What Role Does Airbnb Play in Housing Affordability? The Danger of Microplastics, and Raising American Kids in the UK
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Welcome to the Prof G 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 G. Hey, Scott and team. Hey, Scott. Hi, Prof G. Hey, Prof G. Hey, Prof G. Hi, Professor G. In last week's Office Hours, we answered your questions about China's EV market, how we run our Prof G Media business, and how to rich.

No one does China like China. I wish I had figured out earlier that my core competence is storytelling, 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. So I started PropG 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 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 questions surrounding the future of Airbnb, microplastics, and raising American kids in the UK. First question. Hi Scott, I'm Luke from Manchester in the UK, and I'd like to get your thoughts on the recent surge in regulations targeting short-term rentals like Airbnb in major cities worldwide.

We've seen New York implement restrictions, and Barcelona plans to ban short-term rentals entirely by 2029. With housing prices and rates skyrocketing in recent years, short-term rentals are often blamed as a major contributing factor. Platforms like Airbnb have become easy targets for politicians and residents, despite data suggesting their impact is minimal.

For instance, in New York, where laws have been passed to limit Airbnb listings, we've seen little effect on rent prices, but a noticeable 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 off, 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 onerous margins to travel sites or Google, who then

If you're the Four Seasons, you get some traffic to your site, but you get booked a lot through third-party providers, whether it's Nixpedia, 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-to-consumer traffic means they have better margins. They have more hotel rooms. I think the three biggest hotel companies combined are

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

to build housing in the U.S. if there's just a supply-demand imbalance. We need, I think, another million to a million and a half 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 290,000 to 410 since the beginning of the pandemic from 2019 to 2023, and you've seen interest rates go from 3% to 7%, that takes the average mortgage rate from $1,100 to $2,300, meaning that it's no longer two-thirds of Americans that can afford a 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 forced savings because people have a tendency to make that mortgage payment.

There's a lot of older Americans where the majority of their net worth and their retirement is in their house. My mom moved to Westwood in 1972. When did we move there? Bought a condo for $72,000. Actually, her boyfriend bought it for us. He had another family. Life is complicated. Anyways, we bought our condo, or Terry bought us our condo for $72,000, and then when my mom got sick with cancer,

cancer for the second time. I said, you need to move and retire. And her ability to do that was when she had a son who was starting to do okay economically and could help. But also she had a home that had gone from $72,000 in value to $350,000 because it's a forced savings plan.

over, you know, 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

It's not only having kids, it's not only getting married, but it's deciding to partner on real estate and play house 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 bedroom and, oh, what's going to go in there? Something that's small and looks, smells, and feels like us. So

I think housing plays 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 rejectionist, exclusionary bullshit culture we have where once we have a degree or a house, we want to make it more difficult for other people to get a house. So we show up at the local review board and make it much more difficult for housing permits to be issued. That shit 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 Airbnbs. She would rent apartments. She was very savvy, fix them up, and then turn them all into Airbnbs. So to think that that loss in rental stock did not impact the markets would be naive. Having said that, what we have is a transfer problem.

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 travelers.

Why? Because instead of having to check in to a bad day's end for $289 a night, they can get a cool little studio for $120 in Soho 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, it gets jacked up because there are typically city and residence or hotel taxes that

are pretty serious. Now, if you wanted to make a real dent 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, you're right, is a little bit of scapegoating. It's an issue. It has caused a transfer in 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 their peers. And for the boomers out there saying, yeah, but they still live an extraordinary life with their Netflix and their Nespresso and their Coachella. 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 at the age of 30. And that shit needs to stop. Thanks for the question. Question number two. Hi, Professor Galloway. I'm an MBA from class of 19. We briefly met in 17 at one of your book signings. I've been a follower ever since.

I'm curious if you've read up on the recent headlines around microplastics and phthalates. In May, the news seemed to hit a new degree of virality when microplastics were discovered in testicles.

I guess it took that to gain more attention, but for many years now, studies have been coming out around the negative effects of microplastics 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 inaction and corporate complacency? So let me get this. I've got plastic in my testicles. I mean, this question wins for the question I know the least about. Look, 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 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 peer-reviewed research that having plastic in your testicles is bad and we can solve this problem through 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 and are weak and you're not them, just as recycling, in my view, is a misdirect. The majority of the research shows it's nothing but a chance to virtue signal and feel better about ourselves. And if that sounds harsh, okay, I think we need laws. I don't understand why we wouldn't have laws.

a fairly substantial tax on any plastic and then take that money and invest it either in figuring what you do with these plastics. And the honest answer is 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 think it's a losing battle. But there's gotta be more environmentally sustainable packaging. It's funny as you get older, the things you notice.

I got, I forget what I got. I got a gift from somebody and I opened and there was so much shit in packaging. And I thought, Jesus Christ, all this for whatever it was. I think it was a small fragrance, you know. Ude Musk, Ude 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 it's showing up everywhere 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 at creating misdirection above recycling and alcoholics, so to speak. I think it has to come from laws. We have one quick break before our final question. Stay with us.

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Welcome back. Question number three.

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...

and starting a business in the UK, that means A, 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 and the wherewithal to move to England with your kids, it 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 it the rest of their lives. And you might decide you didn't, you know, I couldn't do better than my life in America. I didn't want to do better. We just wanted to do different. And eventually we'll 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. He's home on weekends, but he 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 Premier League football. My kids still feel very strongly American. We spend a lot of time in America. But look, 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 U.S. is so strong that it won't in any way give them an identity crisis. It'll enhance their identity and make it a little bit more nuanced and 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 U.K. The weather, not so much. The weather, not so much.

So their father is constantly depressed and in a bitch of a mood from November to May where this round thing goes behind a cloud. But Premier League football is awesome and the schools are great. And 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 few years. And some, it's just really good to be you, boss. And it's good to be your children. This is a wonderful gift for them.

That's all for this episode. If you'd like to submit a question, please email a voice recording to officehoursatprofgmedia.com. Again, that's officehoursatprofgmedia.com.

This episode was produced by Caroline Shagrin. Jennifer Sanchez is our associate producer. And Drew Burrows is our technical director. Thank you for listening to the Prop G Pod from the Vox Media Podcast Network. We will catch you on Saturday for No Mercy, No Malice, as read by George Hahn. And please follow our Prop G Markets Pod wherever you get your pods for new episodes every Monday and Thursday, thepropgmarketspod.com.

It 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 and he's British. But anyways, please tune in to Profiting 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 Evian bottles that you carry around after you've actually, oh, 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.