Prof G Markets
00:10:29 · Josh Brown
[00:10:29] S4: So... And that includes that $9,000,000,000 in compute figure. And just the way they account for that, the operating loss is the thing that people in New York or people that are managing money are more focused on. And that number, $693,000,000 down from 2,100,000,000 a year earlier. That is the more important number. And actually, ironically, Warren Buffett is instructive here. Huge Anthropic fan. No, I'm just kidding. Warren Buffett spent decades telling investors to focus on book value. He said, My job as the chairman of this company is to grow the nominal book value per share number. And then like eight or nine years ago, he said, Throw it out. It's the stupidest thing because of new accounting rules. All right, so let's say Berkshire Hathaway invests in plants and equipment, or they acquire something and the value drops, they have to write it down, like based on the accounting rules, which is a hit to book value. But then if that thing that they had previously written down increases in value, you don't get to write it up. There's no such thing. So it makes the exercise of focusing on book value almost nonsensical. And so he switched from that metric to other metrics that he then said, this is actually... So he focused more on things like cash flow. So with an Anthropic, it's not that we should ignore any number that looks bad if we wanna be constructive. That's not what I'm saying. I'm saying like the most bombastically negative numbers are gonna be the ones that they put on the cover of the newspaper or on the news. And of course, then the nuance is discussed. But in today's day and age, nobody reads articles. We read headlines and we react to headlines. So I think like, let's just be like a little bit fair and say this company understands that a certain point profitability will be expected.
00:12:33 · Ed Elson
[00:12:33] S3: The $80,000,000,000, I agree, that is irrelevant. It's relate... It... It's a good thing. It's it's associated with the value of the company going up. It's it's basically the the the the conversion, on a lot of those notes. So I'm with you. I'm talking about... And anyone who's like, oh my god. $80,000,000,000 in net losses. This company is screwed. Has it wrong. 100% agreement. I'm talking about the the future compute purchase agreements that haven't been reflected in the income statement yet, which they are going to pay for in cash and have said so. And they've they've said that they're they're going to invest in CapEx. And so what I'm saying is it seems as though currently the income statement isn't giving us a very accurate reflection of the trajectory of the company because they're about to spend significantly more amounts of money over the next whatever the time frame is, five or ten years. And we don't... They haven't told us, like, over what time frame that
00:13:35 · Josh Brown
[00:13:35] S4: I think that's exactly right. I wanna talk about the word loss, though, because it's loaded. Not all losses are losses, and not all losses, even if they are losses are bad. And sometimes in certain periods of history, when companies have come to the realization that they're in a land grab, the more important thing than accounting profitability is grabbing as much land as possible so that you can eventually generate the profitability that everyone wants. And the corporate leaders of the 80s and 90s mostly went to University of Pennsylvania and Harvard and Yale, and they were taught the Ben Graham textbooks about securities analysis, and they were taught management in a very textbook way. The leaders of today in Silicon Valley were schooled on John Malone and Jeff Bezos. And in those two examples, John Malone recognized that he was in a land grab. He had to buy every mom and pop independent cable system in every region of the country in order to actually build something that could eventually become profitable. And Bezos did it a generation later with the internet. He had to own e commerce and he had to become so scaled that profits would not only be possible, but inevitable. And in both cases, it worked. It doesn't work all the time. It's not a guarantee that Anthropic could pull it off, but I want you to understand the textbooks that this generation read, they're very different textbooks than classical finance. I would actually take it a step further. I'm not a venture capitalist, but if I were and Dario gave a shareholder update and said, we are projecting 25% profit margins in Q4, I would say, what the fuck are you doing? You have OpenAI on your ass. You have Gemini. You have free models being developed out there every day. Now you have Meta and Muse. What do you mean 25% profitability? What what are you thinking? It's the worst possible thing you could say. And I know on the show Silicon Valley, was, you know, there's a caricature, Russ Hanneman, who gets, he has to hang up the phone when he hears people talking about revenue, no revenue. I understand it's a punchline, but think about this. If any of these platforms are gonna be sticky, and I'm not predicting that they will, but let's say the goal is to be the first to amass 3,000,000,000 users. That's how you're gonna pay for all these compute leases and all this equipment and so on.
00:16:24 · Josh Brown
Let's say that's the goal. Don't you owe your shareholders right now the fiduciary duty that you have to your shareholders, don't you owe them the best possible chance of getting to 3,000,000,000 users and isn't the best possible chance of getting there throwing everything you have at scale at land grab right now. I think that's the way Sam Altman's thinking. So if you're Dario, you have to be thinking the same way. And look, if you don't think that they're gonna raise 100 to 140,000,000,000 later this month when they go public, then that's a huge problem. But if you think that they probably will, and I do, I think they're doing what the shareholders expect them to do. The people who are invested in this company are not. It's not the widows and orphans fund. It's not an insurance company in Scotland. You know what I'm saying? Like, it's it's Masayoshi's son. What do you think he's telling them to do? The guy's a a riverboat gambler. Go for it. It's it's it's Adrian coming out of the coma in Rocky two and telling him, when? When? This is... I don't even know, like, profitability. What what are you high? This is like Scott. This is year three. It could be a thirty year battle for supremacy. In year three, the goal is lose money, but make it count for something. I think they think they're making it count for something. They have enterprise users out the ass. They have normal regular people talking to Claude like it's their therapist slash boyfriend. Like this is what they're supposed to spend the money on. Now, oh, 80,000,000,000 loss. Five years ago, Kid Rock took out a machine gun and just went to town on a pyramid of cases of Bud Light for cultural reasons. It's a big cultural moment in America. We're all very proud. Anheuser Busch or Ambev ended up with millions and millions of cases of unsold Bud Light in inventories around the country. It was a huge problem. They had to eventually take that loss. That's a real loss. That's product that you can't sell. That's not what these quote unquote losses are. So when I say sometimes a loss, not a loss, I'm not saying it's good, like negative $80,000,000,000. I'm not saying it's good. I'm just saying this is not the same thing as, oh, we literally lost money.
00:19:04 · Ed Elson, Josh Brown, Scott Galloway
[00:19:04] S3: Yeah. [00:19:05] S4: Yeah. They have an accounting loss for sure. [00:19:07] S3: The 80,000,000,000 is a red herring. Okay. 100%. [00:19:10] S4: So we're on the same page. [00:19:11] S3: We're we're on the same page about that for sure. [00:19:12] S4: I'm just waiting for I'm just waiting for Scott to shut up already. [00:19:19] S3: Scott, chime in and shut him up. [00:19:22] S0: Yeah. Well, in the words, another great Rocky quote. I must break you. So, like, Talia Shire [00:19:29] S3: I love you, Josh.
00:19:29 · Ed Elson, Scott Galloway
[00:19:29] S3: I love you, Josh. [00:19:30] S0: I wasn't expecting her to to make an appearance here. I had dinner with Josh last night, just for shits and giggles, I'm gonna put forward the thesis I put forward. And and Ed and Ed Elson are gonna are gonna literally turn in their graves. I think in the next thirty six to forty eight months, there's a non zero probability that Anthropic is the most valuable company in the world. Revenue went from 1,200,000,000 to 16,000,000,000 in the first half, that's a 13x increase. No company has ever grown revenue this fast at that absolute dollar scale. Palantir's historic 85% year on year growth viewed next to Anthropic's 1200% looks anemic in Anthropic, went from 9,000,000,000 to 65 in that seven x and trades at, what, 60 times revenues? So they're estimating, and I think it's a conservative estimate, that in '27 or '28, they'll be at a $200,000,000,000 run rate, which implies a multiple of 10, which looks cheap or even looks reasonable compared to NVIDIA, which I would argue is trading at suppressed earnings because there are PE because everyone's worried about where the e goes. But I brought up that thesis last night with Josh, and he had pretty severe pushback. So I wanna I wanna recreate it. Josh, I think Anthropic might be the most valuable company in the world in three to four years. Your thoughts?