The Prof G Pod with Scott Galloway - Breaking Up Big Tech

Episode Date: October 1, 2020

Zephyr Teachout, an attorney and associate professor of Law at Fordham University, joins Scott to discuss monopoly power and antitrust as it relates to the U.S. economy and her latest book, “Break 'Em Up: Recovering Our Freedom from Big Ag, Big Tech, and Big Money.” Follow Zephyr on Twitter, @ZephyrTeachout.  Scott opens with what we can learn from Trump’s tax returns and his thoughts on Palantir.  Office Hours: cannabis delivery services, keep an eye on the Fintech space, and diversifying your portfolio.  Learn more about your ad choices. Visit podcastchoices.com/adchoices

Episode 29. Celebrating episode 29 like we're leap year babies, Saturn orbits around the sun every 29 years. Why is Saturn so awesome? It's the rings that bring texture and personality. What is your texture and personality? Mine is that I like to wear dresses because I have more legs than a bucket of chicken. Let's KFC this bitch and ask the world to love us. Don't judge us. Go, go, go. Welcome to the 29th episode of the Prof G Show. In today's episode, we speak with Zephyr Teachout, an American attorney, author, and associate professor of law at Fordham University, where our president went. He doesn't talk a lot about Fordham,

went to Fordham for two years and then transferred to Wharton. And boy, are they excited that he's an alum there. Anyways, we discussed his state of play around monopoly power and antitrust as it relates to her latest book, Break Them Up, Recovering Our Freedom from Big Ag, Big Tech, and Big Money. Okay, what is going on? The New York Times dropped one of the deepest investigations into Trump's finances this week and found that he's paid just $750 in federal income taxes in 16 and 17. He also paid no income tax in 11 of the 18 years that the Times looked at his tax returns. How did this happen? The Times says by using the proceeds of his celebrity to purchase and prop up risky businesses,

then wielding their losses to avoid taxes. The investigation revealed that most of Trump's businesses reported losing millions, if not tens of millions of dollars year after year. Who would have thunk it that golf wouldn't be a great business? Within the next four years, Trump will need to pay more than $300 million in loans, or I should say pay back. I've heard the number's as high as half a billion. What's the learning here? Simple. Trump is one of the worst business people in history. And there's

a difference. There's tax avoidance. Anybody who makes over a hundred grand a year and any corporation engages in tax avoidance. That's your attempt to be as aggressive as possible and take advantage of a tax on the poor, and that is complexity. And that is the more complex our tax code becomes, then it's essentially a regressive tax because wealthy people in corporations, including GE, which has 400 people that do nothing but engage in massive tax avoidance, can figure out these Byzantine rules. They can navigate them like Magellan, which results in a lower tax rate. Some examples of this, the real estate industry is one of those massively tax-subsidized asset

classes in history. Think about this. First off, you can depreciate real estate. Now, if that seems weird, it's actually weirder than it sounds, because if you own $100 of the Apple stock, it might go up 10% a year. Actually, it's gone more up like 60% a year the last five years. But every year, as long as you own it, you can take 3% of that and depreciate it or expense it. That makes no sense. No other asset class lets you recognize an appreciation while depreciating it. Also, you get to roll it into other assets, essentially exchanges, which is like me selling Apple stock, but as long as I buy another stock, I don't incur a tax liability. And this all may seem like chump change, but over time, when interest compounds on interest

which compounds, you end up with a superior asset class. And what do you know? What do you know? The two wealthiest cohorts in America are entrepreneurs and real estate owners. Let's talk about entrepreneurs. And I'm an entrepreneur and I've absolutely engaged in this type of tax avoidance. If you start a company and you have shares in a company with less than 50 million in assets, as most startups do, and you hold onto those shares for longer than five years, you can sell shares. And the proceeds of those shares are tax-free, up to 10 million or 10 times the original investment. So if you're starting a company and you put 3 million bucks of your own money in, and over five years that company does well, you can write off or get the first 30

million in proceeds tax-free. Or if you put no money into the business, you can, in fact, take that first $10 million out tax-free. So think about that. Everyone working in the company, the majority of whom don't have the money to exercise their options, the majority of whom get the majority of their compensation from current income or salary, pay anywhere between, call it a minimum of 25%. If you live in New York, it doesn't take a lot of income before you get to almost 50%. But the founder, the founder who will do the best at the sale of the company gets to pay the lowest tax rate. Market dynamics trump individual performance.

And we have given massive tax subsidies to the real estate and the startup community. In addition, we have a dramatic need to decomplex our tax system. You could probably get the same amount of tax revenue if you went 0% on the first 50,000, 20% on 50 to 250, and then went 40% after. And it would be just a hell of a lot easier. Also, get rid of all the tax breaks. Capital gains, why on earth is capital gains treated as more honorable than the money that your sweat gains, why on earth is capital gains treated as more honorable than the money that your sweat makes? Why on earth would we give capital gains a favored tax

treatment? Oh, why? Because we need investment capital. No, we don't want to wash in investment capital. I've made the same point before. What else can we learn from Trump's tax returns? If you're applying to be a spy at the CIA, what are they going to ask you? They're going to ask you, who do you owe money to? Who are you sleeping with? And who else has leverage on you? Who could turn you into an unwitting asset? And it appears that Donald Trump, we can't even figure out who he owes money to. We know he owes $400 million to Deutsche Bank. Who's the largest shareholder in Deutsche Bank? The Chinese. We know he keeps getting payments from these banana republics and these strongman oligarchs,

including the Mr. Universe pageant in Russia, which by the way, he made $2.5 million on, but every other oligarch in Russia that paid for Mr. Universe lost money. And this is how Putin works. He says, okay, get into that guy via his pocketbook. And by the way, if you're an oligarch, you do what Putin tells you. And then he's going to owe us. He's going to feel obligated to carry our water. This is just so frightening. If we don't have what is a useful idiot, if we don't have what is an asset, we have someone, we have someone right now who, if they don't get reelected, runs the risk of being bankrupt or going to prison. So what would you say tonight? We're recording this on a Tuesday. What would you do to hold on to office?

Would you absolutely spit in the face of every norm of our democracy in our elections? Yeah, you would do that. And that is what the president is doing by trying to create a ton of uncertainty around what has been probably the most well-executed part of our government, and that is our elections. What is he doing? Trying to create constant insecurity and doubt such that maybe, maybe this ends up in such a state of disarray. This is just barreling towards something really, really ugly. We have a corrupt individual in the White House. We have a system that just doesn't seem to be working. We have tax policy that is so complex that it favors the rich, that it favors certain

sectors over another. We need massive tax reform, and we need to return to this notion that nobody is above the law. Tonight is going to be very, very interesting. In other news, in other news, Palantir filed for an IPO that's supposed to come public tomorrow on a direct listing. When I say tomorrow, Wednesday, the Wall Street Journal reported that the company is expected to be valued at nearly $22 billion.

Let's back up. Palantir is a firm attempting to position itself as the non-tech tech firm. And by the way, I think that makes sense. There are certain things I really like about Palantir. They have embraced the government as a client. I agree. The US government is the most noble client in the world. Even if you have a bad king every once in a while, what entity would you rather have as a client? First off, it has the deepest pockets in the world. And B, the reason that we have podcasts, the reason why we have Chipotle, the reason why we have In-N-Out Burger, the reason why we have Disneyland is because the US government has created an

ecosystem that has created the great experiment, the rule of law, incredible business ecosystems. Yeah, 100% Palantir. Go girl, work for the government. But that's where the good stuff ends. The CEO claims to be a socialist as he wants to distance himself from Trump, despite the fact that Palantir is hemorrhaging cash and the senior executives have taken tens of millions of dollars out of the company. So it's sort of a Norwegian kind of socialism if Norwegian management continued to overpay themselves while the firm hemorrhaged cash. One of the founders, Peter Thiel, is the static philosophy, the only individual who's really kind of stayed on the board of Facebook. If you were to try and find an impressive group of people that you wanted to raise your kids,

run your business, you'd be hard-pressed to find a better group of people than Ken Chenault, Reed Hastings, Susan Desmond Hellman, Erskine Bowles. These are the former chief of staff for Clinton, the CEOs of American Express and Netflix, the head of the Bill Gates Foundation. And what do they all have in common? They went on the board of Facebook, saw how this company was behaving, saw its approach and concern for the Commonwealth and said, fuck this, I am out of here. And they left early. But who stayed? Who is right there, my brother? Who is providing cloud cover is probably the number two person in terms of dictating the approach and the complexion of Facebook? Peter Thiel. Oh, and who is the co-founder and has decided to issue himself series or class F shares, meaning that he has control of Palantir, whose mission, whose stated mission, by the way,

is to be the operating system for government data. So do you think, okay, Facebook, whatever's going on there, I'd like those guys to run the surveillance apparatus for our government. Said no one ever, said no one ever. And here's the thing, all this shit I'm talking about, they want me to be talking about. They want me to say, what on earth is a libertarian doing starting a company whose biggest client is the government such that they can surveil on people. That makes no sense. This is the Rudy Giuliani of technology. And that is, you listen to this company for about a minute

and it starts contradicting itself and making absolutely no fucking sense and trying to muddy the water. Why? To distract you from one core premise. This is a shitty business. It took Facebook five years, Google three years, Netflix six years, and Amazon eight years to get to profitability. But at 17 years of age,

and having raised over $3 billion and spent it, the open quote startup, Palantir, has never made money. In 2019, Palantir lost $580 million in approximately 740 million revenues. They claim in their prospectus that their growth strategy is basically the government is so fucking idiotic that they will have absolutely continued unquenchable need for the smart people at Palantir, the un-tech tech firm. Why are they un-tech? Because they moved to Denver. Wow. In 2019, Palantir lost 78 cents on the dollar. Last year was probably the worst year for government in that we spent 33 cents more than we had on the dollar. So technically we lost 30 cents on the dollar, spent four and a half trillion dollars on three and a half trillion in tax revenue. Meanwhile, Palantir has lost 60 cents on the

dollar in 2019. Doesn't that mean, doesn't that mean that the government should be consulting to Palantir? But wait, it's 1999 or what feels like 1999. I remember in 99, everyone was waking up to the notion that this chicken shit wasn't chicken salad, it was chicken shit. And these companies were massively overvalued. So first off, they abandoned B2C companies and companies like Cybershop that was buying Furbies for 40 bucks and selling them for 30 wasn't worth a billion dollars and it crashed. But they said, wait, wait, I know we'll go to B2B. And they went to companies like ICG and these platforms and these exchanges.

And it feels that way now where any company attempts to position itself as a SaaS company or feels data-like or has some of that big techie kind of data software feel goes out at a crazy town valuation. Snowflake trading at 70 times revenues, a great company, a great company that is wildly overvalued. Palantir is one of those things. Look out below 130 clients, three of whom make up almost a third of their revenues. Terrible renewal rates. Supposedly the product doesn't work for many industries, but wait, but wait, you should buy their stock. This is another example of existing

shareholders and management flinging unicorn feces at tourists to the unicorn zoo. Watch out. This is not a canary in the coal mine. This is an ostrich in the coal mine. Palantir prediction. We record the show on a Tuesday. Palantir is supposed to be in trading tomorrow on a direct listing. In 12 months, this company's valuation gets cut in half. This thing is shavings of shit on a shit salad. It is all of the calories of Facebook scaled sociopathy with none of the good taste profits. Stay with us. We'll be right back after this break for our conversation with Zephyr Teachout. Support for this show comes from Constant Contact. You know what's not easy? Marketing. And when you're starting your small business, while you're so focused on the day-to-day, the personnel, and the finances, marketing is the last thing on your mind.

But if customers don't know about you, the rest of it doesn't really matter. Luckily, there's Constant Contact. Constant Contact's award-winning marketing platform can help your businesses stand out, stay top of mind, and see big results. Sell more, raise more, and build more genuine relationships with your audience through a suite of digital marketing tools made to fast-track your growth. With Constant Contact, you can get email marketing that helps you create and send the perfect email to every customer and create, promote and manage your events with ease all in one place.

Get all the automation, integration and reporting tools that get your marketing running seamlessly, all backed by Constant Contact's expert live customer support. Ready, set, grow. Go to ConstantContact.ca and start your free trial today. Go to ConstantContact.ca for your free trial. ConstantContact.ca Welcome back. Here's our conversation with Zephyr Teachout, an attorney, political activist, and antitrust and corruption expert. So professor, where does this podcast find you? I am in my apartment in East Harlem. Apartment in East Harlem. I like it.

That's a New Yorker. And you said you have a toddler. I do. He's almost two. So daycare has been amazing. It's an incredible invention. Two-year-old boys, that is not easy. So speaking of two-year-old boys, let's talk about the president.

Let's talk about monopoly power. Your basic premise or one of the things, and we're sort of siblings from another mother, if you will. Give us your kind of viewpoint on how monopoly power has been or is bad or a threat to our economy and our society. Yeah, I come at this. I like the siblings from another mother. I come at this from I like the siblings from another mother. I come at this

from the opposite position you do. I come at this as a democracy activist, who's written a lot about corruption. I was cited in dissent in Citizens United. And probably the bigger badge of honor is that Scalia fought with me in his concurrence in Citizens United. So I've been writing about corruption, money in politics, democracy. And about six or seven years ago, I'd been interested in anti-monopoly for a while, but I realized no matter how good our campaign finance laws are, if we're going to keep allowing these companies to merge and gain power and gain this choke point control, this is another form of government that's burrowing inside our democracy, and we've got to do something about it.

Yeah. I mean, just to pile on, there's more Amazon, full-time Amazon lobbyists than sitting U.S. senators. The PR department at Facebook is now bigger than the newsroom at the Washington Post. I mean, have we ever seen anything like this kind of scale of Washington being overrun? And where does it take us? I mean, I think you started with Trump. I've been sort of thinking of this as Scylla and Charybdis. Like we have these two just gross threats to democracy. And one is Trump and the other is these big corporate monopolies. And of course, big tech is leading the way in that arena. And it's a form of tyranny. And for most of American history up until 1980, people got that. They understood that antitrust was part of the democracy job. That yes, there's really important economic protections in

antitrust, especially in terms of making sure prices don't get too high and protecting suppliers. But it is also a form of private government. I mean, these companies are taxing. That's essentially one way to see what Amazon's doing with its sellers or Apple. They're regulating. We basically accepted that Zuckerberg is our privacy regulator, and we keep begging him to be a better privacy regulator, but that's crazy. They're spying on us. They're controlling the communications infrastructure. And these are all forms of government. And we're weirdly formal about government. It's like, if you're not the mayor, you're not government. But these are governmental forms here. And it seems as if everybody, to your point, is waiting or hoping that the better angels

will show up from tech companies. And I would argue that it's not even tech companies that need to be reformed, it's government. How have we lost the script here? When did the DOJ and the FTC just become so flaccid, if you will? Yeah. Well, there was, first of all, just a direct attack. If you go back and read what's happening in the late 70s and with Reagan and his California wrecking crew, they didn't secretly bring in an attack on antitrust. They made attacking antitrust really the center of their agenda, whether you're talking about Mies or Baxter. And so Reagan came in and he did a few big things. One is he appointed a lot of judges who took the heart out of antitrust laws, including Justice Scalia, who famously during his nomination hearings laughed about antitrust.

Somebody asked him what it was and he said, I never understood it in law school. And later it turned out I was right because it doesn't make any sense anyway. And then went on to be a sort of major opponent of the old understandings of antitrust laws. He also appointed enforcers who didn't believe in enforcing. And you see this radical drop in enforcement under Reagan's appointees. And third, they brought in a different vision of what antitrust law was about. And it's consumer prices, consumer prices, consumer prices. Right. Consumer harm. Yeah. Yeah. And actually, since then, in recent years, economists like John Cuoco have shown that this actually hasn't been that great for consumer prices

either, that actually the 40-year merger wave has actually hurt consumer prices. But the main thing is we shouldn't just be talking about consumer prices. We should be talking about the oxygenation of the economy, as you like to say, which is, I love that way of describing it. We should be talking about suppliers and what this does to small businesses, which are, you know, it's harder to do a startup in the U.S. than in Europe. And then, but the flaccidness is a really also important second stage. Because you first come in with this, you know, going at the jugular. And then you have, well, you might think, well, Democrats will bring it back.

Clinton or maybe Bush, you Bush, or maybe Obama. And then you see this sort of deep passivity, flaccidity, fear of losing cases, which I don't know if you've read Jesse Eisinger's great, The Chickenshit Club. So it's really been 40 years. And now we look around and it's like, wait, we've somehow allowed our infrastructure to be governed by this guy, Bezos, who both controls the platform and the warehouses and the cloud. How did we get here? And I think the idea of appealing to better natures is, I mean, first of all, you have to be a monarchist, which I'm not. You might get 10 years of a good CEO. But second, it just ignores human nature,

like what we know about power. And this is a core democratic idea. Yeah. And another point you've made more articulately than I have is this notion that the consumer, we're waiting on a consumer-led revolution that we'll get. We as consumers will vote with our dollars and decide this company is too powerful and I don't want a drone roaming around my house, so I'm going to use more products from Walmart than from Amazon and they'll get the message. And generally what economic history shows us is that consumers want that little black dress from 999. And while they claim to care about the supply chain, and some do, that they will, at the end of the day, kind of ethical behavior is a tiebreaker, but not much else. That unless the government weighs in, the corporations that start behaving ethically,

it almost ends up being a tax that makes them less competitive. And if you were advising the Biden campaign, as far as I know you are, what are sort of 24-month plan to restore some sense of balance, some sense of equivalence around government being a countervailing force instead of a co-conspirator? Yeah. I mean, I think Biden is going to have to address this because we are not looking at a thriving economy right now. And although it's not the Great Depression, I would say, hey, let's look at what FDR tried first and what he tried second. And FDR first really tried a top-down approach and then came to realize if you need to revive an economy, you need, I'm going to use your term again, oxygenation. You need a decentralized economy. And Biden has a lot of power here. And I mean, right now, just to talk about the tragedy before we talk about the beautiful future, I mean, we are talking about just wholesale destruction of communities, the mass collapse

of small businesses. Some people are talking about 40% to 50% of Black-owned businesses falling apart, 90% of restaurants not being able to afford rent. I mean, this is just devastating stuff. So what I would do is say, OK, we're going to need some big national programs. But in those big national programs, make sure you do them in a decentralized way. Like FDR did electricity, these localized co-ops. And bring in a strong Federal Trade Commission, a strong head of the DOJ that is no longer going to sit around with this revolving door and let these companies run roughshod over us. I mean, you saw the hearing, which was an amazing hearing.

It was embarrassing for the agencies that Congress was uncovering what the FTC should have uncovered nine years ago with Facebook and Instagram. These agencies have not been fighting. They've not been digging. Key thing they can do is issue new rulemaking authority, especially around mergers and particular kinds of anti-competitive behavior. And that would be a really, really big deal. I also think we have to have Congress involved. I don't think we can just rely on the agencies, but Biden plays a really big role here. I mean, the executive branch really matters. And I've done polling with Data for Progress. And what you see is politicians aren't talking about this, but people are talking about this.

People really want a president who's coming in, willing to take on big tech, big cable, big ag, big pharma. They get it that powerlessness actually hurts them in their daily lives. Yeah. It's strange that it hasn't been. I was disappointed it wasn't a bigger issue during the campaign for president on the Democratic side, because we'd like to think, or CNBC would have you believe, that we live in an innovation economy. And the reality is there were twice as many new businesses being formed in the Carter administration than there are now.

And the fastest growing parts of our economy are controlled by monopolies and duopolies. Talk about the notion. I'm a big fan of breaking up these guys. I think the Amazon, Apple, Facebook, and Google should be 11 companies. The shareholders would do well. The tax base would do well. The startup community would do well. The only stakeholder that loses is the CEO who sits on dual class shareholder stock, who would no longer be on the iron therm of Westeros, just one of the nine realms. Unfortunately, that's the individual who gets to make the decision. But my go-to is breaking up. Can you speak to whether or not you think that's a good idea and who does it and how we would proceed? Yes. I think it's a necessary idea.

I mean, we're talking about this sort of glut of the worst kind of bureaucratic power that is leading to inequality and depressing innovation, as you say. So I think that basically, if you have a strong FTC, these companies would end up breaking themselves up in a lot of ways, which is what you've seen in the past when you have strong enforcement. The DOJ and FTC chasing IBM around really helped lead to more innovation, or the Microsoft case didn't go as far as it should have, and we should have stronger laws. But the fact of strong enforcers actually created the moment for much more innovation, more breaking up. It burned Google. It burned Google, literally. Absolutely. So the federal government is really key here. Now, I also would like to see

Warren's structural separation legislation, so not just using rulemaking. Because I guess one of the things I think that's happened, Scott, is that we've gotten used to the idea that this isn't a public matter. This is like those economists over there will solve that. And I think it's really important to re-politicize antitrust. I don't mean politicize the cases, like all the mess we're dealing with Trump. I mean, make it so it's something you don't go to Chuck Schumer and say, hey, I want to talk about the minimum wage only. You say, hey, Chuck, what are you doing about Amazon? And basically hold our lawmakers accountable. Because when it's just agency action, I think people feel really intimidated, honestly. Like, oh, I don't know what a market share is.

I like Amazon. Don't break them up. Yeah. Yeah. But with Amazon and one of our jobs, I mean, our collective jobs is to let people know, you know what, you can still have same day delivery and it might even come quicker once we break these companies up. Who are the warriors here? I think so. I'll start. Senator Warren is kind of the only one I can identify. I think Representative Cicilline ran the best subcommittee hearing. Wasn't it great?

I thought it was great. It was substance. It was real substantive. I remember I go into these things with my arms crossed and rolling my eyes. And then I thought, wow, they have done their homework. And I thought it was great. I would almost use the word inspiring. I mean, the Bezos confession on fulfillment by Amazon was a big deal, I thought. That's part of our algorithm. This is what sellers will tell you is I got to use the ancillary service. Otherwise, I do poorly. But he basically admitted it.

It was amazing. Do you think – is there – if you look at Amazon – you know, I focus on Amazon, Apple, Facebook, and Google. And you were right to bring up the concentration of power to an unhealthy standpoint that is bad for the Commonwealth, bad for the economy. It's obviously across big food, big pharma. But when we just talk about big tech, do you see any one being much more dangerous than the other? Or are they kind of all sort of equivalent threats? If they said, all right, professor, we can go after one or two of them, but not the other two. Would you pick one or two over the others? I mean, if you look at Facebook is front of mind right now because of the way it's running roughshod over our democracy with the elections. Amazon is where my focus has

tended to be. But I often think like, I got to go back to Google again, because Google is this kind of sneaky, unbelievably dangerous substructure. And I mean, Google has no business owning Google flights. Google has no business owning Google shopping. And you're right about Warren, but I do want to give Klobuchar credit. I mean, it's- Amy. Yes. Senator Klobuchar. Really? Yeah. I mean, here's where our politics are interestingly crossing paths, where I am much more of a progressive dem, and I'm closer to both Warren and Sanders had strong anti-monopoly, very strong anti-monopoly platforms. Warren was great on tech. That was such an exciting moment.

But Klobuchar has been great on antitrust more broadly and the way it's intersected with tech. First of all, she's been great on ag and just really leading some of the legislation. And then on big tech and news, because there's just a bizarre passivity where news organizations will fight for sunshine laws, but they'll basically allow themselves to be robbed and beaten to death by Google and Facebook. And an organization I work with, Open Markets and Klobuchar, did an event a few years ago where she's like, it's not like there's a natural state of affairs that we need to do some pruning over. We get to choose what kind of economy we live in. And we have to sort of denaturalize tech. And I guess what I'd say to your comment about tech and the rest of the economy,

one of the reasons I talk about farming and other areas is I think people get intimidated around tech. And I want to let people know this is a feudal system. You can understand it. They'll wave their hands. Yes, algorithms are a problem. I don't like targeted ads. We can talk about that. Certainly not for infrastructure. But this isn't beyond your capacity to understand feudalism. And when you see feudalism, you should say, yeah, that doesn't really fit with my idea of America. Right. Right. Talk about the role that antitrust plays in racial injustice. Yeah. I think we tend to think about antitrust in racially neutral terms. But again, I come from studying democracy. And what are the techniques that Southern white nationalists used to suppress Black voters' power in the South. Well, the oldest technique in the book was merger.

You merge congressional districts together, and then that congressional district or that city council district that might have gone to a Black representative is now merged with other districts and controlled by a white representative. You see the same dynamic happening. And I'm not saying the same purpose, but the same effect happening in mergers, in the sort of 40-year merger wave and black businesses. So we've seen the total destruction of black-owned funeral homes, insurance companies, newspapers. And these were all key locuses of political power. So right now we're in a Black Lives Matter movement, but without the same number and degree of decentralized locally owned Black businesses that can provide local support. I mean,

you want to go to the SCI, the conglomerate funeral home, and ask them for support in civil rights, they're going to say, no way. We give half to Republicans and half to Democrats, and we're not getting involved in anything. So it's just another example of the way in which we have a, it's just a bad understanding of the world to have this false artificial separation between our understanding of the democracy to have this false artificial separation between our understanding of the democracy and the economy. Yeah, I think of it as, I mean, I always go to World War II, and something that our colleague, Professor Timothy Wu talks about is that if you look at Germany in kind of the 20s and 30s, it was playing out.

I mean, it definitely echoes the notion that private companies begin to become the government. And it leads to really bad places. And then Facebook with the Libra coin. And then, I mean, it just, it doesn't, it's strange that we don't in America, we have this weird exceptionalism that I think has made us more vulnerable to coronavirus, but also we tend to think, oh, that could never happen here. And it absolutely could. It feels as if we're not that far from it. And it's just strange that we don't seem to be as alarmed as we might be when there's a $5 billion fine against Facebook,

which is 11 weeks of cash flow. It's just, well, aren't we just encouraging them to break the law? So let me ask you this. Until there, one of the things that people say is kind of the moral hazard of no one really going to jail from the economic crisis of 2008. Do you think any of this really gets solved, not only without antitrust, but quite frankly, with criminal charges and a perp walk across big tech? I don't mind the perp walk. And I think it's helpful to remember that the Sherman Act is a criminal law just because it's like, oh, right, that's like highway robbery, right? That's standing in the narrowest passage and forcing everybody to pay 30%. It's sort of helpful to remember that way of thinking, but it's got to be structural. I mean,

it's got to be structural. This is the new business model. Everybody's doing it. They figured out, you know, like this is the game. Okay. So now we've got our delivery apps fighting to see, okay, who can control the restaurant industry? And then maybe it'll be Uber. And then maybe we'll try to see a merger there. Everybody's trying to create the same choke point, extract value, control, experiment, terrify. Everybody's doing the same thing. We've just got to stop the business model. It's not a healthy business model. It doesn't lead to innovation. And there's recent research that shows that it may cost as much as $14,000 a year. This is Simcha Barchai, the economist research, for every worker to have the concentration we do in our economy. I mean, that's a lot of money. You want to talk about inequality. There's a lot of talk about

taxes. And believe me, I believe in a very aggressive taxation regime. But taxation is already after the fact. We should have our structures right so people can't extract value and make sure that the people who are creating value get a chunk of that instead of only focusing on after the fact taxation. Yeah. And we tend to talk about things always, we wanted to distill it down to a number, specifically the amount of dollars. And I think about the consumer harm test. It's like, what's the tax on parents when your teenage daughter is depressed because these companies aren't prohibited or really have no incentive to not addict our teens? What's the cost to our Commonwealth when a platform can be weaponized by the GRU? I mean, it seems to me we're paying exceptional costs. So you have run for office. You ran for attorney general. You've run for Congress. Describe the... I love when academics run for office. I think that we need more of it. And I think we need passionate, fearless people

or more of them to run for office. Talk about running for office and are you planning to do it again? Well, I have run for, the first time I ran was with Tim Wu. He was my, running as Lieutenant Governor and I was running for Governor in New York. Yep. We saw a poll that showed that about 8% of people knew who I was and 18% didn't like me. You know, it was that kind of- That's impressive. That's impressive.

And we ended up getting 34% and really making a dent. And actually, antitrust was a big part of what we were running on. We went to places where people paid their cable bills and ripped them up because this is back in 2014, but bad and anti-corruption were at the core. Running for office the other two times, there was a much closer chance. And it is absolutely one of the hardest things you can imagine doing. As my mother said to me, how will you know the answers to all the questions? And you don't. And academics are used to knowing the answers to all the questions and you don't. And you have to live with that. But it just fills your heart. I mean, like I think of the

night I'm at a, you know, getting to introduce myself to people in Queens right after a local comedian is doing his second set ever. And then a high school winner of the band competition is playing her instrument. And it's just human and amazing and funny and beautiful. And people are so smart. That's the thing that comes across is people have big hearts and they're smart and they're creative. And it's, I have a lot of impatience for elites that look down on our, on our amazing, uh, sort of the amazing people in this country and state. And I loved it. And I am, look, I, I would rather, I'd rather be a G, um, but I'd still come on your show. But I also, you know, if you care about something enough, I'm really glad that we pushed a lot of the conversation on antitrust.

I'm glad that we're out there fighting for less corruption in New York government and we're getting somewhere. And I think one of the things that we've seen over the last seven or eight years is that it used to be that there was this sense of like, politics is dirty and gross. And yeah, you know, there's a lot of dirtiness in politics. Every time I meet with elected officials, I feel better about America. I think it's easy to be cynical, but I think there's a lot of very impressive people. So what if you were going to run again? Well, any news? Are you planning to run again? Why wouldn't you run for mayor of New York? No, I'm not planning on running again. I am very happy to be. I'm not saying I'm done forever, but I'm done for a while.

Yeah. And I really, what I'm focused on is there's a new group of people coming up in New York with new ideas. You testified the other day at the Generis. In New York State, there's new antitrust legislation. I mean, talk about energy. It's really exciting because as much as I want Biden-Harris to do things, passivity is the worst thing that can happen. And it's really exciting to see people more involved in politics. And Scott, you are so right. The more you get involved in politics, the less depressed you get. So you, at least from an, um, an outside of some point, it seems like you're doing something you really enjoy. You make a good living. You get to do a bunch of interesting things. What advice would you give to your 25 year old self? I'll give you one piece of advice I care about enormously is keep art in your life somewhere,

like somewhere in your life somewhere, like somewhere in your life, have art. Uh, for me, um, I don't, I guess I don't usually talk about this, but I paint and, um, I do love to do community theater and I'm, you know, out there not need in all, but I love it. I love having art in my life. And I feel like when you have art in your life, whether it's you're singing in a choir or painting, it just keeps that part, it gives you access to the sublime and to joy in a way that I think, especially in today's tech world, can be really hard. Zephyr Teachout is a Renaissance woman and in addition is an American attorney, author, and associate professor of law at Fordham University. Her latest book, Break Them Up, Recovering Our Freedom from Big Ag, Big Tech, and Big Money is out now. She joins us from her home

in East Harlem, Manhattan. Professor Teachout, thanks for your time and let's keep fighting the good fight. Absolutely. It's a joy to be on the show. We'll be right back. Hey, it's Scott Galloway, and on our podcast, Pivot, we are bringing you a special series about the basics of artificial intelligence. We're answering all your questions. What should you use it for? What tools are right for you?

And what privacy issues should you ultimately watch out for? And to help us out, we are joined by Kylie Robeson, the senior AI reporter for The Verge, to give you a primer on how to integrate AI into your life. So, tune into AI Basics, How and When to Use AI, a special series from Pivot sponsored by AWS, wherever you get your podcasts. Support for this show comes from Indeed.

If you need to hire, you may need Indeed. Indeed is a matching and hiring platform with over 350 million global monthly visitors, according to Indeed data. And a matching engine that helps you find quality candidates fast. Listeners of this show can get a $75 sponsored job credit to get your jobs more visibility at Indeed.com slash podcast. Just go to Indeed.com slash podcast right now and say you heard about Indeed on this podcast. Indeed.com slash podcast. Terms and conditions apply. Need to hire?

You need Indeed. Welcome back. It's time for Office Hours. As a reminder, you can ask us anything. If you'd like to submit a question, please email a voice recording to officehours at section4.com. I don't read the questions such that you'll get that sense of authenticity, that buzz, that electricity. So if my responses seem lame, fine, but it's your lame and it's real. Question number one.

Hey, Scott. It's Blake from Scottsdale, Arizona. My question is a follow-up to your interview with Professor Arun Sundararajan, a.k.a. the discussion surrounding platform-based businesses. It's no secret that Arizona is one of the key swing states in this year's election. I've been a zony since the 90s and have seen my state shift from red to purple. One of the more noticeable changes this November will be Prop 207 which is a ballot initiative for the legalization of recreational marijuana. Arizona is neighbors to California, which, as you discussed, Professor Sundararajan, has been catching a lot of heat for AB5 legislation

and the future for gig workers. If you were advising DARA, would it be the gangster move for Uber to expand the platform towards cannabis, specifically a copycat of the pot delivery service EASE? Using EASE as a case study, the drivers are often salaried employees through the dispensaries, aka these workers have protections other gay drivers do not. As cannabis becomes more mainstream, I'd like to know your thoughts on marrying the two platforms. Thanks. Blake, thanks for that. Zony. I've never heard that term. True story, my dad's third wife, and he moved to Paradise Valley, and I used to spend holidays in the summer in Arizona. I absolutely love it there. Arizona's the kind of place I could live. My favorite topography, my favorite ecosystem, the desert, beautiful

sunsets. Anyways, go Arizona. And I used to go down to ASU and U of A games for the Bruins. Anyways, a lot of love, a lot of love for the zonies. Yeah. Look, the green wave is here. And that is, if you look at how many derivative products, whether it's CBD, I mean, it's probably the whole marijuana industrial complex has probably gotten overheated, but there's just no going back. The number of people, baby boomers on down who smoke pot and find that it is less damaging to their life and their health than alcohol with some of the good stuff, specifically forgetting everything else. I don't know if Uber needs to embrace, do the kind of full embrace of weed. I worry that this probably ends up being they come in and take these guys out and we have more consolidation, if you will. I love the fact

that the company you brought up has their employees be salaried as opposed to what Uber does and says, basically, if you're not working, we're going to clock you out. So yeah, good for ease. The green wave is here. I'm not sure if I were on the board of Uber, I would tell them to wrap their arms around it. Maybe, maybe it gets younger voters. Maybe that makes people feel more goodwill towards them. But my prediction would be, and it's not an aspirational one, that ease, if it carves out a nice niche in this and has any sort of technology, they get acquired. And if they don't, Uber just flips on a switch and says, hey, we'll deliver your ganja. True story. When I started working at Morgan Stanley, I was drug tested. And the results, they came back and said, we found some

urine in your ganja. That is good marijuana humor. Thanks for the question. Next question. Hi, Professor. My name is Shreya, and I'm a data scientist at a financial services firm in Chicago. In the past, you have said that fintech is a field ripe with innovation because of its lack of control by companies that exhibit anti-competitive behavior. In your opinion, what are the most exciting developments in fintech, and what are some companies to look out for? Conversely, is there anything that could stop the ball from rolling? Thanks, big fan. Thanks very much, Freya. Great question. So I love FinTech and I'm investing in it. And I'll tell you about the two companies I've invested in. But essentially there's a lesson here and that is FinTech or finance, even despite the fact

there are seven players that control 70 or 80% of the commercial and consumer banking business. It's still seven as opposed to two in digital marketing or one in e-commerce or, I don't know, two companies in operating systems for phones. It's not a monopoly or duopoly. So seven companies is actually a fairly healthy ecosystem, even though some people, including our guest, Professor Tichat would say it's still too concentrated. But if you look at fintech, it has a massive amount of startups and a lot of funding. Why? Because it's considered a diverse ecosystem and there's a lot of opportunity. And I think when you think about COVID going cashless, it strikes me that this is a fantastic field to be in. And it's a field that I've identified that personally, I want to be an investor in. So I'm an investor in two companies. I'm an investor in Lemonade, which is insured

tech, although I have sold down most of my holdings because it's skyrocketed after its IPO, which is essentially trying to disrupt the traditional market for renter's insurance. And it does it using AI and attempts to do a better job of assessing someone's actuarial risk. Also does a decent job, has sort of a CSR component where it says any unused premiums allocated for claims we donated to the charity of your choice. And if you're seen as a disruptor in something like insurance, which is such a huge business, you get what I would call an irrational valuation. And I do think that Lemonade's valuation is irrational, if you will, but as long as they can continue to grow and show that kind of vision and incorporate AI and do a great job

storytelling, and I think the CEO is a real visionary there, they will continue to have access to that cheap capital and be able to pull the future forward. But again, I've sold down most of my stake. The other one I'm just invested in or invested in about a year ago is a private company called Better.com that is using technology to try and make the mortgage business, which is one of the largest financial businesses in the world and one of the largest asset classes, residential mortgages, more efficient. And because of 2008 regulation, a lot of big mortgage providers got out of the business. And the CEO at this company has done a fantastic job leveraging technology to build really efficient crawlers that go out and look

at every source of capital, consolidate it really quickly, find a way to get the loan approved in a thoughtful, measured, compliant way, and get you a message back on whether or not you qualify. And in general, across conforming loans, get you just a cheaper price on your mortgage. And this company is growing like crazy. So Lemonade and Better.com I'm an investor in. I think it's a fantastic field. According to one report by Adroit Market Research, the global fintech market size is expected to reach $460 billion by 2025. Stripe and online payment processing for internet businesses is valued at $36 billion. PayPal's market cap, think about PayPal spun from eBay, is now $226 billion. My

guess is that's about 10 times what dad is worth, eBay. It's like Dayton Hudson. You won't remember them. You're too young, but they were at the parent company of Target. And then the kid grew up to be much bigger. Anyways, I think it's a fantastic business, Shreya. I think it's a great place to make your career. And I'm voting with my feet in my wallet and investing big in fintech. Next question. Greetings, Prof. Spencer here from Kansas City. At the beginning of July, I opened an eight-room guest house, somewhat of a hybrid between a boutique hotel and a collection of short-term rentals. Probably the worst time in history to open a travel-related business, but it's proving to be somewhat pandemic-proof. I have all the rooms listed on Airbnb, which takes a small fortune,

but they reliably put heads in beds. With Airbnb's IPO on the horizon, I'm tempted to buy in. My question is whether I'd be putting too many eggs in one basket or if I should take advantage of the opportunity to be part of a company that I'm already feeding. Looking forward to hearing what you have to say. Thanks. Spencer from Kansas City, thank you and congratulations. I love hearing about these little businesses and you sound like a young man opening an eight-room guest house. That's just awesome. And by the way, you are the strength. You are the pillar of our economy. Two-thirds of job creation is from small businesses. And as I referenced earlier in the program, entrepreneurship, America loves entrepreneurship, including its tax code. So anyway, it sounds like an awesome business. And I think it's great that you're doing what you're doing. In terms of diversification, yeah, finance theory would tell you that you have a lot of eggs in the hospitality basket and you should probably

think about diversifying. At the same time, your need for diversification is, I don't want to say lower, but not quite as urgent if you're in your 20s and 30s than if you're in your 50s or 60s. When you're in your 50s and 60s, hopefully you've put a little cabbage away and you're not looking for outsized returns. You're just looking not to get poor because you don't have the time to make it back. And one of the great insurance policies is diversification. So if you feel like you have real insight into this business, and all of this has to be measured against valuation, right? At some point, Airbnb is too expensive. And at some point, it is too cheap to either own or not own. So I would look at what it comes out at, what it trades at.

And then also, if you feel you have real insight into this company, and if you think it's doing exceptionally well, and that the market doesn't perceive how strong it is, yeah, it might be a decent long-term hold. But your ability to diversify or your need to diversify is a function of how much money you're making and where you are in your investment life cycle. And you sound like a young man, so maybe split the baby, maybe put a little money in Airbnb because you think it's, you've seen firsthand how powerful it is, but ensure that if the hospitality sector continues to get kicked in the nuts repeatedly and Airbnb doesn't live up to its expectations because it's facing headwinds, that you are not in a position where you really, really hate your life.

I know that's sort of a mealy mouth answer. So I would say dip your toe into Airbnb. But like you said, you're already pretty invested. And what an awesome business, Spencer from Kansas City. Thanks for the question. Keep sending in your questions. Again, if you'd like to submit one, please email a voice recording to officehours at section4.com. Algebra of happiness. I am having difficulty connecting with my nine-year-old, or I should

say I've had no difficulty connecting with my 13-year-old. He and I like the same things. He's a pleaser. And our relationship is what I'd hoped it would be. It was something out of a kind of a Hallmark movie. And my nine-year-old is not nearly as impressed with me. I have a tendency to weigh in too heavy. I try to be patient with him and then I just lose my shit and have these outsized reactions. But anyways, anyways, you're always looking for moments of engagement. And that is, and my agent, Jim Levine, said this, that the key to being a good dad, or one of the keys, is to try to find and identify moments of engagement and really run through those or run to them or lean into them. And what I have found with my youngest is a moment of engagement that is one of the few places I found that type of engagement with my own dad, and that is breaking the law or specifically minor

infractions of the law. When I was a kid, my father and I didn't really say a lot to each other. My dad was married four times, moved to Ohio, which I loosely interpreted as abandoning me. But anyways, we used to sneak on to some of Ohio's best golf courses at dusk, and he would point to a bush, and like a bird dog, I would dive into the bush, and I would only exit the bush or emerge from the bush, either having found six balls or seen a snake. And then I'd lay them all out and he would point out a good one, a Titleist golf ball, which by the way, it costs 12 cents to make, but retailed for $2. We had Bitcoin during the Carter administration. It was called Titleist. And he would see the balls and then he would look at me

and he would mess up my hair with his hand. And that was literally the only expression of affection that I ever received from my father, but it felt wonderful. And he did it a lot. We would oftentimes, not a lot, but oftentimes he would look to me when we were in the car and his Gran Torino accelerating onto the artery of the 405 freeway. And he would look at me after we just dined at ship's diner. And this stands out to me. I think it probably happened once or twice. So I don't want to say this happened a lot, but it did happen. And he would say to me in his thick Scottish accent, you know, did you pay? And I'd look at him as a nine-year-old would do and say no.

And he'd say, oh, you wee scunner. And my dad never really dined and ditched, but he would forget to pay, which I guess is like dining and ditching. And he didn't do it a lot, but he did do it. And I know that sounds awful to say, but there was moments of crime, if you will, or mischief that made us, made our relationship feel singular or made us feel closer. And I've tried to do that with my youngest. Now, granted, it's not dining and ditching, which I would quite frankly just never do as I was a waiter and a box boy and a dishwasher

and a bar back. But I have a stash of Coca-Cola and when his mom is gone, we'll break it out. And according to his older brother, who is a total hall monitor and a total, I don't know what the term is, he's definitely going to grow up to probably be an IRS official, will immediately remind us that the Atlanta champagne supposedly gives you inflammation and wants nothing to do with it. The most recent attempt at criminality didn't go well. We were having dinner at Hibachi together, all of us, me and my two boys. And we jumped in the car and my youngest said from the back seat, wait, there's a baby seat here, a child seat. And I recognized they had given us the same model car, but someone else's. And I said, there's a baby seat here, a child seat. And I recognized they had given us the same model car,

but someone else's. And I said, it's our car now. And I threw it into drive and said, where do you want to go? And my youngest immediately thought, wow, this is fun and yelled out Orlando. But as younger brothers do, he looked forward to see or register the look of emotion on his older brother's face. And that emotion was terror. And my oldest said, dad, you're going to get us in trouble and seemed really upset. So I had gone from in a moment of mischief from being fun dad to scary dad, which is a terrible feeling for a father. So this car boosting crew known as my sons decided to return the car. And we went back and I thought maybe I could speak Scottish

like my father and get out of this. Whenever my father got into trouble, he would literally, when the park ranger would pull up to us and figure out that we weren't members of the country club, my dad would break into this Glaswegian accent that was so hard to understand, yet so compelling. And he's been able to dance between the raindrops, if you will. I did in fact inherit though, that gift or at least that knowledge that I want to try and establish a relationship or moments of engagement around mischief with my youngest. And the question is, why? Why would you want to do that? Why would it be important? And I think it's because like most dads, you want your kids, you want your kids

to know you were there for them and they will, right? You put in the time, you log the time, they'll know that. But what you really want, what you really hope for is that they miss you terribly, that they view and think of the relationship as having been singular, that your mannerisms, your smell, your laugh, your approach to life was like no other. So yeah, you want them to need you, you want them to understand you, but I desperately want them to miss me. 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 Prop G Show from Section 4 and the Westwood One Podcast Network. So does binge watching Cobra Kai define or qualify as embracing art?

Sort of there, sort of there. Well, it depends on like the attitude you bring to it. If you're sort of swaggering in, you're setting it up, you're making a moment out of it. There you go. Right? Absolutely. It's all about the ceremony. I like it.

I'm in.