Scott Galloway - The Four - What To Do

[Music] thanks very much and welcome NYU Stern it's always uh sneaking this morning on the way over here it's always so satisfying to walk onto campus and I hope some of you feel the satisfaction when you're walking on campus it's a place where you know good is happening I was I'm not teaching this semester and Laurie sort of jonesing for it a bunch of young people who are just trying to better themselves and get to study with people under people and learn from people and you'll hear from some of them today who are literally discharged with pursuing the truth and think about there's no other atmosphere that that happens in where someone says my job is to take this muscle in between or the sort in between the years of you know tomorrow's leaders and just do my best to pursue the truth such that they might learn from that and I was just trying to identify why I always feel pretty good walking on campus and I think that's part of it anyways thank you for the hallmark moment there so will in each of our update to the for our basic premise is the app Apple Amazon Facebook and Google have become more powerful than any entities in the world maybe with the exception of China in the US and that their influence is appreciated but underestimated and in each one of these updates we talk about a how they're doing and their victims and the major theme for this talk this morning is that we think something really unusual is taking place or significant and that is before Amazon Apple Facebook and Google one is pulling away typically it was those four going after the fuddled prey in different sectors in sucking market cap from an old economy firm that was not keeping up with one of the four and now what we're seeing is one of them is starting not only to go after different sectors but going after the other three and it's pulling them away and this presentation is going to serve as the Nexus to our kind of our next big body of work over the course the next six or 12 months and frame the day in terms of what each of our sessions is going to be asking and that is what is your strategy for Amazon and I believe that slowly but surely the for our transitioning to the one I think Amazon is better positioned competitively than any firm in recent history in terms of that dominant is and how well set up it is and it will be interesting and I invite all of our fellow colleagues here and scholars here to comment on whether they think that's true or not so with that these four and if I had it to do over again I would a take more English classes in college and I would probably pursue some sort of degree in evolutionary anthropology or just biology because the end of the day everything we do comes down to biology and business mimics biology probably cannot understand business you just want to understand biology and these companies have effectively disarticulated who we are as a species and then reassemble them in the form of a public company and created unbelievable economic value so what do we have we have Google which is God a modern society our modern problems get bigger and bigger our need for a superbeing is still there yet its Society has become more educated the society has become wealthier their trust in God and religious institution declines which creates a vacuum and Google is filling that vacuum one in six queries to Google have never been asked before think of a rabbi a priest a cleric a scholar a coach who has so much credibility that one in six questions posts that individual never been asked before in the history of mankind and you're going to quickly figure out that Google is the most credible source of information in the world you send up divine questions or you send up questions hoping for some divine answer will my kid be all right and hope that there's some sort of intervention processing and sends back an answer that's more credible than any answer you would get asking anybody else and now it's symptoms and treatment of croup and we get answers back that are more credible than any other source in the world who you asked for information before your doctor before your psychotherapist before your mom you ask Google moving down to heart as a species we need to love and we need to be loved kids that receive great nutrition and know affection as healthy as kids that received poor nutrition but a lot of affection fastest way to a hundred years of age is to increase the number of people in your life that you love or specifically the you care for and Facebook is tapped into that need creating more connections more empathy and is helping us love at scale consumption more people have died in our species over the course of the last several million years from starvation than any other ailment so it's hardwired into us one basic instinct one basic word more can never get enough open your cupboard open your closet look at your car and the features you want and think are worth of money and you'll realize that about ninety six ninety seven percent of everything in your life is excess beyond really what is required and yet almost all of us almost all of us regardless of how evolved and how rational we are never save that need for more because starvation is an ugly death it's happened a long time to a lot of us and so the notion of having more is much safer and a much lower risk than having less and amazon hits that need amazon is our consumptive track it's our digestive track we take in stuff the strategy of more for less it's always a winning strategy to the strategy of china and amazon has tapped into this strategy and its basic instinct of needing more and then once we survive we go to the next basic instinct the second most powerful instinct and that's to propagate and our desire to be more attractive to the other sex our desire to signal strength speed and intelligence such that we can spread our seed to the four corners of the earth as men and such that as women we can put up a finer filter and pick the strongest smartest and fastest seed which is the basis of all evolutionary progress is what luxury taps into and because it's the most irrational of the organs we translate that to margins irrational purchases translates to margin translates to shareholder value and as you move down the torso you get more and more irrational decision-making which translates to this wonderful thing called margin and shareholder value and with Apple we have the most profitable company in the world that as operating margins between Hermes and Ferrari again to brands its signal to the other sex so these four combined have disarticulated who we are when you think about God when you think about love when you think about consumption we think about sex think about who you are as an individual and you're probably a function of those four things the ratio and the approach to each of those four things to find who you are as a person and these companies have taken each of those things disarticulated them and then reassemble them in a form of a Delaware corporation such that they could capture economic value from those four things and as a result we see power and economic value aggregate that we've never seen before among four entities this fast just 2008 the market capitalization of these four companies was equal to the GDP of Poland 2009 Portugal 10 Nigeria 11 Argentina 12 Turkey 13 Indonesia 14 Mexico 15 the market capitalization of these companies surpassed the GDP of Russia in 2016 it's hit in Canada and next year it's likely going to surpass the market capitalization of India or put another way there are only six nations in the world that have market capitalization excuse me that i'm gdp greater than the market capitalization of these four companies and this is not an apples to apples comparison obviously but it gives you a sense for the kind of economic value that's been created across these four entities now there's a huge amount of controversy over whether these four companies are getting too powerful and the only safety from these companies taking over the world is not regulators who have proven they're someone anemic or flaccid in their attempt to regulate these companies because everybody wants to be seen hanging out with the hot guy or the hot girl and these four companies represent a gross idolatry of youth that we have never seen before in terms of our ability to make irrational decisions such that we treat them differently we have a different relationship with them than every other kid in the high school the safety well I believe the only safety is that the floor fortunately hate each other and what we've seen over the last 24 to 36 months is they're starting to encroach on each other's territory and they all wake up and think there can only be one and they're starting to go after each other's business and it's a good thing it's a good thing economically and it's a good thing competitively and one is winning when you think about where these four overlap and look at those areas of conflict and almost each case there's one company coming out on top in its overlap with a Venn diagram as it goes up against the other three let's talk about Hardware apples the most innovative hardware company in history but the last two years would it be the Apple watch would it be the Apple pods it would be the hardware innovation of 15 and 16 no it would be Amazon's Alexa over the last 24 months Amazon is arguably the most innovative hardware company in the world invoice if someone had said a few years ago voice is going to take off it's going to be very important what company do you think will have the lead in voice recognition technology would you have guessed Amazon I think most people would have guessed Apple than probably Google yet Amazon has taken the lead in voice in digital marketing it's has been a story of Facebook and Google but as we're going to see Amazon is starting to eat into Facebook and Google's duopoly of digital marketing this is a big business for them but no one talks about so the new one is Amazon and it's going to be very interesting how these companies respond to one of them going up against all three of them in beating them so some stats on just how dominant Apple Amazon is so we have 92 billion dollars in US holiday shopping that's an 11% increase from 1518 billion single state from Alibaba think about that 18 billion dollars I'm one day twenty four percent increase three and a half billion dollars cyber monday that was up 12 percent this year 3.3 billion is purchased on Black Friday of 22 percent and then Amazon had their prime day they're copying alibaba's singles day and did 1 billion this year which isn't even in the same realm as single day however it was up 60 percent this year so the fastest growing consumer or consumption holiday or day in the world is owned by one company Amazon now pity Walmart pity how difficult it is to be anyone going up against a company that has infinitely cheaper capital than you you are diving underwater and fighting a war underwater the only difference is you have an oxygen tank the size of a coke can and you're competing with an enemy that has an oxygen tank the size of a dump truck they just have more capital and it's cheaper so they can fight unfair they can do things over and over they can do things that is scale you can't match because of this cheaper capital in the last five years we've seen Walmart at 137 billion dollars of top-line revenue excuse me in the last 10 years they've added 137 billion dollars in top-line revenue and that has resulted in an increase in market capitalization of 36 billion dollars they add 140 billion dollars in top-line revenue they increase the value of the firm of the marketplace says okay you're worth 37 billion dollars more Amazon has added 121 billion and increased their market cap by 2 Walmart's so every time amazon increases their incremental revenue by $1 the market says thanks very much and gives them another two to three dollars every time Walmart figures out a way to increase their market cap by $1 the marketplace gives them a dime Amazon is effectively just overwhelming the competition I'm a wart history buff at the end of World War two the Germans had better troops there were better trained troops in terms of the kill ratio German soldiers were much better than any other any other army they had better technology the jet engines we enjoy today silly putty the leather jacket all innovation from the German army the Panzer tank could effectively deflect missiles you couldn't kill a Panzer tank from the left the right of the front missiles literally bounced off of it however however towards the end of the world the Allies had 38 gallons of gasoline for every one gallon Amazon every one gallon for every one gallon the Germans had and we would literally surround the Panzer tanks with five or six bradley tanks because the wasn't enough gasoline for the Panzer tanks and we would sneak up behind this thing and basically run the Panzer down and the weights we are behind the thing and then shoot it in its vulnerable area Amazon is the retailer with 38 gallons of gasoline and at any category they go into they can just overwhelm a brute force regardless if you're better regardless if you have better morale their godless if do you have better tanks they have 38 gallons of gasoline search searches Google right doesn't Google own search from 15 to 16 44 percent of all searches on the web for products started on Amazon wow that's incredible not as incredible as a year later where it grew to 55% so Amazon's share of search in a key category that's going to garner a lot of very expensive bids from marketers grew 25 percent year-on-year Amazon is a search engine with a warehouse attached to it and is a viable competitor to Google in the world of search if we didn't think of Amazon as a retailer people would be talking about Amazon is a direct threat to Google in the form of search we've seen unbelievable revenue growth in the last several years Amazon has added the revenues of Nordstrom Macy's and Sears to its top-line retail is a difficult business services are a difficult business for those of you are in a business where every January 1 you start your business over and you wake up in the morning and you think how do I recreate my business how do I go from a dollar to a dollar 6 this year or a dollar 12 or a dollar 20 those are difficult businesses and most of us are in the business of recreating our businesses every year as a result businesses that have to recreate or reanimate themselves every year whether you're an ad agency or retailer we're valued at a multiple of EBIT uh first company I started profit brand strategy was a consulting firm and every year I'd wake up January want to think how do we recreate this business plus 20% plus 30% and then technology figured out that's a bad business model let's figure out let's make a massive investment up front and offer people an amazing product at an amazing price that locks them in and integrates into their daily workflow such that we become indispensable in their work floor in the in their workflow in the renewal rates or the annual fee we charge them become greater that's why real estate gets such an incredible value and holds so much economic value for so long because recurring revenue is just a better business model in Amazon decided they wanted out of the business of traditional retail and stopping and starting every January one and they wanted to get into renewal revenue renewal business and that's what Prime Minister has effectively taken one of the fastest-growing retail in the world and turned it into a software like business model where you have an ongoing annual relationship and they're creating hooks into into homes it is stronger than FA P Oracle or Microsoft ever had in terms of your willingness and your need to renew that recurring revenue relationship so in the u.s. 44% of US households own a gun 49% have a landline phone 51% attend church monthly I think these are the same people by the way that's my that's my geography test London San Francisco New York that joke goes over really well Nashville in Houston not so much 55% of US households burn over $50,000 a year 55% of US households voted in the election 58% of US households now have a crime nobody could have guessed that the manifestation or the biggest shift in technology last ten years would be that people would replace their cable line with a cable pipe of stuff and that's effectively when Amazon Prime is it's trying to create a cable pipe of stuff into every household and other things and create an economic recurring revenue relationship with the wealthiest households in the world and 78% decorated Christmas tree the new core competence and business is storytelling think about every media company The Wall Street Journal's Financial Times Business Insider it's basically a megaphone to one of these four companies who steal the might from every other company and constantly put out press releases about all the new innovation they're doing what drones are we ever going to do that maybe may not not at least or five years that's okay invite 60 minutes in it where amazon they'll talk about anything and it'll be on the front page everywhere and by the way no other retailer is going to have any space on the front page this next week we're going to put out another press release and the innovator or the perception of being the innovator results in an additional turn on EBIT and greater profitability which creates lower capital which creates the ability to become the innovator so these companies have turned into storytellers and are fantastic at owning the narrative and being seen as the most innovative companies in the world and we throw money at them to make that a self-fulfilling prophecy no profits at Amazon this has also been a huge shift in our economy I can probably the biggest shift and we have south of startups has been that everyone is trying to mimic Amazon and has replaced profits with leadership and vision and the new black our losses so if you look at the big four pretty profitable with the exception of Amazon and Amazon has now taught everybody to lift their companies establish leadership and vision regardless of whether they're making money or not and by the way I don't think this ends well I think this is strange when we started l-two I was used to profit I was used for services company growth 30% a year and try and make 30 try maintain 30 to 40 percent EBIT in margins that's how so I'm built as a manager and then RV thieves came in and said you got it all wrong go to 20 or 30 percent negative Evita and grow 70 percent a year and establish yourself as the leader and it felt physically uncomfortable to do that to spend that aggressively and see that much money being spent for additional growth and it was the right group it was absolutely the way to exponentially increase our value in the marketplace because investors and the marketplace want to see leadership and if you're a company they don't really care or if you've established leadership they forgive you not only for not making any money but for tremendous losses but profits are like heroin to an addict and once you go there and give the addict the heroin there's no taking it away and so a lot of companies are now trapped in this unfortunate box called profitability and there's that aren't they're not allowed to compete with other companies everything and more on innovation so look at some of the new players we work 500 million in revenues breakeven snapchat 400 million in revenues and a half a billion dollars in losses a 27 year old who's created three classes of stocks so that anyone who buys a share of snapchat has no rights to the company the most agile resource company in the world trying to kill it right and a company now worth more than Viacom and the New York Times combined even with its 40% decline in its stock price uber six billion of revenues three billion in losses if you took an uber from Uptown today and it costs you 20 or $30 it costs uber $45 it is economically irresponsible not to take uber everywhere and then there's Netflix how could Netflix not be massively profitable given their growth because they keep increasing their content budgets watching Amazon have said you screwed up if you're profitable we aren't investing enough so every time Reed Hastings management teams come comes into a room and they say it looks like we're going to make money this quarter you screwed up spend more on content spend more on technology hire more smart people because like Amazon we need to be the growth in the visionary leader not the profit leader this is a very strange economic construct I don't think we've ever been in this territory before maybe maybe in 1999 but I don't think we've seen these kind of losses rack up across the leaders Amazon employs more people combined than the other three because it's a retail company and they have a lot of people in their warehouses a lot of people to argue these on contrib use our employees or contractors and it's not apples to apples however they're much more efficient they create 1.2 million dollars in market capitalization for every person they hire the number one recruiter at stern five to seven years ago was American Express now hands down the number one recruiter at stir in his Amazon and kids come to my office hours nobody ever wants to talk grand strategy digital marketing I just want to talk about their careers and they'll say I have an I have an offer from this company I have an offer from Macy's I have an offer from the limited or have an offer from this great company in my hometown and I get to be near my parents and I have an offer from Amazon and they go through this hand-wringing and I let them sit there to my just don't waste my time you're going to Seattle you know look we can if you need this therapy we can go through this game but you're going to go to Seattle and that's the right move it's the most respected training ground it's the equivalent of the second MBA to go to Amazon there's no company in the world that calls you in for an interview and goes oh you worked in Amazon the last five years now we're just not interested in that skillset we believe Amazon is going to be the first private company or the first the first for-profit company technically that it's going to reach a trillion dollars in value now how's it going to get there most people think well it's a retailer is going to get there - retail it's going to get there one of several ways one it's going after cloud-computing - it's going to figure out an economic model around retails relates to voice it's also becoming a player in digital marketing over the top streaming hardware logistics there's a 150 to 200 billion dollars in market cap from UPS FedEx and DHL who have not innovated in twenty years yet the prices have gone up eighty-four percent in the last eight years which means they're fairly right to be disrupted and imagine a person not in a FedEx or a brown uniform but in an Amazon uniform that's supported by warehouses 757s tractor-trailers your purchase history and artificial intelligence are you going to spend more than a second evaluating who you would rather have or if you're comfortable with overnight delivery from Amazon as opposed to FedEx DHL or UPS I think you're going to see tremendous market capitalization week from the overnight guys to these guys and you can go across every one of these categories and identify somewhere between 100 billion and a half a trillion dollars in market cap across several companies and then look at what Amazon is doing in that area and then you're going to look at it and go I'm betting on Amazon and even if they only win in three of six of those categories they're going to get to a trillion dollars in market out cloud computing is probably the fastest growing area technology and also probably the most profitable to find gravity and that it's growing really fast yet maintaining margins and who's the leader in cloud Amazon every day Amazon adds more cloud capacity than they needed when they started the business 10 years ago their entire they started this business to support their own processing needs but when they started the business the entire year of their needs is now added every day in terms of their capacity around their cloud computing offering it's also the most profitable part of the business it's probably it's going to be as profitable as the rest of the business entirely I actually think this is a problem for Amazon because despite their best efforts they're going to have to be profitable which is an issue for them because this is a very profitable business voice a third of all commands likely in the next several years will originate them voice as opposed to a keyboard and one company owns voice two-thirds of share voice is now from Amazon how do they use the echo mostly for basics where are they headed with this we believe they're going to head full force into brand and believe that echo and voice is the worst thing to happen to brands since world war ii there is this basic reflex reaction almost instinct and marketing departments at business schools that brand as a strategy is a winning strategy develop an average product and average you an average drink an average service create tight brand codes wrap the product wrap the brand codes around this product and then pound away at those brand associations with really cheap and really efficient broadcast media I don't think that's the right strategy anymore I think that strategy is over and we begin we've literally taken it as conventional wisdom that that's always a winning strategy and we're starting to see a crumbling of the advertising industrial complex based on that algorithm of value post-world war two of an average product with great brand associations lends itself to irrational margins and Amazon is conspiring with 500 million consumers voice technology your purchase history artificial intelligence and fanatical investors giving it almost infinite capital to starch the margin from brands and give it back to you so what happens when you want to buy batteries with Alexa you buy batteries Amazon I want to buy batteries it makes suggestions and it's suggestions and it'll make two maybe three are for Amazon basics or Amazon elements basically Amazon's private label and it then LX will say I'm done that's all I have I'm out of ideas but then if you go online you find that Alexa has a selective memory that Amazon in fact does carry several battery brands but without the benefit of packaging without the benefit of pricing sunday inserts and caps I level partnerships with the retailer these are things that CPG brands and traditional brands have spent decades in tens of billions of dollars establishing voice literally obviates all of those links in Amazonas ed with voice mister consumer missus consumer missus investor I'll take that 50 60 80 points of gross margin that P&G and Unilever and maybe even LVMH and Estee Lauder are getting not going to give it back to you because I'm going to use algorithms to trade them off against each other every nanosecond and slowly but surely drive them margin from every single consumer product company brand I think Amazon I love it when people say they partner with Amazon or Amazon calls like every platform they partner with their brands I think Amazon partners with brands like a virus partners with a host I think it's I think it's effectively a one-way relationship if you ask Alexa for detergent it recommends their house label press though even though the algorithm would tell you to order Tide which has better user reviews and is a better deal now a retailer trading brands off for private label is nothing new we've just never seen anyone that's good at it digital marketing thirty five hundred companies finance all being eaten alive by two companies Facebook and Google I think that thirty five hundred companies in digital marketing than our Facebook or Google and now AM on its like being in a pit of death humidity anxiety and death 103 percent of the growth captured by Amazon Facebook and Google and digital marketing so all those people meeting with you at video optimization platforms are graded optimizing your banner ads their join they join magazines and newspapers and that they're in an industry that is now in structural decline kids again come in my office hours and think about working at digital marketing a great business as long as you work for Facebook Google or Amazon otherwise you're in a business in decline Amazon media group does we believe about four hundred million dollars in profit did a billion in half of revenue this year it's four times the size of snap and probably within 12 to 24 months will surpass Twitter in terms of revenue derived from digital marketing over-the-top streaming this is what you can do when you have 38 gallons of gasoline you can go into original video content in adjacent business that isn't even your core business and you can invest more than NBC ABC or HBO only behind Netflix by the way Netflix increased their original content budget two billion dollars when they learn that Amazon was spending four and a half billion dollars on original content so while Amazon isn't thought of as a big player in the world of broadcasts are able to stop streaming they're about to they may not even be as good as HBO they're clearly not as good as HBO they don't need to be they just have more capital and they'll eventually figure it out they're also allowing producers they're attacking a two ways typically when you're a Content producer a production company you end up with 10 cents on the dollar if you produce Modern Family a Modern Family ABC can produce $1 and advertising content about 10 cents goes back to the original content provider production company Amazon is now saying we'll give content providers 50% of all the revenue we create in terms of advertising or we'll give them 15 cents per streaming minute so they're going after the content producers now and say you want to be on prime you want to be in our video platform because you can have access to the wealthiest households and bottom lines we're just going to pay more so you're going to see more and more original content not only that amazon pays for but it's just put on the platform by content providers who have figured out amazon's cut out the middleman is more efficient and can afford to lose money by attracting more and more content so this is where Amazon was in terms of share of peak viewing hours in terms of over-the-top streaming as you can tell in 2015 barely a blip but watch would happen just in 12 months right we know Netflix is number one YouTube's number two Amazon is now number three how long will it be will be with that 38 gallons of gasoline before Amazon begins to threaten Netflix they're almost there in terms of spending on original content you're going to see an unbelievable decline and I've been saying this for five years and I've been wrong for five years but in decline of broadcaster traditional broadcast media the only thing keeping broadcast media alive right now is sports if you took away sports from viewership you'd have massive declines in viewership across these countries and think about sports if you can't own it it's goes to the highest bidder one year the Olympics the World Cup go to ABC than it goes to Fox so these really aren't proprietary advantages there's nothing there's no confidence-building here there's nothing that it does to your culture that's sustainable you're just the highest bidder at that moment but it has been the last firewall of broadcast media so clearly what's going to happen in the next 12 to 24 months we're going to see the Superbowl the Olympics or March Madness go to Facebook Google maybe even Twitter or more likely Amazon why they have a bigger checkbook they're going to start buying these and spreading it across their platforms in their user base hardware alexa is the hardware innovation last few years the Amazon fire gets more reviews than any other hardware product on Amazon logistics they're creating an unbelievable back-end logistics platform that they can sell into other retailers trying to get into those those households that are the wealthiest health of households in the world they felt more patents than almost any other logistics company 757s tractor-trailers amazon has co-opted the post office and said this is a great deal for us they're losing money subsidized by taxpayers and we'll give them gross margin or incremental revenue that has very high gross margin by leasing this vast network the taxpayers play for and operating it on a Sunday so our tax dollars are somewhat subsidizing Amazon's back-end because Amazon's figured out a way to leverage this infrastructure on Sundays and if you see a USPS truck on a Sunday it's effectively an Amazon truck so what's next Amazon is now decided well we live in an app of mobile economy and five at a temp top ten apps where consumers spend 80 percent of the time on mobile on apps is messaging so what did they announce two days ago they're going to get into the messaging game directly going after Facebook none of the other three none of the other four I should say are this aggressively going after each other and across each point of contact winning so each of these four there's a great scene arm I think a decent scene in star wars I forget which one it is where young Darth Vader decides is told to kill all the young Padawans and it goes in and it kills all all the other kids with the force or the depth or the force and we're seeing this before basically identify any threat that's not willing to sell to them or that they don't want to buy or that's a nuisance becomes more of a nuisance becomes upgrades to a bother and they can put them out of business just with a press release Amazon puts out a press release in a picture that they're going into ready cook meals and blue apron drops like a stone that day just a press release Facebook is blowing by snap with Instagram stories everyone was hoping snapchat would be the third player in the ecosystem and that snap would be the Facebook of video the Facebook of video is Facebook specifically specifically Instagram stories that is besting Snap on almost every metric Apple has already put every wearable company out of business it's just a matter of time jawbone announced they were going out of business a couple weeks ago Fitbit will be next so we have a new order and with these four companies I think it's important that we acknowledge with great power comes great responsibility but with each of these companies I think there's a decent argument that instead of responsibility power corrupts they're not bad people but in general throughout history power does corrupt and we've seen a tremendous amount of negligence from each of these four companies in my view and this is where it's fun to be in a university environment and and quote-unquote do your best to pursue the truth this is not a good commercial move for us to talk about how these four companies are negligent so if I'm pulled over and suspected of driving under the influence of alcohol I can be strapped down to a chair and have blood taking from me against my will if your spouse shows up dead the first thing they do is get a court order come into your house and get your computer by the way look at your search history that's the first thing they look at and also search your house but if a terrorist shoot 17 people and they know that's the individual that shot these people and they get his phone don't touch the phone don't sacred right the iPhone is sacred your person your home that's not sacred we can get into that and a couple hours of the court order but Apple has decided that no this is the cross we had our Jesus Christ Steve Jobs and now the iPhone is our cross and it's holy and don't touch it it is ridiculous what if that terrorists mobile device had been a Blackberry do you think we would have put up with that if rim out of a Waterloo Canada had said we're taking a stand for privacy on behalf of all consumers and you American FBI we don't we could let you into the blackberry and there could be another impending attack in the next 24 hours but we decided to take a stand from Waterloo Canada on behalf of privacy for all citizens there would have been a trade embargo on the floor of Congress within 24 hours but we decided that Apple is holy Facebook is not a media company it's a platform because media companies have responsibility media companies the general compact media coming separate societies with great power comes some responsibility and we have some onus to to ensure that what we're putting out has some veracity some credibility make them spend some money on fact-checking and so Facebook decided I know what we'll do we're not a media company it's not that we create content and so advertising against it to make money which traditionally defines a media company we're a platform and that's it obviates us from the responsibility of ensuring what is the content is on our path one was true so 710 days before the election the majority of the news from where 80% of Americans get their news now their social media feeds is fake news now what would happen if McDonald's it was found after the election that the week before the election 80% of the beef they had been serving was fake and it had been giving people encephalitis and their brain had swollen and they started making bad decisions and then after the election we went back and said McDonald's were really upset with you 80% of the beef you were serving was fake and it led to bad decisions that is really bad for our society McDonald said whoa hold on we're not a fast-food restaurant we're a fast-food platform Facebook and Google have really let us down they have committed they have committed involuntary manslaughter of the truth on an unprecedented scale people are going to start connecting the dots and realizing these amazing companies are just more efficient than the old economy piers and there's tremendous job destruction taking place and we get cold comfort and low unemployment rates but we I think you effectively see happening as an arbitrage down at people who used to have good middle-class jobs to TaskRabbit or uber so you see even despite economic growth you see wage stagnation so to get twenty billion dollars in retail services accomplished with Amazon they're going to need an additional 50,000 employees but that twenty billion dollars coming out of the retail echo system is going to result in destruction of 103 thousand jobs or a net loss of 53,000 jobs or you could fill Yankee Stadium this year with merchants buyers window dressers cashiers and say courtesy of Amazon you're out of business it's even worse in the media business to service the twenty billion dollars in incremental revenue to Facebook and Google this year will do or capture from the rest of the ecosystem and by the way the media ecosystem is flat it's not a growth business they'll need another 14 thousand employees but the traditional players the traditional services companies in the media ecosystem needed 150 1,000 people to service that 20 billion dollars so you're talking about a net loss of 100 37,000 jobs in the media ecosystem courtesy of Facebook Google and now Amazon or two-and-a-half Yankee stadium's full of strategist planners copywriters creative executives all of your friends we used to admire or black and got to be cool stuff of clients and came up with big ideas a lot of them are going to start to spend more time with their families in the next few years I also believe these companies wrap themselves in a pink or a rainbow blanket could come across as more progressive why it's to their advantage from a shareholder perspective because as progressives we're largely perceived as nice yet weak so we're less threatened by companies that are run by people who are perceived as progressives so while I believe all these people genuinely are progressives I'm not questioning their beliefs I think it is a good idea from a shareholder perspective to fly Sheryl Sandberg to Kin which they did have her speak to 400 leading executives of ad agencies female executives about leaning in about the very important conversation around women in the workplace it's that's an important dialogue we need to have but I also think it's a bit of an illusionist trip because I think it's Facebook saying hey look over here and ignore the fact that the people Cheryl is inspiring in the audience we're going to put 30% of them out of work in the next 24 months this is who they really are now don't these companies don't we need innovators don't we need them don't they do a lot of good things sure fantastic for the u.s. fantastic in terms of owning real estate in San Francisco at a Ferrari dealership in Portola Valley or if you work at these companies they're inspiring there's a lot of great things about these companies but what about taxes who pays for our soldiers our nurses our roads the average S&P 500 company paid 27 percent of its profits and taxes this is what the for paid why because if we allow them to transfer their capital or their profits to tax havens its suppress their profits and high tax areas and raise them in low tax areas thereby bringing down their average tax rate and no legislature or no lawmaker wants to go after them because everybody wants to hang out with a high girl everybody wants to be friends with the hot guy right you're not innovative you don't get it if you go after these companies Facebook gets fined one hundred and twenty two million dollars for lime saying when EU regulators say we're worried you could share all this information across the half a billion people using whatsapp and use it to threaten privacy concerns across the Facebook platform we don't like the idea of all this data being in one place and Facebook says it would be literally impossible for us to figure this out within several years okay fine we believe you will approve the merger will approve the twenty billion dollar acquisition of whatsapp and then guess what they figure it out and the regular say you know what you lied to us we're angry so we're finding you 122 million dollars which is the equivalent of 0.6 percent of the value that Facebook put on whatsapp so what regulators and we as a society are saying to these companies is that the smart thing to do is to lie to us this is the equivalent of having a parking meter that costs $100 an hour but if you refuse to pay the meter you get a ticket for 50 cents the smart thing to do is to break the law now what we're starting to see in the EU is there's one regulator there whose testicles appear to have descended and has decided that she is going to start finding companies at a level that they begin to notice but still does this really matter does Google really care that they're fine two point seven billion dollars in exchange for going full force at every decision they want the garlotte's antitrust privacy concerns so Amazon will make a transformative brick-and-mortar acquisition in the next 12 months because they have no choice this is by the way this is me gloating my prediction is that Amazon will acquire an organization like a Whole Foods or a Wegmans as they have not figured out grocery by the way I want to apologize for having a picture of me above me that's like shavings of on a ship salad this is five days before Amazon announced the acquisition of hope they still believe they're going to buy a Macy's or a care for or something like that you know I can't imagine why they wouldn't buy Whole Foods for example just now what happened for day they announced the marketplace says this is a great idea as a matter of fact we like it so much we'll pay for it for you and Amazon stock goes up the day of the announcement more than the acquisition price and they say to everybody the retailer we're so pissed off that you're not Amazon and you're not bold like Amazon we're going to make you pay for the price of Amazon to buy Whole Foods and the market cap decline of every other grocer that didn't make this bold move is hammered more than acquisition price so Amazon putting out a press release gets this acquisition paid for by other retailers I believe that CPG companies are going to need to Ford integrate into retail and be the opportunities for these companies to do what LVMH did an Apple did and do this crazy move afford integrating into retail as brand building gets harder an art or pre broadcast as wealthy young people opt out of the advertising industrial complex advertising has become a tax at the poor and the technologically illiterate pay we're opting out of it so the only way to reach people is at the point of purchase you're going to see the best kind these with high margins whether it's Nike Rolex or Samsung have to forward integrate into retail into point of purchase otherwise the margins are going to decline often thing there's a big opportunity because retail has been hammered so hard is so much cheaper than buying other growth brands which is currently currently what they're doing so the question is how did we know Amazon had never made an acquisition more than a billion dollars they made an acquisition of 13 and a half billion and we predicted it literally seven days before it happened how did we know and I'm about to let you in on how this actually went down on how this happened so we're testing Alexa we're hurling thousands commands at Alexa every day in the office and taking notes to try and figure out what is Amazon strategy with Alexa and we're in there and I'm playing with Alexa and I said okay Alexa buy whole milk Alexa buy whole milk I couldn't find anything for home milk so I've added whole milk to your shopping list okay and then I said Alexa buy organic foods Alexa buy organic foods the top search results for organic food is Plummer organics baby food banana and pumpkin 12 pack of four ounces each it's 15 dollars total would you like to buy it and then as often happens now on my age I got a little bit confused and I blurted out something I didn't mean to Alexa and by Whole Foods I have purchased the outstanding stock of Whole Foods incorporated at $42 per share I have charged 13.7 billion to your American Express card I thought that was going to be funnier so our prediction Amazon is the first trillion dollar company but don't celebrate yet a district attorney in a state's office is going to start to connect the dots between job loss people are going to get increasingly pissed off and be continued illusionist tricks of these four companies get angry at Amazon and this district attorney is going to realize the fascist blue line path to the governor's mansion is to go after Amazon Amazon by 2020 first trillion dollar company and then soon after it'll be broken up our next speaker [Music]

Channel: Gartner for Marketers

Views: 220,284

Rating: 4.9052939 out of 5

Keywords: Scott Galloway, L2inc, Winners & losers, Digital marketing, Social media, Ecommerce, Mobile marketing, Marketing news, Business news, Internet news, Tech news, Social Media news, Digital research, Business intelligence, Digital trend, Market trend, Brand strategy, google, amazon, facebook, apple, digital leadership academy, brand marketing, business, media, retailers, digital marketing strategy, brand strategy, harvard business school, kellogg school of management, nyu stern

Id: GWBjUsmO-Lw

Length: 48min 24sec (2904 seconds)

Published: Wed Jul 26 2017

Reddit Comments

[u/simstim_addict]

Not really the usual r/cyberpunk content but I thought people might like to hear a business lecture on how the online corporations work and how much power they have.

Lots of relevant details - their economic size, their domination of our lives, the high tech and the dystopian elements.

I found this in /r/lectures

[u/vicabart]

"Google and Facebook have created involuntary manslaugher of the truth on a massive scale." Lots of great insight. Thanks a lot for the share, OP.

[u/3ii3]

Here's a bit of conspiracy. You actually rule your world and you just use digital services for free knowing that you're the product and pretend that you're helpless and not taking advantage of a company, they're taking advantage of you and it's all a big conspiracy to keep you down.