The Prof G Pod with Scott Galloway - Office Hours: Investing in the Private Markets, Going Vertical, Pursuing a Phd, and Building a Network

Episode Date: April 26, 2021

Scott answers a question about how SaaS or B2B companies could go vertical — or in other words, control as much of the consumer’s end-to-end experience as possible. Scott also answers questions about his decision to invest in the private markets, deciding whether to pursue a PhD, and how to build a professional network outside of your academic institution.  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 a Monday. Oh my gosh, we're twice a week, double the fun to resist his feudal. Just give in to this relationship. Don't ask, is this a productive relationship? Am I getting what I'm putting into this relationship? Just surrender to the relationship. This is the part of the show where we answer your questions about business, big tech, entrepreneurship, and whatever is on your mind.

If you'd like to submit a question, please email a voice recording to officehoursatpropgmedia.com. Again, that's officehoursatpropgmedia.com. First question. Hi, Scott. This is Eric, an undergrad at Northeastern University in Boston. I've loved your work on this podcast

with the new format, especially your book, Post-Corona. It was a great read. You've talked a lot about going vertical for companies, but I haven't really heard them in the sense of SaaS or B2B. How can these companies especially go vertical? And do you have any recommendations for the space? Eric, you should be in voiceovers. You have such a lovely, deep voice. You're sort of the James Earl Jones of Northeastern University. Luke, I am your father. I am your Northeastern father. Anyways, vertical in B2B, that's an interesting point. I don't know nearly as much about B2B as B2C,

and I don't know much about B2C. So look, I think Microsoft has decided they need to go vertical with their Surface, with their tablets, which are supposed to be pretty good. And also their Xbox is, I think, an attempt to go vertical. So I think Microsoft's there. And you could argue that Windows or the Office is essentially, I mean, is that vertical or is the hardware? It feels like the hardware now is the dumb appliance, and it's the software that is really the vertical. So I think Microsoft's a good example. You bring up an interesting point, though. A company like Salesforce with whatever it is, $60 or $80 billion market capitalization, do they need to think about some sort of appliance?

Bloomberg is B2B. And what was their gangster move? They went vertical with their own terminals and their own security protocols. So they're increasingly vertical. And they have their own proprietary research now where they do primary research. So they've gone vertical. I think that there's huge opportunity for B2B. I think the most undervalued B2B brand in the world is Goldman Sachs. And if Goldman could give me some sort of, interesting, what kind of appliance? How could they go vertical? How could they control? You know how they could go further vertical? Goldman should acquire Public, the trading app that is more investor-focused, has a stronger participation of women, people of color, has a much better vibe.

And generally speaking, aren't the mendacious fucks that Robinhood is? My, that escalated fast. Anyways, disclosure, I'm an investor in Public. Raised money at $100 million valuation about 14 months ago, I think, or 12 months ago. Maybe it was six months ago in the internet age, in the age of crypto. But it's, I think, or 12 months ago. Maybe it was six months ago in the internet age, in the age of crypto. But it's an interesting question, and you're right, it's not as prevalent. I've gone to work for some companies who try to reposition themselves as a CRM or software company, and they string together a series of other people's applications. And I've

always said, look, you can do that only for so long, and then you have to build, you have to go vertical and hire your own engineering team and build your own intellectual property. You can only do so much just using duct tape and glue to string together other people's engineering and software development. In sum, it's a very thoughtful question. I think Microsoft has done it.

I think Google has done it. Well, Google, that's B2C, isn't it? Hmm. Eric, very good point, but I think any SaaS company, especially a company like Salesforce that's getting to that $100 billion market capitalization has to start thinking like Michael Bloomberg and say, how do we control the end user interface? Thank you for the question. Question number two. Hey, Scott. Yeltsin from Belgium here. So on last week's pivot, you mentioned you are taking out money

from the public markets because you think they are disarticulated from the real economy and will be flat or even go down. Your alternative is to invest in private companies, having citizenship as investment thesis. Most retail investors do not have the option to invest in the private markets. What do you think are the viable alternatives for people without direct access to private markets in order to avoid those flat or declining public markets? Yeltsin from Belgium. That's a gangster. You should absolutely move to the US just so you can say, I'm Yeltsin from Belgium. Because if you're in Brussels, saying I'm Yeltsin from Belgium, doesn't make a whole lot of sense.

But that's worth moving to Detroit. Hi, who are you? I'm Yeltsin from Belgium. Anyways, so I'm getting out of the public markets because I think they are especially rich and inflated. Now, are the private markets a better valuation? I don't know. But the reason I'm investing in the private markets is one, I don't like the stress of reason I'm investing in the private markets is, one, I don't like the stress of watching stocks every day. I find it taxing. I'm trying to spend less time on my phone, and I find I spend too much time on my phone checking my stock prices. And I'm trying to be more prude or economical with my attention, and I want to spend at least an hour to two hours a day less on my phone. And I think I spend 15 to 30 minutes a day checking stocks, and I don't like that. So I want out. And one of the reasons I haven't

bought Bitcoin or crypto is I just don't want to be following it all the time. I think it's a pain in the ass. And the thing I like about private company investing is you talk to the CEO every once in a while. I like private companies because generally I invest in private companies where the CEO wants to have a relationship with me, and I enjoy giving advice. And I also, to be blunt, I get opportunities that other people don't get to invest in private companies. However, there are opportunities to invest in private companies. There are some publicly traded venture capital firms. I think you can get through BlackRock or some of the major houses that invest in venture capital funds. So you're kind of investing

indirectly and there's fees in between you and that private company, but there are ways to play the private market, even for retail investors. So you're not totally shut out. In addition, the best way to play when you're a young person is to go to work for a smaller company. If you think smaller companies are going to boom. I think the best entry point into the private markets with your own human capital, if you want to go to work for a small company, is in sort of what I'll call 10 to 60 employees. Because at employee 10, usually the concept has some merit or some capital. And at sort of 60 to 80 employees, that's the Series C round when the big money comes in and the bad guys show up and start, the majority of the cap table gets pretty tight. So, but between kind of 10 and 60 employees, I think there's a sweet spot or call between 10

and 100 employees. There's a sweet spot of, I can still get a lot of equity, but some of the risk, the real risk of infant mortality has been starched out, that the baby is going to probably survive, but I can still get substantial equity. And even more importantly, small companies, if you're wired that way, are a lot of fun. You do feel invested or you feel vested in the success. It's like parenting. When a company does well, it's the most rewarding thing in the world. And when it doesn't do well, it's the most devastating thing other than obviously your kids. But anyways, I think there's several ways to play the private markets. And my move out of the public markets is not necessarily a valuation play. It's trying to play to my strengths. And it's also I am trying purposely. I'm trying purposely to spend less time pulling up my phone. I've become addicted

to my phone. I don't like it. I see it in my 10-year-old. He suffers from device addiction. And I want to set a better example. I'm trying to put my devices away when I'm around them so they don't just look at me and model me and end up some angry dude constantly checking his phone all the time. Thank you for the question, Yeltsin from Belgium. 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?

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Subscribe wherever you get your podcasts. Published by Capital Client Group, Inc. All right. Welcome back. Numero tres. Hi, welcome back. Numero tres. Hi, Prof G. It's Karolina here, living in California, but currently remote working from my homeland, Poland. I have a question about the value of a PhD.

Considering Google's newly announced programs and other great organization providing micro-certification, is it still worth to dive really deep into a topic? Especially if it's a less technical one, say in sociology, management, business administration. What do you think will be the value of PhD a decade or two from now? And lastly, does it also truly matter the institution granting PhD? Example, should I aim for the U.S. university or should I find the universities located in Poland? I'm contemplating obtaining this degree to gain more credibility in the industry I'm desperately trying to break into. Karolina from Poland.

Karolina, I just absolutely love that. And by the way, I'm an enormous fan of Poland. I've been to Bratwath, Krakow, which has the most beautiful square in the world. I love the architecture. I love the beer. I love the energy of Poland. I just think the world of Poland, I think it's an economic marvel and can see if I were going to spend a lot of time in Eastern Europe, it would be in Poland. Anyway, so look, PhD.

I think a PhD, I think a doctorate is a fantastic degree. And if you are blessed with the resources to pursue a PhD and you have passion for the subject material and for studying and for teaching, I just think it's a wonderful credential. With respect to the granting institution, the Halo brand, this isn't a good thing. But yeah, it's incredibly important because a doctorate from MIT versus the University of Gdansk, there's just an entirely different world. One is a regional degree. I mean, the doctorate is a global certification. If you're a doctor in something, people just take you seriously in that chosen field. But there's just no getting around it.

Brands matter in a digital world. And in a global world, if you want to work outside of Poland, I would say to whatever extent you can. And a lot of it's situational. Do you have a partner and kids? Do you have parents you're taking care of? Do you have the money to pursue a degree? Can you get in at a better or more what I call prestigious university? But there's just no getting around it.

The strongest brands in the world are universities. And if you can get a PhD from what I'd call an elite university, be it ESSEC, INSEAD, Instituto Impressa, there's fantastic universities all over Europe. And we kind of have a lock in the U.S. on the truly elite. In America, we're great at software, we're great at making weapons, we're great at making media, and we're great at higher education. We have the best brands in the world. Bottom line, right or wrong, if you can get to a great university and get a PhD, whew, gangster move. In addition, I think having a doctorate is just an incredibly, I think it's a wonderful thing to go that deep on something, shows you have a craft. And it takes some time, but you're immediately separating. What's the key to strategy?

When we say the word strategy, what do we mean? For me, all strategy boils down to one basic tenet. What can I do or what can we do that is really hard? That's it. What can I do that 99.99% of the rest of the population can't? And if you can go spend five years in a graduate program of a good university, becoming one of the most knowledgeable people in the world, on a slice of the world, no matter how thin that slice is, that's a strategy. That's a great strategy. I don't care what it is. If you're excellent at it, I don't care if it's sociology, evolutionary anthropology. I think a lot of that stuff, when you go that deep, has a very strong tie to business and has a lot of opportunities for value creation.

Also, I would think about teaching. I think teaching for tenure-tracked individuals, although I think tenure is a corrupt union, those are the people who get into that union, have a really nice life. They basically get increasing compensation every year with lower accountability, which is really nice if you're part of that union or that guild. I'm just a big fan. If I had to do it again, I think I would have gotten a PhD, and I still might. I'm thinking of retiring in three and a half years and going anonymous and shutting all this shit down, as I think I've become too pathetically focused on other people's affirmation. And I don't like that feeling. I don't like me pursuing that feeling. And so I'm thinking of basically pulling the plug on this in about 37 to 39 months. And one of the things I'd like to do, kind of going underground,

is I might pursue my PhD at my rate by old age. Anyways, a long-winded way of saying, get to the best university possible, given the constraints and resources you have. And absolutely, if you're inclined to get a PhD, I think it's a fantastic degree. We are, as a species, what separates us from other species, our cooperation, and I think moving into the light of learning. And when you earn that doctorate, when you get a hood, when you get hooded, it means something real about how human you are. It means something real about how great the society is you live in. It means something real that you now have the ability to impart knowledge on other people.

I think it's a fantastic degree. Carolina from Poland, best of luck to you. Stay in touch. Let me know what you decide doing and where you end up. Next question. Hey, Scott. This is Eric from up. Next question. Hey, Scott. This is Eric from Chicago. My question is about social capital.

I recently was accepted as a transfer to NYU, but after lots of thought, I've decided to stay at my university to graduate with no debt. My NYU application centered around how I wanted to be a part of the next wave of digital entrepreneurship, and I couldn't see myself starting a business if I had to pay off debt until I was 30. To be honest, I'm not worried about my education. I can learn anything I want online, but I'm nervous about growing a professional network and meeting potential co-founders with complementary skills. How would you recommend young people find future business partners and grow a network outside of academia? So, Eric, let me just say that a lot of people are going to tell you that good for you. You

don't need a college degree. I think we live in a caste society, and I think you might have made a mistake. And I hate to say that because I like to think of myself who's supportive and thinks there's different routes to success, and there are. But if you can, kind of a gangster move is to pay a lower tuition at a junior college and then to transfer to an elite university and just get that credential and that tattoo on your forehead. And NYU is, and this hasn't always been the case, but NYU is now considered an elite university. And we like to think it's because of the faculty. We pat ourselves on the back. And it has nothing to do with us, in my opinion.

Although I would argue maybe at the law school, the medical school, they've got some pretty outstanding faculty. And Stern has outstanding faculty. Anyway, now I'm backpedaling. But our success really isn't our fault, and that is young women, and more and more young women are going to college, all want to hang out with Rachel and Ross and Will and Grace and spend four years in Soho. So our applications have exploded, which means we can be more selective. And the incredibly fucked up, insidious devil's work rankings that love exclusivity to disappoint people around the nation, they like that. The more you disappoint young people and make families feel ashamed and feel households with rage in the spring by rejecting not 80, 90, but 93% of the applicants, the more we like you, the more we like

you, and the more pride you can feel as faculty who have engaged in being enforcers of the caste system. Anyways, another talk show. But I think if you can get to an elite university and get that certification, you should do it. I just think you have it the rest of your life, and I think it's worth it. Now, having said that, that's not what you asked me,

because it sounds like you've already made that decision, but in terms of how you meet people, online, be aggressive. I would say that one of the key attributes in your 20s is to be incredibly promiscuous and aggressive around relationships. I get between 20 and 30 emails a day from people and requests on LinkedIn, young people asking me for advice. And most of them I just can't get to, but occasionally I do, or I try to get to as many as I can. I was very aggressive around relationships when I was younger, reaching out for mentors, reaching out to get together with people, because the reality is the ballast of America is the middle class. The ballast in your life, where you return your center of gravity, will be the depth and quality of your peer group. And so you constantly want to be upgrading your peer group.

You want to hang out with smarter, more successful, more interesting, higher character people because you will rise or fall to the level of your peer group, full stop. I think sort of the pillars of my success would be the University of California giving me incredible opportunities at a low cost in terms of world class certification, the irrational passion for my well-being my mother had. But also, in high school, I hung out with a really impressive Mormon kid and a really impressive black kid. And I hate to kind of define people by their religion and their race, but they gave me a sense of empathy and different kind of approaches to life. One guy didn't drink

and was totally focused on his academics. The other guy was trying to get into college with a football scholarship. And they were both high character, high quality people. And I'd like to think that a lot of my character and quality as a person has come because I hung out with really impressive people. My best friend, Adam, in high school is this incredibly impressive guy who he decided to go to business school. And I thought, well, if Adam's going to business school, I'm going to go to business school.

Anyways, long-winded way of saying, your job is to push the limits of your comfort zone and reach out digitally, introduce yourself, push yourself out there at events and network and invest in relationships and follow up and try if there's an opportunity to do a solid for somebody, that's a gift. But if you're not going to go for that certification, you've got to work even harder because these institutions do get incredibly impressive people because they can pick, as Harvard did, 3.6% of their applicants. Jesus

Christ, Harvard. Fuck you. Little much? Was that a little much? Anyways, in sum, if you're not going to get that sort of tier one certification, you have to be especially aggressive establishing relationships. There's more avenues to establish those relationships via digital. The bad news is everybody's doing it. I've noticed my email is going up exponentially.

But put yourself in a position to be uncomfortable. It's okay to be rejected. If you're not getting rejected, if you're not sending emails that aren't being answered, that means you're not trying hard enough. Best of luck to you, Eric. Thanks for your questions. That's all for this episode. Again, if you'd like to submit one, please email a voice recording to officehours at propgmedia.com Our producers are Caroline Chagrin 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. We'll catch you again. We're right back at you. Now I remember where I am.

Dad! Dad, come back to us. Hey, it's Scott Galloway, and on our podcast, Pivot, we are bringing you a special series about the basics of artificial intelligence. We're answering all your questions. What should you use it for? What tools are right for you? And what privacy issues should you ultimately watch out for? And to help us out, we are joined by Kylie Robeson,

the senior AI reporter for The Verge, to give you a primer on how to integrate AI into your life. So, tune into AI Basics, How and When to Use AI, a special series from Pivot sponsored by AWS, wherever you get your podcasts. 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.