Why Trump’s War Week Didn’t Break Markets
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode of Prof G Markets, Scott Galloway and Ed Elson dive deep into President Trump's criminal investigation into Federal Reserve Chair Jerome Powell, examining the unprecedented nature of the attack on Fed independence. (10:00) They explore the geopolitical ramifications of Trump's military actions in Venezuela and threats toward Greenland, while analyzing the massive surge in precious metals driven by global instability. (33:00) The hosts also dissect major developments in the AI landscape, including Google's $4 trillion market cap milestone following its partnership with Apple, and Anthropic's impressive enterprise-focused growth with Claude. (63:02) Throughout the discussion, they examine how these developments reshape power dynamics in technology, finance, and geopolitics.
Speakers
Scott Galloway
Scott Galloway is a clinical professor of marketing at NYU Stern School of Business and a serial entrepreneur who founded multiple companies including L2, Prophet, and Red Envelope. He's the bestselling author of several books including "The Four" and "Post Corona," and hosts multiple podcasts including "Pivot" with Kara Swisher. Galloway is known for his provocative insights on technology, business strategy, and economic trends, and regularly appears on major media outlets offering commentary on markets and corporate strategy.
Ed Elson
Ed Elson is the co-host of Prof G Markets and works as Scott Galloway's research lead and content producer. A recent college graduate, Elson brings a Gen Z perspective to financial markets and technology trends. He frequently appears on cable news networks including MSNBC to discuss economic issues affecting young Americans, and his research and analysis help drive the show's data-driven approach to market commentary.
Key Takeaways
Fed Independence Is Crucial for Economic Stability
Jerome Powell's aggressive interest rate increases from COVID's 9% inflation down to 2.3% without triggering a recession represents an unprecedented feat of monetary policy. (13:00) Scott emphasizes that independent central banks are essential for preventing politicians from lowering rates for short-term political gain, which inevitably leads to runaway inflation. The strongest economies globally maintain independent central banking systems, and Trump's attack on Powell threatens this fundamental economic principle that protects against the boom-bust cycles seen in countries like Turkey, where loyalist appointments led to 86% inflation.
Board Governance Dynamics Determine Real Power
While Chairman Powell's official title expires in May, Trump's real concern is removing him from the Board of Governors entirely. (14:00) Scott explains that in board dynamics, there are typically one or two voices that everyone listens to - usually the largest shareholder or the smartest person in the room. Powell has established himself as the intellectual leader whose judgment commands respect from other governors. Even without the chairman title, Powell would likely remain the most influential voice in Federal Reserve decisions, making Trump's investigation more about eliminating his presence entirely than just removing his leadership role.
Geopolitical Strategy Requires Long-term Thinking
The successful 35-minute military operation in Venezuela demonstrates American military superiority, but Scott warns against squandering this advantage through short-sighted resource extraction. (46:00) He advocates for a Marshall Plan approach - helping rebuild Venezuela as a democratic ally rather than exploiting its oil resources. Historical precedent shows that America's greatest geopolitical successes came from rebuilding former enemies like Germany and Japan into strong allies. The real strategic value lies in controlling oil flow rather than ownership, as Venezuelan heavy crude costs $65-70 per barrel to extract while selling for $62.
Enterprise AI Adoption Determines Market Winners
While ChatGPT dominates consumer usage with 5.8 billion monthly visits, only 5% of users pay for the service, creating a fundamental business model problem. (72:30) Anthropic has strategically focused on enterprise customers, generating 80% of revenue from businesses compared to OpenAI's 30%. Despite having 32 times fewer users than OpenAI, Anthropic generates half the revenue, demonstrating the superior economics of B2B AI services. As AI tools like Claude Cowork automate entry-level tasks, the companies that capture enterprise adoption will build sustainable competitive moats and pricing power.
Precious Metals Rally Signals Global Instability
The dramatic surge in metals prices - gold up 72%, silver up 187%, copper up 36% year-over-year - reflects both geopolitical instability and industrial demand for AI infrastructure. (33:00) Unlike Bitcoin, which has failed as a "digital gold" during crisis periods, precious metals continue serving their traditional role as safe-haven assets. The dual drivers of risk-off investing and increasing industrial applications in EVs, data centers, and renewable energy create compelling supply-demand dynamics. This trend suggests investors should maintain metals exposure as hedges against continued global uncertainty while avoiding speculative crypto alternatives that haven't proven their defensive characteristics.
Statistics & Facts
- Polymarket accurately predicted 93% of Golden Globe winners, demonstrating the prediction market's impressive forecasting ability across entertainment categories. (01:20)
- In 2023, Turkey's inflation jumped from 17-18% to 86% within a year after President Erdogan installed a loyalist as central bank governor, illustrating the dangers of compromising central bank independence. (23:50)
- ChatGPT receives 5.8 billion monthly visits compared to Gemini's 1.4 billion, Claude's 183 million, and Perplexity's 196 million, yet only 5% of ChatGPT users pay for the service. (70:00)
