The Prof G Pod with Scott Galloway - How the Metaverse Might Actually Work — with Matthew Ball

Episode Date: July 28, 2022

Matthew Ball, a VC and author of “The Metaverse,” joins to discuss the winners and losers of the Metaverse, as well as some practical uses for the technology, such as in travel and defense. He previously served as the global head of strategy for Amazon Studios, so we also get his thoughts on streaming and potential acquisitions in that space. Follow Matthew on Twitter, @ballmatthew. Scott opens with his thoughts on Amazon and the healthcare industry. Algebra of Happiness: the last five minutes. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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That's why you come here. Go, go, go! Welcome to the 181st episode of the Prop G Pod. In today's episode, we speak with Matthew Ball, the author of a new book called The Metaverse and How It Will Revolutionize Everything. He's also the managing director of Appelian Co., a holding company that provides venture advising and angel investments. We discuss with Matthew the winners and losers of the metaverse, as well as some practical uses for the technology, such as in travel and defense. He essentially presents the first case for the metaverse. It actually makes some sense to me. Maybe it's not a total head fake.

Anyways, we also discussed the state of play in streaming and potential acquisitions in that space, as well as what he learned spending several years as a firefighter in Canada. That's a good rep. Hello, sexy. What do you do? I have a beard. I'm now in venture capital, but I used to fight fires.

That is such a rap. I bet it's bullshit. Anyways, he's a clear blue flame thinker and has very sort of deliberate. I enjoyed his conversation and he was kindcash deal valued at $3.9 billion, including the primary healthcare firm's net debt. Keep in mind the stock was at $40 around the highs, and then it dove to $10. And so this $18 per share buyout is a good deal, but it's, again, just gives you a sense for how far things have come down. I believe this deal represents the beginning of what should be an enormous unlock for society, specifically three major trends in our modern economy. The first was globalization, comparative advantage of nations, where we said, okay, you're better at manufacturing, or we can offshore pollution, or you have less regulation, or you're more talented at growing this type of crop. And we figured out ways to lower barriers and trade and tariffs. And the entire world got a large tax cut.

Except what was the problem? A lot of people got left behind. A lot of the less competitive industries and people working in those industries that got pushed out or squeezed by globalization. We didn't reinvest any of that prosperity, any of that, those incredible games back in retraining those people. So globalization has resulted in tremendous prosperity, but not a lot of progress,

which I think is a decent metaphor for what's happened in the United States over the next four years. Second big wave, digitization. The internet, right? Processing power, the web, unlocked tremendous value. I think four of the five most valuable companies in the

world are somehow related to the web. Is that true? Amazon, or what is it? It's most valuable company in the world is Apple, then I think it's Microsoft. Let's just assume I'm right. Anyways, an enormous unlock from the dispersion, which is the third trend, dispersion. We've gone through globalization, digitization, and now dispersion. What is the third trend, dispersion. We've gone through globalization, digitization, and now dispersion. What do we mean by that? Amazon dispersed retail from shelves and stores to our porches and our laptops. We've seen Netflix disperse entertainment from movie theaters to our homes. I believe we're going to see education disperse from admissions offices and campuses to our homes. People still go on campus, but I think there'll be more unbundling of the $700 billion education experience. You're

already starting to see pressure on kind of the tier two schools. But the big opportunity that hasn't happened yet, the mother of all chins, is the dispersion of healthcare away from hospitals, away from doctor's offices, and away from regulation. The thing that just always blows my mind is if you think about it, 98 to 99% of the people globally who contracted, endured, and developed antibodies to novel coronavirus likely never entered a doctor's office, much less a hospital. We figured out a way to push out healthcare to our smartphones, which basically 90% of the world has a smartphone now, offers not only to remove barriers around cost and intimidation, but also just to get out in front and create healthcare as an offensive health-driven industry as opposed to, they should really call healthcare sick care because you don't pursue it until you're really, really sick. In addition, it could just be an enormous unlock for caregivers in terms of time savings, cost savings. It's just absolutely incredibly ripe. And who is

better at sitting on a stack of information and then figuring out what they should go into vertically? Should we make batteries? We can do that. Yeah, let's go vertical. Okay, can we make Swiss vacuum cleaners? No, we can't. Let's put them on our platform and charge them 8%, 12%, 20%, 34% of revenue to use our fulfillment to advertise, whatever it might be. Amazon is better at turning data into actual commerce. They will do the same thing here. Imagine if you will, imagine if you will, oh, and by the way, who can store all that data in a secure environment that probably might be at some point HIPAA compliant? I would bet on AWS. Now, some people are concerned about whether this

violation or this violates antitrust. A lot of people said, Scott, how can you like this? You're always saying break them up. Okay, let me be clear. I don't think they're bad people. I don't think we should punish Amazon. I'm not angry. I'm not one of these Elizabeth or Senator Warren, all big companies are bad and millionaires are bad. That's just populist bullshit. I do believe in competition. I'm a capitalist. And guess what? When AWS is subsidizing a retail platform, and every retailer in America doesn't have a cloud division to subsidize the sales of products, that creates a flywheel that no one else can compete with, then yeah, we should break them up. When Amazon leverages the fact they're one out of two e-commerce dollars, and some they own the marketplace, and they start advantaging their own products and their own retail offerings because

they have access to data. In other words, they own the rails and they see what everyone else is shipping. And they decide, okay, the most profitable things we're going to put on the rails. And by the way, we're going to make it harder for anyone else to use our rails that we decide to compete against. That is bullshit. That is anti-competitive. There should be regulation or Amazon fulfillment should be separated or broken up from Amazon, the core platform. Fine.

Or they shouldn't be able to compete against their customers on the platform or advantage their own products, if you will. But when we're talking about healthcare, when we're talking about U.S. healthcare that is somewhat fragmented yet enjoys all of the power of monopoly abuse and continues to raise prices faster, I welcome Amazon. I welcome the deep pocketed gangster from Seattle to come in and start kicking the healthcare industrial complex in the vasectomy equipment over and over and over again. I welcome this. Amazon,

right on my brothers and sisters, go out for these guys. This is the mother of all chins. Other concerns, privacy. I think this is a bit overblown. What we have is an organization that has not, in my view, abused privacy the way Google and Facebook have abused privacy. Why? Because they're not in the business of it. They are a little bit in terms of Amazon Media Group, which is a big business, takes data, and then serves you an ad for Huggies when you buy Pampers. But is that really a violation of your privacy? Whereas Facebook decides, I know, let's violate your privacy so we can get you addicted and get you depressed. Or maybe we just sell that data

or let the platform be weaponized by foreign governments. I mean, they've shown absolutely no concern for your data, delay and obfuscation. I don't think Amazon is guilty of that, at least thus far. The amount of information they have on you, if they wanted, in terms of your movements, what you say in your house is extraordinary. And I do believe that they recognize those risks and they've put in exponentially more safeguards. And let me

think, who else? Meta. Anyways, different talk show. I don't think Amazon is as big a threat around antitrust as it comes to healthcare. We need less antitrust, if you will, in healthcare. We need maybe some of the pharma companies to be broken up, but I love the entrance of Amazon into the healthcare field. I think it's going to be fantastic. Some stats regarding the healthcare industry. In a survey of nearly 18,000 healthcare professionals ranging across 29 different specialties, MedSpace found that the average time spent on medical work outside of patient visits, including administrative work and electronic health record documentation, was roughly 16 hours per week. Think about that. They're wasting 16 hours per week on the admin, on the bullshit, right? U.S. healthcare spending reached $4 trillion or $12,500 per person. So

a wife and a husband, a husband and a husband, a wife and a wife, $50,500 per person. So a wife and a husband, a husband and a husband, a wife and a wife, $50,000 on healthcare if they have two kids. Think about that, $50,000. That's 20% of our GDP. We spend double

what any other Western nation spends for worse outcomes in areas including infant mortality and diabetes. So that's great. We're the wealthiest nation in the world, and we can't keep our kids alive. There is room, enormous room, for innovation. A report by Rock Health shows that in 2021, investment in U.S.-based digital health startups reached $29 billion across 729 deals, with an average deal size of around $40 million.

That was nearly double from a prior year. This is going to be the starting gun for a bunch of acquisitions and a bunch of investment as people realize that the industrial complex, the evil empire here is the healthcare industry or what we should be calling the sick care industry. Telehealth Medicare visits increased from approximately 840,000 visits in 2019 to 53 million in 2020. It used to be less than 1%. Now it's about a third. It's done virtually. The area that's registered the greatest growth has been in mental health. When it comes to 2021, a survey that was conducted between April and October found that nearly one in four adults had reported attending a telehealth appointment via phone or video in the previous

four weeks. Think about that. That's extraordinary. Within the same survey, 20% of people with a child at home said their child had used telehealth services. This is one of the really, this is the silver lining, the size of the cloud coming out of COVID, that finally the sense of urgency, the investment, the innovation here resulted in a reshaping of the way we think about an interface with healthcare. This is an enormous potential unlock. The Office for Disease Prevention and Health Promotion says that almost one in four Americans do not have a primary care provider or health center where they can regularly receive medical services. Think of what broader access to telehealth can do to change that. I'm an investor in a company called 98.6, which is text-based preventive healthcare. And a third of the people that text us, a third of the people that text us do so while

they're in a meeting. This could be so hugely disruptive. And then the next step, the most disruptible industry within the most disruptible industry, insurance. I am looking forward to the day where I walk into my house and it says, Galloway family, would you like to cut your health insurance costs in half? If yes, say, Alexa, tell me more about Amazon Prime Insurance. The insurance industry is the best industry in the world if you're on the investor side or the ownership side. Berkshire Hathaway isn't an investment fund. It's not a hedge fund.

It's an insurance company posing as an investment fund. It's the best industry in the world. 45 cents on the dollar go to administration and profits, meaning when you buy insurance, you're getting 55 cents back. By the way, by the way, I haven't had health insurance in five years. Why? Why? Because I can absorb a big one.

I am privileged. I am fortunate. And I was spending $50,000 a year on health care from my family. Why? Because I'm a narcissist and I want the gold-plated healthcare. And what did I find out? Less than half the time we actually went to the doctor was the insurance company reimbursing for us.

What else did I find out? It's a pain in the ass to get reimbursed. Why? Maybe they make it harder so that there's more breakage. I don't wanna have to pick certain doctors. I wanna pick the doctor that I wanna go to. Anyways, quarter of a million dollars will buy a lot of healthcare. And everybody goes, oh my God, you're a bad citizen. You're a

bad dad. No, you're not. Insurance is nothing but a transfer of wealth from the poor to the rich. Why? Because the poor can't afford a big one. The rich can. And if you are wealthy, insurance makes no fucking sense. I own some rental units down in Florida. If I had a mortgage on them, I have to get flood, fire, and whatever, the liability insurance on these things. Why? Because the mortgage business is in bed. What do you know? The banks are in bed with the insurance industry so they can both rip off consumers at the

same time. So what have I done? Again, more privilege. I pay cash for these things because I don't want insurance on them. The most disruptible business inside the most disruptible business is healthcare insurance. Amazon has the capital. They have the installed base of smart speakers. They have the AI. They already have data on you. Oh my God, my greed glands for a better world are starting to run saliva like there's no fucking tomorrow.

Disclosure, I own Amazon stock. Disclosure, I have predicted Amazon is going to be the fastest growing billion dollar plus healthcare industry in the world. Should Amazon be broken up? Yes. Should Amazon be prohibited from competing with retailers and customers on their own platform? Absolutely. Should Amazon be welcomed into the healthcare industry? Yes, my brothers and sisters, come on in. All right, that's a wrap on our rant for the business story of the week. We'll be right back for our conversation with Matthew Ball. Support for this show comes from Constant Contact.

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Here's our conversation with Matthew Ball, author of The Metaverse and How It Will Revolutionize Everything. Matthew, where does this podcast find you? This finds me in Los Angeles on the first day of my book tour. Oh, that's right. And so what is a book tour? I've written a bunch of books. I find a book tour is mostly hauling up to Midtown to try and get on TV or be on podcasts, but you're actually doing a tour. Not a full tour. It's really just LA as the sole pit stop, but I'm doing one event at the Waldorf, another with Rob McElhenney, the creator of Mythic Quest, and It's Always Sunny. More just about sharing thinking rather than doing in-person events per se.

Got it. Yeah, I love the Waldorf. I love the rooftop. Anyways, leaning into my privilege. So give us a state of play in quote- I love the Waldorf. I love the rooftop. Anyways, leaning into my privilege. So give us a state of play in quote unquote, the metaverse. Who are the big players here? How is this shaping up similarly or in contrast to your expectations about where we would be right now with this thing called the metaverse? So the metaverse is a 30-year-old term. Most people know that it starts from Neil Stephenson's snow crash in 1992. But the ideas, especially as have been encapsulated in science fiction literature, but also some early tests in the gaming space, span at least 60 years, often a century. It's in the last two years that it has gone from an overt strategy inside the boardroom to a public-facing marketing strategy,

most notably with Facebook or Meta, as it's called now. Where it sits is a little bit premature. The narrative has so far outstripped the products that are in market, the ways in which the world has changed. It has been so significantly conflated with the crypto craze, with NFTs and profile pictures, that people are understandably worried that it doesn't mean anything, worried about who might lead it, and confused as to how it could ever live up to expectations. In a recent story for Time Magazine, you wrote, open quote, the metaverse should not be thought as an overhaul to the internet, nor something that will replace all mobile models, devices, or software. It'll produce new technologies and behaviors. Can you elaborate on what those new technologies and behaviors might be? So we can think about this at the underlying technologies, the so-called protocols, as well as the more consumer-facing devices. We don't actually have any consistent standards for the exchange of 3D information.

The internet at large today doesn't really support synchronous experiences. That's why we generally struggle just to pull off a video call with two people, even though we're deep into the streaming wars and there's trillions of dollars of value in the tech ecosystem online. So we're talking about some overhauls to how we program and exchange packets on the internet, establishing some new file formats, just like the GIF or the MP4, but for 3D content. But then we're also thinking about the devices we will use to experience it. This is where augmented reality and virtual reality headsets emerge, but also perhaps the more nascent fear or field rather of holography,

of sensors that can track your body and reproduce them in real time in virtual space. So let's talk specifically about the company most associated with the metaverse, correctly or incorrectly, Meta. I'll put forward a thesis and you tell me where I have it right or wrong. My sense is of Meta's significant investment in the metaverse so far is a big thud, that the Oculus is not living up to expectations and that this grand vision still remains a vision. And there's very little evidence that they're going to be able to develop a new growth vehicle within the company around the metaverse. I'd be curious your thoughts on Meta and the metaverse. So I would say that Meta really has three different areas

that they're spending time on. One is virtual reality headsets. The second is their virtual world platform horizon. Think of that like Roblox, Fortnite, Creative Mode, or Minecraft. And then you can think of it as other wearables that we haven't yet seen. That last category shows potential.

The Verge has called one of their acquisitions Control Labs, potentially the most significant since Instagram. But we've seen no product market fit, nor even a product. The Horizon Worlds platform has almost no users and even less content. Those are circuitry. But then when you're taking a look at virtual reality, look, they've shipped 10 or 15 million units, but it's not clear that many people are using it. And the clearest indictment is the timeline. In 2015, Mark Zuckerberg stated that by the end of that decade, we would replace smartphones with wearables. That time has come and went. we know from reporting from Alex Heath at The Verge that they've now delayed the first consumer edition of their augmented reality headsets three times this decade. We may not actually have the first consumer edition of this product until the back half of the 2020s. And so we see a lot of diverse spending, but we don't see much usage. We don't see much investment from

developers, and we certainly don't seem close to replacing today's devices. So it sounds like, I mean, I don't think I'm putting words in your mouth, but meta and the metaverse so far have been underwhelming or haven't met expectations. Would that be accurate? It would be accurate. I think the strange thing about this would be how changing the name of the company and the extraordinary spending set expectations, which were probably not achievable. Yeah. And who, if you look at a company, well, one, assuming that you're bullish or think there's a future here, what companies are best positioned to add stakeholder value based on an emerging metaverse? Who would you bet on? Who are

we not talking about? Are there companies that we're not, you know, everyone talks about meta when we talk about the metaverse. Who should we be talking about? So it's an interesting frame because I think you correctly said the company most obviously associated with the metaverse is meta. But I think when you narrow in on those in the field, those who are investing or building product, they would say that the company most associated is probably Epic Games, the maker of the Unreal Engine or Fortnite, or Nvidia. Both of those companies were founded in the early 90s, not because of Snow Crash, but specifically for this point in time of 3D simulation. And we are seeing these companies, most people overlooked, really start to mature.

I always thought it helps just trying to find what you're talking about. I think of the metaverse as a three-dimensional rendering of the web. It's this immersive experience. And I think, okay, when I play FIFA with my kids or I watch them play Fortnite, that's a metaverse. And it seems to me that the

video game industry is in fact the closest thing we have to a profitable sector around the metaverse. Do you think there'll be metaverses around B2B applications, around more around entertainment? In addition to video games, where do you think kind of the next big business is as it relates to this 3D rendering of the web? So I agree with everything that you've just said. What I would say is to the extent in which we believe it already exists in consumer leisure, then it already exists in enterprise. A few months before Facebook began talking about the metaverse, Microsoft unveiled their metaverse strategy, focused on the idea of digital twins. This is a virtual live operated reproduction of a facility. The Hong Kong International Airport operates one today. There are many cities doing it on a limited

basis. This is a persistent 3D recreation that you and I, should we walk through the facility, would be instantly recreated in. And that information would be used to operate decisions at the infrastructure layer. Which gate do we move a plane to? When do we notify passengers of that shift? That's interesting. I didn't know about this, and it's a compelling proposition, but what is the use case for having a virtual representation of the Hong Kong airport? It's for modeling or decision making? So you should think of it from the preparation stage and then the operation stage. Let me give you an example of the former. There's this incredible example that happened at Tampa's Water Street. This is a multi-billion dollar, decade-long, multi-billion dollar development

that happened or started in Tampa. And they asked this question of how do we figure out what's the best decision for the neighborhood, the network, the city? And so they built a real-time simulation supported by an 11-foot diameter 3D printed model with multiple different projection sensors and said, let's test what happens. If we have an 11-story versus a 17-story building, how does that affect traffic in the local area? How does it affect emergency services response times? What's the difference between a car park having an entrance on the north versus south side? How does the building affect the light available in the local park as well as the local temperatures? That's how you can think about using 3D simulation, not the metaverse,

but an application to design. In the Hong Kong International Airport, you start to think of it as how can we simulate to better respond to terrorism, fire, flood, etc. But then they use it in the real-time experience. And that would say, we've all had the experience in an airport. Gate 82 is blocked. Where does your plane go? The classic answer is put it at gate 84 or gate 80. But the 3D simulated answer looks at everyone in the airport, where they are live. It looks up the chain, where are other planes, and says, how does the selection of the terminal impact the density of people in the airport, the likely ability to actually board, and then the cascade into the tarmac and the queue?

So I immediately go to, it sounds like a great application for the Defense Department to simulate war games and outcomes there. Is that a possible use case? Yes. And we've actually seen that for years. The UK military in particular has been a primary licensee of the Unreal Engine for war simulations. But more broadly, we can actually take a look at the US Army. They have a $22 billion contract for only devices, the repair, custom software, secure storage, all in support of active warfare and training. And what about even, I'm just going different places here, quantitative trading, where you would say, I'm going to attempt to model out the NASDAQ and movements, and I try to predict how traders are going to behave. Is it being used to try and create alpha or make money? It's certainly being used for those sorts of purposes. I don't know that your specific example requires what we call graphics-based or 3D computing. But certainly when you take a look at a company like Planet Labs, Planet does six-by-six-foot scans of the entire Earth every day. They use eight spectra bands, including biomass and heat

across infrared x-ray that creates a virtual reproduction of the earth. That sort of analysis then applied to 3D simulation is being used for trading. You can start to take a look at how does the rise of temperature in a specific part of the world likely to affect the composition of the biomass impacting actual harvests and yield, impacting the distribution and pricing of said product. It feels like really sophisticated modeling or simulation. I love the way you described this stuff. It's the first time I've actually thought this was more than just a big head fake with

a bunch of legless people. So we've talked about a few companies. We've talked about Meta, sounds like, you know, so far, meh, if you will. And then NVIDIA, Epic, it sounds like you're bullish on. Microsoft is doing interesting things here. I didn't know about this $23 billion Defense Department contract. What about Apple? It always struck me that Apple is the closest thing we have to a metaverse, that it has thousands of metaverses in the form of the App Store, and then they have this incredible portal to the metaverse, which I've always said was the AirPods with the central server, the iPhone. Is Apple well positioned around the metaverse? Absolutely. Let's start

from wearable devices, which we know that they're working on. You can essentially guarantee that at least the first few versions of their device is likely to be the best, most attractive, and highest performance AR or VR goggles. They are just the best in the world, and their computing power with the M1 and M2 chips are bar none. The other thing that's relevant is when you take a look at any time that is shifting online into virtual spaces is essentially obligated, or at least 70% of it, to the iOS app store, where they take a 15% to 30% cut.

When you take a look at the business today, over a trillion is transacted through an iOS platform a year, but only 70 billion applies to their app store. And that's because they don't bill for Amazon shoes or Starbucks order. But if the metaverse means our purchases go to virtual worlds, then all of the growth ends up being billed by them. And for context, NVIDIA's Jensen Huang has estimated that the metaverse economy will eventually exceed that of the physical world. Citibank, Morgan Stanley, Goldman Sachs, KPMG, McKinsey

have all estimated that by the end of the decade, there will be two and a half to 16 trillion in revenue running through these 3D simulation systems. So I think I understand that. That means that transactions move from offline, not even to online, but to the metaverse. And is that my avatar goes and buys Nike shoes? What do we mean by commerce or GDP running the metaverse?

So you can think about it in a few different ways. Now, Jensen is talking broadly in the way that you would say that the economy runs digitally today. When you and I are farming today, you and I are probably using manual tools. But of course, most yields happen right now through IoT devices connected to the Internet. And so we don't specifically say that's Internet revenue, but it's powering much of the agricultural economy. Jensen's talking about those applications. The other would be to talk about this burgeoning field of virtual items where you might buy

physical Nikes, and Nike made an amazing acquisition of a company called Artifact that comes with a virtual edition of those sneakers. And for context, Fortnite has generated in excess of $25 billion in revenue purely for virtual goods, no crypto, no NFTs required, in five years. Their annual sales for virtual cosmetics exceeds the revenue of Prada, Gucci, Fenty, and others. So let's use that as a bridge to talk about NFTs. I've always thought that as more people meet online, that the same way we signal our worth as mates with 1942 tequila or a Rolex or a BMW, we're going to start signaling online, which will be bullish for NFTs. One, do you agree with that? And two, who stands

to benefit when a younger generation that is comfortable paying for digital or virtual goods comes of age? NFTs have taken a hit, right? The whole space, but are you bullish on the category and who do you think stands to gain? Am I bullish on the category of virtual-only goods and the attendance signaling value? Absolutely. I think when you're talking about NFTs

living up to their potential, that has a lot of dependencies that are technical in nature. So for example, just buying an NFT may be interoperable in the sense that anyone can access and use it, but actually bringing that from one environment to another and applying it to an avatar is a really difficult technical problem that has not been solved. And this is where we get into the weirdness of the physical thing versus the digital thing. You can pick up your Nikes and walk into an Adidas and atoms exist everywhere. They're recognized everywhere. But data doesn't work that way. But if you're saying who's going to win, we have seen some version of the intellectual

property story we've seen over the past 20 years, but on steroids. The top three seasons for Fortnite, Marvel, Star Wars, and Travis Scott, followed by FIFA and the NFL. When you take a look at who is selling the most virtual product, it's either brand new brands, or it is the absolute premium Prada and Gucci's of the world adapting over. They're the most likely beneficiaries. We've talked about Apple, NVIDIA, Epic, Microsoft. Are there any smaller or medium-sized companies? I mean, it's always a little bit discouraging to think that it's the same old big semi-monopolies that are going to clean up here.

Are there any smaller, medium-sized companies that you think warrant our attention? So a few different things here. Every time that we go through some sort of new platform shift, you can basically identify five types of companies. The first are those that are destroyed, Blockbuster, Lycos, AltaVista. The second are those that endure but are so far surpassed, nobody cares. Skype still exists, AOL still exists. But even Microsoft doesn't think of Skype when they launch their Teams platform. It's deprecated. The third are the companies that adapt and grow. Facebook is not of the mobile era, but it grew significantly because of it.

The fourth category are companies which are displaced in their core business, but grow through the growth in the digital economy. Microsoft, displaced in mobile, has never had a smaller share of computing devices, but is far more valuable because it's horizontal in a much larger pie. The fifth category are the new entrants, Google last time, TikTok now. The question is, who sorts into which buckets? We don't know the last one, right? No companies are multi-billion. But what's interesting is,

and I know you're a student and expert here, when these platform shifts occur, it is impossible to imagine anyone other than the giants succeeding. They have all the resources, all the engineers, all of the users, all of the cash. Microsoft in 1995 and then 1998 unveils the internet tidal wave memo. They absolutely knew it was coming. They sent thousands of engineers on mobile and on browser

and on software, but they got it all wrong. 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 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. Hello, I'm Esther Perel, psychotherapist and host of the podcast, Where Should We Begin, which delves into the multiple layers of relationships, mostly romantic. But in this special series, I focus on our relationships with our colleagues, business partners, and managers. Listen in as I talk to co-workers facing their own challenges with one another and get the real work done. Tune into How's Work?, a special series from Where Should We Begin?, sponsored by Klaviyo. So you have such an interesting background.

You served as global head of strategy for Amazon Studios. I'd love to get your thoughts or state of play on the streaming wars, the various players, who you think is ascendant and declined. Do you think it's going to consolidate your thoughts? I think the most important is to start with Netflix. For 15 years, extraordinary execution. It's essentially remarkable that when we look back from the period of 2005 to 2020, the worst mistake people come up with was Quickster. And Quickster didn't matter. It's a fun case study. It's a fun joke, but it had no consequence. But what is remarkable is they are simultaneously proof of first mover advantages of scale, of network effects, of having the right thesis long before anyone else and betting on it harder than anyone would have imagined.

And yet at the end of the day, while those things matter, they are a content company. They sell entertainment. And the remarkable thing for me is, having competed against them, in 2016, 2018, you would have expected that their expertise in content creation, their hit rate, would be better than it is. If just for the simple reason that since 2016, they probably spent 50, 60, 70 billion on original content. And you should improve. Apple has improved really rapidly. Prime Video has gotten much better.

HBO has shown that they can treble their slate with no appreciable difference in quality. And we're starting to feel the gravity of that shortfall. But who do you think? I mean, I've seen that Hulu has actually gained share in the last 18 of the 24 months. Disney was sort of rookie of the year last year. Netflix stock is way down,

but it's still kind of what is the tail that wags the dog here. I know Amazon, it feels like there's, A, do you agree there's too many of them? And B, who do you think is ascendant versus descendant? Like if they were stocks, who would you go long on? Who would you go short on? The most ascendant to me feels like Apple. They certainly have infinite pockets and don't care about the, youto-year or half-decade returns, but their

programming is extraordinary. Their pace of improvement is extraordinary. They have become so desirable to all talent that they're getting better projects than ever before. They got MLS rights. They have baseball rights. There are reports that they're about to get NFL Sunday ticket. And that's driving a really powerful flywheel for that company. More audiences, more quality, still a low price point. The saturation that you mentioned helps them. When you take a look beyond there, look, there's still the Hulu problem to sort out in the United States. It's clear that that's going to come to some sort of head. Disney has to buy out Comcast for nine plus billion by the end of 23. But at the end of the day, are there too many services? For sure. And the easiest way to know

that is to know that Paramount Plus as part of a bigger company or Starz as part of a bigger company, their content could be the same, but the audience would be three to four times bigger. No increase in the cost of production, 4x the return, the gravity of that leads to M&A. And what do you think of the new HBO Discovery platform? Look, I'm skeptical that Time will ever consider that deal, the AT&T acquisition, positively. I'm skeptical that AT&T will ever get a positive return on Warner Bros. Disco. But at the end of the day, that product is going to be successful. It's going to have hundreds of millions of subscribers. Why? Because humans

love video. Five and a half billion people watch 2.6 hours per day. 300 million Americans watch five and a half hours per day. And Warner Bros. Discovery has just an extraordinary amount. As long as the price point is anywhere near reasonable, I just don't think most of us can live in a world without subscribing. And you said you were sort of long or bullish on Apple TV+. Do you look at any of the streamers and think they're going to be challenged over the next few years? Well, so I think, again, Hulu faces that fundamental challenge of what is its role. We know that Star Wars is about

to be spun out. It's very difficult to imagine how being a standalone public company that is in ninth place domestically and less access to intellectual property like John Wick and The Hunger Games, which Lionsgate currently owns, is going to thrive. Paramount Global ends up being the interesting case study of, look, they're well-performing. Their content is popular. They have exceeded most expectations. The question nevertheless remains, how good is the business? And does it ever show a really compelling ROIC? It's pretty hard to do the math to get there. Let me throw out a name. I've always thought that Netflix or one of these players would immediately become just strategically much more robust with an acquisition of Spotify, which is now trading at an all-time low. It's got a market cap of about $20 billion, so say it costs $25 or $30 to take out. If Netflix, if it becomes Netflix-ify, if it's Netflix and Spotify, aren't they the number one subscription media company in the world? It just strikes me they're ripe for acquisition. Your thoughts? comes from someone who makes it easier and better to access content. We saw that with cable versus broadcast,

streaming versus cable. And at the start, they're dominant because there's much better at the tech. Eventually, the technical advantage commodifies and you shift to content-based competition. But eventually that saturates. We see this right now. Just making one more high-quality premium TV series

doesn't change anyone's trajectory. And so you shift to platforms. Think about this as how Comcast and others started moving to triple or quadruple play bundles, right? Start by saying cable's better than broadcast. Then you say, we've got all of these channels, peak TV. Then you say, actually, we're an ecosystem. That's the arc of all services. We saw that with Apple, right? We're just going to be Apple TV, then we're going to get into original content, then we're going to do the Apple One bundle. That suggests that Netflix's future at some point is more of a platform company. And arguably, we're seeing that now as they go into games, they're going into merchandising, they have a podcast business. The big question is, and I think this is where it's easy to underappreciate Netflix.

Spotify reports their membership based on a per user basis. If you and your partner share a family account, you're not one subscription, you're two subscribers. Netflix does not do that. My guess would be that

in the years to come, because of password sharing, they change their metric to talk about the number of paying users. And then you're looking at a company that has seven, eight, maybe 900 million different users for which folding in a Spotify starts to make sense. I would describe TikTok as an existential risk. My sense is TikTok is doing to Netflix what Netflix did to Hollywood. What are your thoughts on TikTok? I think when you take a look at the American appetite for

television, it was never sustainable. For decades, TV had a monopoly on leisure. There was just not many other things that you could do that were multimedia that had extraordinary volumes that were live and that the entire family could enjoy. Every single year for the past 25 years, really, leisure globally, no matter where you are, but especially at home has become more contested. I cannot imagine a world where the average American is watching four plus hours of TV in 2030. And so TikTok is one of many different

competitive substitutes. But certainly it is obvious that people who used to spend 30 minutes or 15 minutes watching a few blocks of The Office on Netflix, now potentially on Peacock, are using TikTok instead. That marginal, easy, I'm going to unwind, I'm going to put it on in the background consumption that really fueled 30% of TV time. It's just being devoured by TikTok. So as we wrap up, we like to get our probe a little bit more about kind of personal issues and your approach to work and how your relationships have shaped your professional life. You were a full-time forest firefighter as part of Canada's Ministry of Natural Resources.

What lessons can you apply to business or just your personal life that you learned fighting fires? So I was a forest firefighter for two years. We would sleep in tents or wet tents and wet sleeping bags and wet clothes for weeks at a time. And I did that because I thought I was going to spend most of the rest of my life in an office. I'm fortunate that that isn't the case. But the skill that I think I really learned was camaraderie, trust, and really participating in the culture with those you have very little in common with. And that skill set is really important, especially when you have a shared purpose, least of all one with security concerns or safety concerns. I've always felt that the national service would be a potential solution to the divisiveness that plagues the United States. What you said about developing a sense of camaraderie or appreciation for people with different backgrounds, I feel as if we're just so desperate for that, that people

begin to look at each other as their allies. It's like, it's the fire is the enemy, not whether the guy or the gal on my left or right is Republican or a Democrat. Would you, I've put a lot of words in your mouth here, but I trust you to agree with that. Yeah. I mean, look, I don't, I don't know if it's national service, but I do think that there was something remarkable about being young, about not having expectations, being in a very strict hierarchy where you depend on someone who doesn't have any of the traditional skills that you would idolize, right? I grew up in Toronto in a business community. My friends of mine's fathers ran a bank. That's what you kind

of learn to respect and understand and consider your career objective. Working towards an environmental purpose that can save lives with someone who has none of the traditional skills that you are taught to admire and that has your back is definitely powerful. So just to wrap up here, we like to do a lightning round, kind of first thing that comes to your mind. Most important relationship in your life or most influential relationship in your life? My partner. Writing a book, as you know, is extraordinarily tough. It's anxious. I actually find this release right now and the amount of press attention really, really

hard. I could not have done it without her. Biggest influence growing up? Grandfather. He was an outdoorsman. My family comes from the middle of nowhere in the middle of nowhere, Ontario. And he provided those skill sets, cutting down a tree, hiking, just meant a lot. Any job you'd love to do that is totally

different from what you're doing now? I think legal practice would be a lot of fun. Legal practice? Yeah. I mean, look, the Musk situation is a great one. Being on either side of that would just be freaking thrilling. It's the impossible puzzle to solve. I agree. I agree. Matthew Ball is the managing partner of Appelian Co., which operates an early-stage venture fund as well as corporate and venture advisory arm.

Matthew is also a venture partner at Makers Fund, the world's largest gaming venture fund by AUM, advisor to KKR, and a co-founder of Ball Metaverse Research Partners. From 2016 to 2018, he served as a global head of strategy for Amazon Studios. His new book, The Metaverse and How It Will Revolutionize Everything,

is out now. He joins us from his book tour in Los Angeles. And most importantly, Matthew fought fires in the great country of Canada for two years. Matthew, we appreciate your time. Good luck with the book. Thank you. Algebra of Happiness, the last five minutes. Supposedly, people's impression of you is disproportionately dependent upon the last five minutes.

What do I mean by that? You can work somewhere for 10 years, and when you're leaving, if the last three months you're kind of an asshole and start bad-mouthing people, it almost obviates or diminishes all the good work of the previous nine and three-quarter years. People remember how you leave. People remember the last few minutes. Supposedly, and I love this study because it involves a prostate, but when they do colonoscopies on people, if they did a test with a control group, they did it regularly, you know, as they do. As soon as they were done, they pulled the probe out. And in the control group, I said the test group, I guess the test group, excuse me, they left it in five minutes longer with no activity. So it wasn't as uncomfortable. And the test group where they just left it in five minutes longer, so a longer colonoscopy, but the last five minutes weren't as uncomfortable. People felt, or when surveyed, said that the test group, the colonoscopy was much less unpleasant. Now, that doesn't make any sense. It was actually

the same colonoscopy, just five minutes longer. But the last five minutes are where you develop your impression, right? That's why universities spend so much money on commencement and bringing your parents. We want everyone's last five minutes at a university to be really positive, such that they continue to buy football tickets and give money back and send their other kids and nieces and nephews back to the university. Anyways, the last five minutes. The basic lesson there, always try and leave on good terms your job. Always, when you're at a party, make an effort. This is tough for me. I'm an introvert to be as charming and as nice and as friendly and as complimentary as possible when you're about to leave the last 10 minutes of the party. Now, the reason I bring this up, the reason I bring this up,

I'm taking care of my boys or I'm watching my boys. We're 11 and 14. We're in New York together. It's me and them, the Color Factory, the Elvis movie at Alamo Drafthouse, which is lovely, which is lovely. The On Store, On Running Store, the Nike Store for shin guards, the Pele Store in Midtown to buy soccer cleats, Balthazar for donuts, the Boulangerie Balthazar, Jack's Wife Frida. We've been having an amazing time. And we're going to something called Rise New York City, which is this 3D experience in Times Square, which literally sounds like the seventh ring of hell for me. But as you'll recognize when you get older, it's about what the boys want. Anyways, my 11-year-old is really tough, disagrees with everybody on everything, seems to be upset all the time about everything, gives his older brother a hard time,

will just run into his brother's room or in the bathroom and hit him and scream, nobody likes you, and then run out for no real reason, is just really tough. And I don't know how to manage it. And I don't think there is a handbook here. I don't know if I'm supposed to be just loving and supportive and sit down and be like Alan Alda would be as a father and say, tell me what you're feeling. I'm not that kind of guy. I'm more inclined to scream and curse at my 11-year-old, and I'm not proud of that, to shock the shit out of him such that it moves him back in line. And I got to be honest, I think there's some value to that. I think that kids respond to the deeper voice of a man and that we are there for certain moments of discipline. And I realize as I hear my words coming out of my mouth, I'm probably going to get some pushback around that, but I think there's a

lot of research to show that. The last five minutes though, the last five minutes of every day, of every day that I have ever spent with my sons is that when they're in bed, and again, getting them to bed is a fucking nightmare, especially the little one. Jesus Christ, brush your teeth. I already did. No, you didn't. Anyways, he's finally in bed. When my two boys are in bed, I hang out with them. I adjust them. I rub their backs and adjust them, which they love. I tell them a quick story about my parents coming to America. It's an ongoing story right now. We're at the point where my parents, my mom, seven months pregnant, loaded up in an Austin mini metro and drove, no joke, from Toronto to San Diego because they had read in the newspaper that San Diego had the nicest weather in North America. I embellish on these stories. They absolutely love them. And then I tell both of them that I love them and I mean it. I look at them and I kiss them. My 11-year-old still kisses me on the lips. My 14-year-old will just let me kiss him on the forehead. That's fine.

But the last five minutes are the following. Distinct of what an asshole you are, distinct of what a weak father I am, not knowing how to deal with your asshole-ishness. The last five minutes are me and you. The last five minutes are dad and son. And every time you go to sleep, you're going to have one absolute. You're going to have one thing that is never in doubt. And that is, I adore you. I think you are wonderful. I want to spend time with you. And I love you immensely. The last five minutes every day with your kids, that's what they'll remember. Our producers are Caroline Shagrin and Drew Burrows. Claire Miller is our associate producer. If you like what you heard, please follow, download, and subscribe.

Thank you for listening to Prop G Pod from the Vox Media Podcast Network. We will catch you next week. Daddy had his coffee. We're going to give the dog the benefit of the doubt. It's like when my rescue pup gangster from Puerto Rico, Puerto Rican rescue pup, it's like saying you're a Canadian firefighter. It's sort of sexy. It makes me more likable that I have a rescue dog. Why am I repeating anything? Because I'm angry.

I'm angry and I've lost my train of thoughts. I'm just saying shit over. Maybe we remember it. What software do you use at work? The answer to that question is probably more complicated than you want it to be. The average U.S. company deploys more than 100 apps, and ideas about the work we do can be radically changed by the tools we use to do it. 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 you get your podcasts. Support for this podcast comes from Klaviyo. You know that feeling when your favorite brand really gets you. Deliver that feeling to your customers every time. Klaviyo turns your customer data into real-time connections across AI-powered email, SMS, and more, making every moment count.

Over 100,000 brands trust Klaviyo's unified data and marketing platform to build smarter digital relationships with their customers during Black Friday, Cyber Monday, and beyond. Make every moment count with Klaviyo. Learn more at klaviyo.com slash BFCM.