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This isn't your average business podcast and he's not your average Host. This is the James altucher show.
Today on the James altucher show Scott Galloway has successfully been predicting the future on my podcast every single time. He's been on so he came on when he wrote the book before about Facebook Amazon Netflix Google. He wrote a book called the algebra of happiness. And now I don't know how he got this book done so fast and got it out there, but the book is called post coronavirus on crisis to opportunity. This book is the map of what's going to
The next in the economy for the virus in every industry from education to technology to health care and on and on Scott is so good at kind of seeing these Trends and how they will play out and it's always a pleasure to talk to someone like this. He's so intelligent without further Ado Scott Galloway.
Once again Scott Galloway on the podcast author of the algebra of happiness and also author of The Very prophetic the for which was about all your favorite companies Amazon Netflix Apple Facebook. Is that the for I think I got
them. Yeah Amazon Apple Facebook and Google
Google, right? Yeah. How could I forget that? Can you remember four numbers anymore? How's it
going? Good, you forgot about you forgot about the book. That's coming out November the 24th. Why do you think I'm on that's Joey Bag of Donuts.
So I'm here now my new book Jay.
I know because I've read it post Corona from crisis to opportunity. And also I was going to ask you how did you get the book out that fast? Like I got a book deal before the pandemic. It's not coming out until February. How did you clearly you got the inside
track? So I have a great book agent Tim Levine and we went out with the idea and almost a finished manuscript. Usually it's money is the
Lead criteria for how you select your publisher how much money the willing to give you in the terms and I only had one Criterion. That is how soon can you get this out? Because obviously this is perishable and Amazon came back with a great deal and said we'll get it out fast and then my publisher that did my previous two books penguin portfolio Random House great name that rolls right off the tongue came back and said that match it and then
And I think this is interesting because you write books, but typically it's it is a weird industry from pencils down. It's at least six months. And what we did was we printed out all the transcripts from my podcasts from my blog tried to string it together with a narrative. I have a team of about five people working on it came up with a 250 page narrative and then I spent basically all of August editing adding and trying to turn it into something turn it into a book, but we took a bit of a shortcut and adopted
Other mediums and use a different way of writing a book but this will be record speed of anything I've ever
done by the way. I don't think the way I'm assuming then you're saying you posted articles and different places than maybe stitch them together and rewrote a little too kind of make it seamless as a book
we have it. It was even more than that. They took all of my property podcast and pivot podcasts and they would print out the transcripts and then they would use human and or human in organic intelligence and
form of artificial intelligence to group all that text into three different buckets basically the markets education and society and then we would start and then we tried to turn it into a narrative and then I went back in, you know, the initial draft of 250 Pages read like a run-on sentence and I spent a ton of time editing and shaping and you know all the stuff you go through with a book and of course you have those five or six moments anyone has written a book is like why the fuck did I ever agree to do this again,
by the way that happens on every single
Book I ever write and then I finished the book and I write the next one. It's like that
hormone that supposedly is released with women when they give birth it makes them forget how painful childbirth is. Otherwise, they would never do it again and the species would go extinct same thing happens with books, but this speed here was key because I thought I want to get this out as quickly as possible. But yeah, there's this was short and
violent and as usual you make predictions about what's going to happen next. What's going to be disrupted next. What's the future of different Industries? It's all good. But how are you doing? How did you say?
How did you do during you came on the podcast in March. We talked about the pandemic a little but what's been going on to have you enjoyed life? Did you get sick?
You know, you don't have to you don't have to say this out loud, but if you if you're blessed with good relationships, if you're blessed with some level of Economic Security, if you're at a point in the trajectory in your career where you're on the back nine as opposed to the front line, you're living your best life. It's just not and I feel I don't take any pride in saying that but
For a lot of people covid-19 has been some inconvenience vastly over weighed by an increase in wealth. I own tech stocks which have rocketed up more time with Netflix more time with your kids less commuting. My life was 200 days on the road. I travel the quarter million miles a year. I know you do speaking gigs. I do speaking gigs. I was in The Client Services business with L2. So I used to commute from Florida where we both are now to New York Sunday to Thursday. I've taken 10 or 12 hours a week of airports and planes.
Hands out of my life. So yeah again, I'm conscious of the fact that this is why privileged extraordinary blast self-conscious saying it but if someone had said to me six months ago, we want you to spend a ton more time with your kids a ton more time watching, you know, the Queens Gambit and Andre Mandalorian and we want you to have time to write a book and you can do all your talks and teaching. I'm teaching 280 kids and two hours remotely and you can spend a ton of time.
I'm at home. I would have said where do I sign up having said that knowing a quarter of a million Americans have lost their lives obviously is incredibly devastating. I don't know what lies around the corner for all of us. But yeah, the last six months. I don't want to pretend that it's been rough on me. It hasn't it's been it, you know quite frankly. It's been a it's been a nice time in my life and I cringe even saying that how about you James?
Yeah. I mean, I'm similar. I mean, I work at almost every project I do I work from home and the things that I do out.
Doors were all closed down and I have a wife and five kids and so it's plenty of people to keep me company and and you're right. Like I here's what happened though. So I probably saved about 30 hours a week on things. I would normally do outside the apartment that I no longer had and you tend to fill up the time like I ended up writing two books instead of just one and doing all sorts of other activities. So it's been good for that as well. Although I've missed other things that build up the time
I'm almost too much.
It's an opportunity. Everyone has an opportunity to say. All right, what do you leave behind? You leave commuting behind are there certain relationships you leave behind are there aspects of your career you leave behind are there certain elements of spending you leave behind like this is an opportunity to take the Etch-a-Sketch. It is your life and shake it and redraw some lines. I think it's a really interesting opportunity. You know, I would say beat a man your kids think you are to sit down and say there's my professional life. There's my spiritual my
Life and there's my relationships. And is this an opportunity to hit a reset button and you know, maybe leave some stuff
behind. Well, what was the biggest thing you hit
reset on?
I'm trying I'm a selfish person and I'm self-aware to know that I'm trying to invest more in relationships at work. I'm trying to be more generous but I'm trying to be you know, like I said the man my kids think I am before they're too old to recognize. I'm sort of full of shit. I'm trying to be a more generous person. I'm trying to be less selfish and less self-absorbed and not every fucking thing that happens in the world immediately think we'll how does it affect Scott to try and absorb that and think okay. How does it affect the people around me just be more mindful.
Other people and other people's feelings and motion trying to leave some of the selfishness behind.
Well, what's it what's it instance? You can point to where you can say, that's an example.
I'm trying to there's some people in my life that struggle with substance abuse and I'm trying to be more supportive and mindful and less judgmental. I'm trying to move to how I helped and be less judgmental. And what I found is to date I was this is how you should run your life.
I'm smart. Clearly you're fucked up and I'm smarter than you and this is how you know, like tough love and instead of just providing love and support that sort of unconditional and it's difficult for me to get there because I see them making mistakes and I want to intervene or inject myself because I'm very good at Living other people's lives for them. I've spent my whole life giving advice. So when you're good at it, you make a good living at it. You start to believe your your advice is good in any imminent. You can advise the CEO of a Fortune 500
I'm going to get paid well for it. It doesn't mean you have any license to advise people on their life and I'm just trying to be less judgmental with some people in my life who are struggling with substance abuse.
Sorry to hear about the the people but and I'm sure your advice is good for them. But yeah, sometimes there's a lot of good books about how to particularly for friends and relatives and loved ones of people who are addicted to something about how to
basically change or help on changing their behaviors without directly saying to them Mike. Hold on a second. I'm just gonna get this book right here. Hold on. It's like three feet from me, but I got it.
This is a really good book. That was highly recommended Beyond addiction. Hmm how science and kindness help people change a guy for families. Mhm. That was highly recommended when I was in a similar situation. So Scott did we do it right and we do it wrong and what's next you write all about it in post Corona, which I highly recommend it for to anyone who is scared about what's going to happen next in some cases, you might
Be more scared. But let's let's talk about it. Like sometimes when I look at the data, I think oh my God. Nobody has any clue the horror that is going to happen next and other times. I'm a little bit more hopeful because I think ultimately it's hard to actually know but there is some I'm probably the most scared that I've been since I've started, you know writing about these topics.
Look at our super power as a species is cooperation, and we've decided to put
It around our necks or whatever those things where they put it on their neck with at the X-Men prison that Deadpool went to I don't know what that device is called that immediately the swash or emasculate your superpower. We've decided to ignore our superpowers a species were not cooperating in almost any company. There's best practices of the CFO of one company starts reporting earnings one way and it results in a higher multiple. You can bet every public company in the world with in 2/4 is reporting that we adopt best practices if we have a better cell phone tower.
And Siemens Germany the Chinese all of a sudden figure out a way of Huawei to start producing a remarkably similar cell phone tower. Yeah, you have Taiwan with 60 deaths across 21 million people and yet we have a New York, you know 26 or 28 thousand deaths. There's been absolutely there's been almost no cooperation across borders around how to handle withdrawing from the World Health Organization. It's been the worst practice possible in terms of ignoring. Our powers of superspies is so I
I'd say as the West has done an abysmal job and then we try and make ourselves feel better by saying other nations that handle this. Well Singapore and Taiwan and South Korea. They're more compliant which is our basically our bullshit xenophobic way of saying oh they're pussies and try to fall back on our Macho sense of americanism. No one we were compliant and World War II when we found out that the Japanese had cut off our access to rubber in the South Pacific. We started driving 30 miles an hour. We didn't ask for a government stimulus. We bought War
Once we converted the the Chrysler Factory in two weeks into a factory punching out Bradley tanks. We were compliant. We have given up on citizenship. It appears to me we have you know, our we've outsourced citizenship to our Frontline workers. We have decided that sacrifice is not part of our DNA as Americans. We ignore the mass of sacrifices that people have made such that we can say bullshit things. Like I'm not wearing my mask to Walmart because that's tyranny Jesus Christ. You want fucking tyranny go.
But 70 years back and find yourself a 17 year old boy in Germany and internet find out what tyranny is. Anyways, I think it's a species or is the West we've ignored our super power and then is Americans are super power is optimism. And unfortunately, our optimism has been a comorbidity
and look I just want to say sorry to interrupt but this is what I mean when I say I've been feeling more scared than ever normally back in the 2008-2009 financial crisis. I was on CNBC all the time.
As an optimist. I was so optimistic. They stopped having me on for a little while because they everybody thought it wasn't all doom and gloom like every time there's been a crisis. I've been super optimistic until now where it there's so much uncertainty. It's hard to be you would be stupid to bit just be blindly optimistic.
Well, alright. So Barry ritholtz his podcast Master business. I've been on five times. I've been on your podcast three times. I think you're the only person other than bear. I've been on a podcast.
Cast multiple times with and I think you are I'm not you know, I'm Blowin Smoke a little bit but it's it's mostly real smoke. I think you're a clear blue flame thinker and that is we have learned that optimism typically can bring you out of a crisis. It can bring you out of a war if you're optimistic and get behind a war. I've heard it can literally win a war it can bring you out of economic crisis when James all teacher goes on CNBC and says things are going to get better by stocks and people feel more optimistic and you know, someone says hey honey, let's go buy a Hyundai biter days ahead.
That can literally pull you out of an economic crisis. It can literally win Wars optimism in a pandemic is a comorbidity a we don't need to worry have friends over. Oh, don't worry. We got to live our lives. Oh, don't worry. I can't imagine an enemy 1/400 the size of a human hair. Look how healthy and handsome and good-looking. Everyone is around me. We've got to live our lives. Let's pick the kids up from school. Let's have friends over. Let's go out. Let's live our lives.
We'll get past this because we're exceptional we're exceptional and guess what the virus didn't get a memo regarding our exceptionalism or our desire to return to normalcy. And this comorbidity of optimism has absolutely been our Achilles heel and you are your fears right now set aside some very hopeful news yesterday on the vaccine and I'm hopeful but we still haven't let that way in around the distribution and the fact this is not a very robust vaccine in the sense that you have to refer.
Gerrate, it takes two doses. So set that aside. That's very exciting. We have not yet experienced a winter with covid-19 and Loosely speaking. If you look at outbreaks, if you look at hot zones, one of the key drivers in the key signals is when people have to spend time indoors it started spiking here in Florida about the time it started getting really hot and we all had to withdraw to air-condition closed spaces when the Northeast when the Midwest when the Rust Belt when it starts to get cold up there this could get
really fucking ugly. I mean really world-class ugly and nobody wants I think we have to think of citizenship and that is if you have the resources, I think guys people look at you and me and think we're a little bit neurotic and that might be mostly true. But if you have the resources to distance and a lot of people don't a lot of people don't have the resource a lot of people have to throw their diabetes medication and Diet Cokes and an igloo and head out and drive their Uber a lot of people take their jobs in the Roses healthcare workers very seriously. Thank God and they put themselves In Harm's.
I'm sorry, but if you don't have to put yourself In Harm's Way, if you're blessed with the economic security with people at home that love you and the ability to do a podcast or write or do things digitally I think you have a national obligation to distance because it's not the fear of getting this thing that you should be afraid of its if you're ever getting it in passing it on to someone vulnerable and becoming a note of transmission and I still don't think that basic basic premise of citizenship has has weighed in we want to blame the
Ation, we want to blame our Governor's we want to blame the CDC whatever it might be but I think this has reflected very poorly on a lack of citizenship and sacrifice on call it the general public in the US and I think you are right to be scared. I think this is you know, we're got so distracted with the election that we're looking up and saying O record levels of infections record levels of hospitalizations, which inevitably may not lead to record levels of - but we are losing more people.
Day right now then we have lost an any crisis. We are losing more people per day right now than we lost in World War Two the AIDS crisis the Vietnam conflict. We have never had this velocity of death in any crisis in America and it kind of feels as if we've said okay, the worst thing to happen to us James is that the virus doesn't have brown skin or where our turbine we would absolutely rally around that if the enemy if the enemy was killing a thousand people day and worshipped a different God or had different color.
I'd skin you wouldn't believe the sacrifice we would all be capable of but because it's a pathogen because it involves science because it's something we can't wrap our head around our response has been incompetent. If not Reckless, it is really exposed to soft tissue of America my
view and the end it exposed something else. But you you know, you mentioned quite a bit in your book, which is that the economic lockdown after two months. So I'm talking basically towards the end of April early May.
Basically, the entire economy had collapsed. I mean, there's no other way to put it like the average American had four hundred dollars of savings the average restaurant. Okay, there's hundreds of thousands of restaurants the average restaurant in the US had only 16 days of cash on hand before this pandemic started. Now, they've all been closed six seven eight months. They're all out of business. I mean, there's an argument to be made and again, this is all with best intentions close down. The restaurants have 25 percent capacity do this do this.
But the reality is like in New York City where it's going to be cold for a good five or six months 95% of restaurants are going to probably go out of business unless there's help or unless they don't close. I don't know what they do. But you know, this is all of the the destruction from the pandemic which I agree is has been horrible is going hand in hand with the fragility of the economy, which I honestly don't see a pathway to normalcy from this and I'm trying hard like we all are pretending like things are normal now.
When there's another stimulus package probably coming and you know, we're still I tell people and you mentioned in the book to a lot of the two trillion dollars in the last stimulus package has not been spent because it was kind of allocated incorrectly that it's still just sort of existing in bank accounts and not doing much else. It hasn't really done what it was supposed to do which is increase the velocity of money increase inflation get people excited about buying things in their community and so on and I doubt the next stimulus
What
either there are several stats that just blow my mind and kind of illuminate the proportion of this crisis and one of them is that we have been tracking savings rates the percentage of income Americans save by household for I think 40 or 50 years. It hit a new record this last quarter.
Americans have never saved as much money. We're in a crisis and Americans have never saved as much our savings rate is at an all-time high and then the individuals a lot of these individuals who appear to be getting checks from nowhere. I've decided to open an account on Robin Hood and then lever up because the markets been ripping backup and by what I would refer to a story stocks the stocks they hear on CNBC the stocks that you and I talked about incredible companies that are disruptors and then asset prices go to multiples that they have never.
Achieve before apples usually trades at 12 to 15 times earnings is trading at 38 and the wheel spins and the rich get richer I would argue that the stimulus there will be some very well publicized stories about the woman who owns the cupcake bakery who managed to get through this and not fire employees for every one of those there's some there's five small business people that in my opinion didn't need it and the companies and the organizations and people that needed it didn't get enough of it. We're going to spend three trillion dollars minimum if you took the bottom medium of house,
Ice holds the households and make less than $60,000 a year. You could have cut each of them a check for $60,000 and said don't worry about health care. Don't worry about food. Don't worry about putting yourself In Harm's Way instead. We allocate a three trillion dollars to me. We're going to find out that PPP the we're going to find out 80% of it went to companies that didn't need it in my view. So I don't think the stimulus has been well planned. I think we've we've gone after protecting the wrong people this notion that oh, it's unprecedented. Don't let the airline
Go out of business. What's a pandemic is not in president. We've had several in the u.s. In the last hundred years. What's unprecedented was 11-year bull economy. They gave everyone the sense that oh, you didn't need to save money. Oh, you could use all of your free cash flow where an airline we can use 94% of our free cash flow to buy back stock. And if there's a rainy day don't worry about it. It's always skies are blue and to a certain extent the right the government swaying and I'm bailing them out because they have names like American or Delta. And for some reason we identify we somehow think of Airlines has
And these great employers and American so we're going to go in and bail them out, but we have not prepared for this. We've put forty to fifty percent of the population through strange fiscal policies through regressive taxes in a position where they don't have had four weeks of savings. We put a ton of companies in a position where I thought oh, I'll just lever up and do share buyback. No company that engage in share BuyBacks. I get a single dollar of federal help that's ridiculous. In my opinion. We have you know when you have capitalism rugged
The way up and then you have socialism on the way down that's called cronyism. And I think this is exposed to level of cronyism, which is really really unhealthy, but you're absolutely right our economy. Our economy was dysfunctional and it's gone dystopian. When you have an acceleration and wealth of a quarter of a trillion dollars among the wealthiest a people in America and then you have a situation where you could have record evictions one and three people supposedly are having are more than 30 days behind in their rent.
Oh,
yeah in New York City one and maybe it's one of three now but one for haven't paid rent since March. So what is going to happen when that eviction moratorium is over January 1. I think it's over for everybody.
So some of the big ships right the tectonic shifts. Like what is going to change hear you talking about housing think about think about the way I the way I see it is covid-19 was a earthquake offshore and the waters are forming.
And turning into these tsunamis, what are the tsunamis such that we could ride them or benefit from them as opposed to just being overwhelmed by them. One of them you just mentioned and that is I think there is going to be a multi several hundred billion dollar transition or reallocation of capital out of commercial real estate into residential. My first job was 1251 Avenue the Americas where I work for Morgan Stanley 88 floors lived at work because I was working Investment Banking and they
8,500 people had a there they track how many people for security reasons now the last three months it's average 500. It's not going back to
8,500. The time-life building is the same way on kind of across the street from there.
That's the building. It's called time life though. Oh, yes. Oh, yeah.
They've been at five percent capacity almost this entire time when they could be up to I think they could be up to 50% now and when I go to the companies or ask the CEOs of these companies what's going on? The reality is bandwidth is
10 times faster than it was in 2008 2009 and they've done all the surveys or they've studied all the surveys companies are actually depending on the industry. But companies are on average more productive employees. Enjoy it more and companies are saving costs like every floor in that building is the rent is enormous.
It costs just the average American company cost between 24 and 28 thousand dollars a year to house or office come up with the snacks and security and air conditioning for every
Boy, so say you split that with the employee and give 12,000 or Cheryl's give 12,000 back to employee now. There is some situations. It's going to create a ton of interesting opportunities and there's all these second order effects. Okay. So we're going to have a destruction minimum of 20 or 30% in terms of demand Destruction for commercial real estate that means 50 to 60% of the office roots go out of business because they're levered right? That means that a ton of restaurants are basically dependent upon the lunch crowd go out of business and then
You see on the other side on the residential you see Restoration Hardware stock hitting an all-time high EC lumber prices skyrocketing. You see Pulte Homes a builder down here in the Southeast hitting new record highs right? But you also going to see some interesting societal opportunities. And that is you're going to see online dating or different communities. I think whether it's Peloton or Equinox, I think these guys could start off for online dating because one in three relationships begin at work and what happens when you're 24, and you can't find your way.
You can't make friendships at the same velocity cannot establish professional relationships because you're at home. I mean, it's again it's better to be lucky than good. You and I are lucky you and I are on the back nine of our careers. We have our relationships. We have professional trajectory, but younger people do want to go back into the office and the one anomalous thing about this is that if you look at Facebook and Amazon and Google, they're actually doubling down on office space or at least the Amazon and Google they're renting more space and the Facebook is Midtown.
In Manhattan recognizing that the secret sauce for their company is a woman who's a Dartmouth grad who's EE and she wants to be in an office and she wants to be in Manhattan and that should be our next conversation is how cities are going to do but it's interesting some tech companies Pinterest are tearing up their lease and writing big checks. I cut my landlord to check for a million bucks to get out of my lease, but there are other there are some companies who are doubling down and saying we need young people but on the whole on the whole the
The allocation of capital out of commercial and residential is going to be just staggering that is one of the big waves coming out of this ceramic.
So let's let's talk about that for a second because I don't know if people really understand what it means. So residential real estates very different from commercial real estate and a lot of residential real estate for instance in the city is I don't want to say the majority but there's a lot of mom-and-pop landlords bought an apartment in the 70s. Now they live somewhere else. They rented out to students or 600,000 students normally who go to New York City all of that's going away so we don't
Don't let's hold put a pin on that for a second because that's unclear. But commercial real estate. It's usually these big companies own these buildings rent out office space. But now the bottom floor is going to be empty forever because nobody's taking a restaurant space and saying boy, I can't wait to start my first restaurant in New York City now like that's going to take time if ever to replace these things and floors are going to go empty and these commercial lenders are over-leveraged through their over-leveraged like any other American they can't pay their money back what's going to happen and people
In prices are just going to go down overnight. That's not true. Either
that's price Discovery there right now. They're in the state would have what I call denial and that is if you hear a CEO of an office Reit on an earnings call they talk about how everyone can't wait to get back to work. Yeah, there's some people who can't wait to get back to work. There are a lot of people there are a lot of people who aren't going back to work who have figured out a way. They have the currency in the leverage and the supported home and the technology to not go back to work and then there are probably the biggest
August cohort is people who will go back to work but they just won't go back as much there are much more comfortable and their boss is much more comfortable with them working Thursday, maybe Friday from home, which is going to create just unbelievable demand destruction. The question is who registers the losses and this kind of goes to the future of New York. I know you have some thoughts around this, but if you think about there's just no getting around at the people who own who have the mortgages on those big buildings who own retail office space are going to get crushed and then
Similarly residential will get hurt in New York because I don't know what you do with those Midtown Office Buildings other than convert them to condos. I just don't know what you could do with them there that you know, they're not going to need as much office space as much retail space. I think they get converted to residential which puts huge pressure on residential but what we have in New York is over the last 20 years real estate prices have outpaced inflation and it's now 2,500 bucks a square foot for a nice Loft downtown if that comes down to
that's not the end of the world. I think New York could actually become younger if crime doesn't come back. If the tax base is get eroded too much if we continue to attract innovators and companies and young people you could see New York getting less expensive and younger, which isn't necessarily A Bad Thing the other fork in the road is what happens if a digresses into a cesspool of no Services because we can't afford to support our services because all the whales that were providing a ton of tax revenue including James altucher. I'll move to Florida.
Right. So what happens are we starting an inexorable downward spiral or we can have a two or three-year Reformation where it comes back great place to be a young person because it's less expensive and there's a bunch of cool little startups. That wouldn't have dreamt of starting a company in Manhattan another city San Francisco. I just think it's crude San Francisco for a product would be best described right now is bad but expensive La as well. I think I'll lie somewhere in the middle. It'll be interesting with LA because what do we interesting is that's more about the streaming Wars and media and I still think La is a great place to live.
Because I'm in and out burger and the Hollywood Bowl and Zuma Beach and all that could sip in San Francisco right now is a hellscape. It's crowded. I always thought Fox News should broadcast every day from there. If they wanted to make a point about progressives and say you have totally progressive government sitting on top of the wealthiest Metro in the world. And this is what you get you get veterans defecating on the street. I mean it is just it is an ad for what happens when far left takes over a municipality and I say that as a proud Progressive San Francisco is just a lesson in what you know, how not to
A city right now
also, but arguably New York City. I mean, I initially put down my thoughts in mid-august and it's now almost three months later and the data is so much worse that it wasn't August.
So what do you think happened New York three years from now? What's your three? Five? Ten years from now? Where's New York and your
view? Well, so your two scenarios, I hear both of those scenarios quite a bit and the young scenarios sounds great. Like oh price will go down young people artists entrepreneurs will move in.
I don't think just just logistically just the physics of it. It can't happen within 5 years 10 years, who knows who knows if it ever could happen because what's going to happen first is everybody's got a prop up prices for as long as possible to meet their debt covenants to not be screwed on the next people who rent from them and you know, they're in denial. Meanwhile all these the ecosystem of Midtown the ecosystem of Broadway is down. So I like you mentioned all these restaurants are going to go out of business all these hotels
Going to go out of business but critically and you know tourism's plummeted. So that means sales taxes are down. So basically every part of your tax base every single spot where you get revenues and profits in New York City is gone. I mean, there's a thousand people a week moving just from New York City to South Florida vacancies are at an all-time high and and everybody's there's no velocity of money in New York not to get technical. But if you get a dollar you spend it goes to Seattle go Sam.
Has on it doesn't go to the local store anymore. So there's no Prosperity that comes from just general circulation of money. So that's another thing that's hitting this city. The remote is not going away because of for so many reasons productivity cost but also liability savings. Nobody wants to get sued by someone who gets the pandemic, you know at work. And so what's going to happen garbage collectors are fired teachers EMT workers police, you know fireman all city workers and then it is the death spiral.
Down because then fewer businesses move in fewer tourists fewer residents with 600,000 students are going to school remote and I look I've talked to so many people now like from mayoral candidates to Administration officials to Congressman the people in the Federal Reserve. No one has any solute. I've come up with some solutions just brainstorming but the solutions are really difficult.
Yeah. So like I mean it gets you can see how the flight.
I would say conservatively. It's probably one and two but one in three people. I know that makeover call it a million dollars a year people make a very good living who lived in the Northeast have called me in the last six months and one in from I've been living it. I've lived in Florida for nine years and want information about Florida about schools. I'm not exaggerating like 50% of anyone. I know in the Northeast to make supper million dollars a year is called me in the last three months and said tell me about schools in Delray tell me about housing. It's unbelievable the migration that is being inspired by
Basically sunshine and low taxes the optimistic scenario around around New York. Is that okay? So, you know, there's going to be a huge pain registered and I think I'm hoping a lot or most of that pain is registered by people who've made a very good living the last 20 or 30 years buying and extracting rents from commercial and Retail real estate the families the reads that own those properties are just it's just going to be a bloodbath
The question is is the crisis deep enough where we say. Okay, we start to rethink our relationship with some unions and some workers in New York. I'm a member of a union I'm pro-union, but when it takes when it costs eleven times as much to build a model of Subway in New York as opposed to any other major city probably things have gotten out of control and the crisis might provide cloud cover to somewhat right size our Municipal expenditures and no governor. No mayor has had the cut cloud cover to do that because if the subway goes on strike know
Remembers always trying to right-size the economics of our city. All you remember is you can't get to work and you're pissed off. So I think there might be an opportunity there the biggest thing the reason why the glass may be half empty here is as someone who has if you take a list of the 20 quote-unquote super cities around the world from Hong Kong to Sydney to Paris to Seoul to LA to San Francisco to New York. I have spent 60 days at least in 17 of them.
Em and New York is singular. Everything is fighting for number two. Everything is fighting for number two young ambitious creative people who want to make magic with their lives and their work go to a city. They go to a city the really ambitious people in the world all have this notion where they got a weather was Louis Vuitton hiking into Paris Barefoot, you know, whether it was explorers going into Madrid or to Lisbon to raise money so they could get a ship.
Take off and try and Conquer New Worlds the most talented people in the world are drawn to cities and the best city in the world if you like cities is singular and it's the city where from its New York. And so I think you are always going to get this crazy Alchemy of human capital drawn to the greatest city in the world. I don't think Len I think London takes a big head I'd say London maybe is number 2 or some people would say. Oh, no, it's it's City. That's too fucking far Hong Kong who wants me? And I mean, it's just
I can go through them all on Paris try and find a grade seen at a bar lounge on a Wednesday night in Paris. It isn't there. It isn't there.
I agree with you. And here's what I appreciate the most about New York compared to every other city that you just mentioned is there's a diversification of subcultures. So no matter what you're interested in that's subculture that only exist in New York. It's the best version of it on the planet no matter what you're interested in but the problem is even though subcultures are.
Dispersing. I mean the good the optimistic news about the country is that all of these skills and talented people and money are going to the second tier Cities Dallas Denver Austin Nashville, Charlotte. Even Philadelphia or Miami. Yeah, but I'm scared for New York, and I think it's a lot of the leadership and I'm not just talking about de Blasio everyone trashes him because he deserves it but it's just everybody is in
denial. Yeah. Hey look a I don't think there's any getting around it has
As 3/5 maybe maybe even 10 years of pain but as long as we have that attraction to the best and brightest young people and I still think it's there. I think if you know, I think if New York Brooklyn goes to a thousand bucks a foot instead of two thousand and mangoes from a one-bedroom, you know, one-bedroom apartment goes from four thousand to two thousand the people that get hurt in the people that benefit their I'm not sure the city doesn't come out of this as strong or stronger. I just think it's a decent amount.
A pain if you look at economic history cities actually do well post pandemic. You wouldn't think they do but cities typically go for the 20 or 30 years post pandemic. They usually do pretty well granted situational. I wonder if just New York and San Francisco just price themselves out of the market and then all of a sudden someone woke up and said, oh wait st. Louis has a great University and really great cost of living of Philadelphia's 80% of New York for 40% of the price. So wait Miami's 98% in New York and in some levels a hundred ten percent in New York.
For 70% of the price and then Miami will get too expensive. You know, there's sort of a rebalancing here is the way I would is the way I would describe it. But I wonder if in a little bit of time after that pain if there's leadership what you're talking about. I don't see anyone running from me right now. Maybe the guy from Citibank. There's got to be some really sober hard decisions to right-size New York, and I hope the crime doesn't come back. I think that's a big big variable as if we can use technology to ensure crime doesn't come back. I don't know about you for the first time in 20 years when I was walking around, New York.
Aren't I was cognizant of the people around me and I never felt that way before. I mean this feels this feels like I need to be mindful of my surroundings, which is probably every woman out. There is like will welcome. Welcome to my life boss, but I never just never felt unsafe in New York last 20 years. I felt unsafe when I moved there right out of college in the early 90s to work for Morgan Stanley, but last 25 years never fear anywhere anywhere and then in the last three months.
A few times. I've been out in the East Village or other place in thought like I got to be mindful of where I am right now.
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Man, I am just loving podcast these days. You got to check out this one. I've been paying attention to its the boardrooms out of office podcast and they interview the best business Minds out there and I think and you've probably heard me say this on the podcast and some of my guests say it there's going to be so much opportunity for entrepreneurship. It's good to understand what are all the different micro skills of business. So anyway the boardrooms out of the office podcast. It's hosted by Rich climbin.
Steve's the founder of 35 Ventures. It's a venture capital firm and out of office the podcast features. I mean they've interviewed Jack Dorsey who is the CEO of Twitter and the founder of Twitter. Jesse is slow who's been on my podcast Sports Gods like Doc Rivers and Maria Sharapova big names in entertainment like the global creative director of Apple music Larry Jackson each week, you'll get inspiration from these guests and they're going to share how their experiences help shape their
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Again, that's the boardroom out of office. It's a podcast hosted by Rich kleiman join in on candid conversations with leaders in business and Beyond and learn how the best are doing it.
What I'm worried about is how much am I in denial and ever or is everybody in denial about not only in Europe with the the rest of the country the rest of the world because look at all the malls, right? The malls have already replaced the Town Square all over the country. And now you have Neiman Marcus JCPenney's all these other big Prime tenants of these malls are bankrupt. They're not coming back it many of them all these things have a death spiral to them. So less, you know, what's the great thing about laws the location so
So less people will start moving around them and and on and on and on and this is just one situation. What's going to happen when the IRS is a mess this year or when I don't know every like we're right now we're seeing the stock market go up. Well, so one of the theories I have about the stock market going up of course Starbucks is going up every mom and pop coffee shop has gone out of business. They basically have finally become a monopoly by accident by just simply
Shutting down all the restaurants and cafes that were not financially secure which is essentially 99% of them. So this is going to continue for a while.
Yeah, but where you're having is just you know, again covid-19 is more of an accelerant than a change agent. And every year we were seeing the two or three biggest players in every category Garner more and more share and I don't care. What industry is Big AG big Pharma big Tech Quick Serve restaurants the biggest
Players that are best capitalized who can play offense when everyone's playing defense are garnering more and more share the most oxygenating act we could perform right now on the economy. If we wanted to put an EpiPen into our economy right now, it would be to massively over from the doj and FTC and go industry by industry and break up companies left and right the share the dominance the market capitalization that the top two or three companies in every sector are garnering is extraordinary and
You're talking about you know, the food industry used to be very robust. If JP Morgan goes out of business. They he can call j-pal and say you better bail me out. I'll take down the global economy if McDonald's calls and says, you better bail me out. We will take down the global economy and say no you're not people have a lot of options in terms of food, but we're moving towards a less more fragile ecosystem around several Dimensions. You want to think about Panic? What if Walmart and Amazon it on the same day in April said we have massive outbreak.
Except infections in our warehouse and distribution centers. We have to close down our website and our supply chain if Amazon and Walmart had said we're not able to deliver food or Essentials. You would have seen people that would have been honey. Grab your Glock. We're going to Publix and we're taking what we need. You could have had wholesale panic because we have become too reliant on a small number of retailers and even in fast-casual dining where you think it's so robust. It's kind of coming down to Starbucks Domino's Chipotle.
Panera there's like a few big players that have to technology and the capital to survive this and deliver you your food at home or you need it or cater to you, but there are just way there's way too much concentration of power and wealth and all this is done is accelerate that and we've gone from this dysfunctional economy to this dystopian. Show me if you look at the S&P 500 and you disarticulated into deciles, the biggest 50 companies are up 10% the bottom
50 are down 10% The next bottom fifty are down like 30% The marketplace is said there's two types of companies you want to invest in you want to invest in unregulated monopolies. Big Tech is up 60 percent year-to-date before the pandemic post pandemic their up 60% and then the other cohort this performed really well is companies that are too big to fail because the market census on the way up they get to capture the games and on the way down. They get bailed out by the government and this is really unhealthy when the drivers the
anomic success of our society largely stems from either monopolies or companies that are too big to fail you lose the engine of growth you lose the engine of job growth, you lose the engine of innovation which is small and medium-sized businesses. We need to absolutely oxygenate the economy and go in and have the mother of all trust busting.
So could it be that the Financial Security though of an Amazon and Walmart because because not only are they they're both too big to fail.
And they're profitable. They have a billion customers all around the world and so on. Do you think that's what keeps them going during times of hardship like a pandemic else. They might have closed down.
I think you'd say that about Walmart, but I don't think I can make that I think if Amazon is forced to spend AWS. I don't think that makes them any more susceptible to put to a pandemic. I don't mean I think if that's true if there's true natural monopoly effects, then they should be theirs true Monopoly.
Benefits then they should be regulated as a monopoly. There's benefits to having Florida power on Li you and I have one supplier of electricity and there's benefits to that. I buy it. Okay. So what do we do? We regulate it and we regulate prices and we regulate that they don't put solar companies out of business or whatever it is. So it's one or the other if I don't buy the natural monopoly argument. I think that these companies would be able to serve their consumers really well and be more robust and I think we're going to find out all sorts of innovation I think Google search
Has an increased much I think it's more focused on taking you to a place. They can monetize as opposed to a better place for information try to do metasearch around searching this podcast for a discussion around New York and you can't do that on search. I don't think search is really innovated in several years. Why is they don't need to or the majority of the Innovation is around. How do we get Scott and James to click their second click to be to be a pla or place we can further monetize. So I think we're going to find that there's two just as we found in Bell Labs with with cell with
Brr with data with Optics. I think we're going to find there's a ton of innovation waiting to be Unleashed when we break up. These guys across tons of sectors. Look at Uber Uber is spending all their time and energy Uber and Lyft to spending all their time and energy and money the quarter of a billion dollars to pass proposition 22 to emasculate workers rights instead of trying to figure out how they become profitable. So I think these big companies inevitably start focusing on the wrong things and
Focusing on things that aren't don't unleash creativity talk about down here. I'm I spend too much time thinking about my taxes. I have this cohort of people super smart people who should be figuring out solutions to housing or coming up with vaccines instead. They're trying to figure out there trying to help people avoid taxes. I mean the complexity is a tax on the poor. Our tax system has become just so ridiculous with people who are in the top 1% paying a lower tax rate and why?
A lot of its complexity and all these different tax avoidance schemes
well, and if you think about it, these things generationally like over decades lead to much greater income inequality and people don't think of income inequality in terms of generations. They think oh Jeff Bezos is worth a hundred billion the gender and Amazon's worth nothing that's income inequality. But what happens is that all the people who are get skilled at avoiding taxes their kids.
Mary the kids of other people who are skilled at avoiding taxes and then they have kids who are skilled at avoiding taxes. Meanwhile on the other end of the economy is the people who never have any savings and their kids inherit that and Mary other kids of people who don't have savings. It's that America is not as what's it called when you could move up classes in a
single generation Our cursor and come and come ability.
Yeah Mobility America is not as mobile with with class as people think
think I mean there is class Mobility but built into the system, but people aren't don't use it as much as people think hence generation over generation tuitions get greater and greater rents get greater and greater and then it'd be really becomes Haves and Have Nots and this pandemic is just kind of like you said, it's just accelerating that right now
so a lot there so just some examples we are losing a generation of leaders and scientists right now and in our public
Pause low income kids and middle and higher income kids and there's not a lot of higher income kids left in our public school. So that's created a whole problem and a casting but in the public schools low-income kids largely kept pace on math and science with their middle income cohort their peers once we hit the pandemic and we went to remote learning lower-income kids have dropped off the face of the Earth 50% of them have fallen well behind their
It'll and upper income. Here's why because Mom has to go to work. She can't stay at home and and sit next to the kid when he or she is doing their math work. Their iPad gets stolen or their iPad is out of date. Maybe they don't have broadband and you have distinctive the ethical issues here and we really want to live in a country like that. We're going to lose a whole generation of doctors scientists leaders ministers counselors, because these people are we're going to see just as Julie
He likes to take credit for the reduction in crime and it ends up according to the authors of Freakonomics being a function of rho v way that we didn't have an entire generation of kids born into households. They couldn't afford to take care of them. We're going to see a generation of kids in a decade from now. They just aren't prepared aren't prepared for society that fell off the map and we're going to reverse engineer it to this pandemic where we decided to put two to three trillion dollars in the hands, mostly of people who didn't need it and then we let
Let an entire generation of young people fall off the map.
Well add to that to the one point six trillion dollars in student loan debt. It's an entire generation of kids has never been so burdened with debt. They have to work. We can't start companies or take chances or take or be Innovative. So again, like I want to be optimistic and you're there are opportunities right now. There's more opportunities to start a business than ever probably but it's hard to weave through the
Macro economic possibilities here because there's not that many you were going to get another stimulus. We're going to be more money in the system money in the system flows like in a poker table the people who don't know how to play poker you want them to have the most money because then it will end up in the hands of the people like you ends up in the hands of the Richer people at the table. There's velocity. Yeah. Yeah,
so you mentioned two things starting a business and then higher ed or student debt. You're an entrepreneur. I'm an entrepreneur. I think the best time I think it's gonna be a great time to start.
Business in one to two years real estate will be less expensive people will be less expensive companies and purchasers will be open to buying from new businesses. If I look at the nine businesses I've started and I try and find the signals to distinguish the winners from the losers. The only thing I can discern is when I started companies in recession they succeeded and when I started companies and boob times, they failed your cost base your DNA your sobriety. Your grid is just a company comes out battle trained when it started in a
You get overpriced people overpriced real estate consensual hallucination that you can wallpaper over a shitty business with cheap Capital. When you start a company to Boom time almost every company I've started when the economy is hot has failed almost every company has started a recession has done well and one to two years when we're kind of in what I call I think is we're going to be in a full-blown recession. If not worse. It's going to be a great time to start a business in my view having said that you have to be in a position to have the credentials to have the demographics to have the benefit and when I say
my Graphics, you know, it's just easier for white males to raise money in a city than it is for a black female to raise money and in a small town. There's just no getting around that and your credentialing, right? Ideally you dropped out of Harvard and went to work for Bridgewater, you know, there's just a certain profile for people who are able to access Venture Capital but it is going to be a great time to start a business. I see a silver lining around higher ed and what you were getting to a student debt and that is if the crisis is deep enough, I think these Fists
Stone are coming for me and for higher education and that is we have raised tuition three times as fast as inflation fourteen hundred percent over the last 30 years and a lot of parents and households for the first time are really stepping back and saying is this worth it and the top 20 schools will all benefit they'll get stronger. They'll maintain their pricing power but there might be an opportunity for the big land grant universities the University of Texas system the Cal State system, Florida State, Michigan.
Ian who educate two-thirds of our students to embrace technology small and big tag and massively increase Supply stop this whole bullshit trying to be a luxury brand and brag about the fact that UCLA when I got in with 60% admittance and now it's 12% stop that just stop it ignore the rankings and go back to our rightful place of income mobility and taking unremarkable kids and moving them up dramatically lower tuition dramatically increase acceptance rates and also get rid of
Bullshit Gestalt complexion notion in the u.s. That the only path to success involves a traditional four-year liberal arts degree. There's got to be other paths. We need companies turns to a reset big companies have to get rid of this notion that you need a security pass and a bachelor's degree from a world-class University to work there. That means your company isn't adding value to society, you know, the primary people that are able to get a degree. There's two cohorts that can get a degree from an elite institution children of rich kids are
27 times more likely to gain admittance to an elite University if you're from the top 1% income earning households, and then what I refer to as freakishly remarkable 15 to 17 year olds, and that's the Vaseline for all that. So that's the Neosporin. Oh, we let in some remarkable kids from the inner city will guess what 19 I can prove to us the 99 percent of our children are not in the top 1% and the mission of higher ed is not to turn the top one percent in two billionaires. It's to give the other 99% a chance to be in the top 1% That's what we're
To be doing in higher ed. We have totally lost the scripts. I think there's hopefully an opportunity. I'm working with the Regents University of California. Mike. Stop thinking about UCLA as a place that is constricted by our classrooms and amount of tenured faculty and this notion that all we have to maintain our brand. No, you don't double the admissions if you take 50% of your classes online, you double Supply and we can double Admissions and we don't have just freakishly remarkable kids wandering around here. We just have remarkable kids.
No, you know it also like you could do is a lot of kids are better served right now instead of taking a remote class at UCLA or Stanford. Whatever though taking remote classes at Coursera, but having the credits have reciprocity with the UCLA's of the world.
Well, that's a huge Innovation. So coming like outlier instant company and my company section for does online ever trying to do lead marketing and strategy electives at 10% of the price of an elite University. So we're basically saying, alright you don't get
Certification but you get the experience for 10% of the price 60 70 percent of the experience for 10% of the price. And then what you're talking about a company called outliers doing and they said okay calculus is a something like a two or a three billion dollar business undergrads will spend two or three billion dollars in tuition on calculus or some crazy number. It's been taught the same way for a hundred years. Let's find someone amazing at it. Let's try and use technology and incredible Graphics and Design and infographic to
Eight a pretty good online experience, maybe even better than a mediocre in-person experience and let's charge kids 300 dollars instead of six or seven thousand which is what you paid a private liberal arts institution. They're saying okay. Let's do an arbitrageur. There might be an Arbitrage around to your junior colleges where more kids go to Junior College for two years, which delivers education are much lower costs, and then they transfer to the kind of name-brand school, but we absolutely have to stop praying on the hopes and dreams of the middle class.
And affect what you described as this transfer of wealth of one and a half trillion dollars that makes them more risk-averse stops them from forming households. I do see that as an opportunity though. I think the crisis is forcing the marketplace to rethink education. I think the arrogance and self-aggrandizement that defines University leadership has been their chin that they keep sticking out and I think the fists of stone of covid-19 are coming for it. The Reckoning is overdue, but I'm hopeful we're going to come out of this with increased admittance rates and
Supply and lower costs it's time just like, you know Manhattan real estate got way out of itself tuition in my industry has gotten way out of cells or not. We're not luxury Brands were public servants and we need to return to
that and if you were a young person in your early twenties, now what entrepreneurial opportunities would you start thinking
about? So we talked about waves right residential anything involving the home is going to boom and there's a ton of opportunities and I try to think okay, what are the way because I think it's better to be good at Google.
Then greater General Motors, you know, it's just I go surfing once a year and when I go to when I go, I went to Baja with the waves are perfect. I can convince myself. I know how to surf and I come back to Florida where the waves are just Florida and I realize I can't serve so you want to get to where the waves are great. You want to get in front of a big way. There's some huge waves forming we talked about one the transition from commercial real estate to residential another huge wave probably biggest wave in the last 30 years. Other than maybe the internet if you will is
Reallocation of capital around health care that will no longer flow through hospitals and doctors offices but flow through smartphones smart cameras and into your home if you think about it James 99% of the people who contracted endured and develop the antibodies for the novel coronavirus didn't enter a doctor's office much less a hospital and regulations have come crumbling down because of emergency measures you can doctors can now communicate directly with their patients. They can prescribe things over digital.
It'll they can have Pharmaceuticals delivered directly to the house. They are figuring out where every Wednesday. I have a nice woman come to me and test my entire family for covid-19. Just as a general practice. I think Amazon Prime is as a feature of prime going to start offering Diagnostics and testing. I think they will deliver your package and then rub the swab in your nose or some form of that or they'll be an app that does something like that or they'll be a just as you have an espresso Coffeemaker. I think they'll be a died some sort of Diagnostics tool in your kitchen that
Helps your family be healthier and absorb Health Care through a distribution mechanism called your home just as e-commerce was shifting distribution by taking stores and turning them into warehouses and then taking your house and turning it into a store it computer into a store 17 percent of our economy are approximately four trillion dollars is about to get thrown up in the air and land in places other than a hospital in a doctor's office. I think people want to not only get treated at home. I think they want to die at home. You know, I think that hospitals are going to
Um the place just as advertising has become a tax on the technologically unsophisticated or the poor. I think hospitals and doctors offices are going to be the new Android or the new ad supported media. I think if you end up in a doctor's office or a hospital, it means that life hasn't worked out for you because I think that Health Care is going to move to the home. So you ask me. Where would I want to be if I were just an economic animal I'd want to be in remote health care or telemedicine. I think that is going to admit the first trillionaire. I think the startups there are going to be huge.
So there's already
Like software like remote video software. So that doctors can see patients. There's all the rules for privacy and Corruption and all that kind of stuff what other stuff in telemedicine do pleasure. There's a lot of Mental Health Care telemedicine. There's a lot of prescription doctors doing telemedicine for easy prescriptions. What other kind of stuff do you see
So yes, all of that times 10. I've just made my first investment and telemedicine and I invest in a chemical 98.6 and its Primary Care delivered over your phone and they sell through the Enterprise. So for 200 bucks a month, you know, an axon or Sandoz or a Warby Parker can provide to all their employees Primary Care on their cell phone. And if someone says I'm not feeling well, I think I have a UTI. They answer a series of AI driven questions that gets them to the right.
During the doctors informed when he or she comes on and then the doctors get to work from home. They have more flexibility and 30% of the Outreach from covered 98.6 patients is people communicating with them while they're in a meeting. They're making it so seamless and frictionless to manage your health care and then someone might say the person on the line goes. Yeah it is. It sounds like a UTI answer me the following things. I've written you a scrip. It'll be there within 60 minutes and the idea is getting off your heels and on your toes because a big part of the costs are
around Healthcare and loss of productivity is that we play defense around it instead of offense. We don't want to go to the doctor. You hate the loss of anonymity doctors offices. Maybe the exception of gas stations are the worst retail in America. Its retail. What are the retail imagine going into a Nordstrom or Sephora? And the person behind the register has a plexiglass saying that they slide back and they ask you to fill out a bunch of paperwork that you already filled out before you can buy anything there and then they ask you to wait and then you go in
The
person who's there to sell you the product make money comes in seems stressed out and is therefore maybe 10 minutes and leaves and write you a script to go get another test somewhere else. No, you can't get your La roche-posay here at Sephora. I you got to wait you got to talk to me about it. And then I'm going to write you a script to go to Macy's and by the sunblock you need and then you got to come by and come back and I'll tell you if you got sunburned. I mean, it's just this is retail and the retail is so poorly managed the entrench the entrenched incumbents have made so much money specifically in
Insurance companies that they have gotten in the way of any sort of innovation and I think covid-19 is breaking down a lot of those barriers and I think you're going to see Innovation across these incredibly incredibly across these Distribution Systems. We call our handheld phones and smart cameras and voice. I think you're going to be able to ask Alexa Alexa. Do I have a fever or cold and I'll ask you a series of questions. Maybe you go to a touch-based screen and I think it's going to be able to tell you and then it's going to say alright we own pillpack will send you.
Your z-pack or whatever. I think there's just going to be so much. I mean, this is It's the biggest sector in our economy and it's about to go through changed. I think will be more transformative and more violent. If you will then the shift from terrestrial retail to e-commerce. So first and foremost Health
Tech, right? I do think that is a positive for the economy just because look at all the costs all of the extra cost baked into the system whether it's Insurance, whether it's the doctors whether it's the Health Care system as a whole whether it's the
FDA there's a trillion dollars of extra cost baked in there every year probably.
Well, your point is a valid one. We tend to look at Health Care through the lens of economic costs and lost productivity. What about the non economic costs a mother who has a child hood suffering from childhood diabetes and let's be honest It's usually the mom spends 10 to 12 weeks a year of her life managing that child's Healthcare. Imagine if you were able to free up most of that. Imagine how much more money that woman can make
Imagine how much more time and care she could provide across the rest of the household. Imagine how much more self care such as she doesn't end up sick or mentally ill at some point in her life. There are think about how much time it
takes to go get
well just the friction in the bullshit and the anxiety or on the delivery of healthcare. It's ripe. It's gotten more expensive and the outcomes aren't any better, right the life expectancy in the US has gone down three of the last four years and four more.
Tality is still not even in the top 10 in terms of Nations the outcomes unless you're wealthy have not gone. Well so Health Tech number one Ed Tech number two. My industry is a seven hundred billion dollar industry in the us tonight. I'll teach 280 kids James have 280 kids taking brand strategy. They each page seven thousand dollars. That's one. I think that's about two million bucks to listen to me. Do what I'm doing here with you for 12 nights right hundred seventy thousand bucks a night Jesus Christ. What are the margins?
On that the margins on this class and granted this is exceptional because I get to come on podcast like yours or kids want to take my class margins must be 95 points. So what other product in the world gets two million dollars and 95 points of margin. Can you name one? That's I came up with one. I could only think of one product.
I mean in terms of gross. Margin, I would say Google
Okay, but that they don't but an individual yeah, they have near-perfect damn near a hundred percent margins but I mean a specific product. I am ordering this Prime ordering brand strategy for two million dollars knowing that it's a they're getting 95 points or 97 points of gross. Margin. The only thing I could come up with is there's a drug. I think it's from Pfizer for a rare blood
disease. I know this one. It's like 12,000 a month to take this.
Oh, no, it's two point 1 million
1 million a
month this
So new drug, there's a I'm sorry. It's for a muscular atrophy ailment and the drug is basically a cure. It's a miracle drug. It's a very rare devastating disease. That's fatal and you basically waste away and then die and this drug cures it. Cures it and it's not a huge market in terms of numbers. So they charge 2.1 million. So I brand strategy class and a life-saving drug and I at least I say, alright the life-saving drug has crazy fucking technology.
Some genius some immigrant technology spent his whole life never kissed a girl never never went to the movies never bought a nice car to said, I want a better humanity and work their ass off their whole life to come up with this miracle drug and then the company sitting on top of it said I know we're going to charge two million dollars for it. Okay, I get that. I almost I don't want to say they deserve the two million dollars, but I get it.
I get two million bucks. I get two million bucks because a bunch of kids one Economic Security. They want to be able to support their families. They want us to be able to support their husbands and their kids. They want to have a nice life. They want to help their parents. They want to live the American dream. So they got to spend two million bucks on Scott Galloway. That's just wrong.
Right and this is where and this this even is related to the discussion on cities, but this is related to disruption Theory so as a product
A service gets more expensive because their customers want more and more features and are are used to kind of a upwardly sloping price curve these products and services are easy or commonly disrupted but because of regulations in education regulations in healthcare and so on classic disruption theory is that self disrupted by government regulation.
Well, we create barriers of exit or Barrett we create accreditation.
Ian Wright, so the most powerful brands in the world be clear. Nobody spends a hundred million gives Apple a hundred million dollars to put the name their name on the side of a building on their campus. They'll do that at the University Apple has nothing on MIT Stanford or NCI. These are the strongest brands in the world. In addition. We have like a cartel decided that okay. We're Stanford. We get Triple the number of applications. We got 20 years ago. Fuck that. We're not going to let anyone else in because we're all drunk on luxury and every alumni and every donor likes the idea of putting their name on a more and more.
Was a mess bag as opposed to a Coach bag and every alumni like saying I went to Stanford even though if you didn't if you couldn't get a now think about everybody brags, I couldn't get it now. Okay, that means your kids not getting in. So there's this there's this crazy exclusivity. That's terrible drunk on exclusivity. We have we're gonna need to rethink tenure. I work with one of the finest faculties in the world. I think a third of them should be put on an ice floe. They're not only unproductive but they get obstructionist because they feel the relevance so,
flipping from them and everything points to one thing and higher education whether it was inviting kids back in the midst of a pandemic pretending that we were going to have some sense of normalcy every decision that administrators and tenured faculty of made over the last 20 years in my view is all with one aim, how do we reduce our accountability and increase our compensation and we have gotten to a point and the basic the underlying notion of disruption is if you raise prices faster than inflation window underlying increase in
Activity, which we have done in Education if you walked into a class in in a university 30 years ago. The fashion is different. They're drinking Tab not Vitamin Water. They have, you know, Old Dell computers or or legal tablets instead of their phones. That's about it. It hasn't changed a hell of a lot. I got PowerPoint versus overhead projectors, but it hasn't changed a hell of a lot what's changed what's changed is the tuition and the lack of accountability in a compensation of Administrators 9700 highest paid public.
Officials in the state of Massachusetts work for the University of Massachusetts. We have created programs and vice-chancellor positions and benefits. We have become totally drunk at the trop. There's a bit of a two class tier system at universities where you have your tenured faculty and then you have your clinicals your Abduction of lecturers who don't make very much money at all who carry most of the water but there needs to be class traders of Dean's who refused to award tenure Who start taking a hard look at the cost most of which are human and personal
Al cost and also the opportunity the fastest fast is zero to a billion retailers in history. There's a lesson here where Old Navy 80% of gap for 50% of the price and JetBlue 80% of Delta and American for 50 60 % of the prize give people 80% of something for half the price that is a great cocktail somebody is going to come into education with a decent brand maybe not a great brand and offer 80% of what most of us think we're getting in terms of certification education 450
Percent of the price I think so you ask me Health tech ed Tech in my opinion are probably the two biggest areas fintech is enormous, you know more about that than I do. I just think the whole system of cash and payments and contact us is going to be enormous. Unfortunately places like e-commerce Hardware Social are all controlled by Monopoly. So people come into my office. I want to go to work in e-commerce and like that's great. As long as you're going to work for Amazon. Don't fool yourself the going to work in e-commerce for any of these other guys is a good idea. They're
The shit kicked out of them too.
I mean, I guess there's some you know, like you mentioned Shopify in your book like there's some companies that have been Innovative and and people wanting to avoid the Amazon Seller ecosystem or signing up for Shopify instead kids are selling clothes on places like depop and Poshmark. So there's like up-and-coming competitors that will get acquired by an Amazon at some point. So like nothing is material now for Amazon Amazon could buy everything and it not even disclose it.
Okay. Amazonica by Airbus and Boeing
I'm with the cash they have on their balance sheet right now. So you're right and that's a good correction. The probably the most Innovative company the last 10 years in North America Shopify and it's an interesting lesson that when something becomes so dominant, there's opportunity to be the unco Le that business. So for example Shopify is basically the not Amazon Amazon Amazon partners of the retailer the way of Iris partners with a host. It doesn't end. Well for the retailer, right they say okay we get the data we get custody the consumer.
We get the branding we get the packaging you basically just get increasingly lower lower margin fees for us to take your product and put it on platform because we control every day we control more and more traffic online websites eCommerce sites are probably mostly going to go away Shopify comes in and says, okay, we'll give you the Great Taste of Amazon will give you fulfillment will give you a platform will give you infrastructure will give you a delivery, but you get to hold onto your data you get to maintain custody consumer you decide the packaging.
And boxing you decide what goes in the Box we are truly a service provider. We are a partner and they're even doing things like they they're going to do a partnership with Tick Tock where they might be able to provide with their service videos short-form videos that display your product if your small Surf Shop, I mean they are doing some just they might even Implement some sort of subscription fee or prime like feature built into Shopify that you can adopt this company, which is now worth more than Federal Express Simon properties and throwing deep.
She'll I mean an incredibly Innovative company the non Uber Uber or the non share share economy company that I'm very bullish on is Airbnb. They've said okay, we don't need they have an incredible mode instead of just having you and I could start a ride-hailing company in New York local Supply riders or drivers local Demand right hailers to start Airbnb you need local Supply people are willing to rent their apartments and you need Global demand.
Because 95 97 percent of the people in an Airbnb in New York tonight are from somewhere outside of New York and a lot of them are outside the country. Well, maybe not right now, but typically and this company I'm really impressed with them trying to they're putting aside stock for their hosts. They've decided they want out of the kind of the exploitation economy. That is what I would argue is ride-hailing and they're trying to start your hat. Why'd they still have some issues around housing stock and housing prices There's real issues, but I would describe their hat as being kind of Gray.
Which feels vanilla white or avarice wide compared to instacart an Uber. So I think Airbnb is going to be a monster. I think that's my next kind of big Tech. If you will, you
know, a lot of the industries are talking about are all have this one hidden word behind you right now, which is remote. So whether it's a telemedicine reset remote, yeah even education fintech all this stuff. So we're doing this podcast for instance Zoom. What's what happens to these companies today? I wonder if there's an arc where
Companies like Zoom start to intersect with media because there's no reason we can't be doing a show right here that we toggled as public and people could log in and be in an audience and watch it and then it's recorded and saved and people who watch later. There's no reason this couldn't be a whole network right here.
Well, okay. So all the all the home stocks took a beating yesterday, but they when people say they take a beating they were off, you know, they're down three percent off their two or three hundred percent games whether it's Peloton or zoom zoom.
So we took a beating because of a vaccine which may or may not be any
way right there. Probably is probably a decent opportunity to buy right now. But anyways, let's look at Zoom worth more than the US Auto industry. I think it's got about a hundred fifty billion. I mean, she's just staggering, right? Yeah. So where does Zoom go because if you're on the strata if you're the head of strategy for Zoom you like? Okay, we got a almost any acquisition we make as a creative so they should be calling every investment banker in the world and saying what do you have for me? And the question is do they?
A go horizontal into some sort of entertainment or do they go vertical into some sort of communications if I were to zoom I think about buying, you know, telefonica some of the like tier-2 telcos in Europe. I would try and solidify my position and Communications and really really stick out my elbows around frictionless communication, which is in their mission statement, but you know, I look at a company that's worth this much and I look at the revenues and I think okay, I don't see how
You grow into that valuation. I don't see how they do it.
Yeah, I agree. I mean they have 700 million customers, but they're not like I never have paid Zoom a dime. I use, you know some company account or whatever but there's like, I wonder if that's a good point though. They could start buying companies like twilio which has, you know, SMS, you know text agreements with every phone company in the world and you know start doing, you know allowing people to do more calling into meetings through something like a back end like 12
Leo yeah, well it even totally those got a 42 billion dollar market cap in this environment it's hard to find a public company to buy that's for
sure
Yeah, I wonder I mean even I was I was looking at AT&T right? I mean if you think about covid it's taken the winners and it said, where are you going to be in 10 years and there are discounts of back a record low interest rates which results in record multiples on revenues Enterprise Value. However, you want to talk about across the story stocks or the perceived winners or the perceived disruptors at the same time. AT&T is at a five year low, right? So mostly because of failed acquisition of Time Warner what?
It was a failed acquisition. So are there opportunities for someone like Zoom to go by Vodafone and say alright, we're going to take that ebit that customer base. We're going to integrate traditional phone service, you know should Zoom be the operating system or the Telco that does a deal with handsets. I don't know. I think Zoom the right now is zoom has such cheap currency to go. I'd be I'd be going shopping like crazy. Should they be buying
mercadolibre? Yeah, or what about an HBO?
Max and then you have to get Zoom to watch your favorite a be HBO shows.
Well HBO maximum by Time Warner owned by AT&T. Probably probably the greatest Fall From Grace and streaming video. This was the original gangster the luxury brand the Hermes. HBO was always about not what was on it, but what wasn't on it and HBO had greater trial across anybody when something came from HBO you assumed it was better quality. They created a culture that attract and retain the best talent and in the last two years or three years.
At the hands of AT&T they have absolutely fucked this thing every which way they have said, let's jump it up with a Big Bang Theory. Let's call it HBO Max HBO GO HBO now HBO Joey bag of doughnuts. And it's just so hard to tell what HBO is and whose slipping into that gorgeous brand positioning of curation less is more AppleTV plus with all vertical all original content. It has a great content so far, but they are stealing HBO's position and HBO has decided to compete on bulk.
Luke with Amazon and with Netflix and they don't have nearly the Firepower the budget so HBO will go down as a case study in one of the most flawed strategies. It has resulted in one of the greatest erosions and brand equity in the shortest amount of time. HBO was probably the premier streaming video platform just three years ago, and now they can't get people to sign up Disney plus has more Amazon has more Netflix has more
and also,
All the HBO shows are an Amazon and they can't really give that up. Like that's you know, Amazon's got a lock on those shows so I don't need to get HBO I got well I get HBO through Amazon
Prime. Yeah, it's maddening for me because I think of HBO I think of The Sopranos I think of anything with you know, the Larry Sanders show. I think one of my favorite shows six feet under I think HBO had some of the most the best moments in media history and incredible positioning is the luxury
Brand, they it cost them 75 million dollars to get an Emmy it cost Amazon 350. They literally had the best culture in the world for creativity. And then AT&T comes in and says, let's scale it and starts chunking it up with all this crap. It's just it's like brand Harris
know every I mean HBO was really making his biggest Arc in the 90s and the early owes because that's when you start having the Larry Sanders Show and The Sopranos and all those things. Yep, and it was like you say it was a great company culture. I work there then and all
Everybody wants to be. Oh, yeah for about 4 years. What did you do at HBO so I did all of their websites and then I convinced them. I convince Jeff yuccas to let me do original web shows just like they do original TV shows and it was a I had a I had an exceptionally fun job. I basically created my own job which was doing you know shows but that I would put on the web and then occasionally they were giving money to shoot as a pilot. So it was a different time. But what was great,
It was learning from I mean every executive at HBO ended up leaving to become the CEO of some other Media company like that was the training ground of all the executives of the entire industry. So for a while was it was the best and now it's like you say, it's just it's just a name now. It's nothing
but we'll talk about I mean just to give you a sense of how the pandemic is accelerating everything you had this very uncomfortable feeling an ally that. Oh big Tech is starting play in our sandbox in a matter of six.
Hans tech-driven media has absolutely feature arised Hollywood. Now, what do I mean by that LA and these companies Time Warner Paramount Universal it mean these companies were just tightens culturally economically HBO and overnight the tanks from Cupertino and Seattle have rolled in and Netflix was so much Capital that they basically feature eyes business. They feature eyes entertainment business and that is Apple is offering.
Six billion dollars of content for six dollars a month so billion dollars of content for $1 a month Netflix is offering a billion dollars in content for every 60 cents. They're gonna spend 20 billion dollars in content this year for 12 or 14 bucks and then quit be a standalone entertainment company comes in with you think one point six billion dollars great Storyteller Jeff katzenberg amazing executive Meg Whitman, but that comes down to they were trying to charge seven bucks that comes down to like
Four dollars or six dollars for billion dollars of content because no media company makes any economic sense anymore. Unless you have cheap Capital like Netflix, or you can monetize it by selling another handset or paper towels. So overnight the entire media ecosystem has become a feature to sell more of the core product of big Tech you taken what is what in the most robust impressive Industries in America and overnight mean everyone was saying will Big Tex coming for
us?
It was like it got
so late so early for media so fast these companies what the fuck does Comcast to Peacock? What is peacock Disney with unbelievable assets is flat over the last five years. One of the most incredible companies with unbelievable assets can't figure out what to do right now. Why because the deepest pockets in the world that can monetize content through other businesses that traded a much higher multiple are coming in and flooding the market.
With amazing programming that's a traditional guys just can't compete with economically. So we have an entire industry that has become a feature a big Tech.
Yeah. I mean, that's why I think there's so much uncertainty now, you know and uncertainty is always a poison for the stock market, but I think the stock market's living large on the stimulus which hasn't really been absorbed by the economy. It's like it's like one of those, you know things you eat which it never gets digested in the stomach this stimulus money that
Came in has never been digested by the economy and it just floats up into the stock market without being fully digested into the system. And then there's going to be another stimulus package, which is neither here nor there philosophically for me. Like I hope that people who are hungry get some the stimulus and can eat again. I mean they've been eating but you know, there has been a lot more poverty lately and I don't know I just don't know what's going to happen. I think it's I think the next year is going to be very telling and politically were so polarized that
Stretches people apart, you know in terms of the cooperation you mentioned at the beginning of the podcast just don't know what's going to happen.
I hope I mean, I'm trying I'm a little I'm like you you and I are brothers from another mother. I think we see things the glass is half empty, by the way, everybody claims to be an optimist without pessimist. It's a very dangerous world. You have to have people who say well have we thought through X you wish there had been more people who had been pessimists about the likelihood of a pandemic when Bill Gates was saying there might be a
A pandemic he got really low ratings on Ted because Urban like Jesus Christ that guy's a downer and you so you need pessimists, right? We need to we need to or realest whatever you want to call it. I do think there are some opportunity there. I'm very hopeful James around this election. I think that American voters 75 million of them have said yes to science again. I think we've said yes to immigrants are super power as a country our secret sauce and we're going to I think we've said yes in a weird way and I say, this is an atheist. I think we've said yes to Jesus Jesus started with love the poor. I
I think we were loving the poor. I think we're moving back to more. I think we said yes to capitalism capitalism is not organic. It requires empathy requires a certain level of redistribution of income or it does not work. I think we've really embraced capitalism and I think we've said yes to being a good man being a good dad. I mean, you're a father what the fuck you say about Trump to your kids. I've 10 and 13 year old boy. So you should the president is the most modeled individual for young boys in the world and hopefully young girls like what?
Were they supposed to model? So I hope we have illuminated Flair for the world to say be less nationalist be more Cooperative. I hope her maturing a generation. Everyone says gen Z and Millennials are such expecting jerks. I hope they look at us and say, you know, we need to stop arbitraging taking shit out of the earth and spewing shit into the air. We need to start arbitraging people who don't have a college education and get them to pay day loan with their car. We need to start really embracing the North Atlantic Treaty and join hands with our brothers and sisters.
Sisters in Europe, we need to learn from Asian nations in terms of innovation. We need we just need to get our heads out our asses and embrace science and Brace cooperation Embrace Brotherhood Embrace Sisterhood. So I'm I'm hopeful we're maturing a generation of younger people. I'm hoping that America has lit the candle again for other Western Nations to say that empathy the capitalism that loving the poor is absolutely back. We have opened the biggest can of stain.
Ever in the history of mankind. So I'm actually very hopeful I come off this last week feeling let me put it this way. I hate my life less and less every day
James. Well that is good news particularly from the author of the algebra of Happiness. Also, most recently the author of I was I was going to bring up the title to to make sure I get the subtitle
right hose Corona from crisis to opportunity
from New York Times bestselling author Scott Galloway, and it really is
Is the blueprint for how to think about the world where even if you agree with everything or you agree with nothing? It's a great blueprint to how to think about the world for the next year two years three years you break down all the parts of the economy the you know where we're going to need help where we might not and once again Scott, it's always a pleasure having you on the podcast. Come on again soon.
I appreciate that. Jim. Stay safe, brother. Thanks
Guy.
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