Innovative Leadership: Scott Galloway, MBA 92, serial founder



welcome welcome everybody I'm rich Lyons Dean here at Berkeley Hawes and this is our final Dean's speaker series session here for our for our semester so thank you for being here is a pleasure for me to introduce to you one of our own one of our alums and someone who has been an inspiration to me and really a an important source of advice and counsel for me and that is as you know Scott Scott Galloway he has served on our board here at the Haas School he has been close to the school for for a long time and in so many different ways I mean I just couldn't put this in a personal enough way because when I think of the things that he has done for all of us and for the school it is really quite remarkable and on many different fronts so let me let me say a little bit more about him I won't be able to do it justice but you're here to listen to him and not to me but when we talk about question the status quo for example this is a quintessential questioner of the status quo this is somebody who makes sure that we're being real and that we're being honest with ourselves he will I'm sure challenged us with a number of great ideas here today that's part of why he's here of course uh let me say also that you know he self describes as a proud product quote of the generosity and vision of the University of California Regents this is somebody who grew up educationally in California and is deeply thankful for that he attended UCLA is an undergraduate on a Pell Grant scholarship he graduated with a degree in economics and went on to work at Morgan Stanley as an investment banker he soon realized that Investment Banking was not for him quote I hated it and was terrible at it end quote he decided to pursue his MBA at berkeley haas it was here that scott met his marketing professor david ocker one of the great marketing professors and branding minds in the world along with his MBA classmate Ian Chaplin Scott founded the successful profit brand strategy that company was 1992 and that was based on some of occures branding principles and some of the what he learned what Scott learned it's got any and learned here at Haas in 1998 he founded an e-commerce gifts company that was read envelope that red envelope went public in 2003 calling himself an entrepreneur turned academic it was at this point that Scott decided to pursue a lifelong desire to teach and he joined the faculty at NYU Stern School of Business teaching brand strategy and digital marketing 2012 he was named one of the 50 best business school professors in the world by poets and quants his latest venture a member based digital research firm L 2 that focuses on the luxury brand market founded in 2010 already they've got 30 of the world's 100 largest brands in their client base they use extensive data across a number of different dimensions of what what brand strength means in luxury and other industries and they provide their member brands with comparative data to help them really sharply differentiate in an obviously super competitive market the luxury markets I'm certain we'll be hearing a lot more from Scott and also of l2 about that in the future let me also mention close here in the comments where where I started really this is I mentioned quintessential questioner of the status quo I'd like to link him also to that principle of ours beyond yourself he's just completely committed to the University of California to this Berkeley to this hospital please join me in welcoming Scott Galloway thank you Scott thank you Thanks Thanks hey thanks so much here this is such a an emotional experience for me I remember I was the student speaker at and strawberry or Greek the Greek theater so ever stood wherever it was and I remember my mom who's no longer with us waving she was just so just so proud anyway I'm crying before I start so I work for a company called l2 and we are a data-driven company we track 800 1,850 data points across the 2,000 largest brands globally and we like to think that were trainspotters and we can see patterns and thinking a lot about the companies that disrupt traditional industries and if you were to play the Final Four over and over in business it always comes down to the same four teams is what I find it's either Amazon Apple Facebook and Google in almost any any Final Four and any tournament around these categories in these industries and there's some really wonderful inspiring things about that and I also think there's some dangerous things about that one of the wonderful things about being an academic and one of the great things about America and this notion of tenure and academic institutions is that you're given license to pursue the truth regardless of who it offends which fits my personality well so the idea of being an academic and also getting a chance to go out and collect data and then talk about business is really an intoxicating opportunity so I'm going to take you to today some thoughts around what I call the Gang of Four Apple Amazon Facebook and Google and then reminisce for just a few minutes about Berkeley and some of the stuff I've been doing since graduating and then if we have some time open it up for questions so with that I'm going to go fairly crisply here I'm going to save the add on l2 so 1,850 data points across four dimensions site digital marketing social and mobile and we do it across a ton of brands and we'll go out and then make big predictions and like Eisenhower said plans are useless but planning is invaluable I think predictions are a lot of fun even if you get them wrong and under the auspices of getting stuff wrong I spoke at a conference last year in Germany where I predicted that Amazon would decline in value that the world is moving towards multi-channel retail canned consumers want multiple touchpoints no consumer lives in isolation of any one medium so we would have finally an era where Amazon declined in value and literally the moment I said that it got a ton of play I got over a million views on YouTube which for professor is a lot and if you want to be invited to every retail boardroom in America just be critical of Amazon right because everyone is just so ready to hate Amazon and so I made this bold prediction when the stock was at 300 and laid out my case and Amazon was going to decline in value and literally the moment I said it this is what happened to the stock price so the first big data observation is we get it wrong all the time let's talk about these companies 1.3 trillion dollar combined market cap in 2015 now they're up to about 1.8 trillion or 1.6 trillion so basically the GDP of Canada is what these four companies represent and to talk about the outsides value creation they have there's about 350,000 people working for all four of these firms so that's the equivalent of the GDP of Canada being produced by the number of people who live in the Lower East Side of Manhattan so we have never seen this smaller group of people create so much economic value in the history of modern business and if you were to look at the GDP of Nations it largely correlates to their influence globally and as you can see now these companies have more influence than many nations if we even take it further in the mass and go with the analogy Amazon's market cap is equivalent to the GDP of Romania Serbia and Iceland keep going you a Polly get to add in Ireland in Finland let's talk about Facebook we have the Czech Republic in Belarus and then if we add Google we pick up Denmark the Ukraine and Bulgaria and if we add in you're close to this if we add in Alibaba we end up with a combined market cap that's equal to the GDP of Russia so and I would argue that other than having nuclear weapons these companies have more influence on society the northern Eastern Europe and in many many instances Russia and this is both a good and a bad thing so let's talk about Google Google's market cap and this is an infographic scale to size is greater than a ton of AD supported media companies I mean you have some of the most iconic media companies that have taken generations to build and they still don't add up to Google Amazon if you don't include Walmart it's tough to find as many retailers who add up to the market cap of Amazon Amazon in November and December of last year we're responsible for 43 percent of all online sales the next 10 we're responsible for 25 so think of an industry with a number one leader the number one player is doing 43 percent and the next 10 combined are doing 25 percent the same is largely true in Europe very concentrated towards Amazon Amazon is actually growing faster in Europe than it is in North America now let's talk about Apple this is apples to oranges if you will because on the left hand side we have their growth what they added to their top line and then on the right side we have total revenues so Apple added last year to their top line Louie Vuitton coach Prada Hermes Michael Kors riche menthe and the caring group that's what they added last year and everyone's worried and talking about how Apple is slowing down Apple added fifty two billion dollars to their top-line revenue last year so in sum it's Jeff's Larry's Tim's and Marc's world we just shop search text and post in it now typically a conferences or gatherings like this we talk about winners and we like to think that the tide the rising tide is lifting all boats but in a 1.8 percent global GDP growth economy if a company is growing faster than 2% there's someone on the losing end of that and people don't like to talk about the losers because they're ultimately going to offend somebody and they're worried about losing clients or losing opportunities but it's just as interesting and quite frankly it's probably a greater ROI to talk about the losers because it's an under invested theory it's an under invested or an under invested explored part of our economy is who's getting hurt by the incredible growth here I love television I think this is a golden age of TV and I'm a huge Game of Thrones fan and I like analogies to Game of Thrones so I call this game of phone but effectively these companies are like khaleesies dragons and that when they're small you can feed them goats and rats and they're fine but when your Apple and you have to grow your revenue 52 billion in your Amazon and you have to grow your revenue 16 billion every year you have to start feeding them cities right they get really big this is Westeros for those of you don't know Game of Thrones so the question isn't whether they're going to get into self-driving cars grocery media television it's not if it's when they have no choice these companies have no choice but to get into these industries because they're so dominant in their current play their current sectors that to maintain their incredible expectations from the marketplace they have to get into these large high margin businesses so let's talk about Facebook and Google against the media industry or think of them in the media context grew 40 percent and 12 percent respectively for an average growth rate of 26 percent these this is the average growth rate which is basically flat of some other amazing media companies as you can see some iconic brands are basically just struggling to hold on why kids come to my class and I want to talk about careers and I have one graph and it's basically sex appeal versus return any industry that doesn't sound sexy is probably good return and if it sounds that you want to go to work for Vogue you want to open a nightclub your restaurant or great but make sure there's a lot of psychic income because the ROI and your human and financial capital is going to be really low these iconic brands are having a terribly tough time why because it's great to be in digital marketing as long as you work for Facebook or Google it's a very difficult industry because we have two companies sucking the oxygen out of the room for everybody else in 2010 you had the magazine US magazine industry did 16 billion Facebook was doing 2 billion just five years later Facebook will do 16 billion an entire US magazine industry is now 11 billion think about that Facebook is bigger than the entire US magazine industry if you look at the UK Google is about to become a bigger business in the UK than the entire print magazine business there to give you a sense for their scale now what is the industry that advertising built that ad supported media built this has all kinds of ramifications across the entire ecosystem the industry that print and broadcast media built was CPG P&G is the house the TV advertising Clorox is the house the TV and great rigorous advertising skill set built so what happens when these swords get duller and duller when ad-supported media is no longer an effective tool what you have is is at 90 of the hundred largest CPG brands in America la share last year and two thirds of them declined in revenue that death in the advertising industrial complex is not only hurting these big agencies in these big media companies its rippling back to industries that were built on advertising like CPG they're struggling as well so if CEO of L'Oreal says the brand's agree the most in 2014 were low advertising intensive brands like Urban Decay keels etc NYX has no media Kiehl's has no media Urban Decay has media the same from the CEO of s de la Tour a company that has a larger market cap now than WBP the largest communications firm in the world the fastest-growing brands such as Mac or Joe Malone Allah Mara Bobbi Brown are not advertised in the traditional way advertising has become the tax did poor people pay if you are technically literate or wealthy you are increasingly given the ability to opt out of advertising we have become numb to how bad advertising is and we are getting the opportunities to opt out how many of you watch modern family off of iTunes when you could get it on demand from ABC News or a bee excuse me ABC com but you'd rather pay the buck ninety-nine than endure the advertising all right Business Insider made 35 million bucks last year and had 70 million people go to their site which means they're getting just 50 cents from us so they can reload the page with all that video and all that ad crap they're constantly inundated it with think about TV advertising and think about how ridiculously bad the advertising is in terms of its relevance to you chances are you do not have restless leg syndrome chances are you do not drink Light beer and you're not in the market for a Hyundai advertising does not work 82 90% of the advertising industrial complex does not work and so wealthy people are using their DVRs and over-the-top look what's growing in media it's all non ad-supported it's HBO it's Netflix why because just as we became in this country numb to the idea of mass shootings and woke up and realize this is awful we don't need this we become numb to how bad advertising is and the public's waking up and going I don't need this I don't need advertising in my life and they are opting out of the system do not go to work in an industry that is either built or dependent upon ad supported media if the Sun has passed midday on these industries and these firms any ad agency execs with us they're not just befuddled prey waiting around they're trying to make this transition to the great digital future my favorite example of this is we scrape data from LinkedIn these are some great media companies mindshare Emmy see if you're looking to meet with their did Steve digital officer for lunch and he or she stands you up no problem there's five others these companies have six cheap digital officers I love that just tell call everyone a chief digital officer let's look at the ad tech ecosystem this is a loom escape all of these companies are great well-funded ad tech companies that should have a great future but let's really look at what's happening in this great high-growth industry there's Google and there's Facebook whose stocks are up 40 and 42 percent respectively over the course of the last year here are all the other publicly traded ad tech companies as you can see there's a big difference there's Facebook and there's Google and then there's everybody else and everybody else is dying and we'd like to think this is a robust great echo system with tons of opportunity again digital marketing is a great business as long as you're working at Facebook or Google everybody else is waiting around hoping to be acquired by Facebook or Google or to go out of business we've entered into this Gestalt in the venture capital community and the ecosystem of entrepreneurship which I call get rich or die trying' when I got out of business school here there was an ocean build a great company sell for a good amount good return to stakeholders now it's be a unicorn or die right your venture capitalists have to get one or two unicorns to pay for their return on their portfolio so singles and doubles just don't work so while we had some of the biggest exits in history there's fewer and fewer of them and it's becoming a winner-take-all economy and it's dangerous because if you if you believe the media you would think that there are 400,000 people working at uber there's only four thousand there's 1.1 million partner drivers who don't share in the equity upside and average seven dollars and seventy five cents per hour but the majority of the spoils of a company valued at sixty billion dollars are being split by four thousand people that's great if you own real estate in San Francisco it's great if you on the Ferrari dealership in Portola Valley Valley it is bad for the fabric of America to have so much wealth concentration so much wealth creation with a small group of people the heroes and the innovators of yesterday Unilever one hundred and fifty billion dollar market cap 150 thousand middle-class households spit into the world globally Intel more efficient only a hundred thousand people 160 billion dollar market cap Facebook 300 billion dollar market cap twelve thousand employees we have moved into an economy where the perception is we're creating a ton of great jobs when the reality is we're creating a small number of ridiculously high paying jobs and everybody else is fighting over the scraps and it is a dangerous place that we are headed everybody's cool you should see when I give this speech on the west coat this is I'm like they're like wait what you're a socialist now so I feel I feel like I'm home what is the future of media we still love brands we still need to understand and learn about stuff the future is mobile advertising a mobile phone ads and search search ads on on on a mobile device there are two companies that control 51% Global mobile ad revenues and everyday they control more think about this the most exciting fastest growth part of the entire media ecosystem is controlled now by two companies let's talk about Amazon and Apple in the context of retail so they each grew six eight combined grew sixty five billion dollars in revenue as we mentioned Apple is at fifty one Apple was at fourteen and a half you can't find enough retailers to add up to that much growth they just they just don't exist Nike an amazing company its best year in history 2015 its stock up forty percent they grew their revenues 2.8 billion Apple Gouda revenues 51 you can't find enough company the only way you can find enough companies to add to the global growth of these two retailer's if you will is to add in companies like Toyota de Muller Chrysler BMW you can add up the most iconic biggest companies in the world and you have to keep going until you finally add up to the revenue growth of Amazon and Apple Amazon was responsible for 24% of all retail growth in America last year and 51% of all e-commerce growth think about what an amazing ecosystem and how much opportunity there is an e-commerce the majority of the growth in this amazing growth sector came from one player fifty one percent of growth in the u.s. online came from Amazon last year Amazon has redefined business and the thing that's so wonderful I think so amazing about Game of Thrones back to television is Game of Thrones redefine our relationship with leading characters and protagonists and that is we've had this agreement with media companies that they'll build up someone we become emotionally involved with and buy into usually a dude usually a good-looking dude who has some scary kind of spy skills right and he always gets out of these dangerous situations no matter what so there's a there's a new James Bond film or there's a Series three right Game of Thrones has redefined the relationship and that they build up these protagonists both men and women and we really buy into these people and then what do they do they kill them and it's absolutely game-changing and amazon has had this Game of Thrones Game Change it's imaginative Goldfinger let the laser kept going with James Bond right Amazon has redefined the relationship between shareholders and a company and what they've said is we're going to replace profits with vision and growth so here are the profits of Amazon and people say Amazon can't be profitable of course they can they don't want to be they perfectly manage their business to break-even because they have recognized that profits are to investors what heroin is to an addict in that he or she gets very used to profits and really likes profits and then if you take the profits away the investor gets very upset and very irritable so Amazon never got the marketplace addicted to this heroine of profits this is Amazon's profits vs. Walmart so you think this is by accident the way that Amazon manages its profitability you couldn't do that accidentally they perfectly managed to break even we're a great company we're not losing money but no no no heroin for you right look at Walmart massively profitable Walmart has the correct response last year and says we have to respond to Amazon we're going to make a two-and-a-half billion dollar increase in capex around technology that is absolutely the right move absolutely the correct response and within 20 minutes of announcing that they shed the value of Macy's their stock gets hammered 14% because yeah that's all fine and good but don't take away my heroin so every company in the retail space is in a box because the only way they can compete with Amazon is to make these unparalleled gargantuan investments to go toe to toe in Amazon but the marketplace has said no you need to show a profit whereas Amazon can just break even it's the equivalent of having a business school that every year gets five hundred million and everyone else gets 20 250 million at some point the guy or gal getting the 500 million is this going to build a better organization that is the advantage amazon has it's not operations it's not brand it's storytelling from Jeff Bezos that has created the cheapest source of capital in modern business history so they can do more stuff innovate more take more chances and fail more because it doesn't matter because they have that much more capital Mickey Drexler the founder or assuming the CEOs of the gap and j.crew summarized it perfectly how do you compete with a giant that doesn't want to make money that's what the world is competing with in retail against Amazon what is the product that defines our age I think most of us would agree it's the smartphone one player controls 92 percent of profits globally from the the product that defines our future and that is Apple they get 92 percent of global profits from the smartphone industry Samsung gets 15 you might say well that doesn't make any sense it does because everybody else fights over 7% of the losses Apple PCs are going out going down right don't tell Apple that they sold more pcs last year than a year before the Apple watch is a big failure right let's talk about Apple's failure the media treats Apple in a bifurcated standpoint it's either going to change the world or it's a failure a product that just says you never see a headline that just says meth or okay right let's talk about their failure Apple comes into the market and overnight takes the entire SmartWatch market away from Samsung the the day they announced that Samsung used to control 76% of smartwatches it went down to 8% and Apple took 74% or in 60 days they literally came in and said thank you we'll take that market there are no more smartwatches shipped then watches shipped out of Switzerland the SmartWatch industry is now bigger on a unit level then the entire Swiss watch industry and Apple is responsible for 63% of it let's look at the stock prices here is Apple with its failure it's up 67 percent in the last three years notice when they launched the Apple watch now look at the stock price is of every other wearables and watch company that's publicly traded and pay specific attention to try and draw a regression line since the release of the Apple watch their swatch there's riche montz there's Fitbit there's GoPro and there's fossil do these companies would they agree that the Apple watch is a failure the Apple watch has literally come in and decimated a multibillion-dollar industry with about a hundred billion in market cap and cut it by a third based on apples failure Fitbit announces they're going to compete head-on with Apple their stock goes down 13% the moment the release goes out saying they're competing with the Apple watch let's talk a little bit about migration in a digital age players team of the best players wins this is the number of people you can do this on LinkedIn now you can scrape LinkedIn and see where people are migrating from what firm to what firm this is a number of people who've gone from Google Facebook and Amazon to these amazing firms P&G excuse me from these amazing firms to Google Facebook Amazon so P&G has lost 360 people the Amazon Unilever has lost 194 people to Google you might say okay Scott that's not a big deal people trade players all the time we go back they go forth but what's the next question right how many people have gone from Google Amazon or Facebook to these amazing companies so watch closely this is the reverse migration over the same time period in some if you want to find the brightest and best at P&G Unilever or L'Oreal it's easy just go to Google the economy is literally reshaping now what about within the Gang of Four right what about among the four firms they trade players and they're largely the one firm that has probably got the best retention right now is Facebook and this is probably a Ford looking indicator of value who's holding onto people who's losing them the firm that's starting to suck the most people out of these four companies oops Zuber one out of four people at work at uber came from one of these four companies what company is effectively acting as a giant HRM recruiting vehicle for the entire industry bring us a mom pays them well trains them and then they leave Yahoo I got in a lot of hot water by saying that Marissa Meyer was the most overpaid CEO in the history of Technology I'm checking that statement she's the most underpaid recruiter in the world of Technology what's the path to a trillion how do each of these companies get to a trillion dollars for Facebook its monetization right now they have about they have some unbelievable assets but they get 95% of the revenue from one platform Facebook what if they monetize Instagram messenger and whatsapp Instagram easily the best acquisition in tech in the last ten years they stole it for a billion dollars remember all the grief that Zuckerberg got for buying that thing with 19 people it's worth somewhere between 20 and 40 billion easily right now Instagram is the most powerful social media network in the world if you look at the population times the levels of engagement it's already by far the most powerful platform in the world whatsapp has grown doubled its users there's a there's there's a proxy for monetization of messaging with WeChat out of China that's now getting five bucks per user Facebook spending forty cents on every dollar and Ardie we've never seen that in the history of business for a company doing more than ten billion in revenues Apple and IBM spent between five and ten percent on R&D so as a result Facebook is the most innovative generative new product company in the history of business they're putting out stuff every two to four weeks so a case where a trillion they have a billion daily active users $16 for users 16 billion in revenue 300 billion dollar market cap what if they monetize the rest they got to 2 billion daily active users and got the 50 bucks per user that's the same growth rate that their if they just continue the same growth rate for the next three years that that's 100 billion in revenue I think that's a one trillion dollar market cap I think Amazon gets there with acquisition Jeff Bezos denied they were opening stores or the rumor that they're opening hundreds of stores I do think that's not true I think they're going to open thousands of stores stores still mad cutter there's a rumor that stores are dead it's not that stores are dead it's the middle-class or dying show me a store in a wealthy neighborhood I'll show you a store that's just fine show me a store in a middle-class or a lower income neighborhood and I'll show you a business like every other business is suffering bricks have never been stronger as long as you own the right bricks General Growth Properties & SIMON properties are the two largest mall operators in the u.s. they largely concentrate on wealthy neighborhoods their stocks with hit all-time highs multichannel is the future Amazon will absolutely have thousands of stores within the next decade how do they get there my favorites are they're going to acquire Macy's or care for they could acquire these companies pay a 50% premium on their stocks and take about a 14% dilution to their current equity and they'd end up with a company that doesn't have 68 warehouses but has thousands because Macy's and care for basically turned their stores into warehouses so what do we end up with we end up with a company that does three hundred billion in revenue is the perfect multi-channel player 50% from you commerce 50% from stores growing at 12% I think that's a one trillion dollar market cap company do not go to work or invest an overnight delivery knight now FedEx DHL or UPS these are companies that have stuck their chin up raised their prices 84% in the last 10 years with no underlying innovation which is the definition of being susceptible to disruption and here comes Amazon leasing 757s buying tractor trailers they are going to be in the overnight business you're going to see 120 billion dollars in the total market cap of DHL UPS and FedEx get cut in half and Amazon's going to be happy to pick all of it up you trust Amazon more you'd rather have Amazon deliver your stuff and then Amazon will start leasing that capacity the same way they deliver storage and computing power out to other players will start delivering and renting last-mile services to other players and start going after those those three Google I think's extension greatest concentration of IQ and history is at Google there's really two properties that make money so they're trying a bunch of other stuff they're obviously incredibly smart people we talked about disruption how do you know if you're ripe for disruption you just look at your price increases relative to inflation and if the price increases are much greater than inflation you're ripe for disruption if there hasn't been an underlying increase in innovation so cable right our cable bill doubled as the underlying innovative DVRs a little bit better your screens more megapixels but it really hasn't been much innovation so in steps all these incredible players who say we can't resist the 60 billion dollar high-margin Chum in the water that is TV advertising so you have these incredibly savvy players saying this is too good to resist and it coming into disrupting the TV ad market there is another though there's a market that's more ripe for disruption that it's raised its prices even faster than TV with not a lot of underlying increase in innovation any guesses absolutely one point six trillion dollars in the u.s. seven trillion globally education is literally sticking its chin out after coming except for here of course so I teach brand strategy on Monday nights which is a basically David Icarus class that I took here with updated case studies I have 325 kids enrolled in my class that's one point nine million dollars they pay $6,000 for me for 12 nights in a room with a projector like this that's a hundred and sixty-three thousand dollars a nine I remind myself of that every time I go into class so I'm tempted not to just phone it in to give you a sense for how outrageous that is granted my agent nyu takes a 97% commission but i'm getting paid technically more than these amazing football players get paid per week i am paid more for my skills than these guys you can see this makes no sense i am paid more than every cast member of the most recent installment of Star Wars with the exception of Harrison Ford by the way for the next one I think I would be awesome I'm ready I am ready and I will cut my fees Adelle until her last album made less than I did when she would tour I made more money per week than Adelle until her most recent album I typically do an imitation of Dell here Adele here but I'm not going to subject you to this so Apple I think apples mission is not clear I think the only thing standing between them and a trillion dollars is the lack of a compelling mission the best brand in the world what is Richmond focused on the last 10 years constantly pounding into anyone who listen these principles you know beyond yourself oh is it and you get sick of it but what you realize is how powerful it is because if you don't have it it gets in the way of people investing in you because they judge you on what have you done for me lately if they don't understand your mission Facebook connecting the world I get it I like it compelling they're going to make a lot of money I'm going to buy their stock Amazon's world biggest store I get a compelling I'm going to buy their stock Google organizing lyrics information super compelling they're going to make a lot of money I'm going to buy their stock what's Apple's mission we can feel it we sort of know it but we kick can you art can anyone here articulate in five words like these other firms what Apple's mission is they haven't been able to so as a result it's a what have you done for me lately in the investment community where if they release a product that doesn't work they take the stock down 40% Amazon can release a terrible phone they ride right through it Google can fail with Google glass but as long as they show progress against being the Earth's biggest store or organizing newest information we continue to bid their stock up as a result Apple trades at a multiple of evita of seven versus 1939 and 41 respectively all it Apple needs to do is communicate the amazing thing they're doing and it is still mission to the marketplace and if they can get there multiple just to 12 boom they're at a trillion dollars this is literally a lack of vision discount or tax that they pay what does the future look like I'm a big naysayer on a lot of technologies people are excited about mass customization makes no sense to me the reason I pay so much money for this stuff is I want someone more talented than me telling me what to wear I don't want a mascot customize anything that's a niche market wearables make no sense to me Google glass is not I got to show Google glass is not a wearable it's a prophylactic ensuring you'll never conceive a child is known again near you the other thing that I think is a huge head fake is 3d printing aren't we all supposed to have 3d printers by now and never need anything because we'll just make it out of a wax mold getting everything we want great quality really inexpensively guess what the world already has an amazing 3d printer and it's called China what's the next big nod thing the next big head fake think it's going to decimate VCS all over the world is virtual reality I just don't buy it I don't think that's what people want to put on their head I think they're going to get nauseous this is what you look like when you have this thing on your head we have learned nothing here's the narrative around virtual reality right now the narrative it's going to change everything then it's going to go it's going to change business and it's going to move don't know well it's not going to change business it's going to change entertainment then it's going to be well maybe it's time to change entertainment will definitely change video games then it'll be commercial applications then we'll be niche commercial applications and we'll finally end up where all over hype technologies end up and that it's going to change porn what about society Google is a modern man's God as society to become more aged more more educated they become more atheist we still have a need to pray to a higher being that takes information distills it in a divine way and it sends us back an answer symptoms and treatment of croup will my son be alright you type it into Google it comes back with an answer Google is a moderns man God we can't wrap our heads around these huge problems like how can someone as awesome as me actually die how does space end so we need the intervention of a divine being and the closest thing we have in a modern society to that divine being is in fact Google and that's why they are so successful Amazon Marketplace we hoard stuff we want more stuff in our lives and makes us feel safer Apple is procreation this is the first slide in my class there's only three things we do in business we appeal to the rational organ the brain transportation commodities you do not want to be in this business the brains the ultimate competitor we'll start out all the margin in the business then CBG figured out let's move to a more rational organ the heart and that is choosing mom's choose Jeff you love your kid more if you use this peanut butter or watch their clothes in this detergent and then the margins get really great when you move even further south to talk about procreation if you haven't done really stupid things with your genitals you haven't lived and luxury brands tap into that stupidity right this isn't a watch it's an $11,000 mix of steel glass and movements that cost a thousand dollars that makes me feel more Italian and more masculine and it's not saying I'm into watches it's saying to women if you may with me your children have a greater chance of survival than if you mate with someone wearing a swatch watch we'd like to think we're more evolved than that we're not estee lauder LVMH and now Apple have tapped into that Apple sang to our brain with a better computer then it went into music which was emotional and now it's moved down to the genitals this is the ultimate signal of wealth and opportunities in terms of procreation this is if this says you're smarter better educated and have a greater likelihood of a random sexual experience and if you're carrying Android this is how kids now express themselves as a result rich is dying it's like whoo goo how did we invite this guy how did we invite this guy as a result Apple has 32 percent operating margins greater than LVMH we'd never had a company that has had this scale of Toyota with the margins of Ferrari no company has ever been the low-cost producer in terms of volume with the margins of the premium price product we've never seen that before in a company and it's because they have migrated successfully down the torso Facebook is love we as a species need to love and to be loved the number one indicator of your longevity or number three is your genetics we'd like to think genetics are number one the number three the lesson port and then you would think because we like the security of thinking the dye have been casted no matter how badly I abused my body I'll lived it the 95 because grandma popped it right it's not that way at all number two is lifestyle in some don't be obese and don't smoke you screen out 60% of cardiac and cancer diseases the number one indicator of how long you will live is how many people in your life do you love specifically are you a caregiver it's not how many people that love you people who have a lot of people to love them report living more rewarding lives but they don't live any longer new mothers do not die if your aging parents move in with you your life expectancy immediately goes up three to five years we have a part of our brain that senses whether we are adding value and the greatest value add in life is to love others and take care of them and then a hormone goes out clears out the bad cholesterol and you live longer I believe Facebook is letting us love it's scale I think it's very instinctive our ability to make connections with people check in on them take care of them I believe that is what Facebook is letting us do at a scale that was previously unimaginable I'm going to wrap up here technology is doing some amazing things more environmentally sound products giving people born in the right place of the right education opportunities that we've never seen the likes of before a certain amount of income and equality is a good thing because it's motivating I love you can't see this I took a screen shot I got from uber just two days here at San Francisco and it said your driver kang is hearing-impaired please put in your address I mean there's some amazing things we're doing with technology the hard part is for me is are we in fact I'm going to skip through the some of these things do we have the greatest concentration of wealth and IQ in history to sell another Nissan right is we're making incredible progress against the meaningful but I worry we're not making much progress against the profound health safety and safe harbor from violence status status you know gender gender equality income inequality there's some big problems that if you're on the wrong side of them are a hell of a lot more meaningful than getting to the right place for five bucks instead of eight bucks or having a bigger TV or having someone serve you the ride out at the right time with the best and brightest used to go to work for NASA now they go to work for Twitter and I'm scared we're getting a little bit screwed up in terms of our priorities and the outcomes the most exciting thing about technology I think is empathy I think there's a direct quote relation between broadband speeds and our likelihood to go to war with each other China has very low bandwidth North Korea has no bandwidth the less we understand about each other the more likely we are to make stupid aggressive actions people with the same economic system do not clear war on each other as soon as countries get more and more bandwidths they understand us we understand them and I think we are less likely to commit acts of violence against each other so I think the greatest thing that's happening in technology is an increase in broadband that is infecting the rest of the world some great numbers abject poverty down 75% in the last 20 years we thought we were going to cut it in half we've cut it by 3/4 it's going to be halved again in the next 10 years if you have a kid right now or you're expecting the life expectancy is a hundred years and that child has less less likelihood of dying at the hands of another human being than any child in history literacies up life expectancies up and a lot of this is being enabled by technology so I always like to end on a positive note so I'm going to leave it there I'm going to spend two minutes waxing philosophical or sentimental about Cal and my experience since Cal graduated from UCLA or got into God so the story now for UC kids is some exceptional kid that rich and his team or people from UC find and pull them out I did not get get good grades but I didn't test well either I was I was a unremarkable kid but the University of California the UC system in the 80s said if you graduate from high school with a B average will let you in somewhere so I got into UC Riverside and then I got off the waitlist at UCLA and in exchange for that generosity and that belief in me I rewarded them by graduating from UCLA with a 2.2 7 GPA that is a true story rich can confirm that Dan Sullivan reminded me of that just about 45 minutes ago and then Dan Sullivan and Fran Hill took another chance on me and let me into Haws which made absolutely no sense school for me with six thousand dollars tuition undergrad and grad I started profit with three clients Levi Strauss & Company the Haas family dryers Rick Kronk and William snow a Howard Lester were my first three clients here I do something I love I have Economic Security because of the generosity of the University of California so that the largest shareholder Dell to is me the second largest shareholder are my venture capitalists we put 20 million bucks into the company the third largest shareholder is the University of California I am so committed to making sure that this good man and his good team continue to do for me you know what we can do for everybody else that the stat I love about Cal and the Chancellor did this when he was in New York I'm not only getting emotional but I'm literally running out oxygen is cow will graduate Berkeley will graduate more kids from low-income households this year than the entire Ivy League combined so it's such a great honor to be here and to see what fantastic stewardship we have of this institution that literally gave me this just so much I'm going to leave it there thank you very much for your time the Latin Brewers we open at the question how about two quick questions is that okay we love having speakers here who have a point of view and I think we just got one we are right at the end so we if we have time for two questions you'll have to use the mic because we're recording we'll have quick answers and then we'll have to depart so please you're the first question and then if somebody else and you're the second question back here I thank you very much for your talk I couldn't help but think introduce yourself with I'm Mubeen Kamala second-year MBA student I couldn't help but think that Teddy Roosevelt is probably rolling in his grave right now about the Gang of Four and thinking about these will become monopolies in the industry so how do we go about as a government in making sure that these don't become monopolies and overtake the consumer you know that's such a thoughtful question and my guess is there's so many more talented people here that can answer that than I can it's above my pay grade I always come back to the same place and that is you've got to give as many people as possible the opportunities to go be disruptors themselves and it kind of all comes back to education for me and that is you've got to give as many people as possible a chance to go after their piece of the pie but I do worry that I mean and I can say this in Berkeley and I say this everywhere but I'll get more perceptive I think that there's absolutely no excuse to have a long term capital gains tax why am I being taxed at 20% when I sell shares for some reason we've decided the capital is more honorable than sweat that the money that money makes should be more precious and treated more benign in a more benign way from a tax status than actual work which to me is nothing more than a transfer of wealth from the middle class who owns assets 92% of stocks are owned by wealthy people it says why do we have this protected class which why frankly I'm a part of it just makes no sense to me that we would let people accrete so much wealth and then put this chaser effect on it of lower tax rates it just it absolutely is totally backwards to me and not a progressive society and not how we encourage I mean we've taken income inequality and a certain amount of good for time I love living in a nation with a cementum inequality with a combination of luck talent and hard work can give you a great life I think that's important but we've taken and said ok once you're in the winner's ring once you if you win the lottery we're going to triple it courtesy of taxes from the middle class I think our tax structure is regressive I think we talk about programs for the poor people and we use terms like moral hazard and then when we talk about cutting taxes for the wealthy we use terms like growth I have we have been sold a bill of goods around around not giving people the opportunities not giving companies a chance to just eke out a good living in my class I have no doubt I've seen 25 kids there's a couple billionaires in there they'll make it through alternative investments we have a ton of kids who go into hedge funds or tech but the sad part is I think 20 or 30 of them are gonna end up dependent upon the government or their parents it's never been easier to be a billionaire but it's never been harder to be a millionaire it's never been harder just to do a good job and make a decent living the media makes us believe that these billionaires are everywhere and that there's people from uber Facebook and Amazon everywhere there aren't that many of them there just aren't that many of them so I think better tax policy ensuring that as many people as possible have access to education so they can get their piece of the pie but I've worried and I don't know if I'm getting older and I see everything is half empty now but I don't think a kid like me can get into a school like this the way I was I don't think a kid like me can afford to start a business now with the crushing student debt that come out with and you know I've reached Lightspeed I'm doing really well now and all of a sudden I find out I'm getting all these tax breaks I started a business from 2011 to 2016 to the first ten million dollars in capital gains tax free right totally tax free that makes no sense at all right I'll take advantage of it I'm not going to disarm unilaterally but we have a tax structure and an education system in terms of cost that in my opinion are creating massive inequality that was a longer answer than you want it thank you thank Scott eat hi this has been a tremendously valuable use of our time thank you so much oh yeah uh-oh are you my name is Eve Cowan and I'm a development officer for the Haas School of Business I'm sure I'll hear from you I mentioned a little bit about the future of higher education and education in general and of course that's of interest to probably everyone in the room can you can you share a little bit more about that sure as deeply as we have time for everyone's waiting for this environment to be disrupted right because a guy teaching at 163 thousand dollars a night can't be sustainable right so everyone's saying it's going to be disrupted everyone knows it's going to be disrupted but then the next question is well who's going to disrupt it and right now the conventional wisdom is it's going to be some Mook or it's going to be a technology company financed by kleiner or general catalyst with Sequoia you know who's going to disrupt education Harvard or Stanford the five or ten companies with the best leadership the best human capital and the third leg of the stool the most resources Harvard could double its incoming class with no sacrificing quality they're going to go from 3,000 students in my view what I would do if I were Harvard I go to 30,000 students using technology in a multi-channel model I'd wipe out tuition then how do you compete against Harvard when it's free and they're using technology to take the 30,000 not the 3,000 best students so this is what is so important for us as an institution over the next five to ten years the top five or eight schools will disrupt everybody else are we going to be on the right side of that or the wrong side of that you don't want you do not want to be number 20 right now the top 5 it's happening everywhere the top one or two in every industry that I've accessed the cheaper capital better human talent and a better better momentum are pulling away from everybody else the same exact thing is going to happen in education it's going to be the spoils are going to go to the top five so you know the speech I give around education is you know we're right on the bubble like we're spread somewhere between by most standards between six and eight and the only thing separating us between six and eight and between five and one it's only one thing our preferred Esther's are right there our human capital the students you know second hard school in the nation to get into meaning unbelievable human capital the only difference between us in the top five and the people are going to disrupt his resources full stop so get to it thank you thank you God and I'm going to go get to it as well thank you for coming

30 Comments

  1. Big Straz said:

    This is a 55 minute and 7 second rant.

    June 30, 2019
    Reply
  2. Ghaffar Ellis said:

    Mentorship is great. Scott, you're wrong about 3D printing. I have a vision that your gonna have to recognize.

    June 30, 2019
    Reply
  3. WilliamSGilbert said:

    "People with the same economic system do not declare war on each other" (44:10). Not to be that guy but, uh, WW1?

    June 30, 2019
    Reply
  4. MyNameIs_Peanut said:

    9:16 thought I spider jumped on my screen. Fell off my bed.

    June 30, 2019
    Reply
  5. Chris North said:

    excited about the govt graduating more than private? That is just wrong.

    June 30, 2019
    Reply
  6. T MO said:

    He explains things the way he interprets the data in digestible language, which makes him right, about 52% of the time.

    June 30, 2019
    Reply
  7. electroturi said:

    Wow

    June 30, 2019
    Reply
  8. Alexandre Silva said:

    can anyone explain to me what he meant at the end of the video about "get to it" in regard to eduaction??? That only a small amount will get the pie?

    June 30, 2019
    Reply
  9. -.- Cat said:

    Apples and oranges comparison. GDP comes in every year and you're comparing it to market cap?

    June 30, 2019
    Reply
  10. Sam Jensen said:

    Go to 4:00 to skip the most boring intro ever.

    June 30, 2019
    Reply
  11. Randy Summers said:

    Lmao!!! "That's All The Time We Got!"

    June 30, 2019
    Reply
  12. paul Sharratt said:

    a good mind

    June 30, 2019
    Reply
  13. LJM2stepspain said:

    I almost had a heart attack at 9:19. I thought his hand was a lizard or huge spider that crawled onto my monitor since I was watching in full-screen.

    June 30, 2019
    Reply
  14. Patricia Craja said:

    this is my first comment. Thank you all for reading it. I think Galloway is amazing

    June 30, 2019
    Reply
  15. Bill T said:

    You would not need to go to a school like Berkeley, you need imagination and belief in yourself. Gates did not need it nor did Jobs. These colleges are on a mission to leave kids broke and society tries to make every young person think their only way to success is through these campuses.You can get a free education right here on Youtube,

    June 30, 2019
    Reply
  16. J said:

    What does L2 Do exactly, I've read on their site what they do, but I don't fully understand it.

    June 30, 2019
    Reply
  17. Carlos Flores said:

    What a great answer to the monopoly question. So thankful for Scott Galloway in giving these talks and Berkeley for hosting.

    June 30, 2019
    Reply
  18. Oswald Chisala said:

    This was a really enlightening Leadership video. It is composed of so many working parts but it all boils down to a clear, concise vision, and evaluating how meaningful your technology is to the world. Thanks for the video!

    June 30, 2019
    Reply
  19. workstation19 said:

    I am really curious about his thoughts on the future of medicine and the medical field.

    June 30, 2019
    Reply
  20. The Scarlet Pimpernel said:

    I love Scott's insight into tech companies, not so much his socialist agenda.

    June 30, 2019
    Reply
  21. Thomas c said:

    "The realest people, have the least friends" – Tupac….This guy is real!

    June 30, 2019
    Reply
  22. coolbanana165 said:

    I don't get why he doesn't think 3D printing will do well? Why would people own computers or 2D printers?

    And what 'gamer' doesn't want a VR headset?

    June 30, 2019
    Reply
  23. TurtleT1 said:

    who is this camera operator? just stay on the damn slides. we know what the guy looks like

    June 30, 2019
    Reply
  24. ZuZu Petals said:

    Thanks for tickling my little grey cells and giving me multiple spontaneous outbreaks of deep delicious laughter, Scott! GREAT presentation.

    June 30, 2019
    Reply
  25. iamtheyorkiemom said:

    OK… published in 2016 on YouTube, but what's the date of the actual presentation?

    That makes a HUGE difference!

    Fantastic presentation, BTW, thanks!

    Wish he'd commented on their Amazon Prime services (inc recently introduced home delivery), which is what makes me question how old this is…

    June 30, 2019
    Reply
  26. Shahzad Zafar said:

    Amazing, inspiring talk! Why does this only have 5K views, it should be seen by millions.

    June 30, 2019
    Reply
  27. Chuubie said:

    47:01 wow. the emotion after telling his story of Cal taking a chance on him.. goes on to then say: "The stat I love about Cal.. the Chancellor did this while he was in New York… …Cal will graduate more kids from low income housing this year than the entire Ivy League combined."

    June 30, 2019
    Reply
  28. Chuubie said:

    41:46 "The number one indicator of your longevity is" …is not genetics, not lifestyle… it "is how many people in your life do you love. specifically, are you a caregiver? it's not how many people that love you. people that have a lot of people that love them report living more rewarding lives but they don't report live any longer. If your aging parents move in with you, your life expectancy immediately goes up 3-5 years. we have a part of our brain that senses whether we are adding value, and that the greatest value add in life is to love others and take care of them. And then a hormone goes out and takes care of the bad cholesterol." #BOOM.

    June 30, 2019
    Reply
  29. Chuubie said:

    I love his insight and his L2 inc. YouTube channel.. such good information. Had no idea he was involved with Haas! I did undergrad Haas but didn't learn about him till 8 years after i left!

    June 30, 2019
    Reply
  30. Ashish Patira said:

    Did he really compare Market cap to GDP of Canada !!!! ?? GDP is a flow variable ( on a per year basis ) while Market cap is a stock variable ( lifetime accumulated value of these 4 companies )

    Please compare relevant metrics only !!

    June 30, 2019
    Reply

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