Will Tesla’s Robotaxi Ever Arrive? + Sin Stocks and Zyn Nicotine Pouches
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Today's number, $10. That's the value of the Uber Eats gift card that CrowdStrike offered customers as an apology for its worldwide outage. Ed, I just can't take much anymore. I'm divorcing my wife. First it was some guy in a drunk party, then it was her ex-boyfriend, her boss, my best friend, even an Uber driver. I just can't stop sucking other men's cocks, Ed. ♪ 1977, no me diga no, me loco siento ♪

That was bad, even for me. Here we are, Ed. Prop G. Our producer just went off camera. She's calling her lawyer.

Hello? Hey, Dina. It's Claire again. What's going on, Ed? I'm doing very well. By the way, I saw a nice headline in the news this week, which is that you're donating $12 million to UCLA and UC Berkeley. That's an interesting segue from me giving random oral sex to men. Yes, I am, Ed. I'm trying to portray you in a better light here. We definitely changed altitudes pretty quickly there. Do you want to stay on sucking dick? You want to remain there for a little bit longer? Let's do it.

Let's try and pivot out of that. Even I'm feeling a bit cringed out right now. Even I'm feeling a bit cringed out. All right, back to me and my virtue signaling. What would you like to know, Ed? You know me, I don't like to talk much about myself. What's on your mind? Well, I think you should just talk about it. I shared it on Twitter, which you're not on, so you didn't see this, but I just sort of gave you a little shout out for putting your money where your mouth is. That's nice. That makes me feel good. And people just loved it. I mean, it's gone...

I wouldn't say viral, but semi-viral. I think people are just very impressed with that donation. So maybe explain what it's for, what you're doing. I just like when you...

Yeah, follow through with your ideas, and that's what you've done here. Okay. Well, first off, thanks for asking. So it's a lot of things. It's a culmination of a lot of things. One, it's an overdue nod to the generosity of California taxpayers that gave me a shot. The reason I'm here with you today is the generosity of California taxpayers and the vision of the Regents of the University of California. I'm not being humble. I'm a remarkably talented person, but without the certification contacts and

job opportunities that I got from the University of California, I just wouldn't be here. And the thing about UC back in the 80s was that it was not only affordable, it was accessible. 76% admissions rate, $1,200 per year. And I feel that people who are successful and have gathered some wealth have an obligation, especially UC grads, to try and return it to that level of affordability and accessibility. In addition, I saw an opportunity, and that is

We have this incredible infrastructure across the UC campuses. We don't take advantage of the facilities at night or during the summer. Also, our product hasn't evolved. Not everyone should be shoved through a traditional four-year liberal arts degree. Because five people are leaving the trades for every two that are going in over the next 10 years, we've seen a dramatic escalation in the salaries and compensation of plumbers, electricians, cybersecurity professionals,

specialty nursing, specialty construction. So I approached the chancellors at UCLA and Berkeley and said, if I funded a program that was more vocational in nature, that gave maybe young adults and adults a chance to take courses, very specialized courses over the course of a year, that gave them access to this incredible

upswell and compensation and job opportunities in the main street economy. Would you be interested? And they were interested and they were very generous with me, even though they hate using the term vocational. So we talk about non-traditional students. Why do you think they hate the term? Does it just sound not elite enough or something? Yeah, I think they see themselves as wanting to, higher education is about giving a kid a chance to explore different disciplines such that it rounds out the kind of the brain as a muscle, whether it's history or philosophy.

And that maybe our junior colleges or other trade schools are really for that, that that erodes kind of the mission and somewhat of the elite status of higher ed. So they are very, they have been, that was the hardest part about this gift was getting them to somehow move to the notion that we need to offer an opportunity here over one or two years that would help kids have the skills that foot to the main street economy right now. And that,

My vision is I want it to be free, and I don't want there to be an admissions process. I want it to be, if you're smart—no, no, not even smart. You're a good person who wants to be a part of our economy, wants to be in the middle class, wants to—or higher—wants to pay taxes, but isn't cut out like two-thirds of Americans for a traditional four-year liberal arts degree that you have opportunities to.

And, you know, free and accessible. Those are my two call signs here. But this is, I'm super excited about it. Both UCLA and Berkeley were really supportive of the idea. And also for me, it's not even philanthropy. It's consumption. It makes me feel really fucking awesome. I feel like a baller doing it. I think I'd have accomplished another goal, which is that many of the comments I saw on Twitter were, I didn't know Scott had $12 million. Yeah.

I have $12 million and one. It's all gone now. That's what I said. Someone said, how much does he have? I said, more than $12 million. It's super exciting. I'm happy to be, you know, I don't know, Dad. It's like you get to a point in your life, and what I want to do is, I love the difference between an opinion and a principle or a value, and the difference between an opinion, of which I vomit out to everybody on this and other podcasts,

is that, okay, are you really passionate about struggling young men? I think I am. Well, is it an opinion or is it a value? I'm really passionate about higher ed and making it more affordable and accessible. Well, is that just an opinion or is it a value? And the way you show it's a value is that you sacrifice for it. And so I'm sort of overdue closing the gap between everything I say and everything I do. I need to, you know, I definitely talk the talk. I need to walk the walk more. And this is an attempt to do that. And with that,

Let's share our opinions on the news. Let's start with a weekly review of market vitals. The S&P 500 had its worst day since 2022. The dollar was flat, Bitcoin declined, and the yield on 10-year treasuries fell. Shifting to the headlines. Google reported second quarter earnings beating analyst expectations on the top and bottom lines. Operating profit crossed $1 billion for the first time ever. However, the stock still fell 5% due to concerns over heavy AI spending and slowing YouTube ad sales.

Louis Vuitton and Dior owner LVMH reported only a 1% increase in sales for the second quarter. That is its lowest growth rate since 2009, excluding the pandemic. Sales for fashion and leather goods also only rose 1%. Nearly half of what analysts expected, the stock fell more than 4% following that news.

And finally, Spotify hit 246 million premium subscribers in the second quarter. That's up 12% from a year earlier. Those subscriber numbers helped deliver a record profit of just under $300 million. Spotify stock rose as much as 16%. Scott, your thoughts, starting with Google earnings. I've been thinking a lot about Alphabet, and I wonder if they're still sort of semi-stuck in the innovator's dilemma. And that is the company's LLM, Gemini,

gets about an eighth of the traffic of ChatGPT. When you think about the captive audience they have between Android and search, and the fact that a lot of the IP for AI was actually developed at Alphabet,

have they really turned the fire hose of their 3 billion captive consumer base to Gemini? Or do they want to have their cake and eat it too? And that is the majority of the AI efforts I have seen from Alphabet have been in the context of a Google search, and it has that kind of summary at the top. But I don't feel like I've had that much marketing or that much incentive to use Gemini. And I wonder if they're still sort of protecting or not going full force. They don't

In other words, they haven't burned the boats, so to speak. And they're busy sending out $23 billion offers to Wizz and buying back shares and issuing dividends, yeah. Their capbacks got hit hard this quarter. And what struck me, I immediately thought of Apple, that's so smart, not getting into this arms race. They're just going to make sure they own access to the billion wealthiest consumers. And then they're going to charge someone like Alphabet or OpenAI a ridiculous amount of money to be the AI of iOS.

But their capex was hit 13 billion up 91% from a year earlier. Their total capex this year could be around 50 billion, which would be 84% higher than when the company has averaged annually over the past five years. I got to think most of that was on AI, which was mentioned, get this, 89 times on the earnings call. YouTube

You know, ad revenue still climbed 13%. So I think it's pretty, pretty striking. The thing we have to remember here is that Alphabet, and this is our big tech stock pick of 2024, so I've been tracking it. Microsoft year to date is up 16% for all of the excitement about that stock. Amazon's up 21%, but Alphabet ad is up 25%. So they're doing really well. And it just strikes me when the analysts, the analysts zero in on the negatives here.

But the company is still doing really well. What are your thoughts? I completely agree with you. I think people are so obsessed with this idea that they're behind on AI, which is probably true when you compare it to Microsoft. But as with anything, you have to look at the big picture here. And the big picture for Google is extremely compelling. Search revenue is up 14%. People thought that ChatGPT and AI would be eating into that revenue. It hasn't hurt it at all. In fact, you know,

Search is chugging along just fine, better than fine. Cloud revenue up 29%.

I think that was expected. And as you mentioned, the YouTube revenue, people didn't like the 13% jump in YouTube revenue. It's coming off an insanely high base. And I think they're just comparing it to the previous quarters where they were getting 20 plus percent growth, which is already insane. I just want to point this stat out. YouTube ads, just the ads alone, they are now bringing in on an annualized basis, $35 billion per year.

which is higher than Netflix's total revenue last year. And it doesn't even include all the paid subscriptions that they get from YouTube Premium and YouTube TV. So I just think it's remarkable what YouTube has done. We have been saying this for a while. I continue to believe that YouTube is the most underrated media asset in the world. And I think if you just stack all those things up,

There's so much reason to be optimistic about Google. Well, the market agrees with you. And I've always, the thing I've said about Alphabet for a long time is that it has the greatest concentration of IQ since NASA. And the team of the best players wins. And Alphabet consistently wins.

finds, attracts, and retains some of the best players. It's an incredible company. I think you have to admire their management and what they built there. As we went to LVMH, thoughts on these earnings that were a disappointment? LVMH is sort of the quote-unquote bellwether for luxury. And

What's ailing them is kind of what's ailing every luxury firm, and that is that Asia, or specifically China, is no longer the gift that keeps on giving. And if you were overexposed to China, it was champagne and cocaine from like 2000 to 2018. And Estee Lauder went through the roof. And, you know, North Face. It took North Face, I think, 20 years or 30 years to get to a billion in sales. It took them 18 months in China.

I mean, the ship was just selling before it even got offloaded from ships, right? And last year, about one in six purchases globally of luxury happened in China. But the Chinese economy is showing signs of weakness. High net worth families in China reduced their annual spending by 11% last year.

And you want to talk about just an incredible shift in fortunes. Chinese stocks have lost six trillion over the past three years. That's twice the GDP of the United Kingdom. The S&P over the last five years has doubled. It's up 100 percent. India, 65. Japan, 25. Europe, 24. China is down 30 percent. So if I don't know what it was, if China was

10 trillion and we were 25 trillion. We went to 50 and they went to 7. I mean, LVMH gets about a third of its revenues from China. So if that's down 15%, that means overall revenues are going to be down 5%. I wonder if it's a buying opportunity. It's such a well-run company. They have such incredible brands.

But this is just simply put, their biggest customer doesn't have as much money as they used to. I'll also add, it's very interesting. I think this is another nice example of these ripple effects that we often talk about in the markets where, you know, what started out as basically a real estate crisis in China that began with Evergrande has morphed into a larger issue in China. It has reverberated throughout the world and it's now...

worming its way onto the income statement of a French luxury fashion house, which is LVMH. And so it's a very interesting dynamic going on here. Having said all that,

I think your point that it could be a buy is a good one because this company is not in crisis. I mean, the stock is down this year, you know, down 10% year to date, coming off some crazy highs where you saw Arnaud becoming the wealthiest man in the world. So yeah, I don't think this is an organizational issue with LVMH. This is a regional issue. It's a problem with China. So, but let's, let's just look at, let's look at the stock over the last five years, the

the stock's up 66 percent. Yeah. Then the one that just absolutely flummoxes me is Hermes has a market cap of 213 billion euros, which is about 240 billion. Unbelievable. I think luxury is going to continue. I think it's ridiculous. This notion that young people aren't as fascinated by luxury as my generation and their ability to command margins once they get to that iconic status. They also, and I'll wrap up here,

They have an incredible moat because the majority of luxury brands have heritage. You just can't spin up heritage. You can have a brand like Supreme that becomes aspirational for a while, but these brands, you know, Panerai was initially crafted for Italian submariners. I mean, this shit is just Louis Vuitton trekked into Paris on barefoot and said, okay, it makes no sense that

These carriages are carrying suitcases that are rounded at the top and have leather that attracts moisture and mold. So we came up, luxury is really rooted in innovation. I think it was, was it L'Oreal or was it, I forget who initially, it was a German chemist,

Coco Chanel defined luxury as the following.

"Luxury is a necessity that begins where necessity ends." I thought that was sort of the perfect encapsulation and a great explanation of why, yes, we will always worship luxury no matter what we say. We'll find a way to find necessities when necessity ends. Yeah, she also said the opposite of luxury is not poverty, it's vulgarity, which I love.

And she also said, I love that Nazi dick. She said that too. And she said that too. Oh, okay. Is that fair? Is that fair? It's pretty easy to tell. I'm no longer working for a company that caters to luxury brands. By the way, Chanel is an amazing company with amazing people. Sorry about that. Yeah. That's why you're getting sent clothes from Nike and not Louis Vuitton.

I've used Chanel moisturizer. I use Chanel Blue. It's what I bought actually when my son was headed back to boarding school. I always do a little bit of a shopping ritual for him. And I'm like, this shit is gangster. You got to put a little of this on. And I use Chanel Blue moisturizer. Anyway, it sells lovely. Masculine yet feminine at the same time. That's fascinating. I'm glad everyone's getting to hear this. Let's move on to Spotify, who had a great quarter yesterday.

Monthly active users up 14%, revenue up 20%, profits up 45%, record profits for the company. Your thoughts on Spotify? If you think about what Spotify has accomplished, it's singular. They've taken an entire medium and distilled it to a single icon on your phone that is searchable and very user-friendly. No one's done that in TV. No one's done that in books.

I think it's a great value. I think they do a fantastic job. In sum, I think it's a great company. And they were also pretty bold. They went all in and gave the artists and labels a disproportionate amount of the revenues. They basically lost money. They were more like a collective or cooperative, just taking money and distributing it to the record labels and the artists. But once they got scale, and once they kind of not consolidated the industry, but had a large enough share where they could start, they had the pricing power to improve or increase prices, and their subscribers didn't go down. And basically,

Essentially, what they have figured out is that they have more pricing power than they thought. And despite increasing prices, they have increased their revenue. So revenue from premium users increased 21 percent and premium subscribers accounted for 95 percent of Spotify's gross profit over the last 12 months. The thing that doesn't work or the thing I saw in this earnings call or in these numbers is.

I think both Netflix and Spotify, I think the advertising does not work for them. And I remember being like in 2000, like the early 2000s, I think I was on a date or whatever. I had some people over and I was trying to impress these people and I was at my

And I know it's horrifying to think of me as single. And I remember I had music on and things were going really well. And all of a sudden it dawned on me like some really bad ad for like pets.com or something came up. And I'm like, oh my God, no one's ever going to have sex with the ad supported Pandora guy ever.

And I literally thought having ad-supported Pandora was just going to ruin no matter how many Panerais I had or how hard I was trying. When the Pets.com ad comes on on Pandora Radio, it's over. Everyone's like, well, it's getting late. It's getting late. But what I saw on the Netflix earnings call and in this one is,

is that it's just the ad-supported ecosystem is having a really difficult time. I think it gets in the way of storytelling. And I think this earnings shows just that basically it's subscribers that are

What, 95% of Spotify's gross profit? One other thing I found really interesting was how the CEO, this guy Daniel Ek, announced these earnings. And that is before the official earnings call, he posted on Twitter and on Instagram what was essentially like a TikTok video. It was like a two-minute selfie video where he just spoke directly at the camera and ran through all of the headline numbers in the earnings report.

I think he started doing this around Q4 of last year. This is kind of his calm strategy. I'd like to get your take. I will just say, I think it's such a good idea because...

In a weird way, the way most people consume earnings news, it isn't actually from the company earnings calls. It's from media companies. It's from like CNBC or the Wall Street Journal, or even you might get it from listening to this podcast. You're rarely hearing from the CEO. But this strategy is such an obvious one. Just post directly to social media. That sort of fixes it.

You know, it's a small detail. It's a small innovation. But I would predict that this is going to become the norm. I think you're going to see lots more CEOs posting on social media these selfie videos about their earnings in the next few months. I think that's really interesting. I didn't know that. You can see them bypassing kind of the

analyst industrial complex with the CNBC industrial complex and doing a video, kind of timed well choreographed tweets, and then maybe doing like Instagram live to do their analyst calls, right? To say, all right, I'm going live to answer your questions. There's some choreography around SEC and when you release non-public material information that they got to be careful of, but

I think you're right. I think that that might be because what you want is you want to get more people just as you want to garner more consumers. A consumer brand wants to get new consumers into the franchise, get new customers. The company wants to get new investors.

And they also, what never goes out of style is they all want to be known for having an innovative product that's differentiated and that they're good at what they do and they're competent. But what they really want more than anything is they want some of that innovative pixie dust poured all over them. So communicating your earnings via video that's posted to

YouTube and then spliced up for TikTok or what have you, and then doing some of this live stuff on some of these platforms, that just sort of screams of innovation. Yeah, I can't understand how PR firms or PR teams, I should say, at these public companies haven't gotten on this. It's weird to think this, but I would bet within five years, 10 years max, a key component of your boards deciding whether to make someone CEO is how strong is their following.

Basically, as the CEO, your job is to attract and retain the best talent and set a vision for the company. But as much or more than anything now, it's your ability to tell a story or craft a narrative that results in access to cheaper capital such that you can invest at a greater rate than your competitors and pull away from them. Anyways, I'm 100% with you, and I would bet you're the next generation of CEOs.

are ones that come armed with pretty decent followings on social media. We'll be right back after the break with a look at Tesla.

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We're back with Profiteer Markets. Tesla's second quarter profits fell 45% year over year, declining for the second quarter in a row. The company also posted its lowest quarterly profit margin in five years and its second consecutive sales decline.

Tesla did not offer a fresh sales target for the year, but it did warn that its vehicle volume growth rate would be, quote, notably lower than 2023. The stock fell 12% after the earnings call. Scott, reaction to Tesla's earnings? I think the analogy here is this market feels very similar in some ways and not in others to the streaming market. And that is Tesla basically had the market to themselves similar to Netflix through the aughts and the 2010s.

And that is, if you were going to buy an EV, you were really going to buy a Tesla. It was kind of like Tesla in the seven door. No one was going to buy a Pontiac Leaf or whatever the heck it was called, right? And so they sort of owned it. And then the stock market just reacted so positively to Tesla and gave them SaaS-like, tech-like multiples that everyone in the auto industry said, okay, we got to get into this. And they announced, you know, Mary Barra announced that half the cars were

Sold from GM, we're going to be electric within a certain time. Rivian spinned up. Fisker, all these startups kind of spun up. And there was essentially what happened in the EV race is what happened in streaming. That is, it became overinvested. And the manifestation of that overinvestment is that a year ago, an EV, an electric-powered vehicle, was $8,500 more expensive than its internal combustion equivalent.

As of today, it's only $1,500 more expensive. And in some instances, it's less expensive. So the F-150 Lightning, that is now $10,000. The electric version is $10,000 less than its internal combustion brother. And I will say brother, that's a pretty macho fucking car. That shit has real balls, Ed. That shit has balls. Bottom line is, this is just classic economics. Overinvestment,

because of the market giving it above market multiples, that overinvestment results in a price war. And then I think you combine that with Tesla's products feel a little bit dusty right now.

They don't feel that. I mean, by the way, I drove in a matte black Cybertruck. No way. Yeah, a friend of mine is this total master of the universe baller hedge fund guy, and he invited me out to his house. I went out there last weekend, and his house manager picked me up in a matte black Cybertruck. No way. And I'm like, I am literally the douchiest douche in doucheville right now. How did it feel on the inside? Because I kind of agree with you. I think Teslas feel very cheap on the inside.

Did it feel cheap on the inside or did it feel cool? No, it felt modern and very techie. But on the way back, we drove in his Range Rover and I thought that was just much nicer. Yeah, right? Quite frankly, I think the Cybertruck is fucking ridiculous. I think it looks like something Homer Simpson would have designed after watching Battlestar Galactica for 48 hours straight. I think it's just so stupid looking and weird looking. And the inside was very...

It felt like you're on a set of a movie about the future, but you would never fucking actually own this car. Right. And, you know, people were coming up and stopping and talking to us because they were so interested. It looked like, you know, the Batmobile thing.

But I don't, I think that thing is a giant thud. Although I guess the sale, have you heard anything about the sales of this thing? I don't think they've broken out the sales for the Cybertruck yet. But I think the consensus is that orders are underwhelming and they're sort of struggling to keep up. The other thing that strikes me about Tesla is that if you think about pure meme stocks, like the memiest of meme stocks, a meme stock is a stock who's

in my opinion, to stock is totally disassociated from the underlying fundamentals of the company. It's like the ketamine of the market, if you will. And the ultimate meme stock is hands down Donald Trump media. It's got a $6 billion market cap even after declining 30% in the last week.

and it's like seven million in revenues and 300 million. The company makes no fucking sense. It's basically people have decided it's a proxy for your support of or your belief or the probability that Trump is elected president. And it trades on kind of sentiment and emotion. It has nothing to do with the underlying business. Halfway between a stock that trades on its underlying fundamentals, like an alphabet or 99% of stocks, and Trump, which is a Trump media, which is a total meme stock,

I think in near meme stocks would be like AMC and GameStop. They're shitty businesses and they trade at much greater multiples than they should because people think there's a chance they'll go crazy again because of, you know, roaring kiddie or whatever. I think perfectly in the middle of that continuum is Tesla because to be fair, it's an amazing company. It inspired the EV race. They have they do have great products. Their energy unit is making money.

The idea of a robo-taxi is compelling. We'll come back to that. But Tesla trades at 99 times forward earnings. This is in contrast to Ferrari, an amazing brand that a lot of people want, kind of singular in terms of prestige and self-expressive benefit. That trades at 50 times.

Ford trades it seven times, and GM, get this ad, trades it five times forward earnings. So great company, but should it trade at double the multiple of Ferrari and 20 times the multiple?

of General Motors. So this is sort of a, the term I would use is it as it relates to meme stocks, that Tesla is a hybrid. It's a Prius. Yeah, it's a great company, but it can't really justify the multiple it's at. And then what I'll end up with, and this will come back to our prediction, is that just as Donald J. Trump media became an index for whether or not Trump got reelected, I think these guys, these techno-libertarian weirdos really fucked up

by coming out so forcefully in favor of Trump. Because what they've done is they've tied themselves and their businesses to the reelection of Donald Trump. And as the likelihood of Vice President Kamala Harris becomes more likely, and it's become much more likely just in the last five days,

I think people are going to go, well, who is this going to hurt? And I think, one, it'll put pressure on Bitcoin prices because they'll say, OK, maybe Bitcoin isn't going to be totally deregulated and become the ultimate stablecoin or whatever. I don't know. Whatever the right term would be good for Bitcoin. But also, I think people are going to soon learn or soon figure out if it's a Harris administration, they may not be inclined to put tariffs on BYD.

They may not be as inclined to give subsidies that would include Tesla or give subsidies that might exclude some of the Tesla models. I think people are going to start connecting the dots that when you go all MAGA, Musk, there's some risk there.

And I think that risk will start to show up in some pressure on the stock as a little bit of a meme stock tracking Trump's election or lack thereof to the White House. You mentioned the robo taxi, which we should definitely talk about. It was supposed to come out or the robo taxi model was supposed to be unveiled in August. And then on this earnings call, Elon delayed it to October. And that's, I think, a big reason why the stock fell.

He's been saying that Full Self Driving is coming next year for literally a decade. So, you know, he's delayed the unveiling again. Supposedly it's coming out in October now. One sort of tangential point I'd like to get your reaction to in terms of this

when will this robotaxi ever arrive discussion. I was speaking with an AI founder recently, and he actually started his career as an engineer at an autonomous vehicle company, and that episode will be coming out in First Time Founders. And he made a really interesting point, which is that we tend to think of self-driving cars as its own sort of separate, very specific technology. But in reality, as he pointed out,

Self-driving cars is just AI. And his point is that, you know, right now is the big AI moment. 2024 is the year of AI. And so logically speaking, you would think that if we're in the AI moment, we're about to witness the self-driving moment too. I think it's a strong case for why

the Tesla robotaxi might actually, it actually will arrive this year, despite all of Elon's bullshit. And I'm wondering if you agree. I have no idea. I just know that it's the thing that's supposed to be around the corner. And then you look around the corner and it's not there. And you also have Waymo, you also have a lot of competitors in the space. In order to really, I'm taking this through, in order to capture incremental margin and

that results in this type of increase in earnings, you would have to have Teslas that were more AI-enabled or had more automated driving technology than any other car. Is Tesla that far ahead of the other self-driving technologies such that they could capture that innovation just for Teslas? I don't

There's two things here. When does this happen? And also, what would Tesla's ability be to capture the economics of that innovation versus any other company? Just before we wrap up on this, we spend all this time ragging on Tesla. Let's try to think a bit more positively. Say you were on the board of Tesla.

And let's be clear, the business is struggling. Revenue rose, but it only rose 2%, and profits fell 45%. It's dealing with a lot of issues. Its market share in the EV space in America is down to 50%. Four years ago, that number was 80%. So we're not being biased by saying that Tesla as a business is

is struggling, what would you be focusing on if you were trying to improve this business and you were on the board? Okay. So if we're going to imagine we're on the board, I'm going to imagine that I'm dating Tom Brady and he runs his hands through my share like thick hair. I mean, if we're really going to hallucinate, let's go full psilocybin and with a kicker of like nine shots of something. Okay. I'm on the board of Tesla.

Oh, that's a good one. Where would I be focused? I think I'd be... I mean, this sounds boring, but I think I would... Their energy stuff is pretty cool. Totally. By the way, that business doubled. Yeah, doing pretty well there. I mean, it sounds really base. I guess I don't have anything creative here. I'd be focused on freshening the model lineup. And then I would probably...

I would probably, for the robo-taxi stuff, I would probably acquire Lyft and have a built-in base and user base of people who are comfortable with ride hailing. They should acquire Peloton. Yeah, there you go. That's right. That was my favorite for a while. They're definitely being acquired, says Prop G. We'll be right back after the break with a look at a tobacco company's recent success.

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We're back with Profiteer Markets. Shares of Philip Morris International hit their highest level in more than two years after a red-hot product propelled the tobacco company to a better-than-expected earnings report. That product is Zin. Zin is a nicotine pouch that you absorb through your gums, and they're so popular that there's been a nationwide shortage of them this summer.

Philip Morris, which acquired Zin in 2022, said sales of the pouches rose 50% year over year. Overall sales in its smoke-free category rose 24%, and total revenue for the company rose 10%. Scott, what do you make of this new Zin trend that Philip Morris has managed to capture and that is benefiting this company? I think it's really interesting. I think all the Zin guys are trying to figure out a way to go sort of near Zin, and that is...

My understanding of Zyn is that, I want to be clear, this shit is not good for you. Don't pick it up if you don't have an addiction to nicotine. But it's a much less damaging means of delivering nicotine than chewing tobacco. Just full disclosure, I have some background here. I invested in a company being pulled out of bankruptcy called Enjoy, which is an electronic nicotine delivery system, better known as vaping.

And I think I did it in 2015 or 16, a long time ago. And one of the reasons I invested was my mother died of a smoking-related illness, and I'd had two friends who'd quit smoking using Enjoy. And just as combustibles are going away, every year they're down like 5% or 8%. One in three people who buy a pack of cigarettes, let's get this, says this is their last pack they're ever going to buy, one in three.

It's the largest source of preventable death in the United States, and it's going away. People are getting the memo here. Long story short, we pulled this company out of bankruptcy

I think we bought it for 60 or 70 million, put a bunch of money into it. It was basically a regulatory play. I think we invested another 100 million in it to try and get FDA approval and show that we're good players. We're not Juul. We don't have a youth problem. Anyways, seven, nine years later, we got acquired for 2.8 billion by Philip Morris. Sorry, was it because there's Altria, which used to be Philip Morris, and then there's Philip Morris International, which is the international...

segment that was spun out of Altria several years ago. So that's just one little wrinkle in this story. Do you know if it was Altria or Philip Morris International that acquired you? It was Altria. Okay. So you're right. It's technically a different group.

Because there's different dynamics, and I guess they figured they could get more money. Yeah, and they're totally separate companies now, but at one point it was... They were the same people. Yeah. My favorite, though, is they changed their name to Altria, thinking that people would like them more. They would forget about all the death, disease, and disability that they'd spent around the world. You don't think it worked? Um...

I don't like name changes when you're trying to escape from something. I don't, I don't, I don't know. I don't think it made any sense. Anyways, but the thing that really struck me, I think I told you this. I went to Summit at Sea with all these, you know, young and up and coming vertical farming, you know, it's like, I call it learning man. It was TED Talks during the day. And then at night, everyone did their drugs with a DJ and pretended they were interesting and thoughtful people because they'd gone to a talk during the day. Yeah.

I'm like AI and fashion. That'll be riveting. Anyway, so, but the thing that struck me was it was on this Virgin cruise ship and I went up and ordered a Makers and Ginger at the bar and he's like, oh my God, finally someone's drinking. And I said, what do you mean? He goes, none of these kids drank, they're all doing drugs. And I noticed that everybody, the drug of choice was mushroom chocolate. And then everyone buys one drink and just nurses it all night. And that alcohol is really, well, actually I'll turn this question back to you.

You're young. And now for a young person. What is going on with the trend of substance abuse, both tobacco and alcohol and drugs? And I won't ask you to say what you do, but what do your friends do, Ed? Yeah, that's exactly right. Everyone stop drinking. I mean, here are the statistics.

non-alcoholic beer sales increased 28% last year. And then two, probably more importantly, Gen Z drinks 20% less alcohol per capita than millennials did at their age. And I'd love to see the difference between the millennials and the boomers, probably like 100% less. But the thing that, you know, what we should be talking about with this story is this new obsession with Zin. And yeah, it's a nicotine pouch. It's similar to chewing tobacco, but without the tobacco.

supposedly it doesn't cause cancer, but like the vapes, we just don't have enough data to say it causes or doesn't cause it.

But it's extremely popular everywhere. Zin sales were up 80% earlier this year. It's now around 50%. An expected 580 million cans will be sold this year. And as I mentioned, there is a Zin shortage in the US. So now Philip Morris is spending $600 million on a manufacturing facility in Colorado just to keep up with demand. Final anecdotal evidence I will offer is

Most of my friends use Zen. Really? Yes. None of the women, all the men, especially the tech bros and especially the bankers. This is sort of a phenomenon in the world of nicotine. So it's massively popular. I think the question is, do you want to get in on it as an investment? I mean, Philip Morris International is trading at 20 times earnings, which is...

pretty high. It's double Altria's P-E ratio at the moment. I think the market is correctly recognizing that Zin is an absolute rocket in the nicotine industry. But, you know, I will throw this back to you. One, do you like this as an investment? Two, do you have any ethical concerns about investing in a company that, sure, offers tobacco alternatives, but also sells tobacco? I think it's easy to be a purist and lecture other people after you're already rich.

I think people have an obligation to develop economic security for themselves. Like, I used to own Facebook stock, and I got so much shit for it because I'm constantly saying, you know, Mark and Cheryl have done more damage to the world or teens than anyone, like, but you own the stock, so I sold the stock. But I don't have a problem with owning sin stocks. I don't... My attitude is...

you know, if you really have a moral, if you really are against it, then fine, do what you want. But my observation is that the companies that are quote unquote ruining the world generally have the nicest people and are the best run companies. So I did work for fossil fuel companies in my first company, Profit. The people at Chevron, the people at Exxon, so nice, such a well-run company.

I've worked with people at gaming companies, casino guys, incredibly professional, incredibly well-run. Walk into Altria, do work at Altria, and you're going to see some of the most talented, disciplined people

managers. They've massively invested in their human capital. I think it's got some of the happiest employees in the world based on surveys. They invest a tremendous amount of money in training. They have great employee profit sharing. These are just really well-run companies, and they're typically, in terms of evaluation, somewhat depressed relative to peers because there's a large segment of the population that won't invest in them. So long-term, I'm not going to make a moral argument for or against them. I mean,

I'm a capitalist, and have at it. It's your capital. Do what you want. But I would invest in it. I'm an investor in a—am I an investor in a fossil fuel company? I'm an investor actually in a small fossil fuel company in Switzerland. But let me put it this way. I think it's a personal choice, but I don't look down on people who invest in this stuff. I think economic security is—

is really the thing you should be pursuing. And I think we should be voting for people that put in place regulations that think about the well-being of people. Let's take a look at the week ahead. We'll hear the Fed's interest rate decision for July, and we'll also see earnings from Microsoft, Meta, Apple, and Amazon. Big earnings week. Do you have any predictions, Scott? Tesla is about to become a bit of a meme stock that is an updraft or a downward draft based on Vice President Harris's likelihood or where she is in the polls.

And I think these guys, a couple weeks ago, this big list of tech bros that, again, seemed like literally the lamest club in San Jose, thought that they were smart to go all in on Trump and that it would pay off for them. They didn't do the math on what's going to happen if all of a sudden a Harris presidency becomes more and more likely. I do think it's going to actually impact the companies they're involved in. And Musk has turned Tesla red pill.

And it appears as if he's gone all in on Trump. He said he was giving $45 million a month. Now he's backtracked on that. Well, he argues that it was made up. I don't think there's any way that we'll know. Well, okay. It was the Wall Street Journal reporting it. So who do you trust more, the Wall Street Journal or Elon Musk? Yeah. Anyways, this is about to become another, not as much as Donald Trump media, but it's about to become a tracking stock and become inversely correlated to Harris's poll numbers.

This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Our executive producers are Jason Stavis and Catherine Dillon. Mia Silverio is our research lead and Drew Burrows is our technical director. Thank you for listening to Profiteer Markets from the Vox Media Podcast Network. Join us on Thursday for our conversation with Dan Ives, only on Profiteer Markets.