The Iran War Is Costing You Money. Here’s How Much. | The Week — Transcript

Welcome to the week from Prop Media, where we break down what mattered and what it all means. I'm George Han, and it's Friday, October 2nd. Today, Aura postpones its IPO and what investors should watch for when companies go public. Then, can AI agents save you money by taking on chores you hate? And finally, how America's war with Iran is hurting Ukraine and hitting Americans wallets.

Let's get into it. To start, Aura, the company behind the health tracking Smart Ring, has postponed its IPO, citing market uncertainty. On Propy Markets, Edson asked IPO expert Jay Ritter what companies are looking for when they go public and what might give investors pause. >> What exactly is a company looking for when they go public? >> They're looking for liquidity and raising capital uh and uh possibly a currency for making acquisitions. uh as a public company you can do a stock for stock deal to acquire another company.

Now here the the company is not burning cash you know unlike Anthropic uh where uh they have a huge cash burn rate uh that the company uh does have the the luxury of um not going public because it it's not needing the the cash. I think with a a lot of companies uh that they get uh lofty expectations about uh what their value should be.

Institutional investors who are are looking at it are worried uh could this be the next GoPro or a company uh like Pelaton or or a company that never did go public uh 11 years ago. Soul Cycle uh was also a rapidly growing company that was about to go public and postponed going public. Uh they never have gone public. But all of these can be viewed as kind of one trick ponies where they were growing rapidly but uh are going to be hitting a wall in terms of of growth.

like with GoPro, uh, a lot of people who wanted the GoPro camera, uh, bought it already and, you know, they don't wear out immediately. They don't need to be replaced. And that the market was not exploding with continued growth. And and I think uh some investors have have the concern here that uh with the Aura Ring, well, they've got a great product, but it's not as if there aren't any competing products for, you know, personal health measurement, and just how big is the market, how profitable is it going to be? Uh it doesn't have the upside of a company like Anthropic. But does postponing mean waiting for a better moment or missing the window altogether? Jay pointed to the history of companies that have put their IPOs on hold?

>> Historically, the the majority of companies that have paused their IPOs have never gone public. Some like Soul Cycle get acquired. Um, you know, sometimes at a good price, uh, you know, sometimes at more of a fire sale price or conservative valuation. Yeah. You know what what's difficult for companies is to execute the business model. You know, stuff happens. Um a a company can be uh firing on all cylinders, but uh competition comes along or or the demand evaporates. um you know sometimes for uh things outside of its control and uh nobody can foresee the the future with with certainty. But given the the track record of uh companies that have postponed their their IPO where where most of the time they never do go public, that's the most likely outcome here. Uh if if they continue to execute,

uh this might be a good decision. they they might uh wind up being able to go public at an even higher valuation a year or two from now, but uh who knows? It could be like the uh autumn of 2007 where uh if if you waited a a little longer, you might have had to wait for many years. >> Meanwhile, a draft of Anthropics IPO filing leaked. According to Reuters, the company brought in $4.6 6 billion in revenue last year with an operating loss of $8 billion and a net loss of $42 billion. Anthropic is expected to go public in November at a valuation of around $2 trillion, which would make it the most highly valued IPO of all time. Ed asked Paul Kadrski, managing partner at SK Ventures, whether that price makes sense.

>> It's a ridiculous price and it's then and it's, as friends of mine were saying this morning, some of the largest hedge funds in the world looking at this and it's like anyone who thinks that being the the buyer at these kinds of prices in a very late stage IPO of what amounts to a relatively mature company. When you look around the poker table and wonder who the sucker is, it's you. because not because it's a bad business, just because what's happening is this is not a financing event anymore. They're not raising money for anything other what's really going on is people are unloading shares. They're unloading shares on retail investors and on Quickflip institutions and we're able to back in and out. So, you have to look at it accordingly and realize that this is really what they're saying is this seems like a good time to get out and I'm an insider and I want out.

>> Anthropic IPO was supposed to be the biggest AI story of the coming months. instead last week belonged to Meta and its new AI agent Muse which is built for everyday consumers. This week on the Profod writer and investor Jack Reigns spoke with his friend and fellow VC JC Bar Dphano. They discussed why some companies are welcoming AI agents and others are resisting them. >> But it is funny seeing like who's leaning into agents and who is saying like no like we don't want this. There's a real like bifurcation in the market of like just consumer interfaces right now.

>> Yeah. I mean my like my observation on it so far is is it it totally depends on the business model, right? And like I think it was it was last week when Muse was just like banging out like announcements about new integrations, right? They had they had Shopify, they had PayPal, they had Expedia, and they had Instacart all all in the span of a couple days when Amazon also came out and said, "No, you can't do this." Um, but like if you think about those business models, right, like Expedia and Instacart in particular, like they don't want to be disintermediated by agents that can go do all of these things without them being there, right? So, I mean, their incentive surely is like if we don't do this, then the agents can either bypass us or go to Booking.com or Kayak or Door Dash instead. And so, we have to do this for fear of existential risk on our business model. And then PayPal and Shopify, they don't care.

Like, they make money as long as money flows. So if an agent does it or a human does it, it doesn't matter. Like the pie is just going to grow for them. And so they just need to make sure that they're in the transaction flow and the payment flow regardless of who who the end user ends up being. >> For consumers, the promise is simple. Let an agent deal with the tedious tasks that cost us time and money. Think cancelling subscriptions, chasing refunds, or sitting on hold with customer service. For companies that profit when we give up, that could be a problem. Here's Jack on what's known as the annoyance economy. In a period of about two weeks, we've gone from AI agents are used for software engineering and AI is going to kill everybody to, hey, my mom can find coupons and discount codes in her inbox by asking the little sloth to like save her some money. I think the most interesting second order and just longer term effect of Muse and these AI agents in general is how they impact the annoyance economy. This is everything from being stuck on hold to spending time clicking

through endless series of pages to cancel subscription to screening spam calls or trying to change a flight. Agents are really good at doing all this stuff and they don't care about getting bored. So, it's a really interesting thought experiment to think about how agents will begin to upend this annoyance economy. both saving people money by reducing by reducing the cost of going after the money we leave on the table to zero and potentially eating away at the profit margins of companies that have largely monetized like friction and inertia. A few data points on how Muse has been helping people save money so far. Muse helped a user find about $730 in Amazon store credit for more than 3 years ago that was given to the state to hold. It also found a $272 refund from when this user switched from Sprint to another phone carrier and unused gift cards lying in his Yahoo mailbox. Another search by the same user identified $800 in closed bank account balances, health insurance claims, and a potential payout from a class action settlement. If you have your Muse or Grockbot or personal claude code thing

you built constantly looking at different interest rates and different bank accounts where you can then just move from one account to another with Plaid, you might as well do that. Which means that that could massively impact net interest margin for some of these companies. The question is how much of that promise becomes an everyday reality? Can an agent reliably recover your money? And can you trust it with the access it needs to do so? We'll be right back.

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Welcome back. America's war with Iran has consequences far beyond the Middle East. On the Prophet Pod, historian Timothy Snyder explained how America's decisions from cutting aid to Ukraine to spending munitions in Iran have affected Ukraine's fight against Russia. But on balance, cutting off the financial aid, cutting off the military aid, um, and putting our diplomacy in the hands of a couple of people who are not professional diplomats who and who are not really, I think, acting the interests of any of the states involved except possibly Russia. And then finally, as you say, starting this war with Iran. All of those things have drastically hurt the Ukrainians over the last year and a half. in the Iran war. I mean, in the Iran war, in the first 10 or 12 days, we spent munitions, I'm sad to say it, but utterly pointlessly, which would have won the war for Ukraine. And the Ukra that's not something that Americans see or would like to see, but it's something that Ukrainians definitely see. We just like we shoot, you know, munitions all over

the place essentially to kind of make ourselves feel good with no measurable strategic outcome, at least not anyone, which is positive. Whereas if we just allowed the Ukrainians to use that stuff, they probably could have won the war. So the Iran has been tremendously negative for Ukraine. And meanwhile, this is also worth noting, you've got like coal miners from the Donbas in Ukraine who've learned to be drone operators who are out there in the world helping to defend Americans and others in the near east from Iranian drones, which is something that no one thinks about or talks about, but which is part of this kind of mismatch of how how we think about things, that we, the Americans, are this big power. We win wars. We help other people. We've been beaten by an a middle power, Iran. And meanwhile, the Ukrainians are holding back a much bigger power, Russia. And you got to think those things through to their logical conclusion to to see just how wrong our approach has been in the last year and a half. And in Iran, economic pressure hasn't brought a clear end to the conflict. On raging

moderates, Jessica Tarlov questioned Trump's promise of a deal after the midterm elections and whether Iranians have any reason to trust his assurances. But there's no reason to for them to think that they're going to be getting any US support and they see the writing on the wall. The fact that, you know, there is a big election coming up that is pivotal for them. And Trump has been teasing, you know, a deal is coming after the election. It's like the $5,000, right? Like if if you stick with me, like things are going to get good. I'm going to put money in your pocket and I'm going to have the most beautiful deal with Iran. And you know, no one is buying any of this. At home, Americans are paying for this war at the pump and in the bond market. Brent crude is back above $100 a barrel, and the 10-year Treasury yield is at a two decade high.

On Tuesday's Raging Moderates episode, Scott laid out how a prolonged war can become a recurring bill for American households. >> Terms of the oil math, Brent went from $72 to over $100, up 40% since the war started. Rule of thumb, it's about two and a half cents a gallon for every dollar. So gas is up sort of call it 60 cents to a buck depending on where you are. And that's kind of the Iran war tax that every American pays every week and they get reminded of it. Oil shocks preceded the recessions of 73, 79, 90 and 2008. So oil spikes aren't a leading indicator of a recession, they're a leading cause of it. The 10-year being at a two decade high is a pretty big deal. It's the market saying it doesn't trust the plan. Higher yields means 7% mortgages, pricier car loans, more interest on the debt. At the end of the day, the bond market is the adult in the room that just isn't impressed with Trump. And it's kind of it's kind of the only voter that Trump camp primary, if you will. Wars that don't end become taxes that don't end. And it's clear

they are playing defense right now. >> Finally, a little closer to home. On office hours this week, Scott answered a question about what makes a good manager and shared a lesson he learned the hard way. >> What is the key to being a good manager? One, you have to demonstrate excellence. And that is not only you have to be really good at something, you have to be willing to do anything you would ask of anybody else. And that is demonstrate excellence. I call it player coach. Pulling up a chair, showing them how to do something. You have to demonstrate excellence. People want to follow success. two, uh, accountability, a willingness to fire people. Everyone talks about strategic hiring and all this hippie- dippy Brooklyn sandal of, oh, they're in the wrong role. No, fire them. In a small company, if they're not working, get rid of them. And that may sound Darwinian and horrible. Fine. You're not doing anyone any favors by letting someone's career go sideways. be generous once you decide to shed them, but everybody in the organization doesn't need to like each other, but they need to look left and look right and say, "Okay, I get why

they're here. They're good at what they do." And when you don't hold the underperformers accountable, the upper performers, the top performers stop working as hard and go somewhere else where they can be rewarded for their outperformance. And then finally, and this is where I up, empathy. What is it you want out of this job? I know you're like me, concerned with your own success and your own economic security. Here is how you're going to get there. Here's how the company is doing. Here's maybe your share of the profits or your equity. But giving giving them a sense that they're appreciated and that they're part of something. Uh creating an environment also something I learned where young people can be social and enjoy themselves. It's a little bit harder with remote work, but I think we're a social animal and giving kids an excuse to gather or do fun or social stuff together. All of our team is going to the US Open. I think that's a that investment has a huge ROI because I think especially if you have a younger I just want to go home. I don't but what you realize is young people want to meet. They want to hang out. They want to make friends. I think that's also

kind of a hack if you have a young organization. I would describe myself as a Bminus manager. I think I got to B+, but I was smart enough to know what I didn't know. And I've always hired and held on to people who were who were good managers. >> That's the week. I'm George Han. We'll see you next Friday.