The Prof G Pod with Scott Galloway - Office Hours: The Lab-Grown Diamond Boom, Investment in Women’s Sports, and Deciding Whether to Quit Your Job

Episode Date: November 29, 2023

Scott gives his thoughts on the diamond market, specifically how the rise in lab-grown diamonds has affected the industry. He then discusses why women’s sports are a good investment and whether he��d invest in an athlete representation agency. He wraps up with advice to an investment banker planning to quit his job to travel the world.  Music: https://www.davidcuttermusic.com / @dcuttermusic Learn more about your ad choices. Visit podcastchoices.com/adchoices

Support for this show comes from Constant Contact. If you struggle just to get your customers to notice you, Constant Contact has what you need to grab their attention. Constant Contact's award-winning marketing platform offers all the automation, integration, and reporting tools that get your marketing running seamlessly, all backed by their expert live customer support. It's time to get going and growing with Constant Contact today.

Ready, set, grow. Go to ConstantContact.ca and start your free trial today. Go to ConstantContact.ca for your free trial. ConstantContact.ca Support for PropG comes from NerdWallet. Starting your slash learn more to over 400 credit cards. Head over to nerdwallet.com forward slash learn more to find smarter credit cards, savings accounts, mortgage rates, and more. NerdWallet. Finance smarter. NerdWallet Compare Incorporated.

NMLS 1617539. Welcome to the Property Pod'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 officehours at propertymedia.com. First question. My question is about the diamond market. Given the advent of lab-grown diamonds, the price of traditional diamonds has dropped. In fact, I've read somewhere that the prices of traditional diamonds have gone back to 2004 levels. So my question to you is, do you think the price of traditional diamonds will come back? Or due to the advent of artificial diamonds, which are much lower in cost as compared to traditional diamonds,

do you think they're going to take over and the value of the traditional diamonds are going to go down? Thank you and look forward to hearing from you. Keep up your great work. Thanks. Well, thank you for the thoughtful questions, Kartik from India. Many ring shoppers have opted for lab-grown diamonds because, you know, they're visibly and chemically literally identical, but are a fraction of the cost. According to analysis by Paul Zimnitsky, a New York-based diamond industry analyst, lab-grown diamonds global sales rose to $12 billion in 2022. That's up 38%. I mean, this is very few things doing more than $10 billion growing 38%. Mainstream jewelry retailers, including Kay Jewelers, have been selling lab-grown diamonds since 2019. Pandora introduced its own lab-grown collection last year. Luxury brands, including Gucci and watchmaker Breitling, have started to integrate synthetic diamonds into their high-end

collections. The downside? Lab diamonds don't appreciate in value at all. According to Zimniski, lab-grown diamonds sell at an 80% discount compared to natural diamonds. That's up from 20% discount just five years ago. De Beers, a major industry player, anticipates further price drops in lab-grown diamonds due to increased supply. Overall, diamond demand is falling. According to Zimniski, global rough diamond price index, natural diamond prices are down 18% from their all-time peak in February 2022 and are expected to continue on that trend. Diamonds, along with other jewelry, experienced increased prices amid the COVID-19 pandemic, which is what led it to reach its all-time high early last year. So what's going on here?

There's utility and there's scarcity. And with respect to utility, you know, giving someone a beautiful diamond or the aesthetic value of a diamond or the sort of expression of affection that De Beers convinced you that a diamond is forever and somehow you're supposed to take two months salary and spend it on a diamond, which makes no fucking sense. There's utility there. An expression of love. They're beautiful. They have an extraordinary aesthetic quality to them. And then there is the scarcity value. And that is their store of love. They're beautiful. They have an extraordinary aesthetic quality to them. And then there is the scarcity value, and that is their store of value. And so if shit gets real and there is, you know, another depression or, you know, you need your go bag for whatever reason,

or the AI takes over or Taiwan's invaded and we start, you know, people get worried, we start firing missiles at each other and all these rich people head to New Zealand. What the fuck is with these people and their go bags? Anyway, maybe the equivalent example would be the art market. And that is they came up with prints or lithographs where instead of just having one, the artist would sign a cast or a casting of 200 and then break them old and they could sell 200. And those still sell for good money, but not nearly as much as the original. I don't know what happened to the art market after that. That would be the interesting analogy. But the original still sell for a great deal of money. So what's going to happen here? The market is probably going to continue to be under pressure as there's now a substitute. But the truly fine rough cut or maybe not even rough cut, the truly fine, naturally grown diamonds that took millions of years for carbon and pressure and heat to create, those will always have value. Those will always have a value that supersedes lab-grown diamonds. And it's a case study in scarcity. What is really marketing? They say, well,

marketing is an attempt to find the right product for consumers. I think most marketing, especially marketing to try and get high margins, is about creating the illusion of scarcity. Try and convince people that, oh, wait, we're only going to let in 5% of you. Even though we could let in 80% of our applicants, we're only going to admit 5% of our applicants. Why? So we can create artificial scarcity and keep raising tuition faster than inflation. Oh, Panerai Watch, not a complicated piece of machinery. We could produce 10,000 of these of this model a year and charge $1,100. No, let's just produce 400 and let's charge $11,000. Let's create artificial

scarcity. And once you create artificial scarcity, create aspirational value, desire, want, passion, love, and you can squelch or throttle supplies such that demand always best supply, even if you artificially constrain it, you create a cash tap. And by the way, it's very hard to do. It's very hard to maintain or choke supply like that. And what's that cash tap? When the CFO of Hermes walks into the North American COO and says, oh, we're a little short on earnings. Could you produce another 50 million in EBITDA? That's like another 100 million in bags. No problem, because our demand is so much greater than our supply. So you're going to, that kind of scarcity value here will continue. And I do believe the industry is going to continue to decline in terms of prices for everyone. Thank you so much for the question. Question number two.

Hi, Professor Galloway. This is Sarah based in Florida. I'm actually one of your old students from back in 2007. It's been heartwarming to see your revolution from brilliant but intimidating professor to empathetic thought leader. So in 2021, I became a minority investor in a women's professional soccer team. And I've noticed most conversations about team ownership fail to include the women's game. I listened to your earlier episode about team investment, and I wondered, would your positions from the episode still hold for a women's team?

I'm also interested in the business ecosystem within sports, and I wondered about the talent side of the equation. Would you invest in an athlete representation agency? Why or why not? Very thankful to still be learning from you 15 years later. Thank you so much. What a nice message, Sarah, from Florida. And I've become nicer and more cuddly as I've gotten older. I think a lot, I think I started at NYU, I was like 33. And I think my harshness or getting in people's faces, I used to think that it was, I want to toughen you up and I want to challenge you. I think some of it was insecurity. I think that I was trying to just show, I don't know, a little bit about how powerful I was in that environment, because maybe I was disappointed I didn't have as much power or currency professionally

as I'd hoped for at that point in my life. Anyways, I think it was more a function of insecurity than anyone else. But anyways, womenary soda, a decent shoe, not a great shoe, a decent car, not a great car. And what do these guys need? They need branding. They need awareness. They need to be top of mind. They need to imbue and say, Teen Mobile, we're more innovative. We're more cool. Or Budweiser, we have funny frogs.

We're kind of cool and interesting. We're top of mind. And grab the six-pack of Bud Light because you like Tom Brady and he's in a cardboard cutout. So marketing and branding still does matter. The problem is there's no way to reach the most valuable consumer in the world, specifically young people who are stupid because they're entering their mating years and their hormones are being poured over their organs and they just want to be more attracted to potential mates. And so they will spend money on stupid things at a very high margin. And we need to reach those people. And unfortunately, those are the people who are cutting the cord, and we can't find using traditional advertising anymore because they're watching Netflix or listening to Spotify, and they're upping for their subscription, and they don't want to

endure advertising. What is advertising? How do you know your life hasn't worked out? You're watching a lot of advertising because it's become the tax the poor and the technologically illiterate have to pay. Having said that, the one last bastion, the reservoir, the Eden, the watering hole, the last Mohican, if you will, is live sports. My kids will not watch football. They will not DVR it. Once it's over, they'll look at the score, but they won't watch it because the magic has already happened. So they will endure ads because they have to. And so there's more, even though brand marketing budgets are going down, the funnels through which or the doors through which they can actually go through to meet people in a broadcast video environment that aggregates a shit ton of people is getting

smaller and smaller. Meaning if you can bring shit ton of people is getting smaller and smaller, meaning if you can bring a lot of people together to watch live TV, you have something really valuable. As a result, the sports licensing fees have skyrocketed and sports continues to be an asset class that increases in value. One of my predictions last year was that the best performing asset class of this year would be sports teams. Why? Because the number of billionaires has quintupled in the last 10 years. Can you get over that? Quintupled has gone from 500 to 2,500. And they all happen to be men in their 50s and 60s who are going through this arrested adolescence, fear of death thing. And I think, fuck, if I'm worth $12 billion, why wouldn't I spend a billion

dollars on a sports team and overnight become the most interesting person in Milwaukee because I bought the soccer team or the second most interesting person behind the guy who owns the box. Anyway, where was I? Okay. According to ESPN, an NCAA women's basketball championship game drew a record audience of 9.9 million TV viewers, twice more than the previous year. Wow. NCAA women's basketball. What's interesting is the WNBA has not worked. The women's NCAA March Madness tournament earlier this year saw a 42% jump in viewership from the previous season. This year's Women's National Soccer Team's opening game averaged 5.26 million viewers, up 99% from the team's opening game in 2019. The Wall Street Journal reported that FIFA values the broadcast rights for the 2023 Women's World Cup at around $300 million. I wonder what it is for men's. I know it's more. We just don't know how much more. According to Sports Pro Media, the WNBA has seen a 67% surge in viewership when compared to the previous season. A study conducted by the Wasserman Collective revealed that female athletes get twice the social engagement when compared to their male counterparts. Isn't that interesting?

Look, the reason why I think women's football is probably going to—or soccer, as you unwashed Americans call it. The reason why I think it will probably be a good investment and they'll increase in asset value is I do think you're going to see more women billionaires over the next 20 years, which would be a good thing. And I think they will probably be interested in investing in women's or owning women's sports teams. But more than that, more than that, when I go to soccer practice, I coached soccer for a brief time because I know nothing about soccer. And I was out of town a lot. Oh, that's the coach that's never here, but doesn't. But when he's here, he doesn't know what he's talking about. The one thing that was wonderful was when they were younger, it was co-ed. I really liked that. I thought it made for a nice vibe. And in addition,

there's just a ton of female athletes now. It's been wonderful. And a lot of girls grow up playing sports. And I think one of their biggest sports in the U.S. is soccer, which is just going to create a lot of soccer enthusiasts. And with respect to the second part of your question, would you invest in an athlete representation agency? These businesses are all about relationships. I think this is like investing in a consulting firm or investing in an investment bank, a small niche investment bank. And that is you're so vulnerable to the people. It's generally speaking, these types of firms that are very relationship dependent don't make great investments because you're just vulnerable and you're kind of the assets truly do go home in the elevator.

And the majority of the equity should be owned by the agents and the people maintaining those relationships. So as a general rule, without knowing more specifics, I would say that talent or representation businesses or agencies are not great investments for a passive investor. Thanks for the question. We have one quick break before our final question. Stay with us. Welcome back. Question number three. Hey, Scott. Love the show and appreciate all the help and guidance you bestow upon the masses. My name's Robert. I'm 30 and living in Los Angeles, and I've been working in investment banking since leaving grad school, about 10 years. Thus far, I've made a good living with this career, but as of late, gotten to the point of complete disillusionment with where the field ultimately takes you. Among the many red flags, most of the higher-ups of the firm were workaholics and or divorced, and seemed to just be supporting an expensive, lavish lifestyle without size pay. While I understand this is a privilege problem, I'm about to cut the cord and quit in the near

future. I envision my next chapter being one to two years playing the tourist visa game, working odd jobs around the world, and figuring out what my next chapter in life is going to be. While I have enough saved to support many months on the road, I do plan to look for professional and investment opportunities throughout the Odyssey. Any advice you'd send my way prior to embarking? First off, I feel you. Jobs typically bifurcate into one of two things. They're either very stressful, but very interesting and rewarding, or they're very, very non-stressful, but boarding and not that intellectually stimulating. I found investment banking to be this unique combination of an incredibly boring subject matter with a shit ton of pressure placed on it.

I spent a lot of my life at the printer. We actually printed prospectuses or S1s for public offerings. And my job was to go through this fucking prospectus, this 80-page prospectus, read it frontwards and backwards to find errors, to make sure the base rental payment on page 33 wasn't base rental payments on page 81. And if I missed anything and there was a typo, I could no joke, there was a good chance I'd be fired the next day. So I'd be up till four in the goddamn morning proofing a prospectus. It was just awful work. I thought I was going to be doing deals on the Concord and hanging out with interesting people. Instead, I worked with a bunch of abusive assholes, and they were assholes, and it was just incredibly boring work. Now, having said that, it was a fantastic training

because work is hard, taught me attention to detail, taught me sort of how to manage people with big egos. But everyone in my firm, not everyone, the majority of the senior people, not happy, would rather be doing something else, but had gotten to the point where they'd built a lifestyle where they needed to clock their half a million, million, $2 million a year in investment banking and could either go be the CFO of a company and take a 60% pay cut or go try and start a business. And none of them were really entrepreneurs at heart. So they were kind of all trapped, if you will. Now, there's some, a small subset of them that really enjoyed it.

But I literally think for most of them, the term work was the appropriate term. Anyway, the fact you're getting out and you're pulling the ripcord, good for you. Having said that, I wouldn't take too much time on the road. As a matter of fact, and it may be too late for this, you know, boss, it's so much easier to find a job with a job. Is there any way you could find a job or try and figure out what you want to do next, whether it's a startup, and then take your three-month sojourn? I know I'm sounding like your dad right now, but you're just a used car. You're not as attractive when you're interviewing and you don't have a job. There's no sense of urgency. In addition, my experience with people who kind of go to touch Indians and, you know,

practice yoga or whatever it is you're going to do or hang out with llamas in Argentina. Do people do that? Is that a thing? I don't think you're going to have this epiphany of what you were meant to do. Maybe, maybe. I think most people who do that kind of stuff and they have an epiphany, it's that they should return to the religious roots or get more involved in nonprofit, but they usually don't. They usually don't think, oh, I should really be in healthcare maintenance software or something. I don't know if that's going to happen on the road. So look, I don't know enough about what your skill set is. If you're at an investment bank and you've done well, you're good in services. So that lends itself really well to consulting. You have an understanding of finance, so that lends itself to operations or to be the CFO or in finance. But my suggestion is at your age, I would go

where you think you have some interest, where you think you can leverage your investment banking skills and an industry that's growing. Having said that, it means I don't know. I would need to know more about you, my brother. What I would suggest, though, is that you begin to make those inquiries sooner rather than later. And just so I can play dad for a moment, time's going to go really fast. And what you don't want to be is wake up a year, two years later, and you let perfect be the enemy of good, and you didn't take any offers, you didn't chase anything down, and you start to smell. What do I mean by that? Once you're out of the job market for longer than a year, you begin to smell. And I know how terrible that sounds now as people are like, what is wrong? And your skills begin to atrophy. So I would be making as many contacts as possible, having coffees, following up with people,

get an idea of what you want to do, have a plan maybe, and then take off. But anyways, you're obviously a very talented guy. Investment banking, I found, paid off for the rest of my life in terms of the skills and the discipline and attention to detail it taught me, even if you don't like it. And I also think if you don't love it or you don't have to have the money, I think you're smart to get out. It is, in my opinion, a fairly soul-crushing, non-redeeming way to make a living. Too much? Too much?

Thanks for the question. That's all for the question. This episode was produced by Caroline Shagrin. Jennifer Sanchez is our associate producer, and Drew Burrows is our technical director. Thank you for listening to The Prophecy Pod from the Vox Media Podcast Network. We will catch you on Saturday for No Mercy, No Malice, as read by George Hahn, and on Monday with our weekly market show.