The Prof G Pod with Scott Galloway
00:16:02 · Aziz Sunderji
[00:16:02] S7: Yeah. I mean, I think America does have a really complicated relationship with housing because, you know, Derek Thompson has talked about this before, housing has to be both a speculative asset and a place to live. And I think for a lot of people, a lot of their wealth is wrapped up in the house. So they're gonna push back against anything that they think can threaten that. And increasingly, that's turning towards the stock market. Stock market wealth is becoming more and more of people's total net worth. But I think that for younger folks, like, they look at the refusal to build, and when they look at older folks, you know, just saying, like, no. You can't build near us. Like, we don't want this housing near us. I think it can feel like everything is sort of working against you because what you've been told from... Since you were little is that in order to be a successful person, in order to reach this American dream, you have to buy a house. And, you know, I'm 29, and I don't I don't know when I'm gonna be able to buy a house. And I I know a lot of people in this situation, and more and more people are starting to lean on their parents for financing a home or leaning on some sort of outside help. And I think that's the really hard part is that housing is the foundation of the economic ladder. And if people feel like they can't climb up a bit, they're just gonna be like, well, you know, maybe it doesn't make sense for me to work really hard at my job, and it doesn't make sense for me to get married. It doesn't make sense for me to build this economic future because I don't feel stable. And I think for older folks, they were able to benefit from the post World War two boom. You know? I feel like there was just so much policy that worked in their favor, and that's why people over the age of 55 have so much wealth in The United States.
00:17:42 · George Hahn
[00:17:42] S3: Aziz spent fifteen years in research at Barclays and later worked as a data journalist at The Wall Street Journal. He wanted to put the current crisis in perspective, so he read the group an article from The New York Times.
00:17:56 · Aziz Sunderji
[00:17:56] S8: The article is called High Rents. This is the season of the year when the people of New York break out in loud complaints about the rise of rents, the scarcity of houses, and the impossibility of making both ends meet while landlords demand such exorbitant rates for their tenements. So that last word might give you a clue about when this is from. This is from 1856. So aside from the word tenements, you could kind of just copy and paste that onto The New York Times today, and it would read pretty accurately. So my point is that this is like... This is a big this is a big crisis. It's happening around the world, especially in these big productive cities where the economic opportunities are, and it's been happening for a long time. So I think we should stay very humble about our ability to influence this. I think if I could choose one thing that is driving it that we don't talk about enough, it's income inequality. You know, the fact is that you have some people like Scott, as you were working at a bank, and when I moved to New York, was also working at an investment bank. They come to the city and they earn these high salaries, and they're competing with everybody else, teachers and, you know, all kinds of people who don't earn high incomes for the same parcels of land. Housing is a positional good. We're all competing for it. And I think inequality is a huge engine explaining the fact that we've been in a housing crisis around the world and clearly for, like, hundreds of years. So I... You know, it's... I I don't know if there's any, like, silver bullet for it.
00:19:25 · George Hahn
[00:19:25] S3: Earlier in the week, a listener wrote into office hours asking what it would take to actually make housing more affordable. Scott started with the permits.
00:19:34 · Scott Galloway
[00:19:34] S4: What do we get wrong around housing? Probably the worst thing we've done in housing is everyone complains about bureaucrats. The worst thing to happen to the housing market, especially for entrants, is we took power around housing permits out of the hands of bureaucrats, local civic officials, and we put it into the hands of homeowners. Now what are the incentives of a homeowner? They live in a neighborhood, they like the fact there's not traffic, they like the fact there's not construction, and free gift with purchase, and everyone, this is the atmospherics, is they know that the less housing that is built, the greater the scarcity of housing, which creates their primary asset, or incentivizes, or fuels an increase in value of their primary asset. So the people in charge of issuing permits for economic growth and to provide more housing to meet the needs of new entrants who want to have their own house, the incentives of the people issuing permits is totally contrary to the needs of entrants. And that is a larger metaphor for the country the last forty years, and that is the incentives have created regulatory capture such that the incumbents deny admission to the club such that their membership goes in value. This is a supply problem, not a demand problem. And the way we approach it and actually end up making things worse is the government provides tens of billions of dollars in what is a good intention, and that is creating more demand. Low income housing tax credits. Tax advantage on mortgage interest rate, which is tax deductible, right? First time home buyers credit. All this does is create more demand. When we don't address the supply side and maintain a national kind of nimbyism as a public policy, we just again further escalate the price of housing. We need to address the supply side. We need federal legislation and local legislation that says look you cannot access federal funds if you do not, or if you create a NIMBY like situation where it's very hard to issue permits. We need to provide tax credits to developers such that they have greater incentives to build.
00:21:48 · George Hahn
[00:21:48] S3: Anthropic, the company behind the AI model Claude, filed its s one with the SEC this week, the last major step before public listing. It's expected to go public at a valuation of as much as $2,000,000,000,000. That would make it the largest IPO in history, and one of the dozen most valuable companies in the world on its first day of trading. The filing shows 16,300,000,000 in revenue for the first half of the year, up from 1,200,000,000 a year earlier, and an operating loss that narrowed to around $700,000,000. Ed ended Wednesday's Prof G Markets by looking past the income statement to the numbers on the very back of the filing.