Professor Scott Galloway: Masters in Business (Audio)

School of Business. I found this. I found some of the work of of Scott Professor Galloway on YouTube and he's done a number of really interesting videos. He does a weekly video. But but the most fascinating thing I saw of him was called the Four Horsemen of Technology, Apple, Amazon, Facebook, and Google. And he did this presentation at a conference.

It was thing like nineties slides in fifteen minutes, and it was really just a tour to force discussion of what's going on in branding, in retail, in technology, and it was really just an amazing um conversation. And so

I saw this, I started doing some research. Uh, he's right here in n y U use, you know, ten minutes from from the Bloomberg studios, and so I invited him to be on the show, and to my great uh surprise, he said yes, And so we had this conversation and he is one of the most fascinating knowledgeable people when it comes to those areas things like luxury brands and marketing and the intersection of your your physical stores with your online sites, with your social and mobile engagements.

And it's really quite a fascinating um conversation. We we covered so many different things. It's really so interesting and amazing. And as you'll hear, at a certain point, it shifts from me, you know, doing the radio thing and asking questions and having him answer to just a real conversation about what is happening in the universe of technology and retail and branding and Amazon and Apple and Google and Facebook and Twitter and everything else. So I I really

had a great time sitting and chatting with him. He's the sort of guy you would love to pull up next to um in a in a bar, sit down and have a beer and just talk about what's going on. And that's pretty much what we did. A little cappuccino and we were off to the races. So without any further ado, here is my conversation with Professor Scott Galloway of n y U. This is Masters in Business with Barry Ridholts on Bloomberg Radio. My guest today is Scott Galloway.

He's a professor of Digital and Brands at and while you learn, is that the correct title professor of Marketing. UM. Welcome to Bloomberg. So before we get started, you may not be well known to all of our listeners. Let me go through your very very significant curriculum. Curriculum VITA bachelor's from u c l A and then an NBA from Berkeley. Currently Clinical Professor of Marketing, n y U Stern School of Business. Author of the Digital i Q Index,

a global ranking of prestige brands. Will talk about that in a little more detail. Named one of the world's fifty best business school professors, founder of numerous firms L two, rent, Envelope and Profit and named the World Economic Forums Global Leaders of Tomorrow, which is a hundred individuals under the age of forty whose accomplishments have had an impact on

the global level. You're also on the board or have served on the board of Directors of Eddie Bauer, the New York Times, Gateway Computer, and Berkeley's Hot School of Business. Did I skip anything or is that No? That's great? Thanks. So so let's talk a little bit about your background. First of all, why would you leave Sonny, California? For Yeah? It makes it makes no sense, right, That's one of

those things. Every time you're flying back into l a X and you look around, you're getting your convertible, you think, why did I ever leave? I just always wanted to live in New York. You know what it's like. This is if you're an energy, it's it's the center of the world. Yeah, the helm of the bob sled, the tip of the spear of the greatest experiment. The density of culture, interesting people. Is a great place to live. I love San Francisco, did my graduate workout there. Start

a bunch internet cominges. But it's a one industry town. It's tech l as in one industry town, it's entertainment. The thing one of the great things about New York is the currencies of power and success here are are multiple. There's a lot of different ways to kind of get your groove on here and just just love it here. Oh sure, business investing, theater, publishing, television, real estate is just huge here, although it seems to be huge where

if we're looking around the country. Yep. So you come to n y U as a professor, Um, what was tell us a little bit about red envelope and profit do very different companies. Sure, So started out of Morgan Stanley, only real job I've ever had, and then I actually got kind of sick, and when you get sick at a young age, you reevaluate your forced maturity is kind of forced on you and decided I didn't know what I wanted to do, but you I didn't want to

be an investment banker. So did what anyone who is fairly ambitious and doesn't know what they want to do. I went back to graduate school and then got very inspired by a guy named David Ocker, who was considered the father of modern branding UH, and started coming called Profit of Brand Strategy Firm, focused on his principles. We grew that to about four people, really rewarding, but then decided I didn't want to be in a services company.

I've always decided our thought of services company was really a young man's business. You're kind of on your clients schedule, and then was fortunate enough to get swept up in the Internet era, started red Envelope, multi channel e commerce company, and then on the day of the I p O said this is great. I have some opportunities and some flexibilities with what I want to do with my life and decided to pursue there's kind of lifelong passion or

dream and teach and change my life. Moved to New York, join the faculty n y U, and here we are. That's that's a huge, huge set of changes in a very short period of time. Yeah, it's it's but it's been a lot of fun. So so you briefly were at Morgan Stanley, so you have some experience in the real world. How long have you been an n y U F I joined the Faculty n y U and two thousand and two, and it's been just it's been thirteen great years. Just feel exceptionally, exceptionally fortunate to get

to teach at such a fantastic university. It's been, it's it's just been wonderful. So let's talk a little bit about the Digital i Q Index. This is something I believe you were involved in creating. Was it two thousand and ten. Is that right? Yeah, it's it was really accidental. You can't get very far in academia without doing research,

and my background was in the e commerce. I thought, there's there are metrics for return on equity and UH, price earnings, carc quality with JD Powers, how many people watch a program with Nielsen, But there really isn't a measure or a benchmark for how a brand is doing

across its entire digital footprint. So architect and an algorithm of eight hundred and fifty data points across site, digital marketing, social and mobile, and then applied it against a hundred brands and rank them, thinking it would be a piece of academic research. Within about forty eight hours of releasing it heard from about forty of the brands saying who are you and why are you doing this? And recognized

there was a commercial opportunity. So I asked the dean if we could spin out the I P and start a private enterprise called L two, and n y U was very generous with us and and said fine, as long as your support of M y U and UH. And that's it was really the birth of an accidental business and now L two works with everyone from PNG and Uni Leaver to Coach Tiffany, Nike, Samsung. So it's

been a lot of fun. So you talk about looking at and evaluating a company across site, digital, social, mobile, that's a pretty broad yet inclusive set of of data points. It's the thinking behind that every place a consumer might come into contact with a brand, so all the touchpoints so and every brand has different strengths and weaknesses. And regardless of how much capital you have, the cruel truth of capitalism and investing in digital is you have to

pick your punches. So even a home depot or a Sephora or a Vitan, organizations you would think would have a ton of resources, have to pick their punches. And the issue is you know what lever you're gonna pull. If you're really about increasing your percentage of sales online, you're gonna be more focused on side. If you're about signaling innovation to a younger consumer, it's probably gonna be

around more around social. If you're trying to create a loyalty program that has tremendous uses digital to connective tissue between your store and your site, that's more about a loyalty program and a mobile phone in the store, So we're trying to create a benchmark sets the brands contract their strengths and weaknesses relative of their competitive set and help them shape the shape their digital roadmap and allocate

their human creative financial capital more efficiently. Because everyone agrees that a better investment in digital is probably gonna get your great to return than did than investments in some other areas right now, but they don't know what they don't know. They really don't know where to start. So the ideas, how do you figure out how your digital capital allocation foots your of all corporate strategy and how do you drive stakeholder growth. I'm Barry rid Helps. You're

listening to Masters in Business on Bloomberg Radio. My special guest today is Scott Galloway. He is a professor of Digital Brands and Marketing at n y U and I love your conversations. By the way, the way I found out about you was the Four Horsemen video which is all over YouTube, and some of the conversations you've had about retail and the deep dive you do into that space, which I find to be absolutely fascinating. So let's let's

jump into retail. I love this quote of yours. You said retail stores are the new black explained so in the turn in the world of e commerce, I believe the pure play commerce has no future. That almost every pure play commerce company is either going to open stores or go out of business. That's a pretty radical position, isn't it. Well? I would defend I think it's defensible. I would I would challenge anyone to name the pure plea e commerce company, and and and and let's talk

about whether this is a sustainable business or not. And effectively, the consumer always gets what she wants. And there's there's three doors here. There's a great e commerce site that just has an e commerce offering. There's a great retail concept with just bricks and mortar or maybe a week

e commerce site. And then there's door number three, a Saphora, william Snowmer and Macy's that have great stores, grat e commerce and use digital as a connective tissue for around a loyalty program, and the consumer wants door number three. I think the future looks more like Macy's and Williams Snowman than it looks like Amazon or not a Porte or Guilt. And where does eBay fit into that? Ecosystem.

I wouldn't describe you as a pure play retail. I think of them as a marketplace, just to get between a berness. They're not taking inventory there, They're they're a marketplace. And speaking of inventory, you another quote of yours. We

have these incredibly flexible, robust warehouses cold stores explain. So I've been a big fan of Amazon, and I'm actually going a little bit bearish on it because I think it's I think what Amazon has missed a little bit is that in terms of consumer behavior, consumers value convenience over speed, and that is if you were to order, say you decided, I'm gonna spend more time outside at my home in the North Fork and I need some some block, so I'm going to order Laroche Puss, which

is this fantastic und block. You neither order an Amazon and have it delivered to you in a day four hours, two hours if they have their way, or you could order it at sephora dot com and then bomb down the elevator here and pick it up with the Sephora two blocks away anytime between the hours of ten and a PM. Click and collect or buy online pickup in store is probably the biggest phenomenon retail in the last couple of years, we didn't see a company it's coming.

It sounds very base, but it's hugely convenient to order online and pick up in store. And these if it's in the store, why do I have to order online? Why could I just walk two blocks and do that? Because people like to get the information, they like to do the brow saying. Emotional and intellectual purchasing has moved from the store to online. So for traffic to retail down and five years by retail has grown two or

three percent a year. But what happens the following The browsing and buying has moved online, The fulfillment, the transaction and the pickup is still in the store. Think about cars. Think about when you and I were a kid, we used to go with our dad to that one area town where we look at a car we'd actually kicked the tires, take a car and it's test drive, look at those brochures and negotiate the transaction. The number of people now who have actually skipped the test drive has

doubled just in the last five years. We can go online. Cargoes are prohibited from actually selling online, but effectively we buy online. Now we go to a great configurator, we start getting served ads by other automobile companies. We can go to Audi dot com, build our a six down to the leather piping on the seat. We can find out how much the dealer paid for it. We can get user reviews, and then we go into the dealership armed with the exact car. We want the exact price range.

We know we should. So car dealerships are no longer selling cars. They're really just warehouses fulfilling and consummating the transaction. That's a great metaphor for what's happening in retail. Browsing and decision making have moved online, even if the transaction and the pickup are happening in retail. But bricks and mortar plays a great, you know, really important role. It's a great way to pick up stuff. It's a great place to learn more about the transaction. It's a great

place to brand. These are powerful branding vehicles, these these brick and mortar stores. So I think the new black and e commerce is stores. A lot of them are opening bricks and mortar. So you talk about um, the biggest challenger to Amazon is stores like Macy's and I've noticed over the past few years in terms of marketing and displays within the stores. And I know they own a variety of other stores. I think they own Lord

and Taylor or Bloomingdale's or some combination of um. But I've I've noticed that they've really gotten very savvy about their online and you show up at store, Hey I have I like this, but you don't have it in black, and you don't have it in a large They're like, oh, we'll ship it to you for free. That's a new thing from them, that thinking like an e commerce company, not like a well we'll get a delivery in six months and you can come check us out. Then. Yeah.

The most inspiring companies in retail for the last five years haven't been Amazon or Netaporte. It's been Macy's in Nordstrom. The crisis is a terrible thing to waste. Five years ago, I advise Hedgephones and a large read came to us the fund I was advising, and said, we want to take a control position and Macy's or a large position, and advocate for them to shut it down and sell the underlying real estate, which is worth more than the

stock right now. They saw the future was not where they were headed, and they made massive investments and leverage their operational competence, their capital to cash flow to build unbelievably strong e commerce offerings, connected that to their stores and have fantastic multi channel offerings. Macy Stock is outperformed Amazon over the last one, three and five years. Nordstrom

Stock is outperformed and Amazon the last several years. These are incredible companies that have embraced the digital future and have proven basically everybody wrong the future really is about multi channel Macy's and Nordstrom's, I would argue most inspirational retailers and have rewarded their shareholders of the last last several years. So much for first mover advantage, at least

when it comes to Amazon. Yeah, Leonard Lottar at est lottor another unbelievable company, Uh you know said it the second mouse off and gets the cheese if you really look at uh. Peter Golder, who's a where's a colleague at Stern and now as a call as now as a colleague at Dartmouth is probably the best scholar under the age of fifty on the world of innovation. We

talked about Clay Christenson. We talk about but but Peter Golder, in my opinion, is the kind of future of innovations relates to academia, and the body of his study basically says, if you talk about return to stakeholders, it's not the first mover, it's the second. The true innovator. The guy or the gal that goes first usually doesn't serve shareholders that well. It's the person that comes in second. Apple. Apple has been second at most stuff. They're not a

true innovator in the definition of the word. They weren't the first into into object are in computing, they weren't the first MP three player. They weren't the first mobile phone. But they look at something, they improve upon it. They wait, and they come in and make it more user friendly. The department stores, the best retailers have often been the second mover. So let's talk a little bit about brand

versus products. Because you've discussed this, you know what's easy to fix a good product with a bad brand, or a bad product with a good brand. I think it's changed. I think and and I've devoted my life from a majority of my professional life around brand. I've made a

nice living from it. But I think the sun has passed midday on what I call the era brand the eighties and nineties, the primary way to drive a lot of shareholder value, Barry, was to have an average to good product and then hire the best talent around brand and create unbelievable intangible associations. Are a great brand, an average shoe, an average cup of coffee, and the an average beer and the best brand in the world. But what do all these technological innovations and platforms allow us

to do? They allow us to share great ideas that this show is generally better than other shows. It's going to spread faster than anything before. I'm Barry Ridholds. You're listening to Masters in Business on Bloomberg Radio. My special guest today is Professor Scott Galloway of n y U Stern School and L two Digital. Let's talk a little bit about Amazon. Um, what is it that they're doing

wrong with their last mile strategy? So, first off, incredible company and uh, Jeff Bezos arguably the best you have the last ten years. I think they're two. Primary advantage that has cost some tens of billions of dollars to to erect have been this last mile, incredible last mile infrastructure such that they can supposedly within twenty four months at about fifty percent of American households of everything they buy within two or four hours, which is incredible. And

then one click paying. I think we we overlook what an incredible innovation is to be able to just touch something and know that it's on its way. However, very I would argue that some recent innovations erode those competitive advantages, specifically Apple Pay. Some of the things Google is doing are going to make want that one click payment advantage a road in value. I think other people are catching up.

I think the most unusual or the thing that none of us are expecting and and there's still some time to see if it plays out, is actually believe Uber is gonna give a lot of retailers the opportunity to catch up very fast around the last mile without making the same staggering investment Amazon has having to make it. I think effectively, Uber has created a vascular system for business.

And when you have someone a smart person inside their own car that they have paid for it without a union, without without a uniform, and by by the way, I'm not sure that's a good thing without health insurance. You're effectively giving every retailer and every business in the world that last mile competence that cost Amazon billions of dollars for a fraction of the cost. So in some I think the Amazon advantages, those two advantages are slowly being

eroded by other innovations. Let's talk a little bit about both those things. I don't really see what the big deal about one click is. I'll take the other side because I've been on Amazon for well almost twenty years, I want to say, and when I go to buy something and I'm an Amazon Prime member, I kicking and screaming, finally did it, and since then just love it the past couple of years. So when I buy something, it's which credit card am I paying? Is it the office

is at home? Which of the home cards is it? Is it going to the office, is it going to the house. Is it going to a third destination? So for me, one click really never because I always and what's the big deal? I select one of these four credit cards, I select one of these four destinations. It's it's not terrible. I love the idea of Uber being that last mile. But let's think about that. The closest Bloomingdale's to my house is. I live all the way in the middle of nowhere on the north shore from

Long Island, but it's still twenty minutes away. If I order something from Amazon and with Prime, it's usually there within two days. I don't know if they're gonna get it there all that much sooner. But I'm hating, you know, I need something here? Does it's here in two days? There's nothing I need right now that I can't drive ten minutes and get so anything I'm watering, I'll get here when it gets here. If I want something from Bloomingdale's for them to send an Uber driver to my house.

If I was going to take an Uber ride to my house, um, that would cost you know, thirty bucks or so. So is there gonna be that much of an infrastructure of deliveries that they're not just dropping off one package, that dropping off ten things, and it's essentially a rounding era to to a store like that. So the short answer is no. But I would argue Barry that the war of shareholder value isn't gonna be one

or lost over you. I think you're the anomaly, and that I think the majority of shareholder and wealth creation is going to be around serving people in urban areas, because, to be blunt, that's where the majority of the wealth is moving towards. I think we're creating a set of supercities where the density of income and disposable income is aggregating around a small set of supercity. So I think Amazon still works for you. Quite frankly, I don't think

it works for Amazon. I think it's gonna be expensive for them to deliver to you. They're Amazon's shipping costs for six billion last year. They're going up a year. They took him three billion in fees. That's not sustainable even with Amazon's cost cheap cost of capital. You want to see a celebrity deathmatch, wait till this holiday is as Walmart has announced a prime light competitor at fifty bucks,

and they have stores. The thing that epitomizes this battle in the advantage Walmart right now will have over Amazon. As Amazon. Walmart has this great ad that says free delivery if you pick it up in store. And do you know a percentage of the population lives within a drive of Walmart A lot that's not exactly delivery that's going to the store and shopping. Yeah, but if if it's waiting for you, it's packaged and you can bomb right in and bomb right out. My prediction Amazon is

going to buy a gas station company. As fossil fuel has become less relevant in our life, we're used to bombing in left and right. Just what's happened in London. They took the ticket kios that where people no longer sell tickets. People can order their grosser reas it a tube station and have them waiting for them at their destination tube station. People don't mind picking up stuff. Was it a missed opportunity for Amazon not to have grabbed

radio Shack with their thousands of stores. I think that would have been a really interesting combination. But Amazon is so smart, they have such such incredible access to capital. I think they're going to do something traumatic. I wouldn't be surprised if they buy the post office or take a major investment in the post office. That's that's a problem.

Look what's happening. If you see job growth and job declines, most of the A lot of the job declines are coming out of municipal governments and government employees who are under constant pressure. I wouldn't be surprised that Amazon strikes to deal with the government to take over their less performing post offices. That would be astonishing. I'm Barry ritt Holts. You're listening to Master's in Business on Bloomberg Radio. My guest today is Scott Galloway. He is a professor of

Digital marketing and Brands at n y U Stern. I really love the video you did talking about the four horsemen of technology, and um, we already discussed Amazon. Let's jump right into Facebook. You call um first. You note how Facebook has changed the taxonomy of relationships, which is very significant for the way people interact socially. But the question that I the statement I really liked was Facebook has pulled off the greatest bait and switch in history.

Explain what you mean by that? Oh? Absolutely. Facebook convinced some of the biggest brands in the world to spend tens of millions of dollars to build these communities, uh, you know, likes and fans, and these brands did it because the notion was you'll get to own this community

and they'll be captive. What an unbelievable asset. But Facebook then said, just kidding, put a walled garden around it and in the organic reach on Facebook, meaning the percentage of messages that channelle puts out to their community that actually reached the channel community is now six percent, meaning only one in sixteen messages reached them unless barry, they pay and they advertise. So this was an incredible bait and switch. These are not These are not communities owned

by the brands. They're owned by Facebook. Same things happened, It gonna happen on Instagram or right now. It's a organic reach. They will figure out a way to put a paywall around it. But I'm shocked there isn't more. If you will outrage, I admire Facebook for being able to pull this off, but I think we forget how important it is to be liked or cute as an organization. Steve Bomber and Bill Gates were not likable or cute, Sir again, Larry more likable, more cute. But the regulators

are getting angry at them. Facebook lean in the hoodie. They have gotten a ton of license from Corporate America and regulators. In my view, that has given them a lot of leeway. I think what they've done has been exceptional in terms of their ability to say one thing and then do another for the for the benefit of their own shareholders. And by the way, I say that as an as an admirer, what they've done has been incredible. And yet there's been issues about privacy and issues about

people's data. How does that? How do they as a company deal with that or do they just shrug it off and say, hey, man, get used to it. Privacy is a thing of the past. Anyone who's talking about privacy is typically someone like you or me, a guy over the age of fifty. Young people don't seem that concerned with privacy. At the end of the day, the consumer behavior indicates one thing that people like to have their privacy violated as long as there's a coupon or

more relevant offering. At the end of it, we want relevance, and part of that relevance is observing our data stream and then and then responding with a more relevant offer. Now, the identity war is the secret war taking place online and Facebook is winning, and that is the ability to attach a specific identity with specific actions that you can serve more relevant ads and charge more for those relevant ads. Google cannot track specific identity on their core platform, the

search engine, and it makes sense. Neither you nor I are comfortable with the idea of having our name and our picture above a list of everything we have typed into that query box. Right, all of us have typed some crazy stuff into that box we would rather people not know about. However, we're not as that's what the incognito window. Yeah, that's where you're you know you you

you you erase your cookies. But with Facebook, for some reason, we're not as uncomfortable with Facebook attaching our actions to our specific identity on Facebook. So as a result, Facebook is now tracking more identity data than Google and is able to use their platform across the wider reb web to serve more relevant targeted ads. Facebook is winning the identity war now. I find I'll give you a perfect example of something online that I find creepy and I

don't know if other people find the same thing. So my wife and I were literally in a um florist nursery um recently, and we see this hanging chair, beautiful hanging chair. It's got cushions, it's really really odd, interesting shape and scene price, and I just make note who makes it? Necessarily let me look at it online? Where it's a third cheaper and so okay. So now I just want to get a sense of what the markup was. I know with this more or less should go for

and I forget about it. Now wherever I go ads for that chair of popping up and it's like, no, no, I'm done with that. I'm moving on. Why are you following me around the Internetive it gets annoying. It's contextual retargeting. If you go to an Audie site, you're gonna start getting served ads by Alexis and Mercedes because it looks as if you're in the market for a car. Most consumers actually like it. Most consumers rather have a relevant ad on the right rail or their top. That's exactly

where most people. Most people actually like that. Embrace it. The thing you talked about. The The other point is show rooming. That is going in and trying to find a different price. And there's been a lot of popular

press that this is bad for retailers. The majority of the research shows when people pull out their phone and price compare, they not only end up buying, they often end up buying more because typically what they find, except for the retailer you were in, they typically find they're getting it around the best price for a good price, and then they start reading news reviews, finding more products. Actually, web rooming, being in a store and using your phone

is a creative to the host retailer. Really, that's fascinating. I know that at one point in time best Buy was a little discouraging them. Yeah, I think they've since changed their tune. They have and only look at best Buy. That's a great example of the war of how stores are new black. If you order a flat screen TV, it's gonna be it's gonna get to you faster if you order from best Buy, because they're going to fulfill it out of their store in East Hampton or some

some some store out there. Then Amazon will get it to you because they're using these unbelievably robust, flexible warehouses called stores. That that's amazing. So now let's talk a little bit about Google, and I love you quote about Google. It's the closest thing to God. You ask a question and you get an answer. So how is Google losing if we consider them God like? Sure? So when I say God, you know, when what do you do? When

you pray? You send up information or a question hoping that a higher source that's smarter than you will send it back an answer. Right, is my kid going to be Okay? Now you go onto Google and say symptoms and treatment of croup, right, and it gives you back what's going on? So I think it is somewhat godlike. Now, having said that, I think that Google is going to

decline in value and influence. Why because there are one dimensional company that hasn't had any success branching out much beyond Android or Gmail nine percent of the revenues of the profit from the search platform. Also, at the end of the day, Bury the way it summarized it is that this rapid change to a mobile world is not good for Google. On a mobile phone, of our time done in app, were less likely to search when we're

in app, which is not good for Google. A lot of competitors popping up a billion queries a day on Facebook of all products, searches now start on Amazon. So that's so there were dominant, their dominant market share starting to show some signs of weakness and cost per click is going down and as a result, profits and revenues have their profit and revenue growth. If you will have have stalled, this is a one dimensional company, an unbelievable

revolutionary product. But I think my prediction is you're gonna see a couple more minute earnings misses, and all of a sudden, that company is going to find focus again. The self driving cars, the broadband blimps, the wearables are going to go away. What about this new app cold Now, I don't know how familiar are with that that essentially hovers over the whole operating system, and even within apps brings up that exact sort of search behavior you would

discuss them. So you could never count Google out. They're just they human capital, the people, the culture, just a remarkably innovative company. But based on where they are now relative their valuation in the marketplace, I think they have some substantial competitive threats. And the thing about Google versus an Apple or a traditional retailer is your one click away from going to a competitor. So I think Google, on a risk adjusted basis, has greater risk than some

of the other guys. And I think they're gonna leak market share to Facebook. We didn't talk about YouTube everybody. I just circled that question. Everybody talks about our YouTube is gonna disrupt TV. I think Facebook is going to disrupt YouTube for the first time ever. There are now more native videos uploaded to the Facebook platform than links to YouTube. I think you're gonna see Facebook start to garner more and more share of our time in terms of how how we watch video. I think it's moving

to Facebook. That's interesting since since you mentioned Apple as the fourth enforceman, let stalk a little bit about Apple, which you call a luxury brand, not so much a technology dent. It's been the worst, it's been the worst or the best house in the worst neighborhood for a long time. And that's a tech hardware. That's just a bad business, low margin. And they decided very Dell. Who else is in that space. I was on the board of Gateway Computer. I mean, it's just a difficult Our margins.

Our margins of Gateway were six percent. Try and operate a business on six percent margins. It's just computer hardware. It's just really difficult. They have effectively moved down the tour. So we only do three things in business. We very we appeal to the brain, rational decisions, low margin, transportation, food, basic shelter. We appeal to the heart choosing moms choose Jeff P. And G figured out that we're social animals. The biggest predictor of life expectancy is how many people

in our life we love. It's not how fat or how skinn you are. We how much we smoke. You take. If you're new a new mother, you're gonna live. If you're taking care of your parents, you're more likely to live. P ANDNG figured that out post Worttle or two and said, if you wash your kids in clothes and tied detergent, you love them more. We have a need to love, and and CpG firms tapped into that and then just

move down to the tour. So you go to the second most powerful instinct in the world, and that's reproduction, the self expressive benefit. The watch I'm wearing costs eight hundred bucks. I paid a lot more to wear it because I'm trying, in a vain attempt to intimate Italian masculinity to the rest of the world, and on a very base level, and I don't like to admit this.

I think I'm trying to signal to the opposite sex that if you mate with me, your kids are more likely to survive than if you mate with someone who's wearing a Swatch watch, and I don't think in the business world we're very honest or open about how strong self expressive benefit is. Tesla is not an environmental car, as an attempt to signal to the opposite sex. And you can afford a hundred dollar car. Women were ergonomically impossible six d dollar shoes because they're trying to solicit

inbound offers from those same men. I realize how base and how awful that sounds, but it's the core of evolution, and it's what has driven the best sector in the world. Barry the luxury sector, Eschmont, larger market Captain, Deutsche Telecom Este Lot or larger market capped w p P. Apple is decided we want to be in that business, and

they have. They are the only company in history that is successfully migrated down the torso a better computer, rational decisions, saying to our heart emotionally with songs, and now they are the ultimate self expressive benefit. You no longer signal with your watch or your hoodie. You signal with your iOS. If you own an Apple phone, you were saying to the world, I am smarter, better educated, and have more options in terms of who I mate with. The transaction

is complete to the Apple Watch. Apple is now the ultimate luxury brand. It defines what it means to be a luxury brand, and they're going to be the first trillion dollar market cap company on the back of their successful transition down the Torso and it become a luxury brand. Scott, where can people find your work? What's the best way for them? I know you have a YouTube channel for L two. How do people find that? Other than thanks? Plunching in Scott Galloway into YouTube. Thanks for asking L

two Inc dot com. Almost all our videos are there, all right? That's great? And um be sure and check out my daily column. I'm on Bloomberg View dot com. Follow me on Twitter at rid Holt Scott. Your Twitter handle is proft Galloway proft Galloway at Twitter. I'm Barry Ridhult. You're listening to Masters in Business. I'm Bloomberg Radio. Welcome to the podcast portion of our show where I take

my ear piece out and don't worry about time. Although I'm getting better at kind of pacing that I used to be so awful with that, you have no idea how thinking about how much time do we have? It's really a distraction and a and a disruption. So anyway, Scott, thank you so much for doing this. I'm really I've I've fallen in love with your videos. My wife is a teacher and there's one thing I wanted to ask you about. So I first I showed her some of

your video. She really she was like, Oh, that's kind of interesting, like passing interest in her husband's life. But then the letter, the email from the students, and she's like, who is this guy? This is awesome. She's a teacher and she has all sorts of headaches with kids like everybody else does. Um tell us the derivation of the get your s Together letter, which we can't curse over the air waves. Um, how did that come about? You just never know when you're fifteen minutes are gonna gonna hit.

And this was an email I got from a student who walked into my class late, and then I kicked him out of class. I kicked as per your class. Also thing in general and gradgety school with coddle students too much. And as a clinical professor, are you know our mission is to try and prepare kids for the workforce, and I think part of that is giving them a sense of what the workforce is actually gonna be like

and trying to impost some standards on them. And one of those is if you're late to my class, I don't allow you in. And I didn't have late. Can you show up two minutes late, five minutes or either on time or you're not allowed in. It's hard, hard military stuff. I have a theater seating for the kids who work part time because I realized sometimes I can't get downtown of time. At six fifteen, we let people in for a theater seating, meaning meaning outskirts of the class. Yeah,

I know. At exactly six fifteen, we let in latecomers for the part time Okay, after the first after the first part of the first act, but this kid came in. I kicked him out, and then he wrote a long, snarky email to me about how we checked out three other classes. Anyways, I got equally snarky back, and then it got forwarded, and then Within and then dead Spin,

the sports blogging places picked it up. But it got about half a million beaus, and at one point I think the dean of the school was getting an email either wildly in favor or wildly against what I had done about every seven or eight seconds when it just kind of blew up and it tapped into a vein because one a lot of people feel as if, Okay, this millennial generation is entitled, and we're very supportive of

my response. At the same time, a lot of people were said, look, these kids are paying six thousand bucks to take your class. If they show up a few minutes late, you just need to suck it up and deal with it. So it, like anything that goes viral, I think it tapped into a bit of a controversy of the time. It was about five or six years ago, and every two years it gets fired up again. But that that is not what I had hoped or expected. What you know is the piece of literary work that

I would be known for. Well, you know, the generation and the offspring of the baby boomers, who you and I are really just on the other edge of that where would be TwixT and between Gen X and and boomers. But um, you know, they get participation awards for showing up, and I think my wife tells me that they come to school with that attitude, Hey I'm here, where's my trophy? No, you gotta do something to earn a trophy. It's it's

a double edged sword. So about eighty people at LT right now, I'd say the average ages around twenty six. So work a lot with millennials. And the downside is they are more entitled. Remember when we went to work, If you can you imagine whyking your boss or your first job and so I want to have a career talk. I mean they would have said, okay, work your work, your ass off, career talk over and get back to work.

And now these kids are very focused on their lifestyle balance, things that we just wouldn't have had the guts to bring up, having said, at least not till ten twenty years, until we had some currency, tho, some divorces, something something right, all of those things. But the flip side is there's a lot of media tention on the net millennials, but the reality is the more talented than you and I

were at the village. Oh yeah, the tools they've grown up with, the skills they have garnered, just some of these kids are exceptional. We wouldn't put up with this otherwise these kids would have trouble getting job. The reason they're can demand more of a balance in their life, the reason they can demand more talks around their career.

The reason they can demand, uh, you know, wanting to know what is the larger role that their job plays in the world is because a lot of these kids are outstanding that some of the some of the skills they bring, the our ability to pull together information. Uh, you can't force maturity, So that's still the same, you know. But millennials are the most talented generation I have ever worked with. Hands down. It's going to be it's gonna be inspiring to see what they're able to build over

the next ten or fifteen years. You know. The debate that that has been circulating about technology and robotics and what it's costing in terms of jobs. I speak at a lot of schools, I give a lot of speeches around and one of things I'll never forget We went to a wedding of my wife's cousin in Virginia and we meet not only so I know the groom who from he's this toll to now he's getting married, and

we meet some of his friends and the groomsmen. One of the groomsmen created this perfect for college and Apple iPhone case, the dumbest thing in the world. He has built into the back of it a bottle opener, so you could pop a beer you always have, right, Like so obvious, And I'm like, oh, that's interesting. How are you gonna manufacture this? He's like, oh, we have a company in China. They drop ship. It was sound about

forty units a month. There's a kid who's twenty in college, Like, and every time I go to a conference with young kids with college students, that's sort of insane experience. They understand forget roy and loyalty, forget company loyalty. The company ain't gonna be loyal to you. They have no loyalty back and they know that they're essentially um their independence.

They're they're you know, contract players, and they're aware of it. Yeah, it's we we get We get angry at them because most of us now are in principal positions where we want to talk about loyalty because it serves our advantage. But at the end of the day, I wonder if they've figured it out. And you've talked about this, your blogged the Big Picture, and we've talked about this a lot. There are a lot of well publicized cases of these kids who can tap into global markets and have extreme

wealth or success really quickly. There's a dark side of that, though, and that is I think it's getting harder and harder for these kids just to be solid citizens. Say they're not geniuses, say they don't get lucky. I think it's getting harder and harder just to punch out an average living.

And and you know, it gets into income inequality. And I like a lot of the work that you've done on this, and a lot of the work that your past guest, Henry Blodge has done on this, but I would when I look at my class versus fourteen years ago, I got a hundred forty kids on every Monday night. I think it's never been easier to be a billionaire. I think someone in my class will be a billionaire

either through alternative investments, are starting a tech company. At the same time, it's never been harder to be a mill in there. And what I mean is to be aggregate a million dollars, just be a middle class guy or gal that aggregates some semblance of a living over ten or twenty thirty years. The top, the most talented people are going to aggregate wealth faster and in the

velocity we've never seen before. But the rest it's going to be harder and harder just to be a solid citizen when you when you look at the state of the recovery as to what's been going on. You know, I love the William Gibson quote the future is here. It's just not evenly distributed. The same is true for the recovery. And it depends on what industry you're in, where you live in the country. You mentioned superurban centers, so we travel around the country and visit clients. D

C is a house of fire. You go to Boston and that's in New York. Obviously that's this ghast. Seattle people tell me the recovery is terrible. Have you been to Seattle? Seattle? Austin is a little smaller. I think Austin is the fastest growing city in the country, but Seattle is number two, and it's a big city with a lot of industry and a lot of track. It's most amazing. They're still actually fairly reasonable, at least compared

to San Francisco and Silicon Valley and and NAPA. That that whole run of an hour north and an hour south of the city of San Francisco is utterly insane, it's lost its mind. We're creating a small a small number of elysium like environments where the life is just incredible there if you can afford access in the opportunities, but most people can't afford it. In Europe it's London,

you can't. It's London in the seven Dwarves. If you're an unbelievable systems application developers, saying Baconi Italy er in Marinello, you end up in Milam within twelve months, and you're in London within thirty six months. There is Look at how and you've talked a lot about this. You know, the top top one percent aggregating, but this isn't a one percent thing. This is really like of the professionals technology, there's a whole separate that the middle class has really

shrunk and the top one person. What's so differ today is the top one percent, in the top one percent are so far ahead of anything we've seen previously. If you if you hold that aside, put put aside the g fives and the hundred million dollar properties, just normal insane wealth, hundred millionaires, that sort of top one percent, top ten percent, top this recovery. I actually left out.

The most significant factor if you have a graduate degree, if you have a any specific technical skill and degree that goes with it. This recovery has been very, very tropic, right, really good if you come out of college with an English literature degree and you don't have a skill set that you can take to one of those urban supercenters, this has been a really terrible recovery. We were talking about Facebook. Look at the innovative companies of the past.

You know, a Leaver a hundred and fifty billion dollar market cap, has about a hundred and twenty five thousand family being supported by Unilever, Intel more efficient, about a hundred thousand people. A hundred fifty billion dollar market cap. Facebook two billion dollar market cap, nine thousand people. That's amazing. So you have more and more spoils going to fewer and fewer people. And Facebook is a good company. It's great if you're on the Ferrari dealership and pala Alto.

It's great if you own real estate in San Francisco. It's great if you're serving the ecosystem of Facebook. But I think these companies have so dramatically outpaced wealth creation. These companies, the four horsemen, Apple, Amazon, Facebook and Google have the population of Lexington, Kentucky or Corpus Christi, Corpus Christie, and they have the GDP right the value of the

GDP of Spain or Australia. When you talk about and they've effectively, I think, legislatively and and operationally done to the US with the South canow militarily, I think they're seceding from the nation barrier. They're ultimate, they're incredible tax avoiders. It's all legal, but they're licensing their IP overseas and avoiding taxes. They're telling women will pay for them to freeze their eggs. They're telling people that they'll do better

DNA testing. They're giving them their own municipal transportation back and forth and work. They've effectively succeeded from the nation. They've said, we're smarter, we're better, we can create more wealth. We're going to create a society outside of the normal boundaries of the of the sovereign in the US, and we're gonna operate in the Netherlands. I think they were effectively seceding from the US and well, when we look at Google as example, in San Francisco, a lot of

the complaints about the Google bus. You would think, who cares they have a bus? Is that much more room on on public transportation? But that's not the attitude in San Francisco, is it. It's you have a lot of frustration. I think a lot of the civil unrest has taken place is a lot about the individual acts of violence, but it's about frustration that there's just if you're in this uber class, you have the right skills, the right

work ethic, it's never been a better time. But if you're the ninety eighty percent below that, it's just harder and harder to be at the average Joe. The heirs to the Walmart portion the wall in the airs were probably very decent. People have more wealth in the of America. If there's gonna be a revolution in this country, it's probably gonna start an aisle five of the Walmart. I mean, it's just that if you have the right skills, it's

never been a better time. But that that quote unquote population of people the right skills is getting smaller and smaller, and more and more fruits have have act created to those people. The good slash bad news is whenever this has happened in history, it usually self corrects in the form of war, revolution, or famine. That's the self correction.

Well that's not very encouraged. That isn't encouraging. So and the funny thing is, you know, post War War two, you could raise a family on a job as a postman or a fireman, or or even a teacher or Hey, if you were an accountant or a lawyer, you were in the uppercross. You were doing really well. Now that whole um low skilled jobs have have slid to the bottom of the middle class and what used to be considered high skilled jobs lawyers are accountants. Maybe accountants are

doing better in the lawyers. I think we cranked out too many lawyers so sometime ago. But it seems like the alignment and the strata has really changed. And it comes back to the educational attainment. If you have the right degree, in the right focus, the right the right sector. Hey, these are great times. Everybody else is having having a challenge, But those fruits were increasingly only being able to be picked by people who were either exceptional or come from

wealthy families. The bottom death style of households eight percent of the kids will go to college, the top decile eight percent. And this is This is a real point of personal passion for me. I was raised by a single mother who lived and died a secretary. We didn't have a lot of money, but we had a nice life and I was able to go to public schools all the way through undergrad US graduate school at Berkeley.

You know, if I didn't have the big handed government and in very generous forward looking visionaries in the form of the founders of the University of California, I just wouldn't be here with you right now. That's the bottom line. And those that same access. You know what my tuition was UCLA in Berkeley was twelve hundred bucks a year. And I'll beat you at I went to sunny stony Brook. You know. The joke was the Berkeley is the stony Brook of the West, and my tuition was four fIF semester.

And look and look at what it is now. It is a it is a lot more and kids are taking on student debt, more student debt than than than credit cards. It's it's hurting the housing crisis. It's giving them a huge, a huge head wind before they get out. And I'm worried that, you know, kids just aren't going to have the same unbelievable opportunities that I had, because it doesn't seem as if the bottom of education is the lubricant of upward mobility. My class and I this

is a man in the mirror test barrier. We charge kids six thousand dollars to take my class. Have a hundred twenty kids or hundred forty kids on a Monday night, every time I walk into class. We're charging kids sixty thousand dollars that night for one class, and the majority of it is being paid for in debt. Something is wrong here. We have to figure out a way and

now I'm really on my soapbox. We have to figure out a way to give middle class kids with single mother is the same opportunity to be in this chair. And you know, I U in public about this. I gave ten percent of my holdings in in my company to the University of California, Berkeley, Los Angeles and n

y U because they've been so incredibly supportive. But I really worry that our economy is under a huge threat that the same number of people aren't gonna have access to the unbelievable education that you and I had at the same price, and the amazing thing is a lot of these schools have enormous endowments. And it's not just the I vys. You look at Harvard, Gale, Stanford. That's a hundred billion dollars in endowment just amongst those three.

That's astonishing. So if they do nothing else, they're throwing off somewhere between five and ten billion dollars a year in revenue. That's insane, and how do they manage to charge But the same thing is happening there, So winner take all economy. It's the same things happening in education. And used the operative term there was a hundred billion dollar endowments and three schools. The schools the top five or seven endowments are growing at a much fast rate

than everybody else. In education, we're ripe to be disrupted. We've tripled our tuition in the last fifteen years. Inflation is kind of two or three percent yere. We are so ripe to be disrupted. So people are looking for a tech player to disrupt us. You know it's going to disrupt education. Harvard, Harvard and m I T did the open open course uh the years. It's the same effect that's taking place across the economy. The top, the top, top guys are gonna create more power than anyone has.

Harvarder said they could double their incoming freshman class without sacrificing inequality. They're gonna take some of that endowment. They're gonna say, take some technology, and I'm predicting they're gonna say Harvard, m I T, Stanford, and Berkeley. At some point, the top schools are gonna say here's here's the deal, free and we're gonna triple quadruple, quintuple. And then what does Indiana do? What does what does Fordham do? What

does the university in Miami do? What do they do when the best ten or twenty percent of the population has access to the best schools for free and every every company worth its salt only recruits at those few schools. So how does Harvard, with this much physical space triple they're entering freshman classes it online only or people literally? Are they tripling the number of students in Cambridge? I

think it's going to be a hybrid. I think they're going to be able to double the size of their class in the next five years and triple it over the next ten to twenty years because they'll make people more efficient. Let them take a lot of their lectures. Right. We talked about a flip classroom that actual teaching takes place online and we come together to discuss. Every university, including ours, is now building satellite campuses for all to

talk about online. We just opened a campus and now Abudhabi. We opened a campus in Shanghai. Wharton's opening in Singapore, so we're opening all over the world. But it's like every other category. Where there used to be fifty players eating out a good living, there's gonna be two or three capturing of the profits. Unbelievable. That's interesting. Let's talk about some other sectors of the economy. Um, that that's

right for disruption. Um. And I know we mentioned television earlier. Um, do you watch a Silicon Valley on HP love such a hilarious it's just it's just, you know, Mike Judge has done some interesting odd bowl stuff in the past. This seems to be the first thing I'm trying to remember. The future the name of the future show where everybody the movie he did, uh Idiocracy was a name of where everybody's just a blob sitting around TV wat sitting

around a couch watching TV. And it was really sophomoric and goofy, And when I first saw the previews for this, I'm thinking, Hey, is this guy grown up enough that this is really going to be a serious and he seems to be has the tone perfect. I mean, it's just every time I speak to anybody on the venture side, on the private equity, totally totally dead on. And it's amazing to think that there's a whole part of the country where, for a hundred miles up the coast, that's

half of what's going on. Yeah, it's just I mean, obviously it's an exaggeration, but I love Barely. Though it's barely, it's everything's good and root and reality. It's an exaggeration, but it's not like a gross parity. It's a slight exaggeration. You see some crazy stuff. But the the other show I always love to watch. I love Silicon Valley and I watched Girls, and I love Silicon Valley because I can relate to it so much, and I love Girls because I can't relate to it anyway. And I'm constantly

is this what young people are really like? And I find it so fascinating because I don't know if you've ever watched Girls, but I've tried desperately and I just can't. It's it's literally wow, is this what kids are like? And the honest answers? I think it is, and so it's fascinating. It's almost like being a Vorior but Silicon Valley. You know. It really shows how some of the sausages made.

And there's a series of well publicized entrepreneurs. But what people don't do is they don't realize we have a tendency to romanticize entrepreneurship. Kids come to me because I'm an entrepreneur and say I want to start a business, And I would say, if you have the skill set to go to a platform like a Bloomberg, like a Facebook, like a Google and navigate the politics there, be be

effective as opposed to just being right. Something I've struggled with my whole career is a difference between being right and being effective than on a risk adjusted basis, you're better off going to work for a platform. Entrepreneurs are people who have no choice. It's like some being a doctor is a terrible job now, but some people have no choice. They just have to be doctors. Right. They were taking temperature since the age of six some people

have to be in fashion. Entrepreneurship is the same way. And I think that show gets across just how difficult, scary, insecure, and sometimes you could kill yourself for seven or eight years or ten years or longer and end up with not only nothing, but less than nothing, you know, oh in your parents, your family, everything. And we don't talk a lot about that, but it happens more than it

doesn't happen. Well, that's the reality is that the vast majority of startups, the vast majority of of new restaurants, of new retail stores from new businesses, hey, two years out, most of them are gone. That's just the simple numbers of it. And I'm glad the show isn't glorifying. Hey, hang out a shingle and and everybody get I p O s at a billion dollars ours. They're really making it clear that you could lose this company with one

wrong decision anywhere along the way. They the litigation was really an insightful plot device, because you know that happens all the time. Yeah, and just the kind of full full body contact hardball that takes place. I worked with a lot of vcs who are very some are outstanding. Some are super aggressive to some of the stuff you see. It was really really rapacious. It's a it's a it's a full body contact sport in terms of a startup,

specially a venture back startup. So so they there's one episode where they're doing their second round and suddenly they start getting they become more obnoxious to the vcs thinking making it look like they already have funded and everybody starts throwing money at them, and that leads to an interesting plot point, but it raises a question, what do you think about the valuations amongst startup these days? Is

that something you look at? And here we are in the market where people have been talking about valuations being too it for two years and the market just well, the economists called the dot com crash perfectly. They just called and I'm on the board of several startups, and what I'm telling them is raise raise money right now. But you can't. Yeah, I don't know if it's I don't know if this is the best time to raise money, but I am pretty confident it's not a bad time.

And in general, I think acid prices across the board because of low interest rates and things. You understand A lot better than I do are really high. And my senses you raise money when you don't need it, because when you really need it, it's typically pretty hard to raise money. So everybody, anybody who owns something, I'm saying, if you're in a position or for whatever reason, need to sell, then sell. But because I think it's a

great time to sell almost anything. And if you're in a position to raise money or you think you might need to raise money, I'm a l two is a venture back company. We have fantastic nature cavalists firm called General Catalyst. But we're even thinking we don't need the capital. But it's just not a bad time to put another five, ten, twenty million bucks in the tank right now because you can get really solid evaluation, to say the least. Then and I'll tell you what my theory is. What's driving it.

It has nothing to do with interest rates, it has nothing to do with the fed. Um. I'm a car guy. I've been a car first word I ever said was car. I'm a car buff and my whole adult working life there are a series of cars I would like to own, and they're now starting to creep up as I oh I can afford to buy a two thousand five for g T or a two thousand two BMW Z eight because when they were seventy five dollars and I was

making sixty, I couldn't afford that. But the problem is that the Z eight is up to one seventy five, the GT is up to three hundred. As my income goes up, these cars go up. And the reason for this, to bring it back to start up valuations, there are only so many of them, and as we discussed before with the top one to there are so many people with so much money who desire those things that they

don't care. They'll bid one fifty for a car that's really worth a hundred thousand dollars, or they'll bid fifty billion for Uber because they have to show Uber in their funds in order to make their limited partners happy. And so there's a limited number of of these goods, a limited number of these companies that at least appear to have some shot at at being a home run, and so everybody piles into the same. Look, look at

the Ferrari market has gone insane. Like I've always thought, the Ferrari to seventy five was a gorgeous car, from one and later in the sixties the Dino. You could have picked up a Dino fifteen years ago for fifty thousand, fifty thousand dollars. They're half a million dollars. Now why because there aren't ten million of them. They made a

few thousand. Half of them were wrecked on the track and the other half have been lovely restored and they've just completely But it's I see the same people buying those two seventy fives going to the art market and picking up the Jack Meddi sculptures or a bran cusio or whatever happens to float your boat, and piling into these private equities the best returns, the best industry in the world the last five ten years is this market

surges has been the vanity economy. The vanity economy. Ferrari is anything that makes you more attractive or makes you feel more signaling to the opposite sex. Yeah, even even and a lot of people say, well, Scott, that's not true. I'm happily married. I just really like this ferrari and I bought it and I kept in my garage. And the questions, well, why does that make you feel good? Or people will so women will say, you know, I wear laprola under my work clothes and no one's ever

going to see it. I'm happy. I'm in a monogous relationship. I'm not trying to attract anybody. The question is, well, why do you feel so good? It's because for the last ten million years, it's been pounded into us that we have this job to be more attractive to the other sex, such that we can find someone stronger, smarter, and faster than us to mate with. Such of the next generation is smarter, stronger, and faster. And this vanity economy the most successful people. There's a limited number of

these objects because scarcity is what are scarcity values? What gives us the sense that it's sick? Those were really successful when you can only only so many people can buy and then long and ZN watch this unbelievably German watch Makeground by Richemont, and the prices have just gone just gone nuts, and it's totally irrational. And that's where you want to be in business. You want to be in an irrational part of the ecosystem because that irrational

translates into great margins. I love the work you do on the signaling and the value of these different things. My my biology, my favorite biology discussion of what beauty is my favorite rationalization is or description maybe not rationalization is, well, beauty is a function of symmetry, and symmetry is a function of health, and that means that they'll be better

able to reproduce the bare children. And so you're attracted to these supermodels not because they're so special, but because they meet all of the subconscious, instinctual inditia of health and the ability to procreate. And I don't know how solid the science is behind that, but I just love that rationalization. It makes so much sense along the signaling of the watches and all that other stuff. It really, when you put things in terms of evolutionary biology, suddenly

a lot of irrational behavior starts to look less irrational. Yeah, it becomes highly irrational when you think about how important it is um that the next generation be better. That's, you know, Darwin, whatever you call it, the looks, what we're attracting this looks. I do think it bifurcates, though

I think there's basics. Certain types of looks are more associated with infection or disease, and we have veered away from people who have those common characteristics, and I'm always worried I'm gonna I'm gonna say something off color here, and that's the quick end of my career, so I

won't say what those things typically are. The second thing, though, I do think, is man made, and that I think clothes look better on people who are built like hangers, who are unutually thin, and because great organizations like Vogue have consistently wanted to make clothes look fantastic, I think there has been a man made, a man made training

towards some unnatural body types. It's not like the days of of the Rubenesque window, which when Rubenesque women, which were a signal of wealth that you can actually you could be a little overweights, which signaled hey I have more. You know, I'm a cross fitter. I don't know if I've become one of these cross flash Yeah, there you go. Actually, my knees are killing me, but I think that's more function my age. But anyways, I think they tapped in.

I think they tapped into this underserved marketplace, and that as women who don't necessarily want to be thin. If you look at the the the the workout industrial complex, it says to guys be ripped and be big, and I don't think that's always healthy, but I think there's benefits to being strong. But I think what it says to women is being naturally thin, and I think that's unhealthy.

Won't cross fit, by the way six cross fitters or women has said to women is be strong and being strong as women can mean that you can be five five fifty pounds and you can still be really strong, and it's celebrated that and it has tapped into this wildly underserved population of women who are normal and strong. Did you see the Times article about the new um

brands of cross fit? Close was so women who do cross fit they can't wear off the rack clothes if you're doing it strong enough, So you have these big muscular thighs and you're a little ripped on the shoulders and arms. Traditional women's clothes don't fit. I think it was the New York Times, but Wolf Jennal, I want to say Times about this whole new run of clothes that are designed for the CrossFit female body and women. It was invented by a woman who was a cross

fit enthusiast, and it's become wildly successful. A real solid cross fitter female goes to the regular department store. Well, you're starting to talk about one that one of the best returns in retail have been plus size clothing. But you're also starting to uh segueing into something that's a tectonic shift in the world of retail. And one of the reasons why I think Nike is just gonna boom,

Oh my gosh, what is athletic apparel? Or We've had a tectonic shift in the third largest consumer market in the world, and that US. For the first time ever in two thousand and fourteen, people are spending more money on sweatpants than on denim. You now see the denim the denim generation. But year olds in my office are not wearing Rachel Strugrats, the technology reporter for w w D, very fashionable woman. You know what she wears every day?

Head to tell Nike. Really, people are spending more and more money that most the most the most popular brand among young wealthy millennials is Nike in apparel. People are showing up to work. The fabrics. It doesn't it's not just a bad pair of sweatpants. It says juicy on them, but these are interesting fabrics that look good. You're going to see athletic wear boom under armor Nike, they are

gonna They're gonna boom the next ten years. And it's gonna be and and God help Leavi Strauss and Company, diesel Um any denim based company is going to be is going to be pushing a rock uphill the next time. Well, there's clearly far too many denim companies before this happened. Now that this is gonna happen, it will be interesting to see what sort of what sort of consolidation there is. So so let's talk about another UM signal out there, Twitter,

Twitter followers, etcetera. You know, I may be a little ovo weight, but I got seventy Twitter followers, so I think that's worth thirty pounds or so. I could lose thirty pounds or um. But you've talked about how far Twitter is behind Facebook, and again for you and I I would bet you're much more of a Twitter user than you are a Facebook. Yeah, you and I were talking about this. Uh, you and I don't get Facebook.

I would like to put a banner across my Facebook page that says there's a reason we haven't stayed in touch. I just don't like it. I don't get it. But as you don't care about your baby's doesn't interest done. It's but as Yoda said, you have to forget what you know. If you look at the numbers, Facebook's the

most successful product in the history mankind. That's lessful than God, all a, Coca Cola, communism, whatever you want to call it, as relationships, meaningful relationships with two point four billion people across Instagram? What's happened Facebook? Anyways? Twitter? My basic rap is on Twitter, and I love Twitter, no doubt. It's a great company, no doubt. I think they've got a

great management team. The question is are they worth worth more than coach Tiffany and and you know, throwing Abercrombie or Clorox combined. I just think it's wildly overvalued. And if you look at the user base, it appears to a flatline. And I would argue that their product innovation hasn't been nearly as robust as facebooks or even seen a way about. We tend to, as Americans, think of

ourselves as being the home of innovation. Actually, if you look at the product roadmap of a lot of the social media platforms in Asia, we chat seen a way about Cow Cow talk line in um UH, South Korea and Japan, respectively, their product roadmap is actually more innovative than what we're seeing here. But I don't think Twitter, quite frankly, is innovated. And and if you look about we'll see that's exciting. Um I'm hedging because quite frankly,

I don't know a lot about it. I think it's exciting. Real time partner loves it, uses it all the time. He's on the air a couple of a couple of days a week, and he'll pull up periscope. I have it on my phone. I have yet to set it up. He'll pull up periscope and say, all right, we're about to go on the air. He'll do a quick once around the studio and then bang, that's it and he gets real time back and forth. Another one you just mentioned.

We're sitting here in Bloomberg and we're seeing all these screens, these these headlines come across these big beautiful screens, and we just saw the Pinterest announces you can now purchase directly from pins. I think that if Instagram tomorrow releases Instagram uh and says look curated pages of specific topics that you can pin your images too. I think Pinterest is going to decline in value. I think Pinterest product development has been almost zero the last twenty four months

and is wildly overvalued. Granted I said that they were at five billion. I think you have essentially social media is basically Facebook in the seven doors right now. I think you're gonna see Facebook. And we said this during the brig. I think Facebook is gonna be the most valuable company in the world within five years. Granted I said that five years ago. I was gonna say, I'd say ten years. It might take longer. I said it five years ago. The Facebook was going to become the

Internet of all time. Online is spent on Facebook. It goes to fifty one, and the Internet just the underlying technology, and Facebook is the Internet. But when you look at two and a half billion people, meaningful relationships dominating the funnel up and down, I just think they're an unbelievable jargonaut and they're gonna start to take share from Google and every other social media platform including Twitter. See that's

really fascinating. Some of their advertising stuff. It's going to be interesting to see how they integrated because they have the ability to do wondrous things. They're a b testing and I don't know if we'll get to that. Will will circle back later about that. But some of the things I've been seeing that they do and hearing about that they do are astonishing. And I don't know how other marketers slash advotarser is going to be able to

match the infrastructure because they have more you. You alluded to this earlier. They have so much information about you, who you are, what you do, you know. I love the story and this is way maybe there's some competition with Facebook. I love the story about target marketing to the pregnant d and dad goes into the store and yells at the manager and how dare you? You know, grows the paper, how dare you do this? And then a month later shows up to apologize, Hey, guys, we're right.

Based on what her purchase history is through her credit card, they can track her. If other retailers can do that, do they stand a chance against Facebook? Or is it going to be Facebook and everybody else? So I think that's I think it's apples and oranges. I don't think facebooks in the retail business. As a matter of fact, social commerce has been one of the biggest head fix

in business the last five years. There were what do you mean by that, well, a bunch of retailers in two thousand and twelve about seventeen retailers that whe track open stores. On Facebook you could buy something. There were three Social When you're at a bar, you don't want to buy. When you're looking taking your friends, you don't want to buy. But it doesn't matter it even if,

even if these aren't platforms. Retail advertise is a huge market, and Facebook is going to start to take share and market cap from every other media vehicle in the world. They're gonna take it from ESPN, They're going to take it from w PP, They're gonna take it from pinterest. This is back to the notion of a winner take

all economy. But you have top of the funnel with Instagram, would you could argue is already the most powerful platform in the world if you look at the community size times the level of engagement that it inspires top of

the funnel, brand based, image based awareness. Then with Facebook you have unbelievable targeting in the mid funnel at scale, and then at the bottom you have What's app, which by the way, is strong in every market that Facebook wasn't strong and right, it was very, very um complementary acquisition.

They're jumping the silos. They're starting to figure out what images you're looking at on Instagram and then and then target you on Facebook with more relevant ads, and at some point they're gonna be able to target you locally based on where you are on What's app. We have never seen, we have never seen anything like this. Very this is this is the most successful product in the

history of mankind. It's nothing. It's a scene for a Minority report where where Tom Cruise walks into the store, they know who he is, they know what he's shopped at, the ads pop up specifically for him. Facebook is approaching that way. And look how smart they've been. Remember all the grief that everybody gave Mark Zuckerberg for buying Instagram nineteen people for a billion bucks. Now they say it's where billion dollars fantastic acquisition. Meanwhile, yeah, who goes and

buy his tumber from one point one billion? And they never mentioned in earnings calls again, right, best acquisition in tech the last five years, Instagram, worst acquisition in tech the last five years, Tumbler, and then What's App perfectly complimentary every market they weren't strong, and this has been This has been the most nimble company in the world. Zero zero revenues from mobile thirty months ago, now two

thirds of the revenue. And that's the huge shift once they cracked mobile, because I was skeptical about Facebook's valuation pre mobile, I did a reversal once they basically said, Hey, here's how much we're seeing and that was a huge, huge game change. Unbelievably nimble. Who's made better acquisition than Facebook, who's being able to retain talent better. They've also got the benefit of being seen as benign, so regulators aren't yet coming after them. Uh yeah, I think they made

the most uh most valuable company in the world. That that's that's incredible. That's ah. We'll see if they can actually bypass Apple, And which raises the question how dependent is Apple on their next hit? I know that we've had a long run of really successful products. Are they a hit driven company or can they afford the watch the eye watch to be a little uh maybe not on iPhone or even an iPod for that matter. Yeah, I think they have their next hit product, and I

don't think it's the watch. I think it's the iPhone sex Really, I don't know if you're an iPhone guy, But which one do you have? I got the six, My wife has the big one. The big one is too big to put in my pocket. She looked. Now, by the way, not a tech person like getting her to return voicemails like she texts. She she so totally loves this phone. It's easy to read, it does everything. It's the pictures, so she teaches a photography class. The

pictures that you do on that phone are just just astonishing. Yeah, it does the Apple Watch. Is the Apple Watch successful? I think it is, but quite feely. I don't think it matters. I think the iPhone six is such an incredible product. And by the way, who loses Samsung? Oh my gosh, it's a Samsung killer. And you want to talk about Android. There were more Apple Watches sold on the first day of the Apple Watch and every Android device combined for the previous year. Really, Oh my gosh,

that's unbelievable. Realized that Apple store on Fifth Avenue with the one below the General Motors building is going to do more sales in a year just that store than the entire wearables market. By the way, everybody thinks that the Apple watches evidence that the wearable's market is thriving. The wearables market is dead except for the Apple Watch. And the Apple Watch isn't a wearable. It's a second screen for your phone that's going to take all the

discretionary income out of the wearable's market. Fit bit job on never going public, No way, the wearable's market is done. Aska. Anytime you're with a hundred people or more in an audience, how many people about a wearable? They all raise their hand. How many people are wearing a wearable? You got? What are you wearing? Which one you have? Um, it's okay. I don't love how poorly it sinks with the phone. Sometimes it does, sometimes it does in the battery last

three days. I don't like the way this closes. If I have a better, if I I have zero brand loyalty, I've been using it because truth be told, I'm at nine thousand steps. Hey, I'm gonna make it to ten. And there are days when I'm doing fifteen and eighteen. And you know the only reason I'm not three hundred pounds is because I'm so I'm running around constantly what right. If it wasn't for that, I'd be a Macy's float

um for Thanksgiving. But but, but I will tell you the fascinating thing about Apple and the phones is, you know, you see the Android market chair and how much Samsons Apple's capture about the profits in the phone space. For the first time in the history of South Korea or as long as it's been mobile phones, you're gonna have a mobile phone from a non domestic carry I have the number one market share, and that's the iPhone China

never having before. It's Westman Samsung, which by the way, is a great company, and you can't count them out. I just think they're I mean, they're appliance as they do an amazing job. So diplomatic I work with all these guys anyway, So uh, but you look at the iPhone. There's gonna be more iPhone sold in China this year than in the US. And then just coming up in the elevator here, I realized the upgrade cycle has such traumatic potential because everyone has an iPhone, but they still

have the five. So two things the iPhone, the successful migration to a luxury brand. Apple is going to be a trillion dollar market cab company. It you have never realized one of the core the core pieces of I P in the world of academia, Academias per Halla out of Chicago, this notion of core competents. Find one thing you're really good at, then do everything an industry standard.

That's how the majority of great companies operated. What does an Apple's core comp prounced the best retailer in the world to the best retailer in the world, best store, the numbers on a square foot basis, there's nothing even close to it. There number one in retail in the world on a per square foot basis and five dollars per square foot. The number two is sifty at three thousand. There's a new number two warby Parker at about granted, small base, but what do they sells? But anyways, and

then design, who's a better you know hardware? I mean this is a company with five or six core competence is it's blown out the traditional notions of a go to market strategy around business that we've ever had. We've never seen a company like this. Google has one public company search, Search and search right, nothing else could be taken public at Google. You probably have four to six fifty billion dollar plus companies within Apple that are distinct

of each other. You know, iTunes could go public, the hardware company could go public. The iPhone you have so many company is operating on twelve cylinders in that company. We've never seen anything like that. It's amazing. So so let's there was a question I had for you about Apple earlier. How do you how do you compare Tim Cook to Steve Jobs? How good is Tim Cooked? He may be one of the most underrated CEOs in the country. I think he's I think it's fantastic. And you've run

a company. I've run a company. You just see how damn hard it is to create value, and how and and and what both Steve Jobs, who has deservedly, you know, kind of attained icon status. Tim Cook, Oh my god, what unbelievably big shoes to fill. And he's slipped right into him. So every year one Buffett walkhings off for lunch. It goes for three or four million dollars. Tim Cook does one each year, and I was like, I would love to do that. I can't. I can't pass away

two million dollars on lunch. You need that Ferrari, Right, Ferrari, it's two hundred thousand dollars. You can have lunch with Tim Cook to raise money for charity. How is that pop talk? That's what I mean by that's the most underrated CEO running the biggest company in the world. How is that not a million dollar lunch? Crazy? I'm gonna have lunch twice with them, crazy, great failure. That that's

exactly right. Um. So we talked about design, design and brand with Apple, So what else do they need to do to move the needle? Or is there installed platform? Is there installed base so big that just that that upgrade cycle is enough to keep them going for a few years until the next hit comes along. My sense is between the watch, which is really a second screen for the phone, and anything you could do with the phone, whether it be you know, continue to approach on media.

They announced their streaming service today. We'll see what happens with that. But there's so much opportunity there are there every every one of these companies and moving towards one place. They all want to be your global operating system hub I called gosh. They all want to control more time of your screen, time of your eyeballs, and your attention than any other firm, and Apples and probably the best position to do that among the people that matter most,

and that's effectively higher income households. If you did a heat map of the iOS mobile system, it's basically a wealth map. If you're in Manhattan, you own uh, you own an iPhone and an iPad. If you're in on the island and some of the lower income areas, you're out of Jersey and some of them income areas, your Android and your PC. So Apple is effectively said and Apples tapping into this. They're getting in front of this wave. When we talk about unfortunately the wealthier aggregating more and

more income. Apple only has what of a fifteen or tent market share, but they have share of mobile commerce because only wealthy people right now are shopping on their mobile phones. Wealthy people have iPhones. So who owns an iPhone? Everyone that matters. And when I say everyone that matters, I mean everyone that has a lot of disposing income and it is comfortable buying online and comfortable buying high

margin products online. So I don't think I think all they need to do is keep improving the ecosystem for the iPhone and they're gonna add hundreds of billions of dollars in market cap. That's amazing. You know, in one of your videos, you show the heat map of operating system and exactly what you described, so you could see in Manhattan, Proper and Park Slope and and Morristown, in parts of Nasca County it's iPhone and all in the lower or or even middle income spaces, it was um

the Android system. You also mentioned the purple areas that are Jurassic Park. Let's talk about that. Yeah, we infectionately called Midtown, which is purple lights up purple Jurassic Park. While with where all the dinosaurs with their blackberries are. And I don't know about you, but I missed my BlackBerry. I absolutely salivate when you didn't love the black hated it,

hated it. And I'll tell you why, because my first the iPhone comes out and it was a T and T only, and I went and I got the iPhone and the first iPhone one was this beautiful, useless glass brick. It was just it was great unless you wanted to make up phone call. And back then, I supposedly a teen T is much better today, but back then it was utterly worthless in this part of area, a part of you know, New York and Essel County. You couldn't make a call within New York. State allows you thirty

days to return a cellular country. So so the iPhone went back and I swapped it for a black beer. And for two or three years I used the BlackBerry, and I had the worst I'm a Mac guy since my classic, so I've been I've been a fanboy for a long time and I had the worst iPhone lust. But it was unusable for me, and I the whing m call it um. The basic concept of G, I really want this iPhone if only it would work for me was really really you know, frustrating. And then when

finally it showed up on Verizon, that was it. It was get rid of the BlackBerry. Every time I used the BlackBerry was just reminded that it wasn't an iPhone. It was very, very frustrating. Yeah, it's it's it's been. I'm still I'm still envious of people who have their black but I missed the tactile keys. But talk about what's interesting is basically, in a two percent global growth economy, when a company's increasing market cap, the way Apple, it's

increasing market cap. The question is, well, who's on the losing end of that? And we know they basically sucked all the all the all the life in the blood out of Rim. They're doing the same thing to HP. They're about to do the same thing to Samsung. The

question is who's next. I think Apple is going to start to suck market cap out of the LVMH and carrying to the world in the j cruise of the world because there's only so much disposable income in the ecosystem to go to products that costs between three hundred and a thousand dollars and teen retailers who have been wrecked the last five years from a stock market perspective, staring at the navel is the product problems with the brand problems of a brand problems prodctblem, it's neither. It's

an Apple problem. And that kids are now expressing their identity through their phone specifically there Apple phone, specifically there I found versus a hoodie. The hoodie, So the Abercromis of the world are no longer it. So let me show you why I don't really care about the BlackBerry anymore so. The speech to text feature which was awful in the first year and then was pretty good in the second year. Take a read of what I just did.

It's picture perfect. It's letter for perfect. I hardly type anymore unless I'm on the subway, so it requires connectivity because it's basically checking. It takes what I say, it converts it to a formula to math, essentially sends it up to the cloud, brings it back down, compares it against a bajillion versions of this, finds out exactly what I'm saying, and the quality is it's so much better,

um than it was. It's pretty usable. Typing on glass not my favorite thing, isn't it's it's I will say that the android, this thing where you can just sort of drag your fingers around. I think it is superior than the individual. But the the text dictation is now so accurate. The only problem is it's a different part of your brain to speak than to write. I find what I write is much better than what I say

because it's a different lobe. Yeah, that's well. Look at the stories of different wornucks area, broke as area, the different aphasias. People who lose the ability to speak but can sing or can't read but can write. They just can't read back what they wrote. That sort of stuff

is really fascinating to me. And look, when I wrote my first book, I thought, I'll just dictate, it'll take no time at all, and suddenly I discover, oh no, that's a very different part of it's a very different part of the brain, and it doesn't work nearly as well. If I write something out and then integrate it into my speaking process, it sounds much better than when I'm just what does that quote? If I'd had more time,

I would have That's the thing about writing. I do think you try harder and you're more thoughtful about what you're actually communicating. So we never got to talk about the fifth Horsemen. Let's let's talk about that a little bit. So what we attempted to do is look at what are the common the underpinnings of the four horsemen that's enabled them to build these multi hundred billion dollar market

cap companies. And we found several things. One a truly differentiated product, I mean something that's surrounded by IP that you couldn't replicate easily. You couldn't replicate Google Search Engine easily. You cannot replicate the phone, iPhone easily. You can replicate Facebook's primary platform's I mean these are protected really unbelievably differentiated products. Then visionary capital and that as someone with a big vision of Jeff Bezos has said We're going

to be the world's biggest retailer. And then some progress against that vision that allows them to access capital at such a low cost that they can launch a phone, spend a couple of billion bucks on it, have to be a dud, and it doesn't really matter. They can have so much capital to go play in traffic and innovate. I think control of the end user experience vertical than

luxury products are now sold through control channels. Your ability to control the end used product and have your brand be in front of the consumer is really powerful vanity uh self expressive benefit of brand that people want to associate with. So there's all these different factors. Maternal the companies have outed the most market cap, treat their employees

really well, they're great places to work. So if you dook all those things and applied them to a bunch of great companies, who comes up as potentially could be the next big big thing. And some of the companies we came up with that have some potential. We talked about a couple of them. Nike has a lot of potential. I think Ali Baba when you look at six of all packages being shipped through China are coming from Ali Baba.

When you get the product roadmap, you have a company that you know, is that kind of the best digital company in the fastest screen market in the world. That's a pretty good combination. A company that most people might not think of as potentially being in that same breath, but I think it's an amazing company. Is Starbucks? What are the twenties something thousand stores now? Two stores opened

every day for the last seven years. Also, I would argue a technology company that serves hor beverages, the largest mobile payments company in the world. You have that. You have a Starbucks app one five One in five dollars go through the mobile app. Now, that's unbelievable, more successful than I've been using it for god knows how long. It's flawless, more than any other company in the world

right now, and also incredibly maternal. They spend more money on employee benefits and they spend on coffee beings fantastic and not nine dollars and twenty three cents average order value. If they can figure out a way to get into food or into other things and get to twenty or thirty bucks transaction, you're probably looking at a company that's

three to five billion dollar market cat. Starbucks is an unbelievable company that has had, in my opinion, just made we haveventimes sit with comes and say, well, we're not a tech company. Were apparent we're never going to be a tech I'm saying, if Starbucks can be a tech company, or can use technology to drive tens of billions of dollars in market appitalization, what's your excuse? No one would say of Starbucks as a tech company. Yeah, they are.

That's how they've had it, tens of billions of dollars in market cap, the number one company or the company based on what i'll call the subjective algorithm we've applied against it. In my view, if I was to say, okay, what company now is trading at less than a hundred billion dollars but could be worth three to five d billon dollars in five to ten years, I would pick Uber. I think it's become the vascular system for business. We've never seen anything like that. It's it's adopted this strategy.

When you look at the other things companies have had in common that have added hundreds of billions of dollars in market capit last few years, it is their parasites, and that is they're they're feeding off another organism. Someone else is creating the content. You create the content for Facebook, we create the content for Google. Uber is basically fed x ups without unions, without cap X. They buy their own car, without a uniform, without the right to strike,

flexible labor meaning cheap labor. It's sort of a it's an a ran Darwinian dream from a shareholder standpoint. Uh, and they could potentially get into all sorts of businesses. I don't think Uber is a private drive, a private car company. I think Uber is effectively a last mass solution for millions of businesses that all are struggling with last mile That's fascinating. Way do you put Netflix into that ecosystem? Unbelievable company, I mean, but it's already it's

already almost there. Right. What will be interesting is it's a great lesson and it's something that my industry we failed to learn that If you want to understand how likely you are to be disrupted. It's pretty easy. You just look at what is our prices relative to inflation, you know, and if our prices have gone way more inflation and there's no underlying innovation, Cable massive price increases, no innovation, everybody gets into it. Netflix, Uh, my senses

could be one of those company. The thing that's scary about Netflix is the dumb pipe of cable riders. They still have a lot of power, and so even with net neutrality more or less passing, but there new FCC rules, but they still own the pipe. Yeah, they still own the pipe, right, so they can raise prices, I know. So I wonder if Netflix, Netflix, in my opinion, has one big hurdle that the other guys, the four Horsemen, don't happen to. That is they are not totally vertical.

They don't control their distribution. They still have to go through someone else's pipe. By the way, how familiar are you with the history of of the Apple stores, since you're talking about controlling the vertical you you just made me think of something from back in the when it looked like Apple wasn't gonna survive. Are you are you plugged into the best buy Apple story? I'm not so.

The first Apple stores were this ghetto in the corner of the PC section of Best Buy, because um, Apple had a real hard time getting people to pay more money for computers that the staff wasn't really all that familiar with. Everybody knew how to sell a Windows machine, everybody know how to sell a Compact or an HP,

and so Apple cut a deal with best Buy. They set up these little I called them the Apple Ghetto the Mac Ghetto, and so it was four or five machines, some of which works, some of which were hooked up

in properly, they were dusty, It was just ignored. And my thesis is that Steve Jobs walked into one of these places and said, you know what, making a gesture that we can't discuss here, and said, I'm gonna do it myself, and I'm tired of being dependent on these, you know, retail bumbs who don't want to sell my product. But what you're describing as the evolutional luxury in general,

because effectively you had Rolex or you had Vitan. As a better example, Toner Gucci going into Bullocks or Macy's and saying, you know, they do a good job and not a great job. So I'm gonna start opening my own stores. So when did the Coach stores open up? When did the Louis Vuitton stores open up? Well, Coach has been has had more control their distribution, although sort of the dirty secret of Coaches at the majority of the retail sales come to their outlets, the majority of

their profits. But and their outlets isn't the same stuff that's in the I believe it's custom product at a lower price point. And there's a lot of brands that do that. It's just trying to bandage that balance. But with luxury where you have last years for the first time more luxury goods are controlled, are sold through controlled vertical channels. If the way to summarize it as a brand building has moved from broadcast in other words, pre

purchased advertising, PARNT trade shows. It's moved from there in terms of effectiveness to the store. And the guy that discovered that and created tens of billions of dollars in value for shareholders is Mickey Drag Slour absolutely largest apparel company in the world by Stouston Company at seven billion. Basic model was best advertising the world. Then stuff Army Navy stores with pile highs of five oh ones and

they had the best outs of the world. And Mickey Jackson said, we can't afford to go tote toe, so we're gonna put all of that money and branding into the store. Bleachmond would more intelligent, attractive sales associates, bigger, bigger dressing room, scented stores, better real estate. The branding, he said, is moving to the store. Leave Strasson company exploded from seven billion of four billion in that time period. The gap went from something like two billion to eight billion.

It's a huge shift. We don't give enough credit to him for. But branding is me from pre purchase into the store. Starbucks took advantage of that, and Luxury has seen that. You see Richmont making these staggering investments in stores, so high end distribution. The Achilles feal for Nike becoming up one of the four four horsemen. They have to control more of their distributions. They have a decent amount of stores, but it seems like there's one store per city.

One in Seattle, there is one in in San Francisco. I think there's I know there's one here. Every now and then we see one pop up. But it's not like a giant chain. Yeah, it's I believe they only control about ten to fift of their distribution, so it's um, they're going if you. The one thing you see in common among these four horsemen is that they control the end experience. Whether it's Google, Apple, Facebook, and Amazon, they

have vertical control. And that's that's because that, in my view, that's a prerequisite to become quote unquote part of the trillion dollar possible club. That's quite fascinating. All right, I know I only have you for so many minutes left, so let me get right to my favorite three questions or four questions, and I asked all my guests, and we'll get you out of here at a reasonable time. First, we have yet you talked about some of your mentors.

We have not talked about any of your favorite books. What what sort of books do you really uh? Do you really enjoy? God, I'm just I'm embarrassed to say this. I don't read as much as as as I would like or as I should as an academic, because I'm reading all day, but I'm reading blogs like yours and other people's. Um, some of the books that have had Yeah, yeah, the basics like the Alchemist had an impact on me. I love now I'm sending like I'm seven year eighty,

but I love reading books about military history. I find them fascinating, you know, guns, the early light or Herman Wooks, the wins of war. And then in terms of business, my father introduced me to Peter Drucker, a young observations of a bystander. Um, I find that stuff, uh really interesting still time least irrelevant today? Oh gosh, I think so. I think it is the father modern management. Is stuff

is more relevant than is today. Also love some of the stuff from John Irving, you knowld according to guard I think it's I think it's just a lot of fun and just so strange. It's kind of I find it really really um So say next question, So you deal with a lot of millennials, you deal with a lot of people at the start of their career. What sort of advice do you give to somebody starting out

in your space today? Find find a great platform, find a place you're gonna learn and it's not aspirational, but find some of your good at and work really really hard at it. Um and um. If you don't find yourself on a path, yeah, you're not if you're not fortunateough to find yourself on a path where it's something you love or you like. People say, find something you love, find something you like. I was the way I would say that, because if you like it, you're gonna be

good at it. Um, think about graduate school. For all the for all the noise about and all the publicity about people dropping out of college, I still think school is a good plan. B. The Peter Field thing, you're not a fan, I think that is so frightening and so scary. I just you know, I'd love to pick ten kids at great public universities to match up against

the ten heat. Look, if you're Steve, if you're Steve Jobs or Bill Gates, granted they're exceptional and and God love you if you're one of those one of those rare people that can, you know, take a calligraphy class and then drop out and start the start the MAC. But for the rest of us, you know, college is

a pretty good plan. B. So, as we've seen in this recovery, to say the least, get get a great find a great platform, find something you think you like or you're good at, work your ass off, and if it's not working out in your mid twenties, think about graduate school and you know good karma. The really successful people what you find in the trade is they do spend a lot of time thinking about how can I help other people? Because it will come full circle. People

do remember that. Um, what do you've seen that have changed in your industry and branding, him marketing, What are the big shifts over the past decade. Oh gosh, I don't want to say the death of creativity, but it's definitely revenge of the pocket pen protectors. And we've talked about Don Draper's dad. Created activity is not not a commodity,

but you've had, You've had. It's more important to understand how to operate sales source and a database and CRM than to necessarily come up with the right copy or the most beautiful, inspiring creative ads. So it's moving more, much more towards zeros and ones than it is from tech. It's the guys who are cool and we're black are making less money, and it's it's it's the math and

the chess club. And now at the same time, we have to produce people who understand have the maturity and management skills and the EQ and played with the right toys to manage those people, and it's hard to find them in the same body. But it's definitely headed towards technology. In the world of marketing and branding, we talked about brandings moved from pre purchased to purchase. Now it's moving

to post purchase CRM, contextual retargeting, taking behavioral data. Um. But it definitely seems like tech is just eating eating the world. So I'm not a technologist, but I'd like to think I know enough about it to be dangerous. And I try and stay on top of stuff. So if you're you know, if you're starting your career, are guys like us, right, we're trying to stay relevant. You

gotta be on Facebook, you gotta figure it out. You gotta go on Pinterest and start pinning stuff so you at least get it, or at least get it enough to hate it. Right, And because most people just they dismiss it. And when they dismissed, when they're dismissive something, or when guys our age are dismissive of stuff, it's basically their way of saying I don't get it, and scares the hell out of it. The comment I always get is like, I don't understand what do you do

with Twitter? And my answer is always, hey, here's here's what you do. Find five hundred of the smartest people in areas that you're really interested in. I don't care if it's beer burgers in baseball, but follow those people and you will know more about stuff that you like and have access to more interesting stuff. It's like hiring a full time men's a research team. What could be

bad about that? And the final question, My final question, I asked all my guests, what do you know about your field that you wished today that you wish you knew when you were starting out? What do I know about my field today that I wish to know I started out, Um, I would have focused more on how to learn how to build stuff. I would to learn how to code. I would have learned more about industrial engineering and design. I think the world the future belongs

to the builders, not the browners. The people who know how to actually make stuff. That can be making a website, that can be figuring out how to edit radio show, but the people who build things. As opposed to my focus was always on the intangible associations and creating the theory. I wish I'd learned more about how to build things. So we've been speaking with Scott Galloway, professor at n

y U Stern and founder of L two Digital. UM. Let's once again tell people where they can find you on Twitter, proft Galloway, proft Galloway and your website dot com L two ink dot com. Scott, thank you so much than this was. This was really fascinating. I think people really can enjoy this. If you enjoyed this conversation, and I can't imagine anybody did not look an inch upward or down on iTunes and you'll see the other

forty seven or so uh such um conversations. Be sure and check out my daily column on Bloomberg View dot com and on Twitter follow me at Hults. I'm Barry Rihults. You're listening to Masters in Business on Bloomberg Radio.