Pivot - Sharks, WeWork & Tumblr's tumble from grace

Episode Date: August 16, 2019

Kara and Scott take on sharks, summer in New England, WeWork's IPO and Tumblr's fall. They also talk about how trade-wars with China are slowing down tech. Scott had a win this week when Nike added a "rundle" subscription service. Scott also gives a win shoutout to Harvard professor Raj Chetty for his research on how class and race function in US society. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Support for Pivot comes from Virgin Atlantic. Too many of us are so focused on getting to our destination that we forgot to embrace the journey. Well, when you fly Virgin Atlantic, that memorable trip begins right from the moment you check in. On board, you'll find everything you need to relax, recharge, or carry on working. Buy flat, private suites, fast Wi-Fi, hours of entertainment, delicious dining, and warm, welcoming service that's designed around you. delicious dining and warm, welcoming service that's designed around you. Check out virginatlantic.com for your next trip to London and beyond and see for yourself how traveling for takes forever to build a campaign. Well, that's why we built HubSpot. It's an AI-powered customer platform that builds campaigns for you,

tells you which leads are worth knowing, and makes writing blogs, creating videos, and posting on social a breeze. So now, it's easier than ever to be a marketer. Get started at HubSpot.com slash marketers. Get started at HubSpot.com slash marketers. Hi, everyone. This is Pivot from the Vox Media Podcast Network. I'm Kara Swisher.

And this is Scott Galloway. Scott, we are in New England right now together, but not together. Shark bait. Shark bait. We'll get to sharks in a minute. You are on Nantucket where all the fancy people are. And I am up in Provincetown where all the interesting artists and people, different people are. And that's essentially our relationship.

Let's rephrase that. You're lame. I'm cool. My name is Kara Swisher. Is that what you just said? Yes, I believe that's what I just said. I'm with the drag queens. I saw a great drag show last night. But the sharks we were referring to is all over the Cape and Nantucket and Martha's Vineyard.

There's been sharks everywhere, sighted everywhere. All kinds of stuff on the internet. Great white sharks are everywhere. And you're scared to go in the water, I understand. Well, I'm not going to say this has had any impact on me, but I refuse to go in the pool. I'm literally, I am so freaked out. It's just, because here's the thing about sharks is they don't, you're not part of their natural food supply. I know way too much about them.

There's unfortunately this great website you can go to to track all these gray whites, which is like going to aerodisaster.com. And that is after you do it, you wish you had not done it. Yeah. But effectively, these guys don't want to eat us. And most of the time you survive a shark attack. Some data, Florida has more shark attacks every year than the rest of the world combined, but they just take a small bite, realize you're not their food supply and they leave. But the idea of a refrigerator with teeth coming up and taking a bite out of me, I'd rather just die

instantly than survive that to experience it. Did you see Jaws? We're the same. We saw Jaws. Jaws was a formative movie for us, correct? One of the great films of all time, Roy Scheider and Robert Shaw's Cinematic Peak. Probably Richard Dreyfuss' Cinematic Peak, too. And Spielberg. It made Spielberg a star, too, as a director. 100% of second movie after Duel with Dennis Weaver. Anyways, enough about sharks. I'm scared shitless. Can we segue into WeWork? Because WeWork's mission- Yes, speaking of sharks, speaking of things- Speaking of sharks. Sharks, speaking of sharks. I'm scared shitless. Can we segue into WeWork? Because WeWork's mission- Yes, speaking of sharks, speaking of things- Speaking of sharks.

Sharks, speaking of sharks. You're obsessed with WeWorks too. First of all, let's just make it clear. You have been talking about the WeWork business model as being less than sound for a long time. Why don't you go into that first? And of course, their IPO is coming. So go for it, Scott. Well, first, let's talk about their mission. And their mission is to elevate the world's consciousness, which they say that like it's a good thing. I've got an appointment here tomorrow at this thing called the Green Lady Dispensary. And my entire, all my disposable income lately is going to try to dampen my consciousness. But they're talking about elevating it, whether it's a COPpa or trips to the dispensary. My wife was complaining this morning that I'm not present enough. I'm like, oh, trust me on this. You do not want me present. I need to be less conscious. Anyways, elevating our consciousness, it's a fucking, it's real estate. And this is literally, we kind of continues this culture of let's find the words and the positioning of the highest multiple companies in the world,

and then let's try and masquerade as one of those companies. So, they're calling themselves Spaces Service, SaaS. They talk about themselves being a tech company. They mention the word technology 123 times in their prospectus. They talk about, you're not a renter, Kara, so you're a member. So when I stay at the Holiday Inn next week, I'm not a guest, I'm a member. And they also talk about, they're trying to position Adam Newman as the next Jeff Bezos.

They mentioned his name 169 times. Yes, yeah. And if you read the related party transaction section, it's like literally reading a lesson in poor corporate governance. And it's a terrible indictment on the board that they let this shit go down. So, for example, Adam Neumann. Explain that. What have they done?

Well, for example, Adam Neumann owned the term WE. He called his family office and investment holdings the WE Group. And they decided, or WE, they decided that would be a better name for the company. group. And they decided, or we, they decided that would be a better name for the company. So, in his generosity, he sold the term we, which I didn't know could be trademarked, back to the company for a cool $5.9 million that was supposedly validated by an outside third party. So, $700 million in loans, a constant two-step in the prospectus. And what we have here is a company, it's an interesting company. It should be worth like two or $3 billion,

similar to its competitors, but they're trying to position it as something that's worth 45. And what this really is, Cara, this is a test of whether or not the markets finally say enough. I mean, Uber and Lyft got out. They probably shouldn't have,

but the markets are starting to sober up and take both those firms to the woodshed. It'll be interesting if the consensual hallucination continues and WeWork can even get out. So what do you think this business is worth and what do you think the business is? Away from all there's, you know,

renting as a service or whatever it is. What do you think it is? Well, it did 1.8 billion in revenue for 2018. And granted, it's explosive growth, up 105% year on year. But it also reported losses of about $1.9 billion. And if you look at other companies that are in the business of renting offices, they get anywhere between 0.5 and 3 times. So let's look at this and say it trades at the upper range of this. This is a company, and let's assume that at some point they get some scale and can, you know, somewhere along the lines look at profitability. This is a company that if you're really excited

about it, you could justify maybe a $5 to $10 billion valuation because it is a great brand, they do a great job. But let me start a company where I can lose a hundred, you know, I can lose 50 cents on the dollar and I'll build a great co-working space. I think it's an interesting concept. By the way, like Uber, every consumer in the world should use WeWork and take Uber to WeWork because your investors or investors are financing what is a non-economical value proposition. But I think this company ultimately is worth $5 to $10 billion. And I think the public markets, after some time, should it even get public, will register that value. And the problem is, or one of the issues is these companies are supposedly worth, and they use it as a proxy and a benchmark, their most recent private round

valuation, which for WeWork was around $47 billion. And what they failed to realize is that in the private markets, the most recent investors usually get a pref, meaning that if they put in a billion dollars and they're the last ones to put it in, even at the sky-high valuation, the first billion out of the company, they get back. Right, exactly. So that number is sort of a fake number, but it serves a very useful purpose for the people trying to pump and dump it in that they can say to the public markets, hey, Joe Lunchbox, you should pay this value for this company, A, because it's cool. There's smart people behind it. It's an interesting, cool concept that your son uses or your daughter uses. And smart people have paid this number for it, not realizing that the public market investor, the retail investor, doesn't have that same downside protection.

Right, right. So this is another example, and we'll go into the ultimate. To me, I agree. I think this guy taking this much money out was unprecedented. It's such a lack of board oversight in terms of this guy taking, how much did he take out? It's like $700 million. That says every single thing to me. I'm sorry, Adam Newman. You take out 700 million, you just signaled exactly what you think of this company. You know what I mean? It's just, it's happened before several times and it's the same bullshit essentially.

In addition, one of the keys, when you're ideally, when you're looking at it, when you're staring down the barrel of a recession, you want a company where you can variable the cost, meaning that, okay, if our revenues go down, we can variable our cost structure down and survive. And if you think of WeWork, it's almost like an investment vehicle that buys real estate and then tries to arbit

out short-term at a higher number, which is no different than Hertz or really what a real estate landlord does. They buy a company long-term and then they sell it short-term. That's not a different business model. But where these companies go out of business is what this guy, Jim Kohlberg, I used to work with, gave me this great term. The reason they go out of business is what this guy, Jim Kohlberg, I used to work with, gave me this great term. The reason they go out of business is mismatched durations. And that is they borrow money short and they invest long. In other words, their customers need to give them 24 hours notice sometimes. Sometimes they have leases as long as eight months.

But their revenues can leave fast. Whereas their expenses, they're signing 10-year leases. can leave fast. Whereas their expenses, they're signing 10-year leases. So you head into a recession and you have a 20 or 30% laid down in members, but you're still stuck

with the long-term leases. Yep, exactly. This is a company that is especially vulnerable to the downturn. During the recession, which this inverted Y curve, yield curve is like freaking people out.

It sounds like a recession. To me, you can't just slap nice wallpaper and fresh kombucha on it and think that that's going to survive the recession. It's just not true. That's where it gets me, is this recession that is clearly headed this way that most smart people think. Cause by a lot of things. We'll get to that in a second. But I agree. I think, what would you do?

Short this company? I don't buy and sell stocks like this. So I don't typically either. And also I don't ever short companies. One, because I think it's bad karma. The natural trajectory of the markets are up. You have to be a professional to short companies. You got to spend all day watching the stock. I think shorting really is for the pros. But if you look at this company, I mean, let's look at some comparables. Hertz, which is effectively the same business model for cars, except there's not a tap of IPA in the passenger seat,

which by the way, I think is a really good idea. Anyways, they trade at 0.2X times revenues. Amazon, who clearly WeWork, if you believe their prospectus, is trying to be the next Amazon, saying that they're a tech company for some reason. Amazon trades at four times revenues. And based on the most recent valuation of WeWork, basically this real estate company trades at 26 times revenues. It's a big flashing accident sign, I think. I agree.

That sounds right. Have you talked to anybody, investors or people at the company? That sounds right. Have you talked to anybody, investors or people at the company? They kept offering me him for interviews, and I just was like, I just think this is just bullshit. You know what I mean? I didn't feel like beating him up. You know what I mean? I just didn't.

And this whole, hey, I'm wearing a T-shirt, and my hair is flowing, and hey, it's all cool. I just am like, you rent office space, right? Like it's not a tech company. It's sort of like Theranos in that way. It's like, you're not a tech company. I'm pretty, and she, then that was more a tech company and it's fake, whatever that Edison machine was. It's not a tech company. It's not a tech, it's just not.

And so I don't know why I would speak to him. That's how I feel. Ooh, Keres, you used the T word, Theranos. I don't know, I just watched that. Wow, that was low. I just watched that documentary, which was fascinating. What a good idea that was, at least. What a good idea that was.

This one is just renting office space. Like, that's where it comes down to. And it's a very lovely office, but, you know, whatever. And anyway, speaking of which, real companies that are getting hurt by economics is this trade wars with China affecting tech companies. Obviously Trump, who is doubling down on these tariffs, now pulled them back a little bit for Christmas I think largely for political reasons

so that the economy doesn't get bashed a lot. But a lot of these electronic firms are seeing a sharp slowdown in revenue growth for the quarter because of this, including the ones in China too. Everybody on both sides of the ocean are seeing the troubles. Any impact, do you think?

Well, unfortunately, I think we've lost this one. And that is, I believe that the, I actually think the president got it right, that the agreement or the approach of the Chinese, kind of this mercantile trading, Gestalt is bad for, you know, asymmetrically advantages them. But we should have gone into this discussion with the full heft of our allies and had a more thoughtful conversation. And here's the problem. You know, World War II, the Americans lost a quarter of a million people. Germans lost 550,000.

And the Russians lost 20 million people. And they would have lost another 20 million because the core competence of Russians is the ability to basically suffer. And the Chinese will close towns down. They will say, oh, sorry, you need to be relocated because we're no longer making this widget because of this trade war with our enemy, the US. And we have a soybean farmer in Wisconsin that is all of a sudden struggling. And MSNBC is out there talking about a bailout. So, we just don't have the same tolerance to endure this sort of suffering, despite the fact that on a kind of peri-passu level, we're in better shape or can hurt them more than hurt us. But we're going to hangnail and we're going to freak out. The U.S. is just so incredibly, you know, our soldiers needed chocolate, Playboy magazines, and cigarettes. The Chinese in World War II

needed a handful of rice to go a week. Yeah, that's interesting. I saw this movie, The Farewell, here, which was not about that. It's with Awkwafina. But they actually talked about those issues, the difference. And I was thinking,

this sounds like the trade wars. Like, they can wait us out. They can wait us out. A hundred percent. Wait us out. They think in 10- and 20-year increments. We think in election cycle increments. Yeah, but the companies that will affect in tech are obviously Apple,

probably Apple the most significantly, and we'll see how that goes. Speaking of tech companies, I wrote this week in the New York Times about Tumblr and how it was sold to the company behind WordPress, Matt Mullenweg. It's called Automatic, for a fraction of what it was sold for. Marissa Mayer bought it for $1.1 billion in 2013, a story that I actually broke. And now I think it's maybe $3 million to $10 million. They don't really quite know the price,

but it's hardly anything, even though it's relatively still a big site compared to a lot of other social media platforms. Tumblr, I wrote about how it was the thing, and it was when things were sort of, they were the most creative of all these companies, these social media companies, and sort of they fell on hard times because of a range of things, both external and internal. And including, you know, pornography, the pornography on the site, all kinds of different issues. So, what do you think about that sale, the number?

all kinds of different issues. So what do you think about that sale, the number? You have a different take on this. I mean, first off, 99.7% decline, destruction in value. That's just unprecedented. I think Tumblr was always a porn site. And I think that because venture capitalists and nice people from Silicon Valley saw an opportunity to make money,

they tried to recast it at something else. Somewhere between 23 and 28% of the content, even from the early days, was adult content. And then when they decided to turn off the porn after all these people had sold their shares, they lost a third of their traffic overnight. So, when you're a platform whose primary domain is adult content, you're a porn site. And my question would be the following, Union Square Ventures and the General Limited Partners there, who invested $400,000 and got $240 million back, have there ever been any individuals in the history of business that have made more money from pornography than these individuals?

Hi, Fred Wilson. Oh, you mean King of Porn? King of Porn Fred Wilson? Okay. And I'll get an email on that one. All right. You know, it's an interesting thing. I don't agree that it was all fully porn when it was started.

I think it was really- You're right. It was gay porn. I'm sorry. It was gay porn. There's a difference between safe havens to express sexuality and porn. I mean, I think it started off as safe havens to express sexuality. There's nothing wrong with porn. Some of it isn't porn.

It isn't for Scott Galloway's enjoyment. It was a way for people to express themselves. You know what I mean? Like, it was... Yeah. And then it got to that. It absolutely did. And then, obviously, when they got corporate owners, that couldn't stay.

And they tried all kinds of ways to hide the porn. Oh, come on. It couldn't happen? It could happen as long as they own shares. Yes. It could happen as long as they own shares. Yes, but I'm saying when the companies, when it finally sold to Yahoo for that incredible amount of money, which I thought was incredible at the time because they weren't making that much money in their advertising, they had a problem with advertising.

I remember them talking, we don't like advertising. I was like, well, what are you going to do? Well, porn, I guess, sell porn. They started to crack down. They first started by trying to ban things or move things or put a safe default on it, safe watching default. But then when Verizon got it, it was like, no. And then their mobile app, you know, child porn got into, you know, Apple wouldn't tolerate that. And so I think it's,

you know, it's series of owners because it went from Yahoo and Yahoo got bought by AOL, AOL became Oath, AOL got bought by Verizon. It just was one corporate owner after the next. It was the wrong place. Where it is now is a really interesting place. Matt Mullenweg is one of the original type of people who should have owned a site like this, who did understand all these problems. I think it'll be interesting what he does.

It was sort of a solid for Verizon to sell to him versus Pornhub was interested in it, as you talk about buying it. It was kind of a solid that they didn't go for the most money here because it was like a de minimis amount of money. But the one thing I would love your commentary on is like Marissa Mayer, 1.1 billion is what she paid for it.

Could be possibly the worst deal in history. Yeah, I'm patting myself on the back and we'll hopefully have to find a tape and roll tape here. is what she paid for it. Could be possibly the worst deal in history. I'm patting myself on the back and we'll hopefully have to find the tape and roll tape here. Another loser, Tumblr. We believe that Instagram is the best acquisition of the last five years and Tumblr is the worst. Both cost about a billion dollars.

Both have the same user base. Instagram will be due between 250 million and 450 million this year. Tumblr was noticeably absent from Yahoo's earnings call, which means that likely the revenue is somewhat negligible. But five years ago, five years ago, I said in a very public conference that Instagram and Tumblr were the best and worst acquisitions

in the last decade in tech. And I said that at a P&G Signals conference before Marissa Mayer took the stage. So I had to sit behind stage after saying that this was the worst acquisition in technology. And if you want to talk about pump and dump, the backstory on Tumblr is really interesting because you had Dan Loeb, who I know you're friends with, come in. He's not my friend. Oh my God. Okay. They are acquaintances. I know him. You know him. Anyways, he basically took a large stake in Yahoo, agitated to get seats on the board,

and then fired a guy named Scott Thompson for saying that he had a minor in computer science from his university on his resume. Whereas Sheryl Sandberg and Mark Zuckerberg weaponized our election to addict our teens, Scott Thompson gets fired for exaggerating his resume. That makes sense. Anyways, he gets— I broke a lot of those stories. He more than did that. Okay, so he gets fired, and then Dan Lowe comes in- He was a big fat liar

about that stuff. Go ahead. Dan Lowe comes in and hypes Marissa Mayer, who is this very compelling figure, and brings her in. Clearly, in the first two board meetings, realizes she has no idea what the fuck she's doing, and sells all the shares once the stock is up. And then Marissa Mayer goes on to do some of the lowlights of her tenure, hires someone to head sales from her old company, Google, who she fires within 14 months and gives $120 million severance payment to. She didn't do reference checks. Almost queers the tax structure of the asset worth 96% of the value of the company, that was their stake in Alibaba, took revenues down 20%, EBITDA down 50%.

Oh, and by the way, walked out the door with a quarter of a billion dollars. I mean, there are few people who have done more damage while making more money than Mark Zuckerberg or Sheryl Sandberg, but there's very few people who have made more money while destroying more shareholder value than Marissa Mayer. That was, and what did she have to do?

Sweetie, you know what my coverage was like. You know how I wrote about that particular tenure. No, and you were out in front of this when everyone had decided that, you know, no one wanted to say anything bad about Marissa Mayer, but she had to fill this void of hype and inflationary expectations. And the way she filled it was with the pumpers

and dumpers of the modern era, Union Square Ventures. By the way, if you want to see what bullshit private companies are being hyped right now, just go to abc.com and see what blockchain or crypto bullshit is totally overvalued and can be foisted on some unwitting corporate executive. Anyway, so they foisted Tumblr

into the void of inflated expectations, $1.1 billion. That's their job, right? Are you blaming them? Are you blaming them? Good for them. They're smart. They're smart. But let's be clear.

This company, the core competence of these individuals is they are masters pumpers and dumpers. And when I said this was the worst acquisition in the last 10 years, five years ago. So how was it backstage? How was it backstage? It was very awkward and uncomfortable because she seemed like a nice woman. Anyways, I wasn't prescient. I just could do math. They had absolutely no advertising. A third of their content was porn and they paid $1.1 billion for it? I mean, it was just—anyways, this was really just massive inflated expectations, pump and dump everywhere. And you say, okay, it's interesting what's happened here. The fucking bike rental shop down the road in Nantucket is worth more than Tumblr right now.

And it's page views. The joke was that a Silicon Valley house, a middling Silicon Valley house was worth more than Tumblr right now. And it's page views. The joke was that Silicon Valley House, middling Silicon Valley House, was worth more than Tumblr is. It's still, now, aside from all your thing, it still has, it's quite large. It's still quite large. There's not that many big sites, and some of it is good. And so, it'll be interesting to

see what Matt Mullenweg does with this. There's no downside to him for this. WordPress used to be a competitor in a lot of ways of Tumblr. And so it's interesting to see what he'll do with it and see if he can salvage the really very creative, there was enormous creativity on Tumblr in the beginning. I understand the porn part.

It did degenerate into that. It was 21% actually of it. It never degenerated though. That's what I'm saying. It was always a porn site until a bunch of Knights VCs and Silicon Valley people while they were holding shares tried to recast it as something else. It was always a porn site until a bunch of Knights VCs and Silicon Valley people, while they were holding shares, tried to recast it as something else. It was always a porn site. I was on it early.

You were not using it early. I'm telling you. Oh, I was using it almost every day, Carol. Trust me on this one. I was using it to post pictures of graffiti. You were doing something else. And I'm just saying, two things can be not mutually exclusive. Don't criticize my hobbies.

I think that where it is now is the right place for it, and I'm hoping that Matt, who has been a very quiet, successful entrepreneur, will do something with it. He doesn't toot his own horn. He's made a very successful blogging platform. Very quietly could have sold it a million

times. I think it'll be interesting to see if he can get to the heart of what was good about it and remove the parts that you like and perhaps sell it to you. So you can run such a site. Anyway, we'll see what happens. We'll see what happens. Lastly, before we get to our break, you know, there was a story in the New York Times this week, supposedly, which James Stewart wrote from a meeting. Apparently, Jeffrey Epstein was going around to tech reporters, but Times this week, supposedly, which James Stewart wrote from a meeting. Apparently, Jeffrey Epstein was going around to tech reporters, but not this one, and meeting them, talking to people that are interested in tech about how he was advisors to a lot of tech people. Specifically, in this column, Epstein alleged that he was helping Elon Musk compile a list

for new chairman candidates to oversee the Tesla board. At the same time, Epstein alleged that, you know, most tech, a lot of tech moguls are very hedonistic and wild, and he knew all the stories, but of course never said anything. I thought it was a tiny bit irresponsible to let this dead guy, it was an off the record meeting, but he's dead. So I'm fine with them running it. It's just that there was no backup on whether any of this was true and letting this lying dead guy pedophile have his last words seem to be problematic as far as I was concerned. So we'll see if there really were links

between tech people and Epstein when these federal investigations get going and if they were problematic or if they were just gross. But it was an interesting question. He seemed to have his, you know, anywhere powerful people were, this guy shows up like Zelig, which is kind of disturbing. But there's a sub-economy and a boutique industry now into shaming people. And it's gotten to the point where, oh, you were at the same party with Jeffrey Epstein. That means you're guilty of

something. It's like, okay, enough already. If Jeffrey- Yeah, this went a little further. This was a little further. You know, there was a story in the Daily Mail that Bill Gates took a plane ride with them. So what? I understand that. I understand that. I'm just saying that what I'd like to see

is if the federal investigators actually find out anything that is actually legal. And that's my... I agree with you. I think we're on the same page on this. It's like, could be,

but him just investing, is that... How would... You know, it's gross. Gross is... If you knew about his... If you had done this after he was know, it's gross. Gross is, if you knew about his, if you had done this after he was convicted, it's just gross to have done that.

At the same time, you're right, just adjacency does not, it's a problematic adjacency unless you have proof of something more sinister. It reminds me of when Bill Clinton was accused of being a Manchurian type figure because in college he'd done an internship in Russia and James Carville, you know, adroitly responded, for God's sakes, we were playing him in basketball. I mean, it just, at what point does, like you said, adjacent associations just become that, adjacent associations and nothing more?

That said, I think people are very upset by this sort of very clear power structure that sits on the top of society, some of whose members are super abusive, like Epstein, right? So I think there is this, you're going to hear more about this, I think this idea of this power structure that, you know, sort of back rubbing, kind of back slapping group.

It's the same thing as the, you know, the cigar sold smoke rooms that everyone knows about is that there's these elite centers of power that other people don't get into. And I think you're going to, you know, like all of a sudden- There's a word for that, society. That happens in every society. I know, but I'm just saying, I think you're going to see a lot of it. I think people, this Repstein thing shows the very ugliest side of that. And I think it'll be interesting to see if federal investigators really do come up with some more significant things.

We'll see. 100%. We'll see. But, you know, the shaming culture continues. Don't complain about the shaming culture. You're sitting on top of it. I'm scared of the sharks. It's manifesting in me giving you a hard time.

I'm scared of the refrigerators with fins. We're coming for you, Scott. We're going to bite you and then just leave you alive. That's the plan. I need to dampen my consciousness, elevate my consciousness fucking WeWork as if that's what I need. Anyway. He's like, where's the Zacapa?

Anyway, it's time to take a break. When we get back, we're going to talk about wins and fails. No. I'm ready to drink. You can drink soon. We'll talk soon about wins and fails and our predictions for the next week. We'll be back after this. Fox Creative.

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with a commitment to an ethical approach that puts humanity first. To learn more, visit anthropic.com slash clawed. That's anthropic.com slash clawed. anthropic.com slash Claude. We're back with Scott Galloway. He was on Nantucket where all the elite people are gathering secretly to make deals that the rest of us are not party to. I am here in the more democratic promised town. Scott, wins and fails. You got a big win this week, this week.

Come on. You can say it. You can yell it. Yeah., this week. Come on, you can say it. You can yell it. Yeah, you know who I'm just blown away by? What, who? Do you know this guy, Raj Chetty? He's an economist at Harvard. I am aware of him. And he was one of the youngest.

He's basically a shoo-in for the Nobel Prize at one point. And he gets government data, and he looks at income inequality and income mobility. It's government data. And he looks at income inequality and income mobility. And as, you know, occasionally you just see an academic and his whole tagline is big data as a force of moral good. And I just love this guy. And he's looking at basically income mobility and income inequality. And I've learned so much just reading his data.

So, for example, I've always thought that affirmative action should be economically based and not race-based. And what he's found is that, for example, a person of color born into wealth is twice as likely to end up in poverty than a white person born into wealth, which I just thought was fascinating. He's also done this incredible research around where you live has a huge component of income mobility. So, for example, a poor person born in the bottom quintile in Salt Lake has an 11% chance of getting to the upper quintile, where someone born in Charlotte has half that. And his whole attitude is, if we can find data and connect them to an issue, we can manage the data, we can adapt it, and we can manipulate it. And I think this guy

has just taken an incredible brain, incredible discipline, an incredible immigrant story, and is changing the world for the better. And it just brings out the best in what we're supposed to do in academia, and that is pursue the truth for the betterment of the commons. So anyways, my win is Professor Raj Chetty, future Nobel Prize winner,

who is taking very boring data and turning it into very important seminal work. Fantastic. That's so brainy. I thought you were going to scream, Rundles are back, baby. Oh, Nike? We didn't talk about that. Yes.

Come on. Take the win. Take the Scott Galloway win. Only one word to describe that. Gangster. Nike the swoosh. Coming in. Explain what Rundles are for the people who do not follow us closely.

Okay, so this is a little bit. I'm trying to think. I don't know if I'm conflicted, so I'll disclose it because it makes me look good. But I've done some work with Nike and I've been talking to them a lot about recurring revenue bundles or rundles. But basically Nike has decided to go after

effectively a subscription product with kids who have this terrible habit of growing. Kids age two to five, their feet grow. Oh, I know. They grow one and a half millimeters a month. They need six pairs of shoes. Then they need about four pairs from five to seven. And then it goes down to like two pairs.

But they're essentially offering a subscription service where you can pick any of these shoes and not have to worry about costs. And they have even some predictive technology to try and figure out- Are they the good shoes though? Are they the shoes that- Well, they do offer the good shoes.

And here's the thing, it only makes economic sense because on average, they're charging about 50 or 60 bucks a shoe and you can get them for about the same price on Zappos. It only makes sense if you go for the higher price shoes and you get the shoes more often than your kid's feet are growing. But what that doesn't take into account is A, it's fun to be a part of a community and B, it's more convenient than trying to figure out the constant price trade-off and figure out when are my kids buying shoes to just have them order. But you can see this as a trend where great brands like Nike begin to attack individual cohorts with a subscription offering that takes the friction out of the process and just says, all right, you don't have to constantly measure off price versus

quality. Just get your damn shoes because you're entitled to them. But I think this is a fantastic move and basically an indicator of where our consumer economy is heading. So thanks for bringing it up. What's the next rundle that you're not involved with planning? What's the next rundle? Or maybe the one you're involved with planning? So loosely speaking, and I won't mention the brand, but I think that travel. So unfortunately, the top 1% are garnering all the incremental income, but I think travel involves a lot of decisions and a lot of uncertainty. And one of the biggest mistakes that brands in the economy or consumer brands and consumer executives make is that, as Professor Sheena Iyengar says at Columbia University, who's a total gangster, that consumers don't want more choice.

They want fewer choices, but they want to be more confident in the few choices they're presented with. And I think something around travel where a fantastic, iconic brand comes in and says, we're going to handle everything. Pay us one fee, and we're literally going to take your hospitality, your travel, your airplanes, your hotels off the table, and we're going to tell you where to go. You're going to pay one fee. one fee. So, for example, if Four Seasons just gave you an app and anytime you land it, it says you either pay $400 or $600 a night, depending upon the city, and we send you a QR code and you're just done. And you pay $10,000 a year or something like that. I think there's huge opportunity in hospitality travel. To do what? What do they give you? Because people are plagued by choices. At the same time, you're also like, was this one better? Did I miss this? Right. But I think there's a lot of people that would just love to land somewhere and have the confidence of knowing, okay, this is my brand. They're putting me at

the right hotel. I don't have to do the trade-off of cost versus everything. They just know what I want. I pay an annual fee. Maybe they give it to me a cost or they give me the best hotel room in the hotel and I pay an annual fee and I'm just all in on this brand. Well, rich people have done this. There were all those, I think every rich person I know belonged to some vacation properties. I can't remember what it is. They were all in on this brand. Well, rich people have done this. There were all those, I think every rich person I know belonged to some vacation properties. I can't remember what it is. They were all in it and they got to stay at the nicest.

Inspirato. Yeah, whatever that. Yeah. So is this just for everybody else? No, I don't think so. I think this is going to be a bigger grand bargain where somebody is going to be the lead dog here and roll up or coordinate a bunch of other brands

and just say, okay, you trust. I mean, to a certain extent, Amazon has done this in e-commerce. You just trust Amazon. Your default is there. Now, if Amazon were to go into predictive modeling and just start sending you stuff proactively or speculatively, that's what I think we're talking about. But I think there's going to be a series of brands across our major consumer categories, travel, health, apparel, and it's just going to be one brand that says, we know you better than you know you, and we're just going to start proactively sending you stuff so you don't have to make choice. Or we're going to tell you, you tell us you want to go to Africa. We'll tell you where to stay,

how to get there. And we'll charge you wholesale. And every year, we'll just charge you one big fee. And we'll get to know each other. It's the difference between what I would call serial dating and monogamy. The marketplace wants monogamy. It's a better way to run a business. So I think you're going to see a series of monogamous recurring revenue bundle relationships emerge over the course of the next few years. Scott, you're so deep this week. You're deep. You're not as shallow. And I haven't even been to the dispensary yet.

Talk to me in a few hours. What's your fail? What's your fail, then? My fail is just this pump and dump culture that I just wonder when it's going to end. I wonder if we were... Never, never said the person who's the most human race until the human race is blown off this earth. But go ahead, go ahead.

But as we work the next Tumblr, at some point does the manufacturing of hype and the nomenclature or the fraudulent nomenclature and just using the word tech 127 times in prospectus and then claiming that someone paid a valuation of $47 billion and then foisting it on the unwitting retail investor, at some point does the pump and dump culture, does somebody call bullshit on it? And so my fail is the pump and dump. We'll see. But Tumblr is such a cautionary tale. And WeWork could potentially be, I think, the next Tumblr

if it manages to get out. I think you're going to see an extraordinary destruction of value if the bankers are actually able to foist this thing on the public markets. And do you think they're going to foist it? What are the chances right now? You know, Cara, I don't know because I thought Uber and Lyft, there was a chance they might not get out. And granted, they're slowly but surely, the air is being let out of that balloon. Those companies are off, I think, 20% or 30%. But look at, you know, the bankers got their money. The founders got their money.

The investors got their money. And it's the guy or the gal holding shares in an ETF. Especially heading into a recession. Yes, indeed. You're right. It's a real, we are cautioning you people, just the way there are shark cautionings on the beach where we are. There are sharks out there.

You're going to get bit and you're going to lie on the shore in pain and not dead. Well, that's a nice image. Jesus Christ, what are you doing to me? You're just being very intelligent. And you know what the worst thing is? My kids are running around the house in their wetsuits. Basically, they might as well be flapping their fins and asking for a fish. I caught seals this week.

I went fishing with my kids. We caught quite a few fish and then my son cooked them all. And we gave the carcasses to the seals as we were filleting them on the dock. Stay away from seals. Food chain, food chain. They don't, the seals,

the fishermen hate the seals here because they take all the fish. I like the seals. What are your wins and fails? I have one that's a win and a fail and it's Anthony Scaramucci's fight with the president. Oh my gosh. Go on. Go on. I haven't talked to him yet. I'm going to text him. Say more. I didn't have enough energy to text him this week. But I think it's interesting that he's now suddenly, you know, and this, the concept, and he and I have argued about this, is this a la carte

liking and disliking of the president. It's the same thing with Stephen, the Hudson Yards do, Ross, right? Like he has an a la carte method of liking someone. Like, I don't agree with his racism, but I like his tax breaks. I'm like, it's not an a la carte, they can't pick and choose between this guy. Like it all goes together. You have to take the send their backs.

You've got to take the racist tweets. You've got to take what's obviously, you know, a declining mental situation, which I think Scaramucci quite specifically referred to in which George Conway, also people, you know, a declining mental situation, which I think Scaramucci quite specifically referred to, in which George Conway, also people, you know, close to those groups, are referring to like a continuing decline in mental facility. I mean, it's, they're not even being, you know, sort of, oh, he's a little bit off. It's like, he crazy, you know? So I think in that way, I kind of welcome the message. And in a fail thing, it's like, In that way, I kind of welcome the message.

And in a fail thing, it's like, you were never our friends before. Now you're worried. So you sort of say, ah, brave of you. And ah, what took you so long? So I think I'm sort of of the double minds. And so I do want to have a discussion with them about it. Because what they tend to try to do is get you to dis... The people who oppose them when these people sort of break out and start actually telling the truth is that they try to undercut them by saying things like, oh,

well, you know, he wants a contract. He wants, he wants to be on CNN. He wants to be liked by the libtards, whatever. I don't care if he's telling the truth, who cares if he wants to benefit from it? And what is the real benefit? Is there a real benefit? And so I'm fascinated by if there's going to be, he was saying that the cabinet members think this, that he's crazy and this and that. And so I'm wondering, will there be a moment when everyone goes, okay, like we cannot do it anymore.

But I don't think there is a bottom for the Republican Party with this situation. They seem to, and now they're comfortable defending the indefensible. And so it was fascinating. I thought it was a win and a lose. I don't know quite how I feel about it. So that's my win and lose.

That's a great one. And you brought up to kind of the irony or the, I don't know, the inconsistency of when Cloudflare all of a sudden decided they'd had enough with HN. And you're like, well, look, we've been having this conversation for a while. And all of a sudden you found religion, which was a fair point. But the mooch, there's a term to describe the mooch. And that is totally full of shit. And that is when a white supremacist ran over a woman, you know, he was okay with that. He was talking about tax cuts. But all of a sudden, he's fed up with President Trump. You know what the mooch has no tolerance for? Being out of the

media cycle. That is the only thing he gives a shit about. And all of a sudden he's popped up and decided he's had enough of the president. Well, show me anything the president has done recently that is any different than what he was doing while you were carrying his water. And the notion that all of a sudden he's found religion, no, he hasn't. He just wasn't on MSNBC enough.

And when in three months- Well, we'll see where it goes. But people can also tell the truth at the same time they may be in it for themselves that's my problem with all this that's the issue I think Catherine Rampell from the Washington Post had a very good thing I think it all stemmed from

an appearance on Bill Maher where he was defending the president actually quite handily and saying I have some disagreement and he voiced his concerns about the racist tweets but I'm concerned about these racist tweets I don they were, I'm concerned, you know, about these racist tweets. I don't like them. And what happened was Trump then reacted saying he was a traitor,

like as he always does. And then that's where he then, then by Sunday, he was like, fuck you. Like, you know, don't do it, don't do it. You know what I mean? It's like an episode of Goodfellas, which I feel like it is. Like we're living in Goodfellas almost continually. And he's, I guess, the Joe Pesci character. But it's a really, I find it fascinating.

And at the same time, I'm like, well, I kind of want these people to say this because they know. So on some level, at least he's saying it and the others aren't. What does he know? He was there 11 days. I got it.

But they're all part of the same gangs. They're in the same gang. I welcome the truth, and at the same time, I'm like, what took you so long? Exactly. And I think I've had this discussion with him a million times on this issue, and so it's fascinating. I think I'll bring him back on the podcast.

Maybe I'll have you join. Maybe I'll have you join that one. No. The thing is, what if someone is actually telling the truth? Do you just discount it? See, that's how the Trump group works. That's how they FUD these people. So, you know, I don't know. I don't know.

I don't know. I'm confused. And I don't know what to do about thinking this is what should be said. At the same time, do we like the people saying it? Sometimes we don't get the people we want to tell the truth. I think what we all need to do is to elevate our consciousness

and pay $700 a day for a desk and IPA tap here. That's what we need to do. We worked for 14.2 seconds, recode was fine. They do a great job, by the way. We worked as a fantastic job. It was fine, it was an inexpensive, it was like slightly better than a Kia desk and I was irritated. Really? I think they're great. I do like what

they do, actually. A number of things there. I did not spend much time there. It's a great concept worth two or three billion dollars. Any predictions? I need a prediction. We've got to get to the beach. I got to get to the beach. Predictions. Okay. So I'm going to choose my words carefully here because this is such a hot topic. Uh-oh. Uh- right. By the way, if I'm not risking my career every 48 hours, I'm not doing my job. Look, I think the story of the year and maybe even the story of the next several years is going to be Epstein's apparent suicide. And if you have ever, ever been in a situation where it feels like there's not a shoe, but a 10-ton truck about to drop, and I'm not even curious around this. I'm kind of scared because the notion that an individual who was about to spend the rest of his life in prison and the only way he wasn't going to spend the rest of his life in prison was to drop a dime on some of the world's most powerful people somehow ends up hanging himself in an 8x12 cell after he's on suicide watch. Yeah, I know. It's like an episode of Homeland or something. Yeah.

Yeah. And so I want to engage... In fact, it was an episode of Homeland, but go ahead. I want to engage the same thoughtful investigators that President Trump engaged to investigate Ted Cruz's father's role in the assassination of JFK or the fact that he alleged that President Obama was born in Kenya. I want to get those same crack investigators on this because if you were to basically look at all the conspiracy theories the White House has laid out over the last four years and then talk about the fact that you had this guy who, now that he's dead, the most powerful people in the world are all sleeping better.

And if I tried to hang myself on Fifth Avenue with the cameras, somebody would stop me. Yet they couldn't figure out a way to not let this guy hang himself in an 8x12 cell. And there's all this stuff where the guard wasn't around. There was either just such incredibly gross negligence or malfeasance here that it makes me sad because some of the most talented people I know and some of my closest friends come to the United States, not only for our freedoms, not only for economic opportunities, but because of the rule of law and that our government agencies are not only seen as competent, but they're seen as trying to do the right thing. And Cara, this shit just stinks. I know.

It does. It makes me feel like a conspiracy theorist. I'm like, this is insane. Like, this can't be incompetence. This is like so planned. Like, the problem is which one of them killed them? Because there's so many. There's so many on so many sides.

It's like maybe, someone was like, it's like, you know, the Agatha Christie mover, murder on the Orient Express. Yeah, where they all did it. Where they all did it. Yeah. It's like, that's what, it's like all of them. Like, over here, the Agatha Christie movie, Murder on the Orient Express. Yeah, where they all did it. Where they all did it. Yeah. It's like, that's what, it's like all of them. Like, over here, the Clintons.

Over here, the Trumps. The Trumps, the Clintons. The Elon Musk is wandering somewhere around, you know. It's like, literally, it feels like there's so many. And, you know, who knows with the Russians. It does feel like we live in Russia right now. It feels like, oh, they just fell. They just got a cold and died.

Like, what? Like, you know, like they took an umbrella and poked him or something. Like, I don't know. Right, I feel like crazy conspiracy theorists. And the president's criminal defense attorney immediately comes out and says he's outraged, like thou protested too much.

And then the president tries to create a diversionary tactic accusing the Clintons of this. It's just, the whole thing is playing out. That's what I'm talking about, this group of people on the top who are running everything. I'm just telling you. Yeah. So, look, I'm not even sort of curious here.

I'm just really disappointed that we're now that nation. Yeah. That can't seem— We probably were always that nation, in case you're interested. There was always— Listen, I'm near the top, and I'm scared of the people at the top. That's, I'm just saying, they just, they have a thing going on up there where they do bad things. Well, that's the thing.

You got to downgrade to the little dog park with the big dog. We don't have to worry about that shit. We just chase our balls and smell other dogs' butts. Again, you are on Nantucket. That's all we do. I am up on Providence Town, I feel like. Downgrade to the little dog park. I have nothing to worry about.

I'm economically secure. I have people to worry about. I'm economically secure. I have people who love me. One big wave and half the elite would be gone right where you are. One big giant wave and it would be over for most of the elite. That is an elite island there. I've been there. I have children who love me. They don't let you paint colors on your houses there because it doesn't fit.

Anyway, whatever. I have kids who love me. I have Netflix, a dispensary. I'm just going to enjoy myself to the ass. All right, we can do that. Until the ass cancer shows up, Kara. We're going to go. The good news is we're going to be seeing a whole lot of each other next week.

We have a live pivot. I'm so excited. Explain for the people. Oh, my gosh. We're hosting a live pivot show in New York. And we're going to do live predictions or we're going to assess people's predictions. And I'm just so, A, I'm just totally shocked that people want to show up and see us live. Or that live podcasting is a thing.

I just still can't figure out that that is a thing. It seems like it's sort of an oxymoron. No, we're a thing. I have been stopped on the street a dozen times here in Provincetown by people. Yeah, I know. Yeah, that's it. Where's the big dog? You know Sean Hayes from Will & Grace?

He's a friend of mine. That guy? Three of his, yeah, we were hanging out. Jack? Yeah, Jack is a friend of mine. That guy? Three of his, yeah, we were hanging out. Jack? Yeah, Jack is a friend of mine. Oh my God. That is so awesome. Does Jack ask about me?

Does he ask about me? No, he doesn't. But he brought over like half a dozen other gay guys who loved Pivot. Like, I'm just like, oh, hi. He's like, this person's a huge fan. They like Recode Decode too, but they're like, they love the whole shtick.

They love, anyway. Jack loves us. Jack, I'll introduce you to Jack. Thank you. He's a lovely guy. I'll introduce you to Jack. Thank you. Another empty promise. There's another rabbit coat promise. He lives in LA. I'm getting you a rabbit coat, sweetheart. We're going to send you a video, okay?

Jack. Then you'll feel better and say hi, Scott. Anyway, we'll be in New York next week. It will also be on Pivot. It'll be two Pivots. Bonus episode galore next week. We're going to have a regular Pivot and this Pivot. It's going to be great.. Bonus episode galore next week. We're going to have a regular pivot and this pivot. It's going to be great. And I can't wait to see you, Scott. What are you wearing?

You know what I was thinking we should do? I think we should go, or at least what I'm going to do, I want to go as Megan Rapinoe. I'm serious. We should dress up as... I don't even know what... Don't you think? Okay.

You need hair for that, but okay. I'll wear a wig. I'll wear a wig. You do whatever you want. I was thinking jumpsuits, matching jumpsuits. But anyway, we'll figure it out on the phone separately. Thank you for dialing in today. Get back to the water.

Take a dip. Yeah, no way. No way. Take a dip. Jump in the pool. Don't worry. Dispensary, Zacapa, home scrabble. That's my day.

That's how the dog rolls. You don't have to outrun the bear. You just have to be faster than the other people running away from the bear. That's what I say. There you go. Anyway, today's show was than the other people running away from the bear. That's what I say. Anyway, today's show was produced by Rebecca Sinanis and Eric Johnson. Erica Anderson is Pivot's executive producer. Thanks also to Rebecca Castro, Drew Burrows, and Nishat Kerwa.

Make sure you've subscribed to the show on Apple Podcasts. If you like this week's episode, leave us a review. If you have any suggestions for what you want to hear us talk about on a future show, send us an email, pivot at voxmedia.com. Thanks for listening to Pivot from Vox Media. We'll be back next week for another breakdown of all things tech and business. Support for this podcast comes from Anthropic. It's not always easy to harness the power and potential of AI. For all the talk around its revolutionary potential, a lot of AI systems feel like they're designed for specific tasks performed by a select few. Well, Claude by Anthropic is AI for everyone.

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