The Prof G Pod with Scott Galloway - Office Hours: Why Cars are the Next Battleground for Attention, Advice to a Young Real Estate Investor, and Balancing Fun with Frugality in Your 20s

Episode Date: July 19, 2023

Scott gives his thoughts on the auto industry’s approach to in-vehicle infotainment and describes it as “the next battleground” in an attention economy. He then gives advice on investing in real estate as a young person whose earnings are unpredictable. He wraps up by discussing the importance of striking a balance between frugality and embracing life’s pleasures when you’re young. Music: https://www.davidcuttermusic.com / @dcuttermusic Learn more about your ad choices. Visit podcastchoices.com/adchoices

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.

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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 PropGPod's 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. First question.

Hey, Scott. This is Matt from Madison, Wisconsin. And I have a question. It's about the automotive industry and app stores. It seems to me that the automotive industry with hundreds of millions of users in the U.S. and billions of users worldwide has an opportunity to build the next great big app store

in the sense that these panels that are in you know cars new and old represent it could represent a dumb terminal that you could just you know hook your phone to and display anything you want on it i realize there's some safety issues and things along that but like why don't they open up that sdk that microsoft did years ago or the way apple does or google with their app stores and just simply allow any developer who wants to, to write apps for your driving experience, right? Whether that's a new kind of radio or new kind of navigation or just the entire managing of your interface in your car,

and then take a cut just like the app store does. It just seems to me that this is a really easy, I shouldn't say easy, obviously, like things are always harder than they seem. But this seems like a huge cash cow waiting to be milked by the automotive industry. And is it just simply that they don't have the vision or it's not in their DNA to think that way? Apple, CarPlay, and Google run that experience when they themselves could be taking a cut from every single person who would download a custom experience via their own app store. Thanks so much for your opinion. I really value it. I love it. I listen to you. I look forward to all your different shows and podcasts.

I think you're just a great thinker, and I really appreciate the work you do. Take care, and I hope to hear an answer. Hey, Matt, from Madison, Wisconsin. Madison has one of the best brands in the world. I don't know if it's because of the interest of Wisconsin or the—what did they call you guys, Wisconsinans? Anyways, it just has such a nice brand. A bunch of my friends from UCLA sent their kids to be badgers. And I've always thought at some point, I have this image that I'm going to retire

to a university town and just teach and be universally loved. And other professors will give me pens and we'll play football in the yard. Anyways, I think your thinking is right on. And you're clearly an innovative person and it's super interesting. So we live, and I think this is where you're getting to, we live in an attention economy. So for years, there were all these charts showing that the internet occupied 40% of our time, but had 18% of ad dollars. And we knew that they were up shit's creek. Simply put, attention calibrates with money. You can monetize attention. And we're in our cars a lot. Some people are in their cars one to two hours a day, some people two to three hours a day. So it makes sense that if you have a captive audience for two to three hours a day, you should be able to monetize it. And that's one of

the reasons that outdoor advertising, specifically billboards, have actually held their own in a world of branding and advertising that has been in structural decline. Now, in terms of the players, this brings up kind of the battle or sort of the world of worlds here, and that is auto industries. The auto industry isn't stupid, and they don't want to let similar to what newspapers did and every media company did say, OK, let Apple and Meta and Facebook pretend they're your friend. And they come in and they partner with you the way a virus partners with a host. And it ends really poorly from one of those entities. They've said, okay, fine, we'll let you in for a little bit. But then now they're trying to develop their own operating systems, which is likely not going to work. But anyways, General Motors recently announced it plans to remove support for Apple CarPlay and Android Auto in its future EV lineups. Apple CarPlay and Android Auto technologies is what enables drivers to mirror their smartphone screens onto a vehicle's dashboard display. And according to Reuters, GM is doing this with the intention to transform its forthcoming EVs into platforms for digital subscription services,

along the lines of what you're talking about, Matt. GM's infotainment system will be co-developed with Google and provide a range of services and applications, including Spotify and Audible. GM CEO Mary Barra reportedly believes these subscription services can generate up to $25 billion in annual revenue by 2030. So it feels like mad. It feels like they're sort of on to your idea, if you will. And there's, you know, the battle of the operating systems is now moving. The ultimate place for attention was your computer screen, then your phone, a little bit or less your television screen.

And now it's moving to your dashboard, if you will. So it's not lost on them. We are going to see kind of the next battleground is going to be in cars. I just think that Apple should go vertical and have their own car with basically every sort of Apple iOS touchpoint. Anyways, Matt, great question. Congratulations on living in such an interesting, progressive, cool part of the world, one of the great public institutions. I think one of the top five public institutions in America, the University of Wisconsin at Madison. Anyways, thanks for the question, Matt. Next question. Hi, Prof G. My name is Nagin. I'm 26, and I'm based in Kitchener, which is in Ontario, Canada.

And my question for you is about finances. I'm fortunate enough to have already purchased my first home, which I did prior to COVID and prior to the prices just skyrocketing. But as I think about retirement, I would love to have some investment properties. The only problem is that I am a commissioned employee. I work in executive search. And so my earnings change month over month and year over year because I work in the tech space, tech's having a rough time right now. And so my earnings are a little unpredictable. With that in mind, the average home in my city is about $800,000. And as we know, interest rates are really high right now. So A, I would love your thoughts on if you think now is the right time to enter the market and for investment property,

I should say. And B, any advice that you can give to a commission employee or even a small business owner whose earnings aren't predictable and who might be a little afraid of now adding a second mortgage to their expenses, especially because my first mortgage is also on a variable term. Thank you so much, and thanks for the amazing podcast. Nagin, let's just review. You're 26 and you own a rental property or you own a house. So, first off, let's just take a moment to recognize what a baller you are and that you are basically ahead of where most people are at 36 because very few people at your age are able to figure out a way to buy a home. So just take pause and recognize how well you're doing. So let's speak specifically to your question. According to Statistics Canada, in 2020, one-fifth of all residential properties in the Waterloo region, which includes Kitchener, were owned by investors. So it appears that it's been identified probably as a place that has decent cap rates. What's a

cap rate? It's the percentage of the total cost of the house you get back in rent. So a 5% cap rate, am I doing this correctly? It means that if a property is generating $5,000 in rental income a year, I believe that's after expenses and taxes, is worth about 100 grand. And as cap rates go up, properties are worth more. As cap rates go down, it's a good time to buy. It means the yield on that property in terms of rents as a ratio of the total investment or total principal cost of the home. I'm not using all these big words. The ratio of rent to the cost of the house is essentially kind of how you determine if you want or the yield on a rental property. Now, that yield has gone way down because residential real estate has attracted a lot of capital. As you referenced, the prices in different areas have skyrocketed. So to your looking and you always want to be prepared to strike. So try and get pre-approved for a mortgage, if you will. And also something that is happening

more and more is you might find a property that's right. Maybe you'd like to get it for a little bit less money, but contact the owner and say, would you be willing to do seller financing? And that is you're looking at a rental property that costs, say, $500,000 Canadian. And the owner might be willing to say, okay, if it was going to cost you 7% to get a mortgage from the Royal Bank of Canada, maybe I'll loan you the money at 5%. Or maybe I already have a mortgage on the house at 2.5%. And I will sell you the house and keep the mortgage and we'll enter into an agreement where you get to keep my mortgage. And maybe you pay a little bit more for the home, or maybe he or she gets to sell the home in a market where people are having trouble finding financing. But one, I would be in a position to strike. Two, I would think about unique ways of financing

a new property. Three, make sure that it's in, I would put it into probably an LLC. That way, if the economy crashes, you can hand the keys back to the bank, quite frankly, and create some distance between you and the property in case something bad happens in the property. But I think you are absolutely thinking the right way. And I would always look at what is the ratio of rents to the cost. In 2011, I bought a bunch of residential real estate in Florida because no one wanted it, bought it out of foreclosure. And these properties cost about $100,000. And you could rent them out immediately, put in $10,000, $20,000, and immediately rent them out for $1,000 a month. So you were getting kind of 10% cash on cash. And I'm not a real estate guy, but I knew enough about math to go,

that's a great return. And I had the capital, so I didn't even put any leverage on them. You're not in a position to do that. So you want to come up with creative ways around seller financing. But here's the bottom line. Here's the bottom line. You should be mentoring me. You're 26 and you already have real estate. You're doing so well. Just the fact you're thinking this way, you're obviously living below your means, trying to save money. There are few ways to build more wealth over the long term that's enduring and intergenerational or multigenerational than real estate. But my sense is you want to be constantly assessing the local market. I would stay local. I think real estate. But my sense is you want to be constantly assessing the local market. I would stay local. I think real estate's a local business. I try and get approved for pre-approved for a

mortgage. But again, let's finish where we started. Let's finish where we started. Nagin, you are doing so well. Congratulations. Keep learning about real estate. Keep thinking about ways to add value. Supposedly it's kitchens and bathrooms that add the most value. And I hope we stay close because I think you might be able to take care of me when I'm older. Well done, my sister. Well done. 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. Support for this show comes from Constant Contact. You know what's not easy? Marketing. And when you're starting your small business, while you're so focused on the day-to-day, the personnel, and the finances, marketing is the last thing on your mind. But if customers don't know about you, the rest of it doesn't really matter. Luckily, there's Constant Contact. Constant Contact's award-winning marketing platform can help your businesses stand out, stay top of mind, and see big results. Sell more, raise more and build more genuine relationships

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Welcome back. Question number three. Hi, Scott. Huge fan of your podcast and longtime listener. Your insights into business get me to think about things in different ways, and I've always learned something new when I listen to your podcast. I also like your thoughts about young males and the mentoring they need in order to grow. These things really resonate with me as I grew up without a father figure and had to play father figure for my brothers as my mother was a school teacher making a poverty income for a single mother raising three kids. However, my question is, what to do now? Some background. I am 28 and my girlfriend is 25,

and together we make roughly $165,000 a year. Together, living in Kansas, so really low cost of living, we have almost $250,000 in investments saved up and put around $45,000 away each year, most in Roth IRAs and Roths. We have always been very gung-ho on putting money away for retirement, but recently we are traveling more and more, smaller trips, and we love it and would like to do more of it, but it would hamper our ability to make larger purchases, such as paying for weddings, putting down house payments, and whatnot. Are we insane to put this much emphasis in retirement, or should we spend more money now and enjoy our younger years? We both come from families that never vacationed

much or spent much on nice things, so the frugalness is embedded deep in us both. I one day hope to have a job as cool as yours with a fraction of your knowledge to impart on the world. I've read all your books and can't wait for a new one. Thanks for everything you do. I truly believe you have left a lasting impression on many people. Jesus Christ, what is this? Future ballers of America and Canada day? Let me get this. Let me get this. You're 28. Your girlfriend is 25. By the way, being a 28-year-old male and just having a girlfriend is impressive. Our society doesn't appear to be producing men that women are interested in. So congratulations on having a girlfriend. Congratulations on a combined income of $165,000, which I think puts you in the upper decile

of all Americans, much less people under the age of 30. And being smart enough to do what very few of us do under the age of 30, and that is live below your means, such that you can put, let me get this, you have a quarter of a million dollars in investments? So, I mean, you're just doing so well. And around the tension that we all face, living below our means and enjoying life, what I would suggest is that when you're young, you find joy in things that may not require the level of lubrication around economics. The thing I remember most about my 20s was backpacking through Europe. I had a Eurail pass. I stayed in shitty hostels,

but I was with my best friend, Lee, and we spent three months in Europe, and we didn't spend any money. I think I spent a total of, I don't know, $8,000 over the course of the summer and just had an amazing time. So I don't want to say you can have it all, but I would suggest that, you know, the opportunity to do cool stuff, I would try and think about how can we do cool stuff that doesn't break the bank. And we live in such an Instagram society where it sort of says, go to Tulum. Well, here's the thing. Tulum is really fucking expensive. So are there other ways, other adventures you can take and make sort of a game out of it, whether it's an inexpensive Airbnb, staying in an URT at Burning Man instead of a trailer?

But I wouldn't say give up on experiences or scale back on experiences. I would say let some of that frugality come through. Because when you're young, just seeing the Eiffel Tower for the first time, you know, staying in a $30 a night thatched hut on the beach in Phuket, you can get away with that shit when you're young. Because here's the thing, with a girlfriend and that youth and some drinking and some good music, my brother, you can have a fucking amazing time. Whereas when you get to my age, if I don't have 600 thread count Egyptian cotton bedding, I break out in a rash. I need to be airlifted by American Express. I mean, just being in Kansas, making $165,000 a year and saving money, again, you should be giving advice. You're killing it, my man. You're killing

it. So don't give up on adventure travel with someone you're into. That is a gift. Oh, my gosh. But Christ, I don't know, camping. I don't know if they have your rail passes anymore. Just make a gamify it. But try and figure out a way to bust out of this addiction we have towards the lux in where all these young people on Instagram with this wealth porn of pictures of them on a jet or drinking Dom Perignon bottle service. What fucking douchebags. Guess what? You're not going to have any money, you idiots. You are the baller. You are the baller. You're going to have great memories to look back on with your girlfriend. And then you're going to have

several million dollars when you're older and you're going to be able to do really nice things with your kids. And you're going to be able to do it in style, which will become more and more important as you get older. Well done. Well done. That's all for this episode. If you'd like to submit a question, please email a voice recording to officehoursatpropertymedia.com. Again, that's officehoursatpro 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 on Monday with our weekly market show. 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. 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.

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