Pivot - Uber offers to gobble up GrubHub, Elon Musk is “Re-open America guy”, and a prediction on mergers in digital media

Episode Date: May 15, 2020

Kara and Scott talk about Uber's offer to buy GrubHub, which would give the company a majority of food delivery market share. They talk about whether this merger would be good for Uber (yes) and whether it would be bad for the commonwealth (also, yes). Meanwhile, Elon Musk is reopening the Tesla factory in California, and his mother is texting Kara about how harsh she's being on her son. In Listener Mail we get a question about companies taking back their upfront ad deals with the major television networks and how that will shake things up in the industry. Scott's prediction is that we are about to see mergers in smaller digital media companies. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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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. Hi, everyone. Get started at HubSp UCLA. They better not. You better not. I'm not going to speak to you if you do that. You don't take money out of the mouths of real, actual small businesses.

If you do that, it would be very disgusting. I want a virtue signal and be indignant on this podcast. Not any virtue signal. It's just not right. It's just not right. I know. I know. I'm not taking it.

I told you. We actually could have got a quarter million bucks. Listen, we have a lot to get to. There is a lot of news. I have Elon Musk's mother mad at me right now. We're going to discuss that later. But let's talk about a couple of things. One is Twitter says employees can work from home forever now.

So Jack can finally live in Africa. This is a really great moment. What do you think about that? Well, WFH is now just W, right? Right, yeah. I think they should test it yeah. I think they should test it, and I think they should all announce they're working from Rwanda. No, no, listen to me. Listen to me. What do you actually think of this idea? Because all the tech companies are now sort

of giving everybody work from home. We don't care. It doesn't seem to affect us. Well, it's just, remember those Space Odyssey movies and all those commercials in the 90s where they would show a dad watching his daughter play soccer from his computer or his phone, and you would think, okay, that's just ridiculous. That's never going to happen. Yeah. And now it just seems as all of a sudden the future has been accelerated. And the fact that Peter Drucker said in the 70s that office buildings would be like the pyramids, that we would come to marvel at them, but they would serve no functional purpose in the future. Oh, yes, Peter Drucker. marvel at them, but they would serve no functional purpose in the future. And that, you know, that was one of those interesting things that was, quote unquote,

proven wrong. And he may be proven right, that you might have the largest, most dramatic office buildings in the world either converted to condos or be sort of interesting museums. But there is work from home is. So you think it's a good decision by Jack Dorsey? You think that's just like work from home forever? If you want, I think he's going to provide an office space. But what do you –

Yeah, it'll be work. It's really – I mean, there's just so many second-order effects there. It blows your mind. The office is about to become a perk. It used to be an obligation where I have to get up at 7 in the morning, get on a train, put on a bad tie, and go to work. And now it's going to be a place where I get to socialize with friends. I get to go to this cool cafeteria and maybe meet my wife or my husband. I get to see my team. If I'm a manager, I've got to put on my happy face and go rally everybody and make them feel loved and

taken care of. Young people are going to differentiate jobs based on who has an office that's been vaccinated and will bring them in. Young people want an office. So offices and the obligation to commute are about to become a feature, not a bug. What that does to commercial office space, I mean, even if it's just a decline of 10 or 20 percent, that totally upends every commercial office REIT. It probably puts more housing stock. I mean, that just blows the fuck in mind. What your mayor did, putting the homeless in hotels, that could be permanent.

There are hotels that just make no sense now. There are low-budget value hotels that have no market probably for the next 10 months, much less the next 10 years. Is this maybe sort of a fixed, a semi-fixed, I don't want to call it the homeless problem because it's a much more complicated problem, but you're going to see commercial and also hospitality real estate just be totally upended here. Do not be in commercial real estate right now. Well, I mean, like everything, there's always-

Oh, it'll be something else. You'll say it's going to be something else. Well, speaking of that, let me just, let me get to your show, No Mercy, No Malice on Vice TV, which apparently you did rather well. That's right. Go on. Go on. Your piece, your piece that you inspired on colleges, like the idea of what a college is, which I think a lot of people, there's a lot of stories right now of obviously, you know, my son is going to college this year of like what a college, what's the actual spaces. Now I believe that you have to have a space that you have to, you have to go somewhere. And I know there's all this online education stuff. I just, and it, it, it broadens the pool of people who can go to school, but there is a place for physical, the physical nature of maybe you don't think that anymore. Not that you ever show up at NYU,

but anyway, what? It's just, yeah, but I have a sweatshirt. Okay. My son is going to NYU, and just so you know, and he just got a jacket. He just got a jacket. He's wearing it all the time. Actually, your son is one of the few people at the age of 18, I think, can handle New York, but I actually tell people not to come to NYU when they're 18. Anyways, look, I've been doing a ton of thinking about this. I've heard from people. I've presented to about six different trustee or advisory boards for universities. What you might find with some of the universities you're talking about, the top tier, they might pull an Amazon. And that is a place like Princeton, might dip into some of their endowment, and they might vaccinate their campus. And that is they might create, their campus might become a hermetically sealed Elysium

for a student body, 75% of which are from wealthy families and 25% who are from first-gen kids who've never gone to college. But they could potentially, the top 20 liberal arts campus-based universities could just pull away from everyone else and offer. So you show up, you go into quarantine for two weeks, and then nobody else is allowed in, and it's this idyllic fall leaves, dead poet society experience. But when nobody else is allowed in, how are they going to do that? Like, look at NYU, it's impossible, right? I mean, how is that? It's the streets of New York. Well, NYU, it doesn't happen. But there's going to be these, I think, think about this. I don't think you can do that. If you're Brown or something like that,

and you're out in, I don't know, Madison or something, could you potentially have this incredible, could you double down on the residential campus experience and just spend a ton of money on testing and protocols? I don't know on testing and protocols. You know, the town right around it, like at Brown, Amanda went to Brown, and, you know, there's restaurants and stuff that everybody goes around. It's just, I don't think that's possible. You don't think it's going to work?

I'm not going to know. It's not going to work. I don't know how you're going to keep people in or out. I think it all comes down to testing, right? Testing, yes. Yeah, yeah. But anyway, so look, if 10% to 30% of kids don't show up for the fall, and then another 10% to 20% don't show up for the subsequent years because they've decided to take a gap year, I got an email from Michael Smirconish. He's one of my heroes. I just love this guy.

He's a raging moderate. He's a host on CNN. And he was saying that he has three college-age sons. I don't think I'm speaking out of school. I don't think he keeps that private. But anyways, they're all contemplating what they're going to do. And they're all at great schools, and they're all contemplating if they're going to return. So the thing about education that's wonderful about the economics is we get 90-plus gross margins.

So every additional person is massive revenue. But when you build in all these fixed costs like facilities and tenure, if you lose 20% of your top line revenue, but it's at 90 points of margin, you go from making tens of millions to losing tens of millions. I mean, you could have just so many schools that are charging too much money go out of business. And I don't know if you saw, but Cal State, the Cal State- Cal State, yeah. A half a million kids, but they'll be okay because the majority of places like Cal State Northridge are commuter schools and their tuition is $7,000 and $19,000 for in-state and out-of-state respectively.

So people will put up with marginal Zoom classes in exchange for certification and learning for $7,000. They just won't do it for $57,000. So the top guys, the Browns, the Princetons, the NYUs, the Berkeleys, they figure it out. They have the technology. They have the budget. They have the endowments. They have the talented administration. They have incredible human capital in the form of their students. They have amazing campus. They figure it out. The bottom guys, I don't want to call them the bottom guys, but the junior colleges, the Cal State systems that are charging $7,000 in tuition, that's still worth it. I mean, this is just price to value trade-off. The liberal arts college at 55 grand that was giving you a Joey Bag of Donuts tier two degree, those guys just go away. I mean, they're the steers and JC Pennies of universities right now. They're about to get

clocked. Well, all I know is I want my son to go to college in the fall and I'm worried that he's not. That's the, I think a lot of parents. The campus experience. But what do you think the odds of it, if they don't open, if the school doesn't open, are you just going to say take a gap year? It's going to leave it up to him. If he wants to take Zoom, I think he does not want to take Zoom classes. I think he said that. But I think he also doesn't want to get behind. And I don't know if they're going to grant all these gap years. There was a good story about that. There used to be just a few, and colleges would say yes right away to them. And so if everybody,

if 20% of the school wants a gap year, whatever the number is, it's going to be hard for these colleges to say yes. But then how can they say no if they say yes

to some people, right? I think it's going to be complicated. I'm going to leave it up to him and therefore I don't have to make the decision and he can stay home and cook for me. He cooked beautifully last night

again. So he can do whatever he wants. So many unintended consequences, so many winners. There has never been a better time to be on a waiting list at a top university because you're getting off that waiting list. Yep, there is. Anyway, all right, we're going to move on to our big stories today. We have lots of them. There's so many going on.

Uber is offering to gobble up Grubhub. Scott, this is one of the things, good prediction here. The New York Times reported that Uber recently approached Grubhub with a potential all-stock takeover bid. Grubhub asked for two Uber shares for each of its shares. The deal would amount to around $6.1 billion. The talks seem to be ongoing, and nothing has been finalized. If Uber Eats combines with Grubhub, Uber would have about 55% of the food delivery market in the U.S., which might be a problem.

DoorJash is the biggest major competitor, which accounts for 35% of the market. Meanwhile, Senator Elizabeth Warren and Congressperson AOC have teamed up for the Pandemic Anti-Monopoly Act, which would stop large corporations from exploiting the pandemic to engage in harmful mergers. So first of all, congrats on this prediction. But what do you think? Is this a smart move for Uber to do this? Oh, this would be a great move for Uber.

It all comes down in a weird way to real estate. And that is the most valuable real estate in the world isn't in Manhattan. It's not in Hong Kong. It's on the front screen of your iPhone. That is, if you have an icon that has cemented its real estate on your, I think it's like a quarter of an inch by a quarter of an inch on your phone in the form of an app that people touch a lot, you can then use it to sell other services because people would rather have Apple TV Plus at three clicks versus Netflix at 11.

So Uber is now on everyone's home screen or the home screen of, I don't know, probably 150 million people in the United States. And they figured out, okay, if we press on it, what else can we sell people? And if we can also be the place that starts to roll up food delivery, which has overnight become one of the fastest growing sectors in America, they could, I mean, it's a brilliant move for Uber. Dara Khosrowshahi, big brand, very smart move. It's a great move for shareholders that they get it done. It's pretty much a bad move for the planet, for the economy, for workers, for the Commonwealth.

And the restaurants, small business restaurants, which they're going to have to do something about these fees. I think they can't be abusing this power. That's going to be the focus of a lot of it. They're going to get a lot of small business restaurants come in and say, look, they're taking all my money and I made this beautiful lasagna and I only got a dollar for it and they got 10. That's the kind of thing that they've got to work on. Well, let's just look at this from a pure game theory and pure leverage standpoint.

And let's look at the supply chain here. You have 105 million U.S. households, right, that will order food. Probably 70 or 80 million of them are going to utilize some sort of food delivery moving forward, right? So let's talk about the 70 or 80 million food ordering households. There are something like, I don't know, something like 2 million restaurants and no one restaurant, even McDonald's, no one restaurant has more than single-digit market share. It's a highly fragmented. Fragmented.

Well, Nassim Taleb would call it a robust industry, meaning that no one restaurant has too much power. If McDonald's goes out of business, the global economy isn't threatened. If J.P.'s goes out of business, the global economy isn't threatened. If J.P. Morgan goes out of business, the global economy might be threatened. Anyways, it's a robust industry where if Chipotle, God forbid, were to ever go out of business, Dos Toros, a fantastic Mexican restaurant from these Cal grads, would slip in and take market share, and we'd still be safe from a world free of fantastic Mexican fare. So you have millions, you have tens of millions of U.S. households. You have hundreds of thousands, if not millions, of restaurants. You have probably

eight million, a workforce of eight million people, Uber driver partners, plus another couple million people would be the drivers. And then you're going to have, in the middle of all of that, you're going to have two companies that control 90% share of delivery. Which stakeholders start to leak value and which gain? It is the most basic econ game theory course in history. You got that. What about the repercussions that should mergers be allowed to go through during a pandemic? The AOC's warned.

You know it's going to get ugly really quickly if this merger is announced. See, it's the right intention. It's the wrong execution. It has nothing to do with the pandemic. You don't let mergers go through. All right, away from the pandemic should it happen. All right, let's take the pandemic out of it. Oh, my gosh.

They should absolutely, they're going about this the wrong way. Elizabeth Warren and AOC should say, we have seen the playbook when one slash one and a half Uber and Lyft companies control ride hailing. They end up using software and their leverage to turn people's cars into payday loans, and we circumvent minimum wage laws. We figure out a new class of workers that no longer get health insurance and are so desperate that they put themselves in harm's way during a pandemic. And a small number of people, the 18,000 employees at Uber, make billions of dollars. Is that the America we want? If you want to expand on that, then Washington, by all means, let this merger go through. If you want more ride-hailing economy, if you want more people who are in desperate situations, if you want a greater concentration of wealth, if you want more income inequality, if you want more pollution, if you want more carbon into the air, if you want more big tech

concentration and tax avoidance, then by all means, let this merger go through. All right. So that's their argument. But it has nothing to do with the pandemic. It shouldn't happen. I get that. So what do you think it should go through? I want your actual. You think it's a good idea economically, but do you think it will go through? And do you think it should go through? I want your actual. You think it's a good idea economically, but do you think it will go through? And do you think it's an actual? I want you to have some ethical considerations, Scott Geller. I know it's hard for you because everything's economic.

But is it good for America? Is it good for America? I think Uber and DoorDash going through would be one of the worst things that has happened in the corporate world. through would be one of the worst things that has happened in the corporate world. Having 90% controlled by two companies, they would have more share than any cable company. They'd have more share than any utility. Those two. But this is Uber and Grubhub. Yeah, but combined, right.

There would be two companies. There would be two players in food delivery that have 90%. That's the two of them. That would be Uber Eats would be 55% and DoorDash would be 35%. So should this happen? I must be speaking a different language here. 100% no. Look, if you want to take the economics and the external damage that ride hailing has done and you want to expand it, then fine, let it go through. This is a test. Is the DOJ, the FTC, and Congress awake at all? Have they decided that, I mean, do we want to go full Hunger Games? If we want to go full Hunger Games and have a smaller

and smaller group of people have more leverage over a greater and greater group of people, then let it go through. If you want to have some sense of semblance of a disparity of power and influence and you want to have restaurants, the few remaining restaurants stick around. If you want to have drivers have the currency to get maybe 12 or 13 bucks an hour instead of four bucks an hour, which is what they will get paid, Uber will figure out ways to not pay them or charge them fees or figure out ways to put pressure because they'll be seen as innovators by states to avoid certain labor and wage laws. This is a dangerous idea that you'd have this much concentration of power around the food

supply chain and key delivery. Everyone will lose. Restaurants will lose. Consumers will win in the short run. Right. And drivers, delivery people, and restaurants will leak massive power. And guess who employs tens of millions of people? It's people who are gig workers and then the restaurant industry.

So this is not only a bad idea, it's a dangerous idea. But for Uber, it's a good idea. Well, yeah, but it would be a great idea for General Motors to figure out a way to have no emission standards and pour mercury into the river. So, yeah, this would be good for Uber shareholders. So would unfettered regulation of Facebook's content on anti-vax and white nationalism. That would be good for Facebook shareholders, too. I'm saying, and I'm not being direct enough, that we absolutely should be trusting our leaders are not going to let the merger of Uber— So, I'm going to let the merger of Uber.

So I'm going to make you make a little prediction here. Do you think that will happen or will it get through? No, I don't think it'll get through. I don't think it'll get through. What about for Grubhub? What if it goes out of business, like the idea of merging Lyft and Uber? Well, these guys, okay, so it seems to me that you want to let this play out. I was actually, you know, I said three months ago that I thought this space was going to consolidate because it was such a shitty space.

But overnight, it's become a very exciting space. Good space, yeah. Which will end. Which will end. Which will end. But it'll never go back to pre-COVID levels. A lot of people all of a sudden are like, wow, I can get good food delivered. Yeah, but I think it will.

I don't know. I don't know. I'm going to give you an I don't know on that one. You don't think so? No, I don't think everyone's. I, like, literally want to go to a restaurant. When I saw all those Wisconsin people in a bar, I can't stand those Wisconsin people in a bar because I think they're going to give each other the virus. But at the same time, I was like, I want to be in that Wisconsin bar.

So I don't know. I don't know. I think I'm not going to do takeout for years after this. Yeah, it's like you've never missed a city so much that you're trapped in, right? Yeah. I don't know. I think it's like online grocery. Online grocery in the U.S. is about to go from 2% to 10% and not go back. That's different. There'll be a surge of restaurant activity, but 20% to 40% of restaurants are going to go out of business. Oh, sure. You're just going to be- Although maybe they'll have lower commercial rates, maybe lower rent rates. Look at Starbucks asking for low rates on rents. That's going to happen,

100%. So maybe there are lots of things. There's a lot of moving parts here. I'm doing all the blathering here. Do you think this merger should be allowed to go through? No. Actually, I'm interviewing Dara Khosrowshahi next week, so I'm going to ask him this question. But why isn't Amazon in here? Google, remember they were all sort of in this delivery space?

What's the – Uber seems to be running away with it. Yeah, I don't know. I don't think, I don't think, I think they look at the space. They've just got so much low-hanging fruit in their own categories right now. I don't think they're- Why attract another group of people who hate them? Yeah, I just, this would be, this overnight has become a very interesting and even like socially important space.

It's about to become, it's the new ride hailing. And are we comfortable? Do we look at ride hailing and go, wow, that worked out really well for America. That worked out really well for the environment. That worked out really well for low wage people. Are we like, yeah, we need more ride hailing in our economy. If there's one part of the economy that just hasn't kind of turned out the way we thought, it's not only gig workers, it's ride hailing. These gig workers need, we need to reclassify employees in some way and in a smart way. And again, it's up to our regulators. It'll be interesting to see if this goes through, but it would be, it is the move for Uber. It is the, if I were to- Oh, it's a gangster move. It's visionary. It's smart. They've done a few things with the Lime. Why not? Like, why not? Yeah,

great move. Now that it's- We'll see, but we'll see if it gets through. Big brain. Smart move. All right, so last question, and then we're going to take a break and talk about Elon Musk's mother. Thank God. Thank God. Finally. I didn't know he had a mom.

I thought he was like being down from some moon from Pluto or something. We're not going to get to her. Here's my last question. You were Uber. What's the argument you make for to do it? Like, what do you say to AOC and Senator Warner and the others who are coming for your head? I think the argument they'll make is that this is a fantastic service for consumers. This is a fantastic way to lower costs. We are very concerned about workers. And in an era where there's so many people that find themselves newly unemployed, we're going to be able to offer them jobs right away. And as noticed by all this fake faux concern for our workers, we want to work with government

hand in hand to ensure that we create an employment class, a new employment class that is good for them, good for us, good for shareholders. I mean, there's a lot of good arguments, theoretically, that they'll make. And also, they'll just say to the Republicans, don't let these Democrats stand in the way of innovation and economics. So look, it's going to be interesting. I think there's a chance for AOC and Elizabeth Warren to cauterize the entire thing. If they get rid of this notion it shouldn't be done in a pandemic, it doesn't matter. Just say it shouldn't be done.

It just makes no sense. 90% – two companies controlling 90% of an enormous emerging category leads to bad things. Yep. Okay. I think that's a very good argument. You should work for Uber. Anyway, we're going to take a quick break. I'm the new Jay Carney.

I'm the new Jay Carney. Oh, my God. I know Jay Carney, and you're no Jay Carney. He seems nice. He looks very nice. He's very nice. He was a reporter, you know. He was a reporter.

Really? I just know him as the Obama guy. No, he was a reporter. He looks nice. I think it was Time Magazine. I think he worked for Time Magazine. He was a reporter. Anyway, we're going to take a quick break.

Is that your dog? Jesus Christ. What is this Joey Bag of Donuts podcast? That is not my dog. Listen to me. I can't stop my dog. I have to get up and let the dog in. If you let me do that, I will do that.

But we're going to take a quick break. I will let the dog in. Who let the dogs out? All right. You would like dogs, I would imagine. This is the pandemic. We're going to have to deal with the situation of dogs. I love dogs.

Anyway, we're going to take a quick break. We're going to talk about Elon Musk becoming the reopen America guy. We'll be right back. I am going to go let the dog pull up. Fox Creative. This is advertiser content from Zelle. When you picture an online scammer, what do you see? For the longest time, we have these images of somebody sitting crouched over their computer

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that puts humanity first. To learn more, visit anthropic.com slash clawed. That's anthropic.com slash clawed. All right, Scott, we're back. My dogs are in the room. My dogs, I am like, what is it called? I'm the alpha dog of the dog relationship. And so they love me just like you. The same thing. I'm the alpha dog here. And that's why you, you know, that's the room. My dogs, I am, what is it called? I'm the alpha dog of the dog relationship, and so they love me, just like you.

The same thing. I'm the alpha dog here, and that's why you, you know, that's the situation. You're the alpha something. You're definitely alpha. Yeah, I'm the alpha something. Listen, we're going to talk. Speaking of alpha, Elon Musk is now the Twitter poster child for Reopen America movement. California has now let Elon Musk open his Tesla factory in Alameda County.

You already had it opened. But let's back up and talk about how we got here. Musk threatened on Twitter to move his company's headquarters out of state to Nevada or Texas. In Musk's recent Tesla earnings call, he also called California's shelter-in-place order fascist and has been on a tweet storm rampage for days on these topics. President Trump weighed in on Twitter saying California should let Tesla and Elon Musk open the plant now. It can be done fast and safely. Musk thanked him in a tweet. He also does have, they do have a plan. Tesla's plan is quite, it's long and very involved. They

have been doing stuff in China. They've already reopened their thing there. So they do have experience there, to be fair. But he's sort of moved forward. He put a lawsuit against the Alameda County, where the Fremont factory is. It's in Fremont, California, near San Francisco. What do you think of all this? He's become the free America now, the free America now guy. I read your Times article on this, and I actually thought you were balanced to the point of being pretty easy on him. I agree. His mother did not agree. His mother said I'm not nice. No, no, literally. She was like, I'm not nice. And then I had all the Elon lovers on my butt. Whenever you talk about Elon or crypto, the weirdos, it's like a whistle call for every weirdo. Every guy who's living in his basement, who's new hero, who should be worshiping Jesus Christ or someone else for God

sakes who says love the poor instead of crypto or Elon. Anyways, the scary thing here is regardless of what you think about if and when we should reopen and how we should reopen, there is a really important debate around where does the line around the deaths of despair start to increase past the risk of relapse infection? I mean, at some point, you want to take risks. At some point, the risks are worth it. We catch the flu when we go out. I get the arguments. I personally don't feel we've crossed that point yet. I think the downside of opening too early or is much greater than the upside of staying closed two weeks too long. Anyways, but regardless of what you think, that's not the argument here. The argument is, should unelected private citizens whose primary assets or credibility is that they're remarkably innovative,

but more than anything, that they're billionaires and they have 35 million followers on Twitter, should they be shaping public health policy? And I think it's dangerous when they can not only shape public health policy, but what we've seen in Alameda is basically a billionaire has overrun the government and he's decided to open. And whether you think it's a good or bad idea, if you directly wave the middle finger at public officials and open a work facility in violation of local municipal orders, I believe you should be arrested. And then we can discuss whether or not that was a good idea or a bad idea. And maybe he's seen as a leader. Maybe he's seen as someone who made the right call. But basically Alameda, as far as I can tell, or the county of Alameda, the factory is actually in Fremont, has acquiesced and been intimidated and been run over by a billionaire.

And I think that is very unhealthy and is a key attribute or a key signal of a step to tyranny when private power can overrun government. Government becomes a... That was my simple point I made. At the end of that story, I said, should companies and charismatic founders be able to override public health officials in the way he did it? There's lots of ways he could have done this. And, of course, the only way Elon can do it is rather dramatically because he loves this whole... He loves, you know, he has this Trumpian strain. I think it was Elonian, actually.

I think Trump is Elonian. And rather than the, he's not copying Trump. He's been this way for a long time. That was the point, was that this was done in a way, and there are people who supported him. Gavin Newsom was sort of sitting on the fence between Alameda County and Elon. He was trying to play both sides, essentially. We had the mayor of Fremont who was supportive of it, because of course the mayor of Fremont would be. It's a lot of jobs there in Fremont. And so what it does is it puts, you take advantage of people in distress. And so you don't make good decisions about things. You can't make cogent decisions and have a good argument when someone just weighs in on Twitter. My issue is allowing these people to use these platforms to sort of

bully people into it. I think the Tesla plan looks pretty sound. I think they should have just waited a few days, get it approved, realize the fact that regulation exists and it's for a good reason. It's not just to screw with you. It's just weird. You know, one of the things, I can't stand doing any column on Elon. His mother is lovely. I did a podcast with her. She's lovely. She's defending her son.

That's fine. I don't think she actually read the piece, but that's fine. What I object to is people then saying, oh, the Alameda County officials belong to big oil. You know, or I got that. I got that from his mother, too. She's like, oh, fossil fuels will win. I'm like, I don't have a car, Mother Musk. I just, like, I don't know what you, I don't, I need to start making any fossil fuels.

GM isn't opening factories over. Well, they are in Michigan. Like, things are, right, exactly. So they were saying that they were the only ones not allowed to open. There were other things that were opening better. But it's state to state. Like, they don't want to have any, like, actual complex. And we have lower infections in California because they've erred on the side of conservatives.

Right. Well, this is the issue. It sucks to be a grown-up, right? This is the issue. I want you to take the pro-Elon side of wanting to open up, this idea of wanting to open up. Sweden. Right. You want to keep going and doing business.

The argument, and it's a good argument,, we should have a debate in the town square, but certain individuals shouldn't get to decide this because they're richer than everybody else. It should be who the town square elects to make these decisions. And so the argument is very straightforward, and there's a really decent argument here. Unfortunately, and this is a longer-term issue, the wealthiest country in the world has put 50% of its populace in such a vulnerable position as we move towards a society of 3 million lords being served by 350 million serfs that the serfs can't go out of work for 36 to 90 days without being food insecure. And food insecurity takes a toll on you. And the shame of not being able to look after your children results in high blood pressure, a tendency towards opioid addiction, and finding that gun you have the rights to own and fucking

shooting yourself in the head. So deaths of despair are going up. And there is a reason to get people back to work. That is a solid argument. And we have to measure that against the health risk. That is a worthwhile debate. But in Sweden has basically said, okay, we're going to ask our vulnerable population to stay home. We're going to ask people to distance. There's a cartoon of everyone on spring break in Sweden, and it's not true at all. And they have had a higher mortality rate, but there's an honest and a worthwhile debate around was it worth it or not? Because keeping factories closed does also result in death. But the reason I'm cynical here is that I don't think Elon Musk, I don't think his heart is in the right place here. I don't think he's worried about his employees.

I don't think he's worried about America getting online. I think he's worried about Tesla stock and his payout. And I know you don't believe he's worried about money. I think he's worried about building these cars. I think he's quite religious about this. When you talk to him, when he starts talking about, remember when he was in that last period of manicness? He was like, I just had to build the cars. I have to.

I think our planet depends on these cars. And I was like, okay. It was an interesting, if you saw it in person, it was really fascinating in terms of how he really does believe that the continued thriving of Tesla matters to our planet. He does believe that. He does believe that. And so I think it's not about money. I don't think it's about shares. Listen, he hardly thinks about shares. He's always tweeting something that affects them. And I don't think he cares about shareholders or the board or anything else. I think he thinks

these cars must be made. And he should do it the old-fashioned way. He should buy off every congressman, the majority of whom are whores, and get them to side with him, i.e. the Republican Party. He shouldn't be allowed to use Twitter and his reputation as an innovator to steamroll publicly elected officials. This is dangerous. Well, he's allowed to do it. He shouldn't do it. He shouldn't. Allowed is not going to happen. Well, I mean, the officials in California, I thought it was a moment, quite frankly, for Governor Newsom to step in and say, look, Mr. Musk, we love you. We love the factory. But the culture here, there's something about the University of California. There's something about the weather.

There's something about the risk-taking mentality of people who are willing to endure scurvy to get here. It makes California a unique place. And part of the cost of that tremendous culture and In-N-Out Burger and the most beautiful coastline in the world is that you have to abide by our laws, including local municipal laws. And we should have an open debate. It's an interesting one. You have good points. But, boss, until Alameda officials say you have the all clear, stand the fuck down.

Yeah, he's not going to do that. He didn't do that. I agree. I thought it was a lost opportunity for Governor Newsom, who, by the way, I'm hoping, announces he's running for president with Cuomo, which was vice president. He may have done it off the record. He may have done it. He should have done it on the record. This is a lost opportunity for the governor, in my viewpoint.

It's hard. I have to tell you, every time I write a Musk article, I breathe heavily. Oh, God, it's crazy. It's just exhausting. Here they come. Here come the Tesla guys. I mean. Yeah, exactly.

And I'm an idiot. And he'll never. It was fascinating. One guy was just going on about he'll never talk to you again. I'm like, that's really not how I make my calculations. It's like, oh, no, he's not going to talk to me. He can talk to me or not. I love talking to Elon. He's fascinating, but whatever. Whatever, whatever. So how is it going to affect the Tesla stock? Or worse than that, he'll name your next child.

I like the name. I love a crazy baby name. A name? Really? I do. I think that name in Latin means you're going to get beat up in the second grade. Sarah Cooper did a very funny takeoff on it. Go watch it. Let me just say, I wanted to name my youngest son Romeo. So don't even tell me I would have just... Romeo. Romeo Swisher is so cool.

Romeo Swisher is the coolest, coolest... Romeo's kind of cool. I can see that. I don't... Yeah. I also wanted Jesus. I love the way he's named. I've renamed my oldest Favorite.

Do you think that's bad? I think it's bad. Favorite. I just call him Favorite. Sending the wrong signal to your other children. You think that's unfair? Favorite. Hello, Favorite.

And then we're going to get to listener mail. Listen, enough of you in a second. How do you think it's going to affect Tesla stock? Briefly. Oh, God. I have absolutely. Tesla stock is totally. You better get away from that.

You've had a bad relationship with that stock. I said publicly that Tesla was overvalued when I think it was at 300 bucks a share, and it went to 200. I'm like, the dog is on fire, and now it's at 900. Do not listen to me when it comes to Tesla stock. Tesla is now worth... Yeah, why do you get that so wrong? What's the deal? Tesla is worth more than the U.S. auto industry. It makes absolutely no sense. But anyways, I have absolutely no idea what's going to happen to Tesla stock. It's like trying to predict Bitcoin. Good to know. But he's back in building, and we'll see how that goes. And we'll see if he gets- By the way, I want to be clear,

and Paul Stevens told me this. One of my mentors from the 90s in San Francisco, I said, I just think Tesla stock is overvalued. And he said, Scott, I learned, he ran a hedge fund. He's like, never short the stock of a company with a great product. It's a great product. I do love it. I own a Tesla. I love it. Every few weeks when he says something stupid, I think about doing something dramatic like driving it off a cliff or something.

I love it. You love your Tesla. You know what's nice? Not going to the gas station is incredible, is liberating. Well, try not having a car. I'm testing out electric bikes this week. I love electric bikes. Electric bikes.

Oh, I'll go into it soon. Really? I'll be having a car. We'll be discussing it. It's enormously heavy, but I love it. But let me just say, let me be clear. Look, whatever you think of Elon Musk, the stuff they're doing at, say, these meatpacking factories is so appalling versus this. I think he really does want to build these cars.

Well, maybe the meatpacking people want to make sausage. It doesn't make it right. I don't. I love sausage. I mean, I love my Tesla, but I really love the sausage. Okay. All right. Okay.

Enough of Elon and sausage. I don't know how we got to that situation, but let's get some much needed sanity from our beloved listeners. And we are, we beloved our listeners. We beloved them. This comes from Aaron Coral in Tucson, Arizona. You've got, you've got, I can't believe I'm going to be a mailman. You've got mail. Hello, Karen, Scott. I hope both of you are doing well and your families are staying safe. I recently read an article where some Fortune 500 companies

are looking to get some of their upfront ad dollars spent back from the big three television networks. And I was wondering if the two of you could share your thoughts on whether this signals a bigger change ad for the three networks and their ad driven earnings model going forward. Thanks so much and keep up the great work. That's a good question from Aaron. The Wall Street Journal article this week reported that big advertisers from General Motors to PepsiCo and General Mills are seeking to walk back spending commitments they made to broadcast and cable networks. Here is some context. The majority of money spent on TV ads in the U.S. is bound by contract and made long before the new TV season, which starts in September. Under those upfront deals, the first real opportunity since the

pandemic struck for companies to pull back on those deals and cut back on future spending began this month. So companies now have the option to cancel up to 50% of their third quarter ad spending. Scott, I mean, I think these networks are in big, big trouble and you can sort of feel it, the panic from them if you talk to anybody there. Oh, this is, well, what happened to print? This is just a repeat of 2008. In 2008, a lot of companies withdrew from print, a lot of luxury brands, and then they never went back. You're about to see the same thing finally happen to the $57 billion television ad market. You can see it even worsen. It'll come back, but it'll come back not nearly to the same level. Most of the major networks have diversified. Most

of the content companies are now making good money in streaming, so they will survive this. A lot of print and radio companies will not survive it. They have not diversified. The two biggest radio companies haven't even breached double digits in terms of subscription or digital revenues yet, whereas even CBS has all access. Peacock is coming out with a big streaming service and has ESP. They have different things. Disney, obviously, ABC has the most successful OTT platform, at least out of the gates, the most successful new one, I should say,

in Disney+. But this is going to be – the companies that get hit really hard here, even more than the networks. Name names. WPP, IPG, Omnicom, and Publacy, who have made a living charging between 6% and 12% of media spend on broadcast television. Those guys are just – I mean, they're in the new department stores of the communications world. Oh, wow. And you're going to see split-ups and all kinds. Remember how, think about 10 years ago. Everybody wanted to know what Martin, Sir Martin thought.

Sir Martin. Everyone thought these were the, these were the, these guys were the helm of the bobsled. They were the smartest people in the world. They're about to become the department stores of the communications network because company, big companies, AB InBev, really smart companies, you know, Procter & Gamble are going to rethink, they're going to take this pause as an opportunity to rethink their media mix. All right. So, rethinking.

Now, listen, watching has never been higher. You know, Fox News is doing really well. Numbers are up at CNN and other places. Why wouldn't you want to spend there? Oh, I think they'll still be spending. Why wouldn't you want to spend there? Oh, I think they'll still be spending. They'll just have much lower CPMs, and they'll take it as an opportunity to reexamine their media mix.

And it's like everything else. COVID-19 is just an accelerant. And do you think digital advertising was going to grow? Yeah. So they'll return. There'll be a minority, but a significant number of advertisers that'll just abandon television and decide. I mean, have you advertised? You know I hate Facebook. Have you actually ever advertised on Facebook? It's incredible. I have no need for advertising.

This is what you do on Facebook. I have an online learning company called ProfG, right? Instead of advertising on cable TV or on radio or even on podcasts, we give Facebook our pixel for the site, and they optimize the shit out of it using AI. They try and figure out the most cost-effective way to drive you people to your site or to your ad on Instagram that is then optimized to get the lowest cost of a customer acquisition. It's just fucking insanely genius. Who else? You use Google. Where does the ad spending go? Them, Google?

Facebook, Google, and then if you're CPG, Amazon Media Group. So what do you mean by Amazon Media Group? Where would they be spending? To buy, like, to hawk their paper towels or what? Well, Amazon is now, and this is one of the most underreported stories in the world, Amazon is now the fastest growing billion-dollar-plus media company in the world because if you think about kind about one of the basic constructs of marketing, it's the funnel, awareness, consideration, intent, and purchase,

and then loyalty. As you go further down the funnel, the rates you can extract get higher and higher. That shelf space at the checkout is really, really valuable. And Amazon has the mother of all bottom of the funnels because if you put Huggies in your basket, they can see that. And then they can go to P&G and say, would you like to advertise Pampers with a coupon and get those Huggies out of their basket? So every CPG company or basically every advertiser on Amazon

has now incentive or almost a tax to pay Amazon the equivalent of shopper marketing. In-store marketing- It feels like a vague. It feels like a vague. Well, it's nothing new. So if you go into a Kroger's, Kroger's- Yeah.

I'm not sure about Kroger's, but supermarkets actually make more money off of that- End cap. End cap, exactly, than they do some of the margin on the products they're selling. They get Bud Light to say, all right, put Tom Brady, a styrofoam picture, a cardboard version of Tom Brady, and have a bunch of six-packs at the end cap. That stuff is hugely, that's a bigger business than advertising. They're used to that. That's a bigger business than advertising. I think that's what Jeff Biz is. I argued about 100 years ago at a TED. He said they'd never do it, and then they did it, and then he called it

out. I agree. I mean, Everybody talks about AWS, but Amazon Media Group is probably alone out of 50 or 100, probably more than that, probably 100 or 300 billion in market capitalization. It's an unbelievably powerful company. It's found money on the floor. It's money on the floor. So the big winners, I mean, no shocker here, Facebook, Google,

and Amazon, they pick up money. What will be really interesting is to see what happens to the guys one level below that, Pinterest, Twitter. What happens? Because Twitter's usage is off the charts, but their advertising tools just don't nearly, they don't rival Facebook's, right? They haven't been nearly as innovative. I think they do too. Oh, full disclosure, I'm a Twitter shareholder, but like Pinterest, what happens to the guys one level down? I think that's the more interesting question, but radio. And what about what happens to the big cable companies, the radio companies? Oh my gosh, especially without sports. You got to think cord cutting is getting accelerated.

People were holding onto cable because of sports and now with no sports. There will be sports though. Again, it'll be back. Sports will be back. Yeah, but it seems like it's going to take a while, right? Yeah, but they'll be back. That's not going to go away. But in the meantime, do you cut the cord, and then the OTT guys have the incentive and the money to finally say, okay, NFL, let's sit down and let's get serious.

Okay, NBA. And Amazon is already streaming some NFL and some, I think it's Premier League games. So, look, cable is... They've got these wrapped up for many years. I get confused when I think about all the sports ball stuff, but they do. I think a lot of these companies have it wrapped up. So, who is in trouble? Is it the News Corp?

Is it the Disney's? The Comcast's? You know who doesn't get talked about a lot in media that's really in trouble? And this goes into my prediction today. Everybody talks about the terrestrial guys. I think the cable companies are consolidated enough. They have such incredible cash flow. They're really well-run businesses.

Their stocks might go down, but I think they're going to be okay. The smaller guys, the AMCs, the Viacoms, they get gobbled up. I think the media companies that are in the most trouble, radio is going to go chapter 22 again. They're going to have a difficult time. What you're going to see, though, that people don't talk about, they assume that digital is immunity to anything. The guys who are being really hard hit here, and this goes to my prediction, is the secondary digital players. All right. We're going to get into that because we have predictions next. All right. But I want to know who of the big TV companies, these big companies are going to get hit, the ones that are

the big NBC, ABC, CBS, Fox News, CNN. I would think, well, okay. So when you're talking about these guys, when you're talking about NBC, you're talking about Comcast, which has unbelievable assets, incredible cash flow, cable. So less town cars at NBC. Yeah, but the little guys, the AMCs, quite frankly, Viacom. I don't know what happens to Viacom in this. They have CBS All Access as a bright spot. You just mentioned Comcast.

Newscore, I think it's fine. I think Fox has carved out such a crazy following. I think that they will figure out. And also, ad-supported TV has a market, but it has a market for personal injury attorneys and opioid-induced constipation medication. And there's a lot of old people out there, and most of them are watching Fox. Actually, CNN has a lot of that advertising. CNN? I'll tell you that.

CNN is AT&T. So I believe over time, AT&T re-spins Time Warner because I can't see any synergy between this content and telco that was supposed to materialize to support what was a rich acquisition price. They re-spin it to where? Well, they just spin it out again. I mean, these are incredible assets. I just don't see what leverage or synergy they're getting attached to a phone company. And then they live off of opiate stuff like whatever those drugs. Okay, HBO on its own is worth a ton of money. HBO is still –

The hurricane. HBO Max, I think they totally fucked up, in my opinion, by crapping up all that gorgeous content with the Big Bang Theory. But in terms of the big media players, they're going to be fine. I don't think they're great places to invest. They will continue to leak shareholder value to Facebook, Google, and Amazon. But they're not in any sort of dire straits. They have such incredible franchises, such great human capital. Okay.

But it's the big ad companies, like you were talking, publicists and others, it is the amount of money they have to spend on things that they're going to be constrained. Well, not only that, but they'll all be under pressure to reduce costs, and the place they'll turn is they'll go back to their ad agencies and say, I need you, you know, P&G and all these guys will go back to their agencies and say, I need you to optimize or I can spend the money with someone who's optimizing for me. And that is Google or Facebook. So it's the services guys that are going to get, I think, hit really, really hard.

All right. We're going to make one more quick break and then we'll be back for predictions. Scott has already started on his and we'll talk about that in more detail. Through the words and experiences of investment professionals, you'll discover what differentiates their investment approach, what learnings have shifted their career trajectories, and how do they find their next great idea? Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Do you feel like your leads never lead anywhere? And you're making content that no one sees?

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Scott, between your Uber predictions and my Amazon to buy theater predictions, we are truly on fire. You just started a prediction about the second-tier digital companies, such as Vox Media, maybe BuzzFeed. They closed their UK and British operations, for example. Tell me more. Yeah, well, your instincts are right on. I think there's going to be news very soon that involves Yelp, BuzzFeed, potentially our employer, Vox.

These are smart people that right now don't have the scale. Merger. You're talking merger. I've heard that rumor. Yes, something. Yelp. Every year, Yelp loses power, currency, and shareholder value, and it's a great company with interesting technology. Vox, BuzzFeed both have really good audiences. They've been really good? Vice is in there speaking

Vice they've actually got an outstanding new show, so that will save their ass what is Vice? I don't know anyways I don't know why they didn't just fire you now

everyone else does, I mean it's's going to happen sooner or later. Like, Nancy Dubuque, let me call me. I've never even met her. I need to explain. She's great. She's a tough lady, let me just say. I'm used to those. She's a tough lady.

I'm used to those. She's a tough-talking lady. The dog only goes to households run by tough ladies. She's a tough lady. I think we need to, when we are out of this pandemic, you, me, and her are going for a drink in Williamsburg.

You know my boss. No, I don't know. I know her because I covered her for years. You give each other pedicures. I hate that you make fun of me

for having done my job, which was to get to know the people I cover, but I'm not going to, like, it's fine that I know a lot of people, but apparently not Elon Musk anymore,

according to his mother. But let me just say, she's a tough lady. But what happens to those? So you're talking about a merger. I've heard this rumor just the other day. None of these guys make any sense alone. Without cheap capital, without the consensual hallucination that these companies are the next Amazon with cheap venture capital money, they all have to get together and say, all

right, we have to hold hand. The Panzer tanks have rolled in, and they are coming up on Moscow, and they are bombing the shit out of London. And the British, the Russians, and the Americans have to figure out a way to get along. Well, you know, the Germans did not win in that battle, but go ahead, keep going. That's a fair point. Okay, so bad metaphor. I'm trying to keep you historically sound. I just interviewed John Meacham, so I'm very historically oriented right now. But let me just, talk to me about what the merger looks like. What is the merger? And why together are they better than apart?

Because they can fire a shit ton of people. Because they can take, they have one CFO, they have one producer across all other podcasts. They have more power with people like you and me. They have the money to invest in technology to do the type of ad tools that Facebook and Google have. These guys have to triple their audiences and have to cut their costs by 40%. Then they're viable, interesting companies. These are all units of a bigger—the whole is greater than the sum of its parts here. None of these companies have gotten to the scale they need to, and they're smart people.

Our guy is a great deal guy. I thought New York Magazine, us acquiring... I say us, I had nothing to do with it, but I think Vox acquiring New York Magazine was one of the gangster deals of the last year. It made a ton of sense. You and I are doing better. This podcast is doing better because of New York Magazine. So, times three, BuzzFeed, The Atlantic, Yelp, these guys all have to come together and say, all right. And probably because the DOJ has its head so far up its ass, it'll decide that that's a competitive threat. I think that you're right. It has to get bigger. It has to get bigger. It has to get bigger. And it has to get bigger with some sort of protection like for Maureen Powell jobs. You know, you left out, interestingly, the Washington Post and New York Times. Well, they're family owned. They're not going anywhere. They have

deep pockets. They have, I mean, especially, obviously, the Post has the deepest pocket in the world. But the New York Times, and I know this family, as long as they're making money, they have no interest in letting anybody else into the room. Times, and I know this family, as long as they're making money, they have no interest in letting anybody else into the room. That's just not the way they roll. All right. So it's these other businesses. Atlantic, what else? What other companies are in there? I don't know. Is Vice in there? Oh, Vice is 100% in there. Vice makes no sense as a standalone company. They have some assets, but it doesn't make any sense as a standalone company. And they all make good content. And they all, interestingly, have money from companies like NBC and Disney and other things. What happens to that?

Well, yeah. Well, they get to hold onto the money. But I mean, it's not aspirational. But basically, these are companies that can hold on. They merge. They hold on to 100%. Maybe they grow their revenues faster. And they cut their costs by 20% to 40%. All right. That is a fascinating prediction. And it affects us. How does it affect us? I think really that's what I'm more interested in, because everything is about you and I and our hegemony. We go from being the tallest midget to the second tallest midget. I don't know. I think that, look, at the end of the day... Don't use that metaphor. Tallest little person. Anyways, look, it's strange, but what I've seen through this is that talent, if you will, still commands a disproportionate amount of the revenue stream.

Yeah. I can't get over how brown to me everybody is now that I'm quote-unquote now considered talent. Uh-huh. That part of the ecosystem, what's weird, though, is that, again, it's more of a Hunger Games economy. The top 1% gets 90% of all the revenues around talent. You're going to see a merger across some of the tier two guys. What would be interesting? It would be interesting. I don't know. It'd be interesting if Twitter had a full-time CEO, they could do some interesting acquisitions because their currency is still inflated and they could probably show up and buy a few of these things and try and figure out some sort of offline, online. They need to do something there, but I don't know.

Look, there's something – a crisis is a terrible thing to waste. Something's coming. I don't know what it is, but it is going to be great. There you go. Oh, my gosh. West Side Story is supposed to be released in theaters, and it has not, unfortunately. Remind me to never go see it now. So great.

Prediction, some of these online content companies are going to start merging or doing something interesting. There's assets there. There's management there. How soon? How soon? Any scale. I don't know. Next 30 to 90 days.

All right. That's a big one. That's a big one, Scott Galley. I like it. It's interesting. It's off the beaten path. I like the whole prediction situation. Do you have any predictions? Oh, you know, every now and then I get a good one. I do not this week, but I haven't thought about it. I'm having some interesting interviews next week. I'm talking to Brian Chesky from Airbnb. I'm having some interesting interviews next week. I'm talking to Brian Chesky from Airbnb.

I am talking to Dara Khosrowshahi. So I may have some predictions after that, after I talk to them as I glean. They are talking to me. And by the way, Brian Chesky's mother thinks I'm Grant. So that's a good thing, I guess. I've never met Dara's mother in any case. So you got that. Any case, Scott, that was a great prediction, but we got to get out of here. We do have to get out of here.

So don't forget there's a story in the news you're curious about and want to hear our opinion on. Email us at pivot at voxmedia.com to be featured on the show. And, Scott, please read us out. Today's episode was produced by Rebecca Sinanis. Our executive producer is Erica Anderson. Special thanks to Drew Burrows and Rebecca Castro. If you like what you heard, please subscribe or download wherever you listen to podcasts.

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