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Buy in minutes at mercury.com. Mercury, the art of simplified finances. Welcome to the Prof.Pod's office hours. This is the part of the show where we answer questions about business, big tech, entrepreneurship, and whatever else is on your mind. Hey Prof.C. Hey Scott and team. Hey Scott. Hi Prof.C. Hey Prof.C. Hi Prof.C. Hi Prof.C. This is the first week's office hours. We answer your questions about China's EV market, how we run our Prof.C. Media business, and how to rich.
No one does China like China. I wish I had figured out earlier that my core confidence is story telling so this all sort of bubbled up to a media company, but I didn't want to take outside capital because I didn't want to have the pressure of trying to get a return on other people's capital. I started Prof.C. Media. If you get real money, I mean if you get really lucky and I got really lucky later in life in my kind of late 40s, I think you do two things.
One, I think you spend like a fucking 50s gangster that's just been diagnosed with the ass cancer, you spend a shit ton of money. And then anything above that, I think you just give it away. Today we'll answer your questions surrounding the future of Airbnb, microplastics, and raising American kids in the UK.
First question. I stopped. I'm Luke from Manchester in the UK, and I'd like to get your thoughts on the recent surge in regulations targeting shorter rentals like Airbnb in major cities worldwide. We've seen you all implement restrictions and Barcelona plans to ban shorter rentals entirely by 2029. With housing prices and red skyrocketing in recent years, shorter rentals are often blamed as a major contributing factor.
Platforms like Airbnb have become easy targets for politicians and residents despite dates, suggesting that impact is minimal. For instance, in New York, where laws have been passed a limit Airbnb listings, we've seen lesser effects on rent prices, but unnoticeable increase in hotel rates. It seems politicians find it easier to scapegoat Airbnb rather than addressing their own policy failings.
But looking ahead, what do you think the future holds for Airbnb? Does this wave of regulation pose a significant risk to their business model and should investors be concerned? Thanks, Scott, for everything you do. Keep up the great work. A thoughtful question. So first up, disclosure, I'm a shareholder in Airbnb. It's been my largest position for a long time. I've sold it down a bit, but it's still a big position for me.
I think the world of Brian Chesky, I think the company is the strongest brand. Arguably in the history of travel has network effects. Something like two thirds or 80% of their traffic is direct to site, which means they don't have to pay these owners margins to travel sites or Google who then. If you're the four seasons, you don't get some traffic to your site, but you get booked a lot through third party providers, whether it's an expedient, which does a great job.
But these companies command a lot of margin. They'll take a lot of margin on the fact that Airbnb gets a ton of direct consumer traffic means they have better margins. They have more hotel rooms. I think the three biggest hotel companies combined. And it's just an extraordinary company, et cetera, et cetera. Now with respect to its impact on housing stock and what is a real crisis in terms of affordability,
I do think they've been scapegoated a bit. And that is, if you want to talk about the crisis of affordability, not only in rentals, but in housing, it's pretty simple. We need some sort of federal legislation or funding that encourages just more housing permits and more construction, because it has become so difficult to build housing in the US that there's just a supply demand imbalance.
We need, I think, another million to a million out of units constructed every year just to keep up with household formation. And when you don't have the supply demand and prices accelerate faster than inflation. And I think what you've seen with a combination of housing that's gone from 290,410 since the beginning of the pandemic from 2019 to 2023.
And you've seen a straight score from 3% to 7%. That takes the average mortgage rate from $1100 to $2,300, meaning that it's no longer 2 thirds of Americans that can afford at home. But one third, what's the result? A lot of young people, I think have just given up on buying a home and they're spending more money. They're just saying, fuck it. Let's get an Airbnb in Bangkok or let's go to London and see Taylor Swift.
I think that's bad. One, the thing I love about housing on a risk-adjusted basis, it's not a much better investment than other asset classes. But what people don't take into account is it's for savings, because people have a tendency to make that mortgage payment. There's a lot of older Americans with a majority of their net worth and their retirement is in their house. My mom moved to Westwood in 1972 when we moved there, bought a condo for $72,000. Actually, her boyfriend bought a forest.
He had another family. Life is complicated. Anyways, we bought our condo or Terry Bottas, our condo for $72,000. My mom got sick with cancer for the second time. I said, you need to move and retire. Her ability to do that was once she had a son who was starting to do a kick economically and could help.
But also she had a home that had gone from 72,000 in value to 350 because it's a four savings plan over 25 or 30 years. So housing stock is incredibly important in terms of affordability, not only economically, but psychologically.
It's yet another reason why young people aren't mating. Why? Because practice mating or commitment is not only having kids, it's not only getting married, but it's deciding to partner on real estate and playhouse together. The first thing I did, not the first thing. I did a lot of things before that.
But one of the things I did in my kind of evolution towards monogamy was buying a house with a partner and starting to build a house and think about building a future together and having a second earth bedroom. And oh, what's going to go on there? Something that's small and looks smells and feels like us.
I think housing is just play such an important role economically and psychologically and emotionally in people's lives. What you've had is the acceleration has been a function I think just of supply and demand in this rejection as exclusionary bullshit culture we have.
We have a degree or a house we want to make a more difficult for other people to get a house. We show up at the local review board and make it much more difficult for housing permits to be issued that she needs to stop if it's regulation or subsidies we just need more housing built.
In terms of Airbnb specifically, there's just no doubt about it in certain areas. Some of the rental stock has taken out of the market. I knew a woman who had eight Airbnb. She would rent apartments. She was very savvy. Fix them up and then turn them all into Airbnb. So to think that.
That loss and and rental stock did not impact the markets would be naive having said that what we have is a transfer of economic opportunity and that is there is price hikes among renters right there's a loss of economic value there their prices go up.
But the prices go down for travelers or for short term renters why because instead of having to check into a bad days and for $289 a night they can get a cool little studio for 120 bucks and so how or in the East Village so it's a transfer of wealth and opportunity from renters to travelers and short term renters now.
How do you solve this externality I think it's pretty simple and I think Airbnb has been pretty savvy here and that is hotels pay taxes they pay extraordinary actually if you look at your hotel bill. Unfortunately gets jacked up because there are typically city and residents or hotel taxes that are pretty serious now if you wanted to make a real debt and Airbnb now pays those taxes is my understanding.
And what would you do with that additional tax revenue boom you figure out regulation or just general subsidies to increase the housing stock but to lay the increase in rental prices at the feet of Airbnb right is a little bit of scapegoating.
It's an issue it is does has caused a transfer and prosperity and economics I do think we need something to address it but this is just a symptom of a much larger problem and that is we need a drastic increase in incentives and regulation to ensure that there's more housing stock.
We have seen the quality of life go down for young people relative to the peers and for the boomers out there saying yeah but they still live an extraordinary life with their Netflix and their express so in the coach that yeah but that's not the way life works they look up and they see people doing better than them and for the first time in our nation's history a 30 year old is no longer doing as well economically as his or her parents were the age of 30 and that should needs to stop thanks for the question question number two.
I'm an MBA class of 19 we briefly met in 17 on your books findings I've been a follower ever since. I'm curious if you've read up on the recent headlines around micro plastics and the lights in May the news seemed to hit a new degree of virality when micro plastics were discovered in testicles I guess it took that to gain more attention but for many years now so you've been coming out around the negative of the market.
Now the negative effects of micro plastics that manufacturers and companies knowingly are putting in the products from baby bottles to what we consume as adults every day it feels like companies have failed us along with governing institutions so I have a question for you how do you think as consumers we can ensure the safety of what we buy and consume in the wake of this government and action in corporate complacency.
So let me get this I've got plastic and my testicles I mean this question wins for the question I know the least about like one thing I've noticed about London is that everything rots you buy orange juice you buy cheese you buy salami and three days later it goes bad and at first that kind of bothered me and I thought wait that's a good thing because there's something like 110 or 1200 preservatives and camera.
And I think that the preservatives and chemicals and pesticides that the government of the UK or whatever the health ministry is there the equivalent of the FDA said no not here girlfriend this shit's bad for you and I like that and granted it probably adds expense and it's easy for me to say because I can afford these foods but I do think that probably the only way around this is if in fact you can impose or show pure reviewed research that having plastic in your testicles is bad and we can solve this problem.
The regulation I think recycling is nothing but a misdirect to convince us that we have some power over something I think it was like calling people alcoholics it's a disease and those people have a problem so go ahead and drink well actually the majority of us are not alcoholics but the majority of us would benefit from drinking less alcohol.
So it's a misdirect to create a segment of people that we think are the problem in our week and you're not them just is recycling in my view as a misdirect the majority of the research shows it's nothing but a chance to virtually signal and feel better about ourselves and if that sounds harsh okay I think we need loss I don't understand why we wouldn't have a fairly substantial tax on any plastic and then take that money and invested either in figuring what you do with these plastics and the honest answer.
I don't know I keep seeing all these new technologies of ships trying to pull all the plastic garbage out of the ocean and I don't I think it's a losing battle but there's got to be more environmentally sustainable packaging I can't it's funny as you get older the things you notice I got I figured what I got I got a gift from somebody and I opened and there was so much shit and packaging and I thought Jesus Christ all this for whatever it was I think it was a small fragrance you know
musk who did dog that's right the new fragrance from how not to propagate anyways I think it's just got to come from regulation and peer reviewed research showing how harmful plastic is and the notion that's showing up everywhere but this is it has to be a law I don't think it's a consumer led revolution I think these people are very savvy creating Mr. XC above recycling and alcoholics so to speak I think it has to come from laws we have one quick break before a final question stay with us.
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my question is as a parent what's your advice on raising American kids in the UK do you feel like they're missing anything not being in America or do you feel like they'll be culturally confused at all I'm worried that my kids might have a weird kind of identity crisis if you will thanks for everything that you do first off I think it's great and if you're moving to the UK
starting a business in the UK that means you're already economically successful or you're very confident and a risk taker and economically viable so if you're in a loving supportive relationship and have the confidence in the wherewithal to move to
to hang out with your kids a means you're in a really good spot and my thinking is in the rationalization for moving to the UK was that what could we give our kids that would be amazing and the idea of letting them live in a foreign country for several years and experience a different culture
you know I wish my parents could have done that for me I think that's just kind of I think it's just an extraordinary gift what you're doing for your children and they're going to appreciate the rest of their lives and you might decide you didn't you know I could do better than my life in America I didn't want to do better we just wanted to do different and eventually will move back with respect to kids it's been just a surprise to the upside the schools granted I send my kids to the American
school in London and my oldest goes to boarding school at Wellington is home on weekends but boards during the week both outstanding schools also the public schools that my friends send their kids to are really happy granted we live in London where those schools are probably well funded although I don't know how finance works in public schools but my 13 year old takes the tube to
and from school we just love that fairly independent here I think there's just no way to go around in terms of the identity stuff I just wouldn't worry about that we've gotten really into primarily football my kids still fear of feel very strongly American we spent a lot of time in America but like Britain is a wonderful democracy we are allies it's probably our closest ally maybe Canada I don't know I think that I think the bond between Britain
and the US is so strong that it won't it won't in any way get them an identity crisis it'll enhance the identity and make it a little bit more nuanced a little bit more interesting I think you're absolutely going to love it here I think your kids are going to thrive we have
loved moving to the UK the weather not so much the weather not so much so their father is constantly depressed and a bit of a mood from November to May where this round thing goes behind a cloud but primarily football is awesome and the schools are great and what a what a wonderful place to be in that you and your wife have the opportunity
to bring your kids to a different culture a wonderful culture for a fears and some it's just really good to be you boss and it's good to be your children this is a wonderful year for them that's all for this episode if you'd like to submit a question please email a voice recording to office hours of profg media dot com again that's office hours at profg media dot com
this episode was produced by Caroline Shagrin Jennifer Sanchez is our associate producer and you burrows is our technical director thank you for listening to the profg pod from the box media podcast network we will catch you on Saturday for no mercy no malice as read by George on and please follow our prop g markets pod wherever you get you pods for new episodes every Monday and Thursday the prop g markets pod was number one in business I think it's one of the best or most successful new pods in a while we're really excited about it with my co host Ed Elson
the 14 year old Irish person not sure he's 26 in his British but anyways please tune in to profg markets wherever you get your pods every Monday and Thursday by the way if I have plastic in my testicles I'm pretty sure it's one of those heavy on bottles you carry around after you've after you've actually up there's my family speaking of plastic in my testicles come on in guys just talking about waste and how it's impacting my twins