The Prof G Pod with Scott Galloway - Office Hours: When Scarcity Meets Healthcare, What Do I Do With My Business When I Retire? And Grief is Love Persevering

Episode Date: April 26, 2023

Scott gives his thoughts on scarcity in the healthcare industry. He then gives advice on handling and transitioning your business when you’re ready for retirement. He wraps up with an honest conversation about mourning and grief. 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 email a voice recording to officehours at propertymedia.com. Again, that's officehoursatpropertymedia.com. I have not heard or seen these questions. First question. Hey, Scott, this is Peter from Seattle. You've written about scarcity and you've previously written about healthcare. Curious what you think is going to happen when these things combine. We've got a shortage of primary care providers and healthcare is kind of limited by certain

legislation and insurance costs. But what do you think is going to happen there? I'd be really interested in your thoughts. Hey, Peter from Seattle. It sounds like you're in the healthcare industry, and you might even have some views here. But anytime there is an industry as large as healthcare, it begins to segment from a marketing standpoint. And that is is there are essentially VIP groups that have emerged, concierge medicine, all over the United States. And there's even a pretty thick layer of private medicine in the UK, where I would say probably the top decile of income earners opt out of NHS and go private, if you will. And some people would argue that that relieves some of the

taxation on resources of the NHS. If the rich want additional services, fine. And let's be honest, the adult reality is the wealthy just have access to better services across every dimension. So to think that it's not going to emerge in healthcare is just naive. And it happens in the U.S. I've been given opportunities to join the gold circle, and this is how it works. You pay 50 or 100 grand, you donate it to a certain hospital system and you get on some list and you're on to get a VIP

number. And if you have, say, some sort of respiratory infection, the top respiratory guy or gal in the world calls you right back and no bullshit waiting in line or whatever, does a consultation over the phone, gets you in right away. And if you get really sick, you end up on even a different floor with a totally different environment. Feels more like the Four Seasons. The two biggest systems in New York, NYU Langone and Cedars, both have these. Fortunately, so far I've been pretty healthy and I've never experienced that. But at the end of the day, there's nothing more important than your health. And so to believe that wealthy people aren't going to take advantage of their wealth, and I don't think there's anything wrong with it. The whole point of capitalism is that you garner increased benefits. Now, the question is, how do you ensure that everybody has a certain baseline level

of opportunity? But what happens is that going back to your notion around scarcity, they create sort of this exclusivity that, oh, you're sort of in the know and you have an opportunity to get into this system, if you will. And the other way you express scarcity is by branding. The Cleveland Clinic just opened here in London. And I can tell you, it's going to absolutely kill it because America has a reputation for being more innovative. And the Cleveland Clinic has an unbelievable brand. My guess is they'll limit the number of people who can join or use whatever type of service there is there, which will create a stampede. Where you really see a scarcity is that there's always two or three brands, individual brands, that emerge as the top guy or gal in this field. The top hip replacement person in Florida, Lauderdale, is this guy.

And his next surgery is in, you know, next slot for surgery for hip replacement is in for seven years. The moment you hear that, the moment you hear that, you got to get in to see this guy, right? And if you have rich friends and you get sick, the way they show their affection for you is they know someone who's the top guy or gal and they get you in to see that person. So there's scarcity everywhere across the healthcare industry. So bottom line, if I were just coming, if I were a young person and had some opportunities, or was just hungry,

I think there are a few industries that on a risk-adjusted basis offer more upside than healthcare. U.S. healthcare is the most disruptible business in the world. What's a disruptability index? How can you tell if an industry is disruptible? You look at its core prices relative to inflation and then the underlying innovation. Why does technology continue to eat more and more of the world's GDP each year? Why?

Because it lowers prices every year and gets better. I know. Imagine every year if a Mercedes reduced its prices by three or 5% and every year it got better. Wouldn't Mercedes gain share? That is what's happened in technology. Whereas most consumer industries, the gestalt at the board level is, wait, if we're doing well, let's test how well we're doing. Let's raise our prices. And you can do that for only so long. And what has the healthcare industry done? It keeps raising prices. Meanwhile, meanwhile, raising prices past inflation, but oh my God, it must be awesome.

No, it's not. One out of five, check that, one out of five people is happy with their healthcare. There is no industry in the world that has raised its prices faster than U.S. healthcare with worse outcomes. What does that mean? The mother of all chins has been stuck out

and fists of stone are coming for it. There is so much opportunity. If I was trying to think of a business, I would try and think of how I can apply large language models, better known as AI, to healthcare data sets, and then advise hospitals or consumers on outcomes and recommendations

and what they should be thinking in terms of outreach or lifestyle changes. You know what? I think there's a huge opportunity in healthcare is moving it from a defensive disease-driven industry to an offensive health-based industry. I only call my doctor when something's fucked up or wrong with me. I want someone, I would pay a lot of money for someone to manage my healthcare, to track everything I eat, look at my blood levels, and then say, okay, look at my body mass index,

track my workouts, and say, we're going to get very involved in your life such that you're really, really healthy and don't end up in the hospital. Or it takes much longer before we see you. The first time you're in the hospital is when you're 85 and you have all your photos and you decide to take a massive hit of opium and just sort of check out while listening to Tom Petty. Not that I've thought this through. Anyways, healthcare needs to go offensive. What would I want to do? What would I want to do? I'd want to understand what is the intersection between AI and healthcare right now. Thanks for the question, Peter from Seattle. Next question. Hey, Scott, I love your podcasts. I listen on my morning runs. My name is Dawn. I'm in Montreal. I'm a 59-year-old

woman who owns a recruitment firm with my partner, who is also 59 years old, here in Montreal. I'm energetic. I run four to five times per week. I love my job. I don't really want to retire, but I'm realistic and have many interests, but really love working. I'm thinking of different ways to exit the business, sell to an employee, sell, wind down, or outright close it. I'm healthy. I don't have a timeline, but I want to look at the options open to me. My question to you, Prof G, is if I want to sell my service business, what multiples do you think that I should be aiming for? What are the other options? What are the options if I want to sell to my employees? How would I do that if they don't have the cash?

Any kind of insight or idea other than the ones that you have that I gave you, I would love to hear. By the way, keep up the great work. This is a great question. So first off, Dom from Montreal, I hope that you take the time to appreciate and recognize your achievement. One, it sounds like you have a great partnership. Two, it sounds like you've done really well professionally and that you've built a nice

business for yourself. And three, you live in Montreal. Anyway, to your question, it's a really apt question because there is about to be a tidal wave, a tsunami of baby boomers who retire, who own small businesses. And what do they do? There's not an active market. It's not like a public market. It's not, and these businesses are small enough such that there's not a lot of enterprise value, meaning that you are really dependent.

What I think you do. So first off is how do you sell it? And two is how do you figure out the valuation and what are the mechanics? And I'll go through each of those. I think the best way to sell this kind of business is to sell it to your employees. And that is to have a very honest conversation. I'm looking to wind down. Is there someone younger in that business who wants to increase ownership in it, who is good at what they do, who can drive the business, wants to make more money and say, okay, you are going to own this business or the two or three of you are the natural heirs to this business. You're going to own it. And over time, I'm gonna sell it to you. Now, how do we do that?

You don't have any money. Well, I'm gonna seller finance it. What does that mean? What does that mean? It means that five, 10 years post my exit from this business, you are gonna give me 10% of revenues such that they can just take some of the profits for a little bit of time and give them to you

and you extend your runway, you get more money or you have additional income beyond your involvement in the business. It's called seller financing. So more specifically, there's a couple specific structures. A modified buyout is where the employees purchase a portion of the company shares over the first few years and then the rest of the business can be sold later. I don't like that as much. Employee stock ownership plan, for example, in the UK, there's real tax benefits to the person selling, which gives employees ownership of the company in the form of stock shares. Or a leverage management buyout, which is when a group of employees purchase the company with the help of outside financing. This allows key employees to buy with a smaller upfront investment, but it means they will have a lot of debt to pay back. They borrow money from the bank or they find an investor. I don't like that as much either. I think seller financing is the way to go. And that is, again, where they agree to pay you a certain amount over, say, five or 10 years after you're out of their cash flow first. But effectively, you also asked about valuation.

Valuations in a smaller business usually are somewhere between three and six times EBITDA or kind of one to two times revenues. And kind of employee buyouts usually trade at a lower valuation. Nothing beats a bigger company that gets hot and horny for your company and wants to own it, but that doesn't know what's happened. Most small businesses can't afford to hire a banker to really market the company. So this is a great way to sort of transition the company to new owners while, again, maintaining some additional liquidity and some additional wealth from what you have built. Congratulations to you, Don. It sounds like you're healthy and happy and living a great lifestyle in Montreal. Thanks so much 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, 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. 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. Hi, Prof. J. My name is Kevin. I live in Jersey City, New Jersey. My sister and I recently had to lay to rest our 15 and a half year old Cocker Spaniel, Andy.

And I have a two part question for you about mourning as a man. For context, I'm 29 going on 30. So Andy was around for half my life. I grew into a man with him and he grew up into an older man with me. From your Love Persevering article, I understand you loved and will always love Zoe, so you'll understand where I'm coming from. First, what advice do you have for young men about mourning? Second, on a more personal note, how did you navigate your businesses and do what you needed to do while mourning? I started a new role after being laid off in January in a few weeks, so I also don't want to give myself a hard cut off of when to be, quote, okay. Thank you for your honesty, humor,

and advocacy for mental health. I admire your work. What a nice question. I can hear the pain in your voice. I was shocked how much the death of my dog hit me. And I think it's not only the loss of the dog, but it's a loss of time. For me specifically, it was recognition that I would never have those moments where my four-year-old would play with my dog and make this certain laugh that he only made around the dog. I would never get to see my youngest as a toddler in his crib waking up every morning and just staring at Zoe as if they were planning a jailbreak together. I think it's the passage of time. I think you recognizing your adulthood and recognizing that some of the innocence and fun of youth are gone as, you know, kind of died with your dog, if you will, and just the affection and love you feel

for this thing. And the wonderful thing about grief is that grief is a function of love persevering. The reason we have grief is because we have love. And pity the person that doesn't have grief because that means they've never become emotionally invested in anything. They've never given themselves up to what is the most wonderful thing in the world.

And that is to be intimately involved and to be emotionally connected and invested in another being. And it can be a dog. I have found actually there's a difference between small dogs and big dogs. I have found with big dogs, you kind of have more of a deeper relationship with a beast. It feels more like another animal. And that's not to say you don't learn to the same extent with smaller dogs, but I've always found it's kind of different sort of having a relationship with a bigger beast or a mammal, if you will. Anyways, that's neither here nor there. In terms of mourning, I don't know if there's someone else you can mourn with,

but I used to get with my kids after we'd put Zoe down and just go through and look at pictures of her. And that was nice for us. And also just to mourn together and talk about how sad we were. I think even calling into a program like this and acknowledging your feelings is really important. You do need to put a statute of limitations on it. I'm not saying you need to snap out of it. But if you find that after one, two, three months, you're still very sad and having trouble kind of getting unstuck, there's probably something else going on. This triggered something else maybe a little bit deeper. And I would suggest reaching out to someone for help.

And that's not to say that, again, that's just not a big deal. Men have trouble reaching out and asking for help the same way they have trouble reaching out and asking for directions. I find that whenever you face tragedy, it's not a bad idea to say, okay, I lost my job. I'm going to mourn for a week, and then I'm going to get back on LinkedIn and start doing that shit. I lost a dog. I'm going to mourn for a month. And then if I find I still haven't gotten over it, I'm going

to reach out to someone for help. And by the way, reaching out just might be reaching out to a friend and saying, did you experience this? I think just talking about it. Talk therapy is fantastic. I also find that when I'm depressed, exercise is super important. And there's some studies showing that exercise can be as effective as talk therapy or even pharmaceuticals. I'm not suggesting that it takes the place of pharmaceuticals. There's certain types of mental illness that I think require medical intervention. But I think the opportunity to mourn is really healthy. I'd own it. If you're fortunate enough to have other people who are involved in your dog's life to talk about it with, but put a time limit on it. And at some point, think about getting another dog when you're ready. And also just acknowledge the blessing of grief, because what

is grief? Grief is love persevering. That's all for this episode. Again, if you'd like to submit a question, please email a voice recording to officehoursatpropgmedia.com. Again, that's officehoursatpropgmedia.com. Again, that's officehours at propgmedia.com. 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 Prop G Pod from the Vox Media Podcast Network.

We will catch you on Saturday for No Mercy, No Malice, as read by George Hahn, 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. Hello, I'm Esther Perel, psychotherapist and host of the podcast, Where Should We Begin, which delves into the multiple layers of relationships, mostly romantic. But in this special series, I focus on our relationships with our colleagues, business partners, and managers.

Listen in as I talk to co-workers facing their own challenges with one another and get the real work done. Tune into Housework, a special series from Where Should We Begin, sponsored by Klaviyo.