The Prof G Pod with Scott Galloway - Office Hours: The Race to a Super App, When to Expand Your Board, and Deciding to Get an MBA as an Entrepreneur

Episode Date: November 15, 2021

Scott answers a question on verticalization within the grocery delivery market and explains why there’s power in controlling access to the consumer. He also offers advice to a start-up founder on when to add more members to a board of directors, and why business school is still worth it, even if you just want to work for yourself.  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 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 visit officehours.propertymedia.com. Again, that's officehours.propertymedia.com. Again, that's officehours.propertymedia.com. First question. Hey, Scott, and cheers to your team that is listening to all these questions and audience before you do. I'm class 25 and I'm calling you from Lisbon, although I'm originally from your wife's home country, as you probably hear. Anyway, I know you're a big fan of verticalization, so I would love to know your thoughts about the verticalization in the quick delivery grocery market.

Does it make sense to pivot from the asset-light model of Instacart towards the fully integrated model that Joker and GoPath pursue? And does it make sense for dominant grocery retailers to buy brands like Oatly in order to gain access to their loyal customer group in a market with increasing customer acquisition costs? I know it's a lot, but I would love to hear your thoughts about the verticalization in the grocery market. Thank you for all your work, the podcast, and the books. Cheers. Class. Class from Lisbon, you are living your best life.

A German in Portugal. Wow. I spend a lot of time in Portugal. I have two good friends who have peaced out to Portugal, two hedge fund guys, and they kind of go surfing during the day and hang out with their family in the afternoons, and they're kind of living their best lives. They live in Cascais. Is that what it's called? Anyways, Portugal is becoming kind of the new, I don't know, Montauk or Aspen. I don't know what the term is, but it's blowing up. And also, some of the highest vaccination rates in the world. I think't know what the term is, but it's blowing up. And also some of the highest

vaccination rates in the world. I think something like 83% of the Portuguese have had a vaccination. So good for you or good on you. So I'm fascinated by the notion of verticalization. And I was actually thinking about this this morning. And whoever controls the handoff or the interface with the consumer, the end consumer, has a lot of power. So you're seeing Uber is getting into delivering groceries, getting into delivering baby care stuff, including diapers, because they sort of have the end interface. They're going to have a vehicle potentially in your home. I remember saying seven years ago at DLD that I thought Uber could be a competitor to Amazon and that Amazon would decline in value because Amazon's core competitive advantage was last mile and Uber was going to become a better last mile company. And I get endless shit for saying that Amazon was going to lose value. I reversed my prediction a year ago.

And by the way, what's my second largest stock holding? You guessed it, the Seattle behemoth. Anyways, that end distribution of the race for the end distribution is really powerful. Instacart is now almost neck and neck with Walmart as leaders in the grocery delivery market. It's accomplished this by leveraging existing supermarkets, contract workers, and their cars rather than paying for warehouses and a fleet of delivery vehicles. So it's sort of that capital light model you talked about. A lot of the dominant grocery retailers you referred to have vertically integrated their own dairy products. As of 2018, Kroger produced 40% of its private label milk in-house. Walmart opened a 250,000 square foot milk processing facility to expand its own private label. So what are we talking about now? There's

forward integration to where you're touching the end consumer. And then as a retailer, there's reverse integrating into your own private label. This through the kind of 80s, 90s and aughts, reverse integrating into your own private label. I think Sam's Cola was the second biggest cola behind Coca-Cola. Arizona Jeans was huge for,

was it JCPenney's? I think they built a billion dollar brand controlling that access to the consumer, swapping people out of Levi's into Arizona. And then I think Sears had Canyon River. Anyways, they built huge businesses in high-margin denim. You also have, I mean, Walmart, speaking of going, again, reverse engineering into its own private label, created its own supply chain for Angus Beef. Amazon, Ford integrated into Whole Foods to get more touch or get more multi-channel for $13 billion. Who predicted that? Gaining access to its loyal customer group and their data. I think the most interesting one, when I think about integration or full stack, is Hermes,

get this, bought an anaconda farm in Brazil because it wanted access to the best snakeskins. Jesus Christ. Can you imagine at the board meeting or the executive management team? What do you do? I manage the anaconda farm in Trancosa. Jeez, be nice to that guy. I wouldn't want to wake up

with some fucking 40-foot reticulated python in my bed. Little Godfather reference from Hermes. Anyway, anyway, where are we all headed with this or where are we headed? I think there's going to be the race for the super app. I'm wondering if payments, transportation, delivery, commerce, social media, sort of all comes together in a 10-cent-ish kind of way. It involves Uber. It involves some of these end delivery players.

I don't know, something big, something big is in the air. There's a disturbance in the force around the race for super app. Long-winded way of saying, my brother, full stack is where it's all going. There's a lot of merge arb. There's a lot of startup opportunities. But if you're thinking about investing, your human capital or financial capital, anyone who has controls a disproportionate amount of time, the end user, the end interface has a lot of power. Twitter. Twitter is going to manipulate their users, in my view. They're going to start clearing out their accounts because Jack Dorsey is going to

purposely throw up next quarter to push the stock down to 40 bucks, and then Square is going to come in and buy Twitter. I think they're going to go for the race for super app. I think Twitter, relative to its attention and end distribution, even though it's an app, it controls so much of our attention. And I think they're vertical. I think you could argue they're vertical. Anyways, I think Twitter is going to get acquired by Square. And then Jack can have one office and not have to leave during his lunch hour to go to a second office. Another talk show, another talk show. Class from Portugal. Good to be you, my brother. Thanks for the question. Question number two. Hi, Prof G. Michael from London here. I'm a two-time sprinter and loving the show and all the great content you produce. I'm now based out of San Diego, so expect to bump

into you next time you're here visiting your dad. Anyway, my question is about the necessity, timing, and composition of a board and a startup. I recently co-founded a new business that we believe has real opportunity to scale. We built out the tech, successfully launched, generating revenue, and about to add more clients. Revenue is in the hundreds of thousands at this point. For a company of this age and size, when would you say is the right time to form a board beyond my two co-founders? What would the composition of the board look like? And are there any particular skill sets you'd recommend and also potential pitfalls to avoid? Thanks for all your wisdom and insights. Your messaging really resonates with me. Keep up the great work.

So good for you, Michael. One of the really wonderful things, is that the wrong way to say it? One of the silver linings, I should say, the pandemic is the new business formation over the last 12 months is greater than it's been in decades. People call it the great resignation, people leaving their jobs. It's really, and Kara Swisher, my podcast co-host, brought up this term, and I like it much more. It's the great reassessment. And I think people are saying, you know, if I'm going to be at home, or I've got a little bit of money, or I'm not enjoying work, this is an opportunity to start a business. And we're seeing that everywhere. So it's great that you've started a business. I don't know the company. Typically, a board exists of two parties, independent directors who you just think are really smart people and can advise you and to

your investors. And if you are in fact scaling, and I don't know if you've raised money, but typically the board is sort of controlled by investors. I'm typically an independent board member. I get brought in to kind of be, I don't know, a singular, reasonable, unbiased fiduciary voice. That is what an independent director is supposed to do. Because when you have VCs on your board, they're obviously going to pretty much say anything that plays to their advantage, whether it's washing out the founders or shoving more capital into the company because it's doing really well at a lower valuation when the company really doesn't need capital or getting in the way of an acquisition because they have a lot of different bets and they want you to, you know, go broke or go hard or, you know, die trying, right?

And an independent board, independent director is supposed to really be thinking about all stakeholders. So it sounds like your company is still pretty small. I would probably suggest at this point that you have an advisory board, and that is a group of people who you can call on and just discuss through issues. And ideally, those people, one, have a lot of business experience and wisdom, are concerned with your, have an emotional interest or a vested interest in your success. That's why sometimes investors make great board members because they're on the same page as you. I have benefited enormously from boards. I've been on some really shitty boards, but good boards are fantastic sort of guardrails and advisors and fiduciaries for shareholders. But typically,

a board is supposed to be fiduciary or consistent fiduciary. Fiduciary is a wonderful word. It means once your deal is settled, you're getting this much money to be on the board and you're getting this much options, your job is to represent others. I love that term, being a fiduciary. You are representing other people's interests. And I think that's the first thing you want to do when you're giving advice and when you're on a board and say, I'm a fiduciary. I'm representing other people. When you give advice, I'm going to represent you right now. I'm not going to see this through the lens of what would be best for me or what would I like to see happen, but I'm going to represent you. I'm going to be your fiduciary. I love that word.

Anyways, we all need to be better fiduciaries. I think it's a little early. Advisory board, once you raise money, throw together your board. Thanks for the question, Michael, from London and good luck with your business. 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, 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. 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. Welcome back. Question number three.

Hey, Prof G. My name's Will. I live in LA. I work in the advertising tech space, and I'm a rapid listener. If you'll accept the flattery, you're slated on my list of dream dinner guests. So thanks for everything you've already done for me.

I've charted out a path to business school, and I think I have a real shot at a top-tier MBA. But in recent reflection, I realized my happiness is always going to be capped unless I'm working for myself. It seems like half of a great MBA program is just recruiting back into the corporate world. I'd love to keep doors open in case things don't work out. But does a full-time MBA make sense for entrepreneurship?

Appreciate the advice. Will from Los Angeles, this is a really good question. What is the value of a top- tier MBA as it relates to entrepreneurship? First off, first off, as a narcissist, I heard that you, I'm on your dream list for dinners. I generally, and I'm not, I'm not being humble here. I have huge imposter syndrome. And I, I think that when most people meet me in person and or have dinner with me, that they're generally disappointed. I think the person you're hearing and having contact with across my content is much more impressive and interesting than I am.

I'm generally in person a fairly intense and quiet person. And I think seven in 10 people who meet me or spend time with me are sort of disappointed. And that is they recognize that I'm just not as interesting as I am on this show. But anyways, that's not what you asked. When I got out of business school 20 odd years ago, there were two people in my entire class starting a business. One was me and the other was my partner. Nobody started businesses. That has changed. And now I think something like a third or half of HBS's graduating class is going to be either starting a business or joining a startup. So much of this is situational. The first money. Kind of hard to go wrong. It's great certification for

the rest of your life. You make great contacts. It's a shit ton of fun. You get to kind of go back to college and have a little bit of a rest at adolescence or revisit your adolescence. I went to business school at the Haas School at Berkeley, and it was just great going back to football games. But at the same time, if you already have kids, you already have a mortgage, you're killing it at work, you have access to capital to start your own business, maybe you don't need business school. So it's situational. But if you get into a great school, and a lot of these questions are moot. It's like, well, I kind of sense that probably the next step is for you to apply and see where you get in and then wring your hands around these questions. I can't stand when kids

come to my office hours and say, should I go to work, you know, should I go to work for Google or Amazon? I'm like, do you have offers from both? And they're like, no. I'm like, what the, you don't have a fucking decision. You don't have offers. Get out of my office.

Or, you know, wait till this is a real decision or problem. If you're thinking about business school, apply. And if you have a really high bar and you have opportunities costs, then apply to your two or three dream schools. And if you don't get in, let the market make a decision. Then you go start a business.

It does help. It does help. There's a lot of very well-publicized stories about the most successful entrepreneurs in the world, not only not going to business school, but dropping out. Assume you are not that person. There are tremendous skills you garner in business school.

But if you get into a great school, if you're not already kind of at letter C or D with a startup, and you have the wherewithal to go to a great school, you can afford it, or you get a scholarship, you have the freedom and the flexibility, then I'd say go for it. You're incredibly blessed. Very few people, 99.99% of America can't go to business school. If you have kids, it probably means you can't go. If you don't have access to a quarter of a million dollars in capital or debt, if you're not freakishly remarkable and do really well on the GMAT, all those things, all these moons have to line up for you to go to an elite MBA. So I would say, boss, if you have the opportunity,

the 19 to 22 months to get an MBA, oh my gosh, it goes so fast. It was transformative for me. It doesn't sound like I was, it sounds like you're more talented than me, but I think it's very impactful in terms of contacts, domain expertise, credibility for starting a business. So unless you're already off and running, boss, punch that ticket. Go get an MBA. Become part of the Navy SEALs of an information age business economy. That's all for this episode. Again, if you'd like to submit a question, please visit officehours.profitmedia.com. dot 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 pod from the Vox Media Podcast Network. We will catch you on Thursday. Support for the show comes from Alex Partners. Did you know that almost 90% of executives see potential for growth from digital disruption? With 37% seeing significant or extremely high positive impact on revenue growth. In Alex Partners' 2024 Digital Disruption Report, you can learn the best path to turning that disruption into growth for your business. With a focus on clarity, direction, and effective implementation, Alex Partners provides essential support when decisive leadership is crucial. You can discover insights like these by reading Alex Partners' latest technology industry insights, available at www.alexpartners.com. That's www.alixpartners.com slash V-O-X. In the face of disruption,

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