The Prof G Pod with Scott Galloway - A Position of Strength

Episode Date: May 14, 2020

Scott brings on Paul Rabil, professional athlete and cofounder of the Premier Lacrosse League, to hear how he pivoted his business during this time and his advice to other entrepreneurs whose businesses are essentially paralyzed right now. Scott also discusses the second-order effects you should be considering as the pandemic continues, and answers your business-related questions during Office Hours. Today's Algebra of Happiness: Remember to help yourself while helping those around you.  Learn more about your ad choices. Visit podcastchoices.com/adchoices

Episode 9 and day I think 90 or 50 or something. Time has lost all meaning in the lockdown. I came home last night. My wife was sitting there with a bottle of Zacapa trying to cheer me up. When I say came home, I mean came from one bedroom into the other. And I said, hello, sweetheart. And then I said hi to my wife. Oh, that's good humor. Episode nine. Let's kick it off. In today's episode, we speak with Paul Rabel, a professional athlete and co-founder of the Premier Lacrosse League. He's the definition of lapping the competition. We discuss his decision to pivot his business during the crisis as advice to other entrepreneurs whose businesses are paralyzed in the broader sports market. I'll, of course, be answering your questions during office hours and wrapping with our algebra of happiness. What's the math of despair? What is the geometry of near alcoholism? It's the dog. So before we bust into today's rant,

tonight, tonight, the last nail in the coffin of linear ad-supported television. That's right. The dog has his show, and it's not the Westminster Kennel show with all those weirdos and their beautiful dogs. This is linear television.

Believe it or not, I have a show called No Mercy, No Malice on Vice Television. What is Vice? I don't know. It's basically because Netflix or HBO or Hulu did not call me back. But anyways, I'm on Vice Television tonight, 10 p.m. or at vicetv.com. After 10 p.m., we'll be talking about the disruption in higher education, have a drive-by with Stephanie Ruhl, the inimitable Stephanie Ruhl.

We'll be talking about predictions around acquisitions. And it's our attempt to take our intellectual property to the television medium. And so far, believe it or not, our ratings are really strong. Go figure. Go figure. The dog's got a bone. Anyways, tonight, No Mercy, No Malice on Vice Television at 10 p.m. Please tune in and I will surround you with white light. Okay, enough

of that shit. So let's talk about second order effects. There will be a ton of second order effects here. And I've been trying to think through what are the second order effects is likely the first order effects. All right, we go to teleconferencing or video conferencing. Those will be overinvested. Those opportunities are missed. That's the easiest one. It's no, you know, spoiler alert, Peloton's going to do really well here. What do we, what are the second order effects? So some of them I've been thinking about recently. Second order effect, public schools. Just as everyone is questioning the value of education as a mediocre cost accounting professor alive as the butt of jokes in the quad or in the dorms. He or she is intolerable vis-a-vis from public schools to private schools for anyone who can afford it, I that public schools can offer that, okay, if I'm going to have a reduced shitty experience where there's less variance in the

offering, why don't I have a reduced experience at free as opposed to $58,000 or $38,000? So I think there could be a reverse migration just as there's been a slow but steady trickle out of public schools, we could see a slow, steady trickle back into public schools, which should create an upward spiral. Because it's not that public schools are not only resource starved financially, what they're really starved for is the engagement of affluent parents who have the time to focus on the school, who have time to focus on participating, adding their own human accountable, and also holding the school accountable. So you can see public schools winning. Another second order beneficiary here, Florida. A lot of people are thinking, okay, if I no longer need to be in the office five days a week, but maybe five days a

month, where do I want to go where I have a better quality of life? Where do I want to go where there's a lower tax rate? Moving to Florida, if you're coming from New Jersey, New York, or Connecticut, is tantamount to getting a 10% to 20% increase in salary, depending on where you're living and the cost of living, maybe even more than that. And the fact that you save between 11% and 13% on every dollar in form of no state income tax. So you're going to see this incredible migration from the Northeast higher tax states to Florida. It's going to get bigger and bigger. We're only going to see more and more U-Hauls going one way into Florida. Another second order effect, we're probably going to see a

migration out of cities. We have seen this incredible migration into cities over the last 30 years. All the economic opportunity was projected that over the next 20 years, two-thirds of all economic growth was going to come from cities. Might that be arrested and might the trend reverse itself when people decide, okay, I no longer need to be in the city professionally? And also really the key attribute, let's talk about Manhattan. What is the key attribute of Manhattan? What makes Manhattan special? What makes Manhattan worth $2,000 a square foot? Density. It's not that we have more of it. It's just we have more of it and less space, which means there's more opportunity for crazy,

interesting niche offerings, whether it's an underground sushi place where they play vinyl and you're sitting elbow to elbow, whether it's the sweat of cultural experience in the basement of La Esquina. This is a function of density. What happens when density is no longer a feature but a bug? Does it change the entire complexion and the value add of a city? Or does Manhattan become a playground for the young who, quite frankly, have a different risk-adjusted vision of COVID-19? Does New York become a fantastic place for younger people because it becomes less expensive, but a magnet

for other successful younger people? Do some of those midtown office towers get converted to condominiums or apartments, which creates more housing stock, which lowers the price of housing. Could we have an incredible reversal? So what I want you to do, I want you to think about the first order effects in your industry. Those are the ones everyone's talking about. The analyst reports with the media saying, OK, no shit. Department stores are going out of business. Movie theaters are screwed.

We're going to be spending more time in our homes. Yeah, we get it. Take all of those first order effects and then start doing some scenario planning around the next level, the next layer of the onion. Go deeper. I want you to go deep. I want you to go deep and talk about second and third order effects and be the guy or gal that understands it kind of is looking further around the corner. Second order effects, be that guy or gal. So now our conversation with superstar athlete, Paul Rabel. Paul is also, in addition to being an athlete, the co-founder of Premier Lacrosse League,

which recently became the first team sports league in North America to officially announce a solution to getting players back on the field with a fanless tournament this summer. This guy runs deep. His rivers run deep. He's a thoughtful, spiritual guy that is very in touch with his emotions and very concerned about other people and trying to be an evolved human. Anyways, it's a lesson. My friendship with Paul Rabel is sort of a lesson in the danger of stereotypes. And that is about the moment you think you've figured out people such that are a group of people such that you can make assumptions about them and their spirituality and their character. You find out you just had it all wrong. And it's just dangerous to make

assumptions about any cohort of people. Anyways, the very impressive and very thoughtful and spiritual Paul Rabel. Paul, where does the Prop G podcast find you? In my home in LA. Give us a brief history of how this league came about. Well, the good news is it's not going to take long because we just finished our inaugural season in 2019. But what we look at, or at least compare ourselves to, is that we decided to start a professional lacrosse league. It's called the POL, the Premier Lacrosse League. In 2019, we looked at a sport and kind of modern times and media and tech and consumption of sports

having grown over the last decade, greater than any other period since sports had been first professionalized, call it back, with Major League Baseball in the early 1900s. We looked at lacrosse as a thousand-year-old sport founded by the Native Americans, has been a deep part of North American sports heritage, has been a part of the NCAA at the college level since its inception. So it has a fan base. It has participants. We're not building slam ball from scratch. So the sport just needed energy and it needed thoughtfulness and creativity. And that's what we went after.

So we had a successful first year and then we're building and looking at kind of down the tunnel of doubling our revenue in year two. And we ran up against this global pandemic as everyone did across all industries. But I guess I'll lead into the next point, which is the advantage. And you've talked about this a lot on your show and then even on Pivot with Kara Swisher is during difficult times, call them environmental crises or economic recessions where it actually can be slightly advantageous to be smaller and more nimble so you can act quicker. And in our case, we're a true single entity league,

meaning we make the decisions at the executive level for all teams and we don't have to lobby across 32 NFL owners in a trade association. And that's where we've come up with a solution to have a semblance of our season in the end of July. What do you think happens to the $150 billion sports industry post-pandemic? What is the disruption in sports coming from COVID-19? So sports have actually gotten more valuable for the networks that are hanging onto a thread of appointment television and live programming. So what we're seeing, and the NFL is restructuring their media rights deal now. The NBA has another four years left.

The NFL is pulling north of $6 billion a year across a multiple of networks that either share Sunday football or exclusively get Thursday, Sunday night football. The NHL deal is going to be up next year. So what the market is anticipating is actually an increase in value, but then that puts pressure on the networks and the telecom providers to justify that expense through advertising revenue. So we have now shifted from an experiential event, and that's how the NFL is in college football and basketball, where it's a big emphasis on attendance.

And that helps you with your distribution and your viewership because of all the pans. And when we were watching the kind of the run of shows that went on beginning in the end of March, late night television, there was an impact not hearing the laughs in the crowd from Jimmy Fallon. His jokes didn't feel as funny. And then the WWE, now the UFC, individual sports, we're playing without fans. It's a different experience.

So we actually view this as kind of an ultimate neutralizer for us, where this season we have a chance in this three-week window, which the model is fully quarantined, and also we're able to do this. And the reason why you haven't seen the NBA or NHL or MLS announced is that we have power in fewer numbers. So our all-in experiment with seven teams and medical and production crew is under 300 people. So we're able to land on a campus. We anchored into the Olympic window that was allotted previously before that got postponed to 2021, which is July 25th to August 9th. So you have dedicated linear programming to it. And then we've just rolled out sports gambling. So to be able to get the approval on the betting side of sports, which is now becoming at a minimum, a plurality. And in some leagues cases, the majority of what leads to higher viewership and additional revenue opportunities from sponsorship to

merchandise to just general stickiness and editorial and engagement. That was a big piece for us to unlock. So these are like meaningful steps we're taking amidst these challenging times that again, being a smaller sport that's more nimble is actually advantageous. Speak to other entrepreneurs. So you start a company, it's going successful, revenue is scaling, you got good investors, good sponsors, coordinate, you know, herd these cats, these athletes, facilities, operations, broadcast, and then boom, this meteor hits, and you go from scaling revenue to, I would imagine, almost zero revenue overnight. What do you do? Do you focus on cost? Do you focus on morale? Do you go have conversations with your investors to raise more money? What advice do you have for other entrepreneurs that have been hit by this media? Well, there's no playbook and it's really

hard. You have to have a great co-founder or an awesome executive team and fantastic support from your board. But it is a lot of sleepless nights because you have to do everything that you mentioned, Prof. And the communication, it's so dynamic because it's not just with your shareholders and not just with all the venues that you had previously scheduled and your sponsors and making sure you can try to fulfill 2020 obligations, going after new ones. You communicate with your players are the most important thing and your coaches. You have to communicate with your audience and it's mind numbing. Do you have any hacks or best practices to kind of stay emotionally, mentally, and physically fit? I think it's important to have a person or people in a very inner circle that you can share your stressors with. That's been helpful because I get bogged up

and pent up at different moments. And so I think sharing your feelings is probably number one on my priority. And then finding your motivations. And that can be music. It can be YouTube videos I talked about previously. And then the last thing I'll say is celebrate the wins because we tend to fixate on the challenges or the no's. And so when you get those yeses, I think it's important to recognize them, write them down. And those are very inspirational and uplifting as you take that energy on to the next task. You're tapping into, I think, the opportunity. There's incredible variance. The majority of people in your situation, a lot of entrepreneurs are basically paralyzed and feeling sorry for themselves. And you're taking the opportunity to try and lap the competition.

I think what you've announced, your tournament makes a lot of sense. And just to say more about that tournament, it's a two-week quarantine and fanless tournament that's going to run from July 25th to August 9th. Where are you guys actually playing? Not that it means anything to anybody, but where are you actually holding the tournament? Yeah. So we are finalizing, we have three proposals in one location is in the Midwest, one's down in the Southeast and then one's in the Mid-Atlantic. And then all of these games on the commercial side are going to be available on either NBC or NBC Sports. So that was a huge piece too, is that if we're taking a bath on ticket revenue,

merchandise on site, share of concessions and parking, as well as local sponsorship, which is the same for all major sports leagues, then you've got to commit to making a distribution play and sponsorship across media. So if we didn't get the commitment from NBC to air all 20 games, then we likely would have canceled the season altogether. In addition to being the greatest athlete to ever play the game of lacrosse, Paul Rabel is the co-founder and CMO of the Premier Lacrosse League. And he's also an Atlas LC midfielder. Did I get that right? You got that right. Midfielder on Atlas LC? Yes. I'm still I get that right? You got that right. Midfielder on Atlas LC? Yeah, so I'm still playing.

All right, brother. Stay safe. Okay, it's time for Office Hours. As a reminder, you can ask us anything. The stranger, the better. The dog is a little bit freaky. Fly your freak flag to the dog. Submit a question to officehours at section4.com.

First question. Hey, Scott. This is Simon out of Hamburg, Germany. Big fan and a little sad. I can see slash hear you and Kara Swisher on stage doing the online marketing rock stars festival. Anyhow, Corona crisis demands this. Here's my question.

What will happen from your point of view to the IPO market due to coronavirus? Will big IPOs or big companies such as BNB, Consulates,

IPO plans for now, how will this affect, let's say, smaller startup-like tech or martech IPOs from your point of view? Thanks, Scott. Keep on making a ruckus.

Stay safe and healthy. All the best, of view. Thanks, Scott. Keep on making a ruckus. Stay safe and healthy. All the best, Simon says. Simon, thanks for the question. First off, it is good to be Simon. I think Hamburg, I've been to Hamburg, and Hamburg is as if Wallpaper Magazine exploded into a city. I think it's sort of the coolest, most wallpaperish kind of design aesthetic city I've ever been in. Also, I'm a huge fan of Germany. I go to Germany every year. I love Munich. I think if I spoke German, I would live in Munich. But nine, the dog does not speak. The dog is not a dachshund. He's not a dachshund. He's an American mutt. Anyways, IPO market. The IPO market is being, like so many things,

reshaped. And that is the traditional business of a bulge bracket investment bank going around marketing an IPO and then taking 7% and offering their institutional nice white guy investors who pay them a lot of money a discount to the true value of the company such that it can get a pop and the company loses capital or takes additional dilution such that they can pay this ecosystem of investment bankers and institutional investors, i.e. a racket. I think that is under fire and under assault. And I don't know if the number of IPOs are going to go down in total, but the number of NYC, NASDAQ, investment banking, JP Morgan IPOs is definitely going to decline and it's been on the

decline. I think the number of publicly traded companies because of acquisitions and a lack of new companies being able to get out of the crib because of monopoly power and the fact that there are half as many new companies being formed every year as there were during the Carter administration. 7% of companies are less than a year old whereas it used to be 15% of the company because we do not have leaders that have the sack to break up companies like we used to do in the past, but that's neither here nor there. We keep waiting for the banner year of the IPO and it hasn't happened, although the performance has been pretty strong in the last few years of the ones that do manage to get out. I think you're going to see, however, more direct

listings and that is companies are going to bypass the expensive marketing process and they're going to scoot around the payola, payday mob-like process of the traditional IPO and they're going to do direct listings. And this bypasses a couple of things. One, the lockup period. Investors can get liquidity right away. The market technically or the stock technically begins trading at its market level immediately because there isn't a lockup. There isn't

this attempt by the bankers to price it below. So I think you'll see more direct listings. And I think you'll see fewer IPOs. Simon, thanks for the question. Stay well. Next question. Hi, Professor Galloway. My name is Georgia, and I'm a media and tech analyst from London. I want to pick up on the ad revenues thread. I was looking at the Netflix subscriber increases today, and I couldn't help wondering again about Netflix and ads. Do you think there is ever a scenario when Netflix considers turning on some kind of ad format, given that during a recovery, Netflix inventory would likely be some of the most premium inventory out there. If they don't, I want to revisit the Apple acquisition idea again,

as Apple increasingly positions itself as the big tech privacy leader, and so in many ways anti-ads, and acknowledging their moves into services. Could that acquisition ever be on the cards? Thanks very much for the question. So there's a general recognition, and consumers are voting with their eyeballs that advertising sucks. A lot of broadcast television now, other than sports and things that gets huge audiences, the advertising is basically a series of how much it sucks to either be old or poor. So I think slowly but surely we're going to see just a decline, a continued decline, and it's going to be a step change down of ad-supported media. Now, should Netflix have an ad-supported model? I don't think so,

and I don't think they're going to because I think their brand positioning is so incredibly strong. Supposedly, if you have your kids watch nothing but Netflix, they save 13 days a year of their lives just not watching commercials. So that's right. They get 13 days back that they would spend watching commercials if you don't let them watch anything but ad-free Netflix. I think it's so inextricably linked to their brand. I think mediocre content without ads becomes good content. And that brand, that joy of ad-free content is just so central to their brand and the experience and their NPS rating that to venture into ads would be a mistake. To go into a declining category, to have to hire an entirely different

sales team, it also has huge impacts on your culture. So granted, it's not a perfect analogy, but at L2, we decided to have no salespeople. And we just focused on the product, thinking if the product got strong enough, eventually it would sell itself. So we just focused on the product, thinking if the product got strong enough, eventually it would sell itself. So we didn't focus on sales, if you will. We focused on the product itself. And when you're not ad supported and your subscription supported, it creates a different vibe. And that is you can go for quality. You aren't totally thinking about eyeballs all the time. You're not trying to appeal to the lowest common denominator and end up with reality TV starring the Kardashian family because you're trying to create

marginal content that appeals to millions of people instead of great content that appeals to the long tail, which is effectively Netflix's superpower. You can also go deeper and spend more money on fewer projects as HBO did. So I just don't see that happening. Apple no longer has the balance sheet. I don't think anyone has the balance sheet as I think about it. Maybe Apple does to buy Netflix, but it'd be such a collisions in culture. So I think actually Netflix is more likely to be a quire of a either Spotify or a Roku to try and get that all important distribution that they need.

Thanks very much for the question, Georgia. Next question. Hey, Professor. This is Louis from Denver. I totally buy into your assessment of how higher education becomes more open and democratized in a post-COVID world. However, I'm wondering how this changes business hiring. While it's an imperfect filter, the college you went to does act as a signal to employers. How do businesses adapt if everyone now has access to the same great education? What's the new signal or technology that employers who are already stretched thin when recruiting can use? So, Lewis from Denver, you're zeroing in on what is kind of the key attribute that people don't recognize when it

comes to quote-unquote education. We call it education. We shouldn't call it education. We should call it certification. Our primary value as educators happens when we accept the student. What do I mean by that? Berkeley could do nothing but give the kids beers and have them watch Zoom videos or hang out and watch Planet of the Apes or just make bongs out of common household items. Oh, wait, that was my career at UCLA over four and a half years. Anyways, they could just do that and they'd still have the best recruiters in the world. Why? Because they have the ultimate screening process. Getting into college is an assessment of your personality, your testing ability, what people like you enough to write very long letters of recommendation, how wealthy you are,

which is a huge indicator of your forward-looking success based on daddy's connections, right? Look at the Goldman Sachs wealth management team. It's a bunch of rich kids because guess what? Rich kids hang out with other rich kids who have rich parents whose money needs managing. So the primary value-add of education is certification. So you will see new certifiers, and that is you're going to see a bunch of testing evolve, a bunch of companies that test somebody's computer programming skills, their EQ, their grit, as opposed to just relying on the top universities, which have been the primary feeders or HR departments for the world's best companies. It's a nice idea to think that we don't need college. And I like to think that trade schools escaping this elitist, and it is elitist notion that you have to have a college degree to have a rewarding career. I do think there's some value to the notion that we need to dispel that

myth. But the people that need to dispel that myth are the recruiters of the best organizations in the world. So one, you're right, it's certification and there'll be opportunities for new certifiers. And two, we would need a groundswell shift in HR and recruiting managers at the best companies to decide that a college degree was no longer a prerequisite for getting a job there if we really wanted fundamental change. Thanks for the question. We love your questions. Again, please submit them at officehoursatsection4.com. All right, algebra of happiness. Dennis Runke, and I hope I'm getting that right, a retired Kansas farmer was honored for sending one of his 5 and 95 masks to Governor Cuomo. And as a result, he was awarded a degree, a college degree of which he was, I think, two units short because he had decided to leave college several decades ago to take care of his ailing father.

And this is a wonderful story. And many of you may have already heard it, but I think it highlights the fulcrum between taking care of yourself and your family and taking care of others and being generous. And it's one thing to be selfless, but quite frankly, being selfless sometimes is not the best strategy. You have to be in a position of strength to look after other people. There is a reason that the flight attendant tells you to affix your own oxygen mask before helping others. If you are not breathing well, if you're not getting, if you can't take care of yourself, you can't take care of other people. And Mr. Runke decided that he had five masks and he would hold on to four because he has his family at four,

but then saw, okay, I have a fifth mask. I'm going to send it to the governor. And he asked it to be donated to a doctor or a frontline worker there. And I think that's a wonderful lesson in addition to the generosity, in addition to the act and the notion that the world is a function of a series of small acts of generosity. There is something to having the thoughtfulness and the courage and the need to take care of yourself first, your family, the people around you, and then get off your heels, on your toes and be generous with others. I know a lot of people who are very good at taking care of others, but don't take care of themselves or their families. I know a lot of

people that have great friendships and are really generous with their friends, but quite frankly, aren't that loving or generous or don't have great friendships with their spouse. I know a lot of people who donate a lot of money to children's charities, but quite frankly, aren't very good fathers. So there's something here. There's a lesson here from Mr. Runke. You take care of yourself such you're in a position to take care of the people close to you and make sure that they have N95 masks. And then once you're in a position where the circle around you, the closest circle around you isn't in fear, is taken care of, you can lean forward and start taking care of others and send that fifth N95 mask to someone else.

Our producers are Caroline Shagrin and Drew Burrows. If you like what you heard, please follow, download, and subscribe. Thank you for listening. We'll catch you next week with another episode of The Prof G Show. I am so fed up with this fucking quarantine. Seriously, seriously, I want to speak to the manager

from Section 4 in the Westwood One Podcast Network. So I think, first off, I think your first big mistake was choosing to be the world's greatest athlete in lacrosse and not in basketball or football. Because if you were the world's greatest athlete in lacrosse and not in basketball or football because if you were the world's greatest athlete in football or basketball you and the dog would be rolling with the kardashians in miami tonight instead you're on the prof g podcast so next time you decide to be the greatest athlete in history check with me first paul