The Prof G Pod with Scott Galloway - Office Hours: Should Meta Pay Dividends? + International Students, and Finding Hope

Episode Date: October 5, 2022

Scott takes a question about whether it’s time for Meta to pay shareholders a dividend. He then offers advice to an international student debating whether he should pursue a career in the U.S. or Europe and shares what makes him hopeful.  Music: https://www.davidcuttermusic.com / @dcuttermusic 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 property pods 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 email a voice recording to officehoursatpropertymedia.com. Again, that's officehoursatpropertymedia.com. I do not hear or see these questions before I hear them with you. First question. Hey, Scott.

This is Andy. Long-time listener, first-time audio submitter. Really enjoyed last week's segment on when and why corporations decide to offer a dividend, and it got me thinking whether Meta should pay one. Let's break it down according to four criteria your team shared. First, Meta is no longer a growth company. It's a mature one. Barring the lobotomy of the Chinese Communist Party, there are no more markets to conquer.

They can only recruit replacement-level users from younger generations, and we all know how that's going. Second, reinvesting their capital into innovation has not paid off. From Facebook Watch to Facebook Dating to Instagram Shopping to Reality Labs, almost everything besides Marketplace has been a flop at best, money put at worst. Their most successful innovations have all been acquisitions, and they'll be hard-pressed to get any new ones past Congress and the FTC. Third, even if meta and the Web 2.0 social era have peaked, there will still be anywhere from a 5-15 year period of managed decline where their ad business will continue to print cash, not unlike the interminable off-ramp from cable TV. If they can

keep costs down, they'll still generate big revenue and good margins over that period. Finally, as you've noted about gross sectors, stock options are a huge lever for attracting and retaining talent. An ever-climbing share price was enough to keep a lot of people there, even when their policies and culture were at times difficult to justify. With a tanking price, dividends could be a difference maker in preventing attrition from meta. Any thoughts on this or any other company who you think should issue a dividend for the first time? Thanks a lot. Andy, thanks for the thoughtful question. So stock buybacks and dividends are a way of returning cash to shareholders

such that they don't have to sell the stock to get cash flow. Typically, dividends sort of signal a company that's maturing. A lot of times, what Aswath Damodaran, my colleague at NYU, who I wish was here right now to better answer this question, would say is that with tech, sometimes you have companies or in any industry that believe they're still teenagers and they're not. They're adults. And they try and do all these crazy things and mergers rather than just acknowledging, okay, we are aging, and it's time to acknowledge we're a mature company. So Facebook and Google, I don't think, pay a dividend. Apple does. Apple had an activist investor, specifically Carl Icahn, who I believe talked them into

giving a huge one-time dividend because Apple was aggregating so much cash on its balance sheet. I think at one point it had a third of a trillion dollars in cash on its balance sheet. It was a steady grower, but not a big grower. It didn't like to make big acquisitions. So that felt like a dividend. And I believe Apple is now a dividend payer. I think Meta would say right now that even if we're not growing, it's temporary right now and we need to massively reinvest in new initiatives to jumpstart growth. And I don't see them anytime soon offering a dividend. Whether they should or not, I think that's a fair point. Is digital marketing an industry that's maturing?

I don't know. I think it's still growing double digits. It's meta that's not growing, specifically because the metaverse was a fever dream shit show that makes no sense. And two, you have Apple who has kicked it in the nuts and said, we're not going to let you track people. As a result, Meta's targeting has been severely hampered or hamstrung, and that has probably taken $10 billion off of their top line or taken them from kind of a high single digit, low double digit grower to a flat company. I mean, it's just amazing. We talk a lot about distribution. When you control your distribution, you kind of control your future.

And Facebook has never been able to establish its own distribution. It doesn't have a phone. It doesn't have an appliance. It doesn't have a television. They've tried with this product called the Portal that is a big thud. They're trying with the Oculus, which is the thud of the last decade. I'm even calling it the thud of the millennium, the thillennium. It's the thillennium, Andy. Anyways, so it's an interesting question whether they should, but at the end of the day, what they should and what they will do are totally up to

Mark Zuckerberg because he owns, while he only, I think, owns somewhere in the kind of high teens of the actual company, he has total control over the company. And I don't see him any time deciding, yeah, we're a mature company and we should start returning cash to shareholders. I think he's going to decide, no, we still have big plans. I still want to make big, bold bets. I still want to take big swings at the

plate, and I need a big Louisville slugger of cash. The market capitalization for Facebook, I believe, or excuse me, Meta, fuck it, I'll just call them Facebook. They're Facebook, is $370 billion. It's trading at around, I think, just south of 140 bucks a share. Get this, year to date, Meta is off 60%. I used to own Meta stock a few years ago. I've owned all of big tech because after writing a book on big tech, I decided they're all monopolies and owning monopolies is a great investment strategy. And then some people correctly pointed out that I shouldn't be railing on them and talking about how they're ruining the world and then financing their march around the world and their teen depression. And I kind of

started to get to me. So I sold it thinking I was going to lose on some gains. And that was, it's better to be lucky than good. The stock is off dramatically. Over the last five years, Meta stock is down 20%. So what's the learning here? Big tech is notorious for believing that they're still teenagers when in fact, they their adults are even seniors. Interesting question. Thank you, Andy. Question number two. Thanks, Carl. To give some context, I'm currently an undergrad senior studying in Boston. I've been in the U.S. for a while. I'm an international student. I was born in London and grew up in Dubai and then came to Boston to study. My question is, as an international student, I don't know if you really know much about it,

but we have to go through a lot of hurdles and challenges to get employment. In a way, I kind of dislike the United States in that system. I kind of feel like I'm just here to spend my money, procure some skills and talents, and I'm not even valued or don't feel valued by the US job market because it's so limited in that sense. You know, I'm kind of just in a phase right now where I've had a bunch of internships at investment funds, law firms, corporate

companies, etc. And I'm just kind of deciding my next steps. I don't know if it's worth for me to stay in the US or go back to the United Kingdom to hopefully get work there. If I went to the UK, it would be a pass of least resistance. If I was in the US, I would have a lot of resistance. If you have any tips on is going to a place like London or Europe still a good opportunity for me? Or should I really just stay here and grind through the craziness and application process that is on the road ahead? Thank you for the question, Sahil.

So first off, and it's difficult to tell without seeing somebody in person, but I get the sense you're a little bit down right now. Or maybe you're just kind of a mellow, low-key guy. But if, in fact, you are feeling down, it's important that you take pause and realize that you were, my understanding was, were you the United States, being in Dubai and London and then Boston kind of isn't your fault. And that is because you were smart enough to be born and live in modern economy places with enormous opportunity and then find your way as a young man to Boston, you've kind of hit the lottery. And I hope that you take pause even to think of how difficult your situation might be right now or how frustrated you are with our immigration or visa or worker status. Your glass is definitely half full. Okay, so some sober responses. You said you kind of feel like you're just here to spend your money, that we're just taking your money. That's 100% correct.

And that is we take in about 400,000 international students a year undergrad. And we say in our brochures, when I say we, the higher education system, that it's for diversity. That's bullshit. We bring in foreign students because they pay full freight. And most of them check a box in the application that says, I will never pursue financial aid, which means they have a much easier time getting in. The wealthiest people you will meet at universities, at least undergrad, are the foreign students because typically their parents are very, very wealthy. And the ultimate luxury good globally is not Hermes. It's not a Birkin bag.

It's not a Panerai watch. The ultimate luxury item is not a Ferrari. It's having your kid get an undergraduate degree from a U.S. higher education institution. Now, in terms of what is a fairly fucked up immigration process, and that is we train people who get here. They usually grew up with a lot of privilege, but they're also usually very good if they can figure out a way to get to the U.S. They have the discipline and the credentials to get into a top university here, and they know how to play with others, and they integrate into our American culture. Generally speaking, that young man or woman would be a wonderful person to have in America for a long time, or at least some time, and then they go back, and they feel good about America, and they

feel good about Wolverines football, and they feel good about the Midwest, and then they go back and they feel good about America and they feel good about Wolverine's football and they feel good about the Midwest. And those people oftentimes go on to be in government in positions of power, see above, they come from wealthy families and they're impressive people. And I believe the more international students we have not only come to college here,

but also spent some time in the US post-graduation, the less likely we are to go to war with other nations, the less likely or the more likely we are to have greater international trade and create connective tissue across border, which I think is a wonderful thing. So I absolutely feel for you. Something we used to do at my companies is we used to take pride in getting interns and then working our ass off to get them residency or visas. We don't do it as much anymore because, quite frankly, it is so goddamn hard and expensive because as Americans and as American policy and American government, we are totally fucked up in the head around this. So anyways, on to your

question, should you grind it out in the US or should you go to Europe? These are high-class problems. I'm living in London. It is a world-class city. I think it's the second best city in the world, maybe with the exception of New York. And for certain people, it's the best city in the world. It's also on sale right now because the pound is so weak. And I don't know where your source of income is right now. It's probably coming from your parents. But it's not inexpensive. It's less crazy expensive. And Europe is a wonderful place to live. Is it as good as America? Kind of depends where you are. My viewpoint is that for someone your age, America is probably better.

My general stereotype of America versus Europe is that America is the best place in the world to make money. And Europe is the best place to spend it. And you're in the making part of your career. But they're both wonderful places to live. And this is how you make your decision. You work like hell to try and figure out and find a job that will sponsor you. And you let the market decide.

If that doesn't happen, then it's off to jolly old England or Europe, which by the way, is a really awesome plan B. So to summarize, to summarize, Sahil, you are really fortunate and you should take stock of your blessings and be happy. Go hard at trying to find a job in the US if that's really what you want to have happen. And if it doesn't work out, then boss, you are doing what six and a half billion people on this planet would love to do and that'll start your career in the wonderful continent that is

Europe and in the amazing city that is London. Sahil, thank you for the question. We have one quick break before our final question. Stay with us. 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,

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Go to constantcontact.ca for your free trial. Constantcontact.ca. Welcome back. Question number three. Hey, Scott. This is Robin Daniels calling from Copenhagen, Denmark. I actually spent the last 20 years in the US in marketing, where I was CMO of WeWork, among many other things. I'm a big fan of your show, and my question to you is this.

There's a lot of things to be worried about in the world right now, and you frequently rant about them, and I love it. But what are you hopeful about? For example, I spend a lot of my time these days with startups and it always makes me hopeful for the future because you've got these brilliant, motivated young people who are trying to solve these massive challenges that we're facing in the world. They care so much and they want to make a difference. It's kind of my antidote to the negative news cycles that seem to dominate these days. But what about you? What makes you hopeful? Thanks a lot and keep doing what you're doing.

Take care. Robin from Copenhagen, you are literally what everybody needed today. And I love your optimism and that's a wonderful question. So thank you for that. So you're absolutely right. We are more depressed and cynical than we should be

for a lot of reasons, but one of them is the media wants to put us on high alert. The media knows that we're basically, as a species, like a Tyrannosaurus rex. We're drawn to movement and violence. And a lot of it has to do with cadence and news is a profit machine, where every day you're trying to capture people's attention and keep them engaged. But if you take the perspective of the lens back and look at it globally, even with all the problems around climate change and divisiveness and nationalism,

it's just hard. It would be hard to argue that things haven't gotten a lot better consistently around the world. Now, what makes me hopeful? Every time I teach a class at Stern, I teach big classes. They're usually around 300 kids. When I say kids, they're young adults, average age 27. I think every year they get smarter, faster, more socially conscious, more adept with technology. I just think we are producing a group of really impressive, talented, socially-minded individuals who will do a better job running the world. I'm super optimistic about the decisions we've made or some of the government actions recently around climate change. We're supposedly going to reduce with this most recent climate legislation

carbon emissions by 40%. I'm in London. I think the majority of the cars here are electric. And just from a mentality standpoint, and I'm not an environmentalist, it feels as if we've hit a tipping point where even the climate change deniers are sort of acquiescing and going out and buying a Tesla just to signal that they are hip and rich or whatever. It feels as if we've just hit a tipping point around climate change. I love that Ukrainians are demonstrating courage, grace, incredible grit, and with the help of our

intelligence services and arms being sent to them from our brothers and sisters in the European Union and in America are pushing back on tyranny. I love the fact that the Russians are on the run. I just think that, you know what makes me really hopeful? Vaccines. And it makes me feel really good about America. No one's lining up for Russian or Chinese vaccines. We produce the best vaccines in the world. And by some estimates, if we hadn't produced these vaccines as quickly, we would have lost another one to two million Americans. I think there's a ton to be optimistic about. I think the world gets slightly better every day. So I'm excited about coming out of a,

I think we need to get on with a recession. I think prices should come down for young people. In sum, any honest appraisal of data that goes more than a year, three, five years, backward and forward, spells one thing. One thing, the world gets better every day. Thanks for the question, Robin. That's all for this episode.

Again, if you'd like to submit a question, please email a voice recording to officehours at propgmedia.com. 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?

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