The Prof G Pod with Scott Galloway - Office Hours: Tesla’s Competition, Identity Verification, the Scam of Tenure, and Public vs. Private Companies

Episode Date: June 14, 2021

Scott shares his thoughts on Tesla’s future in a more saturated EV market. He also answers questions on investing in the identity verification market, whether employee-owned businesses could replace publicly traded companies, and how to become a more active member of academia. Music: https://www.davidcuttermusic.com / @dcuttermusic Learn more about your ad choices. Visit podcastchoices.com/adchoices

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NMLS 1617539. Welcome to the Prop G Show's Office Hours. This is the part of the show where we answer your 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 officehoursatprofgmedia.com. Again, that's officehoursatprofgmedia.com. First question. Hi, Scott. This is Jeff from Seattle. While Tesla has a first mover advantage, it's also positioned itself as a luxury item. And as you have mentioned, will face stiff competition from the Apple car. In addition, the best selling vehicle of the last 44 years, the Ford F-150, has just electrified. This electric F-150, while downstream of the Tesla, meets all of the Cybertruck specs, including price, while also carrying the trust and fleet sales of the American masses.

Tesla also faces stiff competition from startups like Rivian and legacy producers like General Motors. Given these challenges, where do you see Tesla three years from now? Should they pivot to selling batteries in their OS or grind it out? Jeff from Seattle, thanks for the question. So first, the fine print and the disclosure. I'm wrong about a lot. There are a few things I've gotten more wrong than Tesla. I thought when this thing was, or this company was at 50 or 60 bucks a share, it would get cut to 30. Why? I just can't wrap my head around the valuation. Since the pandemic began, Tesla was the fourth most valuable automobile company behind Toyota, Daimler-Benz, and Volkswagen, or maybe it was Toyota, Volkswagen, and Daimler-Benz. Anyways, post-pandemic, it's now number one. It's not only number one, it's worth more than Toyota, Daimler-Benz, and Volkswagen combined. So, is it a great company?

Yes. Is it a great product? Yes. Is it dramatically overvalued in my view? Yes. And a couple of the reasons you mentioned are why, specifically competition. And you got to give Elon Musk credit. He has catalyzed a move to electric in automobiles that just wouldn't have happened without him. We might see more EV without Elon Musk. We wouldn't have seen the investment and the response that he inspired. So he's been good for the planet. I don't think there's any getting around it. According to a Credit Suisse analyst, Tesla's global EV market share dropped from 29% to 11% between March and April. So I've said it before and I'll say it again. When Tim Cook gets on stage and he pulls back

the curtain and there's this reasonably good looking car, which it will be, that has an Apple logo on it, me and about 250,000 other people who want to express whatever it is we express with Apple products are going to get on that list. And I think you're going to see $25 to $200 billion transferred from the market capitalization of Tesla to Apple within 30 to 90 trading days. So I just don't see how this company at this valuation is sustainable. Again, great company. Has been good for the world. A great product. I just can't wrap my head around the valuation. Thank you for the question, Jeff from Seattle. Next question.

Hi, Scott. This is Chegg from New York. My question is about the identity verification market. You've previously spoken about how most online trolls tend to be anonymous when you visit their profile and that if verifying your identity was mandated by platforms, the internet could be a safer and nicer place. Moreover, identity fraud and quick, accurate verification of fraudsters seems to be an issue that many neobanks, fintechs, and investment platforms seem to be dealing with more and more. The ID verification market is projected to be worth $18 billion by 2027, but seems to go under the radar. Sounds like an opportunity to invest in the picks and shovels of big tech. How do you think about the identity verification market and its value in the future? I checked from New York, a really thoughtful question.

But the first thing is I had trouble focusing on the question. So I was trying to place your accent. I get the sense you were raised by a bunch of different people and maybe spent a year with wolves at some point. Yeah, I could not pin down that accent. Anyways, if you're listening to this, please send me an email and tell me where you were raised. I'm fascinated by accents. Just fascinated. I'm fascinated. That's the cultural side of me. I can't speak another language, but I try to identify accents. I'm usually pretty good at it. Anyways, the identity verification market was about 8 billion in 2020 and should double by 2025. So, you're absolutely right. Bloomberg reported that Okta, an identity verification platform,

was used more than 52 billion times to log into an app or website between March 2020 and March 2021, up almost 200% from the same period a year earlier. What's been the biggest innovation in my new iPhone or the new iOS is the face recognition, which is a form of identity or an offshoot of identity. Okta shares more than doubled last year. Trulio, I think it's called Trulio, T-R-U-L-I-O-O as opposed to Trulio, Trulio, a Canadian-based identity verification startup recently raised $400 million and is now valued at $1.75 billion. So, word is out. Let's go meta on identity. I think identity is so powerful. Why? Why? Airbnb and Uber wouldn't exist without identity. Specifically, you wouldn't want to get in the back of a car of a non-medallion private vehicle

driven by someone you never met before unless there was identity. What do I mean by that? Uber or Lyft knows who that individual is. And if they do something, if they try and kidnap you or steal from you or whatever, chances are they're going to be caught because they have implemented identity constructs and protocols. Airbnb, would you rent your place out for the weekend to a stranger? Would you stay in a stranger's place without identity? So, identity is a key component of trust. I think it's a fantastic market. I think we're going to see a lot of interesting things around kind of, what do they call it, bio-identity? Anyways, I don't know. I love Clear. Clear is now implementing their

technology at stadiums. And I also think vaccine passports, and that evokes an emotional reaction from people. But I think it's coming. We have identity. Think about biometric identity, what kind of advances we could have. I travel out internationally, and when I go to China or somewhere, they have temperature identity. And that is they're taking your temperature passively as you just walk through the halls. And if you have a high temperature, they say, can you come here? And they just want to make sure you're not sick. Why wouldn't we have some sort of identity around passport where you just keep walking and you have a card on you that says, this is my identity. This is why I am safe to travel. This is why I can get entry into your nation.

And I'm double vaxxed. So I think that like a lot of things, COVID is going to accelerate identity. It is a key component of trust. It is a key component of, in my opinion, reducing the emissions online. And that is if Twitter enforced identity, I think you'd clean up two-thirds of the bullshit and the harassment and the doxing. And that is the majority of the really ugly shit on Twitter is from these anonymous accounts. And that is individuals who are keyboard cowards who don't want to be associated with the things they say because the things they say are so heinous. So, identity is, I think, a key component of where we need to be in the future. Now, can you decide to be anonymous? Yeah. Should you be able to search anonymously?

Yeah. But you don't get to do that and get in the back of someone's car. You don't get to do that and buy a gun. You don't get to do that and land in a nation that is fairly COVID-free without proof that you are who you say you are

and without proof of vaccination. Identity is a key component of our world moving forward. If you're worried about privacy, then elect judges that, in fact, you believe have the discretion and the balance. And elect legislators that write good laws to protect identity when we need to be anonymous, when we don't want our health information, our sexual identity, our political views attached to our identity. That's perfectly understandable. But when it comes to the free flow of goods, it comes to safety online, it comes to making our lives easier. I think identity is a fantastic place to be. A long-winded way of saying, I am bullish, a thoughtful question. And if you're a young person getting into or investing your human capital, your financial capital in kind of the identity

market or identity verification market, I think is a great idea. Oh, my gosh. Oh, my gosh. Chad from New York. Great question. All right. We have one quick break before our final two questions. 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 Blenhill, 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. Hello, Professor Galloway. My name is Cody and I'm from Los Angeles, California.

My question for you is, how do you see the prospects for employee-owned businesses replacing publicly traded businesses in the future? I personally believe that we could see a transition of capital from a small group of people in a speculative market to employees owning their own businesses instead of shareholders, thereby replacing unions and acting as a catalyst for the diversification of wealth to the lower and middle class. And I'm just curious how you see the potential for employee-owned businesses in the future, or if you predict any negative ramifications from employee-owned businesses becoming a larger part of our economy. Cody from LA, thanks for the thoughtful question.

So, private versus public. So, Rolex is a privately owned firm. As a matter of fact, it's owned by a trust whose mission is to, I think, enhance the civic life of people, I think, in Switzerland. So when I was at Rolex, I used to do some work with them. They said, see that bridge over there? And it was some very nice bridge connecting to Hamlet. They said Rolex paid for that. Bose, a fantastic firm, headphones firm. The original Dr. Bose gave one voting share to his wife, but all the other shares are owned by MIT.

So every year MIT gets about $200 or $300 million shoveled to them because Dr. Bose believed in great education and great research. So, yeah, private companies can do wonderful things, but so can public companies. It's a little bit harder to not have to have what I'd call a civic mission when you're a public company, because typically shareholders buy shares in your company because they want profits and they want shareholder growth. But there isn't around income inequality. I don't know if there's a lot of difference. A privately held firm, there's a few advantages. They can make investments for the longer term. A lot of luxury brands, the Chanel's of the world, the Hermes of the world, are privately owned because they didn't want the short-term profit pressures that created incentive not to invest for the long term. So they have the ability

to make long-term investments regardless of public market pressure, which is a real luxury. Now, a lot of firms have gotten around to that by creating two classes of shares where they can just ignore the shareholders because they can never be kicked out. So a lot of media companies own, the Sulzbergers own, I think, 14% of the outstanding shares in the New York Times, but they control it, the Ford family controls Ford automobile, and I think they only own single digits. I'm not a fan of that. I think accountability and ownership have to be correlated. In my opinion, it should be one person, one vote, and one share, one vote.

But anyways, different talk show. The other thing that's a real advantage of a public company, quite frankly, is it's oftentimes a cheaper source of capital. And what do I mean by that? The public markets are really frothy right now. And you can raise money while giving up less shares at a lower price. Now, why is that important? Is that just greedy? No, it isn't.

In a marketplace that demands tremendous investments in technology and growth, your ability to access cheap capital and maintain that growth is a strategic weapon. That's really how Netflix and Amazon built two of the most dominant, valuable companies in the world, because they had access to cheaper capital. And right now, while the private markets are offering very cheap capital in the venture capital unit, nothing matches a frothy sector like the public markets. And that's why companies go public. Also, also, it can be a tremendous wealth-creating construct for employees in the form of RSU or options where they can build a lot of wealth working for a publicly traded company. So, I don't think it's as simple as that. I'm not sure. I'm not sure.

I think there are some benefits to being private, but I think being public also creates a certain level of transparency. It creates more scrutiny of the company. I think publicly traded firms give a bunch of people the opportunity to participate in the wealth creation of American companies. So I don't know if I see a move to more privately held companies or family control companies. I think what you're going to see is greater innovation around financing, and that is they're making it more easy to go public through SPACs. Now, are they making it too easy? Maybe. Direct listings, where you don't have to give up 7% fees to investment banks and don't have to be subject to a bunch of bankers deciding whether you should be public or not. Crowdfunding.. So a ton of innovative constructs to try and get new businesses and great ideas capital. But I'm not sure, while there's definitely unique advantages to being private, there's also advantages to being

public. And I'm not sure you can make an argument that one would solve kind of systemic or structural problems any better than the other. But thank you, Cody from LA. Cody from LA, thank you for the question. Question number four. Prof G, this is Tito, like Tito's vodka, calling in from Carlsbad, California. I'm a fellow Bruin, go UCLA. Prof, looking for insights, perspectives, or tips into how to be a much more active member of academia.

As I'm an adjunct faculty member at a couple of Southern California universities teaching marketing and management courses without the PhD degree. Is there a route to do so more actively within certain or more progressive looking institutions and academia that wouldn't require or demand a PhD degree?

Tito from Carlsbad. First off, thank you for the kind words. Doesn't Tito sound like he'd be fun to roll with? I was born in San Diego and my father lives there now. I think San Diego, true story, my mom was like 10 months pregnant with me and they lived in Toronto

and her and my father met at a dance in Canada. They'd both immigrated from London and Glasgow, respectively. And they just could not endure another winter in Canada. So they've read an article that the best weather in America was in San Diego. And they got in their Austin Mini Cooper and drove. Well, my mom was, you know, literally I was probably, you know, she was probably dilating. Supposedly she was so pregnant.

And they drove 3,000 miles to San Diego. Anyways, that's my San Diego story. So, look, here's the deal. Education has become the caste system enforcer for young people, and it's really unfortunate, but show me where someone lives, and show me their degree, and I'll tell you how much money they're going to make. And someone who graduated from junior college in Little Rock, Arkansas is lucky if they make $50,000. And someone who graduates from the Sloan School of Business is going to make $145,000 their first year out of school. And by the time they're 30, they'll be making a quarter million dollars a year. And within the education system, we have a caste system. And that is you have the tenured

faculty that got their PhDs together, where they write mostly meaningless research, where their objective is to get citations from each other. And then we buy these ridiculous academic journals, the Journal of Consumer Research, and we pay $40,000 for this thing, which no one reads, which is really just artificial relevance and an artificial benchmark so they can award each other tenure. And then they get lifetime employment just as they're becoming unproductive. As a matter of fact, they're so unproductive that most universities have a funding requirement that to give someone tenure, you have to set aside sometimes $2, $3, $4 million as we recognize they're no longer going to be pulling their weight. There are certain departments that still need tenure because they have to say provocative things and they have to be protected. We haven't said anything in the business school that's that provocative in 30 years. No one gives

a shit about the difference between dark water and clear water economics. Anyways, you end up with a bifurcated, a two-class system at universities. The tenured faculty that soak up the majority of the spoils don't teach that much, do shitty research, and are overpaid. I realize that's a generalization, but there's a reason for generalizations in that they're mostly accurate. And two, the rest, the adjunct and the clinical faculty, it's much more brutal. You're in the latter. Without a PhD, and I'm one of those people, I'm what's called a clinical professor. And that is I got there through some supposedly private sector achievement. And because we keep raising the

tuition so fast on students that they're demanding people with more practical knowledge, they're demanding better teachers. So they bring in these clinicals and essentially, and adjuncts. The first year I was an adjunct at NYU in 2002, they paid me $12,000. Why? Because their viewpoint is teaching is your calling, and isn't it fun to teach at NYU? And slowly but surely, my classes grew. Slowly but surely, I did more media. Slowly but surely, I started doing research. It wasn't peer-reviewed research. It was research for my own firms. And my currency grew at NYU. And quite frankly, every three or four years, I would get an offer from Cornell or some other university to come teach. And I'd walk into the dean's office and say,

I like it here, but you need to match this. This is clearly my market value. And slowly but surely over time, I think I got up to about 200 grand a year and you get good benefits. The university is an outstanding place from a psychic or non-economic compensation standpoint. It's really inspiring to be around young people who are learning. Some of my colleagues are incredibly impressive. I've made really good friends there. It's a really wonderful environment and a wonderful job. For the non-tenured faculty, it's the Hunger Games because they waste so much money on the tenured faculty that they have to be especially harsh on the clinicals and the adjuncts.

So, the currency you have to develop, boss, is the bottom line is you have to be especially harsh on the clinicals and the adjuncts. So, the currency you have to develop, boss, is the bottom line is you have to be outstanding. You have to have huge demand for your courses. You have to be a fantastic teacher, or you have to bring a lot of heat and a lot of awareness to the university through your other activities such that more people apply. I get, I realize I'm boasting right now, but it's true. I get mentioned a lot in applications to Stern and they like that. I'm on CNBC, or I used to be on CNBC a lot before I got banned. Another story, another story, but I'm on CNN a lot, which they love. And my classes are huge, which means they make money. It's a business. So this is what you got to do as an adjunct. You got to create a shit ton of money for them. How do you

do that? By getting a lot of butts or putting a lot of butts in seats. But boss, it's a haul. I think being an adjunct or a clinical or a non-tenure track faculty at a business school is a fantastic way to spend your money, not make your money. I think it is a very difficult way to make a living unless you are exceptional. So one, you're at a crossroads. You either have to be exceptional at it or you have to make your money somewhere else and do it as sort of an adjunct, if you will. That's why they call them

adjunct faculty. Sorry for not a more inspirational or optimistic answer, but the reality is academia has bifurcated into the haves and the have-nots. The tenured faculty are so wasteful, so inefficient, and so overpaid that they have to be especially harsh and brutal on the non-tenured faculties. If you want to make a career in it, then boss, you're going to have to be outstanding. Thanks for the question. That's all for this episode. Again, if you'd like to submit a question, please email a voice recording to officehoursatprofgmedia.com. Our producers are Caroline Chagrin and Drew Burrows. Claire Miller is our assistant producer.

If you like what you heard, please follow, download, and subscribe. Thank you for listening to The Prop G Show from the Fox Media Podcast Network. We'll catch you on Thursday. I think kind of the most elegant shark, almost like a whale shark, I don't know, or an orca. That's it. It's an orca. Super elegant shark that's a mammal called an orca. By the way, I get to serve that TikTok video showing all those orcas working together to kill the seal that's on the ice floe. They're like, I don't know, let's work together so we can drown and then rip apart the seal. Anyway, anyways, elegant death. If orca or where was

I going with this? What are really fucking elegant orcas? Where am I? Oh, apple. Apple's the elegant shark, the orca. 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.

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