The Prof G Pod with Scott Galloway
Prof G Markets: Meta & Microsoft Brush Off DeepSeek + Starbucks Stages a Comeback
Mon, 03 Feb 2025
Follow Prof G Markets: Apple Podcasts Spotify Scott and Ed open the show by discussing the White House’s employee buyout, Starbucks’ fourth quarter earnings, and the beta launch of T-Mobile’s exclusive Starlink deal. Then they break down Meta, Microsoft, and Tesla’s earnings, and examine why big tech has yet to adjust its spending plans in response to the DeepSeek drawdown. Order "The Algebra of Wealth," out now Subscribe to No Mercy / No Malice Follow the podcast across socials @profgpod: Instagram Threads X Reddit Follow Scott on Instagram Follow Ed on Instagram and X Learn more about your ad choices. Visit podcastchoices.com/adchoices
Chapter 1: How does Norway's Sovereign Wealth Fund influence global markets?
Today's number 1.5. That's the percentage of global stocks the Norway Sovereign Wealth Fund owns, making it the world's largest single investor. Norway, where the dating scene is a sauna and a hike, and then you jump into a freezing river, and if you survive, you get a second date.
Not really a joke, Ed, just sort of an observation. Here we are.
Just an observation. Let's go Norwegian. Let's make some cabbage here. This episode is brought to you by Fundrise. We think we're Norway. We think we're rich and civilized. Meanwhile, we're arguing over transgender. Meanwhile, we're arguing over Chan. Anyways, never mind. Keep that in. I'm getting so fucking old.
I literally think I'm having one of several million strokes that I've been experiencing. You get to my age, Ed, a stroke is kind of like, I don't know, it's like an erection when you're your age. It just kind of happens when you're least expecting it. Every morning. Don't brag. Don't rub it in my face. Literally. Literally don't rub it in my face. It all comes back to the penis.
How are you, Scott? I'm doing pretty well. I found out I have to be in Orlando for a speaking gig, and at first I was bummed, and now I'm kind of sick of my kids, so I'm sort of excited. So I'm headed to Orlando on Monday, and then I go up to New York for four days. I'm excited about that. I'm going to do our... our team strategy meeting where you're all going to present your plan.
And I'm going to say, you make too much money and you're not growing revenues fast enough. Just so you know, that's the feedback you're going to get. I'm excited. What about you? What are you up to?
Let's see. I got my sister visiting this weekend. That'll be pretty fun.
You're close with your sister, aren't you?
Yeah, I've gotten really close with her in the past couple of years. I've always been pretty close, but gotten really close with her over the past couple of years. So she's visiting. And why do you think that is? I think maybe I'm just mature, or maybe we're both more mature. I used to feel kind of competitive with her. I think that was probably a problem.
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Chapter 2: What are the implications of the White House's employee buyout strategy?
I see it differently. I think I can sort of like fake my way through being normal with adults. But when it comes to kids, I'm going to be kind of like fumbling about what to talk about.
I don't know. I think you just make fart jokes and threaten to hit them if they don't behave. That's my approach to children. But no dick jokes? You can get on the wrong list. The next time you move, you have to go next door and tell them you've moved in next door, which is a real inconvenience. It's a real bummer. All right. Well, should we start with our weekly review of Market Vitals?
Let's do it, my brother. Let's do it, Uncle Ed.
The S&P 500 spent the week recovering from Monday's drawdown. The dollar rose. Bitcoin crashed below 100,000, but then rebounded by Thursday, and the yield on 10-year treasuries declined. Shifting to the headlines. President Trump is adopting a corporate-style buyout strategy, offering federal workers the option to resign by February 6th in exchange for pay through the end of September.
The White House expects 5% to 10% of federal employees to accept the offer. Starbucks' same-store sales fell 4% for the fourth straight quarter. However, revenue beat expectations, and CEO Brian Nicol shared more details from his Back to Starbucks strategy, emphasizing a renewed focus on customer experience. The stock was up 8% on that news.
And finally, T-Mobile's fourth-quarter revenue exceeded expectations, up nearly 7% year-over-year. The company also issued its strongest start-of-year guidance to date. That earnings beat coincided with the beta launch of its Starlink program, where it'll be offering its customers exclusive access to Starlink for the first year. So Scott, let's start with this federal buyout here.
Just to be clear, this is not the same as a corporate buyout or a leverage buyout where you're buying out the investors in a company to control the company. This is what's known as an employee buyout. And the reason companies usually do this is to cut down on costs. Basically, you essentially offer your employees a voluntary severance package They can take it or leave it.
And the idea is to incentivize your employees to leave the company with that severance package. So Trump is doing this, except he's doing it with the U.S. government. Good idea or bad idea, Scott?
So I think on a regular basis, it's probably a good idea to have some churn and to have some recalibration of a company. And especially, I think, with the federal government, where I would think sometimes because of deficit spending and more bureaucracy, I'll probably get a decent amount of emails disagreeing with me.
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Chapter 3: Why is Starbucks changing its open-door policy?
Department of Veterans Affairs and the Department of Homeland Security. So that's not really the people that you would think Trump is targeting with all of his rhetoric. In addition, the average federal employee is 47 years old. A fifth of federal workers are already eligible for retirement. Only 7% are under the age of 30.
So I just think the narrative that we're telling ourselves about the government and who works for the government, particularly driven with this DEI or anti-DEI obsession, doesn't really tell the true story of who actually works for the government. The most likely candidate to get cut is a 50-year-old middle-aged white person who works for the Department of Defense.
That's the most likely candidate. So I just think it's worth keeping in mind. Let's look at the numbers, and then we can compare it to the narrative we're being told. Let's move on to Starbucks and their earnings. I think the biggest... change here, the most important thing coming out of these earnings was this reversal of Starbucks's open door policy.
And basically the open door policy said anyone can come in and anyone can use our amenities and, you know, come in, hang out, it's free for all. And this gets back to something that I said on this podcast a while ago. which is Starbucks used to be the premium coffee chain in America.
You think about the premium brands today, you think La Cologne or Blue Bottle, or in New York, we have Irving Farm, these sort of nice, cool coffee chains where you hang out. That's what Starbucks used to be. Over time, it has devolved into what looks like a fast food chain. And I think a lot of that is, quite frankly, the fact that it has become almost like a halfway house for homeless people.
I mean, practically every Starbucks you enter, you're either seeing homeless people around the side or homeless people sometimes inside of the stores. And this is not... a very comfortable thing to talk about, but I find it so interesting because this new policy is directly addressing that. They now say that you can only use the bathroom if you're buying an item.
You can only use the Wi-Fi if you're buying an item. They're going to train the baristas on how to handle loiterers, which is going to be very uncomfortable, but I think it's actually quite important. And the most interesting development I saw was a statement made by this guy Donald Whitehead, who is the executive director of the National Coalition for the Homeless.
And he said he was, quote, very concerned about this new Starbucks policy. He said, flat out, Starbucks functions as an important buffer for homeless people. So this is going to be really controversial. I think it's going to get kind of ugly. This is not a comfortable topic to be talking about, but it does get to the heart of Starbucks' issue.
You cannot have a premium specialty coffee brand that is also highly associated with the homelessness crisis in America. Well, my first question, Ed, is why do you hate the homeless? I'm kidding.
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Chapter 4: What impact will T-Mobile's Starlink partnership have on its growth?
Really rocked my world. Should we move on to T-Mobile?
Yeah, let's move on to T-Mobile.
We'll just go over the quarter really quickly. They beat on earnings, beat on sales. Sales grew 7% to $22 billion. Most important number, though— was their guidance for new customers in 2025. So T-Mobile expects to acquire 6 million new customers this year, and that is their largest projection for net new customers ever, which I think is kind of remarkable. I mean, T-Mobile is sort of a...
old, slow conglomerate, and then 2025 is, for whatever reason, going to be this breakout year for them in terms of net new customers. Why do we think that's going to happen? I think the answer has to be Starlink. I mean, T-Mobile suddenly has this incredible competitive advantage this year, and that they will be the only mobile network carrier that offers Starlink's new direct-to-sell service.
Now, I don't know that much about the product i've never tried it but you know supposedly starlink is the greatest thing since sliced bread you've said it scott i've heard other people who've used it they've said it supposedly with starlink you will never not have coverage you could be in the middle of the desert you could be flying on a plane and you will always be connected so i
You know, I look at this and I'm really excited. And then I see that new customer guidance number. I'm like, OK, maybe this makes sense.
Starlink is amazing. I heard United is doing a deal with Starlink. I would fly one airline over the other for Starlink. It's incredible. And I had one of those moments, you know, you have one of those technology moments the first time you bought something on your phone or the first time you use Google Maps. You're like, Jesus Christ, this is incredible. Yeah, the first time I saw porn. Wow, Ed.
And nothing will ever be the same. Nothing will ever be the same. By the way, Ed, no one can make sweet, sweet love to me like me. Yeah. All right, where were we? Where were we? Oh, yeah, T-Mobile, AT&T, differentiation for telcos. So I can't imagine the pounds of flesh that T-Mobile was able to – that must have been so fun. Whoever was the Starlink representative negotiating these deals –
They sat down with Verizon, AT&T, and T-Mobile and said, okay, let's be honest, this is going to be ugly. Who wants it? And we're going to give one of you a two- or three-year exclusive, which is going to give you tangible differentiation, which is nearly impossible. in your category, which will add billions, if not tens of billions of dollars in shareholder value, and we want it all, bitches.
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