The last time he was on Recode Decode, hosted by Kara Swisher, Scott Galloway predicted that Amazon would buy Whole Foods. Turns out he was right! This time around, he says Amazon should by Nordstrom. He also boils the four big companies — Google, Amazon, Facebook and Apple — down to their essentials.
You can read some of the highlights here, or listen to the entire interview in the audio player below. We’ve also provided a lightly edited complete transcript of their conversation.
If you like this, be sure to subscribe to Recode Decode on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.
Kara Swisher: Today I’m back in New York City and I’m delighted to welcome back to the show Scott Galloway, the psychic, who’s also a New York University professor and founder of L2. When we last spoke, he casually predicted that Amazon might buy Whole Foods and then less than a week after we published that interview, that exact thing happened. We have a lot to talk about since then, including his first book, which is called “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google.” We have so many other companies to talk about and branding issues. Scott, welcome back to Recode Decode.
Scott Galloway: Thanks, Kara. Thanks for having me.
No problem. You know, you’re the most popular podcast we’ve had going on. He beats Kevin Systrom. You beat Tim Ferriss.
Yeah. I think that’s an incredibly disparaging statement to your other guests, but thank you.
In any case, let’s talk about what we talked about the last time. We ended up, really, in a wide-ranging discussion about brands, which I think is the basis of this book that’s coming out.
It’s coming out when in October?
October the 3rd.
But you can preorder it on Amazon.
Thank you for saying that. Yes. You can.
Mostly just Amazon.
What a thrill. You can preorder it. Yeah.
All right, so let’s talk about the prediction you made on the show, which I thought was interesting.
Which was out of nowhere, really, that Amazon would buy Whole Foods. There are so many other directions you could have taken Amazon in. A lot of people thought you knew about it, that you were part of the deal.
Yeah. I got a couple of calls, including one scary one from an agency asking, “Hi. We’re just calling, but how did you know this?” It’s better to be lucky than to be good, but in retrospect it seems fairly obvious. A company is trying to build a cable pipe of stuff into the wealthiest households in America and create intensity. A key component of intensity in a relationship is making it fluid, not episodic.
It’s very difficult to have that sort of intense, consumer-like relationship with a household if you don’t tap into what is the largest consumer sector in the world, grocery. It’s a $150 billion, and then the hard part about grocery — from those of us who remember WebVan — is the last mile. What Whole Foods has done is create 550 flexible, well-lit warehouses in incredibly dense, wealthy neighborhoods. The fastest way for Amazon to get from not A, but from B to E is to buy this company.
To buy these and they’re all spread out in the exact locations they want and people are willing to go there because it’s a pleasant shopping experience.
They bring life to long-tail brands, which are all the rage, where all the growth is. It’s a company that has figured out or is starting to figure out the last mile. It’s a great brand. They could shut them down and use them as warehouses and I think justify the price.
Right, which you said at the time.
People say, “Well, the largest acquisition to date before Whole Foods was less than a billion dollars,” but as a percentage of their market cap, it was about the same.
You could argue this wasn’t the biggest acquisition.
This was about the same size.
In buying this, what’s interesting is this idea of the last mile because I didn’t buy groceries from Amazon. I could have, I suppose, but I did drive to Whole Foods or I do drive to Whole Foods, which is … there is like three in my neighborhood.
Along with Safeways and other grocery stores.
Yeah. Whole Foods is a pretty good indicator of wealth, and I don’t know how many wealthy pockets there are, but the 550 stores I think that cover probably 60 to 70 percent probably of household income above of those households that have over 90 or 95 percent. I think it’s genius. I think it is going to be to Amazon what Instagram was to Facebook.
Well, think about what we’re going to have here.
Amazon is not only the fastest-growing online retailer. It’s about to become the fastest-growing offline retailer.
Which Whole Foods has been.
Whole Foods had hit a bit of a wall. It was operationally considered not a very well-run company. A fantastic brand, fantastic merchandising, but operationally kind of weak. Amazon, the word is, is pretty good at that stuff.
Yes. I’ve heard.
Although a lot of people in retail say that they’re going to find supplying stores harder than they’re used to, but I don’t know. I think these guys are going to figure it out.
I don’t think so.
I don’t think it’s that hard.
Yeah. Interesting. Would that make them move into other areas or just be cheaper for rich people? What’s the choice there?
I’m not sure this is good for society. It’s not. It’s going to be …
“Now I get cheap kombucha!” Along with everything else they get …
Yeah, it’s going to be great. That’s right. It’s going to be great for wealthy households.
Because rich people can’t catch a break in this country.
It’s going to be great to live in urban centers where two-thirds of the economic growth is anyways. I mean, so many moons line up around why this is such a great idea and one of the most interesting things about it is the market agreed and basically paid for the acquisition with other grocers’ money.
Amazon announces it. Their market cap goes up by more than the purchase price and the market cap of competitive grocers goes down, so basically the market said, “Amazon, we love this idea so much, we’re going to make your competitors pay for it.”
And become weaker. What do they do next? What is next for them? Make your next prediction. We’ll make a lot of predictions today, but what do you think then happens? Is it they’re going to digest this and it’s a big acquisition?
They have a great management team, but still it’s limited in its ability to do too many things.
A couple of non-important and some less non-important predictions around Amazon because they’re fun and they catalyze a lot of thought, and I hear from a lot of people on Twitter telling me how wrong I am, but in terms of a possible next acquisition, the logical one would be Nordstrom because it would be cheap. It’s in Seattle and they are clearly …
Right, and they know each other well.
They know each other well. They’re operationally very sound. It’s a great company.
They’re customer-service oriented.
They’re trying to establish relationships with high-end brands, which they have been unable to do and Nordstrom has those and Nordstrom has a lot of credibility and a lot of wealthy households have a Nordstrom credit card.
It would get them, just as Whole Foods has taken them from B to D or E in grocery, Nordstrom would take them from B to D or E in fashion apparel.
How many stores does Nordstrom have?
That’s a great question. I don’t know.
A lot. A lot, but in the right places. They certainly are.
Oh, yeah. It’s kind of the same thing they do and they do a great job. Now, what I think, though, the bigger prediction — and I’ve been saying this for a while and I’ve been wrong — is they’re going to want something, call it Prime Squared, where they’re basically going to use artificial intelligence, your credit card, a fulfillment network and Alexa to just start sending you stuff. We talked a little bit about this the last time.
Right, the box. Yeah. Explain that. Explain what you meant.
Well, they’ll say, “Hey.” They’ll probably do it in a college town where everyone has a smartphone, everyone loves Amazon and everyone has broadband, and they’ll say, “We know a lot about you and you like us and you trust us. So sign up for this and we’re going to start sending you two boxes two to three times a week, and one of those boxes will have the stuff we think you want, and one will be empty. You send what you don’t want back in the empty box, and we’ll pick it up, and then you’ll manicure using this great thing we have all over your house called Alexa. ‘Alexa, barbecue for six people on Saturday. Alexa, I’m leaving town for 10 days. Alexa, I want Lagunitas IPA versus Stella Artois. Alexa, send me four quotes for auto insurance for a 2014 Toyota Camry via email.’”
They’ll do this and they’ll get better and better at it using artificial intelligence.
They’ll test it.
They’ll test it, and then they’ll announce that the test takes Amazon Prime users from $1,300 a year in purchases to $7,000. The stock will become anti-gravity, race to a trillion dollars, and then the marketplace is going to begin to freak out about one or two things, or both of them. One, they’re going to start connecting the dots around job loss because they’re just better at this than other people and they’re more efficient.
Yeah. They’re starting to.
You’re already starting to see some of that populist rhetoric. Two, you’re going to have a situation where … for the first time in history we have a company that can perform what I call Jedi mind tricks, and that is it can destroy another company by just thinking about it. I think Jeff Bezos could take 10 or 20 percent of the market cap away from any Fortune 500 company tomorrow just by announcing he’s going into their business.
Right, such as insurance. You were talking like insurance or …?
They put out a picture of a prepared meal kit and Blue Apron crashes. If tomorrow he were to say, “We have the infrastructure to do overnight delivery,” the $150 billion of market cap in DHL, FedEx and UPS would decline by 10 or $20 billion within 48 hours.
Yeah. I’m obsessed with their logistics area. You know? They bought Kiva, or what was the company they bought?
Yeah, the robotics company.
Yeah, the robotics company. I think that is the most fascinating purchase of all. I was thinking Amazon Logistics Services, but then it sounds like the disease ALS, but there’s something like Amazon Web Services where Google has caught up and others have caught up that they have an opportunity to really run logistics for everything, for all kinds of things, and automate …
Yeah. I incorrectly thought that that might be Uber, that Uber might be a last-mile logistics company, but that’s not happening, but you’re right. It’s incredibly impressive and when you look they’ve applied for a Trans Pacific Oceanic shipping license. They’re leasing 757s. They’ve bought tractor trailers.
It’s part of their business. Well, it’s part of their business.
Yeah. They’re clearly going.
They’re taking cost out of their business by doing it themselves.
And they’ll start renting it out to other people. Pretty soon, you could see everyone from Williams Sonoma to Home Depot potentially using Amazon’s back end.
Why not use them? Right. Jedi mind trick, that’s a really interesting concept. What does Amazon do then? Because you now have this rising. Very clear they’re going to hurt retail very badly. You have the president tweeting about it in his otherwise busy week. He managed to knock one off against Amazon.
Which nobody paid attention to, really, because …
… He was busy supporting neo Nazis, doing that, and that sort of took the attention off Jeff.
But he did make a hit against him and I think someone was like, “Oh, who cares. It’s him.” And I’m like, “No, no. It’s not going to be just Trump. It’ll be others because it’ll start to really have an impact.”
This week I was in Kentucky and West Virginia on this tech jobs tour and people are trying to be trained, doing here-sourcing, all kinds of different things, but one of the issues was the worries about retail because this is, say, in Kentucky coal mining is really … the jobs have declined rather precipitously, but what if retail starts to decline? Because that’s another big employer there.
Well, Amazon has literally added almost the exact amount of dollar volume to their top line that department stores have lost, but department stores need two people for every one Amazon needs to execute the same amount of business, which means that if they’re adding whatever it is, $20 billion a year in revenue, you’re losing about 30 to 50,000 retail employees. So you could fill up Yankee Stadium with merchandisers, window dressers, cashiers, and say, “Here’s your pink slip.”
I think that they’re going to start making the dots around that or the Fortune 500 is going to basically say, “Guys.” They’re going to use an emotional argument. They’re going to say, “What does it mean for our society when a company can get to a half a trillion dollars in value without paying taxes? How do we pay for our soldiers?”
But they do pay sales tax, just to be fair.
As of four years ago.
Yeah. No. Yeah.
So we were subsidizing Amazon, but not Walmart.
Right, but it’s hard to go back.
No income tax.
Yes, but they could take away. Yeah. They’re not employing people. It’s the employment.
Well, not only employment, but it’s even more than that. They pay almost no income tax because they’ve figured out a way to teach the marketplace to take them to the fourth most valuable or fifth most valuable company in the world without profitability.
Within doing that. No, absolutely. So I think it’s not just Trump will be attacking them. What does Bezos do? Does he get friendlier? He’s also bought the Washington Post, which has put him in the political cross hairs …
But that’s not going to last forever, at some point. What does he do then? Does he become very friendly? Does he get out in front of it the way Microsoft never did during its monopolistic period?
I think these companies are all very smart at wrapping themselves in a progressive blanket — and I’m not questioning their actual principles. I’m not saying that this is disingenuous, but they’re comfortable with them being overtly progressive, because they come across as soft and cuddly and nonthreatening. I think it’s no accident that a lot of photos that officially come out of Amazon are of Jeff laughing out loud. I just think he’s likable and likable people are less likely to invite regulatory scrutiny.
He’s pretty tough in person.
You know him. I don’t. I’ve never been in the same room with him.
Well, I saw him relatively recently, but he’s a tough guy. I’ve always thought he was very tough, not the smiling clown. I’ve never thought of him like that.
Yeah. I doubt that, but I spoke after him at a J.P. Morgan conference and he was talking about endorsing universal guaranteed income, which I found frightening and I wouldn’t … If I were handling his communications, I would say, “The smartest or at least the person who is perceived as the smartest, most visionary business person in the world shouldn’t be pimping universal guaranteed income because, basically, what you’re signaling is, ‘I’m going destroy jobs so fast, you’re not going to be able to keep up. So we just need to start paying the populous here.’”
You asked me what they should do. If I were Bezos, I would prophylactically spin the cloud business, because I think when people start looking at the fastest-growing, most-profitable sector of tech, cloud: “Oh, that’s Amazon, the fastest-growing online retailer, the fastest-growing offline retailer, the fastest-growing streaming media company.” Everyone is going to start to freak out.
If I were him, I would break myself up.
Break yourself up in advance of what?
Spin the cloud business. A) I think it’d probably be good for shareholders.
Oh, that’d be interesting. I like that idea.
I think that company would even trade potentially higher, and it would. He needs to get out ahead of the curve because people are going to come after him.
From a PR point of view, I mean, he’s obviously bulked up physically, which everyone knows.
God, he’s jacked. Isn’t he?
I know. He was a skinny, little guy.
Oh, my God.
Yeah. No. Good for him.
So there’s something going on there.
He’s definitely spending a couple of hours in the gym.
No, and more, perhaps.
Yeah. I know, it’s working for him.
Yeah. You’re going to see. I think a trillion dollars and then I think there is either calls to break them up. What’ll be interesting is it’s going to force some navel-gazing around antitrust because antitrust law has largely been driven by the notion if it’s good for the consumer, it’s good for society.
Yeah, which it is good for the consumer.
Amazon has been great for the consumer.
What we’re going to have on a more spiritual, a more intellectual discussion, is what’s always good for the consumer might not necessarily always be what’s good for society.
Good for society. So we’ve had, not just Trump talk about it, but we had Cory Booker talk about it, specifically call out.
So who’s it going to be that does it? Because, largely, our government didn’t really move in with Google when they had the chance, and they certainly didn’t. The only people that did are Europe, who was mostly targeting Google, like still.
Yeah, Margrethe Vestager.
Yeah, the only regulator in the world whose testicles have descended and is actually going after these guys …
Yeah, so who does it?
And with a real fine … I think it’s going to be a district attorney in a state that sees the shortest path to the governor’s mansion is to create a populist argument and go after one or all of these guys and will get elected governor and then every politician is going to decide that that’s the new cool thing to do.
All of them or just one or two? Because people like Amazon. Customers like it. They like Google.
Like you were saying, they sort of wrap themselves into … Microsoft was a different creature.
Because people didn’t like it.
No one liked it.
Yeah. I think they have tremendous loyalty, but there’s a lot of people hurting out there and looking for someone to blame.
I just wouldn’t underestimate their ability. You can see the narrative, right? There was General Motors created whatever it is. It’s $50 billion of market capitalization spread across a quarter of a million middle class households. Facebook, $450 billion across 17,000 households, so if you’re not one of those 17,000 households, you could find a reason to get angry at these guys or to say they should be … There will also be an argument where it’s not going to do anything to your service if we break them up. It’s not going to do anything to your service if we tax them more.
It’s not going to do … So I think the consumer argument won’t hold water.
Again, what do they do? They, obviously, lobby up. They get the lobbyists. What else?
I think a lot of them are doing it. I think they’re fantastic at PR. I think they’re great at positioning themselves as really thoughtful, progressive, interested, engaged citizens. I don’t think it’s any accident that Facebook spends a lot of time and energy talking about helping Sheryl facilitate this conversation around leaning in. If she was fervently pro-life, I don’t think they would be flying her to Cannes to speak to advertising executives …
… because conservatives are seen as mean and threatening. I think they do a great job of managing their PR.
Then Mark goes all around the country and visits various livestock and people.
That’s right. That’s right. He’s talking about, well, there’s chatter about him running for president. I’d be curious if you think there’s any credibility there.
I don’t think so.
You don’t think so?
I just don’t.
He’s probably too smart for that, right?
I think he’s more powerful where he is and he’s …
That’s an interesting point. He’s more powerful.
I think it’s just a curiosity to him. It would be a curiosity to him to do it.
I think. I don’t think he’s of the typical executive like, “That idiot Trump could do it. I could.” There’s a lot of that. You can see a lot of executives going, “Wait a minute. Look what he did.” I think he’s not of that school. He’s not. I think it’s just an interesting problem for him. It would be … but then he also likes to just do these odd little exercises.
Remember? He was killing things that he ate for a while there. It was in Chinese.
I remember that, but you know what? That’s the equivalent of bulking up and getting jacked without actually the work. Just announcing you kill animals. I think that’s pretty macho.
No, but it’s just like he has these little exercises.
He eats them, right?
Then he only eats what he kills.
I only eat what I kill. Eat what you kill.
Then he learned Chinese and then a couple of years ago it was learning how to communicate better, like conversation, so I don’t know. I don’t know.
But wasn’t the Chinese thing, basically, an attempt to say, “Hey, China. Let us in”?
Yeah, exactly. Everything has another thing, but it’s also part of his personality because it’s been going on for as long as I’ve known him.
At one point, he was walking a certain number of … Way before everyone else was walking around, he was counting his steps. You couldn’t interview him if you didn’t walk around with him. You know what I mean? It’s like, okay. Was he started to do Fitbit? No. He just … that was his thing.
Why are billionaires eccentric? Because they can be.
He’s not really eccentric.
That sounds a little eccentric.
He’d be eccentric if he was just a programmer working for Disney.
You know what I mean?
So when I lived in San Francisco, I owned a house next to his and, by the way, it feels really good to have sold the house 10 years ago that is now next to Mark Zuckerberg.
They all live up there. I’m two blocks away.
I’m always like, “I’m coming up to say hey.”
Yeah. No. That was another sound investment decision on my part.
Yeah, nice. Well done.
To sell the house. No. Yeah.
They’re all up there, a whole bunch of Facebook guys.
That was good. Yeah.
Let’s finish up talking about Amazon. You think they’re going to buy Nordstrom, buy an old department store retailer, essentially.
It would only be Nordstrom. I don’t think they’d want the bad DNA of Macy’s, and I don’t think the Nordstrom deal will likely happen because it’s family run and whenever you’re talking about a family-controlled company, you bring in … family.
Yeah. I know the Nordstroms, yeah.
And they seem like wonderful, smart people, but you don’t know what happens at Thanksgiving there.
What else can they buy?
You don’t know who’s in charge. I think they’re going to digest this for a while and probably the other acquisitions will be more boring ones that are around what you were talking about, the logistics and the back-end space.
The back end? What about in entertainment?
You know, I think entertainment — and I don’t understand that business as well — but I don’t think they need it. I think entertainment …
It just adds.
With enough money, you can go find the creatives and create. The distribution I guess is pretty tough, but they’re now the second largest spender on creative content for television just behind Netflix, which upped their budget when they heard Amazon’s footsteps behind them, but I don’t think they need to.
Any other area you image them getting into?
You know what? Well, the question is what areas won’t they get into? They have sort of this periscope into every consumer category through their marketplace and they can decide what’s the most profitable, but if they were to, say, be the fastest-growing company in the largest consumer sector on the largest economies in the world, that’s a pretty good route.
Will they get back to mobile after their phone debacle?
I think at some point they’ll offer a device to Prime households and give them free telco.
Like a mobile Alexa or something like that.
They’ll just say, “Hey, would you like to have telco for free?” They’ll figure out some funky technology that’ll be 80 percent of your Galaxy or your iPhone for free, which is always a really good value proposition.
It’ll scare and Verizon and AT&T stock will go down 10 percent that day.
Maybe Jeff Bezos should run for president.
They’ll just announce it. That would be really …
See, I could see him doing it.
You could see him doing it?
Yeah. I could.
That would be really, really interesting.
He’s also got a fascinating personal life. He’s got like three children and his wife is fantastic. I mean, the whole story is terrific.
Yeah. It’s all kinds of stuff going on there.
Yeah. He’s got a good narrative, right?
A good tale.
All right, Bezos in ’20.
Yeah and he’s jacked so he looks …
That’s key. I think that’s the key. Actually, now I digress, but I think it’s going to be … I think your guy Gavin Newsom is going to run.
Oh, yeah. He could. He’s great.
I like Gavin Newsom. After he did the gay marriage thing, I will forever be …
Yeah. No. Tall, thick hair, boom. President.
Yeah. He looks good.
His skin is flawless.
Oh, God. He’s a great-looking guy.
That little scandal behind him.
Yeah. That’s fun, right?
Just a little.
He’s actually … just, it’s enough.
It makes him interesting.
Oh, no. He’s got a lot happening.
It’s not good.
I’m not that close to it.
Yeah, but he’s a really interesting guy. I think people underestimate him a great deal.
All right. When we get back, we’re going to talk about other things: Uber, Google, with James Damore and free speech, and other things in the White House, where you know all kinds of shit is going on behind the scenes. We’re here with Scott Galloway and we’re going to be talking also about his new book when we get back.
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Scott, I asked you the last time what book I should listen to next. What do you think I should listen to after that?
Oh, yes. That’s the one you said before, “Safe Hands,” again. Because?
I just think it’s outstanding. And to understand, I used to think that if you wanted to be great in business, you should major in English because I think the written word is so powerful and demonstrates a lot of leadership. I now think that we should all go back and study evolutionary anthropology. I think it gives us so much insight into who we are and why businesses work.
Fantastic. It is a great book.
I’m right now listening to “Shattered,” the Hillary Clinton Campaign things. She lost, in case you didn’t know.
I heard. Do you just put the book down every five pages and sob?
Well, it’s interesting. If she had won, you could have flipped it into what a genius they were, a ragtag bag of … You know?
I don’t think there’s any campaign that is not like Hillary Clinton’s. You know what I mean?
They’re all a mess. They’re all a bunch of dysfunctional, strange people, so I’m not sure it’s … I don’t know.
We’re here with Scott Galloway. He is a professor at NYU. He’s an author. He’s the founder of L2, and he is a psychic around internet companies, especially. He has a new book that’s coming out in October. We are taping this in mid August. It’s called “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google,” and we’ve talked a lot about these companies. You just talked about Amazon, but let’s talk about the others, especially because they’re in the news. Let’s talk first about Uber. I know you like to talk about Uber.
Talk about branding at Uber right now. Now, it’s got worse since we last talked and we had our last show. It was hurtling towards doom and, now, they ousted the CEO. Now the CEO is fighting with their major investors. Arianna is floating around, so Arianna Huffington is floating around out there making trouble. What do you make of this? Because it’s also still a great product.
An amazing product. It’s hard for me to think of one of the companies that’s changed my life the most, other than Uber, but it does seem like it’s an organization where reputations go to die. I think Arianna Huffington, who I think has an incredible brand, looks like an apologist for poor behavior. The board member, the guy from TPG who had had this storied career …
David Bonderman. And one errant, stupid comment, that’s unfortunately the period on his career right now. I think Benchmark looks stupid saying, “We were fooled.”
Well, my understanding is Benchmark has access to pretty good lawyers and if I’m a limited partner, it’s like so you’re saying you’re dumb? You’re not good at this? You’re supposed to protect. You know, cover your ass.
The notion that some 36-year-old entrepreneur bamboozled around board and corporate governance, one of the most successful venture capital firms in history, it says, “Okay. So maybe you’re just not that good at what you do. You’re supposed to make sure this never happens,” and, by the way, when it does happen you should probably keep it to yourself. I just can’t.
Again, I can’t understand why Benchmark would publicly say, “Oh, he fooled us.” All the stuff around different CEOs. They can’t find people. They can find someone. Maybe he’s coming back. It’s just a very … It’s literally as if they brought the brightest together in brand and said, “How can we trash our brand really fast? How can we really screw it up?”
What’s interesting, though, is that from a consumer perspective I think the brand … I don’t want to say it’s bulletproof, but it’s one of those brands … it’s like Jason. You could think you’ve killed it and it’ll come back. It adds so much utility and is such a great service on a global level. Where it hurts them is the investment community. I think they’re going to have the mother of all down rounds.
Also, when they try to IPO.
Yeah. That’s going to be super difficult unless the last few rounds of investors are willing to take a pretty serious haircut. What’s interesting is someone at some point is going to do the math and see if all the liquidity preferences and preferred returns actually get ahead of what the likely IPO valuation would be, meaning that the common — who are always the shock absorber — might get screwed here.
It’ll be … you don’t know because it’s a private company, but Aswath Damodaran, my colleague at NYU, I think put a valuation on it of, I think, 29 billion, making some pretty aggressive assumptions.
Right now it’s at … You know, it was at 70, but really 40, possibly lower.
Yeah, but if you go from 70 to 29, I mean, what is that? That’s a $41 billion destruction in value.
That’s the equivalent of arguably the greatest dot-com/dot-bomb explosion in history.
And then Travis himself. He’s always been on brand, a pain in the ass …
… Possibly malevolent, so he’s continuing down that road.
Yeah and I think that it represents a dangerous narrative in the Valley that was — and I think you might take offense to this — that was largely cemented by Steve Jobs: That if you’re a very talented person, you cement yourself as a genius if you act like an asshole. I think that narrative needs to be broken in Silicon Valley.
This guy goes way beyond Steve Jobs.
Fair enough. Fair enough.
He parked his car funny and he yelled at people and, maybe every now and then something got thrown, small.
No. It got worse than that, Kara.
No. I know that. I get that, but it’s not down this road. This feels like … because it’s the entire company has been infected.
Maybe these stories never came out about Apple, but I don’t recall it being, any company being quite this bad.
Maybe Microsoft in its early days or something.
It’s a pivot because regardless of how whether you think the morality of it, 70 percent of high school valedictorians are women. Our workforce is looking increasingly female and increasingly people of color, so it’s just stupid not to have a welcoming environment.
Right. No. Sure.
There’s a reason why …
… The companies that are adding tens of billions of dollars in value happen to be in neon-blue regions.
In the ’80s, I think you wanted to come across as a CEO as a conservative because conservatives were seen as more steadfast, more responsible, and Democrats were seen as more reactionary and not economically responsible, so the right political posture for a company as a person, we personify these companies in the ’80s, was to be kind of subtly conservative. The right political posture now, hands down, is to be increasingly not subtle, but increasingly and explicitly overtly progressive.
Progressive, absolutely. This mean doesn’t work anymore, this idea. You know, I get your point. I mean, I think Apple, Microsoft, Google, even Facebook had all these problems, not in quite this … I mean, I call it quintessence. It’s sort of like everybody drained to this one company and it has all of them mixed together, but most of those companies pulled out of that behavior relatively quickly and with the help of venture capitalists.
Yeah, they grew up.
Very quickly, even if they went through and committed some of the very similar … I’m not sure anyone is as bad as Uber. I got to say. I’ve been here a long time. I’ve never seen so many, so much.
Yeah. It reflected just really poorly on the board because even when you put out a memo …
Yeah, exactly. The look-the-other-way board.
Even when they put out a memo saying, “I need to go away and figure this out and reinvent travel.” At some point, when you’re responsible for tens or thousands of economic livelihoods of households and tens of thousands of investors who’ve made a big economic bet on you, it’s no longer about you.
The board is supposed to serve as fiduciaries for all shareholders and the fact that the investors had to go around the board basically says they need a new board.
I mean, it’s literally like an unbelievable failure in corporate governance of a company that is worth more than Ford Motor.
Right, so what happens here? What has to happen and then what do you think happens?
I think they bring in a super-talented female CEO. I think that’s …
They’re not doing that.
Well, that’s absolutely what they should do.
That is not what they’re doing.
Say more. I’m not on the ground. I don’t know what’s going on.
I think it’s going to be Jeff Immelt from GE.
Oh. Yeah, a white guy in his 60s, bad move. By the way, he might be the best person, but this is a company that needs to revive their brand and send the right signal to potential employees and consumers in the marketplace.
The same board picking this. They haven’t moved. It’s the same people.
Yeah. I think investors need to step in here. I can’t imagine. At some point, they’re going to be prone to fits of sanity and realize that our perception and our brand is worth tens of billions of dollars.
You just attacked Benchmark for having a fit of sanity. “Wait a minute. We don’t want to get sued for this. This behavior really hasn’t changed.” I don’t think they should have said they didn’t know about it because they enabled it clearly and let it go on for the longest time. When someone at Benchmark was like, “Well, Kara, we didn’t know you knew.” I was like, “Well, how do I know and ] you didn’t know?” It was sort of like …
I like all this inside baseball. I knew none of this, but I think Benchmark is …
They still are at least saying it now. You know what I mean?
They’re making the steps and they had to do it publicly because I don’t think they were able to do it behind the scenes.
Yeah, but they snatched defeat from the jaws of victory. When they stepped in and forced the resignation of the CEO, should have been fired, and basically they did the board’s work. They looked like leaders.
But then when they file a suit saying this kid fooled us and we got bamboozled, around and around.
He wasn’t leaving. But he wasn’t leaving. He was right in there causing all kind … He’s super good at rope-a-dope. I’ll tell you that.
You know this and I don’t. Does he technically control the board, though?
Does he have a different class of shares?
No, not technically. He needs allies.
Yeah. Well, he should be barred. At this point, he should be barred from the building. “You’re rich. You’ve done a great job. Get out.”
They tried. They didn’t do it. I’m just telling you.
Well, then they need to clean out the board.
There is a lot … I mean, there’s a lot of Trump in him.
I mean, I’m getting pissed off just listening about this.
No, but it’s the same thing.
This is just such bad corporate governance.
What do you do to stop something that won’t be stopped?
The shareholders have to stop them.
It’s a little Trumpy. You know, they tried to get him to. He said the wrong thing about Charlie Deville.
Then they got him to say the right thing and then the next day he said the wrong. It happens. There’s a little bit of that going on and don’t you believe it if they tell you he’s not doing it, but he is. He gets right in there.
Oh, my sense is he’s visibly absent and that is he’s … What I’m saying is, he’s behind the scenes pulling a lot of levers.
That’s my sense.
Yeah. How do you stop that if they’re not going to stop? Lawsuit.
I think investors have to step in and basically say to the board, “Look, unless you start acting as fiduciaries for all shareholders, we’re going to replace the board.” If they can only do it legally, but there’s so much money on the line. I would think that their greed glands would start to kick in.
Right. I would think a lawsuit is the last, desperate attempt to stop. I don’t think you go … I don’t think they went to this lawsuit easily. You don’t do it. You don’t do it. You know why?
Because you piss off all your other entrepreneurs. You look crazy. You look stupid crazy and possibly you could do it to others.
That’s a fair point.
You know? I think they didn’t have it. What they did is in ousting him they lost their last bullet and then he kept getting up, just like as you said, which is what this company …
So you think he refuses to leave the building and he’s still basically controlling the company.
He has supporters. No. No. It’s like a “Game of Thrones” situation. Who is getting Westeros? I don’t know. I don’t know.
What they should do, strictly as someone who’s 3,000 miles away, they should bring in a talented female executive to bring some sanity to the place and I think immediately the market cap, the actual value of this company, goes up $10 billion.
I would be shocked if that happened. We’ve reported that it’s three men left in the thing.
I think it’s just one, so we’ll see.
You think it’s Immelt?
Yeah. Well, no. This broadcast … it’ll be known by then, by the time of this broadcast. You’ll see.
Oh, it’s going to happen that quick?
Yeah, and then I’ll look like a genius, but after the fact, like essentially, but it’s still a great brand. You still think it’s one of these brands that can continue.
Oh, yeah. It’s an outstanding product and it brings tremendous utility.
What would you do if you were Lyft in this situation?
I think Lyft’s doing it. I think Lyft has basically proven that the Amazon strategy of trying to spend a company to death, which Uber was trying to do, doesn’t work. I think Uber probably has an opportunity to establish kind of a niche positioning in certain markets. The thing why this company probably isn’t worth $70 billion and the reason why — another prediction: I think Airbnb is going to be worth more than Uber at some point — is that you don’t need … You need global.
You and I could start a ride hailing company in Minneapolis or Saint Paul and all we need is 50 or 100 million bucks, and we can create demand and supply. We can create drivers and we can create people who want to hail rides. So anyone can start a local player. Airbnb you have to have regional supply and you have to have global demand because you have to have the …
Yeah, because everyone’s traveling.
That’s right. If you’re in Austin, you have to have departments in Austin, but the people coming to Austin are from all over the world.
So the moat is actually much greater for Airbnb than it is for Uber, so I think Uber is going to have …
Totally. Uber has no moat.
Uber is going to have a series of small competitors nipping at their heels regionally in different areas.
Lyft is that to them. Although, sometimes I look at Lyft like the Democrats. It’s like, “Uber stinks.” I’m like, “Yeah. He stinks. They don’t care.”
I mean, they let you tip. And the hard part is if I were Uber, what I would do is take some of that cheap capital and vertically integrate and start buying the cars and make them nicer, because when you see an Uber pull up and it has a Lyft and an Uber sticker in the window, that’s bad for your brand.
So it’s very hard to maintain margins without controlling your distribution and in this case the distribution is the actual automobile.
Well, they’re trying in self driving cars, also. I think they’ve fallen behind there because they’re in a lawsuit with Google or Alphabet.
I think self driving cars is going to be one of the most value-destroying decisions for a lot of these guys.
Yeah, me too.
Because if you look at media, stuck their chin out. Ripe to be disrupted. Cable prices going higher faster than inflation. You go across every category. Advertising was ripe to be disrupted, Facebook and Google. The auto industry, if you look at a Mercedes S Class from 20 years ago on an inflation-adjusted basis, so I think it costs less than it does now, and the cars have gotten much better, so this isn’t an industry in my view dying to be disrupted. Now, people will say, “What about Tesla?” Okay, but if I were Apple, I would stay the hell away from the auto industry other than maybe trying to be the operating system.
I think self-driving cars will be the next VR in that it’s going to wreck a bunch of venture capital firms.
Interesting. AR is what Apple is interested in.
I think that makes sense, right?
AR is 100 percent. They’re not that interested in anything else, but that.
Huh. It’s turning back to you. What do you think is the most commercially viable application of AR?
I don’t know yet. You know, we’ll be writing about this soon. I’m actually just learning about it, the things they’re investing in and what they are thinking about, but they right now had opened it up so people start developing. We’ll see. We’ll see all kinds of things. Just even like when you have a phone open and it suddenly projects onto the ground the way you need to walk, like that.
I’d like to be able to hold my phone to a building in Soho and see what apartments are for rent.
Something like that, yeah.
Immediately say, “What’s for sale?”
See? We just thought of two great ideas.
Or you could even hold it up and press another filter, and it would tell you what every unit sold for because we now have that data.
I think there’s huge … So an industry, for example, that I think is ripe to be disrupted is the real estate industry. You sell a house and you pay 5 or 6 percent and kind of trying to figure out why.
Yeah. I think Apple has zeroed in on that. I was recently with a bunch of their executives …
… And AR is all they talked about.
Other things, there’s other things, but AR seemed to be, and they’re right. It’s right in their wheelhouse.
Yeah. And the other industry that I would love to see Apple get into that is by the metric of raising prices faster than you raise the underlying quality of the product is hands down education. Apple could start the largest tuition-free university in the world and not only make a lot of money, but really starch their hat white.
Which is their roots, too. You used to see things for Apple and then buy for schools.
Remember? It’s a brand rooted in education.
And then Google got in there. Yeah, but then Google got in there with Chromebooks, which is interesting.
All right. We’re going to move from Apple to Google. I’d love to talk very briefly and then we’ll talk about your book in the next segment where we can talk more about these companies, but the free speech, James Damore, who now keeps shooting himself. I don’t think there’s any more toes left to embrace. He says negative things about women then he goes and embraces the alt-right and now he thinks he’s persecuted like gays in the 1950s were, which really I think is astonishing.
Well, he’s had a great week, right? Because no one is really interested in manifestos after Charlottesville right now.
Right. Yeah, exactly.
Also, when I write, when I speak, I take liberties. There’s a lot of opinion and then I can’t help it, but I’ll cherry-pick facts to support my opinion.
But when you’re putting out a manifesto about whether or not differences in genders relates to a job, you have to really make your arguments bulletproof. He was cherry-picking so many things. There’s a ton of great academic research that does say men are different from women.
He was cherry-picking this stuff that shed women in a bad light. When you’re a company that needs to continue to have this sort of progressive, welcoming feeling for the 70 percent of high school valedictorians that are women or distinct to the moral argument. You just create an impossible situation for the CEO. Get your crap and get out of here.
They acted quickly.
That was the best thing about it. It was decisive. They didn’t sit on their hands and try and figure out what to do. He acted decisively. I think he-
Yeah. I think his only mistake was to say that, “We value this discussion,” or, “It’s important we have this discussion.” Not really, because at the end of the day, Google is there to sell more keywords to Mazda, not to encourage the employees to have these incendiary manifestos.
That’s just not-
Although, have you been to Google? I think I wrote, I said, “There’s nobody that loves to talk more than Google people.”
About everything. Like, literally. They’ll discuss like the stairs or t-shirts or the lawn. They will go … In the early days with Google, those two founders, it’s said at the beginning they had these TGIFs and, literally, they’d have these arguments with each other. They would say something rude to the founders. The founders would say something rude back to them and it was about the toast. You know what I mean? So it’s a group of people that feel … and they have all these meme generators and platforms to do it within Google. This is a group of people that never shut the hell up.
I’ve only been to the one in New York and there was people on scooters and beards. I felt so old. I was going to slip and break a hip there.
Well, actually, the founders are getting old, now, but I think it’s a culture that’s been very blabby, almost to be like, “Stop talking.” For tech people, you talk too much kind of thing, but they are, so I think that’s why this guy felt the need. By the way, what was fascinating, one of his main arguments that is he couldn’t speak up. When everyone at the company got to see his speaking up and millions of people more got to see it because it got leaked, obviously, so he had an opportunity to speak up. People just didn’t like what he had to say.
It was handled really well. The CEO and whoever was advising Sundar did a great job. They were decisive and it was absolutely the right thing to do and, quite frankly, the timing was on his side because no one feels sorry. I mean, everyone feels less sorry for this guy, now, based on recent events.
His best advice, if you were counseling the kid, would be just literally to shut up.
He can’t do it.
He just can’t do it. He sprayed bullets all over his feet and now he’s taking the gun and put it in his mouth.
Yeah. It was interesting. One of his arguments, which I think a lot of techies agree with — I think that’s the one area — is that the First Amendment, free speech. That was the first thing. When these guys who get to say anything they want don’t get to say something, they go crazy and they go to free speech and it sort of takes it away from the actual issue, which is gender problems in the workplace, but all they want to talk about is what they’re denied, which I found really interesting, which sort of is off topic as far as I can tell. Are there any good arguments you made that that should happen in companies like these, if you’re talking about progressive companies where everybody should be able to say what they think?
I personally think that at the end of the day a company … Like, I think in media you have an obligation to pursue the truth and have these conversations internally and be open about them. I think in academia we have an obligation to pursue the truth and have difficult conversations. I think Google is there to sell more water purifiers, and while it’s probably because they’re so powerful and important that we have that discussion about the service itself, I don’t think they have an obligation to internally promote debates publicly that are going to make them look bad and put the CEO in a very difficult position. It’s nice. It’s theoretically, I guess, it’s a nice thing, but I don’t think private companies … I think that primarily they are to increase shareholder value and build economic security and create a middle class. I think that’s what organizations are invented for in a capitalist society.
Well, what about then … I mean, what I try to explain to people, I say, “You can have freedom of speech against the government. If you work at a company and you say something they don’t want you to say, you get to leave.” You get invited to leave the building, essentially.
I’ve been a CEO. Anyone who damages shareholder value, anyone who puts me in an impossible situation, I’m going to fire, and the notion that people have these … Yeah. If he wants to exercise his First Amendment rights in his spare time, okay. As long as it doesn’t hurt our shareholder value. Look. It sucks to be a grown-up.
When you get benefits and free food, and get to ride your scooter around work, and bring your dog to work, and make $170,000 a year or whatever it is they’re paying engineers now, there is some downside. One of those downsides is when you get all hopped up on an idea that might be incendiary to a large portion of the workforce and a huge portion of the potential workforce, and the CEO and the board has to have emergency meetings all weekend, get your stuff and get out of here.
I don’t think there’s a lot of navel-gazing here.
He screwed up.
Well, there is in Silicon Valley.
He screwed up. Fire him.
We’re going to talk about that, speaking out politically and, also, your new book, which is coming out in October. We’re here with Scott Galloway.
We’re here with Scott Galloway, one of my favorite guests. He’s also the most popular guest on Recode Decode. You have beaten all the others. There can be only one, Scott, and it’s you. This new book you have, “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google.” What is the hidden DNA?
So I believe that who we are as people that these companies have disarticulated who we are as people. I think Google is god.
Google is god?
Yeah. Google is 100 percent, Kara. Google is god. As we become more affluent and more educated, society has become less religious and less dependent upon a super being. At the same time, our modern-day anxieties grow and I think that creates a void where we need a super being that we trust more than any other entity.
We want something where we can send information into the atmosphere, a prayer. “Will my kid be all right?” We want some divine intervention that we don’t understand to send us back an answer. “Symptoms and treatment of croup” into the Google query box. One in six queries, I believe, to Google have never been asked for in the history of mankind. What rabbi, priest, scholar, coach, parent has so much credibility that one in six questions posed to that person have never been asked before? I think if you had your face and your name above every query you put in that box, you would realize you trust and have more respect for Google than any other entity in terms of what you think, how it can divinely answer it.
It’s true. It’s fascinating. I was at a dinner the other night and someone was like, “What happened to that person?” I go, “If only we had a global information vehicle that we could search …”
That was all-knowing, that was seeing everybody.
“That could search and perhaps give us the answer instantly, right now, as we’re sitting here.”
Yeah, and know your intentions before you actually act upon them. So Google is god, I think.
Okay. It’s fascinating. Are they like the encyclopedia or god?
Because I was wandering in Oakland, California last week …
They’re a super being.
… And there in the alley was all the World Book Encyclopedias. They were all arranged or someone was giving them away.
I had an encyclopedia. Did you have one?
So did I. Yeah.
I got one from my godfather. It was a big gift, very expensive.
I had to explain it to my kids.
I was like, “This was Google. This was Google.”
They’re god. Okay. Google is god.
Facebook is love. One of the wonderful things about our species is we not only need to love, but we need to be loved — or we not only need to love, but we need to love others. Kids or babies that are denied of nutrition but get a lot of affection end up more productive and healthy than kids that have good nutrition but get no affection. I think our ability to establish empathy with other people, to connect with them, to maintain connections, to care about them, has largely been facilitated or done at scale with Facebook, specifically their photos. I think it brings out a very nice part of our species.
I think Amazon is our gut, our large intestine. More people in human history have died from starvation than any other ailment, so as a result, a key strategy of our species in one word is “more.” The penalty for more is gluttony or maybe diabetes, but it’s got a large lag. The penalty for too little is starvation, a terrible death.
Right, so it gives us …
So open your cupboard. Open your closet. You have 10 to 100X more than you need and Amazon, Walmart, and China’s strategy of more for less is the ultimate business strategy, so Amazon is our consumptive self.
And then moving further down Apple is sex, our ability … Look. What’s the first instinct?
Oh, Tim Cook’s going to like that one.
Oh, he knows it.
Yeah. All right, sex.
He knows it and is acting on it.
They’ve figured it out.
Your No. 1 one instinct is survival and once that box is checked and you think, “Okay, I’m going to make it through the day,” your No. 2 instinct is procreation. The No. 1 signal of wealth, the No. 1 signal of power and the No. 1 signal of your likelihood of a random sexual encounter and a greater selection set among potential mates is the iPhone. This is the new signaling device that I have good genes. Just as having ad-supported Pandora Radio or paying with a Discover Card is like saying, “I have bad genes,” an iPhone is saying to the opposite sex or to a potential mate, “I have good genes. You should mate with me.” So they said, “Okay, so who else is sex?”
What does a Samsung say?
A Samsung says, “I can’t afford an iPhone.” Actually, Samsung is doing a pretty good job. Samsung is actually a great company.
It’s still … you’re right.
I’m backtracking. I was with the CEO of Samsung yesterday. I’m totally sticking my words back into my mouth. What have they done? They took a page literally out of luxury. What do luxury brands have? An iconic founder.
Vertical distribution, temples to the brand.
I mean, what’s the difference between a Vuitton store and an Apple store?
The Apple product announcements aren’t product announcements or whatever they call them. They’re fashion shows. They have Christy Turlington onstage.
Right. They did. They indeed did.
Where do they advertise? A 12-page spread in Vogue.
Incredible attention to artisanship and design. This is a luxury brand. They’ve decided, “We want to move from being the best house in the worst neighborhood — hardware manufacturing — to the best in the best neighborhood,” which is luxury. And luxury speaks to two things: Our need to be closer to god and our need to procreate.
Which is Google.
Which is Google, but Apple is sex. What do we have?
Every one of us …
Every one of us is a function of those four things.
Every one of us is a …
Is anything missing? Love?
We’ve covered it. Don’t you think?
Yeah. What is Uber then?
Oh, gosh. I haven’t taken the metaphor that far.
All right. Okay. You have to.
You’re not supposed to ask me.
You’ve got to do them all or what is …
You’re not supposed to ask me. You’re supposed to promote this.
Where’s Microsoft in all this?
Yeah. I don’t know. Microsoft is our, I don’t know, our conscience, our daily work, but look: God, love, consumption and sex. The proportion of our approach to each of those four things largely defines who we are. I think these companies have disarticulated those four things, reassembled them in the shape of for-profit companies, and created more value than the GDP of India in the process.
The basic premise of the first part of the book is I think these four companies have aggregated so much power because they’ve tapped into some very basic instincts. And also — I teach this in my class — I think every company needs to decide which of those organs you are appealing to and structure your business around that.
Interesting. I used to say you have to either be useful or entertaining. Yeah. I thought Facebook was useful. Remember? They pushed themselves as the utility for a long time?
Or entertaining. And Google would have been useful to start with; Apple, entertaining. You can borrow this at any time. Amazon useful, like a lot of them are useful more. Now, Amazon has become entertaining.
You totally respond. I think of it as what organ are you appealing to? It’s either the brain …
Or both. If you’re both, fantastic. Instagram was useful and fun.
Yeah. They did both, right?
You’re either appealing to the brain, the heart or the genitals, and as you move down the torso, the margins get better because the decision making becomes more irrational.
Right. You just have to have that.
Ideally, you want to be in the business of appealing to people’s sex organs because that organ is the most irrational decision-making organ in the body, which translates to the biggest margins.
What industry has the largest margins? Luxury. What computer …
So why are AirPods so ugly and unattractive? Why do they render you unattractive?
That hurts. They wouldn’t say that.
I love them. They’re my favorite thing.
They wouldn’t say that.
Oh, no. I wear them all the time. I can’t help myself. They’re so fantastic.
What does Apple have? Apple has margins of Hermes, greater margins than Ferrari, because they’ve figured out. “We’re in the business of sex.”
Where do they go next? What’s the next sexual object we need from them?
That’s a great question.
Well, the new iPhone 8 will come out, obviously.
I think the new battlefront is the home. I think no one has been able to figure out how to pull the home together. What’s weird about Apple right now is that …
I don’t believe they’re not in there. I would buy them over … I don’t want Amazon sneaking up on me and Google, definitely, isn’t getting any devices in my house because I don’t trust them, so Apple I would give because they’re not in the business of selling my information.
I think Apple should buy Bose and figure out a way such that I can rip out …
Bose or Sonos?
I would just go hard after the home. I also think Samsung should do the same. I think Samsung and Apple are going to run head on into each other in the home, because Samsung controls this incredibly important screen that’s been overlooked called our TV. Apple controls the phone, but for some reason I end up with this ridiculously stupid screen called “Control Four” in my house that’s supposed to help me figure out the …
And I just can’t figure it out. I just can’t figure it out.
Somebody is going to figure out the home.
Yeah. Everyone is talking about autonomous self-driving cars as being where these guys are going to collide. I actually think they’re going to collide in the home. No one has brought the home together.
Yeah. Where is Google Play in the home? Information, I guess. They’ve tried it with Nest. That didn’t work out as well as they thought.
Right. That feels like they overpaid for that.
Their home … they have whatever their device is.
Yeah. That’s a good question. I don’t know, but what’s weird is that the company you would have least expected to make inroads there, Amazon, has, which is just crazy.
Yeah. I was astonished. I used to call the CEOs of Google and the people at Apple. I’m like, “Why does this exist?” Amazon. “Why do I own an Alexa and I don’t own one of your devices? What’s taking you so long?”
Yeah. It’s really striking when you think about it. You know what? Apple gave it away, the same way they kind of gave music away.
They owned music. They gave voice away, but I wonder to a certain extent if they just keep … Their attitude is they just keep making … Their innovation right now — and I actually think it’s really genius. What are they coming out with, a $1,200 phone? I’ll buy it. I mean, don’t put gold on it. That’s just not, but I’ll buy it if it … Yeah. If you think … it’s a store of value. Anyways, if they can convince me that it holds a charge for just another 30 minutes, which I think would be the biggest bump in the quality of my life.
Yeah, battery. Absolutely.
I will buy them, yeah.
Are there international companies that have any of these things? Because it’s all U.S. companies. Every one of those is a U.S. company.
Yeah. I mostly talk about them because they don’t understand the Chinese ones. There’s Alibaba and there’s Tencent, which are … People say I don’t talk about them enough, about they’re so huge and they do so well, and the answer is yes. You could argue Microsoft is the fifth horseman because they’re B2B and they have such a great diverse business, but arguably the Chinese ones are the …
The versions in those countries.
But two things, and this is … I hope that it won’t sound xenophobic. The Chinese are really bad at building global brands. It’s the second-largest economy. You name the 10 largest economies and I can name …
They need to buy their way in here.
There’s amazing global brands out of Japan. There’s amazing global brands out of France. For some reason, the Chinese have not been able to build brands that permeate geographic boundaries and owning, and they’re very good at capturing …
Xiaomi tried a little bit.
It didn’t work.
Yeah. It didn’t work.
Lenovo or Haier or Huawei. I ask my class. I mean, “Name a great Chinese global brand.” You name great global brands out of Australia, out of …
Oh, you’re right. There’s lots of those.
There’s tons. Right?
Gosh. Italy or France or Japan, even Korea has got some incredible beauty brands and Samsung is arguably one of the 10 strongest brands in the world.
Yeah, sure. Right.
China? Not one. I wouldn’t put any of their brands even in the top 50 or top 100.
You know, you’re right. I hadn’t thought about that.
Their ability … You probably, I think, tap out at about four or $500 billion if you can’t go global, so I don’t think they get to a trillion dollars.
What they’re great at is benchmarking, which is the modern-day term for stealing IP from Western companies, and then letting a Western company come in, build, educate the market, and then using the support of the local government to take back share.
Although, you could say some of the communication stuff has been better than some of their … WeChat and other things like that are pretty interesting.
WeChat, actually WeChat could be the first global brand out of China.
It’s a top 10 app in, I think, 27 markets, so that’s the one I would bet on. But also, as someone who likes to think they know something about corporate governance, the corporate governance in Alibaba is abysmal. You’re not even buying really a share in the company. You’re buying a share in some strange holding company that is supposedly linked to 27 other companies, so that feels like a company that you could wake up one morning and if there’s some sort of scandal around corporate governance or fraud, could literally just get cut in half in one day, and you’d have no recourse.
Right. Any other country you’re seeing something coming out of? Japan, obviously, used to be that.
It’s so interesting. I was talking to the Samsung guy last night. What happened to Sony? Talk about a brand that’s fallen from grace.
Right. They’re coming back. That’s what Peter Kafka says.
I guess. I don’t know. He has some Sony person coming to one of our events.
Criteo in France, I mean, who?
In the innovation space, like who is tearing it up right now? There’s a couple of brands or a couple of ones who do an amazing job on China, and then most of it is in a bike ride of Stanford and or …
Yeah. They’re all American companies.
West Coast American companies.
This is part of the reason, and when I say this in the book, they play by a different set of rules because they have become objects of adulation and a huge source of national pride for us.
Let’s finish up then talking about the national scene because, obviously, this has been quite a week here.
Yeah. What a week, right?
Right. I know. Bad for U.S. branding. Nazis are always bad for U.S. branding.
Yeah. That doesn’t help.
Can you imagine importing something from the Germans? Now the Germans look so progressive …
… Which is fascinating. How much of a role should these global CEOs, essentially, from Amazon, Apple, Facebook and Google, let’s just use them or any of them, how much should they be speaking up and doing? They obviously had removed themselves from some of these tech councils and other councils that Trump was involved with. They’ve distanced themselves. They were the first to distance themselves, although not fully. They still talk behind the scenes, I think.
What should they do here? Should they, in this particular time period, right now, with an administration they clearly are utterly at odds with on almost every topic from transgender rights to immigration to Nazis. I think most people are on one side on that issue. There is only one side. What should they do here? Should they keep silent, their heads down, or should they just become the techno governments they are? I hate to sound like Steve Bannon, but …
Yeah, so the calculus today, kind of post-World War II, is to stay mostly out of politics unless it involves a direct assault on your shareholder value, a tariff, employment, wages, something like that.
They are. They haven’t been able to. The culture wars have infected everywhere.
Things have changed because these companies are seen as so important that people want to know how they feel. I think the calculus changed a week ago and that is, the current administration has lacked so much credibility and at this point, is seen as, I think, so stupid they’re becoming perceived as dangerous that I believe we’re in the midst of what is referred to as, strangely enough, called a white coup or a bloodless coup.
I think it’s going to be led, strangely enough, by Republicans because the Democrats have been neutered and the more they get angry and upset, the more elections they lose, so they’re seen as an aging home, but not the cute Ron Howard aging home with wise people. Like the bad aging home where everyone is there. It’s like the people that time forgot.
They’ll come back, Scott. You know that.
Hey, I hope so. I’m one of them, but I think that they effectively have been rendered totally obsolete. I think the Republicans are going to go … I think he’s going to be impeached, but he’s going to do the, “I broke up with you first,” and he’s going to resign.
Right, which he likes to do. He did that several times this week.
Yep. I broke up with you first. It’s going to be led by Republicans with the support … And the thing that’s going to get it done is the military. The repudiation by the Joint Chiefs this week …
All of them.
… From the four branches of the armed services is extraordinary.
I know. I kept saying, “Are you seeing it?”
That’s probably the most under-reported thing that’s happened in a long time, and then the tools and the weapons of this are going to be Google and Facebook. I think there’s a lot of people in Google and Facebook that realize they screwed up and I think they’re going to.
Oh, they are. They’re agonized. I’ve had lunch with all of them. They go, “Oh.”
I think they’re going to push the limits of what even they’re supposed to do the next time the election comes around. I don’t even think we’re going to make it to the next election. I think we’re in the midst of what I would call a slow coup, a slow bloodless coup.
Who runs things then?
“The Handmaid’s Tale.” The Vice President. I’ve been watching “The Handmaid’s Tale.” Have you watched that?
I know. Don’t watch it. It upsets you. It’s not going to be Pence.
Oh, my God. It’s crazy.
Isn’t that crazy? And then there’s little bits that have happened already.
How could it not be Pence, though?
Oh, he will be. No. I know that, but …
If Trump resigns, yeah, he’ll be president.
He’s going to run it, but who’s going to run it? Is it going to really be him or is it going to be …
When you say, “Run it,” what do you mean?
Well, in “The Handmaid’s Tale,” a government really runs everything. They control every aspect. In this case …
Oh, no. I don’t think we’re headed there. I think that’s even crazy for me.
You’re in the mood. If you watch “The Handmaid’s Tale,” you just feel … You can only watch one at a time.
Yeah. I watch two at a time and then I go upstairs and …
You didn’t binge watch it? No.
… Then I go upstairs and just stare at the ceiling.
You’re not a lady.
Oh, my gosh. It’s strange, though.
Try being a lady and watching that.
It’s really well done.
Yeah. The yoga pants thing was just …
It is really well done.
It’s frightening, and who would have known it’s from Hulu? Hulu finally stepping up, right?
Mm-hmm. I did a podcast with the showrunner for it.
They do a fantastic job. Look. The word was supposedly the Democrats weren’t going aggressively after Trump because they thought, “Okay. If he leaves, we have this kind of reheated Reganesque-like character who will step in, be seen as a leader for pacifying the nation in Pence, and then we have a guy who has endorsed electroshock therapy for gay people and that won’t close the door and be alone with a woman.” Right?
They thought, “We’re going to wait until ’20 and just take back the White House,” but I think when the military steps in and these people, regardless of what you think of them or the political elites, these people have been standing watch for our nation for decades, and they’re not paid very well or they’re not rich people. They do this quietly without a lot of reward.
Yeah. They haven’t really taken over.
I think the majority of Americans respect them and when they step in and say, “This is becoming a security risk, this demeanor, this decision making, this lack of discipline is becoming a security risk.” I think behind the scenes we’re seeing a slow-moving coup, but I could be wrong.
Wow. That’s quite a prediction. That’s better than Amazon-Whole Foods.
Yeah. Not only that, I think it’s going to happen sooner than we think.
Meaning one of the generals becomes our president?
We’ve had that. We’ve had a general be president.
The Vice President will become, not a military coup. The Vice President will become the President, but I think the military is going to sit down, the Joints Chiefs of Staff are going to sit down, and say, “Mr. President,” and these are people who respect hierarchy. “We have no respect for you and we are worried about you, and think you present a security risk.”
He’s just an outlier in that way, right? I mean, mostly that has been the way it’s been. Most people think that that’s how it’s been run. It’s just this guy is drawing outside the lines and he can’t do it anymore.
Oh, I think we’ve gone well beyond. I mean, regardless. The one thing I like about Trump is I think in the past we’ve had leaders who actually believe this stuff, but they’re smart enough to keep it to themselves. He’s not.
There’s so few ways you could unite 99 percent of people against you and one is Nazis. I mean, what’s next? He’s going to start protecting …
That’s what I was going to say. What’s next? He’s going to start saying there’s two sides to the pedophilia issue.
Yeah. I could argue that, but I could see him doing it.
“There are some good people on both sides.”
“I know some really fine people on both sides.”
I think he’s going to break up with us first. I think he is going to resign.
But I think some people are going to sit him down and freak him out, and say, “We just don’t support you and we think you should step down.”
Right. Oh, God. What do the Democrats do to get that back if you’re a Democrat yourself?
I don’t know. Get a backbone. Grow a pair. Stop being so quiet. Stop profanity.
Who do you like among the current people?
That’s a tough one.
What message? What brand?
We talked about them. Gavin Newsom, I think, is a good one.
Gavin Newsom? Yeah.
I like Al Franken. I think humor would be a great way to counter some of the stuff that’s coming down the pike. I’m hoping a new crop of candidates prop up now that the Clinton Machine is out of the way. I’m hoping we see a bunch of Progressives. I also, at some point, hope that … Florida, there’s more people registered Independent than Democratic or Republican.
Right. It’s been changing to something else.
Yeah, but people always hope for that and it never happens. Who do you like?
Oh, none of them.
None of them?
Not yet. There’s someone else coming.
None of them?
There will be. It always has to be a person kind of thing.
There’s pieces. I think Al Franken is a great idea, but something like that. I think humor’s right. I think a progressive mentality, a progressive-feeling mentality will eventually win out.
Do you know what I mean? I do think eventually our country always goes to the center. It just always seems to. A version of Bill Clinton or a version of Ronald Reagan. You know what I mean? Somehow in there, because Ronald Reagan, remember how crazy we thought he was when he kept saying, “We’ll begin bombing in five minutes,” and Star Wars and stuff, and then now, oh my god. “How do you like me now?”
Yeah. He looks like Elizabeth Warren, now.
No. I know, right? It’s kind of weird.
I don’t know. I think it’ll be interesting, but I like these new things, Scott. This has been fascinating, as usual. Instead of Amazon buying Whole Foods, now we have a bloodless coup that he is predicting.
Yeah. Regression to the mean, you should never make these kinds of predictions.
The General Francisco Franco is still dead. Thank god for that.
There you go.
You know? Again, branding Nazis still bad, right?
I can say almost with total certainty, that if you’re building a brand …
I think it was total certainty.
… Go with youth. Go with America and try to avoid the whole Nazi association.
Yes. All right. I think that’s good.
That’s why you get paid the big bucks, right?
You heard it here.
Nazis, trans fat, Al Qaeda, and pedophiles just stay away from.
Most of the time.
Most of the time?
Most of the time, yeah.
All right, because there’s many sides, as you know.
Anyway, we’re with Scott Galloway. He is a professor at NYU. He’s the founder of L2. He’s very clever. He has a new book coming out called “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google,” or I guess it’s the gut, the sex, the love, and god.
That’s it. I can’t wait to see who else everyone else is. Anyway, thank you so much for coming to the show. It was a fantastic talk, as usual.
One more time, again, the title of the new book is “The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google,” and you can get it on Amazon right now. You can preorder it.