Interview With Scott Galloway: Masters in Business (Audio)

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Speaker 1 (00:00):
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(00:22):
Business with Barry Ridholts on Bloomberg Radio. This week on
the podcast, we have a repeat visit from one of
our most popular guests. His name is Professor Scott Galloway.
He teaches digital brands and marketing at the n y
U Stern School of Business. I first kind of came

(00:43):
into contact with Professor Galloway h through a famous video
he did called the Four Horsemen of the Internet about Facebook, Amazon, Google,
and Apple. And he is one of those people who
is just a fast sating study, a person who does

(01:03):
deep dives into the things we kind of take for
granted about technology, about marketing, about how we interact with
some of our favorite products. And he does it in
a way that's not purely academic. He formed a number
of companies um L two red envelope profit and and
sold them for uh tons of money. And and so

(01:26):
he's more than just a theoretician. He's an actual practitioner.
He's always fascinating. We always have a delightful conversation every
time I I have him in the studio. UH. He
has a new book coming out next year, so we'll
have an excuse to bring him back when that UH
comes out. In the meantime, with no further ado, my
conversation with Scott Galloway. This is Masters in Business with

(01:53):
Barry Ridholtz on Bloomberg Radio. My special guest today is
Professor Scott Alloway. He hails to us from n y
U Stern School of Business. He is the author of
the Digital i Q Index, a global ranking of prestige
digital competence. He has been ranked one of the world's

(02:13):
fifty best business school professors. He founded several companies, red Envelope,
Profit l two. He has also been recognized by the
World's Economic Forum as one of the Global Leaders of Tomorrow.
Professor Scott Galloway, Welcome back to Bloomberg. Thanks very good
to see you. What brought you to my attention a

(02:34):
few years ago was a video that you had done.
It was a conference appearance about the four horsemen and
they were Amazon, Apple, Facebook, and Google. So so why
don't we start with those. Let's talk about Google. In
a recent L two video you did, and you also
speak every year at the Digital Brands Conference d l

(02:54):
D I think conference. Um, you talked about Google low
its price eleven percent and yet it increased its total
ad revenue. They seem to really be dominating online advertising.
Can imagine how difficult all those whether you're competing with them,
your clear channel, outdoor, uh, you're the New York Times,

(03:17):
your hearst, and you have a company that's able to
a competitor's able to increase its revenues and lower its
prices eleven percent, And initially the analysts thought that was
a sign of weakness because their cost per click was
going down, but effectively, Google every year gets more and
more competitive. It's like, how do you know if an
industry is right to be disrupted? They raised their prices
faster than inflation when they'll underlying increase in innovation. You

(03:40):
could argue that media or television is incredibly right to
be disrupted and increase the prices much faster than inflation
while viewership has gone down, whereas Google is probably the
least disruptible business right now in media because every year
it gets substantially better, and they keep loaning their prices.
So the other um leader in digital advertising is Facebook.

(04:03):
Are they ever going to be able to give Google
a run for their money? Oh? They already are. I
mean between the two of them, and it really is
a duopoly if you look at all a digital marketing. Uh,
Facebook and Google accounted for a hundred and three percent
of the growth. Now what does that mean. It means
that if you aren't Facebook or Google and you're in
digital marketing officially, the industry is in structural decline. So

(04:24):
if you work for anyone who's attach platform, search engine
optimization and agency doing media planning online, your business like
newspapers and magazines is in decline. So let's talk a
little bit about Facebook. You said their pivot to mobile
was one of the greatest shifts of a large corporation
in history, arguably the most agile company in the world.
Three years ago, zero percent of the revenue from mobile.

(04:46):
Mark Zuckerberg said he did not believe in kind of
the app economy, thought it was all gonna be about browsers.
And he was wrong and pivoted and turned the fire
hose of great management, great engineering talent, and now I
think about eighty center the revenue comes from mobile. It's
it's it's hard to imagine a pivot. We all saw
mobile coming, but yeah, who wasn't able to get The

(05:07):
New York Times This is this is the most impressive
agile pivot I think in the history of business. Now
you've also previously called them one of the greatest s
bait and switch set ups of all time. Why is
that so? The general the general promise from Facebook was
invest in your Facebook page, Nike, and you're gonna have
this incredible asset. You're gonna have a captive marketing or

(05:30):
a captive asset, which will be people who have raised
their hand and said I have an affinity for Nike,
and then you'll be able to communicate directly to them
that you'll have an asset. In order to build this asset,
you had to advertise, and Nike know the firms spent
millions of dollars advertising to build their fan community. And
it was nice because it had this vanity metric of
how many fans you had. It became a symbol of
whether a company got it or not based on how

(05:52):
many how many fans you had on Facebook. And then
once kind of that, that hundreds of millions of spending
to build these communities with sort of done. Facebook turned
around and said, just kidding. If you want to reach
these people, you've got to advertise and organic reach. That
is the percentage of Nike's messages that reach their end
fans went from a down to eight, five or three.

(06:15):
It's tantamount to you building a house, putting the finishing
touches on it, putting the lock on the door, and
then the county shows up and says, chess kidding, you
don't own the house. We do. I think this was
one of the greatest bait and switches in corporate history.
What did that do to the trust factor of corporations
wanting to advertise on Facebook? I think it was temporary
because there's so much momentum. It's such an outstanding product.

(06:36):
They have such power that and h and quite frankly, also,
I think they've done such a great job managing their
image because I think their management team is likable, which
I think is incredibly important. People have largely overlooked it.
If you want to, if you want to figure out
a way to like somebody, you figure it out. What
about a fatigue? Is something that certainly is an issue
these days. Yes, so the the engagement levels, the percentage

(06:57):
of people interacting with a piece of content on Facebook
or of their posts are sponsored, meaning they're basically advertising.
And he started right into your right into your feed.
One of six pieces of content is someone's paying to
get in front of you, interrupting, interruption advertising no different
than television. However, the interaction or the percentage of people

(07:17):
are liking, sharing or commenting on that comment on that
content has declined in the last nine months, so you
are seeing what you would call ad fatigue glow now.
Having said that, they have other properties and tons of
different ways to monetize, but the core platform does does
seem to be experiencing ad fatigue. And what about Facebook
Live and Facebook Native Stories? Is that going anywhere or

(07:39):
what's the outlook on that? So I I personally believe
that the biggest innovation or the most the thing to
watch right now is from our one of their properties, Instagram,
specifically Instagram Stories, because it is squarely going after Snapchat
and what's interesting and I think the most interesting piece
of data in the world of media right now is

(07:59):
to look at snapchats user growth and daily active users
once Instagram launched Story as a direct competitor, and what
you've seen a Snapchat's growth has decelerated dramatically since Instagram
launched Stories. So people think Snapchat is the Facebook of video.
My thesis is that, in fact, Facebook is the Facebook

(08:20):
of video, and it's coming after Snapchat. And it's fun
to speculate, but I think Snapchat goes public, goes crazy
on first day of trading because people haven't had access
to a unicorn in a while. But I think it's
gonna be ground zero for ringing the bell at the
top and be one of the greatest. I think we're
setting ourselves up for something that might be the spark
that torches the market with Snapchat. I'm Mary rid Hilts.

(08:41):
You're listening to Masters in Business on Bloomberg Radio. My
special guest today is Professor Scott Galloway of n y
U Stern School of Business. He is an expert on
Internet technology, digital marketing, branding, and let's talk about one
of the biggest companies in that base. Amazon. Last time

(09:02):
you were here, we talked about why you thought the
stock was overvalued, wouldn't go anywhere. You very famously issued
a mia Kalpa Online said pretty much that marked the
start of the next major leg up um. What do
we think of Amazon today? So first off, yeah, I
was a hundred and ten percent wrong on that. My

(09:23):
initial thought was that the futures about multi channel retail.
Their fulfilming costs were escalating, and I thought that they
were going to need to buy a multi channel retailer.
The delivery costs also had had hats going up in billions. Yeah,
it continues to but now now people see it as
an asset, not a liability, and there's some some merit
to that. So at the time, I thought, okay, Apple
would be the first trillion dollar company because somebody's going

(09:44):
to get there, And what Apples pulled off is exceptional
lowest price or low cost provider because of their supply
chain power. But at the same time the margins premium
price products, so the volumes of Toyota with the margins
of Ferrari, which makes for the most profitable company in history.
Now Amazon, Amazon is the most disruptive company and the
largest economy in the world. And if you look at
the moats and a number of distinct businesses they would

(10:06):
have that would probably be greater than a hundred billion
dollar businesses on their own, they have the most apples
right up there. But now you have aws, um, you
have the core platform itself. It looks as if Amazon
Prime and their media properties are turning into a juggernaut.
Possibly the brill growth business for them is that they're
going into the business of selling picks as opposed to

(10:28):
mining for gold, leasing planes, leasing tractor trailers. Um, they're
going after FedEx and UPS twillion in market cap between DHL,
FedEx and UPS, and I think Amazon's decided they want
most are all of it. I think most of us
are who have e commerce companies or brands are going
to start using Amazon not only as a as a

(10:48):
platform with Amazon Marketplace, but using Amazon to deliver the
last mile when you say a ws' referring to the
cloud services that they offer. I have a funny Amazon story.
So I have a treadmill in my basement and I
have a tele flat panel TV which have plummeted in
price smart TVs inches four hundred dollars. I want to

(11:08):
hang it. You know. It sits there for a week
with the drill for a month. Finally I'm like, I'm
gonna go back to the store. I got it and
have them hang it. They want more to hang the
TV than the TV cost, and so I start looking
on let me find a place to look online and
I never even heard of Amazon Home Services. What is this?

(11:29):
It's sixty nine dollars that one of the local stores
wanted four fifty to hang it. So I set up
an appointment. The guy shows up, He hangs the TV
for sixty nine bucks. I say, who else do you
work with? And he reels off everybody, and I said,
those are all wildly disparate price points because I get
paid the same. It's the same drill, it's the same stuff.

(11:49):
He goes, I've done three houses on a block where
the costs are sixty nine dollars, three hundred dollars, and
five hundred dollars. It's me. And then I start looking
at the Amazon services that are offered. It pretty much
everything for your house. Where are they going to stop growing?
Where do they draw the line or are they just
completely no market is too far for them. I think

(12:11):
when it comes to your low consideration purchases or your
high consideration purchases that you don't enjoy auto insurance, I
think Amazon wants all of it. And what's interesting about
Amazon and one of the incredibly impressive things the hardware
innovation of two thousand and sixteen, even though it came
out earlier in that was the Echo. And if you
have do you have an Amazon Echo? I do not.

(12:32):
So you get one of these things and it literally
kind of blows your mind because you get a glimpse
into what the future of retail and commerce might be.
You could you put these things around your house and
literally at this void, at this volume, you know, you
see Alexa and it says yes, and you make a
request order an Uber add tied to my shopping basket.
And when you start thinking about the frictionless nature of voice,

(12:54):
you start thinking about Amazon's purchase history, the fact they
have your credit card one click ordering, the reputation for
value they have, the fact that they have a warehouse
within twenty miles of the population, which is miss it's
misleading because it's really eighty percent of the disposable income
of the US. You have what I believe, and by
the way, I don't know this. I don't work directly
with Amazon. I believe that they're headed is something called

(13:16):
Prime squared or some something similar to that, they'll announce
a test area and they'll say, Barry, we know a
lot about you. We're gonna install these echoes all over
your house. Whenever you need anything, you calibrate up or down.
We send you two boxes three times a week, ones
with your stuff, the second you put stuff that you
don't want back in the box, and we calibrate some more.
And over time, we're gonna take your entire retail ecosystem

(13:38):
off the table from everybody else, and of everything you
order in your life that you don't enjoy order and
you enjoy looking for cars, you want to go, You
want to go buy that bmw z A, your wife
wants to buy that pair of Christian lebutan's the other
cent of stuff you don't enjoy buying. Amazon is going
to do for you automatically. They're going to do a test,

(13:59):
most likely in a college town. They're gonna announce the're
gonna take prime from dollars a year to eight thousand.
The stock is going to be per per user. Perhaps
all the stock is gonna become anti gravity and go
to a trillion dollars. I think Amazon is the first one. Again,
So here's why I haven't gotten the Echo. I have
two experiences, three experiences with voice recognition software. One is
Google Voice, which is sort of hilarious garbled thing. The

(14:24):
second is Siria, which, if you read the Demnuota correct,
is one of the funniest collection of of typos. And
we've all experienced really embarrassing things because of the way
that works. So I looked at Echo as just another
mediocre voice recognition product. You're telling me that's not true. Well,
they're trying to Google an Apple trying to it's probably

(14:45):
more ambitious. They're trying to do it more around utility.
Find find me an Applebee's, or how do I get here?
Or call Barry. Alexa is alright, get me information, use
it for search engine. My son does it to test
geography skills and capital skills. But they're positioning it around commerce.
And when you think about the easiest place to make

(15:06):
decisions around commerce, seamlessly saying Alexa, you know, barbecue eight
people Friday night, and it immediately goes into your purchase history,
your preferences, your brand preferences, and puts together a package
of additional additional ribs imported beer. But I p A
because that's what you like and then a selection of stuff,
and it begins to calibrate and can get it there

(15:28):
within two hours. Because of their fulfillment network, you at
some point to sort of throw in the towel and
realize that Amazon is the only retailer that matters, is
the only retailer I need in my life. And as
we get more, we get busier and busier and suffer
from more and more time poverty. The opportunity for voice
artificial intelligence, an incredible investment they've made in fulfillment infrastructure

(15:48):
will result in a value proposition where you might decide
all the shopping and decisions I make around commerce in
my life, except for the ones I love, I am
just going to outsource to Amazon. You also have an Amazon.
To a certain extent, the game is sort of already over.
I play I Play Texas holding poker every every few
weeks with a bunch of guys, and at some point,
when one player has most of the chips, he or

(16:11):
she's already won because they can muscle everybody out by
just going all in until they finally win. Amazon basically
is at that point their access to capital is probably
they've had access to cheaper capital for longer than probably
any company in modern history, and as a result, they're
basically muscling everybody out. I'm Barry Ridholtz. You're listening to
Master's in Business on Bloomberg Radio. My special guest today

(16:33):
is Scott Galloway. He is a professor of brand strategy
and Digital Marketing at the n y U Stern School
of Business. He is the author of the Digital i
Q Index, named one of the world's fifty best business
school professors. He's founded and sold a number of of companies.
We were talking about Amazon before and how they had

(16:55):
a clearly defined mission. What is the problem with Apple's
mission description? Well, there there isn't one. The others have
various succinct and compelling missions that are the the investment
the investment community understands and demands. Apple does not. It's
not entirely clear what Apple is trying to achieve long term.

(17:16):
So as a result, Apple has become a what have
you done for me lately? In the investment market, it's
evaluated in the context of every product release, and if
that product doesn't revolutionize the world, which many have, the
stock gets taken down. So you have you have the
other horsemen, Facebook, Amazon, and Google trading it anywhere between
kind of twenty and sixty times, and you have Apple

(17:38):
trading at seven to ten. So you could argue Apple
could be the first trillion dollar company if it just
got a story, if it just said this is what
we're about and where we're headed. So I'm a mac
head going dating back to my nine classic Mac Classic,
and to me, the Apple story was always it just works.
When the competition was Compact, HP, IBM, dell Um, they

(18:05):
didn't just work windows back in those days. Was it
was a nightmare. And we've seen a variety of innovations,
starting with the iPod. There was nothing new about that technology.
It was all off the shelf stuff. They put it
together in a way nobody else did iPod, iPhone, iPad,
I Watch. Have they run out of innovation or or

(18:28):
are we still milking the last five major products? So
that seems to be the key question. A lot of
people would say our air pods really the design breakthrough,
the you know, the wireless earpieces. Is the Apple Watch
really kind of the legacy of the most creative industrial
engineers in the world. So a lot of people would
say that. I would say that Apple was theoretically suffering

(18:48):
from low te It appears as if it's it's lost
its mojo. Having said that, you know, it just has so.
It has such an incredible brand, It has so much
credibility around anything, you know, any item, and quite frankly,
it's trading it. It's still trades it. You know, it
feels you're you're in this business right. It doesn't feel expensive.

(19:09):
It feels like, I mean, basically bury It's up in
the last couple of months because people just with no
real catalyst. So here's here's the crazy data point we
pulled together when we were doing research for for this show.
You take the Apple cash hoard, just the cash dollars
it has. There are only thirteen companies in the SMP

(19:30):
five that their entire worth is greater than Apple's cash
ord That that's astonishing data point, which which raises the
question what they should do with all that cash. But
let's come back to that. I want to talk about
the Apple Watch, which people have called kind of a failure.
But when you look at the numbers and you look

(19:51):
at what they've done to the Swiss watchmaking group, let's
let's talk about it. That is the Apple Watch a
successor failure. I notice you're not wearing one. I'm not
so the And this goes back to what Apple strength
is This thing on my wrist. I haven't wound it
in five years. If I'm honest with myself, it's my
attempt to signal masculinity and success to the opposite success

(20:14):
opposite sucks. I think men who wear expensive watches are
basically trying to communicate two women. If you mate with me,
your kids are more likely to survive than if they
mate with someone wearing a swatch. So this is a
door winnie or feathers period to feathers, they have no
very little utility, and Apple's genius has been figuring out
a way to make a tech item feathers. Apple has

(20:35):
effectively decided they want out of the technology hardware business,
which trades at a multiple of EBITA, and they want
to be in the luxury business, which trades at a
multiple of revenues. It's a far superior business. The only
way they can sustain their margins is by having what
we would refer to a self expressive benefit. Apple has
become the ultimate display of wealth. If you do a
heat map by operating system Android versus iOS. It is

(20:58):
a heat map of wealth. Manhattan lights up iOS, You're
going to the suburbs. It's Android, the new feather. If
you have an iPhone, it means you're more likely to
be successful, educated, and have a random sexual experience. This
is this is the reason that they have the highest
margins in that industry. And the iPhone is the first

(21:18):
technology product whose margins have not eroded. Is the product
is matured because they've figured out it's a luxury brand,
it's not a technology brand. So one of your presentations
you talk about the mobile phone as the defining technology
of our age. Apple captures the profits Samsung captures, which
includes some overlap because they're a big supplier to Apple.

(21:42):
The rest of the industry or negative fights the losses.
And Apple versus Samsung is illuminating because they've taken different
approach to Samsung, invest two to three times the amount
of their top line revenues and traditional advertising and digital marketing.
So what does Apple do with all that excess capital
they have open stores. Most people would say that Apple's

(22:02):
genius has been the iPhone. I would argue that Apple's
genius move over the last thirteen years was building four
and fifty temples to the brand in eighteen markets called stores.
I'm Barry Ridhults. You're listening to Master's in Business on
Bloomberg Radio. My guest today is Scott Galloway. He is
a professor of Digital brands and Marketing at n y
U Stern School of Business. Last time we had you on,

(22:25):
you caused a little bit of UM controversy with your
infamous letter about millennials. We talked about it, So let
me ask you the question, do you love or hate millennials?
Oh gosh, you know it's easy to hate millennials, but
I would for all the complaints the business owners UM
put forward. At the end of the day, there's two

(22:47):
sides of the transaction. And the reason why we put
up with millennials and they are more expectant, more difficult
to manage, is because they're more talented than we were
at their age. The access to technology, the increase in education,
more kids are graduating from college is exceptional. They they
are the most talented generation. There's a price to it, though.

(23:08):
They want to talk about their careers. When I got
my first job at Morgan Stanley at u c l A,
we had a career talk once a year in the
form of a bonus and it lasted about fifteen minutes
and that was about it. It was so the notion
of going into my boss's office and saying, I want
to have a career talk, you know, six weeks after
I started, and I can't I can't even fathom the response,
but I would have received. But at l two, the

(23:31):
most inspiring people that I think, the thing I enjoy
the most is um is the kids that we have,
some twenty two to twenty eight year olds, and I
would describe them, and this is a sexist statement, and
mostly women. High school paledictorians are now women, mostly athletes,
the competitive grit in their background and and it's kind
of pasted it to say it that I'm not not

(23:52):
not necessarily think it's a good thing. But went to
outstanding universities, they have real academic, strong academic training from
the best institutions. These people are, you know, they feel
as if they could be the junior senator from Pennsylvania.
These twenty six year olds, they are so inspiring. At
the same time, they're used to feedback, they're used to recognition,
they're used to clarity around roles and compensation, and these

(24:16):
are all things when you think about it, we demand
as we get older and we have more currency in
the marketplace. They've just figured it out earlier. The ones
that aren't good it seems to have, you know, they
don't maybe don't have the skills, but they seem to
hold on to some of the negative attributes, and those
the ones to get all the all the press. But
on the whole, millennials have built L two for us
and I'm I'm I'm a fan. The fascinating thing is

(24:37):
for guys who are our age and we're not that
four apart in years, technology is something we've learned for them.
It's a native language, it's something they grew up with
as infants. You start playing with an iPad, right, it's
just there. Um, all right, So let's let's talk about

(24:58):
some of the other things that for For those of
you listening, you should definitely check out Professor Galloway's videos
on YouTube. They're incredibly informative and often entertaining. A line
you said not too long ago I thought was fascinating
is advertising is a tax on the poor? Explain so

(25:18):
effectively technology is allowing us to opt out advertising. Um.
I love modern family. I don't know if you watch
Modern shortly, but I now downloaded from my tunes for
even though I could download it as quickly from ABC
dot com, because ABC dot com makes me watch nine
minutes of commercials. I think just as we become numb
to mass shootings in the US, we become numb to advertising.

(25:38):
I think advertising is so ubiquitous but at the same
time so terrible. We were talking about age. I'm gonna
I've worked out my whole life. I'm at an age
where I can no longer to impact sports when I'm swimming,
and swimming is typically the first few minutes are shocked
your system, no fun. I'm not gonna be able to
do this very long. Then you get into a rhythm
and you get gone. I think great storytelling on television
is like that, where it takes a while, sometimes two

(26:00):
or three episodes into the season to really get into it.
I find I'm just finally starting to get into season six.
I think it is of Homeland. I equate advertising to
your first eleven minutes in the pool and then someone
takes an enormous dump in the pool and they it's shocking,
it's out of character, it's it's disturbing. You have to
stop swimming and listen to and clean it up for

(26:22):
two minutes. That is advertising. So technology is allowing us
to opt out. You're gonna have the New York Times
dot com without advertising soon. And the reality is they
don't get that much money from you. It is such
a game of scale. The New York Times only gets
two dollars and seventy cents a year for littering that
that gorgeous journalism with all sorts of ads. Modern Family
only gets fifty five cents an episode per viewer. Business

(26:45):
Insider Barry only get sixty five cents a year from
making you endure all those irrelevant, obsolete and obtuse ads
that slow the load time. Advertising is becoming attacks the
poor and the technologically illiterate pay. So does that mean
to companies like Google and Facebook if we're just becoming
oblivious to these ads, Well, Google, you're sort of asking

(27:08):
for the ads. I mean, Google has the most relevant
ads in the world because you're the one saying I'm
interested in auto insurance. And then it says, all right,
these are the organic listings about insurance companies or articles
on auto insurance that have credibility of that people search for.
But along the right rail, we're gonna let auto insurance
companies advertised. So it's almost like you're asking for the advertising.
Facebook is still interruption advertising. I think they're gonna have

(27:29):
to get into different businesses because I do think there
is at at some point every media company is going
to have to offer a non ad supported product. But
these these companies are content is so compelling. Most probably
most successful media company in the world, uh Google, because
you've wanted the ads. I would say, the second most
successful media company in the world last thirty years, Bloomberg.

(27:51):
And guess what it's not outsupported, it's subscription base. A
survivability index for all media companies globally is very easy.
Take the percent into the revenues they're getting from subscription
versus advertising. The part of this house that makes a
ton of money. It's a sub subscription. So the more advertising,
the weaker the longevity. You'd rather be HBO than ESPN

(28:12):
right now. You reference not too long ago, The Winner
Take All Society, which was a book in the mid
nineties by Robert Frank, a prior guest on masters and business,
and essentially says, no matter where you look. You can
look in sports, you can look at actors, you can
look at music, you can look in companies. There's a
winner in a given space, and then everybody else comes
in third. What does this mean for technology? What does

(28:34):
this mean for content? It's dramatic, and you you do
this for a living. There are of the SMP five hundred,
there are only thirteen companies that beat the index five
years in a row. It's unbelievable. So every you know,
it's it's never been better to be a winner. And
unfortunately we have this lottery economy because those companies get
a tremendous amount of heat in advertising and publicity. We

(28:56):
assume there are more winners than there are now. The
winners are enormous. You hit it, hit it big. It's
never it's never been a better time to remark, be remarkable.
Access to global markets, the ability to scale your intellectual property,
the ability for good products and good people to get
it out there on whether it's linked In or Facebook
or just consumer discovery. There's never been a worse time

(29:18):
to be good. You know, It's the way I think
of it is. When I got out of business school,
we all made eighty five thousand dollars and some made
seventy and some made a hundred. But now in my class,
I teach two classes a hundred twenty kids, I can
tell you there's gonna be a billionaire in one of
my classes tonight. One of the things you said was
that it's never been easier. I'm gonna just keep throwing
your own clues. It's never been easier to be a

(29:40):
billionaire in this society, and it's never been harder to
become a millionaire. The compact is breaking down. You go
to undergrad you study hard, you got a good job.
You got to graduate school. You're a good citizen. You
work hard, you get the credentials, you you you get
a partner that's also, you know, a contributor to Economically,
it's not unreasonable to think you could save a million

(30:01):
bucks over twenty thirty four years and retire a millionaire.
That's getting harder and harder to do. But at the
same time, everyone has an outside shot at becoming part
of something unbelievable in becoming a billionaire. The other kids
in my class, I think there's gonna be a decent,
non zero percentage of my class that's going to end

(30:22):
up getting unlucky, getting getting having some dents in their
career background, which, by the way, they won't be able
to gloss over because LinkedIn creates MLISS transparency and will
be excluded from quote unquote the information economy, and will
end up living with their parents until they're fifty or sixty.

(30:42):
We are we are entering an economy where it's winner
take all, and we don't have you know, we don't
believe an income distribution. We liked because there's some very
well advertised success stories. People would rather everybody if people
play the lottery because it's statistically as bad for us.
We know it's not good, but hey, baby, my numbers
are gonna win. My wife teaches fashion illustration and designed

(31:05):
to high school students, and in the high school they
actually when they're doing career canceling with these kids, warn
them you anything you put on Facebook, anything you put
on Instagram, anything you put on Twitter is part of
your permanent record, and you're affecting your career chances ten, twenty,
thirty years down the road. This stuff never goes away.

(31:27):
It's a new credit score. It's unbelievable. Um let's talk.
Since I mentioned Twitter, let's talk about Twitter another quote
of yours. A good board cannot save a bad company,
but a bad board can ruin a good company. What
what's the problem with Twitter? A negligent board? Unforgivable the
fact that they've decided that, whatever it is, two thousand employees,

(31:48):
a great product should be subject or should be led
by a part time employee needing the ceo CEO and
I don't know him. Uh my, he sounds like a
product fishionary. But to say that a company is complicated
and environment as competitive, where as many people, uh the
way they have as many investors, where they have as
many people trying to make a living from the fortunes
or misfortune of Twitter, to decide that a part time

(32:11):
CEO is the right guy, how do you say to
the rest of the management team, by the way, almost
all of whom have left. This thing is like rats
off a ship right now. How do you say to them,
this guy at twenty five hours a week is better
than you at fifty hours a week, and it's such
a great platform, and it's a fantastic product. You you
literally have negligence on behalf of the board to put

(32:33):
up with this. It's part of our idolatry of innovators.
A young guy who's very impressive shows up in a
black turtle knock neck and they think we've reincarnated Steve
Jobs and and they it is very very dangerous strategy
to compare anyone to Steve Jobs and assuming it's gonna
happen again, so we end up, like in an abusive relationship,
we end up taking abuse that we shouldn't. It's it's ridiculous.

(32:57):
He's gonna go down. He's gonna go down as one
of the worst CEOs in tech. And it's not his fault.
It's his board's fault. Boards have a fiduciare responsibility. The
board of Twitter is negligent. We have been speaking with
Professor Scott Galloway of n y U Stern. If you
enjoy this conversation, be sure and check out our podcast extras,
where we keep the tape rolling and continue chatting about

(33:18):
all things digital. We love your comment, feedback and suggestions.
Please write to us at m IB podcast at Bloomberg
dot net. Check out my daily column on Bloomberg View
dot com. Follow me on Twitter at rit Halts. I'm
Barry Hults. You're listening to Masters in Business on Bloomberg Radio.
Hey guys, let me ask you a question. Do you

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Welcome to the podcast, Professor Gallie, Thank you so much

(34:23):
for being Scott. I don't know what the hell'll call you.
Scott's good. During the break, we were talking about what
happened to comments in general, and I said, when I
was writing Bail Out Nation, I would put a post
up online do five hundred to seven hundred words. People
would give me comments, suggestions, ideas, sources. I was writing

(34:45):
that in real time relative to the crisis. I mean
the was due August two tho eight, and then that
weekends was do all hell broke loose? And so it
got extended to December thirty first, but I'm writing it
in real time. My readers are really my co authors.

(35:06):
They did a tremendous amount of work. You publish a ton,
especially on YouTube. What's going on with some of the
comments on on YouTube? What is that? Like? Them are
really supportive, interesting dialogue. The comments when they don't agree
with you are generally respectful, but that two or three
percent can be pretty rattling. And everybody I like to

(35:27):
put up this persona that, Oh, I don't care, I
can take it, I don't care what other people think. Yeah,
and it rattles me some of you when people really
say these incredibly person and what's weird? Does some of
them seem to research you and try and find something
that's gonna gonna upset you or even even frighten you.
So there's an element of it that's really disturbing. What's interesting, though,
is that if you think about that, the notion of

(35:49):
identity and that is Facebook forces you to say who
you are in some feature and it's created, I think,
a more civil platform. And even when you think about
the power of identity or around Uber, you wouldn't get
in the back seat of a driver that hadn't been
seeing his or her face makes me feel more comfortable,
and they wouldn't likely let a stranger get in the
back seat that they couldn't track down with their credit

(36:10):
card number or their identity. So this notion of identity
as it relates to Facebook, Uber and even Airbnb, I
would argue that the identity technology is really what's made
air and b Airbnb a twenty five or thirty billion
dollar company or value company is a really powerful notion
in the Internet age. But I think it's good that
people that platforms decide to force people to say this

(36:32):
is who I am, and it creates a more civil
environment because all of a sudden people turned very mean online.
Your colleague and n y U are run Sunda. His
book on the sharing economy, goes over how originally the
eBay rating system companies like Airbnb and you Uber, and
I thank you. I should have referenced him my whole

(36:52):
song I just busted into around identity. I was was
ip theft from Professor cinder Rog and I got it
from a roun so to friends. I absolutely was ripped
off his comments there. I use n y U as
a as my research bench. I think I've had six
different professors from n y U, and if you had
in Columbia, I think we're up to ten the academic

(37:16):
intellectual capital in New York with Wharton an hour that
way and Yale an hour that way. Is just it's
an astonishing amount of and we have to get you
out to one of the the dinners we have with
various Nobel Prize people. UM. So, the other thing I
wanted to ask you about, relevant to UM, relevant to

(37:39):
the to the comments situation is what does that have
to with Facebook? Since they're making you identify who you
are instead of having really vociferous comments, you end up
with fake news that gets passed along repeatedly. That seems
to be the Facebook equivalent of the the angry egg

(38:04):
on Twitter, UM or just the insane comments on YouTube. Well,
the scandal of we talked about Echo being the product
of two thousand and sixteen. The scandal of two thousand
and sixteen, and we just don't know it yet was
fake news. It's going to get It's going to get
bigger and bigger in terms of the damage we we
perceived or that has actually happened to society. Of our

(38:26):
news is now digested and absorbed from social media. Eight
percent of the news coming out of social media the
week running up to the election was fake news. And
one of the issues I personally have a Google and
Facebook is this notion that if you look at their
vocabulary and words matter, they're trying to avoid the word
media to describe their companies are saying their platforms. And

(38:46):
the analogy I would use Barry is that if McDonald said, alright,
eight percent of the beef we're serving you is fake
and giving you encephalitis, and as a result, you're making
bad decisions. We're not responsible for it because we're not
a fast food restaurant. We're a fast food plot form.
And I think these companies trying to absolve themselves of
the responsibility and the damage they've done by calling themselves

(39:06):
platforms and not media companies. By the way their media companies,
they create content, they sell advertising against that content. Boom,
you're a media company. But they need to do a
quarter of the fact checking and the resource investment that
the New York Times and Bloomberg making ensuring that what
we are digesting is not fake and making us sick.
This is the scandal of two thousand and sixteen, hugely

(39:30):
damaging to our society. There was just an article in
the New York Times this weekend about you know, there's
all sorts of of ransomware. Um, not so much where
they're taking over your computer, but there are people who
have figured out how to game Google search algorithms, and
so they dig up You want to talk about digging
up stuff? They dig up from people because it's public.

(39:53):
We've moved all this stuff from the from the government
sphere to the public sphere. Uh, mug shots. Someone's arrested
forty years ago, thirty years ago for driving under the influence.
That mug shot is there. It shows up in the
first page of Google searches and Google and so it's
not It says it's there for information purposes. They will

(40:15):
take the mug shot down for a fee and that
sort of um, blackmail shouldn't be. Google has a responsibility
for that. Well, I do think that is different because
you canna make a bomb threat with the phone and
I don't think the phone company is liable, but when
when the search algorithm. But but I do think it's different.

(40:36):
When Facebook is is got eighty percent of the content
flowing through its platform is fake news? Is it that much?
Is pily The week leading up to the election about
the news coming out on the candidates was quote unquote
fake news. The respective parties turned up turned up the volume.
I think at that point when they're when they're their

(40:58):
their media channels, their platform have literally become totally toxic
and totally misleading, I think they have a responsibility to
make a statement. And what they've done so far is
they're so remiss to alienate anyone on the far left
or the far right, because, as Michael Jordan's said, Republicans
buy shoes to everybody watches ads, so we don't care

(41:19):
how crazy you are. We want We don't want to
alien anybody, and we want the entire market. We want
everyone watching on on our platform. And it's sort of
enough is enough. They're gonna have to come up with
some standards, kick some people off, squelt some content, be acute,
and they'll be accused of censorship. But they're gonna have
to acting the same way a lot of these media companies,

(41:39):
including Bloomberg, Herst kind of out there's gonna have to
be something resembling editorial standards. You need to lose the
ten percent that's toxic. And otherwise they're from a business perspective,
they're putting the at risk the people they're monetizing it.
Once people come to realize, hey, this platform is a disaster.
I think that's been Twitter's big mistake, and they're just

(42:01):
now taking steps to not so much kick people off
the platform. The latest thing I've been reading about is
if you're identified as a troll or someone who is
harassing people because they're gay or black, or Jewish or
what have you or Muslim um, they're basically not gonna
let you put names in tweets, so you'll be able

(42:22):
to harass people without identifying them. And it's it's just
lost in the breeze and no one will see it
or hear it. But and this is this is you know,
this gets me to trouble. But effectively, most of the
leadership of these companies wrap themselves in a progressive blanket
to a certain extent because a I think they have
personally those viewpoints. But also it's awfully convenient because as

(42:42):
a whole, progressives are perceived as being really nice but weak,
and conservatives are seen as being smart but mean. And
if a smart but mean person was running the most
powerful company in the world Google, Facebook, Amazon, or Apple.
Regulators would step in early, so it's convenient for them
to be seen as kind of nice and cuddly Granola.
But the reality is, I don't think you can really

(43:02):
claim to be a progressive if the company that you
have a lot of power up has become weaponized by
the far right. So I see hypocrisy everywhere everywhere here.
These companies, these these individuals prostitute the progressive values in
order to soften the image of their companies such that
they avoid regulatory scrutiny. At the same time they have

(43:23):
allowed their companies to be weaponized by the far right.
I find it. I find contradiction in it everywhere I
use um. I've done a lot of work and a
lot of writing on minimum wage, and I've been talking
about we have this grand experiment going on in Seattle,
in San Francisco and other cities that have been aggressively
raising the minimum wage. Google what is the minimum wage

(43:45):
for Seattle and it comes up twenty dollars an hour,
which isn't true. That's in five years. It's twenty dollars
an hour. If you're this large, if you're this it's
fourteen or twelve or fifteen, depending on which city you're
you're talking about. And yet you know Google tries to
do the first slot is the answer to your question
as opposed to sources with the answer, And what's taken

(44:08):
place is that it's actually shows up as twenty dollars
an hour, which is wrong. Today the minimum wage in
Seattle is fifteen an hour. So people have figured out
how to game Google for ideological reasons. There's you know,
you can't organize the earth information if the information you're
providing is inaccurate, so they need to get on top

(44:30):
of that. Well that that's the exact point you're talking about,
the paid versus organic listings, and organic listings do have
some sort of credibility or or check. And again someone
has someone has game that, and Google would rather not
do anything, nor Facebook to suppress anybody from any viewpoint
around either giving them eyeballs or money. And they're going

(44:52):
to have to step in and say we have some standards.
It'll cost the money, but in the long run I
think they'll be better off. Well, the alternative is enough
people coming around and saying I can't trust Google anymore.
By the way, the reason Google became Google is I
can trust Google because of their crowdsourced algorithm. Their page
rank worked better than everybody else. Once it becomes clear

(45:14):
that too often that no longer works and you're getting
a gained answer that's inaccurate their business model. You know,
they don't have a moat. Their motive is essentially they're
better than everybody else. Once that folds away, they're in trouble.
So they should really they should protect that like the
crown jewels, and they don't. I I think you're absolutely

(45:35):
right there. I would argue that Google so far has
more credibility than any than any objectively evaluated entity in
the world. And we've talked about the last time I
was there. I think Google is a modern man's God
that as we become more educated and wealthier are the
number of people who attend church or or think of
religion is playing a large part of their lives decreases.
But modern day anxieties around sickness, why do bad things happen?

(45:59):
What happens after we die? Um, those anxieties either stay
flat or increase, So the decline in the belief or
or the ability to get comfort from religion and concert
with increasing anxiety, has created this void, and I think
Google is has filled that void. One out of five
queries to Google have never been asked before in the
history of mankind. Think about a friend or rabbi, a

(46:20):
priest that one out of the questions they get have
never been asked before. Because I have so much credibility Google,
Google is a modern man's god. You used to be
looked to the skies pray will my son be all right?
Now it's Google query symptoms and treatment of croup. So
now here's the problem with that? And this goes back
to them protecting the crown jewels. I've had doctors. My

(46:40):
favorite quote from a friend who is a doctor, what
he says all the time is, of course, your Google
searches the equivalent of seven years of medical school. It's
the same thing. So whether it's um any of the
online medical things, if if you put any if you
put any symptoms into Google, you will come up with

(47:02):
a list of things. And if you're a hypochondriac, Google
certainly is your your best friend. But the problem is,
I don't know how trustworthy, especially in the age not
only of of vaxer's But let's use the phrase agnetology,
culturally constructed ignorance, whether it's global warming or vaccines or work.

(47:23):
You way down the list of things that you know.
Nine eleven was an inside job and it's just a
run of insanity. That sort of stuff has found more
and more fertile ground to grow in in the Internet era.
There was some advantage to when there was only three
broadcast stations because that sort of junk never made it
past the gatekeepers. So did a lot of positive things

(47:46):
never made it past the gatekeepers. So now we have
to a fire hose, and it's becoming increasingly challenging for
people to identify what is accurate and what is false, yeah,
and and what's interesting in the face of those problems,
so Google still is the most trusted I believe it's
the most trusted entity in the world. Really, what if

(48:07):
you you were talking about hospital right here, right now,
all of a sudden, you get very worried about a
health do you what do you do for immediately? Well,
you you do both because you need it takes two
weeks to see the doctor unless you're you're bleeding out.
And second, the next thing you do is look for
hospitals with a specialty of what have you suspect? Well,

(48:28):
not even looking for a hospital, but you start trying
to self diagnose and understand more about it. I do
believe the Google has right now more authority than any
entity likely in history of mankind. That's astonishing. I only
have you for uh so many minutes left, so I
wanted to get to my favorite questions. God, I have

(48:48):
runs and runs of stuff that we're not going to
get to before I forget. The biggest winner of Netflix,
Netflix operating system for joy in our lives. Um you
look at in some I think that the economy is
bi for Kate. There's only two sets of winners, and
it's a small number of companies what I refer to

(49:09):
as Benjamin Button companies that companies at aging reverse when
you turn on ways and you use it, it gets better.
The majority of products from the economic titans of yesterday,
General Motors and Unilever. They age when I when I
used a car, when I use toothpaste, that declined and value.
The companies that are garnering the disproportionate spoils of our
modern day economy are Benjamin about the age and reverse.

(49:30):
Every time you do a Google search, it gets one
three billionth better the product. Every time you turn on ways,
it gets better for everybody company, right, That's right, Facebook,
every time you use it, the product gets better for
everybody else. That's one set of winners. The other set
of winners are the companies that help other companies reduce costs,
accenture most successful services company in the world. It's effectively

(49:52):
helping big companies cut costs, outsourcing companies helping companies cut
costs so effectively our economy. The winners are barfecating in
the companies that age in reverse or companies that take
care of the aged. You're either you're either Benjamin Button
or you're dying, or you're you're caring for the sick.
Those are the two companies that are working right now.
We began by referencing the four horsemen. It's always the

(50:15):
next natural question is who's the fifth? So I went
off in at Tangent there with my whole Benjamin Button wrap.
But I effectively think Netflix does take information around your viewership.
It's very simple, but it's very powerful. Last night, I'm
watching House of Cards season four, episode eight, and Netflix
is smart enough to go if Scott like season four
episode eight, we think he's gonna like season four, episode nine,

(50:35):
and they start auto playing it. And it sounds basic,
but it is the notion of of of an artificial
intelligence figuring out what you want. And if you look
at my home scream on Netflix, it has a bunch
of stuff I want to watch. There are now more people,
more millennials. More millennials watch Netflix or have Netflix than
have cable TV. So arguably Netflix should be worth more

(50:59):
then all of TV. If you think that millennials are
the generation, they have the most disposed b income, they're
the ones that are going to go into the primary
earning now. I think they do. I think also they
do a fantastic job. The iOS is our mobile system
for what i'll call the utility in our life. Amazon
is our operating system for commerce. Facebook I think it's

(51:20):
a little bit our operating system for loving relationships. And
I think Netflix is becoming our operating system for joy.
I think it's got an opportunity to be a two
or three D billion dollar market cap company. And Amazon
Video actually will immediately start playing the next episode and
to tell it until you tell it to stop, it'll
it'll just check right into that, all right. So let's
go into our favorite. We didn't do Biggest Losers though

(51:43):
biggest loser snapchats. Now we said that earlier Snapchat. You
think the I p O is going to be the
mark the high price of of Snapchat. I think I
think it'd be better for our economy if it did well,
because we need a third player in the ecosystem outside
of Google and Facebook. But I think ap chat is
gonna get public go crazy because of pent up demand

(52:04):
from retail investors who have been excluded from Uber and Airbnb, um,
and then I think it's gonna and then it's going
to be sort of a slow, slow moving train wreck.
Here's who I have down for your losers theme from
seventeen traditional advertisers. We talked about them. Twitter, we talked
about them, Yahoo, we talked about them. Here's when we
didn't talk about Pinterest. Why is Pinterest a loser? Fantastic,

(52:27):
fantastic product, not a great business. Uh, immature management team
that thinks it's in the business of art, not in
the art of business. Again, another failure on the part
of the board. And one of the things about venture
capital is if you manage to get you have an
obligation to get the highest valuation possible. But the problem
is when you raise money and I think at twelve
or thirteen billion dollar market a little rich, Well, then
you've got all these prefs um the companies should have

(52:48):
been bought for five billion and everybody would have done
really well. But now they convinced people invest in twelve
or thirteen, it's effectively only three or four buyers of
pinterest of all the brands we track at L two,
we don't know any actually buying advertising on Pintra. So
I think again, this is a failure of a board.
There's very few CEOs that can go from A to Z.

(53:09):
I think they have a genius CEO in terms of product,
he's not the guy to take it to the next level.
And the board has failed to make the hard decisions
around that management turnover. There has been an absolute uh.
The word I would want to use debacle. I was
gonna I was gonna use another term, but I was
gonna say cluster something, but cluster debacle. Cluster debacle. So yeah,

(53:32):
I think it's a I think it's a fantastic company.
I think it's wildly overvalued. Twitter overvalued, most overvalued company
in the world right now. We Work seventeen billion dollars.
We looked at a we Work space and it was
fantastic if I was forty years younger and in the
world of tech, these tiny little scrape great company, great concept,

(53:52):
might even be worth a billion dollars. But right now,
if you look at WE Work, it's trading at four
thousand dollars per customer. A little if their valuation stiff.
If you take the majority of that WE Work buildings
there in and you take the floor they've leased and
put in a cool coffee bar, a great market, great concept,
great business model, and it is a great business and
a great business model. But that floor is now worth

(54:13):
more than the entire building they're leasing that floor. So
is it a great company, yes, is it a great idea? Yes?
Is it worth ten to twenty of what it's worth now, yes,
most overvalued company in the world. You know, it's the
same thing as a Regius or there's a handful of
companies that do the office shares. They just made it younger, hipper.

(54:33):
There's a bar and a and a coffee lobby, coffee
lounge in the ground floor. The one on Brian Park
is funky and hip. They do a fantastic. Look. Twitter
is an amazing company. I think it's worth a billion
two billion dollars, which puts it at about se worth
less than it is now. All of these companies are amazing.
I'm not taking anything away from them. The problem is
when you layer in their valuation, they make no sense.

(54:56):
So let's talk about a couple of other things on
your loser list. Jet dot Com recently purchased by Walmart
three and a half billion dollar, hair plugs, trying to
make it, trying to make Walmart going through a midlife crisis,
trying to hang with the cool kids, not recognizing it's
a mature company that should be slowing down its campex
and reduced, you know, in spending a ton of cash

(55:17):
back to Shriff says, we we have a culture problem.
The most expensive aqua higher and history three three and
a half billion dollars, or about six and a half
million dollars per employee, will be the biggest write down
in the history of retail. And what about Dollar Shave Club.
You you've said another another great company, Dollar Shave Club

(55:37):
billion dollars I think about I think about three and
a half million dollars per employee, losing money supposedly had
discovered a new model for acquiring customers online. To Lette
spent fifty million dollars on TV advertising last year. Dollar
Shave Club spent fifty five million dollars on TV advertising.
The biggest winner in the Dollar Shave Club acquisition was
Procter and Gamble, who at a competitor taken out of

(55:59):
the market place on Unilever's balance sheet. That's fantastic. All right,
so let's get to my favorite questions before we run
out of time. We've talked about your background, although I
have to ask your at U C, l A and Berkeley,
right schools all the way through, just like you. That's right.
I went to sunny stony Brook. We the joke was
Berkeley the stony Brook of the West, but last week

(56:21):
it was twenty degrees. Do you do you feel like
you miss a little bit of California when New York
weather gets like anybody is from California. When you come
into l A. And you get in your car and
you got in an outburg, which is my my pattern,
you sort of wonder what was I thinking ever leaving here?
But then you're there for a week and you're like, oh,
now I remember I don't know, it's pretty nice out there.
It's fantastic if you and are a New York guy

(56:44):
so born and Bread were born in Bread. To me,
California would be fantastic if you could follow the neutron
bomb and start over my second I love California, But
every time I'm there, I'm like, oh, now I remember
what my second life midlife crisis. I'm moving alley, running
a port, losing money in movies, and and and and
and dying under suspect circumstances. I'm looking forward to it. Well, affair,

(57:09):
I'll tell you my favorite San Francisco story that's like, oh,
that's I love this place. But I consider myself, you know,
socially progressive, left of center New York liberal. And I
go out there and I'm Mattil of the Hunt. They
think they think I am like Genghis Khan. They're just oh,
so you're really an extreme right wing or I'm like, no,

(57:31):
you people are crazy. I'm pretty center center left. You're
just astonishing um And I repeat this over and over.
I love California. I have family in Lahoya. We spend
time out there. One of the most beautiful place Newport
beach spectacular. San Francisco is a world class city. Beautiful

(57:52):
city in America. I can't imagine. And every time when
you look, you travel a lot. Every country I go to,
every city I go to, I'm like, this place is fat.
Like we were in Copenhagen not too long ago. I'm like, Wow,
this is a great city. I'm not sure I could
live here, but it's a fantastic city. San Francisco. Every
time I'm there, I'm like, I could live here, And

(58:12):
then by the end of the trip it's like, you know,
I can. I don't know. They would not put up
with my New York stick there for very long. I
get away with it here, I can't get away with it.
There is there goods all right, So let's talk um,
I'll do the abbreviated version of our favorite list early mentors.

(58:32):
Who are some of the people that influenced the way
you think about business and digital So probably my first
business manner was a guy named David Anker who inspired
me in my second year of business school, and I
decided that's what I wanted to do with the rest
of my life. He's a professor considered the father of
modern management. I had some really nice, uh kind of

(58:54):
older brother father figure like people who are mentors for
me right out of business school. UM, I got Impat Connolly,
who just retired as CMO of Williams Nooma, has been
a kind of a mentor for me as an adult
adult person. UM, as an adult Warren Hellman invested in
everything I did, the venture, the buyout guy out there. Uh,

(59:14):
it's some great some of my clients said. Profit I
got named Gorge Shank, who was the CMO of Levi's Canada,
was very generous with me. There was just some nice,
very nice, you know, decent people who took an interest
in me and we're very good to me. I feel
very blessed that way. I was raising a single parent household.
My dad was around, but we I didn't live with him,

(59:36):
and uh, I was very fortunate at a very young age.
A lot of you know, older mostly men, took an
interest in me professionally and we're very generous with me.
So I consider myself very fortunate around mentors. And anyone
who doesn't have mentors, it's gonna be tough to be
successful because you need people on your shoulder who can
give you advice even when they're not around, because you

(59:56):
get to know him and you get to kind of
channel how they would handle a given situation. So those
are mentors. What about business people or other professionals who
influenced the way you approach business? You run one very
successful business currently. A few of your prior businesses, profit
and and red Envelope both were very successful. Who who
were the big influences from a business perspective? You know?

(01:00:19):
So my dad gave me a bunch of Peter Jarker
books when I was younger, and I read those and
I tried, you know that that was sort of the
basis I think for how I approach business. But I
wouldn't say like any one person, our individual stands out.
I don't. I don't model myself. You know. The only
thing you guys to get older, you have a code.
And I'm openly critical of a lot of managers. And

(01:00:40):
every person I admire in history has one thing in common.
They've given powerful people a hard time. And I think
it's okay to be critical of people as long as
they're more powerful than me. So that gives me a
very broad target set. Punch up as opposed to punching down.
It's if you're being critical of people who have the
same or less influencer power than you do, that's not
being it of color. Starting at cattle, you're just bowling.

(01:01:03):
So the people I admire most in in journalism and uh,
you know, I wouldn't say in business, but have never
been afraid as long as you're not being means spirited
call out other business people. But I wouldn't say I have,
like you know, there's so many incredible people you can
look to now in business and Lincoln learn so much
about them. But I'm more about, you know, historical figures.

(01:01:26):
I'm I'm a big fan of Winston Churchill and um,
you know, folks like that. But I wouldn't I wouldn't
say there's any kind of dominant I'm not a religious person.
I'm not. I don't have what I call a course
set of a course set of people I looked to
for first off. So so let me digress a bit,
because you just referenced something interesting. Um, the CEO of
under Armour came out and said, uh, some positive things

(01:01:50):
about President Trump. He's asset to the business community. Their
single biggest endorser, Stephen Curry and the Golden State Warriors
came out and said, well, he's right that he's an
asset if you drop the E T. And then that
that got a little viral, and then the question became
they had the CEO of under Romer and Curry had
a conversation apparently all is well there what happens with

(01:02:15):
the consumer society where we just saw what happened with
Nordstrom dropping the Avanca line. Is this going to be
a litmus test amongst consumers and or their high profile spokespeople.
So in the movie Broadcast News, William Hurst asked Albert Brooks,
what do you do if your real life outpaces are
as better than your dreams? And Albert Brooks turns him

(01:02:37):
and says, keep it to yourself. And that's so Kevin
playing handled it poorly. I can almost guarantee you that
when you're the sea of a consumer company and you
come out for or against anybody half it's just so
I'm not faulting him for less than half this time.
I'm not faulting him for being positive. It's it would

(01:02:58):
have been the same stupid move if you've been critic
of the president. Nords From handled it correctly. They basically said, look,
her stuff's not selling. They even said, we like her,
she's nice, we like her and her team, but the
stuff is not selling. This is a business decision. In
some political views from the CEO are are best kept
to yourself. And when when Trump draws you in, I

(01:03:19):
think you have a writer or an obligation to respond
in a soufful a way as possible. But actually a
lot of the CEOs of handled really well. I think
the CEO Ford has handled it really well. I think
I think Nords from handled it very well. What about
the delete uber campaign which which basically forced him, the
CEO of Uber, off of Trump's business advisory board. Yeah,

(01:03:41):
consumers are getting very savvy around how quickly they can
rally around an issue, and then they're smart to hit
people in their pocketbook. That's when that's when you really
see action. Right. Boycott used to be more or less meaningless.
Every now and then one would have an effect. But
between Facebook and others, Twitter and other social media, it
seems that Boycott's can be organized and put into place

(01:04:04):
much more quickly and much more effectively than than Withdrew
in the past. Yeah, it's an exciting time from that
end because you can rally people do a good cause.
Travis being forced off of Trump's Business Advisory Council was a,
you know, a pretty pretty interesting thing. But the politics,
the politicial politicization, if you're a politicalization of every company's

(01:04:25):
now has become relard. You know. I don't mean I
find I love politics, and I'm exhausted by it all.
It's every day just you know, I just want to
watch I just want to watch Modern Family and once
a while and not have politics, you know, have I
can't even watch MSNBC and Rachel Matto. And I wonder
if this is kind of officially another leg down to television,

(01:04:46):
because I think TV and medium and politics have literally
just exhausted us and we're ready for about a thirty
year break. Except I just saw this headline the other
day for the first time. Colbert Beach Jimmy Fallon, Falons,
considered a sort of nice guy inoffensive, has had Trump on.
Colbert has been hammering Trump. So has um who follows Fallon. Yeah,

(01:05:15):
they and their voice has been to push back against
the president. It's good for it's not even good politics,
it's good. Did you see SNL on Saturday? No, of course,
the god the opening is hilarious. But it's not just
the opening. I don't know if you saw the last one,
it was literally the entire show, this segment with Kelly
and Conway. Yeah, Jack Taper's uh yeah, that was just

(01:05:42):
that was six minutes of and you know the White
House is watching watching it, seething, fuming. Yeah, it's it's
just so, I mean, it's just so we're like, we're
just totally in uncharted territory. And I personally, I mean,
I have fantasies about this. I've done some activists investing
if Twitter goes, but oh, ten, I want to signal
it now. I don't think. I don't think I have

(01:06:02):
to follow thirteen D here, but I'd like to buy
some between one and two percent of the company former group,
renominate everyone but Jack Dorsey, and shut down the potus
and the real Donald Trump's account based on really, I
think he's violated their code of conduct well, harassed people,
hate speech. I think they have. They have been inconsistent

(01:06:23):
in their application of their standards around I think we're
all afraid, but I think we got to turn that
thing off. My hope for the election was when November
fourth came and went that's it, We're done no more
and that if anything, it just became louder in one side.
But what do you you're a markets guy, Barry, markets

(01:06:45):
have gone up? What do you think? What's gone on here?
Why are the markets you know? Yeah, well, first the
narrative about about what was going on. I think what
misunderstood it. Markets are looking at a trillion dollar infrastructure spends.
That's stimulative. Big tax cuts may create deficits down the road.
Nobody was a bigger deficit spender than Reagan. It was

(01:07:06):
fantastic for the stock market. So you you rejigger the
corporate tax code, you repatriate two trillion dollars of Apple
and everybody else's staships overseas, it comes back. You're looking
at you know this is there could be. Most people
look at the markets as they time it from the
bottom in March O nine and say left the market
seven years old. That's the long definition of a secular

(01:07:28):
bull market. We broke out to the new highs, and
which means this market is three or four years old
as a new bull market, and you've had a number
of twenty resets. People tend to forget that. So if
this market is three or four years old. Hey, the
last correction which we had January of last year. Remember

(01:07:48):
the whole conversation people were saying that as January goes,
so goes the market. H that was our seven. We
could be a dozen years left from two thousand and
this could really run. Plus, you look at the rest
of the world. If you want to invest cheaply, emerging
markets are really cheaply. If you want to invest aggressively,

(01:08:08):
you look at the worst place in the world, a
combination of Japan and Europe, and you invest there. But
the United States is expensive because we we weren't the
multiple that Apple and Google and Facebook do. Everything is
as bad as people feel, as much as the middle
class is getting squeezed, as much as the popularist uprising

(01:08:29):
call it Trump, called it Brexit, call it Leapan and France. Overall,
we're the ones who came through the financial debaccle which
we essentially caused. We came through with the best We
We ripped the band aid off first. We didn't do
what we should have, but we did something we We
basically bailed out a bunch of banks. We propped up

(01:08:52):
a bunch of financial system that was ready to collapse.
I would have done it differently. I would have sent
everybody to bankruptcy court if I was benevolent dictator, and
you would have been much It would have been more painful,
but you'd be much healthier that much sooner. But here
we are, seven years later. We have a functioning economy,
essentially under five percent unemployment. So we're the you know,

(01:09:14):
we're we're the cleanest shirt in the in the hamper,
so to speak. And so that's why the economy and
the market continues to go higher. How are you interviewing me?
You're listening to Masters in Business with Scott Galloway. I'm
here with my guest, Barry Ritholtz. So so let's go
back to our questions. You mentioned Drucker. What are some
of your favorite books? By the way, all you need

(01:09:36):
to do is pull my string. I said, I'm gone
that I've watched you. I've watched you. I was awake
through most of that was pretty good. Favorite books? What
are some of your favorite books? You sent it every time.
So there are a few things I'm embarrassed about because
I like to think of myself as educated. I don't
speak a second language, and the red and The reality
is I read a ton. I don't read a lot

(01:09:57):
of books. The books that changed my life for the
Peter Darker works, which one is give me the titles?
What is it the Twenty Minute Matter or The Modern
Manager or his his early one about the Austrian economy. Um,
this is really obtuse to my dad sent me, But
I forget the titles. And then and then influence on
me is I'm kind of a war buff. I read

(01:10:18):
when I was in high school. I read all the
Herman Wok books, Warren Remembrance, the Winds Shore Um. And
I also just loved John Irving books. I think he's
just so strange. John Irving. Did you like that movie?
Probably Robin Williams's best film? Really? Yeah, I would. I
would challenge that. I'm gonna have to come up with

(01:10:38):
a list. What would you like that better? Uh? Dead
Poets Society? Yeah, um, good morning. But he's a he's
a minor character in in good Will hunting Dead Poets Society.
He's I would really have to And on the comedies,
you know, some of his comedies were Mrs Doubtfire is

(01:11:01):
a hilarious and he's wonderful and another one he's bringing.
I think it's called twenty four our photo. He's actually
better at playing a psychopath than a comedian. I haven't
seen that. I heard good things about that. So so
herman woke Peter Drucker and yeah, that's what I'm That's
what I'm sticking with. There's a scene in the Reason
I have an issue with Garp. There's a scene where

(01:11:23):
he's in the driveway. We won't go into the details,
but he's got the woman with him when he's be ended.
I think that scene ruined the book for me. Low budget,
low budget gender transition. Yes, exactly. It was before Tranny
was a that's a good that's a good scene. It's horrific.
In the plays his mother, she's outstanding in that as well.

(01:11:45):
There's some she must have been excited to get a
casting called to be Robin Williams mother. It's like than
Sally Field was cast as Tom Hanks's mother and Forrest
Camp and I think she was six years older than him,
all right, I isn't wasn't Robin Williams older than her?
I don't know. I don't remember. It could have been that,
all right. I know. I only have a fine amount
of time, let's talk about, um, what you do to

(01:12:07):
keep mentally and physically fit outside of work. You mentioned
you swim, Yeah, I'm I'm I'm actually pretty into physical fitness.
I trying to cross fit three or four times a week.
It's how your niece, I've been really blessed without stuff,
I think. I think physical fitness is a gift from God.
It's my anti depressant. It keeps me sort of even
keel sort of. I struggle with anger, I get piste

(01:12:27):
off and stuff I shouldn't. But working out for me
has just been a real Like I said, I'm just
a gift from God. And I tell my kids in
my class that if you are in good shape, you're
gonna make more money, You're gonna be happier, You're gonna
have more sex, You're gonna have more options in terms
of who you mate with. You're gonna feel more confident,
You're gonna be a better person to your friends, your pets, um,

(01:12:48):
your neighbors. That it is absolutely one of the most
one of the things you find that's consistent across the
most successful people in business. It's not that they went
to great schools, it's not that there you know, it's
not that they're religious. The thing you find among almost
all of them is they exercise every day. So I'm
gonna do a really brief digression the anger issue referenced.

(01:13:10):
That's a hot amber, hot coal that's in the core
of your being. And you know how if you're ever
working with a fire, you can you can blow on
that and and get that amber going again. In all
of your presentations, that's a very channeled focused anger with
all of the virtual removed. It's and I share your

(01:13:34):
that issue, but my wife says to me, where the
hell does all this anger coming? Um, I don't know
what it is, but it's it's a it's a fuel
source that you can tap and redirect. And when I
watch you take a part um a particular segment, and
and again I'm gonna repeat for people, if you are

(01:13:55):
not going on YouTube and seeing Galoway's videos on a
clear basis as well as the d l D presentation,
would you always make entertaining and you always you're fearless
to embarrass yourself, So you do George Michael and and
they're always entertaining, but they're filled with data, filled with information.

(01:14:19):
But I could see that there is a driving something
that you want people to get to the correct answer,
and it's frustrating that the role looking in the wrong
place and all coming to the wrong decision. So maybe
anger and frustration or two sides of the same coin,
but that's pop psychology for one. That's what I see
driving you as getting people to the right place. I

(01:14:42):
think you're being generous. I just think I have some
chemistry that's all screwed up and anchor off of negative.
Given how fortunate I am, I don't think there's anything
I can blame it on. In my childhood. There's there's
no one I can blame it on, single single parents,
there's that could be it. I had a great mom, though,
and I had a nice upbringing. You know, this isn't
a sob story. We had a nice life, So it's chemical,
you know. She and I got to take vacations and

(01:15:05):
we had a nice relationship, and I went to nice
schools and had nice friends. But I'm definitely gonna be
on something. I think as the the side effects of
the antidepressant's lesson and my anger increases, those lines are
going to cross and I'm ready. Our last two questions, Um,
so you work with a lot of students and millennials.
What sort of advice do you give someone who says,

(01:15:25):
I want to go into filling the blank technology digital content.
I think about this lot a couple of things. One,
don't follow your passion. Most people will tell you to
follow your passion. Unfortunately it's every speaker at lunchtime and
stern is already rich. Figure out what you're good at,
and then try and really expand and and being great
at something. We'll give you the currency and the economic

(01:15:46):
reward and the psychological words such that you'll start to
love it. So your job as a young person is
to figure out something you're good at, not not your passions.
I was I was meant to be quarterback of the Jets.
I have a good plan of vision, a decent arm
I would have been loved it, but I wasn't. I
was mediocre at it as an athlete growing up. Uh
what I ended up being semi grade at? With starting

(01:16:06):
starting companies and analytics. Find out what you're good at.
Get to a business that has recurring revenue. Recurring revenue
companies are valued at a multiple of revenues versus a
multiple of ibada. You want to be in a recurring
revenue company you want to be, in my opinion, getting
more tactical the two technologies the next three to five
years our voice and messaging. I'd want to find companies
in the ecosystem of voice and messaging. Get to a

(01:16:28):
city two thirds of the economic development is going to
be in within a bike ride of a major world
class engineering university. Make sure you live near one of
those and get into that ecosystem. You pointed out that
most of the major successful companies in the SMP fire
are all right near a major university of renowned university.
How can you tell if a kid successful, how long

(01:16:49):
does it take him or her to get to the
biggest city in their country? And then how long does
it take them get to London in Europe, Shanghai, Shanghai, Beijing,
or Hong Kong or Singapore in Asia, or San Francisco,
New York in the US. Our most talented human capital
is flocking to these barter town, full full body contact
business centers, and your your ability to get the skill set,

(01:17:09):
the competitive nature, the grit, and the opportunities is very geographically.
Sense of the intellectual capital is there. And our final question,
what is it that you know about technology, digital brands,
marketing startups today that you wish you knew twenty plus
years ago when you began. It sounds very um pasting.

(01:17:30):
It's not that, not that romantic, but um. In the
one of my venture capital Larry Bonds, has successes in
the agency of others, trying to find good people and
then overcompensate, show empathy for them, really trying to figure
out what it is they want and make your success.
Is there such that they're loyal to you? UM. I

(01:17:53):
think I was a little bit more Darwinian as as
as a younger person. And also just get to a
business with um recurring revenue. I know that sounds ridiculous,
but the business of software is it's a better business.
The business of owning a gym versus part private training
is a bet. Being the insurance company that gets the
bills everybody every year as opposed to the doctor, the

(01:18:15):
healthcare provider. Recurring revenue I think sorts at and get
towards something that is one or two degrees separated from
the plumbing price and processing power or something around technology
technologies eating the world. We have been speaking with Professor
Scott Galloway of n Y u Stern School of Business.
If you want to learn more, go to his YouTube channel.

(01:18:35):
Just search for Scott Galloway at L two. Or we
didn't talk about your book. You have a book coming
out in September. We'll revisit that when that book comes out.
Winners and Losers. Who's publishing that portfolio? Penguin, Random, Random House,
not self published. You should be just barely. If you
enjoy this conversation, be sure and look up an inch,
down an inch on Apple iTunes. You can see any

(01:18:56):
of the other hundred and thirty such conversations. I would
be miss if I did not think my booker, Taylor Riggs,
my recording engineer Medina, or Michael Batnick, my head of research.
I'm Barry Retults. You're listening to Masters in Business on
Bloomberg Radio. Masters in Business is brought to you by
proper Cloth, the leader in men's custom shirts, with proprietary

(01:19:19):
smart sized technology and top rated customer service. Ordering a
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