Scott Galloway Schooling Wall Street on Silicon Valley | Interview | Real Vision™

Scott Galloway Schooling Wall Street on Silicon Valley | Interview | Real Vision™


Amazon will be the most valuable company
in the world with him 24 months if not 12 anywhere Amazon competes if I was
gonna write a sequel to the four it would be called the one and it would be
bad Amazon show me chaos show me a lack of faith in institutions and I’ll show
you big point of $20,000 the White House takes on big tech its McGregor
mayweather part two and the redhead gets the shit kicked out of them hi I’m Nicola from data Trek research
right here in New York City and we’re doing a video today with real vision
with Professor Scott Galloway of NYU Stern and he’s got a bunch of really
great topics to discuss including why big text read get broken up as well as
his perspectives on valuation for everything from Amazon and Apple to
Facebook and even some Chinese tech companies so Scott you’ve got a picture
that you show I think the first day of class is it yeah every student that’s
ever been through your class yeah what does that picture look like and how does
it inform your thinking about technology generally sure so it’s it’s a tack in
the torso and the belief for the thesis is that the only way you can scale a
company to hundreds of millions of users and hundreds of billions in enterprise
value is to directly speak to an instinct that that regardless of our
subscription to The New York Times or graduate degrees we’re animals and to
really build a big business you have to know exactly what instinct you’re going
after so in order goggle is God and appeals to our need for a super being
our competitive advantage as a species is our brain is so large that we have to
literally be expelled from the body prematurely and the brain is robust
enough to ask very complicated questions but not robust enough to answer them
creating a void of 3500 super beings all competing to kind of be your favorite
your favorite your favorite God if you will unfortunately as we get more
educated or fortunately and more affluent as the society our reliance on
a super being and church attendance declines dramatically but our questions
keep getting more and more unanswerable if you will which creates a void for
more of an Information Age super being and anybody who has kids has prayed will
my kid be alright that’s a pretty common query and what is a prayer but a query
into the universe hoping there’s some sort of divine intervention that
processes the query that sees everything and then can return an answer that you
trust more than any answer you would get from any priest rabbi scholar mentor or
boss that is Google will my kid be all right
symptoms and treatment of croup if you don’t believe Google is your god
think of your name and your face above everything you have put in that dial
box and you’ll soon realize that you trust Google more than any other entity
it knows if you’re about to get engaged and knows if you’re about to get
divorced it knows your diseases it knows what diseases you’re worried about
having been exposed to so Google is our guide God moving further down the torso
one of the nice things about our species is that we not only need to be loved
kids with poor affection and good nutrition don’t have as good an outcomes
as kids with good affection and poor nutrition we need to love others the
fastest-growing demographic group in America centenarians we’re all gonna
have someone in our family who’s a hundred years of age and the three
signals of the likelihood of you making it to 100 are in reverse order number
three genetics it’s not as important as we as we’d like to think number two is
lifestyle and some don’t smoke don’t be obese you avoid a lot of early cars
carcinogenic and cardiovascular events but the number one signal whether you’re
gonna make it to 100 is how many people in your life do you love caretakers
literally the physical and mental strain and nuance of caretaking releases a
hormone that clears out the bad cholesterol and people who are taking
care of others get to stick around which makes sense because those people are
most important in the species moving further down the torso so Facebook is
love and I think it foot’s to our need to want to love others and catalyze and
strengthen first and second order to be relationships mostly with images and
pictures that create empathy moving further down the torso I think Amazon is
our consumptive gut it is drilled into us more again since we emerge from caves
the number one source of death across our species has been starvation so it is
drilled into us more more more open your cupboards open your closets you have
between ten and a hundred ex more than you need and is immediately washed over
by the instinct of yeah but I’d still like more the penalty for too much is
diabetes lethargy gluttony but these all these all these things have huge lags
and that penalty is a fraction of the penalty for too little which is
starvation so the economy that offers more for less is usually a fastest
growing economy that’s China and the company that offers more for less or
does the best job of more for less is usually the most valuable company in the
world and the nineties it was Walmart now accompanying that from a perceptual
standpoint offers the most for less is Amazon which will soon be the most value
company moving to our final spot in the torso the reproductive organs we
constantly make irrational decisions irrational in the business world means
large margins a lot of irrational decisions with our reproductive organs
this has resulted in a series of products in a category that has grown
more shareholder value over the last thirty years and even tech on a
risk-adjusted basis and that is luxury where we signal to other people that we
have good genes I have high cheekbones with Estee Lauder products which means
I’m less prone to infection that I Drive a canary yellow Ferrari meaning I’m
strong like bull and have good DNA these things have built more wealth more
billionaires on the Forbes 400 list if you take out inherited wealth and
finance then intact are from luxury wealthiest men in Europe Bernard Arnault
numbers two and three the signs of Inditex Zara and H&M Apple the iPhone is
now the easiest way to signal our people that you have good genes you can afford
it 268 dollar product would pay eleven hundred dollars for you live in a city
you’re part of the creative class this is the easiest way to say to someone
mate with me just as paying for dinner with a Discover Card or having ad
supported Pandora or an Android phone says do not have sex with me
Apple says I would be a good mate these four companies the peeling of these
instincts have added the GDP of India to the market capitalization since the
Great Recession the brain the heart the gut and the genitals if we google your
name the number one video that comes up and two and three and four and five are
all versions of the same message from you which is it’s time to break up big
tech yeah it’s a very controversial point of view because these are
companies at the top of the food chain so walk us through how you got to that
conclusion but as obviously you’ve looked at this for a long time
sure so wrote a book spend two years kind of marinating in these companies
and reading about them and trying to understand them and over the last ten
years work with these companies they’re my clients or there’s a couple of them
are and work in the ecosystem with some of the biggest companies in the world
we’re trying to figure out how to compete in a digital age and the book
really started as a love letter I think they’re incredible by the way I always
come use a lot didn’t know unruhe croissants a number-one recruiter
of kids my class at stern more people will go to Amazon than any other firm
that that recruits its turn they saved my ass economically in 2008 I got run
over by a truck economically and took what little dry powder I had and I
bought two stocks Amazon and Apple and it’s kind of restored economic stability
to my household so I love these companies I love the products I’m a
customer I have no intention of giving them up but I think there’s a natural
part in the economic cycle where through incredible execution a lot of luck
access to cheap capital we end up in a situation where one company has so much
power that smaller companies have trouble getting out of the crib and
competing and bigger companies are euthanized prematurely and I think we’re
at that point and we tend to look at it through the lens of well one is that a
socialist or a European thing there’s sort of this macho test
I remember feeling reticent I kind of knew that I felt that they had gotten
too powerful them should be broken up but I found myself checking those
emotions at the door because I liked that thing of myself as a dude and likes
competition and I’m an entrepreneur and I like the full body contact sport of
business but part of a natural economic cycle whether it was the railroads or Ma
Bell is occasionally you break a company up and you exceed the marketplace and
the object of every innovators affection Google would not be here if the DOJ
hadn’t moved in on Microsoft of 99 and said stop putting small companies out of
business like Netscape we’ve got we’d be all saying well let’s bang it right so
this is a natural part of the economic cycle they haven’t got anything wrong
either these are for-profit companies their job is to grow their earnings grow
their top line and create economic value and security for the families of their
shareholders and employees and they’re doing that in spades and every quarter
that is their sole mission regardless of their claims to do no evil or connect
the earth they’re there to grow earnings full stop so we have gotten to a point
where we have Google and 92% market share to companies Facebook and Google
duopoly on two-thirds of all digital marketing probably the most robust
business in the world Amazon is pre-installed into 62% of US house
80% of wealthy households no cable company no utility company has more than
15 or 20% and then there’s Apple which is the most profitable company in
history so I don’t think they’ve done anything wrong I don’t think they’re
evil I don’t think there’s anything socialist or European I think a key
component of our society in our economic cycle is to break companies up when they
get too powerful that’s part of capitalism you know the worst system of
its kind except for all the rest is that we need competitive markets and I think
the markets are failing I think there’s examples everywhere
whether it’s Amazon that can take the stock of any company down 30% in 30 days
with 30 press releases whether it’s this idolatry of these companies where they
get the mother of all hall passes where Starbucks has an unfortunate incident at
one of their stores and decides they’re gonna close the store now for for a day
on May 29th we’re training what our democracy has potentially been
subterfuge or weaponized by Facebook at the end of day what are they really done
and we accept it and how many advertisers have they lost they have 5
million advertisers playboy and pep boys have head to the door oh well right a
conservative commentator on Fox mocks a 17 year old which is terrible and she
loses a third of her advertisers because advertisers on TV have a lot of choices
but advertisers in digital have two choices and there are a lot of very
patriotic civic minded people who are advertisers who would like an option but
they don’t have any have anyone on top of the funnel its Facebook bottom of the
funnel it’s Google so in some you know sure they avoid taxes but we all avoid
taxes their job destroyers but we need job destroyers they’re not evil they’re
no less and more evil than any other company we break them up because we’re
capitalists and it’s time we are at that point in the economic cycle so stroll
down a little bit on that how would you break up a Facebook share of Google what
are the individual components look like in that schema Facebook I think is
pretty easy Facebook Instagram whatsapp a messenger and just to give you an
example I think a lot of these problems so I I think regulation tends to be
ham-handed inexpensive and creates kind of permanent government jobs so I’m not
I’m not actually in favor of regulation other than some basic laws and they
should probably be regulated as media companies meaning that
be sued for the content on their platforms but I think the ants are the
most effective efficient way to kind of unlock more value would be to break them
up similar with you know with Ma Bell what we found is when we broke them up
there was a lot of innovation including cellular technology fiber optics in Bell
Labs that hadn’t been unleashed because they didn’t want to compete with their
monopoly business so I think breaking these guys up probably Facebook into
four companies would create a lot of interesting innovation and opportunities
for example I think one of them would say how do we compete with the other
three guys I know let’s go to PNG let’s go to Unilever both huge companies very
civic-minded and say you know we’ve done we’re taking a bunch of our free cash
flow and we will guarantee you that our platform will not be weaponized by bad
actors I think that would be very appealing to advertisers I think one or
more of them would say you know what we have a CEO who can actually be fired
I think that’s attractive to investors and he got some tractive to employees
Castro took over Cuba when he was 33 and oversaw an island nation of 11 million
people and we were all freaked out and he was arguably the most powerful man in
the world because he lasted a half a century right just out living people
it’s a pretty good strategy if you’re a lot so who’s the most powerful person in
the world a lot of people say it’s Putin he’ll probably be dead or lose his
faculties and you know 15 20 years max we are cursed for a max with Trump for
another six and a half years Mark Zuckerberg could oversee a
community larger than Christianity 2.1 billion people for the next 70 years and
he can’t removed from office in addition getting into the head of this man this
is a guy that a year ago proposed a third class a share such that he could
sell his entire economic stake have nothing at risk and Facebook and still
control a population greater than the size of the southern hemisphere plus
India what could go wrong you know we need to break Facebook up into four
companies more competition more hiring more venture capital more options in
terms of advertisers less weaponization let’s bullshit delay an obfuscation when
senators get mad at them who clearly don’t understand technology and they can
just say we’re sorry or senator this is a serious issue and then
to say nothing breaking these guys up would create more in my opinion more
civic responsibility we better for the Commonwealth better
for our tax base better for hiring better for the planet
so two-part question after that so it sounds like you feel that breaking the
company up would actually create some shareholder value if a shareholder got
those four companies in their portfolio instead of just one is that accurate
yeah I want to be clear I don’t think there’s ever a quote unquote free lunch
I think in the short term these companies might lose their stock prices
might go down but I think there might be you might be able to have your cake and
eat it too here look at Amazon and AWS I’m not sure that if AWS has spun from
Amazon that the two independent companies aren’t an aggregate worth more
than the company is now so you know an eBay spun PayPal it was incredibly
accretive to shareholder value so I don’t entirely acknowledge right away
that you would be economically ruined it would be economically ruinous for the
shareholders but again having said that I don’t know if there’s a free lunch
here I can see the stocks going down the short run okay so let’s take that one
level further there I’m really intrigued by the idea because the question that
pops up in my mind is what US companies will compete with Chinese tech company
yep like 10 cent Alibaba and Baidu that have
an entirely different relationship with their government than these companies do
with us and our government and it seems that if we break those companies up
they’re not gonna have the firepower to build the AI the self-driving cars other
technology so who’s gonna step in the void and how to avoid just losing out
entirely Chinese tech so that’s a very compelling argument we need big football
players to compete against their big linemen right so the first the first
responses is that the right premise would Facebook Instagram whatsapp and
messenger in aggregate be better competitors and scarier against Chinese
companies than one and if you look at innovation coming out of China we in the
u.s. tend to be very narcissistic we think that basically all innovation kind
of stems from the epicenter of the world and that’s SFO International Airport if
you look at each of the platforms in China in terms of product rollout in
terms of innovation their companies are actually more innovative
and so I’m not sure I entirely buy the premise that these companies as
individual speedboats wouldn’t be more nimble and more powerful competitors
than then kind of big companies know but let’s for a moment assume they are what
you have in China is a glimpse into a little bit of a glimpse into the future
in that what happens when governments let companies kind of grow unfettered
and you end up with very valuable companies the question is is it is it
good for the ecosystem and a lot of people would argue it is because much
more now venture capital investment in China I would argue that over the long
term a group of small companies that control so much wealth and influence it
ends up having a lot of negative impact so just as an example I don’t think
there’s any way you can ignore the decline in the growth of middle-class
wages and the rise of big tech when you have one company with 24,000 employees
with a six hundred billion dollar market cap Facebook and then you have the old
economic Titans of yesterday would employ a hundred thousand no quarter of
a million people and have a hundred billion dollar market caps you have this
this kind of winner-take-all economy and a lot of people are saying well that’s
just a natural part of the evolution of our economy and I would argue no the
world isn’t what the world is the world is what we make of it and we’ve decided
to let these companies a gregarious great if you own real estate in San
Francisco it’s great if you own the Ferrari dealership in Portola Valley but
it’s not great for the middle class and it’s not great for our society China is
a totally different animal because there’s so many more I mean just the
echo system so much if in the distribution of wealth is so much
different but the question is alright if China is the model that’s you know
that’s who we’re competing against name a great global Chinese brand so they
have three companies now in the top ten in terms of market cap they’re
comfortable with natural or unnatural monopolies but long term what Chinese
brand name a global Chinese brand can you name one Huawei Huawei okay you
really think that’s a global brand you didn’t do any our teenage kids know what
Huawei is No do you use Huawei in your life and
your no way but I would say look at the other side if we had asked the same
question about a Japanese company in 1960 I think we would have gotten the
same reason we might get there a hammer son we ignore the Chinese the
Japanese threat you have to clean the auto industry because of exactly this
logic and we pay for it it’s a great point we didn’t have the Sony to have we
gonna have a Honda’s we don’t have the Toyota Toyota’s it doesn’t appear so far
that the Chinese have been able to take on any of our guys I’m not sure we talk
about them because they’re large market cap and the Chinese have been quite
frankly smarter than I would argue a lot of Western nations who openly and freely
trade with big tech so here’s the Chinese model come in just long enough
for us to steal your IP and then we prop up a local entrepreneur and we capture
the value domestically we call it IP theft they call it innovation we did the
same thing in the 19th or the 18th century with British and Irish textiles
if you want to grow your GDP faster than 5 or 6% a year your core competence of a
nation has to be theft and right now I would say that China is moving from a
theft driven GDP economy to an innovation based economy but make no
mistake about it Google come in long enough PNG come in long enough to
educate mothers not to let their kids pee in the streets the diapers make
sense that they’re there a signal of upper-middle-class and affluence and
then BOOM send in a local guy and that’s what they
did with Google and by the way are they the dumb ones who stuff there’s the
Western Way Italy went the Western Way let Google compete we’re macho let him
compete Western trade laws what’s happened to their ad agencies what’s
happened in their newspapers what’s happened to their tax base what’s
happened to their job base then look at China would Baidu and by the way how
many Chinese platforms have been weaponized by a foreign advertiser for
an adversary now you could argue they’ve been weaponized by their own government
but they haven’t weaponized by the foreign intelligence unit of another
nation but if there’s no democracy there’s no need to weaponize it fair
enough I’m not saying it’s the right system I’m saying economically I think
what you’re gonna I’m not gonna make a value judgment just make a prediction a
European nation or a Latin American Asian
nation is gonna go Chinese and they’re gonna say we’re Arab why and we’ve seen
what letting Google and Facebook into our ecosystem has done for our media
environment maybe we’ll just come up with something that looks very similar
to Google and prop up a local entrepreneur and capture the value
themselves we’re going Chinese because to date I think if you look at the
Western nations that have adopted these technologies and let these companies
come in unfettered yeah their consumers can search and point oh oh five five
seconds they’re connected to their friends in Europe but has it been good
for their societies because at the end of the day these four companies have
been the most efficient fastest vessels in the world of the transfer of wealth
from the rest of the world to the US and then from the middle of the u.s. to the
coasts so Charles Schumer Dianne Feinstein aren’t going to go after these
companies right but I do think you might see a smaller Western nation say like I
said we’re going Chinese but your original question around would these
companies be less able to compete with these Chinese behemoths
I don’t know I don’t know why you wouldn’t say that a group of smaller
companies all well capitalized keep in mind Instagram on its own it’s probably
worth 150 billion dollars so they wouldn’t want for capital to compete
some people would argue that the focus and not being in a corporate structure
might make them more nimble a lot of the companies that have been broken up have
gone on I mean when telco was broken up it unleashed unbelievable shareholder
value it wasn’t like you know China sell or Deutsche Telekom immediately seized
the US market because it was no longer one big competitor so I’m not entire
thing kits a decent argument I think it’s worth exploring what people who
have a much stronger background I mean antitrust and you know a game theory but
I don’t entirely buy the premise that they would immediately indicate that we
wouldn’t be as competitive okay thinking through how the trajectory of the
pressure to break up tech might shape up particular over the balance of the year
yeah we obviously had a huge catalyst with a Zuckerberg testimony up a couple
of weeks ago what do you see for the rest of the year what headlines perhaps
that investors aren’t thinking about you you think are unlikely to happen well
just as we don’t know who the Democratic nominee for president is gonna be we
just don’t know who’s gonna pop up we don’t know where I’m pretty sure
regulation or trust-busting is going to show up but it’s not going to be from
where we think it’s going to be the only thing that the hearings of Zuckerberg
really solidified is that DC doesn’t have the collective will or IQ to take
on big tech 4% of our elective elected representatives have the background in
technology or engineering it was on that ignorance was on full display even the
format let’s give everyone five minutes so Mark Zuckerberg and Facebook were
very smart immediately registered the flaw and in the glitch in the matrix and
said other idiots they’ve giving everyone five minutes so nod your head
respond thoughtfully and nod and say senator this is a serious problem
repeat the question pick one of 15 talking points if the second question is
difficult then say senator and look around thoughtfully and say this is such
an important question I’m going to have my team get back to you four three two
one gavel next question they employed the
oldest strategy in the world of sports burn the clock and they did it over and
over and over across five minutes you would think that our elected
representatives would be adult enough to get into a room and somebody maybe I
don’t know the Speaker of the House would say are the head of the head of
the Judiciary Committee who here raise your hand if you understand technology
one or two hands would have gone up and they said I know why don’t we let you
Bob and you Lisa maybe have six or seven minutes instead of having Orrin Hatch
who questions of sustainability the Facebook of Facebook saying how do you
survive when you don’t charge for your business I mean clearly this guy had no
idea what was going on or senator Nelson my senator from Florida who was just
fascinated by the notion that if he says he likes chocolate
he gets chocolate ads who would have thunk it right so the notion that it’s
going to come out of DC is ridiculous who would be I mean even think who in
the administration out of the White House can take on big tech what was
interesting with Donald Trump’s comments just a few weeks ago
or two weeks ago against Amazon Bezos in the post is that he unwittingly
immunized Amazon from regulation how was that came across as a partisan hack
attack it was ill informed immediately started with Amazon doesn’t pay its fair
share of taxes true but then went on to say they don’t pay any state taxes not
true they pay state taxes they don’t pay any corporate income tax because they
run their business at break-even so since the Great Recession Walmart has
paid sixty four billion in corporate income tax the Amazon has paid one point
four despite the fact that Amazon has been adding the value of Walmart to its
market cap about every eighteen months for the last three years so it came
across as ill-informed it came across as partisan which it is so immediately some
very powerful senators on the Left who were starting to make noises about
Amazon’s and growing influence if all of a sudden gone dark so he literally
alienated his allies and has immunized his company and then what did Bezos do
or what did Amazon to start feeding the media facts about everywhere he got it
wrong so in this war between DC and big tech so far the shaping up between Trump
and Bezos one of them is acting presidential one of them is president
this has been a his literally immunized Amazon ultimately unwittingly in
addition you’re gonna have the first pitch of the Washington Nationals season
2019 be thrown out by Jeff Bezos they’re gonna headquarter in DC because this
will serve as a prophylactic for regulation no one wants to regulate the
local guy he’s gonna be playing golf and mahjong with senators and congresspeople
and it’ll it he’s gonna like DC on fire there’s gonna be no momentum to go after
him so if DC or the White House if the White House takes on big tech its
McGregor Mayweather part two and the redhead gets the shit kicked out of them
this is this is not gonna come from DC where it’s gonna come from this one or
two places Brussels margaery vestige earth is going gangster on these guys
and you can understand why they register all of the downside of big tech
weaponization of their elections or platforms that undermine their elections
job destruction tax avoidance anti-competitive behavior but they
register a fraction and amp side we register a ton of benefit here
they do build it create a lot of high-paying jobs there the object of our
affection national pride they build these ecosystems
you know net-net we’re having an important conversation around the
downsides but net-net in the u.s. we’re we’re we’re winners from big tech in
europe all the downside fraction of the upside there are very few hospital wings
and university buildings in europe named after google or facebook billionaires so
this is stiff in the backbone of EU regulators you’re about to see europe go
get like like all the major conflicts of the 20th 20th century the war against
big tech is breaking out in continental europe the other nonzero probability of
someone who might go after big tech is a red state attorney general who says all
right missouri and kansas we have very powerful phones we have this great
search engine but has it been good for our economy is google hiring a lot of
people out of the university of missouri how are ad agencies doing how’s our tax
base doing and i think you might see a red state AG say look the fastest blue
line path between the attorney general’s house and the governor’s mansion is to
make a populist argument against big tech and go after them and if it
resonates a bunch of other AG’s will pile on in some sort of class-action
suit basically a redo of what happened in big tobacco so you could see that so
a red state AG or brussels DC it’s over it’s done facebook 1dc zero you know one
reason yeah i watch all your videos and read everything you write is because you
come across with these observations that at first blush seem way out there like
breaking up big tech but you have a really good track record of making
predictions that actually work out i want to start on that vein with probably
your most famous most topical one which was wholefoods yeah an amazon you know
can you walk us through how you got there because you were out there a week
before i think that acquisition was announced parrish wishers talking about
that exact transaction and it came to pass so can you kind of unravel how you
got there yeah so is 50% luck 50% timing and the rest was talent and inside it I
just got really lucky but it makes sense looking back at it because the only way
let’s start what’s Amazon strategy Amazon strategy is to own
all of your retail they’re not going after I mean you could argue they’re
going after the niche which is wealth they’re going after kind of the top top
median of households or the top half but they’re primarily trying to cover all of
your basic retail needs or most of them you can’t and key to intensity across
the prime relationship which is sort of their key if you will tactical strategy
as prime is intensity and what do we mean by intensity it’s affection and
it’s fluidity so if I if I can offer you great programs the marvelous missus
Mizell or things that were or transparent the create intensity of
affection for Amazon that’s key so we’ll spend four and a half billion dollars on
original content but I have to have I have to be selling you stuff not once a
month not once a week but two three times a week and the mother of all
consumer categories a large consumer category in the world is grocery you
can’t have an intense retail relationship with someone it’s like the
way to you know my grandmother you say the way to a man’s heart is through his
stomach the way to a consumers heart or see their stomach its food grocery is
the largest consumer category in the world US grocery it’s a seven hundred
billion dollar market you can’t be in someone’s house two three times a week
unless you’re in grocery so Amazon had to be in grocery in addition they’re
going on after wealthy households with Amazon you get five hundred fifty
well-lit well staffed warehouses slash distribution centers in the wealthiest
of codes in America and not just as nine women can’t have a baby in a month
Amazon even with all the capital wasn’t gonna be able to build out DC’s in
Manhattan in Costa Mesa right in in trying to think of wealthier and
Buckhead Atlanta I’m trying to go wealthy areas also the growth in
groceries in the long tail CPG actually people are spending more money on food
categories but the top hundred brands and CPG and food 90 of the hundred have
lost share and it’s because I’m sorry ninety one hundred of lost revenue
two-thirds of lost share it’s because we all want we used to want Dan and yogurt
then we want a true Bonnie now we want some kefir curdled thing that we saw
Beyonce likes out of some place in Brooklyn the long tail I saw the growth
so warehouses grocery incredible distribution among the
wealthy the longtail all for what was going to be a two percent Aleutian boom
it would be stupid not to acquire this company so this one just made a ton of
sense and then the luck part was I happen to be in media yes spouting off
the week before and then the week a week later they announced it so that was just
a lot of luck no but it helps really frame the discussion about how you come
to the conclusions what I’d love to do now is talk about some of your 2018
positions a lot of which already begin to work so I also want to get a sense
how much more is there left out story yeah so let’s start with one that really
speaks to me Amazon versus Apple a very simple
comparison sure which one should have the bigger market cap yeah well you are
an Amazon yeah Amazon will be the most valuable
company in the world within 24 months if not 12 anywhere Amazon competes if I was
gonna write a sequel to the four it would be called the one and it would be
about Amazon look at where Amazon butts up against the other four in search
which is an incredible business and Google it continues to own it but
there’s an e ship search that is really powerful product search understanding of
being able to bid on keywords from people looking for a car or a watch is a
great keyword and gets a lot of revenue Amazon is now number one in Product
Search and has been for a while and is actually growing pretty fast so Amazon
is building this incredible search business their Media Group while small
only four or five billion is now growing faster than Facebook or Google so in
media you would argue where they bump up against Facebook or Google they’re
actually doing as well or better than they’ve done in a while whether it bump
up against Apple and Hardware the most innovative hardware company in the world
okay still Apple most innovative hardware products of 17 and 18 or 16 was
it the watch was with the iPods no it was the it was Alexa by far the most
disruptive product in our economy since the iPhone who is that it’s Amazon well
let’s talk about streaming video and streaming media
well that’s Apple right that’s iTunes actually Amazon went from number seven
of share of primetime streaming to number three in one year and are now is
now the second largest spender on original television content in offline
retail right Amazon we knows the dominant four
it’s an online retail 45% of the most valuable channel in the world
Amazon 45% a third of the fastest-growing most profitable sector
in technology in the world cloud Oh Amazon offline retail who’s the number
one share there a grower there no it’s not Walmart it’s now Amazon with Whole
Foods so you look at this company and they are firing on all 12,000 cylinders
and then long-term they have the ultimate gangster strategy and that the
market doesn’t seem to want or need them to be profitable meaning they have a
cost of capital no one else can match at the end of the world at the end of World
War two the Germans had better soldiers better morale better tanks better
machine guns but the Allies had cut off their supply routes and we have 38
gallons of gasoline for every one they had so we would take our inferior
Bradlee tanks and zip around one Panzer until we ran out of gas and then go
start banging on the thing with a hammer until became unbearable for the people
and then they come up when killing or taken prisoner Amazon is the company
that shows up with 38 gallons of gasoline if I said to my clients who I
work with fortune 500 companies you don’t you can work at breakeven for the
next 20 years and your stock will go up they could be remarkably innovative so
the number one core competence of the most valuable companies soon to be most
valuable company in the world is storytelling which is created
unbelievable vision in this romanticism and this fanaticism around the company
that has meant they have a hundred or 105 cents on the dollar to everyone
else’s ninety 80 or 70 when they invest Amazon is gonna blow past Apple Apple
and unbelievable company will be for a long time but Apple has been hovering
around 900 billion when Amazon was a two hundred billion I said it was gonna be
the first trillion-dollar company it’s now at 650 it has to go another 50
percent everyone looks at the metrics the the key metrics around Amazon or
most stocks is EBIT growth there is no you better than growth it’s not its
competitive advantage and when Amazon starts going from 13 and 15 hundred
dollars per prime household and using things like ring and Alexa and starts
going to five six seven thousand dollars for per household with artificial
intelligence the markets gonna go crazy and take this
thing over a trillion dollar so yeah most valuable company in the world
within 24 months is Amazon perfect next one which again already started to work
Facebook you said Facebook stock would peak we saw a peak about of $190 a share
in January before the troubles broke down yeah how do you feel about Facebook
now yep more trouble to come actually in
Facebook right now in the short medium term is a buy so the prediction was that
Facebook stock would peak due to multiple contraction as the specter of
regulation would enter and I think we got that right or it looks like we got a
ride it’s performed it hasn’t performed as well as some of the other guys but if
you look at the stock relative to its underlying business and this is what I
wasn’t expecting people are outraged by what’s going on and where do they go to
express their outrage Facebook and Instagram 5 million advertisers seven of
left there’s the business every every single signal I see is that the business
has never been stronger meanwhile the other guys are going up 20
30 40 Netflix up 60 80 % Amazon up 40 50 % Facebook has taken a breather because
everyone believes all this this huffing and puffing it’s gonna have an impact
all the scrutiny all the anger is people stamping their legs on cement floors a
little bit of sound no movement the stock is a buy in the
short of the medium term long term I’d like to think this might be idealistic
that tone-deaf management that is has really poor judgment in my view they
might be geniuses but shows a total lack of leadership I’d like to think that
comes back to haunt you also in terms of how robust a business it is ninety
ninety-five percent of their business comes from top of the funnel advertising
amazing brands and apps but probably a less robust business and the other guys
you could argue all the other guys have businesses there’s somewhat separate
from it YouTube it is a search engine but it is a little bit different than
Google that’s core search engine Apple probably has three or four public
companies Amazon has totally non related businesses making very robust
Facebook is doesn’t seem as diversified and has a 33 year old to my mind makes
an African dictator looks thoughtful in terms of his view of the world his view
of what it means to have responsibilities in power
I think this to class shareholder system is a terrible idea and I think most
recently with both he and Cheryl retreating to the caves of Conda Harr in
the face of crisis outs them as being really weak leaders Disney fit what you
call the fifth Horseman yeah explain what that means what it means for the
value of the stock so I’m not supposed to make stock predictions so I say the
fifth Horseman is basically my covert way of making a stock bike for the year
January 2017 I said the fifth Horseman was gonna be Netflix I saw it as the
operating system for our the second most valuable screen in the world which is
our television that was a great call yeah I got again very lucky but it’s
skyrocketed right so January 1 I asked what’s the fifth Horseman
and I think that the marketplace is ready for kind of a gangster move by an
old economy company I think the only company capable of a fat bundle right
now in terms of media is Disney and with their acquisition of some of the Fox
assets they’re the only old economy company that could go up against Netflix
and Amazon and offer an ad-free bundle of sports kids content you remember
let’s call it Disney prime or Disney flicks you get access to our cruises our
theme parks on on busy days you get Star Wars 7 days before anyone else in your
home I think Disney you get commercial free Disney and Pixar kids content
I think Disney is the only company that could be a viable alternative to to
Amazon video or more importantly Netflix and create the kind of the mother of all
recurring revenue prime like relationships now they would have to
pull an Adobe move and take their their revenues and profits down but I think
Bob Iger is one of the few people who has the credibility to do that what I
would love to see what I’d love to see is if the Time Warner AT&T merger gets
called off which it won’t but if it was to get Jeffery bukas and Robert Iger in
the same room and get Disney and Time Warner assets to create the ultimate
bundle I think that would be really exciting
and a lot of fun but Disney on its own I think Disney’s well position to do
really well yeah it’s amazing his Netflix is about 140 billion dollar
market cap this is about a hundred and fifty billion dollar mark yeah yeah so
if what you say comes together there is a lot of potential energy in that stock
that can be unleashed right yeah and just for your viewers before
they start think I’m some sort of like you know
Nostradamus terms of stock I bought Netflix at 80 bucks a share
it dropped to 70 I sold it it then split seven for one and I think it’s gone up
thirty or forty fold since then so I get it wrong all the time around stocks
maybe you’re just willing patience yeah there we go thank you thanks for that
let’s talk about Twitter and snap because you got some pretty interesting
thoughts there yeah so I I think I do think again going back to the Zuckerberg
you know to class shareholder stock I have been very critical of Twitter I
think a part time CEO is ridiculous I think it’s almost impossible to keep
talented people when you say to them at the end of the day that this guy at 30
hours a week is more talented than you at 60 hours a week and you’ve seen you
know just an averaging of talent their twitter has become more and more
relevant they have become such a part of the National vocabulary I can’t think of
very many brands that have a banner across almost every TV program every
news program they pop up the Twitter logo Donald Trump is if the president
has made Twitter much more relevant the issue for Twitter is just Twitter become
like the New York Times or the BBC or PBS negative hugely relevant
organization that never creates a lot of shareholder value so it’s an incredible
vehicle I use Twitter more than any other social media platform more and
more relevance poor corporate governance shareholder
returns have been okay the last year but weak the three years before that
it smells like an acquisition of me it feels like it feels like it’s gonna dip
to 25 and it get bought for 40 bucks snap in my opinion is the walking dead I
know kids love it but and again this goes to the power or the abuse of
monopolies one company owns the four most trafficked or used apps in the
world that’s Facebook and they have all in a coordinated attack turn their guns
on number five snap we were all hoping Snap would be the
face with a video we need a third player the Facebook of video is Facebook
specifically Instagram stories so I think you’re gonna see the oxygen start
to suck out of the room for snap there’s a lot of players whether it’s Google or
someone else that would love to own snap and I think it’ll be acquired who’s the
ideal buyer of these assets who could make the most of them particularly in
your framework of a big tech getting too big who’s them right not just the
highest paying buyer who’s the right buyer well I think Google’s probably the
right guy for both of them whether that just creates more problems so this isn’t
this isn’t an argument around what should happen it’s an argument on what I
think will happen I think these guys are both gonna get taken off taking off the
table yeah so you also had a lot of really interesting thoughts about crypto
currencies and their effect on financial services yeah so let’s do the financial
services side first you have said that it could take as much as a third of
value you know out of very large well known financial services companies yeah
and it could happen in friendly in the near term can you walk us through that
thinking sure I don’t know if it’ll take a third of the revenue I don’t know if
it crypto to me is beginning to feel a lot like an incredibly hyped technology
that’s gonna let a lot of people down it has all the makings of for lack of a
better term a bubble but there will be a lot of innovation and interesting
announcements around crypto technology over the next 12 months because so much
venture so much human and financial capital are being poured in to try and
figure out really cool things to do with the blockchain right so the basic
narrative is is Bitcoin is speculative I see OSR fraud but the underlying
innovation is blockchain and every VC that wants our company corporate VC unit
that wants to invest in this stuff is investing in the blockchain so you’re
gonna see a lot of interesting cool technologies that threaten ledger based
businesses I spend what feels like a half an hour a day approving wires
because fraud has gotten so bad and supposedly the blockchain is going to do
away with a lot of that so even if these can one of these companies manages to
get just ten basis points of share in the wire industry or in the money
transfer business overseas or credit-card feed transaction or whatever
it is block 10 is going after the market is going to get very excited
about crypto and blockchain and companies and very upset about
traditional financial services so a lot of times the disruption is a
self-fulfilling prophecy so Amazon acquires whole foods and the stock of
Kroger the largest pure-play competitor declines 1/3 between the time they
announce the acquisition and when they close it because Amazon is buying a
company 111th the size of Kroger there would be it would be impossible for you
whereas a Kroger consumer to know that Amazon had acquired Whole Foods it
didn’t change the business at Kroger but the perception of the oncoming
disruption took the stock down a third so will will crypto and blocking
blockchain technologies damaged or hurt the financial services industry on a
tangible business level I don’t know will they create a lot of havoc let’s
say the Americans in Southeast Asia are we gonna win the war no but we’re gonna
chop a lot of napalm blockchain is gonna drop a lot of napalm on the financial
services industry and damage it regardless of whether they win or not
now tie that into perhaps where you see Bitcoin going but there’s one of your
predictions was Bitcoin was gonna drop you to the percent yeah check the box
that worked out great yeah as you said it would if you had to do a prediction
now for the next 12 months yeah what’s your thinking so I made two predictions
one was that it would drop 50% and that happened within three weeks but the
other prediction which is a little scary as I said it would also go past 20,000
dollars because at the end of day and by the way I block chain I don’t I don’t
claim to understand it I’m shrill still trying to figure out ripple I’m just ill
trying to understand these coins as far as I can tell
I think Bitcoin is a is a proxy or for chaos and that is as young people lose
lose confidence in our institutions that trend that bubbles up to the Fed a loss
of confidence in the Federal Reserve and the ultimate signal of trust in our
economies is our currency the dollar at the end of the day is an indication of
trust in our system or the value we put and what is a fiat currency right
so when people start to lose faith in their institutions
I think they turn to this non non non institution backed non Federal Reserve
length non-sovereign linked currency that is Bitcoin so on the evening we
were about to see torque in within thirty thousand votes of seeding in the
Senate a pedophile Bitcoin started to rally and then when it became clear he
was gonna lose Bitcoin dropped in price so show me chaos show me a lack of faith
in institutions and I’ll show you Bitcoin a twenty thousand dollars so my
prediction around Bitcoin going to twenty thousand is that this at some
point over the next twelve months young people are again gonna see actions
on behalf of our leaders they create a tremendous amount of our tremendous lack
of confidence in our institutions and Bitcoin will skyrocket again and hit
twenty thousand so I got it half right we’ll see about whether it hits twenty
thousand this year or not well thanks so much for taking the time thanks for
having me great thank you well I hope you enjoyed the discussion as much as I
did because I thought the professor’s comments about everything from breaking
up big cap tech the direction of Apple and Amazon and Facebook over the next
year and particularly that discussion of Bitcoin at the end discussing where it
might go and what might drive that particular asset was fascinating hope
you enjoyed it this is Nikolas for real vision you

66 thoughts on “Scott Galloway Schooling Wall Street on Silicon Valley | Interview | Real Vision™

  1. great interview. Galloway is knowledgeable…

  2. This guy is a dangerously effective speaker..

  3. Bada Bing!

  4. "Cursed with trump?" Lol ok bud

  5. Scott predicts the future better than any hedge fund manager I've ever seen. 10/10 guest.

  6. is the IoT the homunculus? shared instrumentation as sensory & motor cortex?
    who plays the role of corpus collosum?

    the brain is fractal. as money continues to go fractal – so the state and its corporate models will be forced to decentralize.

  7. Teenagers in Europe and Asia already know about Huawei. North America is the exception.

  8. This guy's just intelligent enough to labor under the misapprehension that he is a genius.

  9. This guy could be brilliant and correct about everything but I was repulsed by his demeanor and didn't watch entirely. Totally a gut reaction on my part.

  10. Long time fan guys and I'd love to come on and talk blockchain. But I feel so many guests have no idea what they are talking about in regard to the tech.

  11. I must say, I don't think it's time for the government to step and and break up these companies – but he does make a pretty compelling argument.

  12. no need to break them up. decentralisation and the race to zero marginal cost will take care of them. coming soon to a centralised platform near you. i'll take bets to the contrary.

  13. I cringe every time he says Google is our…. I'm hoping it's more of a metaphor…

  14. He has good insights and thoughts but this has been his packaged spiel for over 2 years. Doesn't take away from message, bu
    t his message is now a sales pitch for his own books and speeches.

  15. I chose not to watch the entire video. I started to tune out when he said that iPhones are more attractive to women. I don't value sweeping generalizations like that very much. I'm guessing this genius owns an iPhone…

  16. The prediction on the dollar and bitcoin. Infers that precious metals will rise.

  17. I guess I'll have a short life after all.

  18. thought provoking….good show. not sure what i think about him yet, will look more into his work.

  19. I'm grateful that we operate under the rule of law, not the whim of a marketing professor. There's no legal precedent to break them up.

  20. Japanese companies had to get into western markets to be big. That's not true for China. As they wrap up their industrial revolution and keep shifting to a services economy, they'll be their own largest market. We may only start hearing about Chinese brands once they've already pulled well ahead in the overall race.

  21. Genetics are by far the most important factor in determining your lifespan. I can't believe Scott said otherwise.

  22. Amazon is not a company. Amazon is not a business. Amazon is a thief, a disruptor, a confiscator like counterfeiters versus real gold and silver. Amazon is a fake company, not a real company. Amazon is a fraud, a fake. So is Facebook, Netflix, and Google. Is Facebook, with 10,000 employees worth TEN Ford Motor Companies with 200,000 employees? No. This is a fraud, promoted by the counterfeit currency. Ten thousand employees are not worth 2,000,000 employees at Ford. Reality is grossly under valued. Fantasy is grossly over valued by counterfeit currency. Facebook is due to a fall as well as Amazon, Netflix, and Google. You are so wrong, so fucked up, so lied to. Get off the drugs. Reality is more valuable than fantasy.

  23. Still cool to diss Trump? I doubt this talker could do any better.

  24. My child's day care mother has so much more character and reality than you do. You are such a deluded, fucked up, sad sack human being. Get out of your fucked up fantasy life. Get a real job in the real world. You fucked up fantasy people need a reality check. Amazon is a fucked up Nazi company stealing wealth from others. Pirates get wealth but is that the way to life? No.

  25. We've all become Jews, media story tellers, fakers, living in a fake world. It's due to our fake economy of fake currency, bankers lending at 10x deposits. We are a cancerous fake economy where banks get 40%, 240%, 2,400% in a fake counterfeit currency economy. This is a fucked up rigged lying cheating economy. These FANG stocks are utilities not companies. Regulate or nationalize.

  26. 🔥🔥🔥🔥🔥

  27. Nostradamus said…the yellow race will rule.

  28. "The One"

  29. Last year he said Amazon would loose 1/3 of its value this year. Not a great economist.

  30. I get your point, but Google in place of God? My dialogue with God isn't just search bar questions and answers. People have made money and themselves their own gods and is contributing the degradation of our society. Why is everyone so anxious and depressed? The absence of God.

  31. People who say this guy doesn’t know anything should look up a little more info on him. He has a very good ability for studying the market and come up with competitive strategies. He has opinions, as everyone, and he has the right to express them. If you don’t agree with him fine but don’t insult him by saying he doesn’t know anything or is clueless on the topic.

    Scott I hope I can hire you for my company´s board someday.

  32. The part of Bitcoin being correlated to confidence in our government and institutions is scary…cuz our government is looking pretty raggedy right now.

  33. Did anyone notice the creepy clown in the first second

  34. Great interview!

  35. A naive fool who thinks Google was born because the DOJ stopped internet explorer

  36. Great conversation, thanks Real Vision.

  37. LOVE THESE INSIGHT… great interview 🙂

  38. im surprised at the lack of coverage on microsoft, particularly when Scott made the comment on AWS and as a separate entity may be valued more by the market. Microsoft is positioning itself to be the dominant player in web based cloud services and blockchain infrastructure.

  39. Scott Galloway is one of those person I follow very closely and eagerly.

  40. Well said. Spitting facts

  41. The only issue with Scott Galloway is that he is only looking at just the economics in the US.

  42. Another useless professor that couldn't hack it on the street

  43. It's incredible the clarity and confidence in all the controversial topics he mentions. Amazing Scott, please keep sharing your point of view.

  44. 26:08 "one of them is acting presidential and one of them is president" that's awesome!

  45. 3:45 but did they control for gender? because women are caretakers and live long but that doesn't imply a causal relationship

  46. Apple beat Amazon to become the world's first Trillion Dollar Company….

  47. He talks fast enough so you don't get a chance to stop and say, sorry but that's fucking bullshit.

  48. Hope between May and September he's figured out that crypto will disrupt not just the finance sector, but every sector, including the tech giants he suggests need disruption.

  49. I have a Huawei…

  50. Huawei is not a global brand?? Lol might regret that comment. This guy is clearly knowledgeable, but seems to suffer from over confidence in his own opinions. Lots of predictions, not a lot of humility, dangerous combination.

  51. He is american-centric. He has no idea what is really going on in other continents.

  52. Absolutely brilliant insights from prof. Galloway!

  53. Pseudo intellectual babble.

  54. I am doomed. I have one person I love who doesn't speak to me because I am a heretic of Jehovah's Witnesses. I am emotionally disconnected from pretty much everyone even though I demonstrate love often.

    Yet, I don't feel it in return. People like me because they like how I give. No strings. That said, I spend 85 percent of my time alone and on the internet. Don't judge harshly if I become suicidal again.

    Cheer for my freedom from anxiety – however it comes. Thanks. I know there are believers out there. Suicide works.

  55. Very good interview

  56. May God intervene mightily in Scott Galloway's life and may the Lord Jesus be a revelation to him for a testimony

  57. It's been a while since i have seen a good interview. The interviewer is patient enough to listen to him. Scott's just as good as ever.

  58. I heard this guy a few times and really liked his analysis then he says the USA is "Cursed with Trump" then all his credibility disappeared

  59. Spectacular

  60. I thought this interviewer was noticeably fantastic and Galloway is one of a kind as always.

  61. I'm sensing a pattern here. Every New York management speaker likes to talk about problems in Silicon Valley but gladly excludes bad valuation by the wall street. For a growing economy you need harmony of both worlds, right investments and powerful innovation.

  62. A bunch a guys that effectively take a bunch of inheritantly worthless paper to invest in real grinders of technology. Wall st, the biggest scam no one knows about

  63. genius!

  64. This guy is wrong on so many levels, I fear he drank the koolaid and thinks far highly of tech. First likening Google to God is pathetic; I suppose 50 years ago he would have said the same about the Dewey decimal system (not a well thought out argument but sure cutesy and edgy to get the attention of the small brain). Amazon is a joke. Amazon makes money by working with government both domestic and foreign selling your privacy. The core business of selling goods has never made money and never will. It is allowed to exist becuase it sells your privacy and that is power. Amazon is the government, it is not a private, capitalist company. Crypto has a place but also will be regulated, Bitcoin has ways wanted to be regulated and an investment banking product, how do we know this? The winklevoss brothers have said as much. This is your typical academic that is just being edgy. Ideology will always trump technology. Biology will trump texhnology. He was absolutely incorrect about genetics, as a scientist that takes no effort to disprove but having loving relationships is absolutely necessary for cortisol maintenance among other things. He is your typical arrogant professor but he has to be, it is part of the job. This is interesting and I appreciate his faith in tech a which really is a faith in data not technology. These companies do not create new things just updated versions of old ideas. There is nothing new about a ledger based monetary system (crypto), nor Facebook (private schools had a book called Facebook that showed pictures of students, house, name etc), of course Google is a complex dewey decimal system. These are not new. They are updated, old ideas. New technology is quantum computing, graphene, 3D printing, bioengineering etc.

  65. This dude is a joke, yea made a lot of money, and good for him and his family. But he is a pretender.

  66. my teo cents: interviewer is really good, ask simple question, and shut up, let interviee talk, thats very good. Second, he made it wrong with Huawei, why? bec he is American, and Huawei business in America is less than 5%. Huawei doesnt need business in America, has the whole world, 190 countries, etc.

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