The Prof G Pod with Scott Galloway - Office Hours: Adam Neumann’s Flow, Sustainability Goals, and Dealing with Grief

Episode Date: September 14, 2022

Scott takes a question about whether Adam Neumann’s new real estate venture could benefit from operating under a franchise model. He then shares his thoughts on the progress corporations have made in lowering their emissions, and offers advice to someone who recently lost his business partner. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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NMLS 1617539. Welcome to the PropG Pod's Office Hours. This is the part of the show where we answer questions about business, big tech, entrepreneurship, and whatever else is on your mind. If you'd like to submit a question, please visit officehours.propgmedia.com. Again, that's officehours.propgmedia.com. By the way, I'm looking in my camera. I had a facial yesterday at this fancy hotel. I look fucking dreamy. I am radiant right now. Seriously, I look 50, 60. I want to make out with me. I want to stand back so I can kiss myself. Who are you calling? Donkey. Donkey? You're a stallion, baby. I can kiss myself. Who are you calling? Donkey. Donkey? You're a stallion, baby.

I can win it. Anyways, anyways, office hours, I do not see these questions or listen to them. You're getting the authentic real dog. Question number one. Hi, Scott. My name is Whitney. I work for a global hospitality company. So as I look at Adam Neumann's concept for flow

and his plan to disrupt the global rental housing market, I actually think it makes a lot of sense. I believe there's a segment of consumers that would be very attracted to this hybrid space that's blending residential units with the flexibility and consistency of a global hotel chain. While Mr. Neum Newman seems to have the advantage of more easily raising capital than most founders, I think he's missed a key opportunity here. If his strengths are in branding and vision work and not operations, as we saw with WeWork, flow should be built on a franchise model to shift the complexities of property management to more experienced investors. What's your perspective on this and on the franchising model in general?

Whitney, thank you for the thoughtful question. So just some background, A16 or Andreessen Horowitz has invested $350 million. It's their biggest check ever in flow. So a third of a billion dollars, which values flow at $1 billion. So it's a unicorn right out of the gates. Flow is expected to launch in 2023. Newman has purchased, I think it's about 3,000 apartment units in Miami, Fort Lauderdale, Atlanta, and Nashville, kind of where cool young people are escaping to. According to the New York Times, Flow will be a branded product with community features operating the properties Newman owns and providing its services to a third party. So first off, let's talk about the concept and then let's talk about the business model or the kind of the construct.

I think it's a great idea. Brands are meant to be shorthand that helps conduct diligence for you. When I go to London or I used to go to London on business, I would stay in the aughts. I would stay at either the Four Seasons or the Mandarin Oriental. Why? One, because someone else was paying. And two, I don't know anything about London hotels, but I know if I stay at a Four Seasons or a Mandarin Oriental, it's going to be on a scale of one to 10, at least an eight. And then what happened? Social media came along and the social graph and TripAdvisor, and I would find out that the Connett is more my speed, or the Barclay, or the small group of hotels

from the Ferndale group. And all of a sudden, the need for brand, brand equity, and essentially my job as a brand strategy professor has declined in importance because that diligence is no longer needed as much because we have these weapons of mass diligence called Google, and Facebook, and TripAdvisor. However, however, there is no branding

in what is one of the largest asset classes in the world, and that's residential apartment units. If you're moving from Atlanta to Denver and you like the way your apartment, the management of your apartment rolls, you like the amenities, you like the look and feel, you like the aesthetic, you like their approach to your community center, rec center, or the technology.

Maybe you just want the same technology in every place. I'm a customer of something called Inspirato, which is essentially a timeshare. It's sort of hotels, but it's houses. And if you roll with kids and in-laws and dogs, it's so expensive to stay at a nice hotel because you kind of need three rooms. So you rent a house, but it has hotel-like amenities. And what they do is they rent houses or do long-term leases from people who own second homes. They put their own furniture in there. One of the things I love about it, in addition to the services and the hotel services, they clean your house every day. You show up and they have the right beer that you want.

Rotter Burger for me, or an elegant IPA. That's how I roll. That's how I roll. But anyways, it's, and then they even make reservations at restaurants knowing the kind of aesthetic you have. And that is old pathetic guy who wants to hang out with younger, hotter people than him.

I eat everyone. Anyways, but they get it. And the consistency, the positioning, the type of property, the technology. I know how to operate the fucking remote in these places. And I like that whenever I go to a new house because I love TV. It's my hobby. I'm good at it. And I want to know how to turn on the TV without trying to figure it out and operate the music and even just the consistency around the tech. It's the same password for the wireless

in all these places. So when I show up with my computer, it auto connects to the internet. That does not exist. That exists in hotels. It doesn't exist really in commercial real estate either. There's Vornado, there's Equity Office that sort of has a brand, but it really doesn't. WeWork tried to do that and institutionalize or create an institutional brand and commercial. But the idea, I think it's an enormous opportunity because a young rental crowd are very brand sensitive. So to do that, to bring a consistent brand positioning to residential apartments just makes all kinds of sense. It's a great idea. Now, the reason why I don't think this will work is that Andreessen Horowitz isn't interested in the long-term thoughtful operations and execution of a residential real estate business. What they're going to try and do here, in my view, is put a

layer of bullshit publicity and technology on top of this thing and try and get an outsized valuation. And the fact that they're investing a third of a billion dollars, my guess is that Adam has paid a premium to aggregate 3,000 units as quickly. I don't think they're going to be able, I think it'll be like WeWork where they try and position it as a tech company, but it's not. You're renting fucking desk, boss. In terms of your question around franchising, I'm really going on here. A lot of caffeine. Caffeine brings out the NC-17 and the word salad from the dog. What you have with most hotels is a similar model. And that is they create hotels that are, they put them into separate LLCs, meaning they're protected from one another. Then they find a rich guy who wants to

own a hotel and he finances it. Michael Dell owns a bunch of Four Seasons. I think he owns all the Four Seasons in Hawaii. And there's more psychic income there. It's like owning a Ferrari dealership. If you buy a Ferrari dealership, you get 2% return, but you get, my guess is you get whatever Ferrari you want. And it's kind of cool to say, what do you do? I own the local Ferrari dealership. I think it's sort of the same way with hotels. And that is a lot of people like the idea of owning a Four Seasons. Obviously they get great rooms at their family vacations in Hawaii and they'll make some money, but they don't make a lot of money. The folks to make the Benjamins here are the flags. Now, what do I mean?

The W flag, the Western flag, the Four Seasons flag. The Four Seasons, I think, only owns one or two of its own properties. Its headquarters, its flagship property in Toronto, which is lovely, which is lovely. I took my dad to see a Toronto Maple Leafs game there. They knew about it. And they had this kind of Canadian or this Toronto maple leaf cake for us waiting there. They're very good at what they do, but they're smart. You don't want to own the property. You want to be the flag that's in charge of branding, reservation systems, and have someone

else finance it and take 8% or 10% of the gross. So even in a downturn, you still make money. That's the way to go. You don't want to own the hotel. You want to manage it. You want to be the franchisee, if you will, and have somebody else operate it and come up with the capital. How do I know so much about hotels? I love hotels. I won't travel to cities. I travel to hotels.

I don't go to Istanbul. I go to the Soho House in Istanbul, which is the old American embassy, because it is beautiful. I don't go to Bodrum in Turkey. I go to the Mandarin Oriental in Bodrum because I know it's a fucking amazing property. I go to the new Amun. Amun. I'm fucking Instagram right now, shoving my wealth in other people's

faces because I am deeply insecure. But my point is, I go to hotels. I don't go to cities. I absolutely love hotels. So thank you for the excuse to talk about a passion of mine, Whitney. Next question. Hey, Scott. This is Jamie in Philadelphia. Before we know it, 2025 is going to be here, and the biggest firms in the world have made aggressive eco and sustainability goals for 2025. Amazon says 100% of their energy will be renewable by 2025. Unilever is going to cut their plastic sourcing in half by 2025. And Nestle says that all their packaging will be either recyclable or reusable

by 2025. Is this feasible for these major firms? They don't exactly stop on a dime. Their supply chains are engineered around single-use packaging and simple, cheap-to-acquire energy. Do you see firms pushing these goals back again, kicking that can down the road like they have been? Or do you think they'll actually follow through? If they do kick the can down the road, do you think that will manifest itself in a stock price adjustment in any way? Will the market react to that? Thanks for taking my question. So that's a really thoughtful question. And I'm not sure, people ask me a lot, why don't talk more about the environment or they want to kind of sign me up to the

kind of the environmental cause. And I am not an environmentalist. I'm the great endorsement. I think after the last human takes her last breath, the earth is going to belch for about 50 years and it'll be as if we were never here. Having said that, anyone who doesn't acknowledge climate change has just decided they're going to watch Fox and find 10,000 more votes in Atlanta and it's just given up on truth. Oceans are warming. This shit is for real. There used to be, I think, two heat waves on average per year. Now there's seven,

and they've gone from lasting seven days to 20 days. I'm in LA. I have never experienced it this hot. I grew up here. There is, it seems to me we've hit a tipping point. Consumers will ultimately drive the change here, and it does seem as if sustainability is just a key criteria. There's price, there's product, there's how you treat your employees. And kind of every day shifts up in terms of criteria, how sustainable the company is.

So I think they'll accomplish this. And there's so many firms now helping firms like Unilever get to more net zero. There's a whole ecosystem. I think kids are interested in getting into this field. I think companies see it as a key criteria. I think it's an opportunity for them to be good citizens. Anyways, I think we've hit a tipping point. I think firms can and will figure this out. I think it's very exciting. Sustainability is something I used to, quite frankly, be very cynical of. And I've kind of, I've become a convert. I think that's important for all of us. So I think it's absolutely doable.

The world isn't what it is. The world is what we make of it. And I think we're making a better world here. I do think we've hit a tipping point around sustainability and addressing climate change. Thank you for the question. We have one quick break before our final question. Stay with us. I just don't get it.

Just wish someone could do the research on it. Can we figure this out? Hey, y'all. I'm John Flynn Hill, and I'm hosting a new podcast at Vox called Explain It To Me. Here's how it works. You call our hotline with questions you can't quite answer on your own. We'll investigate and call you back to tell you what we found. We'll bring you the answers you need every Wednesday starting September 18th.

So follow Explain It To Me, presented by Klaviyo. The Capital Ideas Podcast now features a series hosted by Capital Group CEO, Mike Gitlin. Through the words and experiences of investment professionals, you'll discover what differentiates their investment approach, what learnings have shifted their career trajectories, and how do they find their next great idea? Invest 30 minutes in an episode today. Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. Welcome back. Question number three. Hi, Professor Galloway. My name is Grant from Iowa City, Iowa. I run a market research and

brand strategy firm focused on higher education. Very recently, my friend and business partner died unexpectedly. In the past, you've written really beautifully about loss, as well as running your own professional services firm. So I was wondering if you have any thoughts or advice for me as I move forward. Thank you. Your thoughts are always incredibly relevant for my work. I love sharing your writing with colleagues, and I look forward to the chart of the week every Monday. Thanks for all you do. Grant from Iowa City, working in education.

Could you be more likable? First off, Grant, I'm very sorry for your loss. I don't think there is a user's manual. I think there are best practices here that usually work, but everybody's got to decide how they mourn. I think it's therapeutic to, if you're running a business and you're with this person's partner, you're clearly a competent person. I think it's cathartic to help the family out or engage yourself in the recovery of this individual. I don't know if they had a family, but take yourself out of your own grief.

I haven't had that many friends die. I think there's kind of two key moments or two of the really key moments in life are when you have kids, it's the first time you're forced to grow up and not think about yourself all the time. And I think it's sort of liberating. And it's the first time you kind of become a grownup

or most of us, I know it was the first time I thought about anything more than me was when my kid came marching out of my girlfriend. And then the other thing is when someone you love gets sick and dies, it's just, it's unthinkable. You can't imagine it growing up and it kind of brings home the harshness of life. And there's some positives to it.

It gives you perspective. It gives you an appreciation for the finiteness of life. And there's some positives to it. It gives you perspective. It gives you an appreciation for the finite nature of life. But it's just, there's just no getting around it. It just kind of, the universe just says, distinct to what you were taught as a kid, there's things outside of your control that are devastating. The thing that's helped me the couple of times I've lost, quote unquote, peers,

is to be more focused on others than your own grief. The other thing is in terms of your own mourning, give yourself the right to mourn, but put a statute of limitations on it. And that is, you know, if you go through a divorce, I would say the first year is terrible and you think you're okay the second year, but you're not. But within two years, if you're not kind of back trying to establish other relationships, having prepared relationships or have good relationships with your kids or be economically back on some sort of track, you should seek outside help. And I think when someone you care about passes,

I think you give yourself a certain amount of time to mourn and use whatever tools you can to help get through that mourning. But if you're not out of it, if you find you're stuck, unable to move on, unable to work, unable to, you know, depressed, unable to focus on things, not getting joy from the things you usually get joy from, then you seek outside help. And also, I found it very helpful to assume, to begin to get myself out of my head and think about how can I help or play a productive role in that person's, in their spouse's life who has had a devastating loss if in fact that person was married, their parents' life or their kids' lives. I find that that's a means of,

I don't know, kind of helps the wound feel faster. Again, Grant, I am sorry for your loss. That's all for this episode. Again, if you'd like to submit a question, please submit a voice recording by visiting officehours.propgmedia.com. it was one of those heat waves on sunday where it was so hot midday i turned into an old person and in my hotel i was obviously scared to go outside, but I was actually starting to get paranoid. Like what if the electricity goes out and I'm in here and they find me seven days later, like melted, clinging to a bottle of water and it's like some fake makeshift ice bath. That's how you think when you get old. That's how you think when you go old. Anyways. What software do you use at work? The answer to that question is probably more complicated than you want it to be.

The average US 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.

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 Thank you. So tune into AI Basics, How and When to Use AI, a special series from Pivot sponsored by AWS, wherever you get your podcasts.