Blodget was the posterchild, but he wasn’t alone. At Salomon Smith Barney, another analyst who’d publicly rated one company as a “buy” was discovered to have called that same company a “pig” in private. Another analyst at Lehman Brothers admitted in an email that “ratings and price targets are fairly meaningless anyway,” and that the “little guy” might get misled. “Such is the nature of my business,” he wrote. It was an epidemic: By the year 2000, three-quarters of all stocks carried buy recommendations, and only two percent carried sell recommendations. I don’t need to tell you what happened next.

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Why would Wall Street analysts recommend stocks they knew to be junk? One word: incentives. Since IPOs and equity offerings are important sources of revenue for investment banks, analysts are incentivized to publish glowing research about companies in order to win deals and generate fees. This conflict of interest was summarized well by a Merrill Lynch employee in 2002, who lamented to a colleague that “John and Mary Smith are losing their retirement because we don’t want [an investment banking client] to be mad at us.”

After the bubble popped, the SEC realized it’d better do something about this. So they came up with the 2003 Global Research Analyst Settlement. The goal was to neutralize the conflict of interest posed by investment bankers and equity research analysts playing for the same team. So, they separated the two divisions entirely: Equity research was no longer allowed to talk to investment banking (without a compliance chaperone present), and compensation for each group was divorced from one another as well. That way, the investment bankers could keep doing their job (winning deals), and the analysts could publish unbiased research.

Why am I talking about this?

Déjà Vu

Last week, the Wall Street banks revealed their equity research for SpaceX, and the price targets were nothing short of insane. Before we discuss them, keep in mind SpaceX is already worth $1.8 trillion. With only $19 billion in 2025 revenue, that’s at least a trillion dollars too high. (I explain why here.) OK, now let’s look at what Wall Street “believes.”

According to JPMorgan, SpaceX is worth $2.9 trillion. That’s 58% higher than its current valuation. Their opinion is that SpaceX’s “potential impact on humanity” is “bigger than any company’s” they’ve “ever seen.” Deutsche Bank says the company is even more valuable: $3.3 trillion. In their view, the rocket-maker represents the “apex of civilisational ambition.” Over at Morgan Stanley, the number’s even higher: $3.9 trillion. MS says SpaceX is the “final frontier” of AI. But the price target that takes the cake belongs to lesser-known investment bank Raymond James, whose lead analyst says SpaceX is worth — wait for it — $10.4 trillion. That would make SpaceX more valuable than Microsoft, Amazon, Meta, Tesla, and Berkshire Hathaway … combined.

I have one question: WTF? I had to read the Raymond James report a second time just to make sure I wasn’t hallucinating. (I wasn’t.) Their “models” project SpaceX revenue will rise from $19 billion to more than $5 trillion by 2035. (That’s nearly a fifth of America’s GDP.) Ninety-four percent of that revenue will supposedly come from AI, which means the company’s AI business must become 23 times larger than Nvidia’s, despite currently being 67 times smaller. As I said a few weeks ago: Pass me the crack pipe.

Conflicted

These price targets are ridiculous — so ridiculous as to be inexplicable. That is until you realize the one thing that unites them all: They were all published by banks that underwrote the SpaceX IPO. Yes, Raymond James, Morgan Stanley, JPMorgan … they all participated. In fact, there is not one bank that underwrote SpaceX’s go-public and didn’t recommend the stock as a buy.

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I know what you’re thinking: If the IPO already happened and the banks already collected their fees, what’s the incentive to publish flattering research now? Answer: More fees. SpaceX has already initiated a follow-on debt offering, and it’s estimated that the company will have to raise $235 billion over the next four years just to cover its costs. That translates to tens of billions of dollars in future investment banking revenue. There’s also talk that SpaceX will pursue a merger with Tesla, which would result in (spoiler alert) more fees. In sum, the most profitable business on Wall Street right now isn’t trading or lending … it’s getting Elon Musk to like you.

Open The Floodgates

But hold on. Wasn’t the 2003 Global Research Analyst Settlement specifically designed to prevent banks from bullsh*tting their research for fees? You’d be correct. That was, at least, until seven months ago, when it was … terminated.

Yes. On December 5th 2025, the SEC officially rescinded the law that Blodget had inspired all those years ago. According to the agency, the GRAS rule is now useless, as it’s been “largely superseded” by other rules. What they’re referring to is FINRA Rule 2241, a law that technically speaks to the conflict-of-interest problem, but does very little about it by comparison. As former SEC Chair Arthur Levitt wrote in his aptly-titled piece, The SEC May Make Wall Street Analysts Corrupt Again, “Don’t be fooled by the promise that other regulations provide this separation … This is the natural pattern of regulatory surrender.”

I’d be inclined to call Arthur Levitt alarmist if it weren’t for the fact that the SEC is literally being ripped apart. The agency has lost a fifth of its workforce under Trump. Last year, it brought just 56 enforcement actions against public companies — down 30% from the year before, the lowest of any transition year in a decade. Four months ago, its enforcement director, Margaret Ryan, mysteriously resigned after she tried (and failed) to investigate the Trump family for insider trading. It’s become clear that the SEC no longer exists to protect investors, but white-collar crime.

Here To Stay

If flattery was the dealmaking equivalent of a bazooka in the dotcom-era, it’s a nuke today. Saying nice things about powerful people can now win you multimillion-dollar deals, unprecedented legislation, and even cabinet positions. Tim Cook didn’t present that gold trophy for the President — he did it for shareholders. Few endeavors yield greater returns in 2026 than being a sycophant, and any executive who hasn’t clocked that isn’t fulfilling their fiduciary duty. In other words, who wouldn’t talk up SpaceX?

The trouble arises, of course, for the retail investors. SpaceX is already down more than 30% from its highs, and anyone who bought post-IPO is now underwater. This is in line with the trend: Research shows IPOs recommended by analysts at underwriting banks underperform and, on average, lose value. Lesson: If someone’s been paid to sell you a stock, proceed with caution.

The truth is, SpaceX at its current price is a bad investment. This was tacitly admitted in Morgan Stanley’s equity research report, which issued an “intentionally wide” price range with a bull-case target of $600 and a bear-case target of … $75. Translation: “We don’t have a f*cking clue.”

People wonder why so many Americans hate Wall Street. This is why. It doesn’t mean the analysts are bad — it just means the incentives are. In the words of Charlie Munger: “Show me the incentive and I’ll show you the outcome.”

The solution is simple: Fix the incentives. Either restore the Global Research Analyst Settlement, or find another way to eliminate conflicts of interest. It shouldn’t be that hard, but for this administration it might be, as it would undo the culture of corruption they’ve worked so ardently to build. So if you’re expecting things to change, take this analyst’s recommendation: Don’t hold your breath.

See you next week,

Ed

The problem isn’t revenue, but spending. For every dollar spent on ChatGPT, it costs OpenAI nearly three. How is this possible? Because the business is subsidized by investors in Silicon Valley. Why are they willing to pay for OpenAI’s life support? Because they believe the company will eventually get healthy and repay them in spades. This is the standard venture model: Yes, the company could collapse, and the equity would get wiped — but it could also hit a homerun. High risk, high reward.

One caveat: While most startups need only a few million dollars in life support, OpenAI needs hundreds of billions. (AI is abnormally expensive.) I’ve long said that when Silicon Valley runs out of money to pay for that life support, OpenAI will go dark. Many said I was crazy for suggesting that. Well, last week my suggestion was proven not so crazy. No, OpenAI isn’t shutting down. However, they are now turning to someone else for life support: you.

Operation Bailout

OpenAI has reportedly offered the US government a 5% stake in the company. The idea is to “provide every citizen” a share in the profits of AI. If that sounds too kind to be true, it is: AI has no profits. Which means the real plan is to provide every citizen a share in the losses — i.e., subsidize OpenAI with taxpayer dollars. If that sounds too evil to be true, it isn’t: OpenAI has been discussing a government “backstop” (bailout) for almost a year now, and it’s not as if the US hasn’t bailed out plenty of other companies before.

The good news for OpenAI? Trump loves this sh*t. The President has already taken government stakes in Intel, MP Materials, Lithium Americas … and he’s likely to take more.

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It’s quite simple: No healthy company would ask the government to take up a stake in it. It’s especially scary when you realize how many trillions of dollars are riding on this thing. So that’s red flag number one.

Red Flag #2

Meta raised another red flag last week when it said the one thing it wasn’t supposed to say: “We have excess compute.”

OK, those weren’t the company’s exact words … but they might as well have been. The hyperscaler is reportedly planning to launch a cloud business in order to sell excess compute. This is a very big deal, as CFO Susan Li had previously said the company was “having a hard time” meeting compute demands internally, and just a few months ago, Mark Zuckerberg said Meta would only build a cloud business if they felt they’d “overbuilt.” Which means Meta has either 1) too much supply, or 2) not enough demand. Or, worse, both.

Front-End vs. Back-End

Both red flags are an admission of the same thing: Building front-end AI is, at best, a difficult business, and, at worst, an unviable one. What do I mean by front-end AI? AI that consumers and enterprises actually use (ChatGPT, Claude, etc.) — i.e., not chips.

In OpenAI’s case, they’ve admitted their front-end AI business doesn’t work without government subsidies. In Meta’s case, they’ve admitted they tried to launch a front-end AI business (it was once Zuckerberg’s goal to build “the world’s leading AI service”), and failed. So, they’re doing what any sensible hyperscaler would do: They’re pivoting to back-end AI. Why? Because it’s already been proven to be a great business. Amazon’s cloud unit did $37.6 billion last quarter. Google’s did $20 billion, and Microsoft’s did $34.7 billion.

Irrational Customers

But hold on … if front-end AI is such a bad business, how could back-end AI be such a good business? In mining terms: How could you sell so many picks and shovels to a goldminer who can barely mine any gold?

This is where the AI trade gets ugly. The economics only make sense if there exists an extraordinarily wealthy (and irrational) customer who’s down to burn billions of dollars a year with no return. In AI’s case, there are two: OpenAI and Anthropic. We estimate that those two companies alone have accounted for 60-80% of the AI revenues generated by Amazon, Google, and Microsoft, and according to The Information, they’re responsible for roughly half of the hyperscalers’ entire revenue backlog.

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In other words, without OpenAI and Anthropic this whole thing collapses, and OpenAI just told us they need government support. Uhhh … that’s not good?

The Blast Zone

This is a bubble, and it will either pop or deflate. That’s the bad news. The good news is the pain will be relatively contained.

How much damage a company incurs will largely depend on their proximity to the blast zone. OpenAI is closest, as it is the blast zone. Next is probably Oracle: The company not only depends on OpenAI to purchase more than half of its future compute, it’s also borrowed more than $150 billion to build said compute. Further out (but still close) are the Big Tech names: Microsoft, Amazon, Google, and now Meta. However, two crucial details are also true of those names (to varying degrees): 1) They’ve invested in blast zone protection (strong balance sheets), and 2) the blast zone risk is mostly priced in.

Take Microsoft, for example. Yes, OpenAI is their largest customer by far. However, unlike Oracle, they haven’t built out their compute capacity with borrowed money. Instead, they’re tapping into the cash mountain they’ve accumulated over the years to make a bet that — crucially — they earned. In addition, the stock is currently trading at a price that implies investors believe the bet won’t even work: Microsoft is valued at 23 times trailing earnings — 25% lower than its five-year average, and 16% lower than the current average of the S&P 500. Meta’s in a similar position, trading at 21 times earnings. In fact, it had gotten so cheap last week that I decided to buy at $564 per share. Meta stock has since risen more than 6% (hooray for me), but I believe it’s still in safe territory. (Note: This isn’t investment advice.)

Bubbles reveal winners and losers. To spot them, keep tabs on two things going forward: price and leverage. If either gets too high, you’ve got a problem. Examples of companies for whom one (or both) of those numbers is beyond the pale: SpaceX, CoreWeave, SanDisk, and Cerebras. I’d add OpenAI at a trillion dollars to that list, but Altman is supposedly already struggling to convince investors of that number. (In which case, the deflation might have already begun!)

This doesn’t mean Big Tech is entirely in the clear. Leverage can always rise, and in fact, it’s already beginning to do so. But that doesn’t mean you should be freaking out (yet), as, unlike 2008, many investors are aware of what could go wrong.

250 Years Later

What if Trump actually does bail out OpenAI? What if taxpayers are forced to take on the burdens hitherto borne by the likes of Andreessen Horowitz and Softbank? What if this incredulous burn is sustained only through the financial coercion of middle-class households? I haven’t modeled that one out, as I find it so outrageous. But perhaps I should.

If that’s how this ends, we’ve got bigger problems than bubbles. The 2008 bailout was, at the very least, necessary to prevent a systemic meltdown in the real economy. (Yes, we shouldn’t have let the banks take on so much risk, but the point stands.) But to bail out OpenAI … a company of no systemic significance or real-world necessity — well, there’d be no dressing that one up. It would be theft, a direct transfer of wealth from the middle-class to the nation’s richest, a bald-faced act of corruption to maintain the wealth of the already wealthy. Capitalism on the way up, socialism on the way down.

Is that really the America we live in, 250 years on? Is that who we are as a nation? I hope not. But everyday my hope fades a little more.

See you next week,

Ed

To the moon Bitcoin went. It started with a promise to fire the “anti-crypto” SEC Chair. Later, Trump spoke at the Bitcoin conference. Each of Trump’s pro-crypto actions sparked another rally. Soon enough, Trump had his own cryptocurrency: TRUMP Coin. He even hosted pay-to-play crypto dinners (where Presidential pardons went to the highest bidders). By October 2025, the price of Bitcoin had risen to $126,000, an all-time high. Trump had made America the “crypto capital of the world,” and as President, he’d “never let crypto down.”

Fast-forward to today: Bitcoin trades at less than $60,000 — down more than 50% in the past eight months. The coin is now less valuable than before Trump was elected. Fifty-three percent of all Bitcoin in circulation is currently held at a loss. The crypto markets have erased nearly $9 billion worth of value per day for 261 days straight. More than $2 trillion … vanished overnight, and the crypto-bros are eerily silent. What the f**k happened?

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Red Herrings

There are several stories that supposedly explain Bitcoin’s downfall: interest rate uncertainty, a more hawkish Fed, a strengthening dollar, etc. Those sound plausible, but anyone who understands crypto markets knows they’re red herrings. The reality is there’s only one thing that moves the needle for Bitcoin, and it’s the same thing that moved the needle in late 2024: vibes.

Here’s how it works: When vibes are good, the line goes up. When vibes are bad, the line goes down. Different forces create different vibes. For example, “the President likes crypto” = good vibes. On the flip side, “Sam Bankman-Fried goes to prison” = bad. Did SBF’s arrest change anything about the fundamental nature of Bitcoin? No. But it was bad vibes, so Bitcoin tanked.

Well, the line’s going down again … which means the vibes are off. The question is why. You can never nail a vibe with 100% certainty, but I have a theory I’m pretty confident about.

The Great Brotation

If markets were a high-school, Bitcoin would be the cool kid: mysterious, rebellious, futuristic, and hard to define — all the things that make a person (or asset) cool. But it’s hard to be cool when you’re also the teachers’ pet, and with the President’s embrace, Bitcoin’s lost its punk rock feel. The more damaging event for Bitcoin, however, was the arrival of a new cool kid. A cool kid who’s not only cool … but cooler. So much cooler that Bitcoin looks like a nerd by comparison. I’m talking, of course, about AI.

It started with the VCs, who abandoned their BFF more quickly than Regina George. Crypto went from attracting $12 billion in venture funding in the first quarter of 2022 to $4 billion in the first quarter of this year — a 70% drop in just four years. Nothing summarizes Silicon Valley’s change of allegiance better than investor Jason Calacanis’s now-legendary 2023 tweet: “If you’re in crypto pivot to AI.”

Then came Bitcoin’s real fallout: the retail investors. For years, BTC was the go-to investment for “degen” traders around the globe, the ultimate “bro asset.” However, as soon as once-obscure AI names started putting up triple-digit quarters that put Bitcoin’s returns to shame (SK Hynix, Sandisk, Seagate, etc.), crypto started to fall by the wayside. The bros started rotating out of the old shiny object, and into the new one. The excellent Financial Times commentator (and my friend) Robert Armstrong and his readers have a name for this dynamic, which I’m now borrowing: The Great Brotation.

To add insult to injury, Bitcoin had also engaged repeatedly with a cool-but-highly-addictive substance known as leverage. As with cocaine, leverage made the highs a lot higher and the lows a lot lower. The most extreme variant was a “perpetual future” (also known as a “perp”), an options contract with no expiration date and almost no leverage cap. Perps quickly became the most popular way to trade Bitcoin, accounting for nearly 70% of all trading volume last year. This is extremely unusual and not talked about nearly enough. It also explains why the price of Bitcoin swung so violently up, and then, so violently down.

The result was a giant sucking sound in the vibes department. The most interesting person in the room was no longer Bitcoin, but AI. And the longer that remained true, the darker the vibes became.

Bitcoin’s Problem

We all have years where we’re cool and years where we’re not. My coolest year was age 11, as I was on the A-Team for football and was surprisingly good at magic. (My least cool year was 14, as I was no longer on the A-Team and still surprisingly good at magic.) I was taught early on, however, that what mattered most wasn’t others’ perception of me, but who I was at my core. This was a corny but useful framework that helped me ride the ups and downs.

Strangely, this same philosophy applies to the stock market. Stocks have years where they’re “cool” (Micron today) and years where they’re not (Micron ten years ago). If all an investor cared about was the stock price, they’d be miserable. Fortunately there are more important things to care about — specifically, fundamentals. Companies create goods and services, which they sell for profits. If a company can figure out how to grow those profits and turn them into free cash flows, it’s investable. Wonderfully, this is the only thing that really matters, and once you realize it, the price (i.e. “what other people think”) becomes background noise.

However, the same cannot be said about crypto. Why? Because there are no fundamentals. Without profits and cash flows, a floor of value cannot be set. When the vibes are up, the vibes are up. When the vibes are down, the vibes are down. This is Bitcoin’s problem: The only thing that matters is what other people think. In many ways, Bitcoin is an investing nightmare.

“Interesting”

I’m reminded of an interview I did in 2024 with Michael Saylor, the Godfather of Bitcoin. At the time, Saylor’s “bitcoin treasury” company, Strategy, was on a tear. The stock had exploded more than 300% in a matter of months. I, however, was extremely bearish, as there was nothing to back up the sexiness of the price other than .. its own sexiness. “A lot of people are going to lose a lot of money,” I said on Prof G markets. I even called it a Ponzi scheme. Since then, Strategy has lost roughly 80% of its value.

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But the most important moment in that interview came when I asked Saylor what would happen if investors stopped finding Bitcoin “interesting.” (Saylor had mentioned multiple times how “interesting” the asset was.) He balked at my question. “If you want to spend a few hours studying it,” he (wrongly) assumed of me, “you’ll find it is the most interesting thing in the world.” He soon doubled down: “I don’t even think it’s debatable. I don’t think there is a second-most interesting thing. It’s interesting in the same way that electricity and clean water and steel and airplanes and fire and nuclear power are interesting, because it’s the single biggest way to improve your quality of life.” (Many people now say the same thing about AI, crypto’s problem in a nutshell.)

Since then, Bitcoin has become considerably less interesting: Google search volume for the cryptocurrency has fallen more than 40% since Trump’s election. “Sell a kidney if you must, but keep the Bitcoin” was long Saylor’s mantra — that was until last month when he … sold his Bitcoin.

The price of Bitcoin may go up tomorrow, or it may go down. Frankly, I don’t care, as England will be playing Congo at the World Cup, Djokovic will be attempting to make history at Wimbledon, and I will be celebrating my best friend’s birthday at the Clemente Bar. In sum, there are more interesting things.

See you next week,

Ed

At the same time, there’s some confusion over how “real” those losses actually are. Someone “familiar with the matter” said OpenAI’s true loss last year was actually $8 billion. Big deal if true. In addition, the Wall Street Journal recently reported Anthropic is “about” to see its “first profitable quarter.” Again, big if true. Maybe AI isn’t unprofitable after all?

The stakes are too high for us to have only a vague understanding of whether these businesses even work. This week I’ve decided to demystify just how (un)profitable these two AI labs really are.

OpenAI

Up until last week, investors knew next to nothing about OpenAI’s business. Then Ed Zitron got his hands on their 2025 financials (which were independently verified by the Financial Times), and the truth of OpenAI was finally brought to light.

Here’s what we learned: The company generated $13 billion in revenue last year, up 240%. (!!!) However, it also lost $38.5 billion. (???) Much of that supposedly included “one-offs” like stock-based compensation and a charge related to their reorganization into a for-profit company. (This is the basis of the “those losses weren’t real” argument … we’ll return to that in a moment.)

We also got a clean look at a financial metric that’s a lot harder to bullsh*t: operating profitability. As a reminder, this is a measure of how much money is made/lost in day-to-day operations. I.e. it doesn’t include capital expenditures. Still, the numbers were ugly.

Let’s go line by line. OpenAI spent $1.6 billion last year on General & Administrative costs (i.e. paying employees), $5.7 billion on Sales & Marketing (i.e. ads), $7.5 billion on Cost of Revenue (i.e. inference costs), and $19.2 billion on Research & Development (i.e. training costs). That’s a grand total of … $33.98 billion in spending. Add back $13 billion in revenue and you get OpenAI’s no bullsh*t operating loss: $20.92 billion. That makes OpenAI one of the most unprofitable companies in history.

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These tremendous losses were brought to you by batsh*t spending. $34 billion in costs means OpenAI spent roughly as much as the US government did last year on the FBI and NASA combined. Also, take another look at that $5.7 billion Sales & Marketing bill. OpenAI spent more on ads in one year than the entire world spent on podcast ads. With that budget they could have also bought every ad-slot at the Superbowl for the past seven years. I suppose the only thing more expensive than building AI … is selling it.

Wrinkle

But wait … didn’t someone familiar with the matter tell the Financial Times OpenAI’s true loss was $8 billion? This is where the numbers become irreconcilable. While billions of dollars could have been lost due to a “one-off charge,” the company’s recurring loss could not have been less than $21 billion. Why? Because we know the operating loss. It was $21 billion.

Which leads us to conclude one of two things: Either someone is confused … or someone’s lying. The next question is who you think that someone is. Either it’s 1) Ed Zitron and all the news outlets that independently came to the same conclusions, or 2) the person “familiar with the matter.” I know who my money’s on.

Anthropic

Moving onto Anthropic, here’s what we actually know: the company’s annual recurring revenue hit $47 billion in May (self-reported but I believe it), and last year revenue hit $4.5 billion. That growth is obviously staggering, however we still don’t know the part that matters most: how much they spent.

There have been estimates. The Wall Street Journal pegged Anthropic’s 2025 compute costs at $7 billion. In that same article, however, they also estimated OpenAI’s to be $17 billion — roughly 60% lower than the real figure we learned last week.

Then came the blockbuster WSJ report claiming Anthropic was on track to be profitable this quarter. That seemed significant … until I dug further and realized the statement relies on a two-month period in which Anthropic’s SpaceX contract (one of its largest expenditures) was heavily discounted (for reasons unclear) — after which the bill would balloon to $15 billion per year. In other words, Anthropic’s path to “profitability” is a theoretical snapshot of a world that doesn’t actually exist … hence the article’s highly conditional language and Anthropic’s bizarrely modest silence.

So what’s the truth then? We don’t know, but we can try to piece it together. Assuming The Wall Street Journal was off by the same margin it was for OpenAI (60%), it’s likely Anthropic’s compute costs came out to around $11 billion last year. We can then guesstimate the company’s other line items. Most B2B ad budgets are about a third smaller than consumer, so let’s assume Anthropic’s Sales & Marketing bill was a third lower than OpenAI’s: $3.8 billion. Anthropic’s headcount is also 50% lower, so let’s cut their G&A expense in half: $0.8 billion. Add back the revenue and you get an operating loss of … $11 billion. This is all highly theoretical as we’re working with almost no information, but still, that number’s not great.

However, let’s also acknowledge that Anthropic’s (estimated) loss is roughly half the size of OpenAI’s. That’s not saying much, but it’s something. If you had to bet on one lab to not hemorrhage billions of dollars every year, it would be Anthropic.

The Way Out

If Anthropic can actually book $47 billion in revenue this year (difficulty: hard), and if they can limit their costs from growing more than 150% (difficulty: extremely hard) … then the company could theoretically turn a profit this year. However, those are big if’s — I wouldn’t bet on them.

As for OpenAI, profitability is still lightyears away. Even if they flatline spending growth (they won’t), revenues will still need to go parabolic. That is an increasingly unlikely scenario given the company is already considering marking ChatGPT prices down.

Conclusion: Profits are currently within the realm of possibility for Anthropic, but not for OpenAI. Do with that what you will.

So What?

I’m obsessive about these details for a simple reason: If AI can’t make more money than it spends, it’s uninvestable. As reductive as that might sound, it’s true. The point of a company is to make profits – and so far, none of these AI labs have gotten close.

It’s possible Sam Altman and Dario Amodei can paper over these gaping holes in the same way SpaceX did: with a ridiculously small float, a cartoonishly large TAM, and a cult-of-personality CEO. But that would also mean developing a personality … something neither Sam nor Dario are equipped to do.

Ultimately, it will come down to getting the boring stuff right. No more cosplaying as social media or acquiring hot podcasts. No more scuffles with the White House or predicting doomsday. Determine which costs are necessary and which aren’t. Then delete them aggressively. The most important person at the company is no longer the CEO, but the CFO. It’s time for the labs to sober up.

See you next week,

Ed

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Today I want to discuss another passion of mine: football (the real one). The World Cup, arguably the world’s greatest sporting event, kicked off last week. This year’s tournament will reach six billion fans, or more than four in five people on earth with internet access. Even more exciting: It’s happening here in America. On Saturday I watched SoFi Stadium erupt as USA’s Gio Reyna scored a last-second curler against Paraguay — you could feel the electricity coming through the screen. Quick cultural prediction: The World Cup will inspire a relationship boom as Gen-Z finds new reasons to get together in person.

Sadly, the cost of seeing a world World Cup match in person is out of reach for most fans. When the U.S. last hosted in 1994, a high-end ticket to the final cost roughly $1,000 in today’s dollars. At the 2022 World Cup in Qatar, the price was about $1,600. This year? Over $8,600. But that’s only the beginning. On resale platforms, World Cup Final tickets have risen another 60% to nearly $11,000. But that’s for a low-tier seat … in the highest tier it’ll cost you a whopping $33,000. This will be the most expensive World Cup of all time, and as a result, the most profitable: FIFA’s set to rake in $3 billion in ticket sales this year — a 216% increase from the previous tournament.

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Why so expensive? It isn’t oil or tariffs or inflation. No, this year’s World Cup is the priciest in history because of a new economic model FIFA has quietly deployed. Simply put, this new model may transform not just the beautiful game, but our entire economy. Put simpler: Everything’s about to get more expensive.

Algorithmic

Two words explain everything: dynamic pricing. Historically, the price of a first-hand World Cup ticket was fixed. But this year FIFA went with the airline model: Ticket prices adjust algorithmically based on changes in demand. That may not seem like a big deal (prices fall on low demand, right?), but it turns out it is: Ticket prices rose for 87% of matches this year, with some more than doubling in six months.

How does the algorithm actually work? No one knows. As a result, FIFA has been accused of “opaque pricing, shifting rules, and potentially deceptive practices.” Officials have even noted that the organization might be “restricting ticket supply to shape demand.” In other words, all the “demand” that was supposedly lifting prices might have been, well … fabricated. This theory was corroborated by last week’s unusual headline: “FIFA Still Has 180K World Cup Tickets Unsold.” Tickets that, as of a few weeks ago, were in very high demand. Strange…

The good news for FIFA is none of this matters. This year the organization launched an official re-sale marketplace that charges both the buyer and seller a 15% fee (six times the fee cap at the previous World Cup). That means FIFA essentially gets to sell its tickets twice — once in the initial (inflated?) sale, and again when they’re flipped by scalpers. Call it the perks of being a monopoly.

Canary in the Coal Mine

FIFA’s doing what every corporation wants to do. From Wendy’s to Target, companies across America are trying to figure out how to use dynamic pricing without pissing too many people off. As for industries that already price dynamically (i.e. airlines and hotels), the mission is to be … more dynamic. Delta recently partnered with an AI firm to help personalize prices based on how much customers are willing to pay, and JetBlue is allegedly doing the same thing. Put another way, it’s no longer about demand, but how desperate you are.

The next frontier of dynamic pricing will be groceries. Large grocers across America are replacing physical price tags with digital ones, making it possible to adjust grocery prices with the click of a button. Already, nearly a quarter of Kroger stores have electronic shelf labels. Walmart is rolling them out to every location by the end of the year. If you felt swindled buying World Cup tickets, just wait until you see next year’s grocery bill.

Naturally, regulators are scrambling. Maryland recently became the first state to ban “surveillance pricing” in grocery stores, and 12 states have introduced similar bills. The devil will be in the details, however, as the lines between “surveillance pricing” vs. “dynamic pricing” vs. “algorithmic pricing” vs. “surge pricing” are blurry. In the business world, that means exploitable. And exploit they have: Kroger’s defense to Congress was that it “never engaged in ‘surge pricing’,” a term we’ve yet to legally define.

Define “Worth It”

Back to FIFA. How much would it actually cost to attend one of these games? Between transportation, accommodation, and the ticket itself, the answer is a lot. Let’s say you’re a New Yorker who wanted to see USA in last week’s opener in Los Angeles. We ran the numbers — here’s how that bill would have stacked up.

That’s more than a month’s rent in NYC for just one match, no merch included. At a certain point, the numbers no longer make sense. We’re way past that point. Instead of catering to the sport’s most loyal fans, FIFA is excluding all but the wealthiest. Maybe that was always the plan.

The downside, however, will be felt in the atmosphere. You won’t see drum-wielding face-painted hooligans doing the Poznań. Instead, you’ll see seated men in suits, likely texting or asking their neighbor how the offside rule works. (And if you’re really unlucky, you might see Marco Rubio.) In the words of every disgruntled football fan in the UK: The game’s gone.

The Real Party

I make very good money — solidly in the top 5% of earners. I’m also an avid football fan: I’ve supported Chelsea since I was four years old and used to unironically pray to Frank Lampard. (Not a joke.) I have every reason to purchase a ticket to this World Cup, and yet I probably won’t. Why? It isn’t worth it.

Set aside the exorbitant price for a moment. If there’s anything I’ve learned from the Knicks’ win, it’s that the energy of a street-corner with a projector screen can rival that of a stadium. If you don’t believe me, you do now. Many of my greatest football memories have happened in front of a screen — sometimes at the pub, other times in a living room, but always in the company of other fans, aka … a community. If you want to feel the magic of the World Cup, you don’t have to be there. All you really need is a TV, and friends.

See you next week,

Ed

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Next, Anthropic will go public. Days after completing its $65 billion “Series H” round (H is the eighth letter in the alphabet and $65 billion is more than double the size of the largest IPO ever), the AI juggernaut submitted its S-1 filing. God knows how large this IPO will be, but with a 10% float we can comfortably assume the company will raise around $100 billion.

After that comes OpenAI. The ChatGPT-maker just filed for IPO, and given the size of its most recent fundraise ($122 billion — more than triple the largest IPO ever), we can assume this one will be likewise gigantic. How gigantic? Unclear. But for the sake of consistency let’s call it $100 billion too.

Tally up those three IPOs and that’s $275 billion in new equity supply. That would make 2026 the largest IPO year ever — roughly double the previous record set in 2021. That doesn’t include the nearly 70 companies that have already gone public this year, nor all the other companies that are about to.

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But Wait There’s More

Last week, Google announced it would raise $85 billion in a secondary offering, the largest equity financing event in history. Two days later, we learned Meta was considering the same thing. Supposedly Microsoft and Amazon are as well. Assuming they’re all the size of Google’s, add another three hundred billion dollars or so to the equity supply.

Then there are all the shares from previous IPOs whose lock-up periods are about to expire. These are newly-issued shares that weren’t allowed to be sold until this year. (In other words, they’re now “in play.”) According to Goldman Sachs, the combined value of those unlocked shares will be nearly $500 billion — an order of magnitude higher than last year.

So: Between three record-breaking IPOs, four potentially record-breaking secondary offerings, and a record-breaking year for expiring lock-ups, the stock market is about to get hit with roughly a trillion dollars in new equity supply. That’s more than the entire stock market of Italy. Economists have a term for this kind of supply-side shock: Not good.

Economics 101

Let me take you back to my Freshman year at Princeton. As I walked nervously into McCosh Hall (where Einstein taught) for my first day of Econ 101, I saw a giant chart displayed on the projector screen. Emblazoned across the top of it read the words “SUPPLY AND DEMAND.”

“Everything in economics,” my professor proclaimed, “comes back to this chart.” Despite some initial confusion, I soon learned it described a very simple concept: All else equal, higher supply means lower prices. The reverse is also true: lower supply means higher prices. This is the most fundamental principle of economics. It explains everything from why US housing has gotten so expensive (not enough supply) to why Chinese-made consumer products have gotten so cheap (too much supply).

Supply & Demand: Stock Market Edition

A stock’s price is determined by many forces — hype, narrative, and fundamentals, etc. — but one of the less discussed forces is that of supply and demand. As the supply of a stock goes up, the price goes down, and vice versa. This is why companies love share buybacks, for example. By reducing the supply of available stock, they reward their shareholders with a higher stock price.

For years, stock prices have remained elevated, partly due to unusually low supply. The IPO market essentially collapsed after COVID. The number of public companies is half what it was 30 years ago.

This made investing quite easy, as all you had to do was keep investing in the companies that already existed. (Read: Big Tech.) The virtuous cycle of low supply and high demand drove the price of tech stocks ever higher, making them, on a risk-adjusted basis, arguably the greatest asset class in history.

But that’s all about to change, and violently so. SpaceX, Anthropic, OpenAI, and Google are about to inject roughly $350 billion of new equity into the market. That’s more money than the entire US venture capital industry invested last year, and more than was raised in IPOs over the past seven years combined. And that’s just four companies.

The question is whether stock prices (tech, in particular) can remain this high with this much new supply. I doubt it. Another way to think about it is the following: If investors want to fund $350 billion in new stock purchases, what will they have to sell? My concerns were recently validated by Goldman Sachs’s global head of hedge fund coverage, who said investors are “increasingly focused on whether US equity markets can absorb a growing wave of new stock issuance.” I read that as Goldman-speak for “we don’t think they can.”

History Rhymes

This isn’t anything new. Going back as far as the 1930s, blockbuster IPOs have consistently preceded periods of market underperformance. From Xerox in 1936 to McDonald’s in 1965, the dynamic is simple: Mega-IPOs tend to suck all the available capital out of the system, leaving very little capital left over to prop up the rest of the market. In other words, it doesn’t even matter whether or not SpaceX is a good investment (it isn’t). The market will be dictated not by fundamentals or narratives, but by supply and demand.

Don’t Buy The IPO

The most important question for investors this year is the following: Should you buy the SpaceX/Anthropic/OpenAI IPO? My answer is simple: F*ck no.

Aside from a dangerously high level of supply, there are other reasons to be bearish. It’s clear, for example, why these companies are all raising money at the same time: They believe this is the top. Sam Altman’s trillion-dollar question isn’t whether he can achieve AGI, but whether he can sell OpenAI stock at the highest possible price. He has finally found his moment to sell, and that moment is now.

This is also why IPOs generally underperform at first: They go public when investor exuberance is at its highest. One study found that within twelve months, the average tech IPO experiences a maximum price decline of … negative 55%. That means you can assume with relative confidence that at some point over the next twelve months SpaceX will be cut in half. Greed is a powerful and fleeting force, but AI greed may be more powerful and more fleeting.

Ghost IPOs

Homeowners hate it when large apartment complexes get built in their neighborhood. In addition to opening their community up to “the masses,” it also reduces the value of their homes. A similar event is about to take place in the stock market. SpaceX + OpenAI + Anthropic is the equities-equivalent of a residential megacomplex: Exciting for new residents, but bad for existing ones.

The critical question will be whether investors actually have the hundreds of billions of dollars these IPOs are asking them to spend. If they don’t, one of two things will happen: Either 1) they’ll sell their existing tech positions to fund their new ones (thus putting downward pressure on the markets), or 2) they simply won’t buy these IPOs. Both outcomes lead to a stagnant market, the second one arguably more so.

I’m reminded of those underoccupied developments in China. Many years ago as part of a national urbanization effort, the Chinese government spent billions building massive apartment developments in underpopulated areas. It would have been a great idea had they not miscalculated population growth — instead of soaring, the population went down. The result? Hundreds of high-rise buildings and commercial plazas with no one in them. Billions of dollars in infrastructure investment gone to waste. “Ghost cities.”

Could SpaceX, OpenAI, and Anthropic be the Chenggong District of the US stock market? The investments that “could have been” but “never were”? The Ghost IPOs? I don’t know, but one thing is clear: If ever there was a time to buy, the time isn’t now.

See you next week,

Ed

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The past few days have been incredible. We started out in San Francisco, then flew to LA, where Scott and I were welcomed to the stage by Justin Theroux. Don’t ask. Then we went to Miami — directly after the show my team and I stayed out till 5am at Club Space. (Questionable decision but good for morale.) Then to Chicago where Scott and I interviewed JB Pritzker. The Governor had also been up till 5am — not partying, but passing state legislation. And now I’m here in the sky … somewhere between Pittsburgh and Newark.

I don’t have time to write a regular post, so this week I’m writing a quick tour diary. Here’s everything I’ve learned from our very first live podcast tour.

San Francisco

For some reason I didn’t expect the SF crowd to “bring it” — I was dead wrong. San Franciscans are nerds, but rowdy nerds. It was an evening of shouting, clapping, heckling, and a lot of laughs. In keeping with the tech-bro theme Scott and I entered the stage in Patagonia vests (and immediately removed them). I also began the show with a reading of some of Scott’s greatest quotes about VCs. For example, how there are “few cohorts less pleasant and more convinced they’re changing the world than venture capitalists,” or how VCs are — and I quote — “the worst fucking people in the world.” Lovely.

We got into the only subject that matters in that city: AI. Or, more specifically, how expensive AI is turning out to be. From Uber to ServiceNow, companies across America are burning hundreds of millions of dollars on AI tokens, and in many cases, blowing through their budgets. One employee racked up a $150,000 Claude bill in a single month. While tech companies have the money to do this, they’re not yet seeing the ROI — and that’s a problem. When asked about the benefits of AI adoption, Match Group’s CEO said it best: “it’s hard to feel it.”

It wouldn’t be an AI podcast if we didn’t discuss the IPO race. SpaceX and Anthropic have filed, and OpenAI plans to. The most staggering thing about these IPOs is the size. At their projected valuations, these three companies will be more valuable than every dot-com IPO put together.

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Los Angeles

On our LA docket was a discussion of the future Hollywood — and who better to tell us about that than the co-CEO of Netflix, Ted Sarandos. In addition to being extremely likeable (part of the job), Ted made some interesting points. I asked him about the clip economy, for example, and social media’s impact on entertainment. His view is that Netflix’s domain is and always will be the big(ger) screen — specifically, TV. As addicting as scrolling might be, there are few things more addicting than a really good show. You can check out that interview here.

Miami

Following a “champagne parade” in which the audience was indiscriminately showered with Veuve and Don Julio 1942, Scott and I had a thoughtful discussion of taxation — or, more specifically, taxation of billionaires. Florida felt like the right place to have that conversation, as practically every billionaire is moving there.

Why? For Ken Griffin it was because of Florida’s “traditional values.” For Bezos it was to be “closer to my parents.” Supposedly the zero income tax, zero estate tax, and zero capital gains tax had nothing to do with it. (And we’re supposed to believe these people.)

Miami is also the crypto capital of the world, so we discussed that industry too. I expressed my distaste for it — specifically the fact that one-fifth of Gen Z investors only own crypto, and at the same time it’s (generally) a terrible asset-class: 84% of crypto traders lose money. This is part of a larger trend among young people, who are increasingly struggling to build wealth via traditional means, and turning to what I call “casino assets” instead, not just crypto.

Chicago

Next up, Chi-Town. I spent the morning researching what Chicago’s “thing” is. Turns out it’s hot dogs. Believe it or not, Chicago Hot Dogs are a $10 billion industry, meaning they generate more revenue than JetBlue, Ralph Lauren, and Ferrari. This is the kind of hard-hitting data we like to begin our shows with.

Then we had on Governor Pritzker, who shared with us his thoughts on AI regulation, data centers, housing policy, fiscal responsibility, and much more. He was characteristically charming and polished (big “dad energy”), but what blew me away was how much the crowd loved him. As soon as he walked on stage … raucous standing ovation. Clearly he’s doing something right.

Scott and I soon had a data-center discussion of our own. This was venue-appropriate as Illinois already has 139 data centers — the fourth-highest number in the country. That’s in addition to the 120 data centers that are planned … but likely to be delayed or restricted. Why? Because, as I predicted several months ago, local residents hate them. Yorkville, for example, just filed two lawsuits to block data center construction, Lockport just postponed all data centers indefinitely. This is a national trend: Seven in ten Americans are opposed to local data center construction. Their reasoning is … reasonable. Data centers are noisy, ugly, and drive electric bills through the roof. Until AI leaders can present voters with a tangible set of benefits that outweigh the costs, their zoning problems are only going to get worse.

NYC

Tomorrow we’ll be joined by one of my favorite regulars on our show: Anthony Scaramucci. I’ve gotten to know Anthony quite well over the past year. He’s one of those guys that can talk about anything: politics, policy, markets, economics — and somehow finds a way to make you laugh throughout. We’ll be covering as much as we can with him.

But before that, we’ll be joined by a very special surprise guest. Believe me when I tell you I want to reveal who it is. But that would … ruin the surprise. My only hint is the following: I have absolutely zero business interviewing this individual. (You’ll see what I mean.) Either way, I’m going to make it the best interview you’ve seen.

OK, we’re about to land, and I can see the lights of Manhattan. That’s my cue to go.

See you next week,

Ed

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The go-public may also make Elon Musk the first trillionaire, pushing his net worth to roughly 3.6% of the GDP of the U.S. (the richest American ever). At $2 trillion, SpaceX would be the seventh-most valuable company in the world, more valuable than Meta, Walmart, JPMorgan, and even Tesla.

That’s why I was anxious to read SpaceX’s IPO filing, the first real look into the company’s financial statements, which finally dropped late last week. At 277 pages, the document is longer than The Great Gatsby and The Catcher in the Rye. And while not as captivating, it might be more consequential than either of those novels, as the words on the page will be the determinant of trillions of dollars.

This post is an examination of the SpaceX filing. To be blunt: It’s a trainwreck. Unserious, empty, hallucinatory, and borderline dishonest. I’m not exaggerating when I tell you I was shocked to see what I saw. So let’s get into it.

Hopeium

The trouble starts at the very beginning of the document. After eighteen images of rockets in space, we learn that the company’s mission is “to extend the light of consciousness to the stars.” To accomplish this, the company plans to advance humanity “to Kardashev Type II status,” which is defined in the document as “a civilization that harnesses the full energy output of its local star.” Only a few pages in and it’s already starting to feel like an ayahuasca trip.

We soon learn that psychedelic language is part-and-parcel of the pitch. “The light of consciousness” (sounds like WeWork’s old slogan?) is mentioned ten different times in the document. Meanwhile “human augmentation” is mentioned eleven times, and “first principles,” twenty-seven times. AI gets a mind-boggling 1,251 mentions — more features than the word “Jesus” gets in the Bible.

SpaceX-stasy

Once you arrive at the financials you start to realize what the language is overcompensating for: awful numbers. The company generated $4.7 billion in Q1 2026, up only 15% from the year before (very low for an “AI company”). It also lost $4.3 billion, up 700% from the year before. That means the company is spending roughly twice as much as it makes (and on pace to explode those losses even more), while growing its topline six times slower than Nvidia and two times slower than my own podcast. There’s no getting around it — these numbers are terrible.

But it gets worse when you compare those numbers to last year’s. Revenue grew 33% in 2025, meaning the business has actually started to decelerate. Meanwhile net losses came in at $4.9 billion, so the company is on track to lose four times more money than it did last year. I’ll put it simply: slowing revenue + skyrocketing expenses = not good.

Pricing Problems

I’d have no problem with SpaceX’s sh*tty financials if they were reflected in the valuation — but they’re not. The stock is set to be priced at 107 times sales, which would make it one of the most expensive stocks in history. (The most expensive stock in the S&P 500 is Palantir, which trades at 64 times sales). It will be twice as valuable than Walmart while generating less revenue than Macy’s.

Maybe this is just the nature of blockbuster IPOs? No. Compared to previous go-publics, SpaceX’s valuation falls nothing short of insane. Meta went public at 28 times sales with 88% revenue growth. Google went public at 10 times sales with 234% growth. Put another way, SpaceX is growing seven times slower while asking for a multiple ten times higher. Pass me the crack pipe.

Ke-TAM-ine

How did they reach such a stupid valuation? With stupid financial projections. SpaceX claims to have “identified the largest actional total addressable market (“TAM”) in human history,” worth (wait for it) $28.5 trillion. That’s larger than the GDP of Europe or China. If this sounds dumb to you that’s because it is.

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It gets even dumber when you learn the company attributes less than $2 trillion of that TAM to space and satellites. Isn’t this a space company? Where’s that $26 trillion coming from? I’m asking the question but you already know the answer. Two letters: AI.

AI-huasca

AI is where this business comes off the rails. While other parts of the business make sense, — such as connectivity (i.e. satellites), which generated more than a billion dollars in profits last quarter — SpaceX’s AI unit is essentially a giant sinkhole. The segment generated less than a billion dollars last quarter while spending more than three billion. Total AI losses for Q1 2026? $2.5 billion. That’s in addition to a ridiculous quarterly AI CapEx bill that came out to $7.7 billion. #MoneyFurnace.

Strangely, the AI unit was not part of the company until a few months ago, when SpaceX acquired Elon’s other startup xAI for an implied $250 billion. Why purchase this seemingly bad business? Because it spices up the sales pitch. SpaceX can now be sold not just as a “space company,” but also an “AI company.” It allows the company to increase its “TAM” by $26 trillion while expanding its multiple. In fact, the filing mentions AI 23 times more than space. This is an intentional sleight of hand trick to make it seem like the core business (building rockets) isn’t the core business.

EBITDon’t

Elon stans will argue SpaceX is profitable on an EBITDA-basis, which is true. The problem, however, is in the D and the A. While EBITDA can make sense for evaluating companies with low capital expenditures, it makes no sense for a company that builds rockets. The depreciation and amortization costs at SpaceX are gigantic — stripping them out in your financial analysis makes no sense whatsoever.

Exit Liquidity

So who will actually buy this thing? Management believes retail is the answer. SpaceX is reserving 30% of its shares for retail investors, three times larger than the average IPO. The expectation is that die-hard Musk fans will buy the stock no matter what — a bet on the “dumb money.”

The other big buyer will likely be you. Elon negotiated a “fast entry” deal with Nasdaq so that SpaceX will be automatically included in the blue-chip index. That means billions of dollars of passive money will automatically flow into the company as soon as it lists. In other words, if you own the Nasdaq, you’re about to own SpaceX.

Return To Earth

If we apply comparable market multiples to each of SpaceX’s three business lines (space, connectivity, and AI), we arrive at a sum of parts valuation of $550 billion. That would be a reasonable valuation of SpaceX. However, it’s roughly 75% less than the target.

The only way to get yourself mentally to $2 trillion is to believe that every possible sci-fi objective will be achieved, from data centers in space to asteroid mining to building cities on Mars. Once you’ve done that, you then have to convince yourself that each of those endeavors will also make money. There’s optimism, and then there’s delusion. As Patrick Boyle told us on the pod last week, SpaceX is more a science experiment than a business.

It’s a shame because I used to like this company. I’m fascinated by space travel and I believe we owe it to ourselves to better understand the universe. But there’s a time and a place for childlike wonder, and valuing companies is not that place.

Needless to say I won’t be buying the SpaceX IPO. Not until it returns to earth.

See you next week,

Ed

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In previous months, wages rose faster than inflation. That’s no longer true. Real average hourly wages fell last month for the first time in three years. As a result, consumers are not happy: The University of Michigan consumer sentiment index just hit its lowest level in recorded history.

Two forces are driving this pain: 1) Tariffs: It’s estimated Trump’s tariffs cost the average household $1,000 in 2025 – a figure set to rise to $1,300 this year. 2) The Iran War: Since Operation Epic Fury began, the price of goods like oil, fertilizer, and food has exploded – price hikes costing the average American household $410 a month. Undo these actions and prices will moderate over time. Carry on and they’ll continue to rise. This momentous decision lies in the hands of one man. Last week, President Trump revealed the plan. In sum: Expect inflation to get worse.

Who Cares

For most Americans, inflation matters a lot. It’s the difference between saving vs. spending, vacationing vs. staying at home — and, for 34 million Americans, eating vs. going hungry.

But there’s one group who’ve decided inflation doesn’t matter at all: investors. Last week’s worse-than-expected inflation report had almost no impact on stocks. Aside from an initial dip, the highly inflationary war in Iran hasn’t made a dent either — the S&P 500 is up over 7% since the war began. Despite some initial bickering, investors have reached their final conclusion on the war and its price impacts: “We don’t care.”

Why don’t investors care about inflation? On its face, their reasoning is actually quite sound. While inflation is painful for consumers, it’s NBD for stocks. Technology companies now account for nearly half of the entire S&P 500 (the top ten make up 40%), and none of them are affected by higher gas prices. If the war made it impossible to ship, say, software then it’d be a different story, but it doesn’t. So, when it comes to consumer inflation, technology companies — and therefore, the stock market — are “insulated.”

Feels Like ‘22

I’ll cut to the chase: I disagree. Let me take you back to 2022, a year that looked eerily similar to today, and which ended up being the worst year for the stock market since the Great Recession.

As with 2026, our big problem in 2022 was inflation. It was also triggered by two major forces: 1) Covid, which blocked up supply chains, making it harder to ship goods around the world thus raising prices. 2) The Ukraine War, which resulted in Russia cutting off its oil supplies and driving up fuel prices around the world. (Side note: neither were self-inflicted.) Like bankruptcy, the crisis happened slowly then suddenly. U.S. inflation hit 4% in April 2021. Within twelve months it had doubled.

For the same reasons they aren’t too worried today, investors weren’t too worried then. Per a March 2022 Baird report, the tech industry offered “very limited direct exposure to higher input prices.” Conventional wisdom was that consumer inflation doesn’t hurt the stocks that matter (tech).

But then … something strange happened. Meta reported their ad business was slowing. This was surprising but not awful. Then came their cardinal sin in Q2: For the first time ever, the company’s revenue declined.

What seemed impossible soon became standard. Meta later reported that ad revenue had fallen even further. Snap’s revenue flatlined. YouTube’s revenue shrunk. Google’s search business went into decline, as did the company’s ad network. The digital ad market was collapsing, and the biggest victim was Big Tech.

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Why did this happen? Meta’s 2022 SEC filing lays it out perfectly: “As macroeconomic pressures reduce the likelihood of consumer purchases of discretionary goods and services, advertisers are more likely to reduce their spending as they anticipate a lower return on investment.” In other words, consumers were spending less (due to inflation), which caused advertisers to spend less too, which … hurt Big Tech.

It was at that moment we realized how unprotected tech companies really are, as they rely heavily on advertising. Ads make up almost a tenth of both Amazon and Microsoft’s business. For Google, about 75%, and for Meta … almost 100%. Most of us already knew that less advertising meant less Big Tech revenue. What we forgot, however, was that less shopping also meant less advertising. As a result, Big Tech was a victim of inflation. Their pain just showed up further down the chain.

The hit to equity markets was enormous. Google stock fell 38% that year. Amazon fell 49%. Meta, 65% The Nasdaq dropped 30%, its worst year since the dot-com crash. The tech industry was brought to its knees by none other than the thing it was supposedly impervious to. And here we are again, calling markets “insulated.”

Chain Reaction

You can see how this might all play out today: Tariffs remain intact. The Strait of Hormuz remains blockaded. Oil prices continue to rise. Higher freight costs lead to higher wholesale costs, which lead to higher retail costs. Consumer spending starts to fall. Ad budgets get restricted. Instagram CPMs decline. Big Tech revenues go from double-digit growth to single-digit growth to no growth at all. With each falling domino, a step-change in Mag-7 multiples. And then … boom: bear market.

You might say this year won’t look like 2022 because of AI. You might say we’re less dependent on digital advertisers because of, say, Nvidia and Broadcom. That’s true, but remember who Nvidia and Broadcom depend on: digital advertisers. Meta, Google, Amazon, and Microsoft make up nearly half of Nvidia’s revenue. Fifty percent of Broadcom’s revenue comes from five (unnamed) companies. It’s widely agreed that three of them are Google, Meta, and TikTok.

You might then argue that lower ad revenues don’t necessarily mean Big Tech won’t spend big on Nvidia chips. History suggests otherwise. One of Meta’s first moves after they reported bad earnings in 2022 was to reduce CapEx by about 13%. Amazon did the same thing. Google went from 30% CapEx growth to 2%. It became known as the “Year of Efficiency” — three words that would make Jensen Huang throw up if he heard them today.

We’re actually more dependent on these companies in ‘22. AI spending drove two-thirds of GDP growth last quarter. It’s expected to make up 40% of earnings growth in 2026. America is a giant bet on AI — or, more specifically, a giant bet on Big Tech spending gobs of money on AI. Do anything to change that, and portfolios could go kaput.

Hut Hut Hike

Inflation is already starting to break down the original bull thesis for 2026. Going into the year, we all agreed we were entering a lower interest rate environment. It wasn’t necessarily our reason to be bullish, but it was certainly our reason not to be bearish. Ever since we bombed Iran, however, that argument has collapsed. It’s unlikely we’ll see any cuts this year, and after last week’s inflation print, the chances of a rate hike rose to 37%. Rate hikes hurt stocks in ‘22 — they could hurt them again this year too.

I’m not saying any of this is inevitable — I’m simply saying it’s possible. So far investors have disregarded this fact.

Optimists

The big question: Why are investors telling themselves the same story they told in 2022?

On the one hand, there are various scenarios in which a 2022-like bear market would not play out. Maybe the Iran War will come to a swift conclusion. If not, maybe consumer spending will stay resilient in the face of inflation. If not, maybe ad budgets will keep growing anyway. If not, maybe Big Tech will keep spending like there’s no tomorrow. Lots of ifs, lots of maybes … but it’s all possible.

Ultimately, however, I don’t think investors are all too interested in these questions, because they know getting rich largely comes down to one thing: optimism. Almost no one has gotten rich shorting the market. Even fewer have gotten rich not investing in the market. The truth is, there’s simply more money to be made when stocks go up — and it’s the investor’s job is to imagine every which way that could happen. Investors are, by definition, optimists.

Are they right? Over the long term, yes. The S&P 500 has risen 107% since its 2022 low. The Nasdaq has risen 153%. While stocks do go down, generally speaking, they go up. That is the prevailing thesis driving markets right now, and though it might sound dumb, it’s true.

Learning

It’s late, I’m tired, and I have several podcasts tomorrow morning that I’m not prepared for. The more I consider how little time I have, the more anxious I become. My brain is telling me they won’t go well.

At the same time, though, most of my podcasts have ended up fine. Actually, better than fine: According to my podcast app, my latest is the 49th most-downloaded episode in the country. Come to think of it: If I had to put money on it, I’d bet tomorrow’s recordings will go well. Why wouldn’t they?

I’m learning.

See you next week,

Ed

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We’ll turn anything into alcohol. Barley, wheat, rice, grapes, apples, potatoes, milk, you name it. Mix in some industrialization and alcohol eventually became a multi-trillion dollar industry. We consumed 77 million bottles of wine per day in 2024. We know it’s not great for us … but that never really mattered, as the pros (laughter, excitement, romance, confidence, dancing, intimacy, fun) always outweighed the cons.

Even during Prohibition in the U.S., alcohol found a way. Russia once banned it too. So did Finland, Iceland, and Norway. Outside of theocracies, prohibition rarely lasts, and even in countries with strict bans enforcement is never 100%. To imbibe is human.

That’s why I was intrigued to see in this quarter’s alcohol earnings a striking trend: drinking is going down. Last week’s results from Diageo, the British conglomerate behind brands like Johnnie Walker and Guinness, showed the American spirits business had fallen by 15%. Before that Pernod Ricard’s U.S. business posted a 15% decline. Constellation Brands, which distributes beers like Modelo and Corona, reported a 10% drop in sales. While ABinBev managed to eke out a (barely) positive quarter, their results, tellingly, were buoyed by growth in non-alcoholic beverages.

Could it be that our thirteen-thousand-year love affair with alcohol is coming to an end? And if so, why? This is the trillion-dollar question we’ll now explore.

The Rumors Are True

If you had any doubts if the whole “drinking is dying” trend was actually real, let me now put those to rest. Only 54% of U.S. adults say they drank in 2025 — that’s down from more than 70% in the 1970s. Meanwhile, the share of Americans who say they’re trying to drink less has risen 15 percentage points in just a few years to 49%.

The lightest drinkers are those of my generation (Gen Z). Gen Z drinks 20% less than millennials did at our age. Which is striking, because millennials notably drank a lot less than their parents did. The share of people under 35 who drink at all dropped 10 percentage points over just two decades. The question isn’t whether young people are abstaining, but why.

Search for Answers

When asked this question, the Godfather of Nightlife, Diplo, pointed out that young people are more health-conscious than previous generations. They “don’t go to clubs as much anymore,” he said, “but they will go to experiences like a run club.” “The sauna world,” he added, “is exploding.”

Diplo isn’t wrong. Young people make up an outsized amount of annual wellness spend in America. We’re also four times more likely to want to meet people at the gym vs. at a bar. This is a fundamental shift in the way that we socialize, and it’s beginning to show up in the numbers. “Sober Curious” gatherings on Eventbrite are up more than 90%, and “Sauna Raves” are up 250%. I personally can’t picture anything worse, but that’s me.

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It’s gotten to the point where alcohol executives are now trying to rebrand alcohol as good for you. Per ABinBev’s CEO, “beer naturally has protein.” Perhaps this is how you get Gen Z to drink? Make it sound healthy?

Another potential explanation is the rise of GLP-1s. It’s reported that GLP-1 drugs can reduce alcohol consumption by as much as 75%. This is a seemingly perfect answer, as GLP-1 usage among Gen Z increased roughly 70% between 2023 and 2024 alone. At the same time though, Gen Z still makes up a tiny proportion of overall GLP-1 users — and certainly doesn’t account for the majority of us who aren’t drinking.

Maybe it’s cannabis, ketamine, or psychedelics? While these drugs are becoming increasingly normalized, their users still represent a very small portion of the Gen Z population. Meanwhile, researchers in Canada have found that the legalization of marijuana has had no discernable impact on population-level alcohol sales.

As much as I’d like to believe we’re the first generation in history without a substance addiction, something tells me that’s unlikely. It’s far more probable that we’ve simply substituted alcohol for something else. Hint: You’re using right now.

Screen-Pilled

In 2025, Gen Z spent an average of 7 hours and 43 minutes per day looking at screens, up nearly 5% from the year before. When you annualize that number it comes out to 118 days of the calendar year staring at a screen. For context, we spend roughly 122 days asleep — which leaves us with 125 days left over to do everything else.

The phone isn’t something you pick up anymore — it’s something you put down (briefly) when you have to. About half of American teenagers say they’re online “almost constantly,” and more than four in five Gen Zers associate social media with the word “addicting.”

Once you consider the sheer volume of social media consumption plus our inability to quit, it starts to become obvious why we no longer drink alcohol: We found something better. Compared to alcohol, screens are more addictive, more powerful, easier to access, and cheaper. They are also seemingly healthier. Unlike drinking too much, which might kill you or ruin your life, watching a couple of videos is harmless. Or at least, that’s the story we were sold.

Addicts

Addiction is defined not as uncontrollably using something over and over, but uncontrollably using something despite harmful consequences. In other words, an addiction only becomes an addiction once it makes your life worse.

This is where it becomes illogical not to classify Gen Z screen use as substance addiction, because the reality is that it’s ruining our lives. 80% of Gen Z reported feeling lonely in the past year, compared to 45% of Baby Boomers. Nearly half of Gen Z have already received a formal mental health diagnosis, anxiety being the most common. The U.S. Surgeon General has declared loneliness a public health crisis, warning that chronic isolation carries health risks comparable to smoking fifteen cigarettes a day. As Jonathan Haidt has proven, the single greatest predictor of these symptoms is an addiction to your phone.

Lesser Evil

Which is worse: An alcohol addiction or a screen addiction? I don’t have the answer but I think it’s a reasonable question. The death of drinking has been positioned as an embrace of healthy living, but the more you investigate the lives of young people the more you realize we’re anything but healthy. What we lack in liver disease, we make up for in depression. We’re healthy from the neck down and sick from the neck up.

Our prospects in life depend on our ability to navigate trade-offs. You can’t build a decent life in the digital age without significant screen time. But without moderation you risk losing your life to the screen. Both extremes — terminally online and permanently analog — are untenable. We have to use these substances — the question is how.

Last night I had dinner with friends and ordered a Negroni. After that, I had another one. After that, one more. Our dinner lasted nearly four hours, and by the end I was in that mood where I decided to pay for everyone. Would this have happened without the Negroni? I don’t know. Either way, it made me feel good, and so did spending a full uninterrupted evening with friends. No phones, no screens, no scrolling. Research says those drinks were bad for my health. My gut tells me otherwise.

See you next week,

Ed

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None of these events are existential, but each hit on big questions that have long plagued the company: 1) Does the business actually work? 2) Is Sam Altman a liar? 3) Is ChatGPT dangerous to society?

It’s especially bad timing considering Sam Altman and OpenAI are reportedly eyeing an IPO in the second-half of this year at a valuation of up to $1 trillion. Usually when companies IPO you get questions like: Who’s underwriting? What’s the float? What are the lock-ups? Less common is for investors to be asking whether the CEO is a sociopath.

Which raises another crucial question: What will happen once this company actually is public? How will Wall Street react when they actually do know the ins and outs of this business? I put this question to Reid Hoffman, one of OpenAI’s earliest investors. He told me it’s not his job as a venture investor to obsess over the financials.

At that moment I realized OpenAI is in for it. For years, the only investors Sam Altman has had to please are the venture capitalists who care more about technology than economics. As soon as the company goes public, however, they’ll learn that what works in Silicon Valley doesn’t necessarily work on Wall Street.

Missed Expectations

The big red flag for OpenAI last week wasn’t the Wall Street Journal’s report on the company, but the market’s reaction to it. Many of the largest companies in the world immediately took a beating. Nvidia fell more than 3%. CoreWeave fell 5%. Broadcom, nearly 6%. When you add up all the losses, the report resulted in a one-day erasure of roughly $350 billion.

That number should make you think the report revealed something terrible. But it really didn’t. All we learned is that OpenAI missed its revenue and user targets for 2025. Do we know how much they missed by? No. Do we know what their revenue target actually was? No. All we know is that they missed. And that was enough to knee-cap the Nasdaq.

Committed

Before we get into what we don’t know about OpenAI, let’s establish what we do know. 1) We (sort of) know the company generated roughly $13 billion in revenue last year. 2) We know they generated $2 billion in revenue in a month this year. 3) We know they plan to spend $600 billion over the next five years. And 4) we know that over the next decade, that number will be roughly a trillion.

These numbers are vague and largely unhelpful, but let’s work with them. OpenAI’s spending will be allocated across seven main vendors: Broadcom, Oracle, Microsoft, Nvidia, AMD, Amazon, and CoreWeave. The Oracle deal requires OpenAI to hand over $60 billion a year starting in 2027. That’s more than Oracle’s entire 2025 revenue, and almost five times OpenAI’s. The AMD deal works in a similar way: AMD gave OpenAI a discount on its stock in exchange for a $90 billion GPU commitment, a bet that only pays off if OpenAI actually has $90 billion to spend. The Nvidia arrangement is the most circular: Nvidia invested $100 billion into OpenAI paid largely in chips, meaning Nvidia’s balance sheet is now hostage to the same growth story. The bottom line: The trajectory of all of these companies are now dependent on OpenAI achieving its goals.

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But those goals are increasingly unrealistic. It’s estimated the company will need to grow revenue from $13 billion to more than $500 billion by 2029 just to cover its compute costs. That’s more revenue than any American company generated in 2025 aside from Amazon and Walmart. OpenAI has to do that without a retail business, and they have to do it in three years.

What We Don’t Know

OK, now let’s talk precisely about what we don’t know. We don’t know OpenAI’s actual cost structure. We also don’t know its gross margins, its operating losses, or its burn rate with any precision. We don’t know how much it costs to run ChatGPT per user, or whether that number is improving. We don’t know whether its $25 billion in ARR is growing fast enough to justify an $850 billion valuation, because we’ve never seen an audited financial statement. While we do know their internal projections of profitability, we don’t know how realistic those projections are nor can we trust them, as the spending plans are constantly changing. We also don’t know if we can trust any of the other numbers, because according to an OpenAI board member, CEO Sam Altman is “unconstrained by truth.” In sum: We really don’t know anything about OpenAI.

If this were an ordinary startup that might not be a big deal. But this isn’t an ordinary startup; it’s a trillion-dollar startup, one on which the momentum of the entire global stock market largely depends. That was proven last week when one shred of arguably meaningless information erased $350 billion in a matter of hours. What will happen when we unearth something bigger?

The Reckoning

The nice thing about staying private is you don’t have to tell anyone anything. This is one of the reasons so few companies go public nowadays. But there’s a ceiling to how many $40 billion private rounds you can raise. Eventually, OpenAI will have to go public. And when they do, Sam Altman will be legally required to do what he’s supposedly avoided for many years: Tell us the truth. At that point, the markets (which have thus far priced off of podcast appearances and press releases) will have to contend with what the numbers actually say. That reconciliation is going to be ugly.

One of the most damning details is the fact that the company’s CFO, Sarah Friar, desperately does not want it to go public this year. It’s gotten to the point where she is now being reportedly actively excluded from investor meetings. A look at her background and you can understand why: She’s a McKinsey and Goldman alum who later wound up as the CFO of Block. In other words, she’s a Wall Street veteran … who knows what other Wall Street veterans will think.

Meanwhile, the Silicon Valley golden boy continues to post across the timeline about the future of artificial general intelligence. His latest area of interest: Algorithmic goblins. Has he told us anything of substance as it relates to the actual business? No. Does that matter? No, nothing matters compared to AGI.

It’s possible that OpenAI’s extraordinary burn will pay off. But the other version of the story — the one that last week’s news seemed to indicate — is that the entire thing is being held together by a collective agreement not to ask difficult questions. So far our questions have been avoidable, but eventually they won’t be. At that point we’ll learn which version of the story is true.

See you next week,

Ed

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That’s a sentence you’ve likely heard a lot this year. It’s a sentence that captures our current moment — the underlying feeling that every major headline is a diversion from the real story. Call it the “Epstein Theory of Distraction.” Is it real? Is our war with Iran actually just a decoy? I don’t know. But if it is, the data would suggest it’s working.

There are other theories of distraction that have also gotten popular. The Insider Trading Theory of Distraction, for example: Trump is “flooding the zone” to distract from the millions of dollars his inner circle has made trading on insider information. Or the Crypto Theory of Distraction: All of “this” is a ploy to make us forget the billions of dollars his family has made on digital Ponzi schemes. There are many distraction theories out there, but they all adhere to the same premise: The headlines are designed to distract us from the crimes the President has actually committed.

I’ve always found these theories a little ridiculous. For two reasons: 1) They’re conspiratorial, and 2) they act as if it’s on us (the public) to solve crimes. But that’s just not how the law works. It’s the police’s job to fight crime — our attention span has nothing to do with it. So why are we suddenly acting like it’s our job? Why are we all moonlighting as cops?

By the end of this post we’ll conclude that these theories are, in fact, not ridiculous. Actually, they’re quite reasonable. Because while catching criminals is obviously the police’s job, we are increasingly learning that America no longer has a police. (Or at least, the kind of police that would catch sexual predators and fraudsters.) This is part of a larger movement that’s grown popular in Washington to defund and dismantle federal law enforcement — an effort which I call … “Defund The Police.”

The Defund the Police movement has many supporters, but its greatest champion is (ironically) Donald Trump. That might sound crazy, but the point of this post is to show you that it’s true. Under his leadership, American law enforcement has been systematically disarmed, weakened, and ultimately neutralized — to the point where it may as well not even exist.

But before we unpack this movement, let me first prove to you that it’s real. In this post we’ll take a tour of the Defund the Police campaign. We’ll examine the various sites of wreckage that have now rendered our law enforcement anemic, and unearth the history of the most alarming trend no one is talking about.

Site #1: The Department of Justice

We begin our tour with the agency most responsible for (mis)handling the Epstein Files. The collapse of the DOJ was in many ways made self-evident when, instead of cooperating with questioning regarding the President’s potential involvement in a sexual abuse scandal, the Attorney General chose to brag about the performance of the Dow. Pam Bondi aside, there’s still plenty of other evidence to unpack.

For one, staffing at the Department of Justice has been significantly cut. Some divisions, such as the National Security Division and the Civil Rights division, have seen their headcount reduced by roughly half. In an alternate universe that might have been a story of efficiency, but in this one it’s a story of incompetence. Federal drug trafficking enforcement has dropped to its lowest level in more than twenty years. Prosecutions against white-collar crime are on track to reach a record low. We discussed this a few weeks ago.

But it’s not just that employees are getting thrown out — it’s why they’re getting thrown out. In most cases, it’s for doing their job. Take Gail Slater, for example, the DOJ’s (former) antitrust chief, who got in trouble after she tried to break up a $14 billion merger after flagging that the acquirer had a compromising relationship with the Trump administration. Ms. Slater was swiftly overruled, the merger was approved, and two of her deputies were soon fired for “insubordination.”

It wasn’t long before Slater was herself ousted. That conveniently happened right before the landmark Live Nation-Ticketmaster trial. Most had agreed this was a layup for the DOJ. (The combined company has an 86% market share.) So it was strange that just a few weeks later the DOJ reached a secret settlement with Live Nation, preventing the merged entity from being broken up. Soon after, four of the department’s most prominent antitrust lawyers quit in protest. Clearly they’d tried to do their jobs, and someone didn’t let them. We’re just getting started.

Site #2: The SEC

You might have noticed that insider trading has become rampant in the past year, and you might be wondering why. The answer is that the SEC, the agency whose job is to prevent these crimes, is asleep at the wheel.

The SEC brought only 56 enforcement actions against public companies last year — the lowest transition year in a decade and down 30% from the year before. Those numbers are generous, however, as 93% of those actions were filed before the administration change. In other words, Trump’s SEC brought only four enforcement actions. Four. Meanwhile, monetary settlements have been cut in half, and disgorgement collections (essentially, repayments for ill-gotten gains) have hit a record low.

This all comes amid a targeted defunding of the SEC. So far, the agency has lost roughly 15% of its workforce. As with the DOJ, those who try to do their jobs get pushed out. Margaret Ryan, for example, the agency’s enforcement director, recently expressed interest in bringing charges against members of the Trump family (who’d quite clearly engaged in insider trading). This was apparently no-no. Ms. Ryan was soon admonished by her superiors, and within a few weeks she was gone.

Every insider trading scandal you’ve seen — from the mysterious oil bets made minutes before Trump’s ceasefire comments, to the suspicious puts placed right before the tariff announcements — should have been dealt with by the SEC. Even Megyn Kelly has voiced concern. Many are asking the pertinent question: Can’t the SEC simply identify the people who made these trades? The answer is sad but simple: Yes they can, but they no longer want to.

Site #3: The CFTC

The CFTC is like the SEC, only their focus is commodities, derivatives, and in some cases, crypto. Either way, they’re also in the financial crime prevention business — and the story is similar.

Last year the agency’s headcount was reduced by a fifth. Their Chicago office, historically the hub for their most complex cases, went from 20 enforcement lawyers to zero. This would all be fine if they’d gotten better at stopping crime, but they’ve gotten worse. Last year they filed 80% fewer enforcement actions than the previous. They also collected less than $1 billion in penalties, down from $17 billion the year before. If it weren’t for cases filed before Trump took office, however, the real number would be even smaller: $10 million. In other words, the CFTC literally isn’t doing its job anymore.

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The agency has rotted from the head down. While it’s historically been led by a commission of five (as is still stated on its website), the department currently has just one. That’s because the White House hasn’t bothered to nominate the other commissioners. Actually, that’s not entirely true. Trump did put forward another candidate, but his nomination was stalled and withdrawn. Why? Many reasons, including conflict of interest: He sits on the board of Kalshi, the prediction markets company the CFTC is supposed to regulate.

Site #4: The FTC

You may know the FTC as the agency that regulates antitrust, but that’s not all they do. Their main gig is stopping companies from defrauding people. They are increasingly not doing that.

It started with layoffs. First, Trump fired both of the FTC’s commissioners, leaving the agency without a quorum. Then the new chair decided to lay off 10% of the staff, bringing headcount down to its lowest level in a decade. Eventually, cases were dropping like flies. The PepsiCo price discrimination suit, which sought to address the company’s practice of offering preferable pricing to large corporations like Walmart, was cancelled. The Microsoft-Activision Blizzard suit, which tried to block an anticompetitive merger, withdrawn. It soon became clear that the real goal of the FTC was to delete itself. No more cops, in the name of liberty.

Site #5: The IRS

Our final stop is the IRS. These are the guys who are supposed to stop tax evasion. Emphasis on supposed to.

DOGE was the beginning: More than 3,600 revenue agents were fired in one go. But the gutting continued. Overall headcount fell more than 25%. Over at the Global High Wealth division (the unit that audits billionaires) that number was nearly 40%. This has led to a collapse in audit rates — especially for the ultrawealthy — with 2025 marking a historic low. According to many tax attorneys the IRS is now a “zombie.”

What’s even more striking is that the IRS had already been in decline. The agency’s staffing levels are now far below those of the 1990s. In the 2010s alone, the IRS’ enforcement budget decreased by nearly 30%. Over the same period, the audit rate for those making over a million dollars fell by 70%. People wonder how corporations still get away with not paying taxes, or how America is losing a trillion dollars to tax evasion every year. The answer is simple: No one is enforcing the law.

Accelerant

Washington’s Defund the Police movement was undeniably championed by President Trump, who called it “the largest deregulation campaign in history.” But he didn’t start it. This is a story that spans decades, across multiple administrations and parties. White-collar crime prosecutions have been sliding for years — down 60% from 1995. The same is true of federal corporate prosecutions, which are also in free-fall. The prosecution rate for white-collar criminal referrals has fallen to 24% — a record low, meaning three out of four referrals are simply declined. In other words the movement is structural, and Trump is merely an accelerant.

The longer this goes on the worse it’ll get. Last year marked the largest one-year reduction to the federal workforce since the demobilization of World War II. If the outcome of laying off millions of cops were a decrease in crime, then great. But that’s not what we’re witnessing. Insider trading is now ubiquitous. Tax evasion is standardized. There’s no better reason to commit a crime than the knowledge you won’t get caught, and no better time to be a criminal than now.

Refund The Police

I began this post with a snarky question: Why are we all moonlighting as cops? I hope the answer is now clear: because there are no more cops. The reason regular citizens suddenly feel the need to investigate insider trading is because no one else will. The same is true of crypto fraud and the Epstein Files. Put another way, the cops aren’t coming. Those who don’t yet understand this will eventually.

So I end this post with a proposal to start another movement — one that was once espoused by the Republican Party, but in recent years seems to have been abandoned. I call it “Refund the Police,” and the thesis is simple: If you want to reduce crime, hire more cops.

We can also call it “Law and Order” or “Tough On Crime.” Either way, these slogans have been abused and perverted by leaders who’ve systematically exempted themselves from the bounds of the law. The cops are now nowhere to be found.

We created the police because we learned what happens without them. We’re about to learn again.

#RefundThePolice.

Ed

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Two months ago I wrote a piece arguing that AI’s greatest obstacle isn’t energy supply or compute, but its lack of popularity. I’d noticed how public sentiment towards AI was souring. More and more Americans said they either didn’t like AI or didn’t trust it. So my contention was that if the AI buildout were to fail for any reason, it wouldn’t be for the reasons Wall Street had worried about — it would be because America hated it.

A month before, I wrote a similar piece called “Death or Taxes.” I argued that wealth inequality in America had become untenable, and that the next logical chapter in the story was either mass redistribution or violence. This view was based on history. Every previous society whose wealth disparities had reached levels like ours were ultimately unwound by war and bloodshed — from revolutionary Russia to revolutionary France.

So you’ll understand why last week, I was shocked but not surprised to read the following disturbing headline: “Suspect in attack at Sam Altman’s house aimed to kill OpenAI CEO, warned of humanity’s extinction from AI”. And then, two days later, a similar one: “Sam Altman’s house targeted in second attack; two suspects arrested.”

Two assassination attempts on the CEO of OpenAI in one week. One thought came to mind: We’re just getting started.

How Did We Get Here?

Let’s first be clear: These attacks are reprehensible. It doesn’t matter what you think of Sam Altman. He does not deserve to be attacked or harassed, let alone murdered. But just because they were wrong doesn’t mean they were unexpected. To understand how we got here, you have to understand the broader context.

Some numbers: In a few months time, America will be home to roughly 36 million people living in poverty (a tenth of the population) and also the world’s first trillionaire. Assuming the SpaceX IPO goes to plan, Elon Musk’s net worth will be equal to roughly 3.2% of U.S. GDP. That’s more than double what John D. Rockefeller’s net worth was in the late 30s, meaning Elon will be, on a relative basis, the richest man in U.S. history. The top nineteen households in America now control roughly 2% of the nation’s total wealth — more than the bottom 65 million put together. The top 1% own half of the entire stock market. Many Americans feel our system is rigged, and they’re increasingly rallying around a collective disdain for a specific demographic: billionaires.

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At the same time, AI technology has promised to upend our economy, from eliminating millions of jobs to concentrating unprecedented levels of wealth. It makes sense, then, that AI has become linked to those same circumstances millions are so upset about. AI has already minted fifty new billionaires in 2025 alone and made existing billionaires roughly half a trillion dollars richer. Since ChatGPT was released in 2022, the wealth of the top 1% has risen by $15 trillion. For the roughly 40% who don’t own stocks, AI’s made them zero dollars.

So when you ask Americans how they feel about AI, it’s no surprise that the only group that feels net positive about it are … people who make more than $200,000 a year. As you go down the income ladder, AI anxiety gets worse and worse. Put another way, the average American’s support for AI can best be estimated by the following simple question: Are you rich, or are you poor?

PR Problems

OpenAI is aware of the problem and working to address it. Sam Altman recently said that if AI were a political candidate, “it would be the least popular one in history.” He’s right. In fact, AI is now less popular than ICE. So Sam is now working on cleaning his image. He recently acquired a tech podcast which he hopes will offer “better marketing for AI,” and has also gone on some popular shows such as Theo Von’s and Stephen Colbert’s. Points for trying.

But the truth is no amount of PR will fix AI’s underlying problem. Yes, there’s bad PR (such as saying your technology will cause an economic apocalypse), but so long as U.S. wealth inequality remains this severe, no one’s going to start feeling good about the technology. The issues simply run deeper than that. In other words, AI’s problem isn’t messaging — it’s policy.

This, however, is where AI leaders are put into a tough spot, because the reality is they have been advocating for policy change. Dario Amodei has proposed various policies to offset the disruptive force of AI. OpenAI recently called for higher taxation and wealth distribution. The trouble isn’t that AI CEOs don’t get it. The trouble is that policymakers aren’t listening.

Let’s Do Nothing

Few individuals have done less for AI than (former) AI Czar David Sacks whose literal job was to do something about AI. Instead, he made it a point of pride to do nothing — and it’s now coming back to bite the industry in the form of Molotov cocktails.

As electric costs surged and billionaire wealth ballooned, Mr. Sacks sought out federal policy that would literally ban states from regulating AI. He also established an “AI taskforce” (promising), whose purpose was to hunt down AI policy proposals and terminate them (oh). David Sacks set the tone for AI policy, which Trump ultimately adopted: Don’t let anyone regulate AI. As I’ve written before, this policy was the product of a Libertarian Mind Virus that’s infected the minds of leaders across the nation — the belief that regulation of any kind is un-American and awful.

The sad truth about our government is that we’re systematically dismantling it. From the defunding of the IRS to the erosion of the DOJ, the past several decades of U.S. policymaking have been characterized by a steady decay. Our last congress passed fewer bills than any in modern history. Billionaires wanted no government, and no government they got. The irony is that by doing this, they stripped AI of the one thing it needed to fix itself.

The Next Chapter

If AI can neither message nor regulate its way out of odium, then the most likely outcome is things will continue as is. That means more “isolated incidents” to the point where they’re no longer isolated. America’s wealth Gini coefficient now sits at 0.83, equal to Revolutionary France. If the French’s response was to cut people’s heads off, is attacking Sam Altman an isolated incident or the response?

Either way, executives are getting wise to it. Nearly forty percent of S&P 500 companies now provide private security for their executives, up from 24 percent just four years earlier. Private security is the “hot” sector all of a sudden. There are now twice as many private security guards in America than policemen. They know what’s coming.

I have no interest in violence or revolution. As I’ve said before, the easiest way to avoid our fate is taxation. But money is a hell of a substance – and like the One Ring, it gives you powers. The capacity to stop at nothing, and the ability to lose everything.

See you next week,

Ed

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For this week’s post, I’d like to turn our attention to something else — another battlefield in which I actually have some experience: the media industry. Specifically, how it’s changed and where it’s going. Heads up: This isn’t another think-piece about the streaming wars or the death of cable. Those trends are old news. This is about something newer and more structural, a seismic shift that’s transforming the way we consume information at a global scale. Not streaming. Not AI. Clips.

Yes, clips, those one-minute videos you see every day on your social media feed. Some would simply call this “short-form content,” but clips are slightly different. They are specifically snippets of long-form content — things like podcasts, livestreams, and TV shows — a byproduct of something else. In other words, every clip is short-form content, but not all short-form content is a clip.

Why belabor the details? Because they’re important. As we’ll see, this specific format has taken over not just social media, but the entire media ecosystem itself. It’s therefore incumbent on all of us who care about the future of media to understand it.

So let’s dive in. Our journey into the world of clips starts with an unexpected character: OpenAI.

Technology Brothers

Last week we read a striking headline: OpenAI acquires popular tech talk show for ‘low hundreds of millions’. The tech talk show in question was TBPN, a live daily podcast that’s gotten quite popular in Silicon Valley. I was soon told by a friend that the deal was worth $200 million. That’s not confirmed, but for the sake of this post let’s assume it’s correct.

Let me put into context how much money $200 million is. The largest podcast deal in history was a $250 million agreement between Spotify and the world’s most popular podcast, The Joe Rogan Experience, which reportedly rakes in more than ten million listeners per episode. Another one of the most popular podcasts is Call Her Daddy, which inked a deal with SiriusXM for $125 million. This deal is larger than that. It also makes TBPN three times more valuable than Dish TV, and nearly ten times more valuable than BuzzFeed. In sum, the deal is enormous.

That’s why you’ll probably be surprised to hear the following statistic: The average TBPN show receives roughly 7,000 views per episode. For context, my show (Prof G Markets) reaches roughly a quarter of a million people per episode. So why on earth would OpenAI pay $200 million? One word: clips. Despite its relatively small live audience, TBPN reaches hundreds of thousands every day with its clips. The average TBPN clip receives around 257,000 views, thirty-seven times larger than the viewership of the show itself.

This is the part where legacy media says, “Cute, but clips don’t make money.” This is where they’re wrong. Unlike most media organizations, TBPN bakes ads directly into their clips. At the end of each one-minute snippet: “This clip was brought to you by …” Ads in clips are what enabled TBPN to generate $5 million in revenue last year, on track for $30 million in 2026. The podcast isn’t so much a podcast as a vehicle for generating clips. The same could be said of many podcasts, by the way, but the ingenuity of TBPN is that they are the first organization whose business model actually reflected that.

Creators → Clippers

TBPN is the tip of the iceberg. Over the past couple of years, clips have birthed an entire generation of media stars. There’s Nick Fuentes, for example, the new king of the far-right. Or Hasan Piker, the controversial progressive livestreamer. Or Clavicular, the viral looksmaxing star. You might not have heard of these people, but for Gen Z, they’re practically household names. All of them have one thing in common: Their clips go extremely viral.

Despite a modest livestream audience of less than 20,000, Nick Fuentes reaches more than half a million people on average through his clips. One of his most recent clips reached eleven million people. That’s more than the population of New York City. Clavicular’s reach is similar: His actual show averages only 16,000 viewers, but his clips average a quarter of a million. Meanwhile his past ten TikToks reached roughly seventy million, more than the population of France. From TBPN to Clavicular to Hasan Piker, the pattern is roughly the same — the shows are small, but the clips are massive.

The craziest part about these clip numbers is that they’re actually underestimates. That’s because they reflect only the views of clips that are posted directly by the creators themselves, but don’t account for the millions of times those clips are re-clipped by other social media accounts (“fan accounts”), which often draw even larger audiences. (We’ll discuss this more in a moment.)

Soon you realize most of the hot new “shows” you see today aren’t actually about the show — they’re about the clips. I’ve even experienced this with my own show. Whenever a fan recognizes me in public, I ask them if they listen to the podcast, and every now and then I receive a striking answer: “No, but I watch your clips.” The first time I heard this I was confused. I thought our clips were the promotional material for our content. It soon dawned on me that wasn’t the case. For much of our audience, the clips are the content.

This is the crucial point to understand: Clips are no longer the byproduct of the main product — they’re the main product. Once you grasp this you start to realize how the entire media ecosystem is being flipped on its head. We’re entering a new media economy, what I call “the clip economy.”

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The Clip Economy

The clip economy has gotten enormous, but as with any economy, it can be gamed. The man who pioneered this happens to be one of the first clip-stars: Andrew Tate. Tate realized that the best way to win the clip economy isn’t to post clips yourself, but to have other people post them for you. So in 2021, he started an online course (pyramid scheme) called Hustlers University. The stated goal was to help young men “escape the matrix,” but the real goal was to get young men to post his clips.

The business model was simple: Tate instructed his subscribers to clip his livestreams and post them on social media with an affiliate link to his “community,” and with each new subscriber, the clipper received a commission. The result? Clips of Andrew Tate were viewed over 11 billion times on TikTok before he was banned. Despite the ban, however, Tate clips still regularly go viral on the platform. That’s the other great thing about having a clipping army: Even if you get cancelled, your clips live on.

The pay-to-clip model has since gone mainstream. “Clipping agencies” are now popping up all over the internet. In fact, one popular streamer known as “N3on” recently revealed how much he pays his clippers collectively each month. Answer: one million dollars. His clippers are paid on a per-view basis, and the best ones make millions of dollars a year.

But N3on is just one streamer, and not even in the top ten. MrBeast recently launched his own clipping platform — he pays clippers to post clips of his new theme park, Beast Land. Kick, one of the largest streaming platforms, also started a clipping program. It’s even trending in Washington: Last presidential election both Trump and Harris hired employees to clip their content. Clips are already the beating heart of every new media endeavor and we’re just getting started.

The Path Back

It’s no secret that legacy media isn’t doing well. Over the past five years, companies like Disney, Warner Bros. Discovery, and Comcast have all lost more than a third of their value. No amount of streaming acquisitions, rebrands, or spinoffs has been able to stop the bleeding.

Their problem is simple: People don’t watch traditional content anymore, they watch clips. Since before the pandemic, time spent watching video content on social media has more than doubled, and in that same period Meta’s revenues have nearly tripled and TikTok’s have grown tenfold.

This really hit home for me the night of the Oscars. I asked my girlfriend (who is a Chalamet fan) if she wanted to watch it, and to my surprise she said no. “Why?” I asked. Her answer was clarifying: “It’s too long and boring. I’ll just wait for the morning and watch the clips.”

There’s only one path back for legacy media: They have to win the clip economy. The bad news is it’ll feel beneath them. The good news is it will be easy. Legacy media is better at original content than anyone, and original content is to clips what light sweet crude is to gasoline. Put another way, Disney and Warner Bros. are sitting on a clip-field the size of the Permian Basin.

The next step will be monetization, which will also be easy. “This clip of the New Year’s Eve Ball Drop was brought to you by Heineken.” “This clip of Fareed Zakaria GPS was brought to you by T-Mobile.” “This clip of Shark Tank was brought to you by Capital One.” Sure, it’s a little dystopian. But the way I see it, legacy media has two options: Either sell clips, or die.

Call Me

If any media executives are reading this and want to discuss, feel free to reach out. I think about this every day for my own business, and I also find it fascinating.

And for those of you who find this all mostly depressing, I hear you. There is indeed a large body of evidence that suggests short-form content isn’t good for us. It decreases our attention span, makes us more anxious and depressed, and it’s very addictive. The clip economy will also exacerbate our polarization problem, which I’ve written about.

But the point of this post isn’t to say the clip economy is a good thing or a bad thing. It’s simply to tell you the truth about where we’re headed.

See you next week,
Ed

We’ll get to why this matters in a moment. But first, a quick refresher on this ballroom. Last summer, President Trump announced plans to build a 90,000 square-foot ballroom for a proposed budget of $200 million. (That budget has since doubled.) In order to do this he needed to demolish the East Wing, a historic portion of the White House complex that was built more than a hundred years ago. This was a controversial decision that required permission from Congress, however Trump didn’t seek any permissions and tore down the East Wing anyway, giving rise to one of the most iconic and disturbing images in recent memory.

That was the East Wing seven months ago. Fast-forward to today, the structure remains obliterated, a giant crater in the middle of our nation’s most historic site. It’s an unpleasant sight, but one we assumed was temporary … until last week. A federal judge ruled the ballroom project unconstitutional, which means the ballroom may never get built — but more importantly, the East Wing will remain in ruins for the foreseeable future.

This matters for historic, ceremonial, and architectural reasons obviously, but also for a more profound reason. The ballroom has become a metaphor for the President’s entire approach to policymaking. It is the mirror image of every major executive decision that has reverberated across economies, markets, and borders. It’s U.S. policy, if U.S. policy were a building.

I have a name for this strategy. I call it BNFL: “Break Now, Fix Later.” It describes the President’s tendency to break things (often old and historic), promise to build something “bigger” and “better” in their place, until he realizes he doesn’t actually have the wherewithal (or the constitutional authority) to get it done — at which point he becomes bored and moves onto the next shiny object. The end result is that “the builder” never actually builds anything, but mostly just destroys things. Break Now, Fix Later.

As we shall see, BNFL describes almost every important decision the President has ever made — and it may help us predict those he’ll make in the future as well.

Iran

Let’s start with the crisis du jour: Iran. It’s still not entirely clear why we invaded Iran. Supposedly it’s because Iran’s nuclear capabilities had grown significantly, even though he literally told us last summer that they were obliterated. Either way, the general idea was that Iran posed an “imminent threat” due to its belligerent regime led by Supreme Leader Ayatollah Khamenei. The solution, then, was obvious: Install a new regime. Indeed, Trump said regime change would be the “best thing that could happen.”

As with the ballroom, the regime change operation kicked off by tearing things down. The U.S. launched more than 12,000 airstrikes on Iran, hitting 11,000 targets and more than 150 vessels. It also (according to preliminary investigations) destroyed a girls’ elementary school, killing over a hundred children in the process. Trump quickly swept those details aside and hailed the successful assassination of Ayatollah Khamenei that brought the murderous dictator’s regime to an end.

A few days later, we learned who’d be running the new regime: the dictator’s son. Yes, the Iranian succession plan went exactly according to script — only instead of the 86-year-old Ayatollah dying of natural causes (which was already imminent), he was assassinated by the nation’s sworn enemy. So not only did we not install a more friendly regime, we made the existing regime even angrier and more radical.

Soon after Khamenei Jr. was installed into power, Trump arrived at the “fix later” part of the operation. The “goal has been attained” he said. “We’ll be leaving very soon … within two weeks.” Few believe his new timeline after he blew the first one. But what’s more important is the sentiment: The operation was more tiring and complex than he bargained for — he’s over the whole Iran thing.

A trail of destruction is left in his wake. Not just in terms of lives (nearly 4,000 and counting) but the economy too. U.S. gas prices have risen more than 30%. In Europe, they’re up more than 50%. Fertilizer prices, an essential input cost for food, have risen nearly 50%. Construction material prices are ballooning, which will lead to even higher housing costs. Investors went from expecting multiple rate cuts this year to expecting a rate hike, and recession odds have risen almost 10%. As I wrote a couple weeks ago, this war is making all of us poorer. In sum: lots got broken and nothing got fixed.

Tariffs

The same pattern played out last year in what has become Trump’s most defining policy: tariffs. On Liberation Day, Trump invoked the International Emergency Economic Powers Act to authorize the largest tariff hike on foreign imports in nearly a century in an attempt to rein in the trade deficit. Many of our closest allies were blindsided with tariff rates as high as 50%. He even tariffed the Heard and McDonald Islands, a territory inhabited by only seals and penguins.

Chaos immediately ensued. The S&P 500 sold off nearly 10% – its largest weekly drop since the pandemic. $5 trillion in market value was erased. As Trump started to ease and pause tariffs, markets recovered — but supply chains didn’t. Nearly a third of all sea shipments were cancelled immediately. As import costs rose, companies began to pass those costs onto their customers. Within a few months inflation was ripping upward again, as nearly 80% of the tariff burden was funneling down to the consumer. The financial loss for the average American household was estimated to be nearly $2,000.

Things got even stupider when the Supreme Court determined in February that the tariffs were illegal. This wasn’t a difficult decision: Trump had falsely claimed emergency powers and levied a tax on Americans without congressional approval. As our founding father James Madison put it, “Congress alone has access to the pockets of the people.” The U.S. government must now return the $160 billion it had collected over the course of the tariff saga. (In other words, this was all for nothing.) Ironically, despite bearing the majority of the costs, consumers won’t see a penny back as they did not directly pay the tariffs themselves. So not only did we not get anything done, we also set back American households even further. #BNFL.

DOGE

A major component of the Trump 2.0 agenda was to reduce wasteful government spending. The goal was, in Trump’s words, “to do what has not been done in 24 years: balance the budget.” So he created the “Department of Government Efficiency” and employed Elon Musk to get it done.

Within days it was clear how Elon and Trump had a shared passion for blowing things up. They immediately ripped up thousands of contracts, fired more than 200,000 government workers, and fed an entire agency known as USAID “into the wood chipper.” It’s estimated the elimination of USAID (which specialized in foreign assistance) will lead to nearly 10 million preventable deaths over the next four years. A high price, but a price they were willing to pay.

That was until DOGE got shut down. After a highly predictable falling-out between the President and Mr. Musk, the agency was quietly dissolved and its employees let go. The department said it saved $215 billion. Independent analyses have concluded the real number was a fraction of that, but for simplicity’s sake we’ll go with it. On their own terms those results were underwhelming: Elon’s original projection was $2 trillion.

It wouldn’t be a true BNFL, however, if Trump didn’t actively make matters worse — and in the case of government efficiency, that’s exactly what he did. Right as Elon was cancelling spending plans, Trump was building a new one: the One Big Beautiful Bill Act, which would prove to be one of the largest government expenditures in American history. The bill both reduced revenues and increased spending, loading up our government with an additional $850 billion in expected interest payments, and adding an estimated $4.2 trillion to our national debt over the next decade. There is literally no bill less efficient than this, which begs the obvious question: What was DOGE even for?

Take Your Pick

So far we’ve reviewed three major policy decisions, each of which were quintessentially BNFL, but let’s be clear, there have been plenty more. For example:

• Promising (threatening) to “take” Greenland, thus ruining our relationships with NATO allies, only to get distracted and ultimately reverse the decision on the global stage.

• Pressuring the Fed Chair to cut rates (and threatening to fire him), which eventually raised yields as investors priced in the danger of an un-independent Federal Reserve, only to walk back his comments and let Powell play out the rest of his term.

• Pursuing greater energy independence with “Drill, Baby, Drill” policies, which actually just meant gutting clean energy programs, which backfired when we spiked oil prices with yet another war in the Middle East making us even more in need of renewable energy than we already were.

Like the ballroom, each policy starts with a grand vision that could feasibly be framed as a net positive for society but is soon followed by a cynical fit of destruction. Then, once it’s time to actually build the thing, the circumstances suddenly change and it’s no longer possible. The strategy amounts to annihilation. It’s “move fast and break things,” minus the innovation.

Two Interpretations

There are two ways to interpret the BNFL strategy. One reading is that he’s simply in over his head. After all, it’s easier to break things than to make things. To build anything worthwhile, you have to invest time and effort, you have to achieve a consensus, you have to pay attention to detail, and the President has no interest in any of these things.

There’s also a darker interpretation, however, and although I don’t necessarily believe it, I think it would be unwise to rule it out. That reading is the following: Maybe he genuinely only wants to destroy things. Maybe this systematic pattern of destruction is actually by design, and his promises to build things anew are in fact lies designed to conceal his thirst for destruction. That would make him a psychopath, sure, and psychopaths are rare. At the same time, though, the probability that a series of policies would all lead to the same destructive end by accident is … equally rare. Again, I’m not saying I believe this interpretation. I’m just saying it’s possible.

Artemis

I’ve struggled to write this, as every time I try to type my mind returns to Artemis II. More specifically, it returns to the mission’s recent image of Earth, which will go down as one of the most iconic images ever.

The image is a reminder that to build anything worthwhile takes time. It took nearly a decade of planning to send these astronauts into space. The astronauts themselves prepared for this specific mission for more than three years. The operation didn’t just involve them, but the coordinated efforts of tens of thousands of people. Nothing this hard could ever get done without collaboration and planning.

In a way, it’s the opposite of BNFL. Build now, fix … forever. A stark contrast to the image with which this post began.

See you next week,
Ed

Before we dive in, a quick refresher: Last Monday morning, Trump announced he was engaging in talks with Iran. Fifteen minutes before his announcement, however, we saw gigantic spikes in trading volumes across multiple different markets. At 6:49am, more than a half a billion dollars in oil futures changed hands. Within minutes, $1.5 billion worth of S&P futures were traded as well. Over in the prediction markets, one trader made nearly $1 million betting on the war with 93% accuracy. Multiple other traders were flagged for making what appeared to be insider trades.

We’re left with two conclusions: Either 1) multiple traders got extraordinarily lucky with their extraordinarily risky bets that they all made at the same time, or 2) multiple traders knew what was about to happen. Those who believe the former are beyond saving.

Most are outraged by what happened. But what’s missing in their response is an understanding of the greater context. This was not an isolated incident. It wasn’t even one of a couple of incidents. This was part of a larger chain of corruption that has become so standardized in this administration that we can only conclude it’s by design. It’s the kind of corruption that requires not just our ire, but coordinated resistance. We will get to next steps in a moment, but let’s first make sure we’re all on the same page and review some of the other recent scandals that have gotten (purposefully) buried in the news cycle.

E Pluribus Unum

One major scandal you might have forgotten about happened last spring, when more than a dozen government officials made unusually well-timed stock sales right before the President initiated one of the most market-roiling events in U.S. history: Liberation Day. This alone would have been cause for concern, but it was only the beginning.

A few days later, Trump made his first TACO, pausing the tariffs and thus yanking the markets right back up. But just a few minutes before he signalled that move, we saw another huge spike in S&P options trading, with some trades skyrocketing more than 2,000% in a single hour. It was one of the largest jumps in U.S. stock market history, and a handful of people were somehow able to predict it perfectly.

Before that, there was the crypto saga. Just days before his inauguration, Trump launched a meme coin that briefly hit a $27 billion market cap – 80% of which was controlled by Trump-affiliated companies. Suspiciously, 58 anonymous wallets made over a billion dollars dumping the coin, while more than 810,000 investors lost $2 billion combined. Melania’s coin was even worse: Twenty-four wallets bought tokens minutes before she even announced it and then flipped them for a collective $100 million. By the end of the year both coins had cratered, but the insiders were long gone.

We must also mention prediction markets, the new ground-zero for insider trading. There was the anonymous Polymarket account that bet $32,000 that Maduro would be ousted just hours before Trump announced his operation on Venezuela, for example. That account ended up making $400,000. There was also the account that made an unusually good bet on the timing of Ayatollah Khamenei’s death right before an airstrike killed him. That one returned more than half a million dollars. These are just two examples but there are more.

We could also discuss the tens of thousands of dollars the new DHS Secretary made buying oil and defense stocks right before the Venezuela invasion. Or last night’s report that Pete Hegseth’s broker tried to buy him defense stocks right before the Iran attack. Or the millions Trump’s children invested in military drone companies, also before the Iran attack. Or the billions Trump’s son-in-law Jared Kushner raised from Gulf State funds right before Trump revealed that he was the one who determined we should go to war. Insider trading is now a standard feature of this administration. You don’t even have to look hard to find it.

In Bed With The Cops

You might be thinking, “Isn’t all of this illegal?” The answer is yes. You might also be thinking, “Won’t they be prosecuted?” The answer to that question is no, because the most essential piece of Trump’s corruption strategy has been to corrupt the very law enforcement agencies whose job is to stop him. In the case of insider trading, that agency is the SEC.

After Trump took office, SEC enforcement actions on public companies declined by 30%, one of the largest drops ever. It also settled only $800 million worth of cases, the lowest number ever in years of administration change. Trump himself canceled or halted almost 160 enforcement actions in just one year, and white-collar crime prosecutions were cut in half. This was all by design.

Trump’s efforts form part of a long-running attempt to degrade the SEC. Both parties are responsible for this — or, to be more accurate, the Supreme Court is responsible for this. The SEC lost its might right after the Citizens United decision in 2010, which unleashed billionaires’ ability to buy our representatives and control U.S. legislation, hence why the agency is no longer interested in prosecuting financial crimes.

But here’s where Trump’s corruption has (again) gone above and beyond. Two weeks ago, after just six months on the job, the SEC’s enforcement director, Margaret Ryan, resigned. Why? At first it was unclear, as her resignation letter and public comments were unusually reserved. But soon, the truth came to light. Reuters reported that Ms. Ryan had expressed interest in bringing charges against many of Trump’s closest associates, including his family. Soon enough she was reportedly in trouble with her bosses, at which point she mysteriously quit.

A similar event took place over at the Department of Justice’s antitrust division just weeks before. Gail Slater, who was tasked with cracking down on monopolization, had run into multiple power struggles with top Trump officials who wanted to be more lenient on enforcement. (Or, to be more accurate, to not enforce at all.) Two of her deputies were eventually fired for “insubordination,” and it wasn’t long before Ms. Slater was ousted herself.

Gotham

Superhero fans have quite literally seen this movie before. The entire premise of Batman is that the cops can no longer be trusted as they are in bed with the criminals, so the city of Gotham needs Batman, the masked vigilante to enforce the law on the citizens’ behalf.

The previous sentence sounds a lot like America. In fact, America becomes more like Gotham everyday. Our politicians are increasingly bought; our law enforcement, increasingly compromised. Some would argue we’re in need of a Batman, but that’s a little too comic-book for me. I would argue we need a Harvey Dent, Gotham’s hard-nosed district attorney who was willing to prosecute the powerful no matter the political cost. Right now we have … no one. Which brings me to my next point.

Advice To Dems

The single best platform Democrats could run this cycle is the following: Promise to put every Trump-associated insider trader behind bars. If that sounds radical to you, it isn’t. Tracking down and prosecuting insider-traders isn’t that complicated of a task, and it’s literally the SEC’s job. In addition, this could be one of the most politically popular movements in recent memory. Roughly nine in ten Democrats and Republicans believe insider trading in Washington is a problem that must be addressed with a trading ban.

Whichever candidate promises to put the insider traders in jail will probably win. At that point, they’ll have the chance to do something even braver: actually put them in jail. This would be a good move, not because it’s politically popular but because it’s simply the right thing to do. Billions of dollars have been made off of insider connections to the President — but the more honest way to put it is that billions of dollars have been stolen by insiders connected to the President. The corruption in our government is reaching a level that is simply untenable, and an easy win for any political candidate would be to promise to put an end to it.

Atlanta

I’m writing this on a flight from Atlanta. I flew down on Saturday to see my grandmother who recently suffered a stroke. Technically, she experienced “cerebral amyloid angiopathy,” a build-up of abnormal proteins in the brain that ultimately cause it to bleed internally. She lost her ability to move and speak, and was in hospital for several days until my mother and uncle made the difficult decision to bring her home for a more peaceful end.

As I entered her house I encountered childhood memories: Helping her water the plants in the garden, hunting for easter eggs in the park, eating Life cereal (my favorite) every morning. When I went in to see her she immediately lit up. “Hello!” she said. I sat down and held her hand and asked her how she was doing. She tried to respond but she couldn’t get the words out. So we sat there, holding each other, while my sister read her poetry.

The afternoon light was falling neatly at the foot of her bed and the birds were chattering politely. Her eyes were closed, but she held my hand firmly. It wasn’t long before I had to leave again. But for a brief moment, none of this mattered.

See you next week,

Ed

The time for shock and outrage is over. Not because it’s unwarranted, but because it’s too late. The bombs have been dropped, the conflict is underway, and our President cannot be bargained with. It’s time we accept our new normal and start preparing for the future as there’s no going back.

Our future probably holds a few things: more violence, more polarization, and more instability among them. You could start scenario-planning for this future, or you could determine it’s so uncertain that scenario-planning is pointless. Both would be reasonable perspectives. But there’s one aspect of this war that you’d be foolish not to plan for. In fact, it’s a future I’d argue you must plan for. Not because it’s lethal, nuclear, or poisonous, but because it’s certain. That future is quite simple: Everything in your life is about to get way more expensive.

It Starts With Oil

As you probably know, the price of crude oil is going haywire. That is because 20% of the world’s supply is shipped through the Strait of Hormuz, which Iran all but entirely controls. These are the very basic facts you’d think our leadership had strongly considered before they decided to start dropping bombs on them. I guess not.

As you also probably know, the substance that fuels your car is a refined product derived from crude oil called gasoline. They’re not exactly the same thing, but they’re pretty close to the same thing. That’s why higher oil prices result in higher gasoline prices almost immediately, and why the price of gas in America has risen more than 30% since the war began.

I don’t know how much this is impacting your life specifically. But I do know how much it’s impacting Americans’ lives on average. For every dollar increase at the pump, the typical household has to spend an extra $530 per year. Americans are collectively spending $300 million more per day on gasoline today than they were before the war. For low-income families this is extremely painful, as they already spend roughly a fifth of their income on energy costs.

If you drive a truck, you’ve noticed diesel prices are soaring too — up 40%. Diesel isn’t the same as gasoline. It’s thicker, heavier, and more powerful, but it’s still a derivative of crude, which is why prices have also exploded. Regular car drivers may think these differences are irrelevant to them — they’re not. Let me explain.

Domino Effect

As the cost of diesel rises, the cost of trucking products around the country rises too. Diesel accounts for roughly a quarter of trucking companies’ per-mile operating costs, second only to driver wages. This is a big deal, as trucks move over 70% of goods by weight around the nation. But it’s not just trucks, it’s ships too. Fuel accounts for more than half the cost of shipping, which is why freight prices have risen roughly 30%. Baked into that number are insurance premiums too, which (for vessels traveling through the Gulf) have already risen by about 50%. War with Iran presents a unique blend of problems that make it a lot more difficult to deliver products to people.

Another domino that’s fallen is fertilizer. Gulf states account for roughly 30% of the world’s ammonia and half of the world’s urea, two substances critical for fertilizer production. U.S. urea and ammonia prices are up 21% and 41% respectively, which has resulted in a 25% surge in the price of fertilizer. This hasn’t affected you yet, but it will. Fertilizer costs account for about a third of the cost to grow crops. As with tariffs, every additional input cost will eventually be passed onto the consumer. This is especially concerning when you consider how bad food inflation had already gotten before we struck Iran.

I’m not done yet. Oil is also a primary input for plastic, PVC, and other industrial substances. It’s also critical for producing things like steel, aluminum, and cement. Lots of these materials also get shipped through the Strait of Hormuz. The result: Construction material prices have risen as much as 30%. These price increases will add more fuel to the dumpster-fire that is the U.S. housing crisis. You might remember when lumber prices tripled after Covid. What you might not recall is how those price increases pushed housing costs up by roughly $35,000. The median U.S. home now costs $405,000, about 9 times median income, the most expensive in American history. How much worse will these numbers get when the price of literally every input goes up?

No Place To Hide

When times get really tough, the best thing you can do is ask for help. In the case of inflation, that means trading with other nations. This was the U.K.’s revelation during the 19th century and Japan’s after World War II — like many economies throughout history, they realized trade was cheaper.

This time round, we don’t have that option. For one, we’ve already significantly damaged our relationships with trade partners via arbitrary tariffs and military threats. More importantly, however, prices have gone up even higher everywhere else. Across Asia, gas prices have increased as much as 60%. In Europe, the price of liquid natural gas (on which they’re heavily reliant) has risen over 70%. That’s because their supply chains are even more dependent on the Strait of Hormuz than ours. In other words, we can’t trade our way out of this mess. No one’s coming to save us.

Time To Get Worried

The Federal Reserve’s “dual mandate” is to 1) maximize employment, and 2) stabilize prices. As it stands, unemployment isn’t a huge problem — but it’s becoming one. We lost 92,000 jobs last month, and as Jerome Powell said last week, net job creation in the private sector in the past six months was “effectively zero.” Meanwhile, inflation is still a problem (we’re still way off the Fed’s target), and it’s about to become even more of a problem for the reasons we just discussed.

This puts the Fed in a tough spot. Do you keep cutting rates to spur employment but risk more inflation? Or do you stop cutting rates to bring down prices but risk losing more jobs and suppressing economic growth? At the start of the year, the expectation was that the Fed would choose the former. The inflation picture wasn’t ideal, but rates had been high for a while and the employment trend was starting to get concerning. This formed the basis of the 2026 bull-market thesis: Yes, the AI bubble was scary, and yes, tariffs were concerning, but ultimately stocks perform well when rates get cut.

Now that we’ve bombed Iran, however, everything’s changed. Prices are surging again, which means the Fed’s other problem (inflation) is a lot bigger again. This should theoretically call the entire rate-cutting cycle into question, and in fact, according to prediction markets, it already has: In the 25 days since the war began, the probability that the Fed won’t cut rates at all has risen from 14% to 31%. Meanwhile, the chances of rate hikes this year are shooting up.

I’m transported back in time to 2022. It was my first year out of college, and I was just starting up with Scott. Covid had already taken senior year from me, and now, because of messed up supply chains, I had to pay $15 for a carton of eggs. The Fed had no choice — it had to raise rates. Fortunately for me the rate hikes worked, and inflation came way down. But not before it brought something else down with it: the U.S. stock market, which fell nearly 25% that year, its worst year since the financial crisis.

Not There Yet

I’m not saying it’s Covid again, but the dynamics are unmistakably similar. A violent force inserts itself into global supply chains, prices immediately rocket through the roof, governments tell us it’ll soon be over (but we all know it won’t), central bankers start to accept the gravity of the situation, they start to tighten policy and ratchet up rates (despite investor protests), market optimism starts to get sucked out of the room, stocks start to fall lower, and lower, and lower still, growth screeches to a halt and then inverts, until we’re forced to contend with what our situation has probably become: a recession.

To be clear, we’re not there yet. GDP growth is still positive (though a lot less positive than we initially thought), unemployment is still relatively low (though rising quickly), and inflation isn’t nearly as bad as it was after Covid. But let’s also acknowledge where we’re headed. Every day this war goes on, American households lose more purchasing power. Grocery bills, airline tickets, shipping costs, and credit card statements are rising by the billions. We’re literally getting poorer by the day.

As Trump looks to the polls, he will soon realize the gravity of his error. But this isn’t Liberation Day, this is war. Unlike tariffs, you can’t take murder back.

See you next week,

Ed

There are many angles from which we can investigate this war. Last week we discussed America’s long history of regime change. (TLDR: very unsuccessful.) We also discussed the price of oil, and the impacts it will have on U.S. inflation. (Hint: bad.) But there’s one angle we’ve yet to fully examine, which might help us understand how we got ourselves into this mess, and why it will likely continue.

That angle is the following: Who’s getting rich off of this war?

Financial Audit: Iran Edition

First, a quick financial audit. Based on what the Pentagon has told us, it’s estimated we’ve spent nearly $22 billion on Operation Epic Fury so far. To put that in perspective, that’s enough money to cover Medicaid for 2.7 million Americans, or feed 2.4 million families for a year, or cover a year of tuition for 1.8 million students. Keep in mind, we’re only 18 days in. Consider what the Iran bill might look like in six months, or even six years.

As with every business expenditure, the Iran war has its accounts payable and its accounts receivable. The spenders in this transaction are obvious: us. American taxpayers will bear the financial burden of this war, either directly through taxes or through deficit spending for which younger Americans will disproportionately pay the price. We’re also set to pay hundreds of billions in higher food and energy costs, but that’s a conversation for another time.

Then there’s the people who’ll make money. These individuals are slightly trickier to identify, as the downstream impacts are (purposely) opaque. There are the defense companies who, as we discussed this morning with Liz Hoffman, are set to net $200 billion in nationally-syndicated investment from Trump over the next three years. There are also the investment bankers whom Trump has assembled to underwrite these deals. But there are plenty of others, many of whom were in the rooms where the decision to go to war was made.

So without further ado, let’s go through some of the biggest winners of the Iran war.

Eric & Don Jr.

We’ll start with the President’s sons, Eric Trump and Don Jr. The Trump brothers are the new backers of a tactical drone company called Powerus, which “builds and scales autonomous drone systems for military and commercial use in high-risk environments.” Eric Trump also recently invested in an Israeli drone company, which is known in the defense community for its “low cost per kill” drone munitions. Both of these investments will likely outperform due to 1) our newly-waged war, 2) the Pentagon’s new ”drone dominance” program, which will issue $1.1 billion in procurement contracts to drone companies, and 3) the fact that the defense department is among their biggest clients.

Finding hot government contractors before anyone else is, of course, the Trump brothers’ bread and butter. That’s why they also created the New America Acquisition I Corp., an investment vehicle whose stated goal is to identify companies “well-positioned to benefit from federal or state-level incentives, such as grants, tax credits, government contracts or preferential procurement programs.”

The Trump brothers continue to make a fortune through monetizing their relationship to the President. It started with crypto but has now devolved into frontrunning bloodshed with early investments in advanced weapons manufacturers. This is a level of corruption unlike anything we’ve seen — not just in terms of scale but also shamelessness, as the Trump brothers have made almost no efforts to cover it up. Think of this as the Trump family’s Hunter Biden laptop, only this one’s a million times worse.

Jared Kushner

Jared Kushner has essentially bet his career on the elimination of Iran — a risky wager, but one made less risky because of his connection to the president. Over the past several years, Kushner has raised billions of dollars from Middle Eastern sovereign wealth funds with the central goal of reconstructing the Gulf. His vision requires establishing a cohort of economic cooperation among the major Gulf players (Saudi Arabia, Qatar, the UAE) and Israel — a feat that cannot materialize if Iran continues to call for Israel’s destruction.

As such, Kushner’s investment firm, Affinity Partners, has begun deploying its $5 billion AUM into strategic Gulf assets such as Shlomo Group, an Israeli conglomerate with large holdings in, yes, defense. His firm is also a large investor in Phoenix Holdings, one of Israel’s largest asset management companies. Jared is even working on plans to put data centers in Gaza.

None of this would necessarily be problematic if it weren’t for the fact that Kushner appears to be one of the people who decided we should go to war. Last week, Trump admitted this. He said the reason he believed Iran was an imminent threat was because Jared Kushner told him so. Keep in mind, Kushner has no formal position in the White House. However he is married to the President’s daughter, which (apparently) makes him qualified to advise our government on global warfare. Taken in concert with his multi-billion-dollar bet on reconstructing the Middle East, it’s hard to see this as anything other than an act of historic corruption.

The Witkoffs

Another key winner is Steve Witkoff, the real estate developer who was appointed as U.S. special envoy to the Middle East by Trump. After winning the position, Steve handed control of his investment firm, The Witkoff Group, to his son, Alex Witkoff, who proceeded to strike multiple real estate deals with entities in the Middle East. He even bragged about it as he pitched more investors at home. The father-to-son handoff was also a cunning workaround to government ethics laws, which require officials to fully divest of any assets that may benefit from state policies. This is fast becoming a popular tactic in Washington. Commerce Secretary Howard Lutnick, for example, recently employed a similar strategy for his firm Cantor Fitzgerald before his sons reportedly began buying up tariff refund claims.

As Alex Witkoff expanded his family’s real estate network in the Middle East, his brother Zach was busy establishing the Trumps’ other family business: crypto. In 2024, Zach teamed up with Eric Trump to form World Liberty Financial. Together they generated billions of dollars in crypto earnings alongside “projects” such as Trump Coin and Melania Coin. I’ve put “projects” in quotes because, as I explained on The Bulwark, we need to start calling these operations out for what they really are: theft. Don’t take it from me — take it from the hundreds of thousands of victims who lost billions of dollars to their own President.

It keeps going. It was later revealed that Zach and Eric had sold 49% of their crypto firm last year to the United Arab Emirates for $500 million. I.e. the same people with whom their dad had been presidentially appointed to broker diplomatic relations. The corruption runs deep, and it goes in a circle.

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Defense Tech Investors

Startups are getting in on the action too. Palmer Luckey, the founder of defense tech company Anduril, hosted multiple fundraisers for the Trump campaign, including a roundtable at Newport Beach that cost attendees $100,000 a pop. Since then the company has won multiple significant defense contracts, including agreements to help build the Golden Dome, integrate autonomous surveillance at the border, and of course, build drones. Anduril’s valuation has more than quadrupled since Trump took office. Meanwhile, shares in defense tech company Palantir (whose founder was one of Trump’s top backers) have risen nearly 15% since the Iran war began and have almost doubled since the start of the President’s second term.

Prediction Markets Bettors

This post wouldn’t be complete if we didn’t mention the numerous individuals who made millions betting on the Iran war via prediction markets. More than half a billion dollars were traded on the timing of these strikes, and one account netted more than half a million. At first I thought this person might just be a smart trader, until I learned their first trade was placed roughly one hour before the news broke publicly. In other words, they definitely knew something.

Next question: Who is this person? Answer: We don’t know, as the trades are anonymous. This forces us to consider the possibility that this person is either in the administration, or at least associated with it. This is made even more possible when you remember that both of the largest prediction markets platforms are actively advised and backed by members of the Trump family. Which also means that if there was foul play, we shouldn’t expect anyone to be held accountable any time soon.

How Deep Does It Go?

The more you dig into this war, the more corruption you find. What’s especially appalling, however, is that I’ve barely done any digging. Most of my observations are simply a function of reading headlines and noticing names. For example, it’s impossible not to acknowledge Witkoff’s conflicts of interest when his title is literally “special envoy to the Middle East” and his son is publicly brokering deals in the region. It’s also hard not to believe that Jared Kushner is steering U.S. war policy when the President literally told us.

All of this forces us to conclude we’re only scratching the surface. If the tip of this iceberg is already iceberg-sized, how big is the rest of the iceberg? This is where investigative journalism is supposed to come in. Unfortunately for us though, the majority of our news outlets are in the process of being bought out by the President and his operators. Once again, we know this because Trump told us.

We’re in a tough spot. The guy who previously said going into the Middle East was the “worst decision ever made” has now launched us into another Middle East war without receiving any congressional approval, and after accidentally blowing up a children’s school (and saying he didn’t), we are now beginning to learn that the reason any of this is happening might be to make a handful of friends and family members richer than they already are.

The previous sentence should be enough to make every American’s stomach turn. But then again, America voted for this. As Ken Levine once wrote: “We all make choices, but in the end, our choices make us.”

See you next week,

Ed

— Albert Einstein

Ten days ago, the U.S. launched a massive military strike on Iran. While the administration didn’t articulate its ultimate objectives, President Trump made clear that regime change is probably one of them. This view is also supported by the fact that we took out the nation’s supreme leader, Ayatollah Ali Khamenei, too. In sum, we’re at war with Iran.

For those familiar with American history, this is nothing new. Since 1900, the U.S. has conducted nearly thirty formally authorized regime changes — a third of the world’s total. This does not include many of the more than sixty covert regime changes that were attempted during the Cold War and the more than forty mostly-covert attempts that were tested in Latin America. Americans are familiar with regime change, as we’ve done it a lot.

Have we been successful? The answer isn’t complicated: no. Out of the 28 regime changes we’ve been responsible for, only three have ever led to a lasting democracy. The rest have resulted in dictatorships and authoritarian regimes, many of which destabilized their regions ever further. By the way, this is a global trend: More than 80% of regime changes imposed by any nation have ultimately resulted in a dictatorship. In other words, the odds that regime change in Iran will lead to democracy are (significantly) worse than a coin flip.

In addition to not working, regime changes lead to more violence. Roughly a third of them have been followed by civil war. Even when a nation successfully installs a new leader, he or she ends up violently removed from office half of the time. This all sounds shocking until you think it through logically: If your own nation’s leader were forcibly removed or assassinated by a foreign entity, do you believe things wouldn’t get violent?

The empirical record on regime change is robust and definitive: It doesn’t work. And yet here we are, trying it again, and expecting different results. The definition of insanity.

Lessons Unlearned

The great irony is that the guy going to war is the same guy who built his career on not going to war. Indeed, Trump’s contention wasn’t just that we shouldn’t go to war, but that we shouldn’t go to war in the Middle East. In 2016, he told us he was “totally against the war in Iraq,” calling it a “big, fat mistake.” He later repeated it was the “worst decision ever made.”

Trump’s message wasn’t just popular — it was also correct. The Iraq war, which Defense Secretary Rumsfeld originally estimated would cost $60 billion and last six weeks, ended up costing $3 trillion and lasting eight years. It also killed roughly 4,500 American troops and almost 200,000 Iraqi civilians. Afghanistan was no different, spanning two decades, costing $2 trillion, and killing nearly a quarter of a million people. In both cases, the strategic outcome was essentially the same: We achieved nothing.

How did the anti-war President become pro-war? Did he change his mind? Was he lying before? The answer isn’t clear, though I’m inclined to believe his position is similar to those of deficit spending, big tech, crypto, and more: He never really had one. And so, ultimately, he landed wherever the wind (money?) blew him.

Are You Sure?

Markets have been temperamental in recent days, but in the immediate aftermath of the strikes, they made their perspective on Iran very clear: not worried at all. While oil prices initially climbed, they didn’t rise as much as many had expected. Meanwhile, gold and treasuries — the safe haven assets that usually rise during military conflicts — actually sold off, and the S&P 500 (the same S&P that had just lost a trillion dollars to a sci-fi blog post) somehow rallied. Last week I asked legendary investor Steve Eisman how the war had changed his investment strategy, if at all. His answer: “Not by a single dollar.”

I couldn’t understand it. While it’s true that wars generally have less impact on markets than you’d think, how could investors be so certain that this would have, essentially, no impact? When I pressed experts on this, I received different flavors of the same answers: that it’s a big deal for Iran, but not really for everyone else. “Why?” I asked. Because supposedly 1) the war is “contained,” 2) it will soon be over, and 3) America can put a stop to it whenever it wants.

That’s when I started to get frustrated. In what world has any of the above been true? Since when has America ever launched a “quick” and “contained” war in the Middle East? Investors seemed unusually optimistic about this whole Iran thing.

What Could Go Wrong

Over the weekend, markets started to get on my wavelength. Stock prices fell; oil prices surged. Perhaps reality was setting in? But then Trump declared the war “complete, pretty much,” and prices normalized again. At that point it became clear to me that the market was genuinely uninterested in entertaining what could go wrong in Iran. They were very happy to ask that question when it came to AI, but for whatever reason, not this.

So, I’ve decided to do it for them. Here’s a list of everything that could go wrong in Iran.

1) Nuclear escalation: If history is any guide, the war in Iran is far from over. That means spending hundreds of billions of more dollars and sacrificing thousands of more lives. I’m not saying this will lead to a nuclear event, but it might. In fact, according to Polymarket, the probability of a nuclear detonation before year’s end (as of last week) was 24%. We could argue that the Polymarket bettors are stupid and misinformed, but that would be quite the reversal from our previous position, which was that the prediction markets are smarter than the experts. In sum: Nuclear warfare is on the table.

2) Non-nuclear escalation: Even if we don’t drop nukes, we could keep dropping bombs — and there’s a very real possibility that other nations could get roped in. China, for example, depends on the Strait of Hormuz for oil more than anyone else. What if they decide to support Iran? Alternatively, what if Russia decides to capitalize on our distractions and launch an offensive on NATO? Or if China does the same, but with Taiwan?

3) Oil crisis: This is the most obvious externality and is already happening. Oil prices have breached $100 per barrel and could easily go higher if Israel and Iran continue to trade blows. This will massively destabilize the U.S. economy, as each $10 increase in per barrel prices results in a 25 cent increase per gallon at the pump. At $108 per barrel, U.S. inflation will rise by nearly a percentage point. If the Fed then decides to raise rates, we will have a potentially stagflationary crisis on our hands as we battle the double-whammy of rising prices and low growth.

4) Cyber warfare: The two oceans that protect us from gunfire offer no reprieve in the world of cyber. Now that we fight battles with autonomous drone networks, it could be argued cyberattacks are worse than bombs. Two days after striking Iran last year, Israel experienced a 700% increase in cyberattacks. Iran has a secret weapon and they’ve demonstrated they’re willing to use it.

5) Refugee crisis: Say we keep bombing their civilians — any thoughts on how many will leave? A 2023 survey found that 93% of the 90 million people who live in Iran have considered emigrating. That was before we blew up their cities, so what’s the number now: a hundred percent? If we were worried about Europe’s refugee crisis (and the right-wing populism it has provoked), we should be a lot more worried now, as a nation larger than Germany might be about to move in.

6) Sovereign investment meltdown: I’m not personally worried about this, but the VCs might be. America’s investment infrastructure has become increasingly dependent on the sovereign wealth of the Gulf states. Last year they poured $70 billion into U.S. companies, the highest ever. They’re also responsible for investments in Anthropic and xAI, and the $2 trillion in “future investment” Trump keeps talking about. If we’re the reason their houses, hotels, and desalination plants are on fire, do we think they’ll keep giving us money?

Lessons From Einstein

I began this post with an Einstein quote that (spoiler) he never actually said. I have no idea how or why it was attributed to Einstein, but it’s still a great quote. We humans do have a tendency to make the same mistakes over and over, and it’s nice to have an adage that calls this behavior out for what it is: insane.

There is, however, another (real) Einstein quote that is also relevant. I stumbled upon it in my friend (role model) Andrew Ross Sorkin’s latest book, 1929. The quote was used to describe our love-hate relationship with financial bubbles, but it could also describe our addiction to foreign wars.

“The ordinary human being does not live long enough to draw any substantial benefit from his own experience. And no one, it seems, can benefit by the experiences of others. Being both a father and teacher, I know we can teach our children nothing … Each must learn its lesson anew.”

— Albert Einstein

Here’s to learning this lesson anew.

See you next week,

Ed

Yet while war rages on, so does everything else. Our tariff policy is still in limbo. ICE killings are still unaccounted for. AI advancement plows ahead. The significance of our new problem threatens to cut short what little progress we made on our old problems. (Some would argue this was by design.) But there’s no problem that wants to be forgotten more desperately than the one I’m about to dissect.

We’ll talk about Iran another time. Today, I want to give you my full and honest perspective on Jeffrey Epstein — a problem far larger than many care to admit, the solution for which too many choose to ignore.

Across The Pond

Two weeks ago, Andrew Mountbatten-Windsor was arrested at his home on the royal Sandringham Estate over his connections to Jeffrey Epstein. It was the first time a senior British royal had been arrested in nearly four hundred years. (The last was Charles I in 1647.) He was released eleven hours later, but not before reporters captured what will go down as one of the most important images in British history.

The image is important for three reasons.

1) It represents a new era of justice in the U.K. — one where wealth and royalty do not make you immune to the rule of law. (For a nation whose rulers have long exempted themselves from the bounds of any earthly authority, that’s a big deal.)

2) It is humiliating. This may seem a trivial point. But when you consider what little justice has been served to the victims of Jeffrey Epstein, the mere look of panic in the eyes of one of his closest associates (a look he likely witnessed in many women over the years) is no small triumph.

And 3) Sometimes all it takes to inspire justice is an image. Indeed, this is the entire point of a perp walk. Images of Ivan Boesky entering a courtroom were what led to the 1980s Wall Street crackdown. Images of Harvey Weinstein in handcuffs helped spur on the #MeToo movement. An image may not seem like much, but it can often be the catalyst that leads to change.

That’s why I was pleased to see that just four days after the image was taken, the chain reaction began. Lord Mandelson, the former British envoy to Washington, was arrested at his London home in connection to Epstein. Also last month, former Norwegian Prime Minister Thorbjørn Jagland was charged with “gross corruption” over his ties to Epstein. Justice is making its way across Europe, and it appears no amount of royal blood will be enough to stop it.

Meanwhile in America, justice is nowhere to be found. Seven years after Epstein’s mysterious death, we are ruled by his close associate who has installed into our “justice department” an army of tactically inept sycophants who’ve displayed greater interest in industrial indices and ice hockey games than the most pervasive sexual abuse scandal in the history of our country. Beers chugged: 1. Epstein arrests: 0.

American Royalty

America may not have a monarchy, but it does have royals. They don’t wear crowns and cloaks like the British — they wear Brunello Cucinelli sweaters and Loro Piana slippers. They also use different titles, not “prince” or “viscount,” but “executive chairman” and “philanthropist.” Unlike in Britain these royals technically earned their privileges, but the privileges are roughly the same: tax exemptions, legislative authority, judicial powers, sovereign immunity, and special protections from the law.

While Europe has sought to unwind these privileges (see above: Andrew), America has doubled down on them. What began with tax cuts for the wealthy has led to total and absolute political capture by the billionaire regime. The more money they poured into politics, the more they tilted the scales of privilege in their direction. More tax cuts and more exemptions, not just for them, but also for their children. As a result, the top 19 households now own nearly 2% of all wealth in America — up almost 20x in the past 40 years. Meanwhile the bottom 50% of Americans own 3%. America is one of the most unequal Western societies since Revolutionary France.

For years we thought the only common denominator among these individuals was being rich and powerful. But we soon discovered another: Jeffrey Epstein. Epstein was the common bond that united American royals on both sides of the aisle — people such as: the current U.S. President, a former U.S. President, the current Commerce Secretary, the former Senate majority leader, the founder of America’s fourth-most valuable company, the former President of Harvard, America’s foremost law professor, and many of America’s wealthiest businessmen. The files, which were supposed to bring justice to Epstein’s victims, soon devolved into a Who’s Who for the rich and famous. As I tweeted recently: If you’re not in the Epstein Files, who even are you?

The Line

The conspiracy theorists weren’t right, but they weren’t wrong either. There was no “elite cabal” that met in the basements of pizza restaurants to speak in code and abuse minors. But there was an elite cabal that met in living rooms — and while they didn’t speak in code, they did abuse minors.

Did all of them abuse minors? No. At the same time, however, we don’t really know. The line between “mentioned in the files” vs. “complicit in sexual abuse” is a critical distinction that the Department of Justice appears determined to leave blurry. Some argue this blurriness unfairly implicates those who were simply mentioned in the files. I take the opposite view: It unfairly protects those who abused minors.

Wherever the line is drawn, one thing is clear. Every associate of Epstein was interested in him for the same reason. It didn’t matter who the women were, how old they were, or where they came from. It also didn’t matter if you were married, because part of the deal was your wife would never find out. The offering, which they all bought, was a harem of nameless, faceless, powerless young women, and in some cases children, whom they could use and abuse as much as they desired with no consequences or retribution. It was the kind of offering that money can’t buy today — the kind of offering that, for most of history, has only been available to tyrants.

But this was Epstein’s genius. He understood that most of his island companions already knew how it felt to live like a king. What they didn’t know, however, was how it felt to corrupt like a king, to molest like a king, to abuse like a king. These were the few monarchical privileges that had not yet been accessed by any American royal. And for just a couple of embarrassing emails and a guilty conscience, you too could experience them.

We Trusted You

Since the DoJ intentionally refuses to delineate between those whose names appeared once in an email vs. those who visited the island vs. those who abused children, we are forced to make delineations of our own. For the purposes of this post, I am delineating between those who hung out with Jeffrey Epstein multiple times vs. those who didn’t. That doesn’t mean they abused children, but it does mean they were likely attracted to Epstein for the reasons we just discussed. Those who fit this description we’ll call members of the “Epstein Club.”

As of March 2026, the Epstein Club has a collective net worth of roughly $400 billion. That number is greater than the market caps of Coca-Cola, Shell, Disney, Lockheed Martin, and Comcast. It’s also equal to the value of every NFL and NBA team, combined. (BTW, if we’d included Larry Page and Elon Musk in the club, who according to the files didn’t hang out with Epstein but tried to, that number would be $1.5 trillion.)

If the list were a bunch of names we’d never heard of, this story would be different. But it isn’t a list of random names — it’s a list of very specific names. Names we’ve seen on buildings and billboards. Names we’ve seen in board seats, and articles, and conferences, and fellowships, and endowments. Names we’ve seen literally everywhere. Not because we necessarily cared about these names, but because society told us we should.

Most of us went along with it. We assumed, for example, that because Bill Gates was the founder of Microsoft, and because he delivered the Harvard commencement address, and because he was the headline speaker at TED, he was the kind of person we should aspire to be. In any other timeline I might have questioned what kind of man would amass hundreds of billions of dollars. But the world told me over and over that he was awesome, so I assumed he was.

Which brings us to the great insult of the Epstein Club: Not only did these individuals enjoy the privilege of being wealthy, they also enjoyed the privilege of being revered. With every scholarship they donated and every honorary degree they received, they assumed a mantle of righteousness to which we obliged. 3.6 million of us listened to Bill Gates’s commencement address, in which he instructed young Americans on how to live our lives. Now that we know what we know, can we get a refund?

What To Do

For the hundreds of women and girls who were sexually abused, the path toward justice is obvious: Their abusers must be punished with the full force of the law. But for the millions of Americans who were lied to for decades about who these people really are (to be clear, a much lesser crime), the path is less obvious. How do you rectify the fact that many of our nation’s heroes were secretly subjugating women for years? How do you “make right” that the people who sold themselves as role models were degenerates all along? Can we “take back” the credibility we gave them? Can we “undo” the privileges we provided? I mean this genuinely: What are we supposed to do?

As it stands, we’re doing nothing. That’s why you feel sick to your stomach every time you read an Epstein headline. It’s not just that so many women were abused, it’s that you know nothing’s being done about it. You also know the perpetrators know this too. You know that somewhere on some distant archipelago, a very f*cked up and perverted billionaire is breathing a huge sigh of relief.

Perp Walk

There’s a solution to the Epstein problem, and it’s called a perp walk. It doesn’t matter what we get them for, but someone very rich and very famous needs to be seen in handcuffs. It could be Gates, it could be Dershowitz, it could be Clinton, it could be Summers, I don’t really care. I also don’t care if their lawyers negotiate them out of doing time. All I ask is that we see that image. All I want is a perp walk.

This image would do for America what Prince Andrew’s perp walk did for Britain. It would resolve, at least in part, many of the resentments and traumas that continue to boil within us. It would lighten the rage of the millions of women who were themselves abused. Or the millions of women who were told by men at fancy conferences how we’re “finally equal,” only to be harassed and exploited in the shadows of privacy. It would redress the outrage of the millions of Americans who looked up to these people, who read their books, collected their quotes, and listened to their interviews. It would do what justice is supposed to do: acknowledge and reconcile.

Without a perp walk, we will continue unresolved. According to recent polls, most Americans have lost trust in our nation’s leaders because of the Epstein files. Most Americans also say the files showed that “powerful people in the U.S. are rarely held accountable for their actions.” The mannerly language of these polling questions understate how angry Americans really feel.

One day we’ll look back and realize just how rotten this Epstein scandal really was. And, as with every great injustice of years past, we will ask ourselves that same, age-old question: Why didn’t we do anything?

See you next week,

Ed

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