The Prof G Pod with Scott Galloway - Office Hours: Coinbase’s IPO, Higher Ed, Mentors, and Building Great Teams

Episode Date: April 19, 2021

Scott answers a question about whether Coinbase could be the AOL of crypto exchanges — “new technology, a little bit mysterious, a little bit complicated.” Scott also shares his thoughts on finding mentors within your workplace, his hiring process, and why higher education needs to be a hybrid between online and in-person.  Have a question for Scott? Email a voice recording to [e-mail] Learn more about your ad choices. Visit podcastchoices.com/adchoices

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cards, savings accounts, mortgage rates, and more. NerdWallet, finance smarter. NerdWallet Compare Incorporated. NMLS 1617539. Welcome to the Prop G Show's Office Hours on Monday. 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 email a voice recording to officehours at propgmedia.com. Again, that's officehours at propgmedia.com. First question. Hello, Professor. This is Matt from Colorado. Question for you on the Coinbase IPO. As crypto gains momentum and moves towards the mainstream, it looks like Coinbase has really fostered that and facilitated mainstream investors getting into the space.

And to me, this seems a lot like America Online did for the internet. New technology, a little bit mysterious, a little bit complicated. What did AOL do? Well, it allowed people to get online and interact with the internet very easily. They were first in the space to do it well. And it seems to me that Coinbase is similar. So bullish on crypto, bearish on Coinbase. Curious your thoughts. Thank you. Thanks for that from Colorado. So I think I know more about this issue than 99% of the US public. And I know almost nothing about this issue. I find that this whole space has benefited from this combination of it's super exciting and very difficult to

understand, which creates an environment where there are no benchmarks for valuation, which is wonderful because it's not tethered to evaluation. If you wanted to buy stock in a cloud or a SaaS company, there are benchmarks, there are valuations. Okay, it's worth 20 times revenues, or most cloud-based companies trade between 10 to 30 times revenues, we have a base. But these things are so new that we have no benchmarks, which I think they benefit from because then it's just all about this story. Coinbase is a juggernaut. The AOL comparison is really interesting because AOL was a closed network, arguably pretty inefficient, not leveraging the technology. I would say if I tried to understand or claim to understand the market well enough to

look at it and say what its weakness is, is that just as crypto is really a function of this great decentralization or dispersion, and that is the dispersion of trust away from central banks and financial institutions where financial institutions aren't as efficient and they're more regulated than crypto. In addition, central banks have lost all kind of scarcity cred where a fifth or a third of all money in the supply system was printed since 2020. You have a dispersion of trust. Now, could you in fact disperse the core functions of Coinbase? And that is Uniswap is growing in popularity, another exchange, because it is more efficient and less costly. Coinbase has a strong brand and is considered as the on-ramp and has very high fees. If I were the people running Coinbase, I would be dramatically

cutting my fees because I think their valuation will be based on growth as opposed to profits. The numbers they put out were just so staggering. But I don't think if you look back, I think the market has replaced profits with vision and growth. I would take some of those profits and massively invest back in A, cutting prices, increasing the technology, and trying to make sure that it's seen as distributed and secure and what other buzzwords I can come up with. But short term, well, rather than making a recommendation, let me tell you what I'm planning on doing. I don't like to trade stocks, but I might trade this one. I might go into Coinbase and see if I can get a pop and then maybe get out because I'm not sure I understand the long-term prospects of an exchange.

I don't see what the moats are here. AOL tried to build a moat by being a closed service. You've got mail. By the way, by the way, I worked very closely with AOL. And I started a company called Aardvark, which was pet supplies online. I love dogs. I thought there needs to be a Williams-Sonoma Pets. Started an online pet company.

Put about half a million dollars of my own money into it or mine and my partner's money into it. And we got an offer to be purchased for $3 million by Petopia. Remember them? Not pets.com, Petopia. And they were going to give us all stock. My partner wanted to take some in cash. I'm like, are you crazy? The internet's going to the moon. But I listened to his better judgment. So we got a million and

a half bucks in cash, a million and a half in stock in Potopia. Six months later, the company was bankrupt, but boom, a million and a half in cash and a $500,000 investment in seven months. Still my highest RRR, RRR, RRR, my highest return, internal rate of return for any investment I've made that wasn't my own company. I also started Red Envelope. Why am I talking about this? In order to access the brave new world of e-commerce, there was only one place. A lot of people would argue, well, that must be Amazon. No, the only place that had any critical mass of sales online was America Online and their marketplace. And I used to go to this guy named Greg Shove, who ran the marketplace and basically beg him. And then he would grab me by

the ankles and turn me over and shake my startup red envelope for every dollar we had. But boy, they got theirs. Boy, they got theirs. Similar to what Amazon does now. It's good to have custody of the consumer. It's good to own the rails. And people don't remember, AOL owned the rails. Worst acquisition of the last 20 years was probably Time Warner's acquisition of AOL. They called it a merger, but it was a disaster for Time Warner. Steve Case is brilliant and saw that $125 billion market capitalization in 2000 that he should punch out. What's interesting is probably the close second or third is AT&T's acquisition of Time Warner, which I think they purchased for over $100 billion. Some great assets, HBO and CNN are wonderful, but it wasn't worth 110 or 140 with debt. Anyways, I like Coinbase in the short run. Long term, do I think it's worth more than Goldman Sachs? I don't know. Thank you, Matt from Colorado.

Next question. Hey, Scott. This is Curtis Davis. I'm a lawyer just up the street from you in Boynton Beach. I just finished your book, and as a father of four, I'm particularly interested in the sections regarding higher education. In one section, you discussed how higher ed needs to adapt to the post-COVID era by admitting more students via virtual instruction. As a graduate of Warrington College of Business at the University of Florida, I can appreciate this approach, as I wasn't familiar with many of my professors until my last two years because foundation classes were largely online. But you also credit your success to your relationship with your classmate slash business partner and the professor who put you in contact with your early stage investors.

Doesn't your recommendation for online remote instruction conflict with the personal relationships which actually enabled your success? Thank you, neighbor, Curtis. So, OK, so two huge benefits of the Hotschool of Business for me. One, I met my business partner there, Ian Chaplin, or at least my business partner for my first five or six startups. Ian was sort of an introvert or is an introvert, very technology-minded, great attention to detail, great operations person. I am none of those things. So I basically raised the money, set the strategy, waved my arms a lot, and Ian made the trains run on time. So it was a good partnership. And also my second year,

David Ocker inspired me to pursue brand strategy. My first company was a company called Profit Brand Strategy. I would argue that it's not, we have a tendency to think in zeros and ones, and that is, it's either all going to be remote and there'll be no connections and networking, or we need the full on-campus Dead Poets Society experience. And here's the dirty secret of graduate education, Curtis. And that is all professors have kind of two or three jokes. What I mean by that is we have a finite number of great concepts and we cram a pound of bread into a 10-pound box. I shouldn't say cram. We put it in there and then we fill it out with class discussion and other shit. And the reality is a lot of times these classes could be done in three or four sessions and,

and probably more appropriately, about half the sessions are basically lectures, not discussions and could be done online. I think you keep it synchronous. I think you have the students dial in at a certain time to hold them accountable. There is the buzz and electricity of an in-person class and then the absolute dearth of buzz and electricity of a pre-recorded video. Synchronous online is somewhere in between the two. And that is you can hold people accountable, you can call on them, there is some buzz there. It's not as great as being there live. But when you take the cost, the friction of someone not having to drive in from Ronkonkoma or even Singapore to take my class. My online class went from 160 in person to 280 when it was on Zoom. Where I think this

heads is a mix of the two. And that is my fall class at Stern will probably have the 12 sessions, six will be online, six will be in person. You'd like to think that that creates dramatic opportunity to take the professors who are the best at teaching and the ones who are in most demand and expand that supply. And what do you do with expanded supply at low marginal costs? You should be able to offer education at a lower cost. That's the promise that the Warrington School at the University of Florida is able to do more with less. They're able to take 10 professors in the marketing department and do the work of 30. But here's the problem.

The elite universities don't want to do that. They want to double down on exclusivity. They don't want to incorporate technology. They want to have a dead poet society-like experience, and they want to be drunk on luxury and create sort of an artisanal offering. And that's their right. What's disappointing is that they become so obsessed with becoming Hermes and Chanel versus public servants that they've doubled down on this exclusivity. Harvard's total freshman class size, get this, a global brand, huge opportunity to change the world, huge transformative certification. The size of their freshman class is 1,400 kids and not increasing that size. Why? Because they're corrupt jerks.

I was going to use the term mother, but I've been getting a lot of feedback that my profanity is turning people off. Well, gosh, darn it. Anyways, Harvard has decided not to expand their supply. They want to maintain that scarcity, which creates more of a wheel of the caste system because then the second tier schools get to raise their prices. It's just the worst of all worlds here. So I'm kind of discouraged or down on education right now. But I think where this heads, I think this is where this heads as a hybrid. If you take 50% of your classes online, you double the capacity and supply of the campus overnight, right? And then technically, you should be able to cut prices in half or almost in

half, say down 40%, which would be a step in the right direction. And more importantly, more importantly, what is the greatest cost of education in our society? It's not the economic cost. It's the emotional cost. All across America right now are wonderful kids, wonderful girls and boys who have done great at school, who have played by the rules, who have studied hard, who have been wonderful sons and daughters and done great at school. And they're getting rejection notice after rejection notice. And that brings humiliation and shame and disappointment to a household, all courtesy of US higher ed. So motherfuckers, here comes technology. The fists of stone are coming for your chins. We need to double supply. We need to cut costs in half. The costs are out of control. What is totally morally corrupt is the emotional cost that this absolute perverted fetishization of luxury that chancellors

and university presidents and tenured faculty have been infected with. It is time. It is time to expand, to break down the doors of higher education and take UCLA back to where it used to be. And that was a 60% admittance rate for yours truly versus what it is now, a 9% admittance rate. That is unacceptable. Curtis from Boynton Beach, thank you for dialing in. We have one quick break before our final two questions. Stay with us. 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,

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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. Welcome back. Question trace. So my question for you is mainly around the talent acquisition and hiring process. You know, it's no coincidence that Nick Saban competes for national championships every year.

He's got the best players on his team. And as you know, if you've got the best players on your team and you're working with a great group, performance goes up, work is more enjoyable, and you get to learn a ton from other A players. So mainly what I was curious about is what are some common mistakes you've seen in the hiring process? How can we avoid them? And currently, what is your hiring model? Thanks, Prof G. Thanks very much, Preston.

A thoughtful question. So first off, I find interviewing is almost useless. I get it wrong all the time. I fall in love with people in an interview and they don't end up working out. I find that the absolute, absolute number one source of talent is referrals. The moment you have somebody good in your company, talented, hardworking people who have certain skills hang out with other talented, hardworking people with those skills. As soon as we identify a young person or not even just a young person, but as soon as we identify someone who's talented in a company, I basically harass them and say, every time you're at a party anywhere, at a reunion,

find out what people are doing. And you all know the people who have their shit together. Smart people, people who have their shit together can smell other shit togetherness. When you see those people, ask them what they are up to and tell them that if they're ever looking that you hope that they will reach out to you and then you will reach out to me and then we will go get them and then I will give you $5,000, $10,000 of referral bonus. That is the most effective recruiting tool I have ever found. Also, I think it's important upfront to outline a really strong job description, and that is to try and set the person up for success. Also, and I hate to say this, I think you have to be fairly Darwinian around the decision to fire. I think everybody in an organization needs to be able to look left, look right, and say, okay, maybe I don't like this person, but I get it. I think tolerating mediocrity and not holding people accountable

creates just a toxic culture that ends up depressing everybody. So we all talk about the importance of hiring. What we don't like to talk about is the importance of firing. Now, having said that, that rattles someone's life. So I'm fairly Darwinian, Randian, Ayn Rand, Ayn Rand, A-Rand, A- rand about this, but I try to become very generous once I've made the decision, and that is helping them find their next gig, somewhere that they'd be more successful, coaching them, making sure they're not worried about paying their rent. I've literally given people severance for a year or paid them for a year because that's how long it took them to

find something else. But look, I don't think there's any secret sauce here to hiring. Again, the only thing I can zero in on is your best employees can and should identify more great employees. Thank you for the question. Next question. Hey, Professor. This is Sean from Montreal. In the past, you've spoken about the importance of having professional mentors in your early career. My question is about how much that should be a factor when you're deciding where to work. for upward mobility within the organization. However, it's a scrappy young company and I don't feel like there are many mentors for me there. Given this is my first job in tech and I have no formal computer science training, this feels like an area where I am lacking.

Is an absence of mentors a reason to change jobs or can the school of hard knocks approach replace a mentor? Interesting question. So generally speaking, you want, well, first off, let's focus on the ends. And that is mentorship, a company that's growing, a place where you feel like you're learning, a place where they appreciate you and your compensation is growing faster than inflation. These are all fantastic inputs and signals and criteria,

including do you have senior... I always call it senior level sponsorship, not even a mentor, but someone who is invested in your success. Because when there's three people up for promotion, the decision will be made on relationships. There's usually not an obvious choice who should be the one that gets promoted. There's usually three or four or multiple people who are qualified and the pyramid narrow, so they have to make a judgment call. And that judgment call is usually the person who makes it on the person they have the strongest relationship with. So having someone who seems personally invested in your success, who you have a personal rapport

with, is incredibly valuable. Having said that, it's an input. It's a means. What is the end? Or what are the ends? The ends is economic security, boss. That's the ends. You're not curing cancer.

At least that doesn't sound like you are. You're not painting the next great fresco. So you want to be, you go to work so you can develop economic security. So this is all situational. And if you're, as it sounds like you are, at a fast growing company and you're an early stage employee, which means that you got a decent amount of options, and perhaps those options are already well in the money and you have the opportunity to get more options, I would say stay put. In other words, what was it Eric Schmidt said to Sheryl Sandberg at Google, I think? He said, if you got a chance to get on the rocket ship, you get on the rocket ship. If you're on the rocket ship, do not punch out. If you're not making bank or you don't see the value of your equity growing dramatically and you don't have senior level sponsorship and you don't like it and you're not learning

a lot, then boom, boom, boom. But the first thing you want to do is interview and see what your opportunity costs are. What are you missing out there? Not having senior level sponsorship at a company isn't in and among itself the reason to leave a company. It might be one factor. It might be one factor, but it's a stew, my brother. Look at the stew. Look at the stew. Are you killing it? Are you killing it? What is the ends? The ends is economic security for you and your family.

Are you on a trajectory to get there, maybe even without senior level sponsorship? Thank you for the call. Sean from Montreal. I am coming up for Formula One. Does the dog like auto racing? No. Does he like the most European city in North America? Oui. I am coming up for Formula One. Does the dog like auto racing? No. Does he like the most European city in North America? Oui. I am coming to that French-loving, weird Montreal-er place. I love Formula One up there. I will see you up there on Saint-Germain or whatever the name of that street is. I've been going to Formula One in Montreal for the last 10 years.

I absolutely love it. Montreal, one of the great cities, literally probably the best city in North America for about the six week period between June 15th and August 1. Then it becomes one of the worst cities in America or North America, I should say. Anyways, love those Canadians.

Thank you for your questions. That's all for today's episode. Again, if you'd like to submit one, please email a voice recording to officehours at propgmedia.com. Our producers are Caroline Shagrin and Drew Burrows. If you like what you heard, please follow, download, and subscribe.

Thank you for listening to The Prop G Show from the Vox Media Podcast Network. We'll catch you on Thursday. How do you get 100 drunk Canadian fraternity brothers out of your pool? Hey, guys, could you get out of the pool, please? That's good Canadian humor. 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,

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