customer quality. We had Nike, P&G, Toyota — quality companies as clients. That’s what institutional buyers want to see. This is the opposite. This is Pets.com out of the UAE.

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The $200 Date and the Free AI Girlfriend: Why Young People Are Opting Out

The romantic recession isn’t letting up. Recent earnings from Match Group and Bumble showed continued weakness in dating apps, with paying users declining across the board. Match Group’s total paying users fell 5%, while Bumble’s dropped 21%.

Young people just aren’t dating. Only 31% of young adults — a quarter of women (26%) and 36% of men — regularly go on dates. Even more troubling, only about half of young, single adults are interested in starting a relationship.

One problem? Romance has gotten expensive. According to a survey from BMO’s Real Financial Progress Index, the average cost of a date in the U.S. has climbed nearly 13% year over year, to $189.

Nearly half of single Americans say dating is no longer financially worth it.

But the romantic recession starts even before the financial challenges of adulthood. In 2024, only 46% of high school seniors said they ever went on dates, down from nearly 90% in the 1980s. Now, only 56% of Gen Z enter adulthood having engaged in a romantic relationship, compared with 75% of members of older generations.

The elephant in the room is AI. Specifically, young men being slowly sequestered from real relationships into frictionless ones with Character AI and porn.

When they’re speaking to an AI girlfriend or absorbing porn, they never feel rejected, they never feel insecure.

I mean, we’ve all had those feelings. We’ve all texted people and not heard back and wondered, what did I do wrong? We’ve had our hearts trampled on. It sucks, and now AI tells you that you can have a reasonable facsimile of life without any friction. And it is such a hollow, empty promise.

The most rewarding things in life are relationships, but you have to endure rejection, persevere, figure out what a woman wants … Frankly, it’s just very difficult. And that’s why it’s so wonderful.

On the economics of dates, I think men should pay. When a woman who is of childbearing age is spending time with you, quite frankly, her time is more valuable than yours. In addition, she spent $400 on her appearance before she even showed up.

But it’s not just paying for everything; it’s demonstrating excellence and effort.

Unfortunately, impressing a woman in a capitalist age with Instagram has become all about money. What I would offer to men is: You can replace money with effort. Think of something cool to do, and even if it’s cheap, you come across as cultured, like you know what’s going on.

I saw this clip recently go viral in which this YouTuber Mike Majlak was asked how much he spends on his dates. And obviously this isn’t representative of everyone, but he said $700 to $800.

That isn’t normal. It also isn’t cool. But the trouble is when you see more and more of these clips, which go viral because they’re so absurd, I think it’s starting to make people think that it is normal to spend thousands of dollars on a date.

People want to be like these famous influencers, and it affects both men and women. Women start to expect it: He didn’t spend enough money on this date. I saw this clip of this guy spending thousands of dollars. Clearly this guy isn’t a baller; clearly he doesn’t respect me enough. And then the same thing goes for men: They start thinking I need to spend thousands of dollars on this date because real men do, so I’m a loser if I don’t.

Cerebras will be below $50/share in 12 months.

1. Trump’s and Xi’s Body Language at the Summit Mirrored Their Styles

2. What AI Did to My College Class

3. Typing Is Being Replaced by Whispering

54%

54% of Democrats think an 8-year-old boy could beat Donald Trump in a fight. Only 6% of Republicans think the same.

1. Middle management is the new target of AI cost-cutting

2. Ken Griffin vs. Zohran Mamdani: The pied-à-terre tax fight, explained

3. GLP-1 drugs are coming for big alcohol

Today at 10 a.m. ET, Scott and Ed are going live with Professor Aswath Damodaran. On tap: Big Tech earnings, the SpaceX IPO, OpenAI vs. Anthropic, and the market’s disconnect from the Iran war. Prof G+ subscribers get access to the livestream and can submit questions. Register here.

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AI Will Replace Your Manager… Or Will It?

The conversation around AI and jobs is evolving. It’s no longer just about AI replacing individual workers — company leaders are starting to suggest that AI could eliminate layers of management, or even managers entirely.

Last week, Coinbase CEO Brian Armstrong announced plans to cut roughly 14% of staff. He blamed challenging market conditions, reinforced by the company’s dismal first quarter earnings in which revenue plunged 31% — but also AI. Specifically, Armstrong said that the restructuring was designed to eliminate “pure” managers.

Last year, Microsoft laid off 6,800 employees, citing AI and an effort to become more streamlined and have fewer managers.

Perhaps the clearest expression of this new thinking came from Jack Dorsey, who, in a blog post about his company, Block, wrote: “For the first time, a system can maintain a continuously updated model of an entire business and use it to coordinate work in ways that previously required humans relaying information through layers of management.”

Eliminating managers has become the go-to solution for companies looking to prove returns on their AI investments. Gartner projects that 1 in 5 companies will eliminate more than half their middle managers by the end of this year.

Every generation of executives has a fever dream of flattening the organization. The version from the 1980s was called Reengineering. But the truth is, management is the connective tissue in any organization. A lot of companies are about to discover that institutional memory was not inefficiency, it was the f*cking company. This was the subject of my No Mercy / No Malice post last week.

We work to create economic prosperity and shareholder value, sure. But the whole shooting match of work is you have the opportunity to build something with someone else. The most rewarding thing in life is relationships, and the things that fuse relationships are building things together. If you take away coworkers, it’s like you’ve literally sucked the soul and humanity around what it means to work.

Does that mean there aren’t cases where management layers become fat and add negative value? No. But I actually think this is one place where AI is absolutely not going to live up to the hype. AI is not going to replace management and mentoring.

What’s really happening here is that a group of CEOs who overhired want to juice their valuations.

Brian Armstrong articulated his vision pretty clearly in his email to employees. The goal isn’t just cutting head count, it’s rebuilding the entire company around AI with humans managing agents rather than managing each other. Sam Altman, Dario Amodei, and others have been pushing the same idea: the one-person billion-dollar company, where a single person manages fleets of AI agents that do everything for them. They’re just glorifying how much value and power you can put into one person’s hands.

I don’t think it’s going to work, and not because it can’t technically, but because people don’t actually want it. You don’t spend years building something meaningful and then celebrate alone with your AI agents. Sam Altman said AI consumes less energy than human beings and children. That framing tells you everything about where this thinking has gone wrong.

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Why New York’s Second-Home Tax Is Smart Policy

The wealth tax debate is escalating. Billionaire investor and Citadel CEO Ken Griffin is now publicly feuding with New York City Mayor Zohran Mamdani over a proposed pied-à-terre tax. If passed, it would levy a new annual fee on properties worth more than $5 million that are not used as a primary residence.

The tax, which New York Gov. Kathy Hochul has included in the state’s tentative budget, would raise approximately $500 million annually, per the city comptroller. Montana and Florida are also reportedly exploring measures that would increase taxes on second homes.

I own a pied-à-terre in New York. Under this tax, it would cost me an additional $100,000 per year. I’m in favor of it anyway.

Property taxes are the largest source of revenue in New York City, and they work. Unlike income taxes, which chase high earners to Florida and Texas, taxing real estate tends to raise revenue before it drives people out. A second home worth $10 million sitting empty adds nothing to the city’s tax base and removes housing supply, which drives up prices for everyone else.

If it cost me another $100,000 to have a second home in New York, I don’t love it. But here’s the bottom line: If I can go to Jack’s Wife Freda and watch all the hot men and women and the world pass me by, and then I can go out for the best food in the world and walk around looking at the absolute wondrous freak show that is New York, f*cking A, I’m not going anywhere. It is the pinnacle of America, the greatest collision of culture, commerce, creativity, fashion, art, and media. People who own second homes in New York will spend a lot more than that to stay and be witness to that amazing experiment.

No one likes taxes, but I hate this tax less than any other idea. But here is where Mamdani made a real mistake: He announced the pied-à-terre tax right in front of Ken Griffin’s building. Griffin has given $650 million to New York charities. He’s planning a multi-billion-dollar development project he’s now considering putting on hold. His only crime here is being very wealthy in New York. That’s not a crime.

Folks, let me be clear, most billionaires are really good people. Some are OK, and some are bad. Most poor people are really good people. Some are OK, and some are bad. The demonization of rich people and the demonization of success is how we get JD Vance as president.

The pied-à-terre tax is the right policy tool. It’s so funny to hear the argument where people say, if you add additional taxes, these billionaires are going to leave. And it’s like, brother — they already have. It’s their second home that we’re talking about. They’re not New York residents. Their income isn’t being taxed in the city. Their empty apartments just inflate the price of housing for everyone who actually lives there. Taxing them is not driving anyone out because they’re already out.

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Two Trends Are Destroying the Alcohol Industry: GLP-1s and Sober Culture

Alcohol companies are on the rocks, and two major shifts are to blame: GLP-1 drugs and a growing cultural wariness toward drinking.

Diageo, the maker of Johnnie Walker and Smirnoff, reported a 9% year-over-year decline in North American sales last week. Revenue dropped 11% at Constellation Brands, the company behind drinks like Corona and Modelo, and at Pernod Ricard, the world’s second-largest wine and spirits seller, revenue fell 15% in the six months through March.

Shares of the world’s top listed beer, wine, and spirits makers have shed more than $830 billion since 2021.

The outlook for booze companies doesn’t look promising. According to a study of 14,000 Weight Watchers members, roughly 50% of patients who drink alcohol prior to starting a GLP-1 decrease their alcohol consumption after starting the drugs. Morgan Stanley estimates that GLP-1s, can suppress alcohol consumption by up to 75%.

The companies behind GLP-1 drugs crushed earnings. Novo Nordisk’s sales rose more than 30%, reflecting growing demand for its new Wegovy pill. Revenue from Eli Lilly’s weight loss drug Mounjaro rose 125% year over year to $8.66 billion.

GLP-1s aren’t the only problem for booze companies — they also face a growing cultural movement away from alcohol. Increasingly, the new status symbol isn’t buying a bottle of Grey Goose, it’s red light therapy, and NAD treatments, and wellness retreats.

Fifty-four percent of Americans say they drink alcohol — the lowest rate since records began in 1939. The decline is even more pronounced among younger generations. Of people ages 18 to 34, only 50% say they drink, down from 72% two decades prior. Young people are also increasingly driving wellness spending: Gen Z and millennials are 36% of the U.S. adult population but drive 41% of annual wellness expenditures.

AB InBev’s nonalcoholic sales grew 27% this quarter and actually drove growth in overall sales. So they are figuring out a way to avoid the alcohol bogeyman.

AB InBev’s CEO also pointed out on CNBC last week that beer has protein, which I thought was one of the greatest quotes ever.

People are definitely moving away from alcohol. On Eventbrite, sober curious gatherings have risen 92%, and sauna raves, which are DJ sets and dance parties that happen in saunas, are up 256% this year. Sidenote: What the hell is a sauna rave?

Finally, one of our research team members, Dan Chiolan, highlighted that there seems to be this idea that if Gen Z isn’t drinking alcohol, then they must not have a substance abuse problem. He argued — and I think this is really smart — that actually they do have a substance abuse problem, but their substance is screens.

It’s a different addiction, and it certainly has its own set of negative effects.

People don’t realize how severe it is. In London, I have a couple of friends who are super into wine, and they’ve said you can get amazing wine now for 70% less than you could get it three or four years ago. There are wineries supposedly in Italy and France where if you just take on the debt, you can own the winery because they just can’t sell.

At some point, it will bottom out, and these companies will be overshot to the downside. They have incredible brands, and there’s few businesses with greater margins than alcohol. I think it still has a ways to go. But typically these stocks bottom before their businesses bottom.

Last week, this really talented TikToker named Hunter Peterson crowdfunded $132 million in nonbinding pledges to buy Spirit Airlines. I think we’re gonna see a company in distress that’s got a big brand be crowdfunded and either brought out of bankruptcy or acquired.

1. Bad government statistics can cost the economy billions

2. The power of patience at Apple and Berkshire Hathaway

3. You can buy a sorority rush consultant for $5,000

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Of the 20 horses in the Kentucky Derby lineup this weekend, 19 were related to Secretariat, the record-breaking winner of the 1973 Triple Crown. The winner, Golden Tiempo, was one of the descendants.

1. OpenAI’s week from hell

2. Spirit Airlines cancels all its flights and shuts down

3. Big Tech’s earnings report card

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Courts, Cash, and Competition: OpenAI’s Week From Hell

Last week, the WSJ reported that OpenAI missed its own targets for new users and revenue. CFO Sarah Friar has privately told company leaders that she is worried OpenAI might not be able to pay for future computing contracts if revenue doesn’t grow fast enough.

Related: The board of directors have been more closely scrutinizing Sam Altman’s data center deals as the business slows down.

Meanwhile, court proceedings kicked off in Elon Musk’s lawsuit against OpenAI, seeking to oust Altman and unwind the company’s conversion into a for-profit entity. The case centers on claims that OpenAI abandoned its original nonprofit mission.

Separately, families of victims from a mass shooting in Canada have filed a lawsuit against OpenAI and Sam Altman, alleging that ChatGPT played a role in the attack and that company safeguards fell short.

Taken together, these three stories touch on three concerns that have been raised about OpenAI: financial viability, leadership, and safety. OpenAI said there is “no truth” to the Journal’s reporting, and that the business is “firing on all cylinders.” But the company that has spent years selling the world on a more intelligent future is now struggling to convince its own board, its critics, and the courts that it has things under control.

OpenAI set extraordinarily ambitious internal goals, so the financial miss is more an issue of optics than substance. But the real story is how fast the competitive picture has shifted.

Anthropic, a company that was a distant second just six months ago, is now squarely the leader. Anthropic recently hit a $30 billion run rate; OpenAI is now at $25 billion. Anthropic expects to break even by 2028; OpenAI not until 2030, and it plans to burn 14x more cash.

On the Musk-Altman lawsuit, I actually think Altman comes out on top. According to people close to the matter, Musk was the one who pushed to convert OpenAI into a for-profit company, demanding 80% ownership and control. When OpenAI said no, he walked and signed away all rights. He then went and founded xAI, arguably the AI company with the fewest safety guardrails. This isn’t about principle; it’s seller’s regret. The one corner of the internet he didn’t get to own. The defense will have no trouble painting that picture.

One of our team members, Kristin O’Donoghue, said it best: We’re not in an AI bubble right now. We’re in an OpenAI bubble.

AI businesses broadly are doing exactly what you’d expect: growing off enormous bases at startup-like rates, posting the kind of numbers that shouldn’t be possible for companies this size. The problem is that OpenAI has spent the last year making commitments that don’t match its actual capabilities. They announced plans to spend $1.5 trillion over the coming years on a $13 billion revenue base. When that number became embarrassing, they revised it down to $600 billion by 2030. That’s still an extraordinary figure for a company generating what Meta spends in a single quarter. Yet they’re valued on secondary markets at around $880 billion, roughly 35x sales. The math only works if you believe the growth trajectory is essentially guaranteed. This week suggests it isn’t.

What’s changed is that Anthropic has emerged as the more credible operation. A year ago, OpenAI had a 75% chance of IPOing before Anthropic. That’s now down to 34%. Anthropic is trading at a $1 trillion valuation on secondary markets, ahead of OpenAI. The revenue gap has closed fast.

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Spirit Airlines Is Going Out of Business

After 34 years of operation, Spirit Airlines shut down for good this weekend after failing to reach a bailout agreement with the federal government.

Spirit filed for bankruptcy twice in the past two years, including most recently last August. It was aiming to emerge from its second bankruptcy this summer, but those plans were derailed by an 80% increase in the price of jet fuel since the start of the U.S. war in Iran.

The airline’s closure means that thousands of travelers with Spirit Airlines tickets now need to file for a refund and rebook, and Spirit’s 9,500 employees and 7,500 contractors need to find new jobs.

Ultimately, the government bailout deal didn’t materialize because the Trump administration insisted the government get paid back first if Spirit went under — meaning existing lenders would have little chance of getting any of their money back.

Industry analysts worry that Spirit’s closure will lead to higher ticket prices. Spirit exited 90 routes between 2024 and 2025, and those tickets rose on an average of about $19, or 14%. That compares with a 6% to 7% typical airfare inflation on routes where it continued to operate.

The only time a government bailout makes sense is when the failure is systemic. The 2008 bank bailouts were defensible because if JP Morgan or Bank of America had gone under, you would have had lines around the block and food shortages. That’s an existential risk. In contrast, Spirit Airlines had a 3% share of the U.S. airline market.

A government bailout would have been conscripting taxpayers into being unwilling, unwitting equity holders in f*cking Spirit Airlines.

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Microsoft, Amazon, Meta, Google, Apple: Earnings Season Recap

Big Tech delivered across the board last week, with Microsoft, Amazon, Meta, Google, and Apple all reporting objectively strong earnings.

However, the market’s reaction was mixed — perhaps in part due to the massive capital expenditure commitments that these once-capital-light businesses are making.

In the first quarter alone, Microsoft, Amazon, Meta, and Google spent $131 billion on capex, up 71% from a year ago. In other words, these four companies are spending the equivalent of the Manhattan Project every month.

Microsoft

Microsoft’s revenue rose 18% year over year, and Azure revenue grew 40%. However, shares are still down 12% year to date amid uncertainty about capex spending and Microsoft’s relationship with OpenAI.

Microsoft’s own AI products are now generating $37 billion in ARR, up 123% year to date. That’s more than OpenAI and Anthropic are making on AI. Microsoft also reported that engagement with its AI assistant, Copilot, is now at the same level as Outlook, its email app.

Amazon
Amazon also topped expectations with strong cloud and AI growth. Amazon Web Services (AWS) revenue increased 28%, the fastest growth in 15 quarters, and its AI revenue run rate is now over $15 billion — nearly 260x larger than it was three years ago.

Another highlight noted on the call was Amazon’s progress in developing and selling its own AI chips. CEO Andy Jassy called Amazon “one of the top three data center chip businesses in the world,” noting that if Amazon’s chips were a stand-alone business, it would be generating $50 billion in ARR (that’s more than AMD and about as much as Intel).

Amazon’s earnings beat expectations as well, but notably, more than half of Amazon’s pretax income for the quarter came from gains from its investment in Anthropic. The company’s $8 billion investment in Anthropic is now worth more than $70 billion.

Prof G Media’s Big Tech stock pick of the year (Amazon) is looking pretty good so far.

A former colleague of mine at NYU Stern, Peter Golder, had a piece of research I’ve held on to for 15 years: Innovators aren’t the ones that reward shareholders. If you look at the first movers in PCs, smartphones, and online platforms, those companies probably don’t exist anymore — CompuServe, AltaVista. It’s usually the second mouse that gets the cheese.

Amazon is second-mousing like no one’s business. They saw an opportunity to be number two in space connectivity behind SpaceX, and they created Amazon Leo. Now Jassy is saying Amazon is one of the top three data center chip businesses in the world.

And I think what the market is responding to is a narrative shift. The street no longer wants I’m going to raise a trillion dollars and buy $300 billion of compute. That’s the Altman narrative. What they want is: We’re participating in the AI boom, our core businesses are strong, and we’re adults about capex.

Alphabet

Alphabet had the best quarter of the group. Revenue grew 20%, and net income grew over 80%, but Google Cloud was the highlight. Sales increased 63%, and now represent 18% of Alphabet’s total business, up from 14% a year ago.

• Cloud margins have also expanded from 9.4% a year ago to 32.9% in Q1.

Shares rose 10% on the news, adding $421 billion in market cap — the second-largest single-day market-cap gain for any stock in history. Alphabet finished April up 33%, its best month since October 2004, the month it went public.

Meta

Despite posting 33% revenue growth — its fastest in five years — Meta fell 10% after raising capex guidance. The company also reported its first decline in daily active users across all its properties since it began tracking the metric seven years ago. Management pointed to internet disruptions in Iran and a WhatsApp restriction in Russia.

The only company with a gigantic question mark — explained by both its valuation and its stock performance since earnings — is Meta. Meta raised capex guidance to $125 to $145 billion for the year, comparable to Microsoft, Amazon, and Google. The difference is Meta is the only one without a cloud business. Microsoft has Azure, Amazon has AWS, Google has Cloud. Meta generates 97% of its revenue from advertising. It is purely an ad business.

So the question for Meta is: What are you actually going to do with these data centers? Are you going to monetize them, or just use them to turbocharge your existing ad business? They haven’t explained it. They’ve used vague allusions to AI being the next big thing — okay, fair enough — but with the other companies you can see the ROI right now. Meta can’t show you that. They need to get their messaging straight and tell Wall Street what the actual monetization plan is.

Because right now you’re basically praying Zuckerberg figures it out. And given what happened with the metaverse — where he plowed billions into a distant dream and said trust me — you’re asking a lot from investors. Meta’s forward PE is now 20, the lowest of the group. Google’s at 34, Amazon 33, Apple 32, Microsoft 21.

Apple

Apple reported revenue growth of 17%, its fastest quarterly growth in four years. iPhone revenue grew 22%, Services hit an all-time high, and sales in China jumped 28%. Unlike its peers, Apple made no significant changes to capex guidance.

There are different types of risk. Apple risks missing out on upside by not making forward-leaning AI capex bets — but they don’t face an existential threat from AI. They’re the plumber of Big Tech. Nobody is talking about vibe-coding an iPhone or replacing the App Store with the latest Claude update.

But I think Apple’s saying, no, our job is to create the most aspirational signaling ecosystem in history. Nothing signals that you’re part of the 1 billion most attractive mates in the world more than having an iPhone. And that supply chain,I don’t think it can be replaced by AI. Figuring out a way to get 2,000 distinct parts from probably 400 different sources to different regions in China and then build a phone for $400 that would cost $3,000 anywhere else is really hard.

Apple got criticized for not getting into the search wars and for killing the car project. Both turned out to be smart. They’re making the same call on the capex race around AI. They might be wrong — but if they are, the consequence is they miss out on earnings growth. Not that they get disrupted.

Intel gets cut in half within the next 12 months. Intel is up roughly fivefold since we called it a buy, and at these levels now it is a short. The stock is now trading at 118x forward earnings, the highest forward PE of any large-cap chip stock, while its business is expected to grow slower than every peer trading at a lower multiple. Good for anyone who bought in when the thing was nearly left for dead. But at 118x earnings, look out below.

1. Chinese court rules that a worker cannot be replaced by AI

2. ChatGPT became so obsessed with goblins that OpenAI had to intervene

3. Must we really, do lunch?

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1. Two months into the Iran war: The standout markets and the stragglers

2. What makes a great leader? Learnings from Tim Cook and Reed Hastings

3. SpaceX strikes $60 billion deal to buy AI coding startup Cursor

4. Justice Department drops its criminal probe into Powell

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Two Months Into the Iran War: The Biggest Market Winners and Losers

The war with Iran reaches its two-month mark tomorrow, double the four-week timeline the Trump administration initially promised – and there’s no end in sight.

Since the start of the conflict, Israel and Taiwan’s stock markets have outperformed, both up 6%. Israel’s performance is likely tied to the war. A weaker Iran ultimately lowers Israel’s long‑term risk premium.

Taiwan’s growth is a reflection of continued investment in AI, and, specifically, TSMC. The company makes up 40% of the entire Taiwan Stock Exchange’s value, and its run-up helped the Taiwan Stock Exchange overtake the U.K. stock market for the first time.

Among the worst performers have been India, the Philippines, and Indonesia; their main indexes are down 4%, 9%, and 10%, respectively. All three countries depend on oil imports, which have gotten scarcer and more expensive — especially as their own local currencies weaken against the dollar. A weaker local currency makes imports and foreign debt more expensive.

• The Indonesian rupiah and the Philippine peso are down nearly 4% against the U.S. dollar this year, and the Indian rupee is at its cheapest valuation in nearly 12 years.

Meanwhile, U.S. markets have surged to record highs since the start of the cease-fire on April 8. What may have been optimism about the conflict coming to an end has turned into a rally fueled by strong earnings and AI hype.

Every sector’s earnings estimates have risen since the war began, especially tech, where earnings projections have seen the largest increase in recorded history.

Energy is still the standout sector this year, with U.S. crude on track for its two strongest months ever in April and May. Even so, the sector is down nearly 7% this month as hopes for an Iran peace deal deflated some of the war premium in oil prices.

It feels like there are two main things that determine how you’re doing in the market right now: your proximity to AI, and whether you have a trade surplus of oil — but one is stronger than the other.

Israel and Taiwan have tremendous proximity to AI, but they’re both oil importers. What that says to me is that proximity to AI beats out your need for energy.

Then you look at the U.S. We’re not only ground zero for AI, but we’re also an oil exporter. Increases in oil prices will cost consumers money, but the only difference for oil companies is that they’re now getting 40% more per barrel.

The market has just become this incredibly resilient organism. It’s surviving wars and pandemics. But it still feels like we’re in uncharted territory.

How do you play this market? You don’t. If you’re worried about the world, then diversify. But my view is: always be in the market, and don’t try to time it. It would have been very easy to make an emotional decision in March. Well, of course, the market is down 10 percent. It’s going to be a forever war. But now the markets are back up at record highs.

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What Makes a Great Leader?

2026 is shaping up to be a landmark year for corporate succession. Last week, news broke that Tim Cook will step down as CEO of Apple. He’ll be succeeded by John Ternus, senior vice president of hardware engineering.

The week before, Netflix co-founder Reed Hastings announced he would be leaving as executive chairman of the board.

2025 was already a record year for CEO turnover. One in nine CEOs was replaced last year across 1,500 of the biggest publicly traded companies, according to an analysis by executive-recruiting firm Spencer Stuart. That’s the highest rate since 2010.

The new leaders were, on average, younger and less experienced. The average CEO appointee in 2025 was 54 years old, down from nearly 56 in 2024. Ternus, the future CEO of Apple, is 51 years old.

Tim Cook is the most successful successor in history. He inherited the hardest role in business history after Steve Jobs left. Jobs had become something closer to a deity than a CEO. Tim Cook didn’t have to fill shoes. He had to fill Jesus’ sandals.

Cook’s most impressive achievement was reengineering Apple’s supply chain. He cut the number of component suppliers by 75% and established a massive production hub in “iPhone City” in Zhengzhou, where specially trained workers can make up to 350 iPhones per minute. In fact, Apple has trained more than 28 million workers in China since 2008 — larger than the entire labor force of California. Put all of this together, and it’s estimated Cook reduced labor costs per iPhone by nearly 23% while tripling the price.

Generally the rules of marketing are you can have an aspirational, niche product like a Ferrari that is highly differentiated and has huge margins, or you can have a product that’s great value where you focus on cost and you have huge production volumes, like Toyota. Apple’s iPhone is the only product I can think of that has the margins of Ferrari with the production volumes of Toyota. It’s arguably the most successful product in history.

Tim Cook’s management style was quiet and methodical. He reportedly embraced the “rule of awkward silence”: When faced with a tough question, you pause and think before you answer. A 2008 Fortune profile said that in meetings Cook was “known for long, uncomfortable pauses, when all you hear is the sound of his tearing the wrapper of the energy bars he constantly eats.”

In another account of Apple’s culture, a manager described how he tried to follow Cook’s example by spending the first 10 minutes of every one‑on‑one just listening, keeping his body language neutral.

He did have some failures. The Vision Pro was a flop. The car project burned years and resources before he shut it down. Apple Intelligence has underwhelmed. But a CEO without gigantic flops isn’t operating at the frontier, and killing the car project rather than keeping it on life support is the mark of a good operator.

People might say his Trump sycophancy is a bit of a stain on his legacy. But look — I think he decided to take one for the team, and the team was shareholders. I can’t imagine that his skin didn’t crawl going to the Melania premiere.

No one gets it right all of the time. Try and find a CEO who’s been more right than Tim Cook. It is really difficult.

Reed Hastings is known for taking these bold, risky bets that paid off. He took on a $6 billion incumbent (Blockbuster) and invested in original content before any other streaming service. And what happened? Netflix stock returned 26,000% over his tenure against the S&P’s 340%.

He also co-created the Netflix Culture Deck in 2009, which played a foundational role in setting Silicon Valley work culture. Sheryl Sandberg called it one of the most important documents ever to come out of the Valley.

Some of its core principles are:

• Adequate performance gets you a generous severance. The fastest way to destroy morale is to let mediocre performers survive.

• We are a sports team, not a family. Netflix leaders were instructed to hire, develop, and cut smartly such that there were “stars in every position.” Families don’t lay people off.

• The keeper test. Managers were encouraged to regularly ask themselves: If this person quit tomorrow, would I fight to keep them? If the answer was no, they would get generous severance. The woman who co-created the test with him, Patty McCord, was eventually let go by the very standard she helped build.

• Take recruiter calls. Hastings encouraged employees to take calls from competitors. Transparency about market value benefits everyone.

• When someone was fired, the whole team was told why. The philosophy behind it was the same one that ran through everything Hastings built: Honesty, even when it’s uncomfortable, produces better outcomes than the alternative.

• No vacation policy, no expense approvals. Just act in Netflix’s best interest. This eventually became a norm across Silicon Valley.

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SpaceX Moves to Acquire Cursor as It Preps for a Massive IPO

Last week, SpaceX secured the option to acquire AI coding startup Cursor for $60 billion. If SpaceX doesn’t exercise the option, it will pay Cursor $10 billion (essentially a breakup fee). The timing is notable, as SpaceX prepares for what could be the biggest IPO in history.

Standard breakup fees are usually 2% to 4% of deal value, so this one (17% of deal value) is unusually large.

Cursor was founded in 2023 by a group of MIT students. In less than two years, the company hit $100 million in annualized revenue; now, ARR sits at $2 billion and 67% of Fortune 500 companies use the product.

This acquisition makes slightly more sense than headlines reveal. Cursor has a real AI product and valuable coding data — both assets that SpaceX’s subcompany xAI will use. SpaceX and xAI have excess compute capacity after building Colossus, the xAI supercomputer that Elon Musk has described as having compute equivalent to 1 million Nvidia H100 chips. Together, Cursor will help improve xAI’s models, while Cursor gets access to a giant pool of GPUs.

The deal may help convince potential IPO investors that SpaceX isn’t just a space company — it’s an AI company. Either way, it will be huge. SpaceX is reportedly working with 21 banks and targeting a June IPO.

xAI is desperate, and I think Cursor is an attempt to establish a front end that might help them get more actual revenues going.

There’s a saying that statisticians lie, and liars use statistics. The thing that struck me about the deal is that this $60 billion number just feels like such bullsh*t to me. First off, nobody’s cashing a check for $60 billion. SpaceX only has $25 billion in cash on hand. I’d love to see the actual deal terms, but it’s something along the lines of, if we go public and you stay for a couple years, you’ll get options on 3% of the company.

These numbers are more about a press release and a jaw drop-value than they are about something that’s actually real. Musk is just stuffing more rabbits into the hat.

If you add the valuations of OpenAI, Anthropic, and SpaceX, their combined market cap could exceed the value of every single IPO from the dot-com era combined.

We’re looking at one of the biggest moments in financial markets in a really long time. Between the OpenAI, Anthropic, and SpaceX IPOs, we’re going to be inserting almost $4 trillion in value into the markets, while, at the same time, adding zero dollars in earnings because all of them are burning billions in cash. SpaceX lost $5 billion last year. OpenAI is expected to lose $14 billion this year.

We’re now getting to a point where private companies are doing all of the things that gigantic public corporations would do. They’re spending tens of billions of dollars on huge M&A transactions; they have valuations in the hundreds of billions. But they have no obligation to actually disclose the facts. We don’t even know Cursor’s exact revenue.

When we finally see the S-1s, there’s gonna be no more capacity for the bullsh*t we’ve been receiving in the past several years. I think it’s very possible that suddenly investors realize that the SpaceX conglomerate is pretty ugly.

Justice Department Drops Its Criminal Probe Into Powell

The Department of Justice dropped its criminal investigation of Federal Reserve Chair Jerome Powell on Friday. The decision clears the way for Kevin Warsh’s confirmation as the next Fed Chair.

Prosecutors were focused on whether Powell lied to Congress about the cost of Federal Reserve office renovations. However, many saw the case as a thinly veiled attempt by the President to remove Powell from his position. Trump has repeatedly criticized Powell for keeping interest rates higher than he’d like.

Now that the case has been dropped, the Senate banking committee is expected to vote to advance Warsh’s nomination on Wednesday, putting him on track to be confirmed before Powell’s term as Fed chair ends on May 15.

The biggest IPO in history will be SpaceX. The best-performing IPO will be Anthropic, and I don’t think OpenAI gets out. OpenAI has been so overshadowed by the upward trajectory of Anthropic, that I think they’re gonna come up with a jazz hands reason for why they’re delaying a public offering.

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1. How the Iran war put billions of Gulf-backed dealmaking in doubt

2. Does your boss have AI brain?

3. Is the US falling out of love with cocaine?

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Sally Ride, the first American woman in space, was asked by NASA engineers if 100 tampons would be enough for her week-long voyage.

1. If the news is bad, why are stocks at all-time highs?

2. AI’s newest obstacle is … humanity

3. The real reason Amazon is buying Globalstar, plus a check-in on Prof G Media’s stock pick of 2026

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Why Markets Are Ignoring the Iran Crisis

Last week, peace talks with Iran collapsed, the U.S. blockaded the Strait of Hormuz, and the International Monetary Fund warned that further disruptions in oil markets could raise the risk of a global recession.

Still, the S&P 500 and Nasdaq both hit fresh all-time highs. With so much uncertainty, why are markets so bullish?

There are a couple potential explanations. First, historically, wars aren’t that bad for U.S. markets. The U.S. is isolated geographically and insulated by having the largest and most liquid financial markets in the world. During times of uncertainty, the American equity and credit markets are seen as safe havens.

The average U.S. stock market decline during 30 major geopolitical events since 1939 was just 4%, and stocks typically bounced back within six weeks.

• One year later, outcomes improved even more: the S&P 500 posted double-digit gains in the 12 months following Pearl Harbor, the Cuban missile crisis, the John F. Kennedy assassination, and the start of the Israel-Hamas war.

Second, company earnings are strong. The S&P 500 just posted its fifth consecutive quarter of double-digit earnings growth — the last time that happened was in 2018.

Third, rising gas prices may be affecting big companies and consumer spending less than expected. In the 1970s, spikes in oil prices triggered a recession. But since then, the U.S. economy has grown less dependent on oil: GDP has tripled, while oil consumption has stayed about the same.

Furthermore, consumer spending now hinges more on the wealthy than the middle class, and high-income consumers are less affected by energy costs.

The top 10% of earners account for half of consumer spending, or a third of GDP, and the highest-income quintile spends only 2% of their budget on gasoline. That’s compared with low income households that spend nearly 20% of their budgets on gas.

I’ve been calling this the ketamine economy. Ketamine is dissociative. You leave your body and watch your life from the outside. That’s exactly what the Dow and the Nasdaq do. They give the illusion that society is doing well, but they’re not a measure of prosperity. They’re a proxy for earnings and the wealth of the top 10%.

Think about what’s actually driving this market. Fifty percent of consumer spending comes from the top 10%. Do they care that gas is $6 a gallon? It doesn’t register. Tech dominates the market indexes. What does chaos in the Strait of Hormuz do to Nvidia’s margins? Nothing.

In addition, there’s this phenomenon of buying the dip. If you look at the last four major exogenous events, the Gulf War, 9/11, the Iraq War, and COVID, basically, there was a dip and then the markets ripped back the following year.

We did have a drawdown here in March, but it’s rebounded since. I think what’s happening is the cycle time between fear and uncertainty around a war and the opportunity to buy is compressing. Now people are like, let’s move to the part of the program where we make money.

Let me break down what’s actually happened in the markets. Year to date, the biggest winners were industrials, materials, and energy. That made sense — war in the Middle East, oil prices surge, and energy stocks move higher.

On March 30, we hit the market bottom. Since then, it’s completely reversed. Energy is down 11%. Meanwhile, financials are up 8%, communication services up 10%, tech up 21%.

So what happened? For weeks, investors were doing what you’d expect. They were pricing in the risk of the Iran war. Then something switched. I call it timeline fatigue. The Iran story kept producing plot points with no resolution. Ceasefire, then no ceasefire. Blockade, then no blockade. Trump says negotiations are going somewhere, then they don’t. At a certain point, investors just gave up trying to interpret the headlines.

When investors stopped looking at the geopolitics, they looked at the fundamentals. Earnings are strong, guidance is strong. Microsoft and Nvidia are trading at some of their lowest forward multiples in years. Suddenly the math was simple: Big Tech is executing, multiples are attractive, let’s buy.

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The AI Industry Faces a New Threat: An Angry Public

The AI backlash is turning violent. On April 10, a man threw an incendiary device at OpenAI CEO Sam Altman’s house, and then went to OpenAI headquarters and threatened to burn it down. A few days earlier, a gunman fired 13 rounds into the front door of an Indianapolis councilman’s home. The perpetrator left a note that read “No Data Centers.”

Americans are making it increasingly clear they don’t like where AI is headed.

Data centers, the most physical manifestations of AI, are an obvious target. Last year, 48 data center projects, representing at least $156 billion in investment, were blocked or stalled by local opposition, predominantly in the form of peaceful protests.

Anti-AI sentiment is starting to shape policy: Maine just introduced a bill to ban data centers altogether, joining 11 other states with active bills proposing restrictions or outright bans.

Opposing data centers is one of the few topics popular on both sides of the aisle. Of the elected officials who’ve taken positions against AI data centers, 55% are Republicans and 45% are Democrats.

Another, perhaps surprising cohort coming out against AI is Gen Z. A recent survey found that 44% of Gen Z admitted to having sabotaged their company’s AI rollout in some way.

This isn’t really about AI — it’s about inequality, and AI has become the most visible symbol of it.

The top 19 households in America own 2% of all wealth, up from 0.1% just 40 years ago. We have more private security guards in this country than high school teachers. Now you have this technology that promises to reshape the entire economy, and the people positioned to benefit are the same people who already own everything. Meanwhile, local communities are watching their electricity bills go up to power data centers they had no say in building.

That’s the context for the violence. And when you look at the reaction online, it mirrors the Luigi Mangione response. People sending support, asking about bail funds. That’s not fringe behavior. That’s a signal about where a meaningful portion of the country actually is.

There’s no justifying the violence. Full stop. And I’d push back a little on the idea that this is specifically an AI problem. Historically, public figures have been targets of violence. One in three presidents has been shot at. The difference is, CEOs are now famous. Nobody knew who CEOs were when I was growing up. Now they’re the figureheads of the American economy, and that makes them targets. Oh, and there’s access to assault weapons and guns at every f*cking corner.

But separate from the violence, there’s a real story here about brand collapse. Sam Altman used to be the tech CEO we actually wanted. He spoke in hushed tones to Congress about the dangers of the thing he was building. He didn’t own equity in OpenAI. He was going to save us from AI while building it responsibly.

Then the mask slipped. He started sh*tposting Microsoft. He compared data center energy use to the calories it takes to raise a child, essentially telling critics to stop complaining. Then Marc Andreessen started saying he doesn’t believe in reflection, only forward momentum. These are not people who are winning hearts and minds.

The result is that AI’s brand has collapsed, and it’s self-inflicted.

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Amazon Buys Globalstar in $11.6 Billion Satellite Deal

Last week, Amazon announced it will acquire satellite communications firm Globalstar for $11.57 billion. Globalstar’s infrastructure will help accelerate Amazon’s plans to develop its own satellite network, deemed Amazon Leo.

On news of the deal, Amazon’s shares increased almost 4%, adding almost $100 billion in market capitalization — essentially paying for the acquisition eight times over. Globalstar shares rose almost 10%.

Still, the deal will be Amazon’s second-largest acquisition after Whole Foods, and it wasn’t cheap, especially given the size of Globalstar’s business. Globalstar operates just 24 satellites and has never been profitable.

So, why is Amazon paying so much for an unprofitable satellite company?

Amazon isn’t buying Globalstar for its 24 satellites, but rather the spectrum that Globalstar owns.

Spectrum refers to the invisible radio frequencies that wireless signals travel on. Some spectra carry Wi-Fi signals, some carry broadcast TV signals, some carry our smartphone data.

There is a finite amount of spectra, and the government, specifically the Federal Communications Commission, auctions off licenses for them every few years. But since there’s a fixed amount, they are expensive and hard to get. The last auction was in 2022, and Verizon paid more than $50 billion for its licenses.

Amazon wants Globalstar’s spectrum so that it can create its own private wireless network. In his annual letter to shareholders, Amazon CEO Andy Jassy described the company’s plans to use Amazon Leo to sell Wi-Fi to rural customers, airlines (Amazon already has a contract with Delta), and to integrate it into AWS.

But there’s another, even more important angle. Amazon’s industrial robots and expanding fleet of drones need to communicate constantly, and they will be able to operate more efficiently on a private wireless network. Essentially, Amazon’s purchase of Globalstar is an extension of their investment in their logistics infrastructure.

Prof G Media’s Big Tech stock pick of the year was Amazon. Why? Over the past few years, excitement about AI has made it easy to overlook the importance of hard assets. But this year, the rise of the HALO trade (heavy assets, low obsolescence) has made Amazon the best-performing member of the Magnificent 7.

Amazon’s hard assets are its biggest moat. It has as many airplanes as the Austrian or Norwegian military (110 aircraft), and more industrial robots in operation than all other companies in the U.S. combined.

These investments in automation are expected to boost productivity by roughly 25% at fulfillment centers.

The Allbirds pivot to AI is gonna inspire a bunch of copycats. Think: Kmart AI.

Prof G Markets is going on tour! Join us in San Francisco, Los Angeles, Miami, Chicago, and New York City. Expect special guests, unfiltered conversation, and the jokes that don’t make it on-air… Get your tickets here.

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NASA is a point of national pride, a driver of technological progress, and a reason for top minds around the world to choose America. It is one of the most underrated brands in the world.

What unites humanity more than space exploration? Passion for sport? Love for our families? The list is short. A fifth of the world’s population — 650 million people — watched Neil Armstrong and Buzz Aldrin walk on the moon in 1969. Five decades later, Americans are still excited about it.

• In 2019, 45% of Americans said there hadn’t yet been any other national accomplishment that gave them as much pride in the U.S. as the moon landing.

The NASA website gets more site visits than The Economist, twice as many as SpaceX, and almost as many as Tesla. Of all traffic, less than half is from the U.S.

Today, NASA is the most popular federal institution, ahead of the U.S. Postal Service and the Department of Veteran Affairs. That is despite the fact that NASA is vastly less efficient than the privately run SpaceX. Over 118 space missions, NASA saw an average cost overrun of 90%. Over 16 missions, SpaceX saw an average cost overrun of 1.1%.

Yet, as recently as last week, 80% of Americans hold a favorable view of NASA. What other seemingly inefficient government agency do 80% of Americans like?

The NASA logo is so broadly admired that it has become a status symbol. Coach, Balenciaga, Kith, Estée Lauder, Nike, Adidas, and Vans have all collaborated with NASA or used its iconic red branding. Ariana Grande named a song after the agency, and NASA has been mentioned more than 230 times in rap lyrics since the 1990s. How many other icons can claim that kind of cachet?

ROI

NASA may look inefficient compared with SpaceX, but be clear: Its second-order effects on innovation and America’s reputation make it one of the most valuable U.S. assets. President George H.W. Bush reportedly called the Apollo program “the best return on investment since Leonardo da Vinci bought himself a sketchpad.”

For each dollar invested in the Apollo program, the U.S. got $7 back. Today, NASA creates more jobs per million dollars in budget than federal spending on defense, healthcare, or infrastructure.

It is also the launchpad for crucial American innovations. NASA calls the commercial products and services that have emerged from its research “spinoffs.” Most notably, NASA funding kick-started microchip and computer innovation in the 1960s. It is estimated that the Apollo program accelerated computer technology by 10 to 15 years.

Other spinoffs include products as impressive as precision GPS, solar panels, satellite TV, implantable heart monitors, and LASIK surgery, and as mundane as memory foam, golf ball dimples, and invisible braces.

Even more importantly, NASA’s achievements have inspired students and innovators. In the decade following the 1961 launch of the Apollo program, the rate of doctoral degrees in physics conferred in the U.S. tripled. Even as late as 2009, 50% of high-profile scientists named the Apollo missions as a major reason they pursued science.

Elon Musk, one of the most gifted entrepreneurs of this century said, “Landing on the moon was probably the most inspiring thing in history. It certainly inspired me. I’m not sure SpaceX would exist if not for Apollo 11.”

Vivek Ranadivé, a tech entrepreneur and billionaire, decided he wanted to study in the U.S. after hearing the moon landing broadcast on a transistor radio in Bombay. He now owns the Sacramento Kings.

NASA’s future

​​In many ways, space is Trumpian. It’s full of superlative opportunities — the farthest flight, the most powerful engine, the biggest rocket, etc. Space also provides another frontier — a key ingredient in America’s manifest destiny ideology. Last December, Trump signed an executive order calling for the U.S. to return to the moon by 2028, and establish a permanent lunar base by 2030. (Prediction: Trump names a moon crater after himself.)

Future lunar missions depend on SpaceX’s Starship to transport astronauts to the moon. NASA’s reliance on SpaceX makes the American space program vulnerable to Elon Musk’s whims — but that’s a separate post.

Another motivating factor behind our return to the moon is that China is trying to beat us there. Since 2015, China has increased funding for its space program by over 1,000%, and its robotic space missions have already retrieved samples from the far side of the moon — a feat the U.S. has not achieved.

National treasure

When Americans were asked what our country’s greatest achievement of the 20th century was, the most common answer was our space program. That sentiment doesn’t seem to have faded. Today, nearly 70% of Americans say it is “essential” that the U.S. continue to be a leader in space exploration.

We may be more divided than ever, we may be at war, and the American brand may be tarnished — but the American spirit is alive and well in NASA. In fact, NASA might be the last bastion of American patriotism, and it is undoubtedly a timely reminder of human unity.

Children in Juárez, Mexico, watched the launch livestream of NASA’s Artemis II mission. Source: Jose Luis Gonzalez/Reuters

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Of Americans think they would lose in an unarmed fight with a rat

1. Markets in review: Trump, Iran, and the worst consumer sentiment on record

2. Is the $2 trillion tech sell-off a buying opportunity?

3. Newsletter Exclusive: NASA is America’s most underrated brand

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US-Iran Talks End With No Deal

President Trump said that the U.S. Navy would begin blockading the Strait of Hormuz after peace talks fell through over the weekend. Oil prices spiked more than 8% and major indices fell more than 1% on Sunday night.

In a post on X, Iran’s lead negotiator cited lack of trust in the U.S. as a primary reason for the failure of the peace talks.

News about the conflict has changed quickly. Just last week, President Trump threatened to destroy Iranian civilization unless its leaders reopened the Strait of Hormuz. Hours later, he announced a two-week ceasefire, contingent on Iran reopening the strait.

In response, U.S. crude plunged 16% and the Dow had its best day in a year. But within 24 hours, the strait remained effectively closed, and the deal unraveled over a dispute about scope — specifically whether the ceasefire applied to Lebanon, where Israel had continued to strike Hezbollah. By the following day, stocks were retreating, and oil was climbing again.

Throughout this entire conflict, there’s been one consistent dynamic: Trump promises to end the war and the market rallies, only to fall when his promises don’t materialize.

In fact, since Trump took office last year, nine of the S&P 500’s 10 biggest gains have had to do with Iran or tariff relief. If one were able to perfectly time these nine occasions, they would have earned a 52% return compared with 12% for buying and holding an index fund throughout.

Last week ended with news that the Consumer Price Index, a key measure of inflation, rose 3.3% year over year in March — the largest increase since 2022. The increase was driven by a 12.5% year-over-year rise in energy prices.

Meanwhile, consumer sentiment has dropped to its lowest level ever. In other words, consumers feel worse about the economy now than they did during the depths of the Great Recession.

Josh Brown is the CEO and co-founder of Ritholtz Wealth Management

Paradoxically, the investor who looks least equipped to trade a market like this, the normal guy with a brokerage account, is actually in the best position. A professional hedge fund manager charging two and twenty has made an explicit promise to outperform the market for a significant fee. In normal times, that’s a hard promise to keep. In an environment where markets swing violently on a presidential tweet and reverse just as violently two hours later, it’s close to impossible.

Arguably, the market is less risky now than it was three months ago. I know that sounds insane, but valuations have compressed and earnings are growing across most S&P 500 sectors.

The war — whether it lasts three weeks or three years — will resolve itself. You can’t speed it up, and you can’t fully understand its depth or duration. But if you have earnings growth, which we do, and interest rates that aren’t rising, history says stocks resume their upward trend once the conflict ends.

Now step back and look at a global portfolio. On a rolling one-year basis, developed markets ex-US are up 46%, emerging markets up 55%, and the U.S. is up 27%. The U.S. underperformance reflects political instability and uncertainty around Trump.

But for investors with global portfolios, the answer to how you navigate an environment like this is: You already did.

”Two and Twenty”?

Two and twenty is the standard fee structure that hedge funds charge their clients. Two refers to a 2% annual fee on everything you invest, regardless of performance. Twenty refers to the 20% cut that hedge funds take of any profits above a certain benchmark.

Even if you had perfect insight into the geopolitical situation, it might not help you. Trump’s decision-making is genuinely opaque and erratic.

What does help, though, is access. In the prediction markets, three accounts made over $600,000 betting correctly on the ceasefire timing. These were the very same accounts that had already nailed the date and timing of the initial U.S. strikes on Iran.

SEC Enforcement Division Director Margaret Ryan was investigating this but abruptly resigned last month. Apparently she clashed with agency leaders over how to handle cases tied to President Trump and his family.

Markets function because participants believe prices reflect publicly available information. When that faith erodes, and when a generation of investors concludes the game is rigged, they leave. It happened after 2008, and the damage was lasting.

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Is the Tech Sell-Off Creating the Trade of the Year?

Since the start of the year, the Magnificent 7 have lost nearly $2 trillion in market cap. Goldman Sachs told investors in a note last week that this has been one ‌of the weakest periods of relative returns for technology over the past 50 years.

Globally, the technology sector now has a price-to-earnings ratio lower than that of the consumer staples and industrials sectors. Microsoft now trades at a lower forward price-to-earnings ratio than the broader S&P 500.

The tech sector has gotten hammered over fears that AI will disrupt traditional software workflows. Concerns over skyrocketing capex spending and broader macroeconomic uncertainty have pushed investors toward “safer” sectors like industrials, utilities, and materials.

However, earnings projections for the upcoming quarter paint the tech sector in a different light. According to Goldman Sachs, the market consensus is for IT earnings per share to grow by 44%, accounting for 87% of index earnings-per-share growth in the first quarter.

Investors are punishing Big Tech companies for overspending on capex, for plowing money into AI infrastructure with no clear path to profitability.

But here’s what doesn’t make sense: Anthropic and OpenAI are doing the exact same thing, just without the scrutiny. They’re spending enormous amounts with unit economics that don’t add up. If the market is punishing Microsoft for overspending, why aren’t OpenAI and Anthropic facing the same reckoning? Probably because they’re not public yet.

The market has been indiscriminately selling software for months — Salesforce, Microsoft, Palantir, CrowdStrike, Palo Alto. These are some of the best companies in the world, down anywhere from 25% to 50%. And yes, some face real AI disruption risk. But it’s gone too far.

The moment I decided to step in was when I saw a story claiming Anthropic was about to disrupt all of cybersecurity — that companies would rip out their Palo Alto infrastructure and just vibe-code something with Claude.

There’s no board of directors at any public company anywhere in the world that would sign off on that kind of cybersecurity plan. It’ll never happen.

I run a business. I’m a Salesforce customer. I’d love to cut that six-figure expense. But it’s a system of record. It’s the operating system of the firm. Any AI-driven alternative is going to cost money too — it’s not free just because it runs on AI.

The deeper story here is a revaluation that I flagged on February 9: The market has been overpaying for asset-light SaaS companies and underpaying for companies with real, heavy assets. Here’s what that correction looks like year to date — energy up 36%, materials up 10%, utilities up 9%, staples up 7%, industrials up 6%, real estate up 5%. Every one of those sectors owns things a chatbot cannot replace. Metal, steel, timber, bricks. That’s the adjustment we’re watching play out.

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Is NASA the Last Bastion of American Pride?

On Friday, four astronauts returned to Earth after venturing deeper into space than anyone has gone before. The mission, Artemis II, sent a rocket weighing 5.7 million pounds around the moon and back, setting the stage for a future lunar landing. This incredible feat is a timely reminder that American excellence still exists — if only under the NASA logo.

NASA is a point of national pride, a driver of technological progress, and a reason for top minds around the world to choose America. It is one of the most underrated brands in the world.

What unites humanity more than space exploration? Passion for sport? Love for our families? The list is short. A fifth of the world’s population — 650 million people — watched Neil Armstrong and Buzz Aldrin walk on the moon in 1969. Five decades later, Americans are still excited about it.

• In 2019, 45% of Americans said there hadn’t yet been any other national accomplishment that gave them as much pride in the U.S. as the moon landing.

The NASA website gets more site visits than The Economist, twice as many as SpaceX, and almost as many as Tesla. Of all traffic, less than half is from the U.S.

Today, NASA is the most popular federal institution, ahead of the U.S. Postal Service and the Department of Veteran Affairs. That is despite the fact that NASA is vastly less efficient than the privately run SpaceX. Over 118 space missions, NASA saw an average cost overrun of 90%. Over 16 missions, SpaceX saw an average cost overrun of 1.1%.

Yet, as recently as last week, 80% of Americans hold a favorable view of NASA. What other seemingly inefficient government agency do 80% of Americans like?

The NASA logo is so broadly admired that it has become a status symbol. Coach, Balenciaga, Kith, Estée Lauder, Nike, Adidas, and Vans have all collaborated with NASA or used its iconic red branding. Ariana Grande named a song after the agency, and NASA has been mentioned more than 230 times in rap lyrics since the 1990s. How many other icons can claim that kind of cachet?

ROI

NASA may look inefficient compared with SpaceX, but be clear: Its second-order effects on innovation and America’s reputation make it one of the most valuable U.S. assets. President George H.W. Bush reportedly called the Apollo program “the best return on investment since Leonardo da Vinci bought himself a sketchpad.”

For each dollar invested in the Apollo program, the U.S. got $7 back. Today, NASA creates more jobs per million dollars in budget than federal spending on defense, healthcare, or infrastructure.

It is also the launchpad for crucial American innovations. NASA calls the commercial products and services that have emerged from its research “spinoffs.” Most notably, NASA funding kick-started microchip and computer innovation in the 1960s. It is estimated that the Apollo program accelerated computer technology by 10 to 15 years.

Other spinoffs include products as impressive as precision GPS, solar panels, satellite TV, implantable heart monitors, and LASIK surgery, and as mundane as memory foam, golf ball dimples, and invisible braces.

Even more importantly, NASA’s achievements have inspired students and innovators. In the decade following the 1961 launch of the Apollo program, the rate of doctoral degrees in physics conferred in the U.S. tripled. Even as late as 2009, 50% of high-profile scientists named the Apollo missions as a major reason they pursued science.

Elon Musk, one of the most gifted entrepreneurs of this century said, “Landing on the moon was probably the most inspiring thing in history. It certainly inspired me. I’m not sure SpaceX would exist if not for Apollo 11.”

Vivek Ranadivé, a tech entrepreneur and billionaire, decided he wanted to study in the U.S. after hearing the moon landing broadcast on a transistor radio in Bombay. He now owns the Sacramento Kings.

NASA’s future

​​In many ways, space is Trumpian. It’s full of superlative opportunities — the farthest flight, the most powerful engine, the biggest rocket, etc. Space also provides another frontier — a key ingredient in America’s manifest destiny ideology. Last December, Trump signed an executive order calling for the U.S. to return to the moon by 2028, and establish a permanent lunar base by 2030. (Prediction: Trump names a moon crater after himself.)

Future lunar missions depend on SpaceX’s Starship to transport astronauts to the moon. NASA’s reliance on SpaceX makes the American space program vulnerable to Elon Musk’s whims — but that’s a separate post.

Another motivating factor behind our return to the moon is that China is trying to beat us there. Since 2015, China has increased funding for its space program by over 1,000%, and its robotic space missions have already retrieved samples from the far side of the moon — a feat the U.S. has not achieved.

National treasure

When Americans were asked what our country’s greatest achievement of the 20th century was, the most common answer was our space program. That sentiment doesn’t seem to have faded. Today, nearly 70% of Americans say it is “essential” that the U.S. continue to be a leader in space exploration.

We may be more divided than ever, we may be at war, and the American brand may be tarnished — but the American spirit is alive and well in NASA. In fact, NASA might be the last bastion of American patriotism, and it is undoubtedly a timely reminder of human unity.

Children in Juárez, Mexico, watched the launch livestream of NASA’s Artemis II mission. Source: Jose Luis Gonzalez/Reuters

Birth rates are falling across the developed world, but the usual explanations miss the point. In this Prof G+ exclusive video, Scott explains why the real drivers are economic: housing costs, stagnant wages, and fewer stable partnerships.

Instead of bonus reads this week, please enjoy a collection of the best X posts about Artemis II.

$23 million

That’s how much the toilet in NASA’s Artemis II spaceship cost to develop.

1. Is SpaceX really worth $2 trillion?

2. Nike’s struggle continues, and Allbirds is closing all its U.S. stores

3. The most underrated lesson from the OpenAI-TBPN deal

4. Newsletter Exclusive: Why is America turning away doctors when there’s about to be a shortage?

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SpaceX’s IPO Could Make Musk the World’s First Trillionaire

SpaceX has confidentially filed with the SEC for what could be the largest IPO ever. The company is targeting a $2 trillion valuation and could raise up to $75 billion in the offering, which could come as soon as June.

If the IPO prices are as expected, Elon Musk’s 40% stake in SpaceX, in addition to his other holdings, will make him the world’s first trillionaire.

SpaceX is by far the most dominant player in the largest ever addressable market: the cosmos. It controls two-thirds of the satellites orbiting Earth, accounted for 85% of all U.S. space launches last year, and operates at one-fifth the cost of its closest domestic competitor.

Some perspective: NASA’s Space Launch System rocket that jettisoned astronauts on a path around the moon last week has launched twice since its development in 2011; SpaceX’s Falcon 9 rocket has launched more than 640 times. The Falcon also cost half as much to develop.

SpaceX generated $8 billion in profits in 2025 off of roughly $16 billion in revenues, and analysts expect sales to increase 25% this year. A $2 trillion valuation would imply a 125x price-to-sales multiple.

SpaceX’s out-of-this world valuation sent ripple effects through the broader space economy. These only intensified when, on Thursday, the FT reported that Amazon is in advanced talks to acquire the satellite telecom group Globalstar for roughly $9 billion. Satellite services stocks Planet Lab, Viasat, EchoStar, and Rocket Lab closed the week up 29%, 22%, 18%, and 15%, respectively.

Is this an amazing company or is it ridiculously overvalued? The answer is yes.

This man of the people bullsh*t where Elon is reserving 30% of the shares for the retail investors? He’s doing that because retail investors are the only ones stupid enough to pay this price. Institutions weren’t going to cover the allotment here.

Research shows that IPOs that allocate directly to retail investors lose over 60% of their value, on average, within a year, underperforming their peers by about 20%. Why? They’re priced more aggressively, and retail trading platforms push shares and hype companies up, leading to big IPO spikes.

If this thing gets out anywhere near a $2 trillion valuation, you do not want to be in this stock three, six months out. Even Musk and his jazz hands can’t figure out a way to justify anything resembling this valuation.

This company bundles SpaceX, Starlink, xAI, and X. It’s very hard to understand what the right valuation is because there’s a lot of bullsh*t — but also a lot of substance.

That complexity is by design. Musk bundles enough ambitious far-horizon narratives such that investors cannot build a clean model and they just have to trust him. This valuation requires you to believe his whole pitch perfectly, across the longest possible timeline.

When Google went public, it was trading at 10x trailing revenue with revenue growth of 240%. SpaceX is going public at 125x trailing revenue, with revenue growth of 25%. So SpaceX’s revenue growth is almost 10 times lower than Google’s was, and yet its valuation is more than 10 times higher.

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Nike Lost Hundreds of Billions. Allbirds Lost Everything

Two sneaker brands at opposite ends of the market are both running into trouble.

Nike stock tumbled 16% last week after reporting earnings. Net income fell 35%, gross margins compressed on the back of tariff pressure in North America, and management warned that revenue will decline for the rest of the year. Sales in China, one of its most critical markets accounting for 15% of global revenue, will fall 20% next quarter alone.

Investors are disappointed, and so is Nike’s CEO, Elliott Hill. Brought back 18 months ago to turn Nike around, Hill told employees in an all-hands meeting he is “so tired of talking about fixing this business.”

He still has a long way to go. Nike is valued at 1.4x sales — roughly the multiple it was trading at in 2009. Its market cap has fallen from almost $300 billion in 2021 to $65 billion today; Nike is now worth a third of what discount retailer TJ Maxx is.

Meanwhile, Allbirds, the wool sneaker brand that went public in 2021 at a $4 billion valuation, sold off its remaining intellectual property last week for $39 million to a brand management firm. The buzzy company, whose shoes were once deemed part of the Silicon Valley uniform, never turned a profit.

Allbirds was always a bad business. The VC community embraced it, which should have been the tell. It had a fashionable product, expensive retail leases it could never sustain on unit economics, no wholesale infrastructure, and no brand loyalty. When the hype faded, there was nothing underneath it.

Nike is a completely different conversation. This is still one of the greatest consumer brands in the world. Whether you are watching football in Ghana or badminton in the U.K., that Swoosh means something.

Elliott Hill has only been back 18 months, and he should be given three years. But I think he’s got the wrong strategy. Something that Aswath Damodaran told me that always struck me is that we’re obsessed with youth, and growth companies never want to accept that they’re aging into mature companies.

Nike has not recognized that it’s a mature, low-growth company. It’s time to cut costs. For every dollar in expenses you cut, it has the same impact on the bottom line as $5 to $6 in incremental revenue.

Which do you think is easier right now? What investors need to hear is a margin story: flat revenues, costs cut 4% to 6% a year for three years, low-double-digit EBITDA growth. That almost certainly means 10,000 to 20,000 layoffs are coming, and an activist will show up and force this if leadership will not. This is a $70 to $80 stock — if there is an adult in the room.

One thing that has always struck me on Nike’s investor relations homepage is that the first thing you see is “Nike is a growth company” in huge letters. It’s been that way for years. That’s like their main pitch to investors: We’re a growth company. And, well, definitionally, you’re not because your revenue has fallen every quarter for more than a year.

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Can TBPN Make OpenAI Cool?

In its buzziest acquisition to date, OpenAI acquired tech-industry talk show TBPN last week. According to a source familiar with the transaction, the acquisition was valued at approximately $200 million.

Founded just 18 months ago by entrepreneurs John Coogan and Jordi Hays, TBPN has become a media staple for fans of the tech industry, and a platform for CEOs like Mark Zuckerberg, Satya Nadella, and Alex Karp.

The caliber of TBPN’s guests creates a flywheel effect: High-profile guests attract other high-profile guests, which attracts high-profile viewership.

This in turn attracts premium advertising dollars. With only 11 employees, TBPN generated $5 million in ad revenue in 2025 and was on track to exceed $30 million in 2026. They will no longer run ads, but as a house publication for OpenAI, they effectively become a marketing platform.

• TBPN’s revenue per employee, assuming $30 million in sales, is greater than Apple’s.

TBPN livestreams from YouTube and X for three hours a day, five days a week. Most episodes get between 4,000 and 10,000 live viewers. Most of its influence stems from clips on X. It’s both a reinforcement of X’s continued cultural gravitas and a reminder that clips are no longer just a marketing requirement. The clips are the content.

OpenAI’s decision to purchase a media company isn’t entirely surprising. There is a long history of tech companies buying or starting media firms as a marketing and customer acquisition strategy. Microsoft and NBC started MSNBC in 1996 to drive traffic to Microsoft’s internet portal, MSN. Bloomberg launched Bloomberg News to sell its terminals, and retail trading platform Robinhood acquired MarketSnacks and launched Sherwood News, a tech-focused media outlet.

OpenAI’s move follows an old strategy, but there is a new lesson we can learn from this deal.

Read the rest on Mia's Substack

America Is Running Out of Doctors. It’s Also Turning Them Away

The richest country on the planet has a problem: It’s running out of doctors.

More than 80% of U.S. counties are medical deserts, meaning areas with too few physicians to meet demand. By 2037, the U.S. will have a shortfall of 87,000 primary care providers. In other words, between 130 and 175 million Americans — almost half the country — could lack a primary care doctor.

But here’s the confusing part: We have no shortage of people who want to become doctors. Every year, medical schools turn away roughly 30,000 applicants, some exceptionally qualified.

• Last year, American medical schools rejected about 25% of applicants who scored in the top-10th percentile.

Today, the chance of a premed freshman becoming a doctor is just 6%.

First, Medical School

Before a medical student spends a dollar on tuition, they’ve already spent $7,400 on preparation and admission expenses. Most apply to 16 to 18 schools; some apply to as many as 30. Ambitious students have to, because the most competitive programs’ acceptance rates range from 2% to 10%. Some are even lower. Stanford admitted 1.0% of applicants. NYU? 0.5%.

After four grueling years of medical school, graduates have to apply for residency. Residency is a mandatory, post-graduate training period that lasts between three and seven years. During this period, they work 80-hour weeks and make, on average, $62,200.

The Residency Bottleneck

Over the past three decades, the federal government has increased the number of residency spots by only roughly 1%, while the U.S. population has increased nearly 30%.

Seventy percent of teaching hospitals fund their own residency slots, but they can’t keep up with demand — and disproportionately fund spots for lucrative specialities where they can recoup the cost through billing, not where the shortage is worst (primary care and rural medicine).

This has created a bottleneck where medical schools are reluctant to increase enrollment because there aren’t enough residency slots. It’s not a good look for very expensive schools to be graduating lots of unemployed MDs. The consequence is that they reject thousands of qualified applicants.

Shaheen Lakhan, M.D., Ph.D., explained that this residency gridlock is a policy choice, not an inevitability. “We have, in effect, added more cars to the on-ramp without building new lanes on the highway.”

It’s Expensive to Save Lives

The average medical school graduate has paid more than $370,000 for their undergraduate and doctoral degrees. More than 70% of graduates carry debt; the average owes $223,130. It takes most of them two decades to be debt-free.

On July 4, 2025, President Trump signed the “One, Big, Beautiful Bill Act” into law, enacting sweeping changes to federal loan programs that will impact who can afford to pursue medicine.

Starting July 1, 2026, professional degree students (including medical, dental, and law students) will be limited to borrowing $50,000 per year and $200,000 over a lifetime. Grad PLUS loans — which allow grad students to borrow up to the entire cost of attendance minus federal aid — will be eliminated entirely.

As a result, many students will be forced to bridge the gap with private loans, or not finish at all.

The Surplus That Never Materialized

How did we get here? It all started back in the 1980s, when people weren’t concerned about a shortage of doctors. In fact, they were concerned about a surplus. The Graduate Medical Education National Advisory Committee report projected in 1980 that the U.S. would have 70,000 more physicians than it needed by 1990.

Policymakers responded accordingly: Scholarships were scaled back, residency training requirements were tightened, and medical schools agreed to a voluntary moratorium on new institutions that lasted from 1980 to 2005.

The most consequential legislation came in 1997: Congress passed the Balanced Budget Act, which capped the number of residency slots that Medicare would fund, freezing support at 1996 levels.

The surplus never materialized. The models failed to account for demand driven by population growth, aging, and expanded insurance coverage. By 2005, the Association of American Medical Colleges had reversed course entirely, acknowledging that the U.S. was now in shortage territory.

America’s rapidly aging population only intensifies this crisis. The number of Americans 65-plus is expected to double by 2060. The 85-and-older population, which requires the most intensive care, is expected to triple by 2060.

We are woefully unprepared to care for them: Only 44% of geriatric medicine residency spots were filled in 2025. That’s largely because geriatricians earn half of what cardiologists do. Primary care physicians make even less than geriatric physicians on average.

At the same time, roughly 20% of practicing physicians are 65 or older, and those between ages 55 and 64 made up another 25% of the active workforce. Realistically, more than a third could retire in the next decade.

Geography as a Preexisting Condition

The shortage of doctors is already affecting rural America. In 2020, only 2% of Medicare-funded training slots were in rural areas, despite rural communities representing 18% of the U.S. population.

Part of the problem is student preference: Only 3% of residents finishing their training say they would prefer to practice in a community of 25,000 or fewer.

This asymmetry has lethal consequences. Rural residents face dramatically worse health outcomes across nearly every major disease category.

It’s gotten worse over time: Prime working-age mortality in rural areas was 43% higher than in urban areas by 2019 — a stark increase from just a 6% difference in 1999.

Access to care is a major driver of these disparities. A 2025 Brown University study found that in rural counties, adding just one primary care physician is associated with 1.4 fewer deaths per 100,000 older adults, a benefit 37 times larger than the same addition would yield in urban areas.

Solutions

The physician shortage is not a mystery, nor is it a demographic accident. It’s the downstream consequence of a policy decision that has never been meaningfully reversed.

The political path forward exists. The Resident Physician Shortage Reduction Act of 2025 would add 14,000 new Medicare-supported residency positions over seven years and codify the Rural Residency Planning and Development Program. It has bipartisan support, but it has not passed.

Without action, the shortage of doctors will only get worse — and every year that we fail to address this problem, another class of qualified applicants is turned away from medical school.

The SpaceX IPO might get a pop, but it will not stay anywhere near a $2 trillion valuation.

Is Partiful fixing the loneliness epidemic? Ed interviews Shreya Murthy, Partiful’s CEO and co-founder.

1. The bright side of AI: It’s not as polarizing as social media

2. Is it dangerous to give AI personal medical information?

3. The astronauts on Artemis II are going deeper into space than any humans before

Some Redditors suspected that Scott had insider information. He didn’t. Scott has been making predictions for years, and while he doesn’t always get it right, he’s pretty good at it. Ten out of his 11 predictions for 2025 came true.

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I’ve made Scott’s annual predictions deck since 2021, so I’ve had some exposure to how he comes up with these bets. The following is my best estimation of the Prof G Media predictions framework.

How to make a good prediction:

1. Read constantly and let data guide your hunches.

2. Never underestimate human nature.

3. Be skeptical when the crowd is certain.

4. Remember: Greatness is in the agency of others.

Read Constantly and Let Data Guide Your Hunches

If you want to make a good prediction, you need a deep understanding of the subject matter. If you’re making a prediction about the markets, for example, you should be reading, watching, and listening to market-related content all the time.

Continuity is important for pattern recognition. You can’t just be really plugged into financial news for three days. To make a good prediction, you need to treat the markets (or whatever you’re predicting about) like a best friend. You should be close to them for months — years even, to understand how they work and how they react to different situations.

Your reading should be biased toward data-heavy sources. Let that data guide you. Words lie easier than numbers.

We anticipated Sora would fail because we were following the data. The app was released at the end of September, and by December, downloads were decreasing more than 30% month over month. In January, they declined another 45%.

Not only was it unpopular, the economics were mind-bogglingly bad. AI video generation is 2,000 times more energy intensive than text, and more than 150 times more expensive. Forbes estimates that Sora burned $15 million per day. That’s more than Adam Neumann burned every day at WeWork.

In terms of revenue, Sora generated about $2 million from in-app purchases; in other words, its revenue covered the first three hours of its operation.

There was just no way that a side bet that disastrous could continue.

Horizon Worlds was even less popular than Sora. At its peak, it had roughly 300,000 monthly active users. MySpace, a social network popular in 2005, has almost 800,000 monthly visitors.

Never Underestimate Human Nature

Society and technology move faster than evolution. Ten thousand years ago, the most-exciting technological advancements were stone tools and the domestication of cows. Today, we have artificial intelligence in our pockets, but we’re navigating the world with the same controls (genes) as paleolithic humans.

This is all to say: Innate evolutionary tendencies are hardwired into our brains, and they influence us more than we’d like to think. We still have a desire for sugary and fatty foods because our bodies are built to avoid starvation. Negative memories are more salient to us because in our cave days, missing danger was costlier than missing an opportunity.

An understanding of biology and psychology fueled Scott’s prediction that the metaverse would fail back in 2021. Prof G explained that headsets obstruct our peripheral vision, exposing us to stalking predators (real quote), so people have a natural revulsion toward putting them on.

They also look stupid. Everything we put on our bodies is, at some level, about broadcasting attractiveness and value to a potential mate. VR headsets are sex repellant (his words).

Be Skeptical When the Crowd Is Certain

Predictions are trends, and as they grow in prominence, they can also appear to grow in prescience. As more people hop on the bandwagon, they bring with them their own justifications for why ___ is going to happen. Then the size and power of the trend starts to influence the media, which converts even more people.

The problem is that when predictions become trends, it becomes easier to overlook risks or ignore the potential for other possibilities. When everyone is already convinced of something, no one has to actually investigate the specifics.

In his book Mastery, Robert Greene argues that true expertise means developing such a deep understanding of a field that you can detect anomalies and outliers that others haven’t processed yet. Sometimes the contrarian call is just stating what’s plainly in front of you.

This is what happened with Sora. AI-generated videos from the platform went viral on social media, making everyone think this was the next big thing. Case in point: Disney bet $1 billion on this trend. But after the initial hype, no one stopped to consider whether this made it a good business, or if the masses actually wanted to create AI videos of themselves.

A skeptic might have realized that media consumption has long followed the “1% rule,” where a small fraction of people create content and the vast majority consume it.

• 4% of YouTube videos account for 94% of views on the platform.

• 3% of videos on Instagram account for 84% of all views.

• 5% of videos on TikTok generate 89% of the views.

The top 25 podcasts reach nearly half of U.S. weekly listeners.

Consumers don’t want to produce their own entertainment. They want to be entertained.

Greatness Is in the Agency of Others

Scott didn’t have insider information on Sora. The prediction came from Dan Chiolan, a member of our research team.

One of Scott’s superpowers is attracting and retaining top talent. He hires smart young people, and then gives them (us) a ridiculous amount of responsibility. Dan is 22. He made a prediction on a major platform that Scott put his name behind. At 24, Ed Elson, a classics major, became the co-host of a prominent finance podcast. At 26, I produced all of Scott’s slides for his TED Talk, a presentation that has now been viewed more than 17 million times.

Prof G Media exists and works because Scott is great, but also because Katherine, Drew, Claude, MJ, Mia, Ed, Claire, Jenn, Allison, Dan, Bella, Kristin, Laura, David, Erikk, Billy, Jorge, Gil, Corinne, Michael, Kami, Karen, and Lucy … are great.

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$250,000

That was the average bonus for Wall Street bankers and traders in 2025.

1. It’s the economy, stupid

2. Are prediction markets gambling? Congress weighs in

3. Is social media addictive by design? Juries are starting to think so

4. Newsletter Exclusive: How did Prof G predict the demise of Sora and the Metaverse?

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Prosperity Is Here, It's Just Not Evenly Distributed

There are two economies right now. One lives in spreadsheets and press releases: GDP grew 2.2% last year, the S&P rose 16%, and President Trump brags that he’s secured $21 trillion in investments from foreign nations. The other economy is the one people feel every day, and it tells a very different story.

Nearly two-thirds of Americans are living paycheck to paycheck. In the past month, 28 million Americans skipped a meal to afford medication. Thanks to the Iran war, these struggling families now have to pay 30% more for gas and will have to contend again with rising inflation.

Young people have largely been shut out of the housing market, with first-time buyers now making up just 21% of all home purchases, down from roughly 40% throughout the 1990s.

It’s also a brutal time to find a new job: Fed Chair Jerome Powell said that after adjusting for statistical overcounting, net job creation is “pretty close to zero.”

Consumer sentiment has only been worse 1% of the time in the series’ entire history. This is bad news for Trump, whose 29% approval rate on the economy is now lower than Biden’s worst scores during the post-COVID inflation spike.

Instead of addressing the growing economic crisis, Trump and his cabinet have maintained a faux optimism — not unlike the Biden administration’s decision to tout “Bidenomics.” However, in Trump’s case, the ignorance looks less like a result of political pressure, and more a reflection of their priorities.

When Kevin Hassett, the director of the National Economic Council, was asked how the Iran war might affect regular Americans, he responded that “it would hurt consumers … but that’s really the last of our concerns right now.” That’s it. That’s the quote.

The way I would describe America right now is how William Gibson described the future, and that is: Prosperity is here, it’s just not evenly distributed.

One of my favorite stats is the Gini coefficient. Zero means everyone has the same amount, 1 means one person owns everything. When France hit .83 in 1789, they started cutting people’s heads off. We’re at .85.

There are wealth gaps, and then there are lived experience gaps. When I was a kid, my dad’s boss drove a Cadillac and we had a Gran Torino. We went to the same country club. That’s gone.

If you’re in the 0.1% today, you fly private, skip the TSA, have private health care, private security, and your kids are in schools that bear no resemblance to the rest of America.

People don’t evaluate their lives in a vacuum. They evaluate relative to others. And when you’re reminded 210 times a day via phone notifications that you’re not in the 0.1%, it attacks your emotional well-being. Young people are told constantly that they’re not wealthy enough. The vibecession critique is valid in theory. But you can’t wag your finger at people and say “trust the GDP chart” when they’re telling you, clearly, that this isn’t working for them.

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Bipartisan Bill Takes Aim at Prediction Markets

Prediction markets just got their first serious bipartisan pushback in the Senate. The Prediction Markets Are Gambling Act would ban sports-related betting on CFTC-regulated platforms like Kalshi and Polymarket and block them from expanding into casino-style games.

The legislation cuts to the heart of how these platforms make money: Sports events contracts represent between 75% and 90% of Kalshi’s $1.5 billion in annual recurring revenue. If sports contracts are banned, the company’s valuation could fall from $22 billion to $5 billion.

The bill reflects a tension that has been building for a while. Prediction markets have long argued they are sophisticated financial instruments, more similar to futures contracts than DraftKings. That framing made them subject to CFTC oversight instead of state gambling regulation, allowing them to operate in states where sports betting is technically illegal. This bill is the first real congressional attempt to dispute that classification.

The CFTC

The CFTC is the Commodity Futures Trading Commission. It’s the federal regulator that oversees derivatives markets such as futures, contracts, options, and swaps. It’s like the SEC, but for commodities and financial contracts rather than stocks.

Polymarket and Kalshi both have a not-so-secret advantage. Donald Trump Jr.’s venture capital fund, 1789 Capital, has invested in Polymarket, and Trump Jr. himself serves as a strategic advisor to both Polymarket and Kalshi.

Outside of sports contracts, Kalshi has become an important source of economic and political data. Federal Reserve economists determined that Kalshi is better than professional forecasters at predicting inflation, and the platform maintains a perfect forecast record on Fed rate decisions.

There are three categories here: traditional gambling, prediction markets, and options contracts. The prediction markets are offering what looks, smells, and feels like an options contract. You’re paying for an outcome against someone who believes in the opposite outcome. The distinction between betting on the Green Bay Packers and buying a zero-day option on Apple stock is thinner than people think, and I’d argue zero-day options are functionally gambling. Eighty to ninety percent of stock market purchases are effectively speculation, not long-term investing.

What I’d love to see is consistent regulation across all three. They should all be age-gated at 21. These products can be really damaging, especially for young people. Researchers at USC found that three to four years after states legalize online sports gambling, there is a 28% increase in bankruptcies.

The people who should be most nervous about this legislation aren’t the prediction markets, it’s the options exchanges. They are going to have a hard time arguing that their zero-day options products belong in a different regulatory category.

Where do you draw the line? As the great John Oliver said, you draw it somewhere. Sports betting is gambling, and it should be regulated like gambling. That means it shouldn’t operate in states where sports gambling is illegal. It doesn’t mean you ban it everywhere; if you want to set up shop in Nevada, go for it. But stop pretending you’re an options exchange when you’re taking bets on March Madness.

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A Jury Just Ruled Meta and Google Harmed Kids. Now What?

Last week, for the first time ever, a jury found Meta and Google negligent for designing addictive social media features that are harmful to young people’s mental health. The rulings could mark a turning point for Big Tech.

Meta was ordered to pay $4.2 million in damages, and YouTube $1.8 million. Snap and TikTok settled out of court prior to the start of the trial.

• Alphabet and Meta stocks fell 2% and 8%, respectively, on the news.

Earlier in the week, a New Mexico jury found that Meta violated state law by failing to protect its users from child predators and ordered the company to pay $375 million in damages.

Financial penalties at this scale are meaningless for companies worth trillions, but if these cases establish a precedent, the damages could add up. Social media companies face more than 1,600 plaintiffs with similar accusations.

Social media companies have thus far avoided liability by citing Section 230 of the Communications Decency Act of 1996, which protects them from liability for what their users post.

Last week’s case was different. The plaintiff focused on the design of Meta and YouTube’s apps, and how they are engineered to be addictive — not the content posted.

Research supports the argument that features like infinite scroll, constant notifications, and autoplaying videos make social media apps psychologically similar to gambling. Millions of young Americans agree, too. Forty percent of Americans 18 to 22 say they feel addicted to social media.

Tobacco took 30 years to get its reckoning. Opioids took 20. Social media went mobile in 2013, which means we’re right on schedule.

Why is this happening now? Juries.

Judges are trained to strip emotion out of the analysis. Juries are not, and these juries are made up of parents whose kids have struggled with self-harm, addiction, and predatory contact online. They feel lied to. And they rendered their verdict accordingly.

I want to be clear: I think these companies are a net good for society, except for Meta. I think Meta has jumped the shark and is now a net negative.

But Big Tech on the whole is a net positive for society. The problem is with the word net. We’re net beneficiaries from pesticides and fossil fuels, but we still have an EPA and emission standards. We have no regulation around these tech companies.

The people who’ve really paid the price here are low-income households. I have the resources to pay for after-school stuff, to keep my kids off screens. I have the time and attention to be at home to ensure they can’t go into the room alone with a screen. Parents working two jobs can’t do that.

The last interesting feature that my former colleague Maria Petrova highlighted is that the insurance companies are saying that they’re not going to protect against this type of liability, because if they had known Big Tech was intentionally breaking the law, they couldn’t have insured them.

I think this is a big moment. I’ve said that before, and I’ve been disappointed. But I think this is different this time.

The Prof G Media Predictions Framework

In the past two weeks, Mark Zuckerberg shut down the virtual reality platform Horizon Worlds, the foundation of his metaverse project, and OpenAI killed Sora, its video creation engine and social media platform. Scott predicted both. How?

Some Redditors suspected that Prof G had insider information. He didn’t. Scott has been making predictions for years, and while he doesn’t always get it right, he’s pretty good at it. Ten out of his 11 predictions for 2025 came true.

I’ve made Scott’s annual predictions deck since 2021, so I’ve had some exposure to how he comes up with these bets. The following is my best estimation of the Prof G Media predictions framework.

How to make a good prediction:

1. Read constantly and let data guide your hunches.

2. Never underestimate human nature.

3. Be skeptical when the crowd is certain.

4. Remember: Greatness is in the agency of others.

Read Constantly and Let Data Guide Your Hunches

If you want to make a good prediction, you need a deep understanding of the subject matter. If you’re making a prediction about the markets, for example, you should be reading, watching, and listening to market-related content all the time.

Continuity is important for pattern recognition. You can’t just be really plugged into financial news for three days. To make a good prediction, you need to treat the markets (or whatever you’re predicting about) like a best friend. You should be close to them for months — years even, to understand how they work and how they react to different situations.

Your reading should be biased toward data-heavy sources. Let that data guide you. Words lie easier than numbers.

We anticipated Sora would fail because we were following the data. The app was released at the end of September, and by December, downloads were decreasing more than 30% month over month. In January, they declined another 45%.

Not only was it unpopular, the economics were mind-bogglingly bad. AI video generation is 2,000 times more energy intensive than text, and more than 150 times more expensive. Forbes estimates that Sora burned $15 million per day. That’s more than Adam Neumann burned every day at WeWork.

In terms of revenue, Sora generated about $2 million from in-app purchases; in other words, its revenue covered the first three hours of its operation.

There was just no way that a side bet that disastrous could continue.

Horizon Worlds was even less popular than Sora. At its peak, it had roughly 300,000 monthly active users. MySpace, a social network popular in 2005, has almost 800,000 monthly visitors.

Never Underestimate Human Nature

Society and technology move faster than evolution. Ten thousand years ago, the most-exciting technological advancements were stone tools and the domestication of cows. Today, we have artificial intelligence in our pockets, but we’re navigating the world with the same controls (genes) as paleolithic humans.

This is all to say: Innate evolutionary tendencies are hardwired into our brains, and they influence us more than we’d like to think. We still have a desire for sugary and fatty foods because our bodies are built to avoid starvation. Negative memories are more salient to us because in our cave days, missing danger was costlier than missing an opportunity.

An understanding of biology and psychology fueled Scott’s prediction that the metaverse would fail back in 2021. Prof G explained that headsets obstruct our peripheral vision, exposing us to stalking predators (real quote), so people have a natural revulsion toward putting them on.

They also look stupid. Everything we put on our bodies is, at some level, about broadcasting attractiveness and value to a potential mate. VR headsets are sex repellant (his words).

Be Skeptical When the Crowd Is Certain

Predictions are trends, and as they grow in prominence, they can also appear to grow in prescience. As more people hop on the bandwagon, they bring with them their own justifications for why ___ is going to happen. Then the size and power of the trend starts to influence the media, which converts even more people.

The problem is that when predictions become trends, it becomes easier to overlook risks or ignore the potential for other possibilities. When everyone is already convinced of something, no one has to actually investigate the specifics.

In his book Mastery, Robert Greene argues that true expertise means developing such a deep understanding of a field that you can detect anomalies and outliers that others haven’t processed yet. Sometimes the contrarian call is just stating what’s plainly in front of you.

This is what happened with Sora. AI-generated videos from the platform went viral on social media, making everyone think this was the next big thing. Case in point: Disney bet $1 billion on this trend. But after the initial hype, no one stopped to consider whether this made it a good business, or if the masses actually wanted to create AI videos of themselves.

A skeptic might have realized that media consumption has long followed the “1% rule,” where a small fraction of people create content and the vast majority consume it.

• 4% of YouTube videos account for 94% of views on the platform.

• 3% of videos on Instagram account for 84% of all views.

• 5% of videos on TikTok generate 89% of the views.

The top 25 podcasts reach nearly half of U.S. weekly listeners.

Consumers don’t want to produce their own entertainment. They want to be entertained.

Greatness Is in the Agency of Others

Scott didn’t have insider information on Sora. The prediction came from Dan Chiolan, a member of our research team.

One of Scott’s superpowers is attracting and retaining top talent. He hires smart young people, and then gives them (us) a ridiculous amount of responsibility. Dan is 22. He made a prediction on a major platform that Scott put his name behind. At 24, Ed Elson, a classics major, became the co-host of a prominent finance podcast. At 26, I produced all of Scott’s slides for his TED Talk, a presentation that has now been viewed more than 17 million times.

Prof G Media exists and works because Scott is great, but also because Katherine, Drew, Claude, MJ, Mia, Ed, Claire, Jenn, Allison, Dan, Bella, Kristin, Laura, David, Erikk, Billy, Jorge, Gil, Corinne, Michael, Kami, Karen, and Lucy … are great.

An activist will take a stake in Nike and force job cuts. Revenue has grown 50% over the past decade, from $30 billion to $46 billion, but the stock is trading at a 10-year low. Head count has grown just 3% since 2020. Expect 10,000 to 20,000 layoffs in the next two to three years.

Prof G+ subscribers: join me (Mia) tomorrow for a live session on the science of better business storytelling.

P.S. Next week, April 6, all Prof G Markets content will live on its own YouTube channel. If you like our video content, head to the Prof G Markets channel and hit subscribe.

1. Macy’s says users of new AI chatbot spend about 400% more online

2. Was he special, or are you just good at making things feel special?

3. AI has the worst sales pitch ever

It also raises a more basic question: What exactly is private credit anyway? Prof G Markets exists to inform, entertain, and educate — so in that spirit, this week’s exclusive is a simple guide: private credit for dummies nonfinance bros.

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What is private credit?

When you think of a company taking out a loan, you probably picture the loan (credit) coming from a bank like JP Morgan, Bank of America, Wells Fargo, etc. That’s what happens most of the time.

But in some cases, if companies want faster, more customized loans, they can turn to private credit. Private credit refers to tailored, often higher‑interest loans that specialist investment firms — like Ares Management, Blackstone, Apollo Global Management, and Blue Owl Capital — make directly to companies, instead of those companies borrowing from a traditional bank. It’s a fast‑growing but still relatively small segment of the corporate debt market.

When did this party start?

The modern private credit market expanded in the wake of the Great Recession of 2008. In response to the crisis, regulators raised capital and risk management requirements on big banks, making it harder for them to lend money to less-established borrowers. This created an opportunity in the market for less-regulated lenders.

In 2007, private credit funds had $108 billion in assets under management (AUM) globally. This year, AUM is expected to exceed $2 trillion.

A Quick Guide to Credit Lingo

Direct lending: a loan made directly to a company by a private fund

Floating-rate loan: a loan where the interest rate changes over time (usually every month or quarter) based on a benchmark rate. Payments go up when rates rise and down when they fall. Most private credit loans have floating rates.

Covenant: rule in the loan agreement that the borrower has to follow — like limits on taking on more debt or requirements to keep certain financial metrics in a healthy range.

Business development company (BDC): private credit fund for retail investors: They operate like closed-end mutual funds (meaning that unlike mutual funds, they don’t accept new capital after they’re formed) and are often publicly traded.

Dry powder: uninvested capital committed by investors to private credit funds

Principal: the original sum of money borrowed by a company or investor, excluding interest and fees

Yield to maturity (YTM): the annualized rate of return an investor is expected to earn if a bond is bought at its current price and held until its final due date.

The ecosystem

The private credit ecosystem has three main players: the private credit funds (like Carlyle, KKR, Apollo, etc.), the limited partners (those who invest in the private credit funds), and the businesses (who take out the private credit loans).

Private credit funds

Historically, most private credit borrowers have been small to mid-sized companies, ranging from $3 million to $100 million in EBITDA. But as private credit funds have attracted more capital from institutional and high-net-worth investors, they’ve started to underwrite bigger and bigger loans. This increased lending capacity has helped fuel the growth of private companies; before, if a large firm needed to raise a ton of money, it would go public. Now, it can turn to the private credit markets.

Private credit has also become a popular source of funding for big public companies that want flexible terms and to diversify their sources of financing.

This is increasingly applicable for Big Tech. Though the biggest tech companies can generally borrow cheaply in public bond markets, there are certain benefits to private credit financing, namely, flexible terms. Instead of traditional corporate debt that would show up on companies’ balance sheets, arrangements with private credit funds can be structured such that most of the debt sits in separate legal entities called special purpose vehicles (SPV).

For instance, Meta announced a $27 billion financing deal with Blue Owl in which most of the debt sits in an SPV.

The largest investors in private credit funds are institutional and wealthy investors, including pension funds, family offices, and sovereign wealth funds.

Investors are drawn to private credit because it has historically offered a higher return than traditional fixed-income strategies like Treasurys or traditional corporate bonds. It can also improve portfolio diversification, giving investors exposure beyond the public markets.

Retail investors are increasingly participating in private credit through business development companies. BDCs represent about 14% of the private credit market.

Private credit firms have gotten crushed recently. Why?

Private credit firms have had a rough 2026.

Over the past few years, lending to software companies has become a significant part of private credit portfolios. Now, investors fear that if AI weakens software firms’ businesses, they could default on their private credit loans. Earlier this month, UBS researchers estimated up to 35% of private credit portfolios faced elevated risk of AI disruption. This could hit retail investors, too: Technology firms account for approximately 24% of holdings at BDCs.

This risk is making investors nervous, and they’re starting to ask for their money back. This creates a whole separate problem. Redemptions are typically allowed on a schedule, but when requests surge all at once, private credit firms aren’t typically liquid enough to return all of their capital (investor money is tied up in long-term loans). If funds refuse withdrawals, that makes investors even more nervous.

That’s what happened late last month at Blue Owl Capital’s BDC: After redemptions spiked, the firm decided to “shut the gates” on the fund, preventing investors from pulling their cash.

Executives claim that these current challenges are merely “hiccups,” not a signal of crisis.

Others warn that investors have good reason to be concerned. “People made choices: If you wanted a higher dividend, you could take more risk,” Mark Rowan, CEO of Apollo, said recently. “That felt really good on the way up. That’s not going to feel so good on the way down.”

Rowan’s quote highlights a vulnerability that isn’t unique to private credit. After almost two decades of most assets going up and to the right, many investors — consciously or not — have come to expect that’s how things will continue. When they’re reminded that risky assets can also go down, the first crack spurs a race to exit doors that nobody thought they’d ever have to use.

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1. OpenAI launches super app in bid to reverse Anthropic’s gains

2. A briefing for Disney’s new CEO: The clip economy is here

3. The Iran War could cost you $1,400

4. Newsletter Exclusive: The business of spirituality is booming

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OpenAI Narrows Its Focus Amid Rising Competition

OpenAI is undergoing a major strategy shift. Last week, the company announced plans to merge ChatGPT, its web browser Atlas, and its coding platform Codex into one desktop “super app.” In a post on X, OpenAI CEO of Applications Fidji Simo wrote that the company was refocusing, doubling down on successful products and avoiding distractions.

Over the past year, OpenAI has announced a range of new products, including Atlas, Codex, and video generator and social media app Sora. According to The Wall Street Journal, employees say that this “do everything” approach has created a lack of focus and made it harder to understand the company’s strategy.

Once the clear front-runner in the AI race, OpenAI may be at a vulnerable crossroads. Despite an impressive suite of products, rival Anthropic’s public feud with the Pentagon and deft marketing have made it a more trusted brand. OpenAI has morphed into the kind of AI brand people fear — antihuman and disingenuous.

Anthropic’s lead in the B2B market has soared. It now captures over 70% of all spending among companies buying AI tools for the first time. As recently as December, OpenAI was capturing 60% of that spend.

This is a really good move on the part of Sam Altman and OpenAI. When you become a CEO, the question isn’t what to do — it’s what not to do. Every day you’re going to be pitched great ideas from vendors, investment bankers, employees. Everyone wants to be generous and visionary with your capital.

Whether a side bet works comes down to management. What often happens is a senior person has a vision, and the people who work below them know the way to get promoted is to tell them how amazing their side project is and what a visionary they are. Then the senior person starts ignoring the data.

A CEO’s job is to have the stones to try new things and the backbone to stop when they’re not working.

You need to define success before you start. Put hard metrics around success and failure and keep coming back to them.

You also have to understand sunk costs. The money you’ve spent is gone, the effort is gone. The only question that matters is: From a standing start, right now, would we continue to fund this side venture if we were outside investors with no legacy investment, no affection for it, no skin in the game?

What makes a good side project? When does it work? When does it not work? We discussed this as a team and we came up with three questions leaders should be asking.

Do you have the money for a side project? Amazon was generating hundreds of millions in annual free cash flow from retail before AWS launched in 2006. Meta’s metaverse bet failed, but its $80 billion in losses didn’t tank the company because the core business was strong.

Does it leverage existing infrastructure? In other words, are you the right person/company to be doing this? If you’re a clothing brand, you shouldn’t launch a candy company.

• Instagram plugged directly into Facebook’s existing ad infrastructure.

• Apple launched the App Store on top of iTunes’ existing billing relationships with tens of millions of paying customers.

• Uber Eats plugged into the driver network and dispatch technology already built for rides.

Is it actually a good idea? No amount of capital or infrastructure will save a bad idea.

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Disney’s New CEO Inherits a Company At a Crossroads

Disney has a new CEO. Josh D’Amaro officially took the helm last Wednesday, stepping in at a difficult time for the company. D’Amaro most recently served as chairman of Disney Experiences, which includes theme parks, cruise lines, and merchandising and accounted for 57% of the company’s total profits last year.

D’Amaro’s appointment suggests the company is refocusing on Experiences. Disney has already pledged a $60 billion expansion of the division through 2033, including doubling its cruise ship fleet and building its first Middle East theme park in Abu Dhabi.

But despite Disney’s unbelievable IP and must-visit parks, the stock has struggled. A $10,000 investment in Disney stock 10 years ago would now be worth $8,000, after adjusting for inflation. A similar bet in the S&P 500 would be worth about $20,000.

Part of the challenge is that live events like the Oscars, once advertiser magnets, are in decline. Oscars viewership last weekend fell 9% from a year earlier, and in the 18-to-49 key demographic, viewership fell 14%.

Young people are still watching these events, but they’re not watching on TV, or even on streaming services — they’re watching clips on their phones. Almost 70% of Americans ages 16 to 24 watch clips from shows instead of the full versions.

Even in live sports, roughly half of NFL, NBA, and MLB fans between 18 and 34 say they prefer watching highlights of their favorite sports over full games.

• Now just 31% of sports fans ages 18 to 24 watch live full-length matches, compared with three-quarters of fans ages 55 and older.

This trend has given rise to “clippers,” people who break long-form content down into catchy bite-sized clips. They’re typically paid between $1 and $5 per thousand views, so they’re motivated to find the most viral moments. Some are making as much as $30,000 per month, proving that the demise of one industry is an opportunity for another.

The live Oscars on ABC are a Trojan horse. The live event is really just a vehicle for the clips that get put out on social media the day after — that’s where people are consuming all of this content.

If I had to give advice to Disney, they should start investing in the clip economy.

The problem right now is monetization. If you just post clips on Instagram and collect whatever Instagram pays you, Instagram owns the advertiser relationship — not you. You have to get aggressive about owning that relationship — working with advertisers directly and negotiating deals before anything goes live.

You shouldn’t post a clip on social media unless an advertiser is directly paying you for it. The current system is that media companies just do it for free, thinking that it’s marketing. But it’s not. The clips are the content. That’s where all the money is being made.

If you’re watching the Oscars on ABC, it means you’re also at that point where you need an opioid-induced constipation medication. Conan O’Brien, one of the most talented people in the world, summarized it perfectly when he said that the next host is gonna be Mr. Beast. He was joking, but it’s kinda true.

The future for awards ceremonies is bleak. The future is experiential events.

I met with the Board of Governors for the Academy, and they asked for advice. I told them: What you should be doing is running live Oscars-viewing parties all over the world with an aspirational guest list — influencers, actors, etc. Charge brands a sh*t ton of money to sponsor them.

People would pay a lot of money to go to a great viewing party, get dressed up, feel fabulous, and meet interesting people.

The Iran War Is Coming For Your Wallet

Last week, the Trump administration requested up to $200 billion in additional military funding for the war in Iran, a conflict the president promised at the outset would be finished “pretty quickly.” The same day, news broke that the national debt hit a record $39 trillion.

Operation Epic Fury has already cost $23 billion. That’s more than triple the National Cancer Institute’s funding. It’s enough to build more than 72,000 units of affordable housing, provide SNAP benefits to 2.5 million households, or offer free preschool to 1.5 million kids.

On an individual taxpayer basis, the war has already cost you nearly $140. If the additional $200 billion in funding goes through, the cost per taxpayer would be about $1,400. Do you have anything you’d rather spend $1,400 on?

A less obvious, but consequential impact of the war is its effect on interest rates. The Iran shock has pushed inflation expectations high enough that the Fed, which was expected to cut rates twice this year, might not be able to cut at all. This means that borrowing costs across the economy, from mortgages to car loans and credit card debt, will stay elevated.

This increases the risk of stagflation, a dangerous economic condition where slow growth is accompanied by high inflation and unemployment. Inflation already increased 3.4% last month, before the war pushed gas prices higher, and GDP growth for Q4 2025 was revised down to 0.7% from 1.4%.

I was more open to military action than most people. But there’s no denying it: The administration did not do any real scenario planning around what happens when the Strait of Hormuz closes, and Americans, along with the rest of the world, are paying for it across the board.

Contrast that with previous conflicts. The first Gulf War: George Herbert Walker Bush, 35 nations, $70 billion total cost, $62 billion reimbursed by allies, a UN resolution behind it. The second Gulf War at least had a symbolic coalition. This one is officially us and Israel.

This goes to what I think is the fundamental mistake of this administration: the belief that cooperation is not the key to Western prosperity. The American consumer is now absorbing the cost of that miscalculation at the pump, at the grocery store, and on their mortgage statement.

We’re 25 days into a war with Iran, and it’s making everything more expensive. Oil prices are surging because 20% of the world’s supply passes through the Strait of Hormuz. Prices at the pump are up over 30%.

For every dollar increase in gas prices, the average household has to spend an extra $530 per year. For low-income families this is extremely painful, as they already spend roughly a fifth of their income on energy costs.

What are the implications of this, and what should we do about it?

You can read more of my thoughts on the economic impact of the war in tomorrow’s edition of Simply Put. Subscribe here.

For Gen Z, the Horoscope Is Replacing the Hymnal

Gen Z is the least religious generation in American history — yet, they’re the biggest consumers of spiritual services.

Religion used to do three things: give people community, identity, and a framework for navigating uncertainty. Ironically, Gen Z needs all three more than any other generation. They’ve entered a job market that doesn’t want them: Entry-level hiring has dropped 35%. Eighty percent report feeling lonely, compared with 45% of baby boomers. And, they’ve gotten priced out of the lives their parents had: The average down payment on a home is 70% of household income, up from 45% in 2000.

This is a cultural shift, but it’s also an economic one. Organized religion contributes an estimated $1 trillion to the U.S. economy annually — as much as the entire sports industry. As Gen Z moves away from churches, temples, and mosques, their money will flow elsewhere. So far, it’s going to astrological apps and psychic content creators online.

Answers in the Stars

More than 30% of Americans under 50 believe in astrology — that the position of the stars and planets can affect people’s lives. Women are more than twice as likely to believe as men.

Astrophiles take their readings seriously: More than 70% of Gen Z and millennial believers use astrology to make major life decisions, and almost a third wouldn’t date someone with an incompatible horoscope.

Mainstream apps are catching on: Last week, Tinder unveiled a new “Astrology Mode,” which drove a 23% increase in likes.

These services don’t come cheap: Birth chart readings and psychic consultations can cost up to $350. If you want to become a practitioner, the highest-rated astrology certification courses cost $2,000 to $8,000.

The uninformed may also be surprised to learn that there is a thriving market for spells and curses on Etsy. Despite officially banning magical products more than a decade ago, the site has become home to thousands of listings, most under $20 and promising results within 24 hours.

Desperate job hunters buy employment spells, lovebirds buy spells for good weather on their wedding day, and disgruntled shoppers can buy revenge or karma curses. The top five spirituality sellers on Etsy have made nearly $40 million.

A new ecosystem of astrology apps have emerged with relative success. Ukrainian startup Nebula has 30 million global users and $50 million in annual recurring revenue. Starcrossed, which promises to help users find their astrological soulmates, hit $70,000 in monthly revenue within 90 days of launching. Co-Star, billed as an app that “deciphers the mystery of human relations through NASA data and biting truth,” has more than 30 million registered users.

AI Is the New Priest

The psychic industry then figured out what every other content business learned over the past four years: Mediocre content has no moat in the age of AI. Birth charts, horoscopes, tarot readings, and compatibility reports can now be produced algorithmically and delivered in seconds.

Earlier this month, Astro-Seek, one of the most popular free astrology platforms on the internet, went down after being overwhelmed by AI.

The cause: Astro-Seek added a ChatGPT data export tool that allowed users to feed their birth chart directly into AI. The feature became too popular, and the site crashed.

Naturally, Mercury was in retrograde.

Mercury in Retrograde

Three to four times a year, Mercury appears to move backward in the sky due to an optical illusion. In astrology, Mercury governs communication, technology, and travel, so when it goes into retrograde, believers say those systems go haywire: emails get lost, flights get delayed, exes return. Astrology believers attempt to avoid making major life decisions during this period.

There is no scientific evidence that it affects any of this.

Seeing the Future

We make a lot of predictions at Prof G Media, but we have never gotten one from a professional. This week, we asked Carol — @astrostarr4 on TikTok — for her best markets prediction and birth chart reading for Prof G himself. If she’s right, we might just have to bring her in-house.

Saturn and Neptune just moved into Aries. Aries is the first sign of the zodiac — energy, action, beginnings. This is a really good time to make money. That said, Saturn is also telling you to slow down and check every detail before you sign anything. This is not a time to be careless.

On the world stage: The planets are pointing to a period of serious global conflict. A lot of skirmishing and instability. Pluto is in Aquarius for the next 20 years. A smarter, more connected world is coming. We are just in the messy middle of getting there.

OpenAI’s Sora social media app is going to be shut down. Sora is OpenAI’s version of TikTok, but it’s all AI-generated content. Downloads are collapsing — they fell 32% month over month in December and another 45% in January.

This app is not central to OpenAI’s core competencies, it’s not attracting users or revenue, and it’s going to be the first victim of the company’s renewed focus.

Join Scott live on Substack on Wednesday, March 25 at 1 p.m. EDT for a discussion of his latest book, Notes on Being a Man. Bring your questions. Prof G+ subscribers can sign up here.

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1. AI chatbots often validate delusions and suicidal thoughts

2. New data on where ICE has been most active this year

3. The tooth fairy lives in Seattle

Semiconductors, which are colloquially referred to as chips, are so important that Congress named an infrastructure bill after them (the CHIPS and Science Act). Between that, two other federal laws, and at least a dozen state initiatives, we’ve allocated over $90 billion to subsidizing the American chip industry. That’s about nine years’ worth of federal farm subsidies. Thanks to these initiatives, the U.S. is expected to triple its domestic semiconductor manufacturing capacity by 2032.

However, our need for semiconductors has made us willfully ignorant of their externalities.

Semiconductor factories, known as fabs, are prolific producers of toxic waste — but nobody wants to talk about it.

On the bright side, this collective ignorance has created a compelling investment opportunity.

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The Dirty Details

Semiconductor factories churn out toxic slurries, acid gases, and polyfluoroalkyl substances (PFAS). This hazardous waste spills out into our drinking water.

Samsung’s semiconductor facility in Austin, Texas, spilled hundreds of thousands of gallons of toxic waste, including sulfuric and hydrochloric acid, into the Colorado River in 2022.

But it’s the PFAS, compounds that are essential to producing advanced chips, that are the hardest to get rid of.

PFAS are also called “forever chemicals” because they can take decades to decay in the body. They’re associated with a range of health issues, including hypertension, diabetes, infertility, cancer, obesity, autism, cardiovascular diseases, and kidney and liver disorders.

Their impact on fertility is particularly intense. Mount Sinai researchers found that exposure to PFAS can reduce fertility in women by as much as 40%, and a 2019 meta-analysis of six studies found that female fab workers had a 29% to 43% higher risk of spontaneous abortion than nonfab workers.

But it’s not just factory workers who are exposed. Millions of Americans are exposed to forever chemicals every day.

Conventional wastewater treatment doesn’t remove PFAS, so contaminated water passes through most plants into rivers, lakes, and groundwater that feed drinking‑water systems. Most at-home filtration solutions don’t remove them.

There are still no PFAS‑specific federal discharge limits for factories, and only a minority of states have them. That means that most fabs can still send PFAS‑contaminated wastewater to sewers or rivers.

Across the U.S., public water systems and states have secured $14 billion in PFAS settlements from manufacturers such as 3M and DuPont for contaminating local water sources.

In 2024, the EPA issued the first federal regulations on six types of PFAS in drinking water, scheduled to go into effect by 2029.. However, Trump’s new head of the EPA, Lee Zeldin, dismantled regulations for all but two types of PFAS, and pushed the deadline for compliance back to 2031.

This is curious, as Trump’s first administration was supportive of PFAS regulations. This was before the AI boom though, and before Trump realized that the growth story holding up the stock market was dependent on forever chemicals. God forbid human and environmental health get in the way of shareholder value.

States are moving faster. In 2025, more than 250 PFAS bills were introduced, and dozens of states have now passed regulatory guidelines on forever chemicals in drinking water.

The Investment Opportunity

In this economy, any company with a decent story is one Reddit post or CNBC hit away from becoming an overvalued meme stock. In other words, narrative increasingly drives markets, and the fact that “semiconductor factories are incredibly pollutive” is a doomer story is … well, an opportunity.

If the major AI companies were pop stars, the second-order beneficiaries, like HVAC, utilities, and data center construction companies, would be the backup dancers. Now, four years into the AI boom, all this talent is expensive and tired. The opportunity now lies in the stagehands that clean up every night after the performance is over.

Veolia Environment is one of those stagehands. It’s a $28 billion utility company that provides municipal water and waste services to more than 100 million people; but, more interestingly, it is a world leader in desalination and deals with hazardous waste.

If you own a nuclear power plant, Veolia will take your radioactive waste. If you own a semiconductor factory or municipal water facility and need to eliminate PFAS from your wastewater so you don’t get sued, Veolia provides those services.

Finally, it supplies an essential input to semiconductor manufacturing: ultrapure water. If you thought data centers needed a lot of water, you’re going to hate semiconductor factories.

Margins have been improving, and it is trading below its five-year average price-to-earnings multiple. Disclosure: I bought some Veolia shares back in January, but I’m still optimistic about its prospects. Of the 16 analysts who cover Veolia, 10 rate it a buy, 3 are overweight, and 3 recommend holding.

The Silicon Wave

In 1979, The China Syndrome, a thriller about a fictional nuclear meltdown starring Jane Fonda, came out just 12 days before the actual Three Mile Island disaster. Both the real crisis and the movie, followed by another nuclear disaster thriller called Silkwood in 1983, catalyzed widespread fear and opposition to nuclear power. By 1986, Gallup found that only 23% of Americans were willing to live within five miles of a nuclear plant, down from 42% in 1976.

In 2024, The Silicon Wave came out in China. It was advertised as the country’s “first TV show about semiconductors.” According to IMDb, the CCP-funded show follows a group of “idealistic tech professionals” who return from overseas to join the Chinese chip industry. Unfortunately for President Xi, it doesn’t seem to have caught on.

An American show about the semiconductor and AI wars would probably crush. (Casting note: Jesse Eisenberg should probably play Sam Altman, but Benedict Cumberbatch might work too.) The show would be dramatic, intellectual, and ultimately patriotic. It definitely wouldn’t mention that a side effect of this noble quest is cancer-causing chemicals, because that wouldn’t make for a good story.

But that’s the point: There are often opportunities hiding in what stories leave out. That is exactly why the Veolia opportunity exists.

It’s funny how powerful stories are. You grow up thinking that they’re for kids, and being an adult is about paying attention to “real life.” But actually, making “real life” decisions, like where to work, who to vote for, where to put your money, etc. — requires a continuous parsing of stories — both what you’re being told, and what you’re conspicuously not.

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YouTube’s revenue last year, making it the world’s largest media company.

1. How the Iran War is reordering the global economy

2. Newsletter Exclusive: Semiconductors have a dirty secret — and it’s creating an investment opportunity

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The Iran War Is Reshaping Global Capital Flows

The war with Iran has changed the global landscape in a very short time — and it appears there’s no end in sight. On Friday, when asked when the conflict would be over, President Trump said, “When I feel it — feel it in my bones.” On Saturday, Trump told NBC that the U.S. may bomb targets on Kharg Island, the site of Iran’s main oil export facility, “just for fun”, after U.S. warplanes targeted military installations there on Friday.

The war has already created the largest supply disruption in the history of the global oil market, and capital flows are starting to reorganize around this new reality.

For the U.S. and other oil‑exporting countries, the 47% surge in energy prices means higher export income and higher corporate profits for oil companies.

• If prices stay close to $100/barrel, U.S. oil companies could register an increase of more than $80 billion in free cash flow this year.

The benefits are harder to see for taxpayers, who are paying more at the pump and footing the bill for the war. The first 12 days of the war have cost U.S. taxpayers more than $16 billion.

The conflict’s externalities are being felt most acutely abroad. In the Middle East, more than 3 million people have been displaced, and more than 2,100 have been killed.

The war is also rippling through the global economy. Europe and Asia are especially vulnerable because they rely on imported energy.

European markets have already lost more than $1 trillion in value, reversing what had looked like the region’s first real recovery in years. The EU’s economy chief warned that if energy prices stay elevated, economic growth this year could slow to 1.0%, down from the 1.4% forecast last year, and inflation could surpass 3%.

Asia is even more vulnerable, with about 80% of all crude oil transiting the Strait of Hormuz destined for the region. Governments are taking extreme measures to conserve energy:

• Thailand’s prime minister urged bureaucrats to take the stairs instead of the elevator.

• Bangladesh has closed universities and urged citizens to turn off their lights.

• Vietnam is asking citizens to work from home and limit car usage.

• Restaurants in India are shutting down for lack of cooking gas.

Just a year ago, global capital was flooding into emerging markets. Now, the war has made many of those investments look too risky. The MSCI Emerging Markets Index has lost over $1 trillion in market cap, while the dollar climbed to a three-month high last week — an early sign that investors are moving back toward the relative safety and liquidity of U.S. markets.

In the U.S., we don’t realize a lot of our success is unearned. We have two oceans protecting us, friendly neighbors on both borders, and we’re one of the most resource-rich nations on Earth. We produce more energy and food than we consume. The U.S. just doesn’t go out of business. Before we make a single decision, the deck is already stacked in our favor.

But those unearned advantages go only so far. We’ve assumed that controlling a third of global GDP means controlling the world. But our dominance wasn’t about size, it was about cooperation. We built the operating system on which 60% to 70% of global GDP runs, and that system works because nations chose to participate in it. That choice was never unconditional.

Our markets will be fine because capital flows are amoral. Money goes wherever it can get the greatest return, and as long as the U.S. remains the center of gravity for entrepreneurship, whether that’s AI, biotech, or space, the capital will keep coming.

The real long-term threat is talent. Young people are more moral than capital. The best and the brightest will start choosing London, Singapore, or Tokyo over the U.S. not because the opportunities aren’t here, but because their values no longer align with ours. That could have huge long-term impacts on our country.

For all the talk of American self-sufficiency, this crisis is raising an important question: How independent are we really? Yes, the U.S. is far more energy secure than many countries, but that doesn’t mean that America can unleash chaos abroad and assume it’s immune to the consequences.

For instance, we’ve become very dependent on global relationships. The Gulf states have become major backers of the American startup and tech ecosystem, pouring tens of billions into U.S. companies and promising even more. Our alliances with Europe and NATO have also been crucial to American economic and geopolitical strength. If Gulf countries are absorbing serious economic damage, are they really going to keep investing in the U.S. at the same pace? If Europe ends up paying a much steeper inflation price for a conflict that the U.S. started, does that strain our relationships? The real risk is not just higher oil prices. It’s that America may be overestimating how immune it is from the blowback.

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The Dirty Secret Behind the Chip Boom

Without semiconductors, we would have to entertain ourselves without TVs, communicate without smartphones, research without computers, defend ourselves without high-tech weapons, and boost company earnings without AI. We’re a nation built on technology and sustained by semiconductor chips.

Semiconductors, which are colloquially referred to as chips, are so important that Congress named an infrastructure bill after them (the CHIPS and Science Act). Between that, two other federal laws, and at least a dozen state initiatives, we’ve allocated over $90 billion to subsidizing the American chip industry. That’s about nine years’ worth of federal farm subsidies. Thanks to these initiatives, the U.S. is expected to triple its domestic semiconductor manufacturing capacity by 2032.

However, our need for semiconductors has made us willfully ignorant of their externalities.

Semiconductor factories, known as fabs, are prolific producers of toxic waste — but nobody wants to talk about it.

On the bright side, this collective ignorance has created a compelling investment opportunity.

The Dirty Details

Semiconductor factories churn out toxic slurries, acid gases, and polyfluoroalkyl substances (PFAS). This hazardous waste spills out into our drinking water.

Samsung’s semiconductor facility in Austin, Texas, spilled hundreds of thousands of gallons of toxic waste, including sulfuric and hydrochloric acid, into the Colorado River in 2022.

But it’s the PFAS, compounds that are essential to producing advanced chips, that are the hardest to get rid of.

PFAS are also called “forever chemicals” because they can take decades to decay in the body. They’re associated with a range of health issues, including hypertension, diabetes, infertility, cancer, obesity, autism, cardiovascular diseases, and kidney and liver disorders.

Their impact on fertility is particularly intense. Mount Sinai researchers found that exposure to PFAS can reduce fertility in women by as much as 40%, and a 2019 meta-analysis of six studies found that female fab workers had a 29% to 43% higher risk of spontaneous abortion than nonfab workers.

But it’s not just factory workers who are exposed. Millions of Americans are exposed to forever chemicals every day.

Conventional wastewater treatment doesn’t remove PFAS, so contaminated water passes through most plants into rivers, lakes, and groundwater that feed drinking‑water systems. Most at-home filtration solutions don’t remove them.

There are still no PFAS‑specific federal discharge limits for factories, and only a minority of states have them. That means that most fabs can still send PFAS‑contaminated wastewater to sewers or rivers.

Across the U.S., public water systems and states have secured $14 billion in PFAS settlements from manufacturers such as 3M and DuPont for contaminating local water sources.

In 2024, the EPA issued the first federal regulations on six types of PFAS in drinking water, scheduled to go into effect by 2029.. However, Trump’s new head of the EPA, Lee Zeldin, dismantled regulations for all but two types of PFAS, and pushed the deadline for compliance back to 2031.

This is curious, as Trump’s first administration was supportive of PFAS regulations. This was before the AI boom though, and before Trump realized that the growth story holding up the stock market was dependent on forever chemicals. God forbid human and environmental health get in the way of shareholder value.

States are moving faster. In 2025, more than 250 PFAS bills were introduced, and dozens of states have now passed regulatory guidelines on forever chemicals in drinking water.

The Investment Opportunity

In this economy, any company with a decent story is one Reddit post or CNBC hit away from becoming an overvalued meme stock. In other words, narrative increasingly drives markets, and the fact that “semiconductor factories are incredibly pollutive” is a doomer story is … well, an opportunity.

If the major AI companies were pop stars, the second-order beneficiaries, like HVAC, utilities, and data center construction companies, would be the backup dancers. Now, four years into the AI boom, all this talent is expensive and tired. The opportunity now lies in the stagehands that clean up every night after the performance is over.

Veolia Environment is one of those stagehands. It’s a $28 billion utility company that provides municipal water and waste services to more than 100 million people; but, more interestingly, it is a world leader in desalination and deals with hazardous waste.

If you own a nuclear power plant, Veolia will take your radioactive waste. If you own a semiconductor factory or municipal water facility and need to eliminate PFAS from your wastewater so you don’t get sued, Veolia provides those services.

Finally, it supplies an essential input to semiconductor manufacturing: ultrapure water. If you thought data centers needed a lot of water, you’re going to hate semiconductor factories.

Margins have been improving, and it is trading below its five-year average price-to-earnings multiple. Disclosure: I bought some Veolia shares back in January, but I’m still optimistic about its prospects. Of the 16 analysts who cover Veolia, 10 rate it a buy, 3 are overweight, and 3 recommend holding.

The Silicon Wave

In 1979, The China Syndrome, a thriller about a fictional nuclear meltdown starring Jane Fonda, came out just 12 days before the actual Three Mile Island disaster. Both the real crisis and the movie, followed by another nuclear disaster thriller called Silkwood in 1983, catalyzed widespread fear and opposition to nuclear power. By 1986, Gallup found that only 23% of Americans were willing to live within five miles of a nuclear plant, down from 42% in 1976.

In 2024, The Silicon Wave came out in China. It was advertised as the country’s “first TV show about semiconductors.” According to IMDb, the CCP-funded show follows a group of “idealistic tech professionals” who return from overseas to join the Chinese chip industry. Unfortunately for President Xi, it doesn’t seem to have caught on.

An American show about the semiconductor and AI wars would probably crush. (Casting note: Jesse Eisenberg should probably play Sam Altman, but Benedict Cumberbatch might work too.) The show would be dramatic, intellectual, and ultimately patriotic. It definitely wouldn’t mention that a side effect of this noble quest is cancer-causing chemicals, because that wouldn’t make for a good story.

But that’s the point: There are often opportunities hiding in what stories leave out. That is exactly why the Veolia opportunity exists.

It’s funny how powerful stories are. You grow up thinking that they’re for kids, and being an adult is about paying attention to “real life.” But actually, making “real life” decisions, like where to work, who to vote for, where to put your money, etc. — requires a continuous parsing of stories — both what you’re being told, and what you’re conspicuously not.

Bangladesh, Pakistan, Sri Lanka, Philippines are going to be in the news a lot more. They are highly energy-dependent, which makes them especially vulnerable to a spike in oil prices, and they also carry large amounts of dollar-denominated debt. If their currencies keep falling, that debt becomes even harder to service. If enough of those loans go bad, big European banks won’t be willing to hold them on their balance sheets. The fallout could spread well beyond these countries and tip the global economy into a recession.

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1. The 1970s demonstrate how to turn an oil crisis into energy strategy

2. Who’s a better writer: AI or humans? Take the quiz

3. The Breaking Bad effect is real

— Socrates

Socrates got it wrong. So did the catastrophizers who warned us about radio, calculators, TV, and even search engines. Google didn’t make us that dumb, so the logic follows that AI won’t make us dumb either. This is false comfort. The conviction that history always repeats itself is getting in the way of our realizing that this time is actually different.

Last month, Dr. Jared Cooney Horvath, a neuroscientist and educator, told Congress that since the 1800s, every generation has been smarter than their parents’ — until Gen Z. Specifically, Horvath said, Gen Z underperforms “on basically every cognitive measure” ranging from executive function and literacy, to general IQ, memory, and attention skills.

We can’t fully blame AI. After all, it’s only been with us for the last four years. This decline began with the internet and got worse with smartphones. What happened? Instant gratification and constant multitasking became the new normal, making it nearly impossible for people to concentrate for longer than 47 seconds. Getting smarter requires being able to pay attention, and we’re increasingly distracted.

It’s not just Gen Z. Adults have gotten less intelligent too, and AI threatens to make this worse.

Study after study has shown that when we don’t use skills, we lose them. AI isn’t just a calculator or a search engine — it’s a critical thinking machine that can do pretty much anything we ask it. Consistently outsourcing the process of thinking … will change our brains and change our society — for the worse.

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We need to be talking about this more

More than 90% of college students used AI for schoolwork in 2025. Eighty-four percent of high schoolers use it. Chat volume on OpenAI dropped precipitously when summer break started last year.

AI is as pervasive in schools as backpacks, and it’s not just because the technology is good at writing five-paragraph essays. AI companies know that the pressure to perform makes students sitting ducks.

Anthropic pays “campus representatives” $1,750 for 10 weeks of promoting Claude. During finals season last spring, both OpenAI and Google offered their Pro tiers to college students for free.

Instructors don’t have the tools they need to regulate AI use in school. Schools are spending thousands on AI detection software, but studies show that the detection tools on the market don’t work. If only there were an effective way to determine what has been created by AI and what hasn’t.

Oh wait, there is. OpenAI invented a technology that was 99.9% accurate in detecting AI-generated work years ago but decided not to release it because they were worried it would discourage usage.

As much as we’d like companies to self-regulate, we know they don’t. Our elected representatives need to step in — but they’re not. How many laws have been passed? Only two — Tennessee and Ohio both passed legislation requiring school districts to develop their own AI policies. How much money is being spent on studies investigating AI’s impact on learning?

The state of intelligence today

IQ scores have steadily increased over time — until now. This is known as the Flynn Effect. As society modernizes, nutrition and healthcare improve, children spend more time in school, and people engage in more cognitively challenging tasks … people get smarter.

Scientists didn’t expect this trend would go on forever. In 2007, it was predicted that IQ scores would plateau in the U.S. by 2024. The key word there is plateau. Not decline.

The most recent standardized testing data shows that American students are getting dumber. The reading skills of American high school seniors are the worst they have been in three decades; a third of 12th graders don’t have basic reading skills.

Forty-five percent of 12th graders scored below the “basic” level in math, which means almost 1 in 2 students can’t do the math on how concerning that is.

COVID-related educational disruptions certainly play a role here, but students’ skills were declining before the pandemic. COVID was only an accelerant.

Crucially, key markers of intelligence are on the decline for adults, too. The OECD assessed literacy and math skills of thousands of adults in 31 developed countries. It found that, over the past 10 years, literacy proficiency improved significantly in only two countries (Finland and Denmark), remained stable in 14, and declined significantly in 11.

Of the U.S. data, Andreas Schleicher, director for education and skills at the OECD, said, “30% of Americans read at a level that you would expect from a 10-year-old child.”

What happened?

Attention is predictive of intelligence, and the internet shortened our attention spans.

The problem is that the internet encourages multitasking and normalizes instant gratification.

A review of over 40 studies on media use and attention concluded: “Those who engage in frequent and extensive media multi-tasking in their day-to-day lives perform worse in various cognitive tasks than those who do not, particularly for sustained attention.”

Smartphones only made our attention problem worse by giving us access to unlimited information and reminding us of it 146 times per day, on average. Now, 60% of teens go on their phones while watching TV.

It’s gotten so bad that, according to Matt Damon, Netflix wants writers to “restate the plot” three or four times in movie dialogue to account for distracted viewers.

We’ve become goldfish — constantly flitting between one brightly colored rock and another in pursuit of intentions that we’ve already forgotten.

Fast-Forward to Today

If the internet wrecked our attention spans and contributed to a marked decline in general intelligence, what will AI do?

When we outsource tasks to digital tools, we become worse at doing them ourselves. The more cognitively demanding the skill is, the more decay we experience if we don’t practice it.

AI isn’t like (old) Google — it doesn’t just give you information. It takes stuff that is hard — whether it’s analyzing a problem, writing an essay, or making a website — and does it for you.

Doing homework with AI, one teacher described to 404 Media, is like “going to the gym and asking a robot to lift weights for you.”

Psychologists described the consequences: “Artificial intelligence assistants are designed to mimic cognitive skills. … For this reason, consistent and repeated engagement with an AI assistant is likely to lead to greater decrements in skill.”

There haven’t been enough studies on this topic, but I’ll present a couple that do exist.

No. 1: Is it harmful or helpful? Examining the causes and consequences of generative AI usage among university students

Researchers compared the performance of students who used ChatGPT for college work with those who didn’t. They found that students who relied on ChatGPT were more likely to report procrastination, worsening cognitive skills, and lower GPAs.

They wrote: “Active learning … is crucial for memory consolidation and retention. Since ChatGPT can quickly respond to any questions asked by a user, students who excessively use ChatGPT may reduce their cognitive efforts to complete their academic tasks, resulting in poor memory.”

The disadvantages of AI will be distributed unequally. Private schools are more than twice as likely to both permit GenAI use and have policies governing it. Among public schools, those serving more low-income students are least likely to have such policies in place. These differences threaten to exacerbate already bad wealth-based achievement gaps.

No. 2: Your Brain on ChatGPT: Accumulation of Cognitive Debt When Using an AI Assistant for Essay Writing Task

When we use AI to write, we literally use our brains less.

Researchers had students write essays using a search engine, a large language model (LLM), or nothing. The group writing with the LLM had 55% reduced brain activity and wrote essays that lacked creativity and were largely judged to be “soulless.”

The study’s authors concluded: “AI tools, while valuable for supporting performance, may unintentionally hinder deep cognitive processing, retention, and authentic engagement with written material.”

But writing isn’t even the most important skill that AI threatens to atrophy.

Large language models are question-answering machines. You can ask them anything, and they will give you a convincing answer.

The problem is, thinking through a problem and coming to what you believe is the best answer is a really important skill. It’s called critical thinking.

According to Wikipedia, critical thinking is the process of analyzing available facts, evidence, observations, and arguments to reach sound conclusions or informed choices. It involves recognizing underlying assumptions, providing justifications for ideas and actions, evaluating these justifications through comparisons with varying perspectives, and assessing their rationality and potential consequences.

No. 3: AI Tools in Society: Impacts on Cognitive Offloading and the Future of Critical Thinking

This survey of business school students found a significant negative correlation between frequent AI tool usage and critical thinking abilities, with younger students exhibiting more dependence on AI and lower critical thinking skills.

Over time, continued reliance on AI for critical thinking worsens our ability to do it ourselves. One survey participant admitted as much: “I rely so much on AI that I don’t think I’d know how to solve certain problems without it.”

No. 4: The Impact of Generative AI on Critical Thinking: Self-Reported Reductions in Cognitive Effort and Confidence Effects From a Survey of Knowledge Workers

This study (ironically from Microsoft) found that when knowledge workers were more confident in AI tools, they employed less of their own critical thinking.

Why is critical thinking important? People with strong critical thinking skills are better able to understand complexity, analyze text, construct rational arguments, solve problems, and consider alternative solutions. People who score higher on critical‑thinking measures are reliably better at questioning and evaluating whether information is true.

As a professor at the University of California, Irvine, wrote for The New York Times, “At stake are not just specialized academic skills or refined habits of mind but also the most basic form of cognitive fluency. … This means [students who rely on AI] will lack the means to understand the world they live in or navigate it effectively.”

Variance

I used to use AI more. For the first two years of its existence, I subscribed to the “AI won’t take your job, someone who uses AI will” anthem. Scott and many others have espoused this view. But then I realized that I was focusing on the wrong thing.

NYU professor Sonia Marciano coined the idea of variance: To achieve success, the best strategy is to focus on the areas where there are the biggest gaps between the best and the worst. Scott has written about it multiple times.

The concept of variance instructs us to become really good at things that are both important and hard. As I’ve written about before, using AI isn’t hard. Not using AI is hard. Writing a thesis-driven essay or a scientific report by yourself is hard. Coming up with an original perspective on something you’ve read is hard. Critical thinking is hard.

I’m not a Luddite — I believe that AI is a remarkable and inevitable technology, and everyone needs to understand how to use it. It’s also just a really convenient time-saver. But what’s not being acknowledged is that while AI might technically be free, it has a hidden price. If you want or need to outsource your work to AI, you should at least understand what you’re paying.

The cost of AI is your own intelligence.

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Cat owners in Sweden are legally required to check on their pets at least twice per day.

1. What does war with Iran mean for markets?

2. How did turning down the Pentagon make Anthropic more valuable?

3. Newsletter Exclusive: A clear guide to what’s happening in private credit

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How Are the Markets Pricing the Conflict With Iran?

The U.S. and Israel launched military strikes on Iran on February 28. The attacks killed Iran’s Supreme Leader, Ayatollah Ali Khamenei, and several high-ranking military officials and damaged government and defense sites. President Trump said the campaign could intensify and last for weeks, while Iran has indicated it is not willing to negotiate with the U.S.

On Sunday, Iran’s Assembly of Experts named Mojtaba Khamenei, 56-year-old son of the former supreme leader, as Iran’s new supreme leader. A mid-ranking cleric with close ties to the Islamic Revolutionary Guard Corps, Mojtaba had long been viewed as a potential successor and is expected to continue his father’s hardline regime. Trump, who said Washington should have a say in the selection, warned the new leader won’t “last long” without U.S. approval.

Iran has retaliated harder than expected. Iranian forces launched more than 500 ballistic missiles and 2,000 drones at the UAE, Jordan, Kuwait, Bahrain, Qatar, Saudi Arabia, and Iraq. Preliminary figures show 1,332 dead in Iran, at least 77 in Lebanon, and 11 in Israel. Seven U.S. servicemembers have been killed.

President Trump campaigned as the “President of Peace.” Polls show most Americans wish he’d lived up to that title.

U.S. equity markets’ response has been relatively muted — the S&P is down 1.5% since the strikes began. However, in the week after the attacks, oil prices spiked almost 12%, spurred a rally in the dollar, and raised inflation expectations, pushing the yield on 10-year Treasurys up 20 basis points last week.

At the open of trading Sunday evening, oil surged past $100 a barrel. President Trump posted on Truth Social that an increase in short-term oil prices is a “very small price to pay” for destroying Iran’s nuclear threat.

The market thinks this is an interruption, not a war. Travel stocks, cruise lines, and luxury stocks have been hit hard, but the markets are not pricing in a long-term conflict.

Markets strip out emotion and tell you the truth. The truth right now is that this conflict hurts certain sectors short term, but the world will return to normalcy. My prediction: A year from now, oil is lower than when this started. If Iran’s nuclear capability and launch infrastructure are truly neutered, the Middle East is actually safer. We could see an economic boom in Iran. There will be a Four Seasons in Tehran, and private equity will start pouring in.

Three-quarters of conflicts since World War II ended with stocks in the green a year later, so the market’s reaction to this makes sense on paper.

What strikes me is investors’ conviction that this doesn’t change much. Steve Eisman, the investor who predicted the 2008 crash, told me this doesn’t change his investment strategy by a single dollar. I’m hearing that everywhere. No one is willing to contend with the downside scenarios.

What if Iran is destabilized even further? What if the nation devolves into something even worse? That is not an unlikely scenario because it is exactly what we’ve seen in most of the regime changes throughout history.

Oil has already passed $100 a barrel. Liquid natural gas prices in Europe increased 70% last week. What does that do to inflation at home and abroad? What if there are cyberattacks on U.S. infrastructure? What if 90 million Iranians flee and trigger a refugee crisis? These aren’t fringe scenarios. Polymarket was pricing a nuclear event this year at 24% before they pulled the market entirely.

Trump built his political brand on saying Iraq and Afghanistan were mistakes. He hasn’t proved this is different. And the incoherence on objectives isn’t a messaging problem. It’s a strategy problem: They don’t know what the plan is. Donald Rumsfeld, the former U.S. Secretary of Defense, said Iraq wouldn’t last six months. It lasted eight years and cost $3 trillion. We’ve seen this before, but the markets haven’t priced in any of it.

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A Turning Point in the Anthropic-OpenAI Race

Anthropic’s Super Bowl ad seemed like the startup’s breakout moment. The ad went viral, racking up 5 million views on X in under 48 hours. But last week, Anthropic’s ad was superseded by a much more consequential event.

Anthropic rejected a $200 million Pentagon contract because it would not allow Claude to be used for surveillance of U.S. citizens or autonomous military strikes. After several back and forth exchanges with U.S. Secretary of Defense Pete Hegseth, the Pentagon designated Anthropic as a supply chain risk to national security and announced that U.S. military contractors must not do business with the company.

Hours after Anthropic rejected the Pentagon contract, OpenAI picked it up. A day later, U.S. uninstalls of ChatGPT surged 295%, and Claude climbed to No. 1 in the App Store.

Taking a stand against the Trump administration has triggered a wave of support — and big bump in revenue — for Anthropic. The company’s annual recurring revenue (ARR) surged to $19 billion, up from $14 billion just a few weeks ago.

For a year, I’ve been waiting for a CEO to stand up to Trump. I said it was a huge commercial opportunity. I thought it was going to be Nike, but the hero we’ve been waiting for was Dario Amodei.

He’s the first CEO who said no. Last I checked, being an American and being incorporated in America means we have to operate by rule of law, but we’re also protected by rule of law, meaning we get to make decisions about who we work with.

What’s so interesting about this is how badly Sam Altman is fumbling the ball from a PR and communications perspective. A year ago, 9% of Americans said they disliked Sam Altman. Today, that number is 20%. If you think about all the things that he’s gotten wrong: his response to that Super Bowl ad, his very awkward Senate hearings, his very awkward interview on Jimmy Fallon where he tried to present as this fun, likable, relatable guy. But then I think the worst moment we’ve seen from him happened a couple of weeks ago, when he compared training an AI model to raising a human.

What do we do about the fact that the leaders and the builders of the technology of tomorrow appear to have a fundamental misunderstanding of the point of life, of the point of why we’re all here, what existence and humanity is actually all about. I mean, what does that mean for us?

What is Private Credit?

You’ve probably seen some alarming headlines about a crisis brewing in private credit. In recent weeks, investors have tried to pull their money out of private credit funds including Blue Owl and Blackstone, raising questions about how these vehicles work, and what happens when people head for the exits all at once.

It also raises a more basic question: What exactly is private credit anyway? Prof G Markets exists to inform, entertain, and educate — so in that spirit, this week’s exclusive is a simple guide: private credit for dummies nonfinance bros.

What is private credit?

When you think of a company taking out a loan, you probably picture the loan (credit) coming from a bank like JP Morgan, Bank of America, Wells Fargo, etc. That’s what happens most of the time.

But in some cases, if companies want faster, more customized loans, they can turn to private credit. Private credit refers to tailored, often higher‑interest loans that specialist investment firms — like Ares Management, Blackstone, Apollo Global Management, and Blue Owl Capital — make directly to companies, instead of those companies borrowing from a traditional bank. It’s a fast‑growing but still relatively small segment of the corporate debt market.

When did this party start?

The modern private credit market expanded in the wake of the Great Recession of 2008. In response to the crisis, regulators raised capital and risk management requirements on big banks, making it harder for them to lend money to less-established borrowers. This created an opportunity in the market for less-regulated lenders.

In 2007, private credit funds had $108 billion in assets under management (AUM) globally. This year, AUM is expected to exceed $2 trillion.

A Quick Guide to Credit Lingo

Direct lending: a loan made directly to a company by a private fund

Floating-rate loan: a loan where the interest rate changes over time (usually every month or quarter) based on a benchmark rate. Payments go up when rates rise and down when they fall. Most private credit loans have floating rates.

Covenant: rule in the loan agreement that the borrower has to follow — like limits on taking on more debt or requirements to keep certain financial metrics in a healthy range.

Business development company (BDC): private credit fund for retail investors: They operate like closed-end mutual funds (meaning that unlike mutual funds, they don’t accept new capital after they’re formed) and are often publicly traded.

Dry powder: uninvested capital committed by investors to private credit funds

Principal: the original sum of money borrowed by a company or investor, excluding interest and fees

Yield to maturity (YTM): the annualized rate of return an investor is expected to earn if a bond is bought at its current price and held until its final due date.

The ecosystem

The private credit ecosystem has three main players: the private credit funds (like Carlyle, KKR, Apollo, etc.), the limited partners (those who invest in the private credit funds), and the businesses (who take out the private credit loans).

Private credit funds

Historically, most private credit borrowers have been small to mid-sized companies, ranging from $3 million to $100 million in EBITDA. But as private credit funds have attracted more capital from institutional and high-net-worth investors, they’ve started to underwrite bigger and bigger loans. This increased lending capacity has helped fuel the growth of private companies; before, if a large firm needed to raise a ton of money, it would go public. Now, it can turn to the private credit markets.

Private credit has also become a popular source of funding for big public companies that want flexible terms and to diversify their sources of financing.

This is increasingly applicable for Big Tech. Though the biggest tech companies can generally borrow cheaply in public bond markets, there are certain benefits to private credit financing, namely, flexible terms. Instead of traditional corporate debt that would show up on companies’ balance sheets, arrangements with private credit funds can be structured such that most of the debt sits in separate legal entities called special purpose vehicles (SPV).

For instance, Meta announced a $27 billion financing deal with Blue Owl in which most of the debt sits in an SPV.

The largest investors in private credit funds are institutional and wealthy investors, including pension funds, family offices, and sovereign wealth funds.

Investors are drawn to private credit because it has historically offered a higher return than traditional fixed-income strategies like Treasurys or traditional corporate bonds. It can also improve portfolio diversification, giving investors exposure beyond the public markets.

Retail investors are increasingly participating in private credit through business development companies. BDCs represent about 14% of the private credit market.

Private credit firms have gotten crushed recently. Why?

Private credit firms have had a rough 2026.

Over the past few years, lending to software companies has become a significant part of private credit portfolios. Now, investors fear that if AI weakens software firms’ businesses, they could default on their private credit loans. Earlier this month, UBS researchers estimated up to 35% of private credit portfolios faced elevated risk of AI disruption. This could hit retail investors, too: Technology firms account for approximately 24% of holdings at BDCs.

This risk is making investors nervous, and they’re starting to ask for their money back. This creates a whole separate problem. Redemptions are typically allowed on a schedule, but when requests surge all at once, private credit firms aren’t typically liquid enough to return all of their capital (investor money is tied up in long-term loans). If funds refuse withdrawals, that makes investors even more nervous.

That’s what happened late last month at Blue Owl Capital’s BDC: After redemptions spiked, the firm decided to “shut the gates” on the fund, preventing investors from pulling their cash.

Executives claim that these current challenges are merely “hiccups,” not a signal of crisis.

Others warn that investors have good reason to be concerned. “People made choices: If you wanted a higher dividend, you could take more risk,” Mark Rowan, CEO of Apollo, said recently. “That felt really good on the way up. That’s not going to feel so good on the way down.”

Rowan’s quote highlights a vulnerability that isn’t unique to private credit. After almost two decades of most assets going up and to the right, many investors — consciously or not — have come to expect that’s how things will continue. When they’re reminded that risky assets can also go down, the first crack spurs a race to exit doors that nobody thought they’d ever have to use.

Dario Amodei is going to give corporate America the confidence to say no to the Trump administration. He took Anthropic from $14 billion in ARR to $19 billion with one strategy. Over the next 30 days, I expect to see a half dozen to a dozen CEOs find their nerve and push back.

Scott and Ed are joined by Steve Eisman, investment analyst best known for his role in predicting and profiting from the 2008 subprime mortgage crisis, about long-term risks in the market. They discuss whether private credit will create the next GFC, and how war with Iran is not changing his investment strategy.

1. Visualizing what makes people happy

2. A statistical analysis of airport lounges

3. U.S. natural gas is insulating our markets from global shocks

94%

of all cryptocurrency buyers are Gen Z or millennials.

1. Did markets overreact to Citrini’s AI article?

2. Trump likes to exaggerate. What is the real state of the union?

3. Who are the winners and losers of the Warner Bros. acquisition saga?

4. Newsletter exclusive: The dark horse in the autonomous vehicle wars

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Breaking Down Citrini’s 2028 Global Intelligence Crisis

A science fiction article from Citrini Research erased $300 billion in market value last week.

Set two years in the future, The 2028 Global Intelligence Crisis imagines a scenario where AI has driven unemployment to 10%, consumer spending has collapsed, markets have plunged, and the economy is fundamentally reshaped.

The foreboding piece only intensified fears about software obsolescence, and the State Street Software & Services ETF fell 5% the day after the article was published.

• Companies name-checked in the post including DoorDash, American Express, KKR & Co., and Blackstone fell by at least 6%, and Uber, Mastercard, Visa, Capital One and Apollo all fell by 4% or more.

• The co-author of the post, Alap Shah, confirmed that his hedge fund had “a set of shorts against businesses that we think are going to be disrupted by AI.”

Later in the week, eBay announced it would lay off 6% of its employees, and Block (formerly Square) announced it would cut 40% of its workforce.

Block CEO Jack Dorsey blamed the cuts on AI, writing: “The intelligence tools we’re creating and using, paired with smaller and flatter teams, are enabling a new way of working.” Block’s stock jumped 25% in response to the news.

• U.S. companies announced 108,435 layoffs for January, up 118% from a year ago.

The layoffs made the Citrini article’s claim that AI adoption will cause mass unemployment seem less like science fiction.

At the same time, while AI has, and will continue to destroy some jobs, there is no evidence that it will happen at the pace that the post suggests.

Business leaders surveyed in the U.S., U.K., Germany, and Australia expect AI to reduce employment by around 0.7% over the next three years. This pace should give governments time to react to changes in labor demand.

Furthermore, AI will be a subpar substitute for most human labor until hallucination rates meaningfully decline. In the best case, 80% of AI-generated answers are correct. Would you trust an employee who is wrong a fifth of the time?

The article also ignores Jevons Paradox, which shows that efficiency improvements can actually lead to higher total resource use. If each unit of efficient work gets cheaper, that can expand output so much that demand for labor actually increases.

In fact, it’s already happening. It looked like software engineers would be completely replaced by AI coding tools, but now job postings are on the rise. As it gets cheaper to ship software, it becomes easier to start new companies and launch new products. “Vibe coding” goes only so far when you need to launch a professional product.

There used to be people who would sit in the elevator all day and wear a uniform and a special cap. They would literally stand there and press people’s floors for them. Is anyone like, what happened to all the good elevator operator jobs?

Of course we’re gonna have disruption. Entire categories of jobs will be lost. The thing that people are worried about is that the destruction will all happen at once. The more realistic scenario is that this rolls industry through industry. And as AI destroys jobs across industries, it creates new ones in their wake. The time frame is what matters.

But the fact that a creative blog posted on Substack inspired such incredible selling pressure and value destruction tells me a lot about how investors are feeling right now.

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The State of the Union: Rhetoric vs. Reality

In the longest State of the Union address in history, President Trump painted an optimistic picture of the country, declaring a “turnaround for the ages.” He covered everything from inflation and immigration to health care and voter fraud.

He highlighted some legitimate wins: the Trump accounts, which give every American child born between 2025 and 2028 a $1,000 stake in the stock market, the most-favored nation program for lowering the price of pharmaceutical drugs, and he announced that Big Tech companies will commit to paying the electric bill for their data centers.

But the rest of Trump’s speech serves as a reminder that you can do anything with numbers if you’re morally flexible enough. So, what is the real state of the union?

Foreign investment

Trump: “In 12 months, I secured commitments for more than $18 trillion …”

Reality: A White House website boasts that U.S. and foreign investments under Trump total $9.7 trillion, and even that figure is disputed.

Tariffs

Trump: Foreign countries are paying the tariffs.

Reality: The Fed Reserve Bank of New York found that nearly 90% of the tariff burden falls on U.S. firms and consumers. The Congressional Budget Office puts it at 95%.

Employment

Trump: “More Americans are working than at any time in the history of our country.”

Reality: U.S. had almost no job growth in 2025; it was the weakest year of job creation since 2020. Manufacturing, one of Trump’s main focus areas, shrank as a share of total U.S. workforce to a record low last year of less than 8%.

Market performance

Trump: “... the stock market has done so well, setting all those records.”

Reality: The market may have set records, but its performance lags most other developed markets. The S&P 500 rose 16% in 2025, while the MSCI All Country World Index minus USA rose 29%.

The whole speech was a master class in cherry-picking. To be fair, unemployment is pretty low. Inflation is down from its peak, GDP growth is positive, but it’s especially concentrated around a small number of companies. He’s sort of asking everyone to stare at AI and big company capex and then take off your glasses when you’re looking at your grocery receipts.

At one point, he said we brought in $18 trillion in investment. Where the f*ck is he even getting these numbers? It felt like an earnings call, where the investors are the Republicans and there’s no SEC. You can’t get in trouble. You can just throw out numbers. It’d be like if Jensen Huang said, Our earnings were up 11 million percent. It was the greatest earnings quarter in history.

But anyway, we’re not dealing with the real issue, which is the deficit. Democrats are gonna have to cut spending, Republicans are gonna have to raise taxes. Let’s get to it. Who are the adults in this room? I feel like Congress burns more calories clapping than actually legislating.

Netflix vs. Paramount for Warner Bros. Discovery — Who Came Out Ahead?

Netflix has dropped out of the Warner Bros. Discovery bidding war. The transaction will still need regulatory approval, but for now, Paramount has come out on top.

The Warner Bros. board declared Paramount’s $31/share offer ($111 billion) for the whole company superior to Netflix’s $27.75/share offer ($83 billion) for HBO and the Warner Bros. movie studio.

• The combined Paramount-Warner Bros. entity will still be smaller than Netflix in terms of total subscribers (211 million subs vs. Netflix’s 325 million).

Warner Bros. gave Netflix four days to counter, but the company declined, saying the deal was “no longer financially attractive.”

The OG streamer will walk away with a $2.8 billion breakup fee, equivalent to 25% of Netflix’s entire net income last year.

On the news, Warner Bros.’ stock fell nearly 3%, Netflix increased 10%, and Paramount popped nearly 20%.

Let’s talk about winners and losers.

At the top of the list in terms of winners are WBD shareholders and David Zaslav. I think he was a mediocre operator, but he’s an outstanding investment banker. This is a company that’s gone from a low of $8/share six months ago to $31/share, and the business has gotten worse over that period.

A close second in terms of winners is Netflix shareholders. This saga shows that Ted Sarandos is a disciplined operator. Good operators walk away when the deal no longer makes sense.

Netflix stock increased 10% on the news, adding $36 billion in market cap, and they get another nearly $3 billion for the breakup fee. So if you consider the price they were going to pay — $83 billion — plus the $40 billion free gift with purchase, they’re basically getting $120 billion to not do this deal. I think Netflix is probably a buy right now.

The biggest loser is the creative community. Paramount has paid so much for this company — there is no vision that’s going to increase revenues to the extent to justify the price they paid. They are gonna have to focus on the expense side (Latin for layoffs).

You’re going to see a destruction in human capital that’s going to make Jack Dorsey’’s announcement look soft and cuddly.

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