Pivot - Big Tech Earnings, College Admissions Controversies, and UFOs
Episode Date: July 28, 2023Kara and Scott talk about the latest interest rate hike, Mitch McConnell’s health scare, and whether the aliens are finally here or not. Plus, it’s earnings season, and the AI effect is making mon...ey moves for Big Tech. Then, should colleges do away with legacy admissions? And a listener question about the future of EV charging. We’ve got some more listener mail episodes coming your way soon, so send us your questions! Call 855-51-PIVOT or go to nymag.com/pivot. Learn more about your ad choices. Visit podcastchoices.com/adchoices
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Hi, everyone.
This is Pivot from New York Magazine and the Vox Media Podcast Network.
I'm Kara Swisher.
And I'm Scott Galloway.
You're not sounding great this morning, Scott. What's going on? How's Aspen again? Well,
it sounds a little rough in Aspen today.
It's just early. I didn't even drink last night. I was up late writing No Mercy,
No Malice because I'm going to Barbie tonight.
Oh, a win. Uh-huh.
I wanted to be totally focused on that.
And so I'm running on just about four hours sleep right now.
Oh, yeah.
Anyways, I feel fine.
How are you?
Good, good.
I'm also, I think in your time zone, I forget where Aspen is versus San Francisco.
Mountain.
Mountain.
Oh, then it's an hour later.
I never sleep, so I'm good without sleep.
You're in.
That's right.
I think you texted me last night at like 4 in the morning.
I was trying to figure out what time zone you were in.
Yeah, San Francisco.
Still here.
So you're still out there.
Having a great time.
Yeah, I'm with Alex.
We're hanging out.
We rode in a Waymo yesterday.
We're going to see Jeff up in Inverness today.
We're going to have some oysters.
It's a very nice, lovely time we're having together.
That's nice.
I'm glad.
In any case, there's lots to talk about.
We've got earnings season and what it's telling us about the AI race in big tech.
We'll also discuss the controversies over college admissions from affirmative actions to legacy admissions.
That's just in the news recently, and it's your area of expertise.
We're going to talk about it. But first, Scott, do you believe in aliens?
Did you see that shit?
Yeah. Well, you know, it's apparently a security problem. That's according to three retired
military veterans who testified at a House hearing this week. Among the most interesting takeaways,
retired U.S. Navy Commander David Fravor said that technology of these UFOs was far superior to anything the U.S. has, and also
an allegation of non-human pilots. Let's listen. If you believe we have crashed craft, stated
earlier, do we have the bodies of the pilots who piloted this craft? As I've stated publicly already
in my News Nation interview, biologics came with some of these recoveries. Were they, I guess,
human or non-human biologics? Non-human. And that was the assessment of people with direct knowledge on the program I talked to
that are currently still on the program. That was David Grush, a former Air Force
intelligence officer, a Pentagon spokesman, denied his claims to NBC. You know, this is
Republicans having a lot of fun, although lots of Democrats, John Podesta and many others,
have been pushing on this. It's not just Democrats.
And of course, we saw some of those naval aviators talking about it in stuff the Pentagon
released about things they don't know what they are.
What do you think?
I mean, the House really needs to work on other things, although I'm interested in this,
as are many.
What do you think?
I don't know.
They're talking about UFOs, and I think they just announced it's like National Cupcake Month. I don't believe in UFOs. I think
if anyone was smart enough to get here from another galaxy, the space-time continuum would
mean that they don't need to let us know they're here. I don't know. I think it's just about time
for aliens to get here. I would like that to happen and save us from ourselves or else eat us.
I don't care, either one. But, you know, I wonder if there were, I was talking about this
with Alex as we were wandering around San Francisco, and he and you really do think alike.
It's like spending the week with a young version of you with a lot more hair.
Wow.
I know. Well, he has a nice head of hair.
There you go.
He was sort of saying exactly what you were saying. And I said, well, you know, maybe they see us like animals, like lions, and they're observing us.
Maybe, and you can see them every now and then.
We don't know what they are.
Like, maybe that's where we are on their continuum.
I got to say, enough people have talked about this, and that stuff in the Pentagon was really compelling enough to want to figure out what's going on. I think that's something that's worthwhile. I know that seems
crazy from me, but I think it's worthwhile. Well, you know, I mean, my view is they don't
visit Earth, aliens that is, mostly because we have a one-star rating.
Oh, what a good Star Trek joke. I know it's a conspiracy theory, but it's kind of an interesting
one, I guess, if that makes sense.
I know that you can see aliens having sex.
All you need to do is go to Porn Hubble.
Get a Porn Hubble.
No matter how tired, the dog brings it.
The dog delivers.
I'm going to move on.
I'm going to move on.
Well, we'll see.
If aliens are here, I think you're an alien.
You could be an alien easily.
Easily. Aliens throw the worst parties, though. going to move on. Well, we'll see. If aliens are here, I think you're an alien. You could be an alien easily. Easily.
Aliens throw the worst parties, though. There's no atmosphere.
Oh, okay. We're getting out of this one fast. All right. The Fed has raised interest rates a quarter of a percentage point, again, marking a 22-year high.
In a news conference, Jerome Powell said there is still a, quote, long way to go to hit the Fed's 2% target and said it's certainly possible another raise will come in September if warranted.
Many people think a soft landing.
He was saying we're not in the recession.
Scott, any thoughts?
Despite criticism from the right that just hates the Biden administration and anything associated
and was really, quite frankly, hoping for out-of-control inflation to get a Republican elected, despite calls from the far
left, including Senator Warren, that good Americans had to pay too much money on their credit card and
their mortgage and railing against Jay Powell that he'd been too aggressive. He's put on an
absolute masterclass. And I want to be clear, some of this is not his fault. When energy or
food prices come down, it doesn't have a lot to do with the Fed.
Yeah, but he did start the party before that.
Bill Cohen talks about that, sort of letting it go on for too long.
But go ahead.
Well, I'm in the midst of complimenting, which I think you agree with.
We have in America, I mean, other than the kingdom of Saudi Arabia that grew 8% last year, We have essentially the Goldilocks economy here.
We have historically low unemployment. Meanwhile, wages are rising. Inflation is crashing as fast
as it went up. Our GDP growth is decent, if not remarkable, it's consistent. And housing prices
have held up remarkably. That's the strangest thing because of a series of unintended consequences
where people can't move because they're trapped by their mortgage and there's no supply.
But really, the economy, it's such an incredible thing.
It's such a random walk of the thousands of economists and thought leaders that we're talking about or projecting or speculating what would happen to the economy.
The idea that the inverted yield curve always leads to a recession is no longer true.
That we could have GDP growth, that inflation would come down this fast, housing prices would stay robust in the face of 400 basis points of increases, 11 hikes over 12.
I mean, literally nobody, nobody predicted this.
I think what I would draw down on is that lots of people wanted it to happen.
You know, lots of people were hoping that the Biden administration would fall.
And I think it's not going to be able to be used by the Republicans in the race coming up.
I think there's not enough time.
And they certainly, there was a sort of glee at the possibility of people suffering.
It was kind of interesting to watch.
And they're completely wrong.
I'm thinking
of a lot of, you know, pundits and podcasters and this and that. We're doing that. And I agree.
I do think Jerome Powell, and I talked to Bill Cohen many times about this, did start off the
party, but he managed to clean up the party, you know? Oh, and I forgot to mention, first half of the year, best first half of the
NASDAQ in 40 years. I mean, what exactly were we hoping for that we didn't get? Some people are
saying it's the sign of a bad thing to come. Anyway, we'll see where it goes. But in any case,
good job, Jerome Powell. Well, if we wait long enough, we will, in fact, get a recession.
That is correct. That is correct. But we're not in that now. I do sense a feeling that people are
feeling a little more positive about things. I'm not sure if that's the case, but we'll see.
The test will be in Q1, because right now we have about, of the $6 trillion that we overdid and
handed out in COVID, there's about somewhere between $700 billion and $1 trillion left. And
supposedly consumers in American households are ripping through about $100 billion a month. So the
beginning of 2024 will be supposedly when households basically run out of money. So
that'll be the true test. Yeah, well, we'll see. Anyway, another story in the news,
new health concerns for Senate Minority Leader Mitch McConnell. I think everybody saw
the press conference where he froze, was unable to
speak, and he was escorted out. I don't think people knew what to do. After a few minutes,
he came back and said he was fine, and aides said he felt lightheaded. One reporter asked whether
he had seen a doctor. He didn't respond. He said he was fine. The New York Times spoke to two
neurologists who only saw video of the incident and did not treat McConnell. They said it was that a mini stroke or partial seizure could have caused it. Let me just say,
I had something like that. And I had had one before I had my bigger stroke that I didn't
realize what it was. And that's exactly what it looked like. I'll tell you, I had such,
when I looked at it, I was like memory bank dropped. Because what happens is, what happened to me, I was putting a shirt on one of my kids.
I think it was Louie when he was younger.
And I froze.
And I couldn't, my hands were in the air.
And I literally couldn't command my hands to move.
And I was aware of it the whole time.
I wouldn't say I lost cognizance in any way.
But I froze like that.
And when he did that, I was like, oh, wow, wow, wow, wow.
And it happened when I had the stroke too, my mini stroke.
And so I'm not a doctor, but boy, did that, that was very familiar, what happened to him.
So I don't know if it matters or not, but it's part of this sort of, you know, I was
young when I had a stroke.
So I know you'll talk about aging, but he really seems to need help.
Well, he didn't, okay. He may have had a stroke, but I know what's wrong. I know what'll talk about aging, but he really seems to need help. Well, he didn't. Okay.
He may have had a stroke, but I know what's wrong.
I know what he suffers from.
He's too fucking old.
Well.
Okay.
I mean, this has gotten so out of control.
He's 81.
Dianne Feinstein, it is insane that she is roaming around the halls of the Senate.
Joe Biden is running for president.
And if he wins, which I believe he will, and I will vote for him and I will canvas for him, he will be 86 when Marine One leaves the West Lawn.
Nancy Pelosi is 83.
The average age of an American is 35.
And what do you know?
Social Security gets a 9% cost of living adjustment.
Oh, but wait, the child tax credit doesn't get.
Oh, but wait, we send 0.6% of GDP on young people.
I get it.
Jesus Christ.
Have we gone insane?
No.
Have we gone insane?
DC is a cross between the walking dead and the golden girls.
It's cute and it's funny.
I mean, enough already. Jesus Christ Golden Girls. It's cute and it's funny. I mean, enough already.
Jesus Christ.
I am going to press back.
You're going to let me press back?
If we can age-gate, if we age-gate Senate, you have to be 25 or 35.
You have what?
10 more seconds.
If we age-gate on the bottom end, 25 or 35, why wouldn't we just age- gate and say, tell you what, at 80, at 80,
we're sending you home? No, no, I'm going to push back.
What? Okay. No.
No. What representative?
You're ranting and you're not letting me speak.
Jesus Christ.
I get it. I don't think you need to link a medical emergency because, you know,
Fetterman had one, obviously, had medical problems and the Republicans were just evil
talking to him. Now, I have to say, I thought the Dugan protests had a lot of class in terms of not attacking him. This was a medical incident,
and you can be a very vibrant 80-year-old. You know that. You know a lot of 80-year-olds.
Not really, Cara. Not really.
Okay, I do. I do.
You said that, and it's actually not true.
It's true.
There aren't a ton of vibrant 80-plus-year-olds who can manage the responsibilities of the Senate.
Okay, that's fine.
But they're never going to do it.
So you can go on and on and rant all you want about it.
Well, they age-gate on the lower end.
Why don't we age-gate on the higher end?
We age-gate pilots.
Because you don't give up power.
They don't give up power.
People don't easily give up power.
Well, I agree with that.
And the people who have to pass it are not going to give it up.
Now, what's incredible is that these people don't
voluntarily or their families make it happen. And as you know, dealing with elderly parents,
both of us are dealing with it. It's very, very hard to even get them to stop doing anything.
My mom's wandering around Europe right now, not to my liking, but she's doing it.
And, you know, I worry about her safety. It's very hard to control
people. One. Two, there's never going to be something passed here. I think he should take
a retirement. I think it looks like he had a very bad fall, and he's passed his prime. He doesn't
hear reporters. He has an incredibly hard job. It's fine if he just stays there and is not in
this position. That I would very much agree with.
But that's up to the Republicans to pull him out.
And they're not going to do it.
People get very uncomfortable pushing around seniors.
They do.
They just do.
You know that's the case.
I get it.
And my question would be this.
If you have to be 35, I mean, what do we need more of here?
Young people.
We need more young people.
And also, I think it would actually be,
I don't want to say a relief for them,
but the best thing for them would be
these people worry that they're going to lose all relevance
and they're going to start to die,
which quite frankly does happen
when a lot of people start working.
But there are a lot of professions
where we have an age gap.
There are a lot of,
the reason why we have term limits
for Supreme Court justices,
for our elected representatives of federal office, I think to say, look, at 80, it's time for us to throw you a dinner and for you to go home.
And you can run for Senate at 76, but it just means at 80, we're going to have a special election.
Okay.
Because we are really – the country is really hurting from this stuff.
hurting from this stuff. You know, Diane Feinstein, our inability to finally have some more progressive judges on the bench is being hampered by Senator Feinstein's refusal.
Ruth Bader Ginsburg, do you know what that did to us?
I appreciate your feelings, but I don't know how you get, how do you get them out? Like,
let's be practical. You can't do it. It doesn't work. And people, watch those people in that meeting.
They didn't know what to do.
They didn't want to make him seem old.
They did their best.
That was a weird situation.
They did.
I'm just saying that people don't know what to do, and they certainly aren't going to go at him.
That's the thing, is they're not going to go at him.
And they're not going to tell you that he had a mini stroke, just the way they kept information away about Dianne Feinstein.
But I'll tell you, I agree.
He should step down as Senate Majority Leader.
He was elected by the people.
So he should make those decisions.
You think Biden should step down at the same age?
No, I don't.
I think this guy has a true medical.
That was a true medical emergency.
You can't start cherry picking then.
You got to have one age gate.
We have an age gate on the lower end.
Why don't we have it on the higher end?
Well, then here I am.
He'll decide when he wants to, and that's what I'll do.
That's, I think there's nothing going to happen here.
But it was very disturbing.
And I cannot stand Mitch McConnell,
but I felt for him when I watched that happen.
It was, he was struggling quite a bit.
Anyway, let's get to our first big story.
It's earnings season with all eyes on big tech
after first quarter largely defined by AI hype,
and we're still seeing the AI effect.
Let's start with Meta, which beat expectations,
reporting $32 billion in revenue,
up 11% over
the same quarter last year.
Facebook's parent company, also most profitable quarter since 2021, reporting $7.8 billion
in profit.
That's a 16% increase compared to last year.
AI targeting reportedly helped ad sales, which were up 12%.
That was interesting, both together in the second quarter.
Looks like a year of efficiency is really working for them.
They've cut costs.
That's probably also in here, too.
They've got threads, Lama 2.
And Zuckerberg is promising more AI products, which will help.
This company will be much aided by AI.
And for the metaverse, the Reality Labs, the division that makes metaverse tech, has lost
more than $21 billion since the start of the year.
So there's lots of cutting he could do.
Moving on to Microsoft, which had a strong quarter with revenue increasing 8% and
cloud revenue up 15%, but it slipped in after hours trading. The company says capital costs
for AI will keep going up as it invests in chip technology, which everybody has to do and builds
out data centers. So let's talk about these things. You have to spend money to make money. Investors
are interested in seeing some returns.
What do you think?
I could add Google into this if you'd like, but talk about these two first.
Look, this was just an absolute blowout quarter.
Of course, I think it's important we bring this back to me.
At the end of last year, every year I do my predictions.
And I said that while growth was going to decelerate across big tech, they were going to have their most profitable quarters in history towards the back end of 2023 because for the first
time they would get to enjoy the great taste of cost cutting, which they haven't done in 20 years.
And essentially these companies have cut real costs and no one's noticed on the consumer side.
Their spending continues. If you can grow while you're cutting costs,
oh my God, champagne and cocaine on the earning side. And that's what we're saying. And then you
add in the chaser of AI and cloud growth and excitement that there's a new catalyst for growth
in the space. The only- Growth and cost savings too, not just growth.
That's right. But between Meta had, that was one of my stock picks last year.
It was at 90 bucks.
Now I think it's over 300.
It's just on fire.
And people do believe that Mark is slowly but surely trying to find a way to have peace with honor and reduce spending around the metaverse.
But look what happened with Microsoft.
The idea, they've launched
an AI feature that can be bundled into Office that they want to charge an additional $30
a month. If there's a 50% take up just across some of the applications, you're going to see
a substantial increase in high margin revenue. Alphabet, its cloud division turned to profit
for the first time. It'll never look back
at unprofitability. It'll continue to be profitable. It grew like crazy. 70% of unicorn generative AIs
use Google Cloud. I mean, it just was like one amazing thing after the other. And the way to
look at it, if you want to see the glass is half empty, is that the smaller guys, for example, Snap, Snap struggled.
Snap had bad earnings.
And the reality is that the big, the giants are just pulling away with it.
They're growing much faster than the economy.
They're growing much faster than the sector, which means that, quite frankly, it's a zero-sum game.
Everybody else is probably suffering.
Suffering. You know, Alphabet, you mentioned advertising.
Google's search advertising sales grew better than expected, $42.6 billion.
So ChatGPT hasn't overtaken in its default search engine, as people had thought.
But that doesn't mean it won't.
Quarterly sales are up 7%.
So again, cost-cutting helped by an uptick and a move to the stronger players. You're right.
Does that mean the online ad market is bouncing back? Obviously, in the case of Netflix,
the actors and writer strikes are having an effect on Netflix earnings. The streaming
giant said it expects to have at least $5 billion in free cash flow in 2023 because of
Hollywood labor actions. That's up from a previous $3.5 billion.
They're going to use some to buy back stock. So they have some money.
Well, okay. Netflix. The actors and the writers are trying to impart pain on Netflix such that
it comes to the table, pays them more, and solves the writer's strike or gives them more compensation.
writer's strike or gives them more compensation. And what has happened to Netflix as a function of this leverage that the creatives have over them? They signed up, I think, five or six million new
subscribers. And they have so much additional free cash flow, they're considering a stock buyback
because a multilateral cost reduction has been forced
on the industry. And when it's forced on the biggest spender, they end up with,
oh, what do you know? I mean, you want to talk about chocolate and peanut butter? We're still
growing our subscribers, but we have this amazing exogenous event forcing everyone multilaterally
to reduce their spending. And we have aggregated so much additional cash flow that we're going to do a stock buyback. And the unions think that Netflix is going to do anything
but show up to that room and come up with thoughtful reasons why the strike should continue.
Well, it's not going to continue on forever, but they can buy a lot of interesting stuff
elsewhere. So I think this has been a gift to them at this moment. Not forever, but this moment,
for sure. What about the online ad market?
Obviously, Snap did not do well, but Google did.
We felt it at Vox. There's definitely pressure, and there's two things going on. I do think there
is a bit of a slowdown, but the ad market, the advertising market is stronger than people
thought. But assume the market is growing 5%. When you have companies growing 8%, 10%, and 12%, that means the other players are getting oxygen sucked out of the room. marketing companies, whether it's Snap, which isn't little, or a company like Vox that has good people out there trying to sell ads to ZipRecruiter for Pivot, everyone feels it's
getting harder for everyone. These guys, their quarter, other than Snap, everyone who reported,
it was phenomenal. And the one I just couldn't get over was Netflix. You know, Kara, you just
said something I'm not sure I agree with. At some point, it'll start to hurt.
Netflix has people in Madrid producing content.
A lot of the content they produce domestically isn't subject to union impacts.
This is the fear.
This is the existential threat.
Well, they've laid the groundwork.
This has been going on for years.
They've been doing that.
They sort of pioneered that with Hollywood.
Rather than, Hollywood used to buy syndicated shows or copy them.
Now they're just making them there as opposed to what they did before.
The metaphor here really is the British coal miner strike.
And that is the strike went, they didn't have enough leverage to really force the government to do anything.
They didn't have enough leverage to really force the government to do anything.
But at the same time, the strike went on long enough such that consumers and industry reshaped their energy needs around other things.
So even when they solved the strike, the industry came back smaller.
They are essentially taking the industry down such that it will have a structural shift
such that late night TV just will not have nearly the amount of money to pay anybody, much less what the unions demand.
And Netflix, I actually think Netflix, if they could press a button and say, we want this strike to go on for two, three years, I think they'd press it.
Yeah, they have very different needs at the table.
It'll be interesting to see how they deal with each other, which is,
I keep saying that. Netflix is a whole different country compared to Disney, compared to the tech companies. There's three different countries working here, and the tech companies can sit
it out too and copy and whatever. And they have the money also and the stuff.
Let's compare and contrast it to the UPS drive. The UPS drivers, what do they want? Okay,
UPS strike. The UPS drivers, what did they want? Okay, so the riders want the studios to not use AI, and they want at least a certain number of riders in the room. This is what the UPS union
asked for. They asked for an additional $2.50 per hour and air conditioning. Okay, and the day UPS
was going to go on strike, everyone that uses UPS was going to feel it, as was the general economy, 23% of packages. And UPS, that day they reached a preliminary deal. It's narrowly avoiding a potential strike.
It still could happen.
The deal is worth $30 billion and includes raises for full and part-time workers,
heat safety protections, which I think are critical,
and ends mandatory overtime on days off for over 300,000 employees represented by the union.
Workers have to ratify the tentative deal in August.
And if the vote fails, it could happen.
But they came to a conclusion rather quickly. And it's because they had financial pressure,
EPS did. And I think the teams just probably knew a good deal when they saw it, a decent deal for
their membership. I don't want to use the word that Bob Iger said they're being unrealistic or
unreasonable. I would argue that the leadership at the unions,
and also to a certain extent, the studios, especially the ones that think they have a
shared interest with Netflix and the negotiating table, but they're being naive. If the UPS
drivers, if the Teamsters had made the same demands or requests that the writers are making
right now, it would have been the following. And this is how ridiculous it is,
some of their requests. They would have said, you can never use autonomous driving for our UPS trucks. They never even brought that up. That's an existential threat to UPS or the Teamsters,
but they realized no one has ever been able to get that, so they didn't even ask for it.
That's a really good point.
What if they had said, it sounds outrageous, but it's what the riders are asking for.
What if the Teamsters had said in every truck, there has to be two drivers?
That is literally what the riders are asking for.
They want a minimum number of riders in every rider's room.
Well, no, it would be more like there were two drivers and UPS wanted to cut one because the rooms have been fuller.
You know what I mean?
It's a little slightly shifted that they want to take away one driver.
The Teamsters wanted air conditioning
and another $2.50 an hour.
That's what they,
those were their demands.
And mandatory overtime.
And they have leverage.
You're right.
You're right.
That's a very good point of comparison.
Snap and Spotify, as you noted,
Snap sales dropped
for a second straight quarter,
even though it rolled out.
It's AI chatbot this quarter
called MyAI
and 150 million users have sent over 10 billion messages in it.
People are using it again.
They had some problems, but they're working on them.
As for Spotify, it was the company's strongest ever quarter for user growth,
but the streaming giant reported losses following podcast cuts
and higher royalty payouts and a recent price hike didn't help the stock price,
which I think they're adding a dollar to it, I think,
which fell over 14% immediately following the news. You're right. Things are sorting themselves out. Both very good products, by the way. It seems to me that they're
going to be bought. I don't know. Maybe I just thought about that when I watched this.
Because excellent products. Both companies have excellent products.
Look, revenue declined 4%, where everyone else is growing their revenue.
Their losses did decline.
So the U.S. advertising market is expected to grow 6%, which is actually pretty good,
versus a 9% growth seen in 2022.
And highlights from the call, daily active users reach 400 million, which is up 14%, which is pretty impressive,
which means they're getting lower ad rates.
The stock's down.
Well, the stock was way down today,
but it's about at 10 bucks.
By the way, we're launching PropG AI,
you know, my own bot.
So people can ask my bot questions.
I'm sure like you, I get questions every day,
really thoughtful, long emails that I can't respond to.
So we're trying to create a bot and we've been experimenting with ChatGPT and Lama
to see the differences between the two. And it's been really fascinating. Anyways, look,
I think Snap is a great company. It's the only company that's not, or only kind of company that's
sort of grouped in with these folks that quite frankly, just no matter how much young people love it,
it is kind of the communications vehicle of choice among young people, which arguably are some of the
most valuable people to advertisers. They consistently innovate. I think they're subscale,
and I'm wondering if we could come up with a very interesting tie-up between Snap and Disney.
And Disney could do a few things. One, it could use Snap as a
distribution channel for their content into those 400 million users. Or they could take, as they
said, they wanted to spin off FX and ABC, and I forget who the other network is they own.
ESPN, they want an investor.
Well, what if they really started shoving content
through, what if they made Snap kind of the premier distribution vehicle as opposed to
cable television? They did try that. Snap did try to do that discovery. You remember,
it didn't quite work out. Maybe it was just too early. Or what if they ran original characters
and snippets before all their movies came out on Snap? I think, and not only that,
Snap has the nicest brand in social.
It's the least toxic.
And who does Disney appeal to?
It appeals to young people.
Young people, yeah.
It's interesting.
What about Spotify?
What about Spotify?
The tie-up of Spotify I always thought about,
but they're not going to do it,
and I've actually talked to some people
at Netflix about it,
is that if you had Netflix and Spotify,
you'd have the largest subscription media company
in the world.
That is correct.
That's always been my thought.
But the problem is Spotify isn't profitable and Netflix has hit profitability.
I don't think they'd want to take that dent.
I don't think it's going to happen.
Snap is $17 billion.
Disney is $157 billion.
So call it about a 10% dilution, maybe 15%.
Bob Iger's not in the buying mood right now.
He's got too many other things on his plate. They're shedding. Well, they have $10 billion in cash.
He needs to do something. Yeah, he's shedding. You're right. But, you know, people are still
giving a hard time over paying for Fox. But yeah, I agree. Let's go on a quick break. When we come
back, college admission standards are under the microscope. We'll take a listener mail question
about the future of EV charging and what that has to do with Elon Musk's ex.
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Welcome back, Scott.
I want to let everyone know
that we're all over social media now.
You can follow us on Instagram, threads,
and yes, even the dreaded TikTok.
You can find us at Pivot Podcast Official, all one word.
Check it out from your burner phone
though for TikTok, but whatever you want. We have some nice little videos going on.
Yeah, it's fun.
We're starting. We're dipping our big toast.
You look good. You look better than me despite being much, much older.
Okay.
Yeah, you look better.
I'm not much older than you. It's like, what, a three-year age difference? How old are you?
Anyway, on to our next big story. The Education Department is conducting a civil rights investigation into Harvard's legacy admissions
policy. This comes on the heels of the Supreme Court decision last month that effectively ended
affirmative action. A new study out earlier this week from a group of economists at Harvard
found that being rich on its own is its own form of affirmative action, which, you know, thank you,
we knew that. And by rich, I specifically mean applicants whose parents earn more than $611,000 a year. Essentially,
if you had to choose between poor people and rich people, rich people, legacy people got in.
This isn't just about Harvard, obviously. Let's read some quick figures from court papers in this
case. Harvard gave preference, recruited athletes, legacies, relatives of donors, and children of faculty and
staff. They got preference. Those applicants make up less than 5% of the total pool, but around 30%
of admissions. Huh. Interesting. Guess what else? About 68% of those applicants are white.
What do you think about that? And Harvard and other universities defend legacy admissions as
creating a sense of community.
Yeah, rich people like to hang out with rich people, and more importantly, ensuring donations.
That's really where the money is. The endowment of Harvard is now the biggest endowment in the
country, hovering around $50 billion. That's a big deal for ending legacy admissions.
Two Democrats, Senator Jeff Markley and Congressman Jamal Bowman,
said they plan to reintroduce legislation to bar preferential treatment for legacy applicants.
Harvard says it's reviewing aspects of the Supreme Court decision, but other schools are
joining the bandwagon of ending legacy admissions. Wesleyan joined Amherst, MIT,
Johns Hopkins, and the University of California. Ohio universities are taking a look at their admissions policies as Black student enrollment has dropped or remained
flat at most of the 13 public universities there. So there's a lot happening. But let's discuss
legacy. It's so gamed. I don't know what else to say just so they can get money for their big,
giant endowments. That's my feeling. Go ahead, Scott. You know more about this than I do.
So I've been thinking a lot about this, and there's a bunch of things here, and they're all sort of related. The first is the
Supreme Court's decision to make race-based affirmative action illegal. And I got a lot
of pushback for this. I agree with that. And today, the academic achievement gap is double
between rich and poor as it is between black and white. This year at Harvard, the freshman class
is 51% non-white.
And here's the bottom line. A poor white kid has a tougher time getting into college
than a rich non-white. And affirmative action is hugely important. And we need to talk about
where Americans can come together. And that is, you need to acknowledge that there's still systemic
racism in the United States. But the question is,
how do you best address, how do you best accomplish what most Americans believe,
and that is a lot of kids who, no fault of their own, face additional obstacles,
and government is here to give them a hand up. It's through affirmative action that is based on
money, that is based on economics. And quite frankly, again, my alma mater is leading the way.
The University of California did away with race-based affirmative action in 1997, and they
went to what was called an adversity score. And that is, they recognize a lot of people, a lot of
non-whites face adversity, and they talk about it in their applications, and they give them an
adversity score. But they don't allow legacy admissions. Do you know they don't even allow letters of recommendation anymore? But here is the bigger, even bigger
problem, the even bigger problem. All of these arguments that divide us and anger us
are a giant misdirect. And the reason why we have such emotional arguments is because college is
still a fantastic ticket to a better life, especially an elite college degree. It is the
premier luxury
brand globally. And me and my colleagues are so drunk on arrogance and self-aggrandizement that
we have decided, despite sitting on the endowments that are the size of a Latin American GDP,
to not expand freshman seats. The solution here is simple. We need more white kids. We need more
non-white kids. We need more trans kids. We need more non-white kids. We need more trans kids. We need
more women. We definitely need a lot more young men. And it should be because if a school has a
$52 billion endowment and isn't growing its freshman class faster than population growth,
it is no longer a nonprofit. It is no longer a public servant, and it should be taxed as such.
And let me tie this into Biden's
student debt relief program, which I think was terrible legislation. It was attacking the tumor,
but it wasn't attacking the underlying cancer, and that is exponentially increasing college costs.
If they'd taken $500 billion of that and said to our 500 greatest public universities,
we'll give you on average size adjusted $ billion dollars a year in exchange for three things. One, you're going to grow your freshman seat six percent a
year for the next 10 years and we'll pay for the infrastructure and technology such you can
accomplish that. And all this bullshit about space constraint with online learning, the fact that
there's no students during the summer on these campuses at night, they could easily expand six
percent a year and we the, will pay for it too.
You're going to reduce your cost through that additional scale 2% a year. That's not a lot,
2% a year. And you're going to have 20% of your graduates and your students be pursuing
non-traditional four-year liberal arts, vocational certificates, specialty construction,
cybersecurity. Where does that get us in 10 years with that $500 billion? It gets dramatically more
apprentices and certificates, vocational certificates, such that there's more
and broader on-ramps to a great middle-class lifestyle.
I think you're going to run for Senate from Florida. I think we need to do this,
this would be a good platform.
We have more kids who aren't cut out for the traditional four-year degree who have an on-ramp
into the middle class. So in addition to more vocational certification, what do we have? We have a net
doubling of freshman seats in 10 years, and we have a net halving of cost. This is where we need
to go. And it stops these arguments where we hate each other and start accusing each other of being
racist. I agree. I agree with this. Everything you said is actually shockingly intelligent. But, but, but. Because I'm young. That's the young brain. That's the 50-year-old
brain. Not for long. Not for, not in 10 years. What do you do about legacy admissions? The people,
just before you start, the people that push the affirmative action thing are also now going after
legacy. That guy, that guy is now doing cases around,
he doesn't like legacy either. They're going to have to get rid of legacy admissions, correct?
It seems like that's the trend. This is what no one wants to talk about because it's politically
incorrect. Legacy admissions, legacy admissions should, should actually help non-legacies. Why
is that? When I was in business school, there immediately was someone in our cohort. I went to the smallest business school. The Haas School of Business only had like 200 students. We all knew each other right away. And 80 of them were Japanese students and just kept to themselves. It was really strange. They just didn't hang out with us or anything. And that was back when Japan was like the economy that had beaten the world. And the way you can tell the ultimate signal of an economy booming is all of their kids end up in elite colleges. That is the ultimate luxury item.
So it was a small group of people. We all knew each other. And there was one person who clearly
wasn't qualified, clearly wasn't qualified to be there. And we were all tutoring this individual.
It ends up this individual's parent, we figured this out fast, was a billionaire.
And we said to the admissions director at dinner one day, we said, so-and-so is clearly not qualified.
And the admissions director was, yeah,
but this person's father is a billionaire
and they're gonna give a lot of money
and that will expand seats and give us the opportunity
to let in more qualified kids.
There's too many of them though.
Legacy admissions create community,
create goodwill and result in more resources.
The problem is these universities
have not been using those resources
to expand freshmen seats.
So there is no way, in my view,
that you can say, all right,
we're no longer gonna help people based on race,
but we're gonna continue to let in legacy
that are predominantly white
because of a history of systemic racism
that infected our schools.
So you, again, have to go
to where the University of California has gone and said, sorry, guys,
unless you can show that that additional goodwill that results in additional funds that translates
to more seats for everybody, including non-whites, no legacy admissions.
Legacy admissions, actually, if handled correctly, would be good for everybody because they create more community and more
money.
But the problem is they're not using that more money for more seats.
They hoard it.
Yeah, I like your first idea better, the government using that money to do that rather than for
loan forgiveness or whatever.
Well, how can you tell to the two-thirds of Americans that didn't go to college to bail
out student loans?
The only way you can, under executive action, require $500
billion is if it's an investment. And the other thing I hate about the student loan thing is it
lets universities off the hook. The other thing we need, Cara, is that 10, 20, 50% of bad student
debt has to be assigned to the university that issued it. And what does that do? That says to
a financial aid department at NYU or at SMU says, you know what?
We apologize, but we're not going to loan you $200,000 to get a philosophy degree because
we're worried you're not going to be able to pay it back.
And you want to talk about a war on the young?
A war on the young?
You don't believe that we in the U.S. do everything we can to fuck young people?
What is the only debt that is not dischargeable in bankruptcy?
Student loan debt.
One of the wonderful things about America is we're about a second chance. You get to start over,
head west, young man or young woman. And if you really fuck up and you get divorced and you're
crushed by debt, you can declare bankruptcy. Companies can declare bankruptcy. It's a
wonderful attribute of America, except the people who deserve a second chance more than anyone in our nation, young people,
don't get it. They can't discharge student debt. We need to make universities put them on the hook
for bad student debt. Put them on the hook. Yep. Then they'd be better at giving them out. Yep.
You're right. All right. This is a lot. Everybody will see what's happening. Just give me a very
quick, and I mean pithy, prediction on whether legacy admissions will
be overturned across the country.
I don't know if it'll legally be overturned because I don't know if you can legislate
that.
I don't know the legal ins and outs.
But unless a university can show they're using that goodwill and that additional revenues
to dramatically expand seats for everybody.
And I have a bias here. I am a product of affirmative action. I applied to UCLA when
it had a 76% admissions rate, and I didn't get in. I was one of the 24% that got rejected.
Wow.
I had mediocre grades.
Wow.
I'm being very honest here. I had mediocre grades, and I'm about to virtue signal in a second and flex. I had mediocre grades, but I didn't test well. And I was installing shelving, and I came
home, and I'm like, this is it. I said to my mom, I was with my mom, she's like, well, can we do
something? Can we appeal? And I found out there was an appeal process. And my appeal process was
pretty straightforward. It was, and the truth has a nice ring to it. I said, I'm installing shelving.
I'm going to be installing shelving the rest of my life. UCLA is the only option for me because I don't
have the money to live on campus anywhere. My mom is a secretary. We make $40,000. This is it for
me. I was just very transparent. And I remember the director of admissions, or one of the directors
called me and said, you're not qualified, but you're a son of California, and you face some tough times. We're going to let you in. And it
changed my life. And guess what? This year, and this is the flex, I'm giving $14 million to the
University of California. No organization can predict greatness at the age of 18. So here's
what government's supposed to do. It's supposed to give as many
18-year-olds as possible a shot. Anyway. That's a tale. I didn't know that. What?
Hello? We need to have a party at University of California.
Adversity-based affirmative action is a great thing. It should be based on income. And UC
is doing it exactly right. They don't give a shit if a senator writes you a letter
of rec. They don't give a shit. They want to know your household income. They give favor to people
with low income. They know letters of rec. They've been to that game. And they're not doing race-based
affirmative action. They're getting there through other ways. They're looking at adversity.
Interesting. Interesting. Anyway, Scott, I didn't know that about you. I find things new every day.
That's very generous of you. But at the same time, I didn't know that about you. I find things new every day. That's very generous of you.
But at the same time, they deserve it because they gave you, although I have some shelves
I need hanging, if you don't mind.
My point here is letting it at that point, what seems like mediocre 17-year-olds making
a bunch of bets across what seemed like mediocre 17-year-olds, you never know.
You never know.
I wouldn't have guessed it.
Anyway, let's give it to a listener question you've got you've got i can't believe i'm gonna be a mailman you've got mail
this question comes in via email came in right as the news broke that seven automakers are
banding together to build a charging network to rival tesla's now bmw g, Honda, and Mercedes are among them. Here's what Amish asked.
Tesla's sudden proposal to share its charging infrastructure
and self-driving tech raises concerns for me.
It seems possible it may soon be charged via the X app.
Had car manufacturers collectively invested in alternatives
like Electrify America,
could they have maintained independence
and avoided potential curveballs from Elon Musk in the future?
Love to hear your thoughts. Amish, first time, long time from Oklahoma.
I'm going to take this because I was charging my car last night here. I have an electric car here
in California as a rental. And I was thinking, why are we going to let Elon run the frigging
electric system? He's going to have us by the balls just like he did with Starlink. Like,
why aren't these car makers doing something? And of course, I don't know if there needs to be two competing
types of car networks, but there needs to be like, it should be like a gas pump. It should
work on every car, whatever, if you're using Exxon or whoever. And I do not want to be forced
to use the X app to pay for charging. And that would be terrible if he dominated that. So I think this is a good thing. And I was literally thinking about it because this was
not, this was EVgo, I think. And it had all the chargers on it. It had the Tesla charger,
it had a fast charger, it had a number two and a number one charger. It was interesting.
And it was a very small amount of money to do it. And it took me 20 minutes. I went into the
supermarket and shopped. And by the time I got back, I was 80% charged, which was great. 30 minutes maybe. But I was
shopping. I was doing something else while I was doing it. This has to happen. There has to be a
competition to Tesla's chargers. And he was way ahead of the game by doing it. I give him that
credit for that. But boy, does there need to be an alternative.
Scott?
Yeah, I think you're exactly right.
Competition is an amazing thing.
We're building this bot and we're using, we're testing both chat GPT and we're testing Lama.
And you can tell, you know that both of them are going to have to keep their costs low and keep adding more and more features.
One charging station brought to you by Elon Musk,
that just does not have a good ring to it. Yep. I think this is exactly what has to happen,
and they have to compete, and they have to do it right. Because, I mean, I don't think he would hold on to that for very long, for a long, long time, especially because he might become abusive.
But what happened with Starlink is a very good example. This stuff is not as expensive
as all that, and these car makers should absolutely, this is a critical investment,
not just for the carmakers, but for the government to help them do it.
It's like building gas stations. Gas stations should be converted into charging.
And there should be innovation in charging so that it's fast. So that you go to a movie and
you charge your car. Or there's a lot of time the cars are sitting.
I'm thinking a lot about it this week because I have this electric car.
And at home, I have a charger, as you do, I think, at your house, in Florida at least.
And it's really important to be able to not worry about distance.
And as batteries get better, certainly it'll get to 500 miles,
except if you don't even think about it very much for most trips you have.
But this is critical that they don't,
they're not at Elon's beck and call on this.
And again, I give him credit for being out early.
So we'll see, we'll see.
Again, I will not download,
I not pay $8 in order to charge my car.
And I don't want that to be the situation that happens.
So we'll see.
If you've got a question of your own
and would like it answered, send it our way.
Go to nymag.com slash pivot
to submit a question for the show
or call 855-51-PIVOT.
All right, Scott, one more quick break.
We'll be back for predictions.
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Okay, Scott, let's hear a prediction.
Let's hear a prediction.
I referenced it earlier in the show.
I think something happens with Snap. I think it's such a great product. It has the least awful brand in
social, even the nicest brand. It has 400 million of what are some of the most attractive consumers
to advertisers in the world, and that is young people who probably over-index a little bit
wealthier, who brands love because young people are stupid and
they'll spend six bucks on coffee and 160 bucks on tennis shoes. They love high-margin products
and signaling because they're about to enter their mating years. But the company's subscale
and its ad tech has never been able to compete. And as a result, it has a $17 billion market cap,
which is obviously real, but it's nothing in that world. And I think you
have a set of players that would love to have those 400 million users. And then you have a
set of legacy players. And the one that strikes me, Disney from a brand fit, after they get through
the cost cutting, need something to inspire growth. And as more people don't access Disney
content through traditional cable, this would give them a new channel of what would probably by then be about a half a billion people of the most attractive consumers to advertising.
And Disney's unique IP plus that new distribution channel, to me, it just feels right as rain.
Yep.
I like it.
I have another purchaser.
Tell me what you think.
Apple.
They would love to be.
Let me just say, Snap would love to be bought by Apple. Love it. That would be their number one choice.
The problem is of all of them, most of the executives of Apple have been there for 109 years and they're great, but they're older and it would bring in a young person who has the same qualities, I guess, of Steve Jobs.
Yeah, I'm super impressed with Snap and this is why I don't like to meet with people is I end up liking them, but I like him a lot. I like Evan a lot. And this is, it's a super impressive company right now. It's,
it's subscale. The thing about Apple though, is that Apple really doesn't like to make acquisitions.
They've decided their culture is the most important component. They just, they're the
least acquisitive of all of them, but from a brand fit standpoint, and does Apple, I don't know. I
think Disney, I think Disney is probably a more likely bet than Apple. But just
to give you a sense of the numbers here, say that Apple paid a 100% premium. And by the way,
Evan Spiegel gets to decide all of this because he has a dual-class shareholder. He controls it.
He owns 51% of the voting stock, so he gets to decide. But say Tim Cook called him, and he
wouldn't have to pay 100% premium, but Tim Cook could pay 100% premium.
And this is how out of control the valuations are.
It would be a 1% dilution because that would be a $34 billion acquisition, and Apple is now worth over $3 trillion.
So literally, Apple could buy Snap and in two years decide we were wrong, shut it down, and it would mean have no impact on the stock price.
I like that you like my idea.
I just feel like Apple's the right place for it.
But Disney would be interesting, another elegant solution there.
And bringing in an executive like Evan and his team, which would be interesting, would
invigorate both those companies if they were allowed to do what they need to do, right?
If they were allowed, given.
And I think a place like Apple, they'd have more landscape.
That's all to operate.
Anyway, well, SAIT would be interesting.
And Spotify, no, no, you don't think they're going to get bought.
He's so stubborn.
I can't imagine him ever admitting that he needs help.
I absolutely love Spotify.
There is no other company that has been able to distill an entire medium down to one searchable app. I mean, what they've done is incredible. They've raised prices. They do have pricing power. They're taking the charges for their adventures in podcasting where they were overpaying, which didn't work out.
become almost a co-op for the music labels. And that is they have to give most of their money away to the music labels. So Spotify, ideally, they need to do something. But here's the problem
with dual-class shareholder companies. Daniel Ek is a billionaire. Evan Spiegel is a billionaire.
Why do they need to do anything? Control is an addictive substance. And if you're already worth
billions, whether you're worth $1.8 billion or $3 3.6, you don't care. You're like, the control
is more important to you. Well, in Evan's case, I think he would. I think he very much would sell.
Yeah. You know him better than me. I don't think he's got the same. I like Daniel,
but he's got an ego on him much higher. He seemed very humble to me. I had dinner.
He likes being the CEO of Spotify. He likes it. It puts him on a level of all the other moguls. And so just being an executive at whatever Netflix is not the same thing. I think Evan would relish being owned by Apple or Disney. I think he would relish that. Daniel introducing everyone at Cannes, he just stopped for 15 seconds because he had some sort of cognitive problem.
They wouldn't allow him to run a music service, but we allow these people to make laws.
Oh, stop it.
You're terrible.
Terrible.
You're terrible.
Just say nothing nice.
Do not dance on someone's grave.
We need age limits.
We need more young people in leadership positions.
More young people,
more women.
Yes, I agree.
Anyway,
that's the show.
We'll be back on Tuesday
with more Pivot.
When Scott turns 70,
I'm going to have to put him
on an ice floe
and send him out.
Anyway, read us out,
Scott Galloway.
Today's show was produced
by Lara Naiman
and Taylor Griffin.
Ernie Indertot
engineered this episode.
Thanks also to Drew Burrows,
Mule Silverio, and Gaddy McBain. Make sure you're subscribed to the show wherever you listen to podcasts. Thank you for listening to Pivot from New York Magazine and Vox Media.
We'll be back next week for another breakdown of all things tech and business. Cara, have a great
weekend.