Why is Silicon Valley Backing Trump? + A Glasses Company Acquires Supreme

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Get it, dad? Get it? It's like a dad joke. that's also a little bit pornographic. Welcome to Prop G Markets.

Today, we're discussing Trump's Silicon Valley backers and Supreme's latest buyer. But first, here, with the news, is Prop G analyst, Ed Elson. Ed, what is the good word? What's going on with you?

He has a, I think it's, I don't know if it's a written or a type letter, but they think it's going to go for three to four million.

someone says the word pee, I need to pee. It's like, I could be walking out of a urinal. and if someone says, did you just pee? I'm like, I have to stop and go back and pee again. And you find like, I took a walk, let's get back to me.

I took a walk through the rose garden and Hyde, was it Hyde Park or Regents Park? I have no interest in roses. And I'm like, this is so beautiful. And I forced my sons to sit down and take a moment to smell the flowers. And I'm like, oh my God, I've become my grandmother.

Anyways, this is what you have to look forward to.

I think it's better that he's spending it than hoarding it. I don't know. Whoever owned that skeleton. now has, now is living large. Like, woo.

Do you hear Bob? He bought a new boat. How do you do that? Well, he had some fucking dinosaur skeleton that he sold to some stupid white guy from Chicago. I like that story.

The S&P 500 hit a new record, then dropped sharply amid a tech sell-off. The Nasdaq had its worst day since 2022. The dollar declined, Bitcoin rose, and the yield on 10-year treasuries fell. Shifting to the headlines. The Biden administration proposed a new plan for national rent control, which will force landlords who own 50 or more units to either cap rent increases at 5% or give up their tax credits.

The proposal would apply to roughly 20 million rental units. And some late breaking news, President Joe Biden has dropped out of the race. We'll take a look at how the markets are reacting. on Thursday's episode. Universal, Sony, and Warner are suing Verizon for $2.6 billion over claims that the wireless provider has ignored piracy.

The lawsuit alleges that the label sent more than 340,000 infringement notices to Verizon, but the company has refused to remove repeat offenders because they pay for better internet service. And finally, the UK's Competition and Markets Authority is investigating Microsoft over its hiring of inflection employees. The agency is in the first phase of an antitrust probe into the partnership and will decide in early September whether or not to launch an in-depth investigation. Scott, your thoughts. Let's start from the top.

The landlords are like, okay, if I'm going to get 80 applications for this, I'm going to pick the person who doesn't need a rent control department. They have so much money that I have absolutely no risk of nonpayment. And so the result is that with rent control, you end up with a dearth of housing stock because nobody wants to build, because they can't get a return on their investment, because there's going to be rent control placed on this asset. they build, so it decreases supply, and all you end up doing is giving a gift to rich, you know, mostly rich, mostly white people who the landlord, you know, picks the safest bet in terms of economic security. It doesn't work.

What they should be doing is figuring out legislation that makes it very difficult for local review boards to kill housing permits. They should be providing, if they need to, economic subsidies that encourage more and more building. This is straight...I mean, this is simple fucking economics. So this is all a long-winded way of saying we should move on to the next story.

D.

: Mm-hmm. Verizon.

: I find this really interesting. I think, in general, what you have is a group of people, a sector, that has had the shit kicked out of it, specifically the traditional creative community. They have slowly but surely seen their economics get worse and worse. And, in addition, there's been a Gini coefficient here, and that is Taylor Swift now sells more albums than all of jazz or all of classical music combined. So she's bigger than entire genres.

And everybody thought that online music was going to create this long tail, and there is a little bit more discovery. A great song can bubble up, even if it doesn't get a contract with Warner Music or whatever. But for the most part, it's created a globalization of music, where I think Sade is a billionaire, because in every country in the world, including Muslim countries, she's like the fourth biggest or the sixth biggest artist. She has made, I think, hundreds of millions, if not billions of dollars. And, by the way, she deserves it.

That shit is buttery and sexy, Ed.

But these artists are, they're pushing back and they're saying, we're just sick of platforms injecting themselves in between us and the consumer and starching most of the margin. And I think that they're basically lawyering up and saying, go after everybody, because we need a bigger piece of this pie, because spending, I believe, on music has actually gone up. But I think that it's gotten harder and harder for all but the top.

1%. Supposedly, the U.S. economy loses about $13 billion annually as a result of music. theft. And visit to music piracy sites increased 13% last year, to more than $17 billion.

And I think they're fed up and they're trying to find ways to restore kind of an economic structure that helps them. I don't know much about the case itself. Do you have any thoughts here?

They were stealing the music. And those lawsuits, to me, were totally legitimate. And I think they'll win those lawsuits. This, on the other hand, is kind of a stretch. As far as lawsuits go, they're sort of scraping the barrel here.

I don't really think they'll win. Having said that, I do think it says something bigger about where the music industry is headed, which is that, after several years of getting pretty badly messed around with, mostly by tech companies, these music labels have said, okay, fuck this. We're taking everyone to court. And from a shareholder perspective, I think it is the way to do it, because this isn't like a normal business. They're not going to make money, cutting costs or increasing production.

All the stuff that we usually talk about, usually when we're talking about tech companies, this is an intellectual property business. And so the way they're going to make money is by lawyering up, just amassing an army of lawyers and winning as many cases in court as possible. So I don't think this lawsuit in particular makes much sense. I don't think that they'll win. But, directionally speaking, going to court, I think that's a good idea.

Microsoft hires co-founder of inflection and takes half of the staff, which means to me that this is the tip of the iceberg. Because if big tech has gotten comfortable enough to do that right out in the open and even put out a press release about it and call it an organizational update, then what else are they comfortable with? What else are they doing to influence the startup industry and to basically swallow all of AI whole? But I do think that as we dig further and as more of these investigations proceed, I think we're going to find out just how deep the collusion in AI really goes and also just how big big tech has gotten.

And they have tried to kind of do this jazz hands misdirect and say, oh, no, it's not Microsoft AI, it's open AI. And this case is really, really weird. Everybody. basically, they take the heart and lungs of inflection, they go over cooperatively in a preplanned kind of weirdness to Microsoft. But supposedly inflection is still a company.

I mean, I interviewed Reid Hoffman and he said, oh, well, we just had a board meeting. It's just very strange. I've never seen it before.

What is he going to say? My guess is they think they can wait out the administration. My guess is they're almost sort of hoping for a Trump administration that may or may not. I think they're all banking on the fact that the Trump administration, and this kind of leads into our next story, I think, that will choose law and regulation based on personal relationships, as opposed to the actual systemic law, right? So it'll be like, well, I like him, leave them alone.

But anyways, I think you were right here.

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Reportedly, they told staffers they think Trump can do more to support startups than Biden. Scott, initial reactions to Silicon Valley appearing to go red.

The scary thing about an autocracy where there is not rule of law, it becomes who he likes. And so if you're a billionaire, chances are you're very focused on economic value. You're very excited about your companies. That's kind of what you, you know, the kind of commitment and passion for, required for your business dealings to get to that point make you obviously very invested in the success of that business. And I think they have figured out that the way we're going to be uber successful is to kiss this guy's ass, give money to the campaign and laws be damned.

I mean, Donald Trump put out a tweet about Elon Musk, saying, he literally said in the tweet, if I asked him to get on his knees and beg, he would have. He was incredibly insulting, incredibly non-presidential, making a personal attack against Elon Musk. But Elon Musk is, well, the way. I go from 120 billion to a quarter of a billion in net worth and get Starlink and tariffs against those Chinese players or EV companies like BYD. And no one gets worried that I control 70, 80 percent of low orbit satellites is, if I kiss this guy's ass and announce publicly that I am donating $45 million a month to this campaign.

And I find the concentration of wealth, you know, the scarier, it's much scarier than buying an exoskeleton of a dinosaur. What's scarier is that an individual can donate $45 million a month to a presidential campaign, especially when you have a guy that doesn't have any principles or is not an ideologue in any way. And I'll just be like, all right. Oh, OK. Elon wants this.

He gave me a quarter of a billion dollars. He can have, you know, fine, put tariffs on BYD and young people won't have access to affordable EVs, or, you know, he's... And the flip is true, too. I think that companies that have state neutral or maybe have CEOs who have donated to Democratic campaigns, I think he's going to decide, oh, sorry, you don't get any... You know, Boeing, you can't bid on government contracts.

This is just becoming pure pay to play. And also, I just, I find it so gross that some of the people who are the most fortunate in our society don't want to pay it forward. They just want a low tax regime with no regulation that just, at the end of the day, that just gets them richer at the expense of what I would argue are... I'm really shocked, is kind of one word, and, you know, disappointed that we're seeing this kind of massive.

influx, you know, of capital across it. I'm kind of flummoxed by it. I was really,

So it's Elon Musk, Marc Andreessen, founder of Andreessen Horowitz, Ben Horowitz, also founder of Andreessen Horowitz, Doug Leone, founder of Sequoia, Joe Lonsdale, founder of Palantir, Bill Ackman, Pershing Square, David Sachs, Antonio Gracias, Valor Equity, Cameron and Tyler Winklevoss, the list goes on. But we should be clear, that is the most establishment list of people. you'll see. I mean, these guys run the most powerful venture capital firms in the world, the most powerful private equity firms in the world, the most powerful tech companies in the world. It wouldn't be hyperbole to say that these guys run the country.

They are the establishment. And I think the thing that bugs me is how they've branded themselves as these underdogs. Like they're these Davids fighting against the establishment Goliath. And the thing that perplexes me even more is the fact that people actually believe that crap. And, you know, again, we're talking about politics because we have to right now.

And I will acknowledge that there are also a lot of billionaires who donate to the Democratic Party too. I mean, we just talked about Reid Hoffman. He's one of the main guys behind that. He's not donating $45 million a month, but, yes, sure, he's on the list too. But the idea that Marc Andreessen and David Sachs and Bill Ackman are out there fighting for working class people and, you know, fighting against the powers that be, they're taking on the big dogs as opposed to basically just supporting the guy who's going to make them even richer, as you have just said, and who, at this point, will likely throw them in his cabinet because he'll take whoever gives the most amount of money.

I mean, this is how the mafia works. He's a mob boss. So I hope people can understand that this isn't about free speech. This isn't about DEI. This isn't about, you know, patriotism.

This is about what it's always been,

At least that's, he's making hints at that. So the upside of shitposting Trump, or the downside, is much greater than shitposting Biden. People who criticize Biden still feel licensed to, as they should in a democratic society, criticize him. Whereas I think people start feeling like they need to be more tempered in their criticism of Trump. And that's how you digress into an autocracy, is that people are like, well, just don't say anything, because he will, in fact, come for you and use the full weight of these institutions that can put you in jail or make, impoverish you that he's not above.

I mean, basically, some of these court cases have said he's going to be, essentially, have dictatorial powers. I say this as someone who's lived in London now for two years, and I was starting to feel this way when I left, but it's gotten just much more severe. I kind of don't recognize America. I always thought at the end of the day, it was about the law, about a group of people passing laws and having a voice, and some people trying to think. long-term and slowly but surely money has become more important.

But this is now, and these two parties competing on ideologies, around limited government and freedoms, personal freedom of the Republican Party and the importance of good government and civil rights. that was, it used to be actually Republicans and it was Democrats. Now the Republicans have gone full, no, it's about money and kissing Trump's ass. That's it. That's it.

And I remember reading that. I'm like, wow, like a lot of people are donating to Trump. And that was sort of the narrative. He's just rallied up the base and everyone's going all in. They're all donating.

A lot of people. Turns out. it actually wasn't a lot of people. It turns out of that $53 million, $50 million was given by one guy. And that guy was this guy named Timothy Mellon, who was a long time GOP donor.

And he is the heir to the Mellon banking fortune. He's like his great, great granddad was some banking billionaire. That's the story of the Trump campaign. That's how they're raising their money. It's all, it's all billionaires controlling the whole story on, on, on the left, to an extent, but certainly on the right at this point.

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As one analyst put it, quote, an investment in a consumer brand with no eyewear DNA needed further explanation. Luxottica is presenting the acquisition as a means of expanding its customer base, but Supreme's current owner, VF Corporation, appears eager to offload the company after finding a lack of synergy between the brand and its portfolio. By the way, VF owns the North Face, Dickies, and Vans. Scott, reactions to Luxottica, an eyewear company,

It's a really well-run company and they're a great acquirer. This was sort of a pretty unusual and public stubbed toe, if you will, buying it for 2.1 billion and then selling it. What are they selling it for? One and a half. Yeah.

And then, if you take into account time, four years, this is a terrible investment. The person who probably talked them into this at VF has probably moved on and is no longer running corporate development at VF. This is a pretty big stubbed toe, if you will. I've never understood the brand, to be honest. I'm just not in this category, but I've never quite understood it.

The revenue growth has stagnated. In 2023, it was a half a billion dollars. It was down 10% year on year. Supreme's revenues for fiscal year 2024 were not reported. But the implied revenue multiple in 2020 was 4.2..

In 2024, it's 2.

9.

. I still think they paid too much. I think VF is smart to be disciplined and say, this didn't work. Our thesis hasn't played out. They're going to take a $600 million write-off.

That's not terrible. I would bet that this is going to end up being, I don't want to call it chapter 12, but two bad acquisitions in a row. I don't think this brand is resonating. I don't know if it has the scale and half a billion dollars in revenue to endure, if you will. This to me feels like a company that could go into a doom loop.

Any thoughts? You're young. What's?

It would be lines around the block, hundreds of people waiting in line to get their hands on these things. The reason that it worked so well is because they were just obsessively diligent about limiting the supply. You couldn't buy anything. I remember. I went to the store.

I thought I was going to get myself something cool. There was nothing in the store. The whole thing was like an economics lesson in supply and demand. What's interesting, though, is who first acquired them. It was the Carlyle Group.

They caught on to this. In 2017, they bought 50% of Supreme for half a billion dollars. It was a $1 billion valuation. Then they flipped it three years later to VF for 2.1.. Now, VF is flipping it on for one and a half.

The real winner here is actually the Carlyle Group, who got in at the exact right time, 2017, got out at the exact right time too, 2020.

. They doubled their money in the process. I'm just wondering if you have any insight into how they nailed this one in particular.

At some point, almost any investment is going to be a good one if you get it cheap enough. At some point, I'm on the board of a great company that's growing like crazy. I don't think I'm going to make any money because I invested in 2021 when the market was fucking hysterical around this shit. So, even though the company's performed really well, I think I'm just probably going to get my money back. Two, is it growing?

They only invest in growing companies, which I thought was interesting. So no distress credit. It's got to be growing. Growth kind of solves in business almost all problems. As long as you have positive margins and you're growing, if you just keep growing, eventually almost all your problems go away.

And then the third thing is, did they have the right guy or gal running it? Those were the three things that distinguished their winners from their losers. Just focus on Luxottica's strategy.

It feels like to me what they're doing is something like an LVMH strategy. And that is, LVMH was a leather goods company. until it wasn't. They realized they could leverage that brand to sell a whole bunch of other stuff. So they merged with Moet Hennessey, they bought up a bunch of assets, and now they sell everything.

And it's a $100 billion per year business. I just wonder if Luxottica is looking at that, they're looking at LVMH and Hermes and Kering and all these other luxury conglomerates, and they're thinking, we want a piece of that action. And so we're going to start by buying up these upper tier to premium, not quite luxury brands, something like a Supreme, and perhaps they have a lot more acquisition ideas in the pipeline. Do you think that might be what they're going for?

And it's the idea of paying for something that gives you massive growth, as opposed to trying to build organic growth, which is more difficult, is very intoxicated. And so a lot of CEOs will talk their boards into paying. And good companies are smart. They know they can only sell once, so they're comfortable if it's a good company holding out or saying no. So two-thirds of acquisitions don't work, meaning that that first criteria for Hellman and Friedman doesn't work out, they overpaid.

The imagined synergies and upside are usually not inflated, but unrealistic as to how long it will take to recognize that growth and those synergies. What they're probably thinking is this is a new distribution channel for their eyeglasses. And they also, I would imagine that they have the kind of relationships with some really incredible up-and-coming brands that might be great brands to license for eyewear. Luxottica, obviously, is very good. Luxottica, I think, produces not only their own and operating brands, but I think they make a lot of sunglasses for other...

I wouldn't be surprised if, like Prada doesn't manufacture sunglasses. I would imagine that Luxottica produces the branded glasses for Prada. That's right. Luxottica does manufacture for Prada. I wouldn't be surprised if Luxottica said this company has a lot of great relationships with emerging hot brands.

It will give us a leg up in terms of licensing agreements, be a new channel of distribution for us. So there'll be a flow. We can help them operationally, a new distribution point for our existing brands. And the reverse flow of the river will be, we will have access to a bunch of cool, hip brands that we will produce glasses for. Luxottica, it's really interesting.

Luxottica is sort of a little bit of a monopoly. It controls a huge... It's just so fucking ridiculous that you go in and you pay this kind of money for eyeglasses. I remember buying Ray-Bans for like 30 bucks when I was in college. Aviators, now they're 200 or 300 bucks.

I mean, this is definitely outpaced inflation. And they have kind of a near monopoly on glasses. This is a very dominant company. It's well run. But yeah, I don't like this one.

We should check back in on this one. I don't think this one's.

Hence why this deal is probably happening. But do you have any reactions to that news? Meta potentially buying a stake in Luxottica? I think it's smart. Zuckerberg said that,

They're actually really, I tried them on. I thought this is actually a pretty cool technology. And in 10 years, the Oculus technology, the dream of Oculus, might be realized with micro cameras and smaller, more powerful chips that can seamlessly go into a pair of glasses. And I think that's his vision. And he wants a leg up in terms of manufacturing and the style.

And so I think, given Meta has whatever, a $700 or $800 billion market cap, or whatever it is, or is it over a trillion? I can't keep track. It's 1.2 trillion. Okay. 1.2 trillion.

So Meta is contemplating, according to the news here, a $5 million investment at a valuation of a hundred million. That gives them 5%. They don't care about the financial return here. They don't want to lose money, but that's spare change for them. That's a couple weeks of free cashflow.

And what they really want is to be one of the largest shareholders, individual shareholders in an agreement to be involved in the development or have access to proprietary manufacturing and supply chain that helps give them an edge around producing kind of a metaverse or AR, VR enabled sunglasses or glasses. This is going to have the metaverse, or what his vision of the headset is going to be realized. It's going to be realized in glasses. And when I put on my kids' glasses, it just clicked on me. I see the potential here.

It's just, and he's stated this, that the technology is about a decade away. That decade will go really quickly. And I love what Bill Gates said, that what's supposed to take a decade takes three years. What's supposed to take three years takes 10.. This might be one of those technologies.

And in three years, there is a pretty good glasses offering 70 or 80% of your VR or AR or metaverse experience. The other thing that's sort of interesting about Luxottica is because that's such a monopoly, they kept raising prices faster than inflation, which created opportunity for a new entrant. And that new entrant are the iconic glasses that the dog wears. It emphasizes his cheekbones and awkwardly shaped nose that veers to the right, because I got kicked in the face by Bobby Henderson in my junior year of playing soccer. I thought it was because you got punched in the face in a boxing match.

That made it worse. He couldn't have punched the other way. Literally. You'd think he'd have, if he was going to knock me out, that he would have punched when it's symmetrical again. Instead, he punched it the way it was already bending.

Anyway.

And I'm like, all right, I'll start boxing because I heard it's what you do. I went to this place called Dog Pound Gym or something. It was just ridiculous. Anyways. So Warby Parker came in at 99 bucks.

I absolutely love it, because I remember it was specifically one experience. I went to this, one of these little boutique, these little boutique eyeglass places, with this very attractive man who, you know, tried on all these glasses for me. And, you know, and then I got my prescription and I got Tom Ford glasses, and it was $900 for my glasses by the time I was at the door. And I literally got them, went and picked them up, got in a cab and left them in the cab. And I'm like, fuck it.

Hey. So, and then Warby comes along and these glasses are 80% of Tom Ford for 12% of the price. And I think they do an amazing job. It's Luxottica has always been, I always thought Luxottica was an example of a monopoly that kind.

It got a huge boost. Was it after the assassination attempt? Yeah, it was right. after. I think it was a 30% jump.

Yeah. It had a huge jump because the stock trades a little bit, it's like a little bit of a tracking stock for the likelihood that Trump is going to be reelected. Cause I think the market's saying, if he gets reelected, he'll just figure out a way to like have the defense department, you know, buy Donald Trump technology group or something.

Anyways, the stock popped to about 46 bucks last Monday, and now it's come back to 37.

. But I think you're going to see the stock go sub 30.. This is not financial advice. I just think it's fun to track, because I think Biden is going to step down and that will send a signal to the market that there's a greater likelihood that the Democrats will hold onto the White House than there is right now. And I think that the way that people trade this stock is based on the likelihood that Trump is reelected.

And so when the likelihood of Trump being reelected goes from like 70 or 75% back down to 55%, you're going to see the stock go sub 30 again.