The Prof G Pod with Scott Galloway - No Mercy / No Malice: Little Tobacco Moment

Episode Date: September 5, 2026

As read by George Hahn. https://open.substack.com/pub/profgmedia/p/little-tobacco-moment Learn more about your ad choices. Visit podcastchoices.com/adchoices

Two and five Canadians will hear the words, you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation Walk. Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca. When West Jet first took flight in 1996, the vibes were a bit different. People thought denim on denim was peak fashion, inline skates were everywhere,

and two out of three women rocked, the Rachel. While those things stayed in the 90s, one thing that hasn't is that fuzzy feeling you get when WestJet welcomes you on board. Here's to WestJetting since 96. Travel back in time with us and actually travel with us at westjet.com slash 30 years. Say you're an aspiring pop star. How do you know if your song's a hit? It's getting harder to tell.

I think that something is going on where the machinery of popularity has changed under our feet, and we don't really know why or what it means. This week on Explain It to Me, How to Avoid Being a Flop? Find new episodes, Sundays, wherever you get your podcasts. I'm Scott Galloway, and this is No Mercy, No Malice. Met a $17 billion social media addiction settlement is being called a big tobacco. moment. It isn't. It's another meta win. Little tobacco moment, as

read by George Hahn. We've been played again. Last week, 47 states and the District of Columbia settled with meta, resolving claims that the company had designed addictive algorithms targeting minors, violated youth privacy, and endangered children. The company didn't admit to any wrongdoing, but it agreed to pay up to $17.1 billion in penalties and make changes to its products. Texas settled separately on the same day for $1 billion and similar terms. The markets shrugged off the settlements, however, with META's shares rising 1% on the news.

For those keeping score at home, a 1% increase in market cap on a $1.4 trillion company means the settlements, breaking the fever of uncertainty, paid for themselves. I often call META the big tobacco of the attention economy. Tobacco destroys individual lungs and pollutes the immediate airspace. Meta's cancer metastasizes across our entire society. The conventional wisdom says this settlement is meta's big tobacco moment. Finally, justice. Bullshit.

This is the meta knife thrust a foot deep into the West's corpus pulled out a centimeter. Let's start on a positive note. A bipartisan group of state attorneys general took action against a harmful organization run by Amor people. Disgusted by the company's scant regard for child safety, but evidencing some measure of self-awareness, one meta-employee acidly noted, targeting 11-year-olds feels like tobacco companies a couple decades ago. Others likened their products to drugs and themselves to drug dealers. It's great that state AGs acted, but that it fell to them shows just a.merell just a lot of how feckless Washington is.

The settlement calls for changes to meta products, though meta began introducing some of those changes last year and simply agreed to follow its own roadmap. The changes include limiting teens to two hours of scrolling per day, unless their parents say otherwise, barring usage between midnight and 6 a.m., and turning off notifications during school hours. That's telling your kids they can only light up after class and not between midnight and 6 a.m.

Teens can also turn off autoplay and switch their settings from the 4-U-style algorithmic feed to a chronological one. Meta promised to disable counting on the like button and ban extreme makeup filters, which will supposedly throttle back teen anxiety, depression, and body image issues. Meta said it would strengthen protections against unwanted contact from strangers. A weird thing to have ever opposed, as the absence of such safeguards was a gift to child predators. Lastly, META promised to invest in age verification, though responsible corporate citizens already do this. What the settlement doesn't do is change META's design priorities.

As my friend and colleague Jonathan Haidt, an NYU social psychologist noted, the settlement leaves many of the most harmful features untouched, including the algorithm. Meta's AI-powered recommendation engine is still running, engineered to maximize young people's engagement even with content that harms them. The ugliest part of the settlement? It makes meta stronger. First, the company can weaponize compliance, digging a moat against new entrants. Second, by conditioning additional safeguards and $5 billion of the fine on YouTube and TikTok agreeing to similar terms,

meta has turned its competitors into corporate shields. Maison Zuckerberg even launched an ad campaign to pressure YouTube and TikTok and position itself as the leader on child's safety. If laddering is highlighting your brand's strengths while depositioning a competitor and illuminating their weaknesses, the way I use the term in my brand strategy course at Stern, meta's settlement is a roundhouse kick, knocking the feet out from under its rivals. Fun fact, Don Draper deployed laddering to weaponize government regulation to Lucky Strikes Advantage in the pilot episode of Mad Men. Meta's behavior is far worse, and its reach far greater than those of its competitors. But sure, they're all the same.

Mark Zuckerberg coined the phrase, move fast, and break things in 2012, to describe the culture of innovation he built at Facebook, now Meta. More than a decade later, it's clear that by things he meant us. Fines are supposed to be a financial deterrent against future breakers. $17 billion is real money, but applied to an enterprise of meta-scale, it's a speeding ticket. Imagine if I told my ProfG Media team to create an addictive product that's always in your ears, inspires five plus hours a day of doom scrolling, leverages network effects and addictive design to lock-in users, renders them depressed and anxious and envelops society in a toxic fog of rage and polarization.

Some Profrey Media employees would likely blow the whistle. But imagine if I responded by deploying publicists and lobbyists to smear them, conceal our culpability, promise to do better, and engineer legislative paralysis such that Profgy Media operated with impure. community. How big would the fine have to be to deter my behavior? Profji Media generates $20 million in annual revenue, with an operating margin of 60%. Its valuation is around $100 million. Meta's 2025 revenue was $200 billion, with an operating margin of 41%. Its market cap is $1.4 trillion. A $17 billion fine scaled down to Prop G Media and spread out over 10 years

would equal a $256,000 annual hit to our operating profit. That's not a deterrent, but a green light to move faster and break more things. The 1998 Tobacco Master Settlement Agreement levied a fine of $206 billion, $422 billion adjusted for inflation, payable over 25 years against the four largest cigarette makers. Two of those companies, Philip Morris, now Altria, and RJ Reynolds are still selling cancer sticks. The other two, Brown and Williamson and Laura Lard, are now owned by RJ Reynolds. Regulatory friction catalyzes consolidation. Since 1998, federal taxes on cigarettes have increased fourfold, while state taxes, on average, have increased by 6x.

Smoking rates among adults dropped 73% between 1965 and 2022, and rates for teens fell by 86% from 1997 to 2021. But the tobacco companies didn't stand still. They innovated. In 2019, one in three American teens reported using e-cigarettes, which are taxed at lower rates than the analog version. The numbers have fallen, thanks to some states banning flavored e-sigs, but curbing the negative externalities of tobacco is a game of whack-a-mole. As Stanford historian Robert Proctor told the New York Times, Today is not the beginning of the end for social media, any more than 1990.

was the beginning of the end of big tobacco. Americans still smoke more than 170 billion cigarettes every year and inhale tons of additional nicotine from electronic variants. The picture is even grimmer if you widen the lens. Globally, one out of every five adults is a customer and 80% of them live in low and middle-income countries. This is by design, as tobacco companies pivoted to developing nations, with a continued emphasis on targeting young customers. Big Tobacco is still

killing it, i.e. others. The media business is built on the back of an attention to profits arbitrage. But for centuries, the conversion technology was rudimentary, and its emissions were tolerable. Also, because distribution was physical, age-gating was practical. The U.S. has a lot of long history of age-gating harmful things that are otherwise legal for adults, guns, booze, porn, etc. This isn't paternalism, it's common sense. When we released ad-supported reticulated pythons into the online ecosystem, however, they became an invasive species and common sense died. Zuckerberg didn't invent social media emissions, but meta scaled them to over half the planet. Despite the proliferation of content that would earn R, NC17, and X ratings at the movies,

we've treated social media as G-rated. An overwhelming majority of Americans support age restrictions. In fact, nine states have active age verification laws, while another eight have passed laws that courts have subsequently blocked. If there's a problem with age-gavecation, it's that we have bought the free speech versus child's safety narrative, i.e. bullshit. Assuming it passes constitutional scrutiny, however, age-gating only restricts the flow of new customers, not the product. Reform with teeth will require changing the incentives. Here are three angles of attack. First, reform section 230, which is a form. protects platforms and websites from legal liability for the content their users post.

The 1996 law was written for online bulletin boards, not trillion-dollar behavioral engineering machines. A better framework? Keep immunity for third-party speech, but impose liability for algorithmic amplification, just as we impose liability for physical products. If you elevate content, you've made an editorial decision, are a media company and should be held to the same standards as every other media firm. Social media would change overnight, not because executives would grow a conscience, but because the chief legal officer would have a bigger number, legal risk, than the head of growth, revenue upside. incentives drive behavior and the upside of continuing to harm kids is still greater than the downside.

Second, reboot antitrust. Technology isn't neutral. Its design is a function of the degree to which economic power is concentrated. The great monopolists are not passive, Columbia Law Professor Tim Woo, wrote in the age of extraction, they actively defend their market position by acquiring threats or competitors. See Meadows acquisitions of Instagram and WhatsApp or Google's acquisitions of YouTube and Deep Mind.

Going Teddy Roosevelt on information monopolists would benefit everyone. The lessons of Standard Oil and 18T are that breakups unlock shareholders. value, ramp up innovation via competition, reduce rents on consumers, and provide workers with more bidders for their labor. The framing? Antitrust could be the biggest tax cut in history. Finally, tax social media's emissions. If the tech platforms are too big to regulate, shrink them by taxing revenue from sales of targeted digital ads. As economist Paul Romer wrote in 2019, companies seeking to avoid the tax play into our hands

as they're likely to pursue an ad-free subscription model, like Substac. Success for those companies would no longer hinge on surveillance and addiction but a clear value exchange. Some platforms will take. continue with the targeted ad model regardless. But a progressive tax with higher rates for larger companies would render big tech tech. Our big tobacco moment ended with meta's shareholders richer, competitors weaker, and its business model intact. We've been played again. Life is so rich.

Two and five Canadians will hear the words you have cancer. That's why every step and dollar raised matters. On September 19th, join thousands in Toronto for the Princess Margaret Cancer Foundation Walk. Challenge yourself, friends, and family to walk 21 kilometers in support of life-saving research. Together, we can carry the fire and help create a world free from the fear of cancer. Register today at pmcfwalk.ca.ca.