SpaceX Raised $111B — It Already Needs More

I mean, what was your reaction to that story? So to be clear, although I'm discussing all the stuff with a straight face, like if you think that SpaceX is really worth $2.3 trillion, which is where it is today, it's because you think Elon Musk is some kind of anomalous genius. And if you don't think that...

you should not be in the shares because it would be breaking all of the rules of finance as we know them. So to hand out investors a two-pager with some pictures of space on is kind of wild. It's not like that is going to be the final documentation for this debt issue. I think what we're looking at here is some early communications with would-be investors that seemed very back of the cocktail napkin. That reflects the fact that Musk kind of shoots first and asks questions later or answers them later and people give him money because he is elon musk when they actually get to do this issue which is they're talking about it closing next year there will be something a bit more concrete than that but it will still be based on this idea that his moonshot literally moonshot putting putting stuff into space putting data centers into space is viable which a lot of people think a lot of scientists think it is not but it does seem to speak to this this issue that seems to be kind of pervasive on wall street specifically when it comes to SpaceX, where everyone seems to be shooting completely from the hip.

I mean, it's not just this two-page deal memo where they're like, we'll just do it. We'll put data centers in space. Don't worry about it. We'll figure it out later. But we see this in a lot of the price targets from the investment banks as well. Morgan Stanley putting a price target at $300 a share. I mean, Raymond James coming out and saying that the company is actually worth $10 trillion. And my little conspiracy theory about this, which I'd like to get your reaction to is that if they know that this company is going out to issue hundreds of billions of dollars of more transactions, whether that be more equity issuance or more debt issuance, they also know that those are fees that they can profit off of. And they want to be the banks to go out and help with those transactions and issue that debt, issue that equity. So it seems to me that maybe there's a little bit of a conflict of interest here, where there's so much money in the pipeline here that they don't care about the numbers. And yeah, they'll just accept a two-pager with pictures of rocket ships and pictures of space. For sure. And like the whole premise of sell-side bank analysts' work is that you are being asked to believe that there is a Chinese

wall that means that they're not writing from a place of the fees that their investment bank is going to make like we you know they say that very earnestly if you don't believe them then you should take all the analysis that you see from them with a pinch of salt and as you said these target prices are really high when you look at how the target prices were derived in many cases. You have research notes that are dozens of pages long, but at the end of it, they extrapolate what they think revenue will be next year and slap a multiple on it, which does not to me seem very rigorous or realistic. It seems to me like a lot of them started with the answer and worked their way backwards. But there you have it, dozens of pages of information and discounted cash flows and whatever you like. So do your own homework, I guess, is the moral of that story. If you believe Musk is a genius, you're not reading that note anywhere. You're just buying the shares or whatever he tells you to pay i'm not sure anyone is reading these notes even the the bears or the bulls um i

Financial Times. John, appreciate your time. Thanks. After the break, a look at the annoyance economy. And by the way, my newsletter, Simply Put, was just nominated for a Signal Award.

Please go vote for it at vote.signalaward.com. It really means a lot. Type in Simply Put in the search bar. You'll find it. And we'll also leave a link in the description to make it easier. Thank you. Are you tired of hearing about business, tech and finance from the bros? We are the Tiger sisters a top business podcast with the vox media podcast network tiger sisters releases every monday and we decode money power and love and who doesn't love all those things we are the internet's wall street and silicon valley Big Sisters. Tune in every Monday for late night sister talk meets boardroom strategy.

Check out Tiger Sisters on YouTube, Spotify, or wherever you get your podcasts. Welcome to the Tiger Fam. Hey y'all, it's Ested from AmericaActually at Vox.com. We know that you have big questions about the world, and so do we. At Vox, we focus on covering the things that matter in your life and the things that make you curious. Whether that's the big politics questions of the day, climate solutions that might actually work, or hopeful news in cancer or Alzheimer's research. We believe that journalism made for the everyday curious person can make a difference in making a better world. And if that sounds like something you want to be a part of, Vox now has a brand new app, and it brings all of our journalism together in one place.

Go to vox.com slash app to download today. As U.S. Americans voted in the midterm elections, A lot was uncertain, but one thing was clear. This year, many of the attention-grabbing candidates identified or were identified as populists. Gina Hinojosa, a Democrat who ran a surprisingly competitive race for governor in Texas. Populism is about economic power. Sam Forstack, who ran for Congress as a Dem in Montana. I'm running as a populist because populism is what the Democratic Party is supposed to be about. It's what democracy is supposed to be about. Josh Turek, a Democrat up for a congressional seat in Ohio.

We want to once again have a common sense prairie populist that is fighting for the people. And Senate hopeful Dan Osborne, who ran as an independent in Nebraska and didn't use the word populist, but... My life sucks too. Costs are too high. The last 10 years in the U.S. have been defined by Trump-style populism. This year, candidates from across the political spectrum embraced the populist mantle. On Today Explained from Vox, what has 10 years of populism gotten us? And are we ever going back? Today Explained drops every weekday. We're back with Prof G Markets. There's a name for the hidden fees, the subscriptions you can't cancel, and the hours spent on hold with customer service.

It's called the annoyance economy. Americans now spend 60% more time on customer service calls than they did 20 years ago. And the Groundwork Collaborative, a progressive think tank, estimates that the annoyance economy costs American households at least $165 billion. billion per year. Now, states are trying to rein it in. Last week, Governor Newsom signed a bill that requires companies to make a good-faith effort to connect customers with a human within 15 minutes of the request. The question is whether regulation can actually fix this problem that companies are making money from. Joining us to discuss the annoyance economy and what to do about it, we're speaking with Ronan Farrow, Pulitzer-winning journalist at The New Yorker. Ronan, thank you for joining us. So I saw you put out this explainer on the annoyance economy, which I just found fascinating. Let's just start with the basic question.

What actually is the annoyance economy? Well, sadly, most of us probably know it very well, right? This is the labyrinth of phone trees and menu options and hold times. It's basically a deliberate business practice. It costs money to give service. So making it as difficult as possible to receive service, it is a business win for companies. And that's how it's viewed. That's how many of the programs that ensnare us in endless paperwork, endless menus are designed. You know, one of the examples I gave when I did a video about this was Amazon built a deliberately winding cancellation path for Amazon Prime. And they actually gave it the codename Iliad after homer's poem right a 10-year war uh and what they found was cancellations fell 14 after they launched that um and you know economists have looked at this uh there's a stanford economist neil mahoney who examined this and his conclusion was a difficult cancellation process can raise a revenue anywhere from 14 to even up to more than 200 depending on the product uh so we see this from, you know, ticketing companies are a big offender, hotels, airlines, cable and phone companies, banks, health insurance companies. We have probably all been there with these practices

and it is not an accident and it is not just a product of limitations of resources on the company's part. Yeah, that's the aspect of this that I find fascinating because, you know, Obviously, we've all been there. I've been there being held up, trying to make a phone call, trying to get through to customer service, trying to get anything done, interacting with a business. always assume when they're incompetent that it's because they are incompetent. But you're saying, no, actually, it's deliberate. This is a sign of their competence because they're basically saving money because it means that they don't have to actually deal with the costs of actually fixing the problem. Talk a little bit more about how deliberate it is. And then I guess the question after that is like, is that legal? Are companies allowed to make their products intentionally more difficult so that we cannot cancel subscriptions, so that we cannot get proper service that we would hope that we would deserve? That question gets tested in the courts a lot. And I think it's important to note, you know, a lot of these are examples where it's more of an inconvenience in trying to get, you know, a consumer good or something.

But it also crops up in cases with real stakes, even life or death ones. One example of this being tested in court in 2024, the Consumer Financial Protection Bureau sued Comerica. That's the bank that ran the debit card that millions of people used to get Social Security. And the allegation was that its vendors dropped more than 24 million calls before anyone picked up as a matter of policy. And, you know, we see numbers where we just know that insured Americans under 65 are delaying and skipping medical care over paperwork problems and obstacles like this in huge numbers. By some counts, up to a quarter of that population reports, you know, I just didn't get the health care because of the obstacles. There's a lot of research on this. You know, people wind up in bad situations because of these obstacles. And the irony is a lot of these policies, Ed, are in place on the argument that if you make it more difficult, only the people who really need the service are going to prevail in this Byzantine process and actually go for it.

But actually, what the research shows is when you increase the barriers, it screens out a lot of the people who need the service most. And actually, what it selects for is who has the time and money. You know, you see that with Medicaid, for instance, the latest federal budget. it starting January 1st. Low-income adults on Medicaid have to document that they're working and reprove eligibility every six months instead of once a year. Food stamps are now getting the same treatment. So, you know, these are cases where it's not screening out people who don't need it. It's screening out, in a lot of cases, the sickest people.

It's kind of crazy to hear that the government is also engaging in this activity, too. That That is what you're saying, right, that the government is actually making it more complicated so that they presumably don't have to spend as much of the money on Medicaid, on food assistance, on these government programs. Is that the thrust of what you're saying? Yeah. And look, there are critics who allege that is the intention. That certainly seems to be what has come up in the way the legislation landed and in the process that got us to that legislation. And we've seen this happen at a state level before.

Arkansas tried this in 2018. They made the paperwork more onerous, more difficult. 18,000 people lost Medicaid. And most of them were eligible is the key thing. The Congressional Budget Office has projected what does this look like with this new federal regime that's in place? Their projection is 5.3 million more people uninsured by 2034, and about 2.8 million of them are going to lose coverage, again, not because they fail this work test that's been put in place, but because they just couldn't get through the paperwork to prove that eligibility. So Governor Newsom is trying to take this on. He's signed this bill requiring companies to make a good faith effort to connect customers. I don't know what that would actually entail, but what do we know about this regulation? And do you think that it will work?

Well, we're seeing a number of states move in this way, right? California, as you point out, is one of the furthest along in the last few years. They've put in place rules where an advertised price has to include every mandatory fee. Since last year in California, you have to be able to cancel the same way you signed up. So if you click to join, you have to be able to click to leave. New York City also has been on this. A new rule went into effect October 1st. uh there's big fines if a company doesn't allow you to cancel with a click um there's a wave of states basically uh And, you know, I'd also point out in courts, we're seeing more action. Amazon had to settle with the FTC. That was a $2.5 billion settlement. They've already sent back hundreds of millions of dollars to customers. StubHub agreed to pay $10 million in fees this April. New York court shut down SiriusXM having like an overly onerous cancellation maze.

uh so we're seeing action here the tricky thing ed is federally we're not really seeing that um the fdc did try to pass a national click to cancel rule um but it got thrown out in court on a technicality so so far the action here is at the state level yeah i was gonna say isn't this literally the fdc's job is to prevent things like this like the whole point of the fdc is consumer protection, protecting consumers in their interests against the negotiation with a business. There is a trade happening there. The FTC is supposed to protect the consumer. This is right in their wheelhouse, right? Yeah. And it's worth noticing that under this administration, there has been the hollowing out of a number of consumer protection organs across the government. So it remains to be seen whether the federal government will catch up on this one.

It is the FTC's job. And there's a number of other agencies that are supposed to participate in this kind of consumer protection. You know, just the track record of late has not been great on the federal side. People should challenge this. The thing that provides hope in this space is that it is a rare, truly bipartisan issue. You know, everyone agrees that these practices are rapacious and predatory and a problem on both sides of the aisle. So people should talk to their political representatives about that. Also, as you actually engage with these systems, you should fight back. There are all these numbers that are really interesting, some of which I put in this latest video on this subject.

showing how so, so few people actually appeal and persist in the process and push back when they get an outcome they don't like. When you're in that phone tree, when you're in that whole time, when you're in that menu system, when you get the paperwork, people don't keep going. And then when they get dinged, they just leave it be. But the numbers also show that for the small... small subset that engage in the pushback and make themselves annoying, the customer being annoying, they really get results. One of the factoids that stuck with me was a lawsuit against UnitedHealth alleged that 0.2% of patients appealed denied claims, so nothing. But of that 0.2, about 90% of those who did the appealing won. So it pays to be a squeaky wheel and to know These systems are set against us, but you can fight them.

I love this. Be as annoying as possible. Be annoying back to them if they're going to be annoying to us. This is why I'm so annoying. Ronan Farrow is Pulitzer-winning journalist at The New Yorker. Ronan, really appreciate it. Thank you. Always a pleasure.

OK, that's it for today. This episode was produced by Claire Miller and Alison Weiss and engineered by Benjamin Spencer. Our video editor is Brad Williams. Our research team is Dan Chiolan, Kristen O'Donoghue, and Mia Silverio. And our social producer is Jake McPherson. Thank you for listening to Prof G Markets