The Prof G Pod with Scott Galloway - A Record-Breaking IPO, Political Strategy, and Five Components of a Successful Business

Episode Date: October 29, 2020

Dan Pfeiffer, a co-host of Pod Save America and a former senior advisor to President Obama, joins Scott to discuss political strategy, politicians to keep an eye on, and understanding court expansion. Follow him on Twitter, @danpfeiffer.  Scott opens with his thoughts on the rise in COVID-19 infections, Ant Group’s IPO, and Robinhood’s inadequate response to hacked accounts.  This Week’s Office Hours: the hardware space, the future of financial advice, and building a revenue-driven business.  Learn more about your ad choices. Visit podcastchoices.com/adchoices

Episode 33. A normal human spine has 33 vertebrae. A bunch of Republicans are finding their backbone now that their coccyx is about to be kicked out of office. The atomic number of arsenic. I would put on Nikes and drink arsenic. I think cults are underrated. What's the difference between a cult and a religion? The person at the top of a cult realizes it's bullshit. The person at the top of a religion is dead. And people are usually willing to acknowledge that a cult is in fact dangerous. So offensive! But let's be honest. That's why you come here, you saucy little minxes. Go, go, go. Welcome to the 33rd episode of the Prof G Show. In today's episode, we speak with Dan Pfeiffer

from Pod Save America. We discuss political strategy, politicians to keep an eye on court expansion, and why you shouldn't worry about Trump stealing the election. So what's happening? We're back to record-breaking COVID-19 cases across the US and Europe. France hit a record 52,000 confirmed infections last week. Spain declared a new state of emergency, and Italy's prime minister issued another strict lockdown. And if you saw the news this morning, we record on a Tuesday here, they're breaking the windows on Gucci and Armani stores in Rome. That'll show them that, yeah, don't lock me down. I'm going to go break the windows on an LVMH

owned real estate play. Yeah, that makes a shit ton of sense to me. The New York Times found cases have reached record levels in more than 20 states, including Illinois, Tennessee, New Mexico, Nebraska, and Utah. As a matter of fact, there's not a single state supposedly where it's getting better. The Times also reported that the S&P 500's decline on Monday was the index's biggest one-day drop in more than a month. Think about this. Think about this. We all formed this narrative, didn't we?

Didn't we have a narrative? We thought, okay, we can shape this crisis. Now, why would we think we could shape a crisis? Because Americans, A, feel that we basically can shape anything. We can shape a story. Oh, we won Vietnam. Oh, wait, the Gulf Wars were a good idea. We're still exceptional. We're still the greatest country in the world. Our optimism, our innovation, our ingenuity can, in fact, solve crises.

So we've come to believe that we can solve any problem. And we develop a narrative. What was the narrative here? Simple. All right, we'd lose some old people. We'd get control of it. The virus would take the summer off out of respect for our summer plans. We'd have a mild relapse in the fall, and then boom, vaccine. Bullshit. Bullshit. Have you noticed? Have you noticed this virus doesn't give a flying fuck about our narrative?

And people are acting. Think about this. Think about the panic level that we have right now with more infections than we've had ever. New record versus where it was three or five months ago. Why? Because we're exhausted. We're exhausted. We're six or eight months into this and we're exhausted. And what does it reflect? It reflects poor citizenship. It reflects how just fat and stupid we've become. And I say that metaphorically and literally. America has become fat and stupid. And if I sound like I'm fat shaming, I recognize that some people are genetically or economically unable to maintain

what the industrial fitness complex or Vogue magazine would like us to look like. I recognize that. But at the same time, we have become out of shape. One of the reasons we have so many deaths in this nation is that we have created an underclass that can only afford fast food. And also as a nation, we have become lazy. We are not physically as active as we should be. We put off stuff. We have become indulgent. Our obesity not only plagues us physically, it plagues us philosophically or plagues us as a complexion. We are an obese nation that has decided that we don't need to work, that we aren't going to buy COVID-19. Shouldn't we have COVID-19 bonds? Shouldn't we have bonds where people are asked to finance testing, asked to finance a Corona Corps?

Instead, we sit around angry at Nancy Pelosi and Steven Mnuchin that they haven't figured out a way to get us more money. We are essentially seven months into this thing and we're so exhausted. We don't want to acknowledge what is actually going on. What if we had sort of given up and said, wow, I'm exhausted. I am exhausted by the Third Reich and the Nazi march through Europe. I've just had it. I'm going to ignore it. We have lost our sense of sacrifice. We have lost a sense of discipline. Part of that is we have outsourced sacrifice. We have outsourced discipline to military families. We have outsourced risk to people that have to take these risks because they're economically disenfranchised. We have become a nation that is obese.

It is really frightening to think about the comorbidities of the coronavirus. You think, well, it's respiratory illness, it's diabetes, it's obesity. That's a good news thing. Wait, okay, 88% of hospital admissions had one of those three and 82% of two of the three. But here's the problem. That is a large portion of America has one or more of those comorbidities. But that's not even the comorbidities, but that's not even the comorbidities that are really hurting us. The comorbidities of exceptionalism, of arrogance,

of a lack of a willingness to sacrifice. I'm disappointed that Biden and Harris haven't come clean and said, all right, day one inauguration, we're locking down. We are absolutely locking down. Why? In Europe and the US, when we threaten a lockdown, you see what happens in Italy, they riot and they start destroying property. Well, guess what, boss? The virus doesn't give a flying fuck if you destroy the glass in front of an Armani building. That is just not going to help cauterize the spread. People are upset that their economic livelihood is being threatened by another lockdown. And what have we done? What's the comorbidity? We have created an underclass that is so afraid of any short-term hit to their economics that they start looting. Why? Because any stimulus that gets anything resembling

bipartisan support that has been run over or co-opted by the shareholder class goes to companies. We shouldn't be protecting companies. We should be protecting people. We need to lock down severely. Again, again, a couple of the key numbers that everyone was focused on. China's economy grew 5%. Ours was down 0.1% this quarter. But the big number that everyone missed was the second quarter. China's economy was down 8%. They sacrificed.

They locked down. Where has our sense of sacrifice gone? In other news, in other news, Ant Group. Oh my gosh, talk gangster. Ant Group, the Chinese fintech juggernaut, is set to raise or raised $35 billion in the world's largest IPO or largest IPO in history. The company's shares are expected to begin trading

in Shanghai and Hong Kong next week, steering clear of the US market. Take that. Yeah, fuck you. You're forcing TikTok to be thrust into Oracle's arms. That makes sense. Tell you what, we'll take the largest IPO in history ahead of Saudi Aramco. To give you a sense of this, to give you a sense of this, what's the most exciting IPO of 2020, probably the United States? I would argue it's going to be Airbnb, which is supposed to go out at a valuation of 30 billion and raise a billion.

This thing goes out, this thing goes out at a valuation of 300 plus billion and raises $34 billion. Two words, first mine, second word, whatever is Mandarin for blown. Oh my God. Oh my God, $34 billion. Most IPOs in the US raise 100 to 300 million. This company has literally raised somewhere between 100 and 300X what most American

IPOs raise. This thing, this thing, you want to talk about a juggernaut. You want to talk about a juggernaut. Ant Financial, talk about a juggernaut. Am Financial, 700 million people on their payment platform, 700 million people, part Tinder, part Square, part Venmo, part Amazon. I mean, this thing is just, it makes Amazon look like a bit of a niche product. It is so dominant in so many different areas, Part Visa, part Shopify. This thing is just rolling up every touchpoint around payments and technology and e-commerce into one platform. It is striking.

And $300 billion makes it, I believe, one of the 10 most valuable companies in the world. And they now have $34 billion in capital to try and pull away or make the jump to light speed. What is the Achilles heel of almost every Chinese tech company? Almost every Chinese tech company? From a pure business standpoint, they are terrible. They are terrible at taking their brands abroad. Very few, if any of their brands have ever gotten a passport. It's like George Bush. Before he was nominated for president, he had never been to Europe. Oh, that's the guy I want representing us on a foreign stage. Anyway, this is something the Chinese have not figured out yet.

WeChat, TikTok are arguably the first two Chinese brands to go global. WeChat is a top download. TikTok is now one of the biggest platforms in the United States and some of the biggest Western markets. Can Ant Financial permeate geographic boundaries? That'll be the big question. In other news, the biggest news, the most underreported story of the week, Robinhood robbing from its customers to give to its shareholders. Several people received an alert last week on Robinhood saying, you've sold shares. One individual got an alert saying, you have sold your Moderna shares. And he thought, but wait, I didn't sell my Moderna

shares. And then a little bit while later received another notification on his elegant Robinhood app that gamifies everything to move further and further down your brainstem to get you more and more addicted. The notification said, we are transferring the proceeds from your Moderna stock sale that you didn't know you had sold the stock out of your account. And suddenly that individual recognized that their account had been hacked and that this money was being stolen from them. So what do you do? What would anybody do? You call Robinhood and say, wait, there's a thief in my account on your platform stealing from me. But here's the problem. There's no one to call. There's no 800 number. As a matter of fact, it's impossible to call

anybody. So this individual started reaching out to people on LinkedIn and finally got an email response that said, this is a serious issue. You can expect to hear back from us and get this a few weeks, a few weeks. Imagine you're at home. Imagine you're at home and you hear someone downstairs stealing for a home invasion. And let's be clear, that's not being dramatic. For some people, if you find out that $10,000 or $15,000, which might be your life savings, and in the profile they ran in the New York Times on the individual who had this happen to them, that was his life savings, is being stolen. That is terrifying. And then you call 911 and what do you get? Do you get a live

person? Do you get action? Do you get a squad car to come out and arrest that person and find that person or to stop the crime? No. You get a prerecorded message saying, we'll be right back to you in three weeks. That is what is happening at Robinhood. How does this happen? Simple. Like other firms in our information economy, they want to blitz scale. They've not invested in anything called their customer because their customer isn't their customer. When you're getting something for free, you're the product. And the traders on Robinhood are the product. They're the cow being milked. They get more and more data on you, specifically your order flow, and then they sell it to brokers

who want to know who is the dumb money so they can bet against it, or because they want to execute the transaction at a spread that favors them and not you, the end consumer. So you are the product. So why would they invest in the product? Well, they don't. And there's no customer service or not enough customer service that they can actually take a call. Think about what is going on here. Think about the stress when you actually find out your money is being stolen from you and you can't get anyone from the company

to call you back. This is blitz scale at any cost to the end consumer. And this is a complexion of a shot where the end consumer is the product. You're the chump. You're the chump. Robinhood stealing from its consumers and giving to its shareholders. Stay with us. We'll be right back for our conversation with Dan Pfeiffer. Support for this show comes from Constant Contact. You know what's not easy?

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Go to ConstantContact.ca and start your free trial today. Go to ConstantContact.ca for your free trial. ConstantContact.ca The Capital Ideas Podcast now features a series hosted by Capital Group CEO, Mike Gitlin. 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.

Welcome back. Here's our conversation with Dan Pfeiffer, a co-host of Pod Save America and a former senior advisor to President Obama. Dan, where does this podcast find you? I am in the Bay Area right now. The Bay Area. Okay. Be more specific. What are you hiding? I'm not hiding anything. Where in the Bay Area are you? What area of the Bay? In Lafayette. We moved to the East Bay right before this pandemic, which turned out to be, from San Francisco, it turned out to be a very wise decision to expand our living space with a two-year-old right before we got locked in our house for nine months. East Bay, hugely underrated. So obviously this is kind of your busy season. I'm going to go

all the way back to the Democratic primary and I want your insight. I still can't believe that Joe Biden won. What happened? It was like all of a sudden it was Sanders and then Pete, and then all of a sudden Biden's the nominee. What happened? I mean, what really happened is black voters finally got a say in the election. The first three states, Iowa, New Hampshire, and Nevada have a very low percentage of black voters. And Joe Biden throughout the campaign had huge support among black voters. They are the largest, most important constituency in the Democratic Party, and they voted overwhelmingly for him in South Carolina. And there's a little bit of a quirk of the calendar, which is that

Super Tuesday happened only two and a half days, or I guess three days, I guess, after South Carolina when it's in previous years been a week and a half. And he rode a wave of momentum and he was the nominee and he did it pretty overwhelmingly and pretty quickly. Yeah, it just struck me that it was like not happening, not happening. It's over. Yeah. I mean, it's one of the true great comeback stories of America in American political history to have finished as poorly as he did in the first three and be written off for dead and not just come back, but come back that quickly. That story got kind of lost with one of the greatest crises in American history hitting us right at the exact same time, but it truly is amazing and a credit to his campaign to have the discipline to survive that period. And give us a state of play right now from your viewpoint and to the extent you're comfortable,

make some predictions, both in terms of the presidential race, House, Senate, where do you think we are? State of play. So right now we're recording this a little more than two weeks out. And if the election were tomorrow, I think Joe Biden would win and he would win by a very large margin. The Democrats would take the Senate and they would pick up seats probably even in some places that may be surprising, like a Kansas or an Alaska and an Iowa. It is so hard to make predictions because we just don't know what voting is going to look like. We don't know what percentages of votes are going to be counted, which are going to be discarded because of the weird quirks of voting in a largely vote by mail election. So it's very, like you would much rather

be Joe Biden and the Democrats than Donald Trump and the Republicans on just about every level. But I'm very, there is not a prior example that is relevant enough to feel super comfortable in those predictions. And what do you think of – talk a little bit about the media's role in this election versus previous elections. It sort of depends on how you define the media because that is a term that means everything now from CNN, The New York Times, to Fox News and Breitbart and The New York Post, to Crooked Media and Pots of America and the like. In some ways, the national media is more consequential and influential than it has been in the past because the candidates have been, up until recently at least, pretty much locked in their homes and campaigning virtually. So you're getting less, there's less local coverage, right?

There's less Joe Biden going to Arizona and dominating the news for three or four days. And then the things the national media is covering are sort of getting even further weaponized and distributed by social media and Facebook in particular. But like so are they influential? Yes. You know, there's probably a different question about how to grade the performance of it, how people have done relative to previous elections. And I think that's a different conversation. And who has run, in your mind, when you look across all the different races, who's put on a master class around messaging and campaigning in your view? I mean, this has surprised a lot of people based on how the primary went. But Joe Biden has run one of the most disciplined campaigns in American history.

He has someone who has in his life had a tendency to make gaffes, to say things that can distract from the message of the day or generate media attention. Even if it's not super consequential, it's an opportunity cost for the campaign. And he has managed to stay incredibly focused on the number one issue that everyone cares about, and it's Donald Trump's greatest weakness, which is the pandemic. And he does it at every opportunity. I watched that town hall with George Stephanopoulos the other night with great trepidation, because when you're ahead- He was very strong. And he was very strong. And he stayed on. It's not always as smooth or with as soaring rhetoric as Obama would use, but it is on message and it is very relatable and is very human. And it has been incredibly impressive. Think of all the political candidates as a stock or people in the world of politics.

Who should we be keeping an eye on? And the Democratic and Republican Party, if you were to say, I'm going to go to work in someone's campaign because I think they'll be a player or even president in 4, 8, 12 years, who do you have your eye on? I would say within the Democratic Party – and this is a hot stock that everyone knows but is certainly AOC, people like that is. You don't think she's too far left. Do you think the party's coming to her? I think that she is a tremendous talent. And I don't know whether she'll be president or not, but she's going to be, she already is, but will be even more so a gigantically influential voice in the party.

And if your goal is to work for someone where you can have huge impact, she would be at the top of the list. I guess that's sort of like, I'm not really an investor, but I've just given you a stock that by suggesting AOC, this is not an undervalued stock. It is one that has already taken off. I think Katie Porter is another person who's a superstar and a huge part of what will be very successful political messaging going forward is going to be what I like to call smart populism. And I think Katie Porter is right on that where she has a populist message. And the whiteboard.

Exactly, the whiteboard. And it is a very social media friendly way of communicating it. Ben Sasse. What do you think of Ben Sasse? Talk about some Republicans. I think Ben Sasse is a loser. Say more. I think that the future of the Republican Party looks more like Josh Hawley and Ted Cruz than it does Ben Sasse. And this sort of, and Marco Rubio I put in that category too of these sort of like sad people who kind of want you to think they're not really for Trump, but they're not really willing to say they're not.

And like this period of – like they will forever be tarred with sort of a scarlet sea of cowardice for how they handle this. And I'm not sure that – But it's not everybody. I mean – Yeah. I think that there – I don't – I do not believe that everybody, I mean, yeah, I just, I think that there, there, I don't, I do not believe in the near term. There is that the Republican party is going to bounce back,

is going to shift away from Trumpism. It's just going to be Trumpism without Trump. What about Nikki Haley? I mean, I'm not, obviously this is, it's hard to talk about people you're not a huge fan of, but I think she has a real potential. If you believe as I do, that the Republican Party is not going to penalize anyone for being anti-Trump, Nikki Haley probably has a real shot. Because what I think you may try to see in the Republicans, if they do lose this election by the levels that people suspect, is instead of trying to pick someone who isn't a Trumpist, you want to pick a Trumpism in a more appealing package. And Nikki Haley could certainly be that, someone who is not an old, angry white male. And so, yeah, I think that

if you were a young Republican staffer who was mostly comfortable with what Trump did over the course of this time, and you're looking for someone to go work for, that Nikki Haley would probably be, that would be an interesting bet on what a moderated face of the Republican Party with sort of equally Trumpist tendencies in the agenda. So talk a little bit about Take Back the Court. So Take Back the Court is an organization that was started by a guy named Aaron Belkin, who is a political science professor here in the Bay Area in San Francisco State. And the idea behind it, which began, it was sort of a lark when he started it over two years ago, was to put on the table the idea that the only way to address the rigging of the court under Mitch McConnell and Donald Trump is to add seats to the court. That is an idea that's sort of been on the fringes of the conversation. And I think good credit to the people that take back the court and certainly recent events with the tragedy of Ruth Bader Ginsburg passing and the Republican response to

it. And certainly candidates like Pete Buttigieg and others who were willing to talk about this on the campaign trail is now a part of the mainstream discussion about how you deal with the Supreme Court, which I think poses an existential threat to every single thing that progressives care about, even if Joe Biden wins this election. So, okay. So the people on the right, we call that packing the court, right? And then what happens when then they get control back? I mean, can't we start packing and unpack packing the court, right? And then what happens when then they get control back? I mean, can't we start packing and unpacking the court? Isn't there a danger to all this? Well, of course there is a risk in everything we do. And I'm of the view that I think it's very possible that Republicans, I don't think Democrats should reverse engineer our decisions

based on what we think Mitch McConnell might do in response to them. Because in a similar situation, Mitch McConnell would certainly, he's never been a man held back by norms. And so I think he would certainly do it. And Mitch McConnell shrunk the court in 2016. He shrank the court to eight seats, ensuring that it was deadlocked during a hotly contested presidential election in order to preserve the seats for the Republicans. Ted Cruz, who is very upset about changing the the number of justices on the court potentially, was put on the table shrinking the court to eight justices in order to prevent Hillary Clinton from filling that seat because he thought Donald Trump was going to lose. And the Republicans tried to shrink the D.C. Circuit Court of Appeals when Obama was president to prevent him from putting judges on the second highest court in the land. I think that we have changed the number of justices on the court more than half a dozen times in the history of this

country. It is a completely legitimate constitutional process and Democrats should do it. I don't think we should worry about what Republicans should do about it because I think they'll do what is in their best interest under any scenario. And the question is, are we going to live with a rigged court or are we not? And if we have the House and the Senate and the presidency, we control the answer to that question. Yeah. It definitely feels like we're burdened by hand-wringing in a conscience, whereas they just do what's strategically advantageous. Let's talk a little bit about strategy because it feels as if, and look, I come at this as a partisan unbiased, but it feels as if the momentum is with us. It feels as if more Americans support our ideals or the Democratic platform.

And yet we end up with more Republican senators. We end up with, I think, the Republican to be headed away from where America is headed. It seems like rivers are reversing or that their ideology is swimming upstream. It feels as if we're just not as good as them. And I wonder, let me put this out there, Schumer, Pelosi, I'm sort of sick of being outplayed as a Democrat. I'm sick of us whining and being angry, and then they shove through a nominee, and yet we couldn't do that. And I understand they had control of the Senate, but haven't we been just outplayed for the last decade? On one level, yes. And I think part of it is a philosophical challenge

for Democrats, which is I sort of like to describe the difference between Republicans and Democrats as Republicans view political power as an end in of itself, and Democrats view political power as a means to an end, and the end for Democrats is good public policy. And so I think Democrats have made a mistake by not thinking strategically enough about how we preserve our political power, right? In ways that are completely consistent with our values. And I think statehood for DC, for certain in Puerto Rico, if the people of Puerto Rico choose is a perfect example, right?

That is, there's nothing that runs against our values in giving a quarter of a million people in DC the right to have legislative representation. But we haven't done it out of some sort of fear that it is dirty pool or they're going to attack us. And we should be more bold and more strategic and think more long-term in how we preserve our political power. Because ultimately, if we are in this to put in place the policies that we think will help people, we can only do that if we have political power for sustained periods of time. And so we have to think about political power and policy. We are swimming upstream in a lot of ways for two reasons. One is structural. The demographic trends, both with the Senate and Electoral College, over-represent white Americans and working-class

white Americans that are the base of the Republican Party primarily, which is why Joe Biden is going to win the popular vote. He's probably going to win it by a larger margin than Hillary Clinton, and we do not yet know if he will be president. And that is very concerning for the long-term democracy of the country. And the other thing is that we lost the 2010 elections. And in losing the 2010 elections, we gave the Republicans the opportunity to gerrymander the country and put in place voter suppression laws that would make it harder for us to win the election. And I think the best example of this is in Wisconsin. Donald Trump won Wisconsin in 2016, but he received fewer votes than Mitt Romney received in 2012 when Mitt Romney lost by seven. And that is for all, there are a lot

of reasons for that. Part of it's complacency, part of it is third party share, but part of it is also the voter suppression laws that were put in place in Wisconsin in the intervening years that made it harder for people to turn out. And so look to the election day. What do you think is the likelihood that Trump is successful in sowing a lot of doubt and highlights a few imperfections, which inevitably there will be in the voting process, and tries to contaminate the whole thing, null and void it, and it goes to some sort of state-based election, or I forget the amendment. What is the risk that this whole thing gets thrown up into sort of a, I don't know what even the term is that they're calling it, but what everyone's scared of, that it moves to the states?

I think that chance is pretty small. I think the chance is that Trump is able to take some set of irregularities or rumors of irregularities or just the fact that Democratic votes may be counted later because more Democrats are voting by mail and turn that into a question of legitimacy of the result to his plurality of supporters of the country. I think that is almost a certainty. And the impact of that is going to depend in part on how quickly the election can be called. I mean, there is, there are some scenarios where Joe Biden could be declared the winner

on election night, uh, Florida, Arizona, among other States count their ballot, their mail ballots when they receive them. Yep. And so like, we could very well know who won those States in election. I have Joe Biden has won both those States. There's a lot of reasons to presume that when it's all said and done, he will be the president. I think it's going to be very hard for Trump to undo the actual will of the voters. I think that is going to be, like the damage he has done to that has already happened in terms of the voter suppression laws that have been put in place, the question, you know, sort of raising concerns about mail ballots,

the playing around with the post office. But Trump is not capable of stealing the election. He's not capable very much. That's good to hear. Trump has never demonstrated the strategic discipline or long-term thinking capable of doing much. And I don't think... So a Trump coup, I worry about – when I think about this election, I worry about a close race where ballots are tossed out because of very confusing and complicated vote-by-mail laws like this issue around the naked envelope in Pennsylvania and signature match issues in North Carolina. I don't worry about Trump and Rudy Giuliani and a bunch of other yahoos in the White House pulling some strings and stealing the election. It's more about just we have a completely broken electoral system in this country that has been perverted for political reasons by the Republicans, but does not function great in a normal year. And here we're trying to do this in a pandemic.

And so those are the things that worry me more than sort of what Trump's going to do. Talk a little bit about – you co-host a podcast. You're obviously a new media kind of guy. Give us – what is your view of Facebook and Twitter having been in the center of politics and seeing the impact they have on our elections? I think both of the impact is deeply dangerous and problematic. And when you think about it in terms of scale, Twitter is a small problem. It's an annoying problem. It's certainly a very real problem for the people who face abuse on that platform.

But in terms of the macro political impact, I think is relatively limited. I think Facebook is a deeply dangerous situation that has had a tremendously dangerous impact on politics. It's having, as we speak, it is a platform that has pushed a tremendous amount of right-wing misinformation, of racially divisive, outrageous messaging, and has done it in some pretty pernicious ways. And I'm very, very, very concerned about the continuing impact that Facebook will have on American politics. I think it reached it. It was cute and fun and somewhat, I think, maybe even more of a positive than a negative when it first emerged. But since maybe about 2014,

it has become, I think, a very, very, very, very problematic part of American politics. And what about Dan Pfeiffer? Do you see yourself going back into public service? Not, I think, I thought I was going to give up politics. And I thought that that would be, I was going to leave the White House. I was going to go do something else and just always have this one period of my life. But what I've come to recognize is politics is, I can't escape it. It is something that I truly do love and I think is incredibly important. I find value in it. So whether I ever go back in a government again is a very open and perhaps unlikely question, but I think the decision has been made for me that win or lose this election,

I'm going to be involved in politics in as many ways as possible for the rest of time. Dan Pfeiffer is a co-host of Pod Save America, former senior advisor to President Obama, and the author of Yes, We Still Can and Untrumping America. He joins us from his home in Lafayette, California. Dan, stay safe. Thank you so much for having me. We'll be right back. What software do you use at work? The answer to that question is probably more complicated We'll be right back. So what is enterprise software anyway? What is productivity software? How will AI affect both? And how are these tools changing the way we use our computers to make stuff, communicate, and plan for the future?

In this three-part special series, Decoder is surveying the IT landscape presented by AWS. Check it out wherever is on your mind. If you'd like to submit a question, please email a voice recording to officehours at section4.com. Roll the first question. Hi, Scott. This is Arun from Vancouver, Canada. I work in the semiconductor space, and my question is about the future of hardware companies. Over the last few years, I've noticed software companies like Google, Microsoft, and Facebook, investing heavily in building hardware teams. Google and Apple have been working on customized processors for a few years now.

What do you think this does to traditionally hardware companies like Intel, AMD, and NVIDIA? Do you think they would see a decline as more companies are moving away from third-party vendors and relying on homegrown teams instead? Thanks, Saroon, and congratulations on living in Vancouver, one of the most beautiful cities in the world. So there is a Cold War breaking out, kind of World War III or Cold War II is probably a better analysis. I think Russia's our enemy. I think they would like to see us collapse.

China's our adversary, our competitor, but not our enemy, because just as you don't want your biggest customer to die, that would be bad for you, it would be bad. A really significant recession or depression in the US would be bad for China, as we're their biggest customer. So I think they want to compete with us, they want to beat us, but they don't have our worst interests at heart, if you will. And there is, in fact, a Cold War brewing. And it's largely, or loosely speaking, if I were to distill it down to something very basic, China has a bit of a monopoly or a lead in hardware and building shit, whether it's cell phone towers, stealing the IP from Siemens, putting corporate spies in Siemens, and then

sending the blueprints of a cell tower, and then massively leveraging this incredible supply chain and human capital and innovation, and they are innovative culture, to build that same cell phone tower for $800,000 versus 2 million. Pretty good value proposition. And then obviously the supply chain of Apple, 45% of Apple's revenue comes from the iPhone. And where is it produced? Where's the glass, the chipsets, and the sensors assembled? All in China. So China has sort of the hard as the gangster on hardware, but the US is still sort of the gangster around the brains, around the microchips. That's our advantage. So there appears to be a bit of a cold war. I don't know what the analogy would be that Russia's advantage was

propaganda or tanks and our advantage was intelligence. I don't know what it would be, but there appears to be the battle lines have been drawn, hardware versus chips. Other than that, I really don't know, have much insight into it. Apple announced that they were thinking about producing their own chips. There's definitely a chip war. I think what's more interesting, and this is sort of unrelated to your question, is that processing power has now outpaced our regulation or ability or instincts to catch up with it. Other than that, I don't have a lot of thought here or insight here. Arun, I need to learn more about this. Thank you for inspiring to get my act together around chips. But we have effectively, we've decided to go the software and the chip route. They've decided to go

the hardware route. We'll see what happens. We'll see what happens. Thanks for the question. Next question. Hey, Prof G, Greg here, former CU Buff and current CFA charter holder coming to you from my COVID hideout in Steamboat Springs. I am considering starting my own advisory firm, and as I turn 28 this week, the more fortunate members of my age cohort are beginning to amass savings, which I know they need fiduciary help investing. In the next few decades,

what do you see as the most promising business model for financial advice? Will personalized service have a place amongst the robos? And if so, will it be based on a fee for service, a fee on AUM, or something entirely different? Thanks, and I hope you and your family stay happy and healthy this upcoming holiday season. Greg, a nice, eloquent, generous message. Congratulations on living on what I believe is arguably maybe the second most beautiful state in the Union. I still think California, from the hills to the sea to the – what was it Jerry Dumpf used to say?

Anyways, in the 70s news broadcast. None of you know that. So, look, I think that advisory is going to be more important than ever. There will be, if you want to trade at home and you just want to trade through a platform that offers you good customer service, is a fiduciary for your money, is responsible, isn't a menace, basically every trading platform but Robinhood, then more power to you. As you move up the income scale, as you really start hopefully developing or gathering some assets, you need the benefit of arm's length advice. And obviously you need to be mindful of

fees and there's been huge fee compression, but I just think the tax system is so complex. There's so many options. There's so much estate planning. It just makes sense to establish a relationship with someone who's thoughtful to advise you, I think, around this stuff. I think that advice is important. So there will be a role for you. As it relates to starting your own business, the key to starting your own business isn't quitting a job. It isn't building infrastructure and spending money. The key to starting your own business is finding revenues. And that is, would you have, if you launched the business, call it January 1, two, three, or a half a dozen clients that would come to you and say, yeah, I would like your help managing

my money or helping me with wealth or estate planning. That's where you want to start. You don't want to rent an office. You don't want to hire anybody. Those are just expenses. You don't want expenses to start a business. Expenses don't make a business. Revenues do. So I think the first thing you want to do is sit down with a half a dozen potential clients and say, this is what I'm thinking. Ask for their advice because then they become invested in the business and they want to be a client. The other thing to think about is it's always romantic or it's easy to romanticize entrepreneurship. I do think that these platforms having a brand so much about financial advice is around trust, that having an institution behind you,

such that if you freak out and develop a meth habit and take off for the Cayman Islands with somebody's money, there's an institution, an organization behind you that quite frankly, they can sue. I think that's important. I think money management really is very much around trust. I started at Charles Schwab managing my own money. I like that. I'm stupid enough to think I can manage my own money. Then as my finances became more complicated and I started to aggregate assets, I went to more advisory driven. I went to Northern Trust just because I have a personal relationship with someone down here that got me great mortgages and things like that. And then I moved to Goldman because I found that their products were more, or their advice was a little bit more sophisticated. Also,

as a self-expressive benefit, I like telling people as I'm telling you right now that Goldman manages my money because it makes me feel important and successful such that people will find me more attractive, which is still very important to me at the age of whatever I am. Old, very old. And in the midst of a midlife crisis, that's the bad news. The good news is I believe I will grow out of this midlife crisis in 30 or 40 years. Anyway, I think an umbrella brand here, I think going to work for Credit Suisse, UBS, Edward Jones, whatever you want to call it. And these brokerages want hungry young people like you, and they're willing to set up. They're a pretty good deal. They take a certain percentage of your fees, they provide you with infrastructure,

and they provide you with credibility and scale. I actually think it's a pretty good trade. Anyway, to summarize, there is a big role and will be a need for financial advice as financial instruments and the tax code become more and more complex. Two, revenues and clients make a business, not expenses. Test it. See if you can come right out of the gates with five or six clients. And three, consider pairing up with a platform or even a group of people, a small group of people. There is agencies and the greatness of others. I do think you need a platform and cloud cover. I think it's very helpful to have that credibility. But best of luck to you. You sound smart. You have a nice soothing voice. I trust you. And that's kind of the key here. But best of luck to you. And thanks for the call. Greg from Steamboat Springs, Colorado. Next question. Hey, Scott. It's Craig from Los Angeles. I'm a super fan and I can't get enough of your content. So thanks for creating all of it. I'm actually enrolled in your strategy sprint right now. And it's been the best money that I've spent on on any sort of seminar. So here's your plug for that. Please mention it on your shows more often and I think it's something that you would describe as a collective delusion with yourself. It was just not a good idea, and I went into it out of sheer arrogance. So now that I'm trying to get back into entrepreneurship, I want to know what framework you use to analyze your product and your ideas when you launch your businesses. How do you analyze whether it's an incremental improvement or a 10x disruptor to the market? Correct from LA. Thanks. By the way, I grew up in LA. I grew up in Westwood, went to UCLA. And if I move back to the West Coast, I lived in LA, San Francisco, and New York. I think San Francisco is the most overrated city in America. I think it's basically a shitstorm dystopia. Most beautiful city in the nation, I'll give that. A culture that collides wokeness with hypocrisy, with venture capitalists who by the day wash out founders and then at night

pretend to save the whales, and democratic politics gone amok, sitting on almost infinite resources that manage to have homeless veterans defecating in the street. It's literally an ad for what happens when you have far left politics take over a city. It's just, anyways, I think San Francisco is a fucking disaster, but I love LA, In-N-Out Burger, Zuma Beach, the Hollywood Bowl. Oh my gosh, the dog is gonna, my next midlife crisis, I am so moving to the Hollywood Hills, joining the Soho house, getting a Porsche, developing a radical cocaine habit, and dating actresses. That is definitely what the dog has in store, but that's not why you called. That's not why you dialed in. Starting a business, how to analyze a business.

First off, I'm really going on a tangent here. You demonstrate something at your age that I didn't have. You demonstrate an attribute. You demonstrate a confidence I did not have. And that is men usually do not have the confidence to compliment other men. So first off, thank you for saying that about my course, our strategy sprint at section four, thank you. But that's not the point. The point is when I was your age, I thought saying something nice about another man, commending him, expressing admiration, being complimentary, that it was a currency. And that if I expressed affection or admiration for another man, it made me less admirable. I was very reticent to act on good emotions or good feelings.

And someone like you who has the confidence to do that will be more successful because you're not giving anything up. What you're doing is you're making other people like you because the fastest way to get someone to like you is to like them. And two, it demonstrates confidence in your part. So anyways, thank you for the kind words and your ability to express those kind words as a young male, which I did not have, will serve you well. So evaluating a startup, it depends on your industry. I'm a big fan of role models. Again, I always thought as a startup, as an entrepreneur, that I was just a fucking crazy genius that I could come up with my own ideas. And then I would just argue anyone to death that didn't agree with my ideas. And it

was like, I wanted to just persevere and prove everybody wrong, that my genius was genius. Well, okay, you need some of that. You need a little bit of crazy founder in you. But to not rely on other companies and to not look at other companies, the majority of shareholder wealth isn't created from being original.

It's not created from being an innovator. It's the second mouse gets the cheese. And the company, I finally got right. I mean, I'd had some wins, maybe even some big wins. I started Profit, a brand strategy firm. I'd like to think I've been some insight into business. I can articulate those ideas well. I'm good at establishing relationships with older men, which is the key to consulting back in the 90s, because basically I would develop kind of these father-son relationships with the men, which is the key to consulting back in the 90s, because basically, I would develop these father-son relationships with the CMO or the CEO of an important company and start doing their digital strategy. And we sold that company for $28 million, which was a lot of money at the time. But by the time I split it with my partner,

my other partner, my ex-wife, I didn't end up with as much as I'd hoped, given what I thought was a pretty big success. But where I really, really kind of hit it out of the park, at least for an entrepreneur such as myself, was with L2. And what I did at the very beginning was I said, okay, I want to look at private company transactions and find the tropes and find what were... Deloitte did this study where they said, okay, they looked at, they examined all the private company transactions of the last decade. And they said, okay, they examined all the private company transactions of the last decade. And they said, let's look at the tropes.

And what they mean by the tropes is as a multiple of revenues, what were the acquisition prices that were in the top decile where companies were getting five, eight, 10 times revenues instead of like a profit where I got 12 times EBITDA, which seemed like a great price at the time. But I thought, you know what? I'm jealous of my friends in SaaS. I want to get a crazy, quote unquote, irrational multiple for the next company I start. And they sussed out all the components of, if you will, the tropes, the companies that had received an irrational multiple. And in my industry, in my industry and kind of services, they found a few things. One, recurring revenues. And that was true of services, they found a few things. One, recurring revenues.

And that was true of services companies and technology companies. SaaS, for lack of a better term. Two, they owned a niche. They went narrow. And so I decided, okay, instead of just consulting and charging by transaction, I am going to have a recurring revenue membership business model. Two, I'm going to focus on luxury, a growing huge industry where there's very little intellectual academic rigor.

Three, they were international. Isn't that crazy? The companies at 10 million that were international had much greater value than companies that were 10 million all in the US. So I started a London office really, really early. Four, technology, technology at the core. So I started investing in scraping and software and scanning technologies that would develop these datasets. And five, IP. They had defensible IP.

So I started something called the Digital IQ Index and put trademarks around it and tried to promote it and constantly talked about it as if it was an asset similar to Intel Inside, similar to the BCG Star, Cash Cow, whatever they call it. I wanted to develop IP. And then ultimately, we sold the company for eight times revenues. But I think looking at the sector you're in, and then quite frankly, just having role models, find the most successful, find the tropes in the sector that you are planning to enter

and say, what were the common underlying features of the companies that got sold for a ridiculous multiple? And all these entrepreneurs who are already billionaires will say, oh, don't focus on the outcome. Don't focus on the money. Just do something you love. What bullshit? Anyone who tells you that money doesn't matter to them or they weren't focused on the money was obsessed with it. Obsessed with it. That's not to say you should just do something because you think there's money in it. You need to like it. You don't need to love it. Everyone says, follow your passion. Just don't hate it. If you like it and you're good at it and you can become great at it, whatever it is, as a function of being great at it, the accoutrements of being great at something

will make you passionate about whatever it is. But whatever sector you're thinking about starting a business in, find the most successful companies in that sector, reverse engineer the two or three or the five pillars, and then build those into the DNA of your startup. Thanks very much for your questions. Keep sending them in. Again, if you'd like to submit one, please email a voice recording to officehours at section4.com. Our producers are Caroline Shagrin and Drew Burrows. If you like what you heard, please follow, download, and subscribe. Thank you for listening. We will catch you next week with another episode of The Prof G Show

from Section 4 and the Westwood One Podcast Network.