The Prof G Pod with Scott Galloway - Scott’s Thoughts on Noncompete Agreements, Surveillance Pricing, and How to Be a Great Storyteller

Episode Date: August 28, 2024

Scott speaks about the FTC’s decision to ban noncompete agreements, specifically why it’s another great move from the agency’s chair, Lina Khan, to rein in the power of large companies. He then discusses FTC’s recent investigation into surveillance pricing practices among eight companies, and wraps up with advice on how to be a good storyteller.  Music: https://www.davidcuttermusic.com / @dcuttermusic Subscribe to No Mercy / No Malice Buy "The Algebra of Wealth," out now. Follow the podcast across socials @profgpod: Instagram Threads X Reddit Learn more about your ad choices. Visit podcastchoices.com/adchoices

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Welcome to the PropG 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. Hey, Prof G. Hey, Scott and team. Hey, Scott. Hi, Prof G. Hey, Prof G. Hey, Prof G. Hi, Professor G.

If you'd like to submit a question, please email a voice recording to officehoursofprofgmedia.com. Again, that's officehoursofprofgmedia.com. So, with that, first question. Hey, Prof. This is Jack coming to you from horse and bourbon country in Lexington, Kentucky. My question today is about non-compete clauses. I work in medical device sales, specifically in spine surgery. And so because I have a highly specialized field, I'm subject to a non-compete clause in my employment contract. And so my question to you is, from a personal level, is this even going to affect me, the supposed Lena Kahn and FTC ban on non-competes? I saw on the news recently that the ban was upheld in the courts and is supposed to go into effect

in a couple months. So does that mean that all of our existing contracts are now void? And how do you differentiate between giving employees the freedom to strike it out on their own and build something for themselves versus maybe switching companies and taking very, very protected IP with them and leaving the door open for IP lawsuits left and right? And apart from all of that, will this even matter? Is it ever going to come into effect? Or will it be stuck in litigation for years and years until maybe Trump gets elected and fires Lena Kahn and we all pretend this never happened? I'd be curious to hear your thoughts, and I appreciate all of your content. Thanks for the interesting question. So, what are non-competes? They're labor contracts that prohibit workers from taking a new job with

competitors or starting a competing business during a set amount of time after their employment with a company. This can sometimes be years long. Typically, though, if you go on what's called garden leave or non-compete, they have to pay you during that time. Sometimes, though, a non-compete can mean you just can't go to work for anyone who is considered a competitor. According to the FTC, nearly one in five Americans, about 30 million people, are subject to non-compete agreements. Many experts believe non-compete agreements are behind the stagnation in middle-class income workers' pay. The FTC ban on non-compete agreements is scheduled to take effect this fall on September the 4th. According to the FTC, the new ban on the non-competes could lead to the creation of 8,500 new businesses per year

and wage increases totaling $300 billion per year. President Biden fully supports a ban on non-compete agreements, saying that they are designed simply to lower people's wages. So what will happen to your non-compete contract? According to the FTC, existing non-competes for the vast majority of workers will no longer be enforceable after the rules of fact update. Existing non-competes for senior executives who represent less than 0.75% of workers can remain in force under the FTC's final rule, but employers are banned from entering into or attempting to enforce any new non-competes, even if they involve senior executives. Employers will be required to provide notice to workers other than senior executives

who are bound by an existing non-compete that they will not be enforcing any non-competes against them. Okay, so my view on this is non-competes are horrible for the economy. And there are a few things I love more about the Biden administration and the competent people they hire that don't end up in jail or don't end up, I don't know, saying their boss is an idiot than what he has done at the DOJ and the FTC with Lena Kahn and Jonathan Cantor. So let's look very meta. Corporate profits have been an all-time high, an all-time high. Meanwhile, wages as a percent of GDP have been flat for 40 years. Consumers or workers have not gotten a raise unless they're in the top kind of 10%. Why? Because every fucking thing we do is a transfer of work and time, i.e. money, from young to old, poor to rich, and from workers to shareholders. There's a healthy tension between capital and labor. And during, for example, the 60s and 70s, it got out of control and labor became too profitable and there were no profits in corporations and the stock market went sideways, hugely mediocre returns for the better part of 20 years, and it was hard to attract investment capital and grow. And so labor had too much power. And there was a series of regulation, the activist investor popped up, and since then, since then, Washington has been weaponized by corporations and almost everything that happens favors the corporation and shareholders. And this

is all tied back to compensation that has increasingly been focused on shareholders. The result is a war on labor, and non-competes are a manifestation of that. Do you realize there are now sanitation workers, i.e. trash men, and even hairstylists that are subject to non-competes? These are total bullshit. Now, if you're a very senior level executive that is making millions of dollars and has access to the most sensitive IP of the company, those non-competes will still be enforceable for a while. I get that. I get that. If you're the one top engineer figuring out an LLM for meta and Microsoft calls and says, wow, we'll pay you 50 million bucks, maybe you should be forced to take a year or two year off because of the IP. However, however, confidentiality

and NDAs cover that type of IP theft. It's not like it's IP theft Lollapalooza. I've been subject to non-competes. When my company L2 was acquired by Gartner, they had two forms of retention. One was a non-compete. And as soon as I said, I am out of here, I hate it here, and that's being generous saying hate, they immediately started sending me nasty grams on legal letterhead saying, if you do anything that competes with Gartner, anything at all, we're going to sue you to the ends of the earth. The better way to create a non-compete is, quite frankly, is money. And they did that as well. And it's one of the reasons I hung around for 14 months, not 14 days. Let's just say it was a

cultural misfit, the dog in a large corporation headquartered in Connecticut. Good people, just not my people, if you will. And I wasn't theirs. Anyways, this is an outstanding move by the FTC and by the Biden administration. This transfers some of the power, some of the economic well-being back to labor. Who are you most worried about? Shareholders or a single mother who's a hairdresser who can't go to another fucking hair salon because she signed a non-compete in order to feed her and her family? This is total bullshit. This is what government is supposed to do. Non-disclosure agreements? No fucking way. This is wonderful legislation. They should have never existed. You want people to stay with your company? Then here's an idea. Pay your people.

That was indignant. All right. Question number two. Hey, Prof G. This is Kevin from Boston. Huge fan. Been listening to you and following you since your now infamous WeWork article. A lot of the things you say about, you know, the country, the markets, you know, being a father, being a man, just really resonate with me. And I really appreciate all you do there. My question is around this concept of surveillance pricing. I'm not sure you've seen it, but the general market. But I'm curious to get your take on whether or not you think this is illegal. I have a federal trade commission who should kind of opine on it

or, you know, what they should focus on. I know you're a big advocate for higher regulation. Very curious to hear your take and appreciate your response to what you do. That's a really interesting question. The FTC has ordered eight companies to provide information on how they use personal data to set prices based on individual shopper characteristics. The FTC aims to understand the surveillance pricing market where the consumer data,

including credit card information, location, and browsing history, may lead to different prices for the same product. The FTC noted that third-party intermediaries reportedly use technology, including advanced algorithms and AI, to do so. FTC Chair Lena Kahn said that firms that harvest Americans' personal data can put people's privacy at risk. Now firms could be exploiting this vast drive of personal information to charge people higher prices. The eight companies the FTC sent orders to include MasterCard, Revionix, Bloomreach, JPMorgan Chase, Task Software, Proz, Accenture, and McKinsey & Company. I'm curious why McKinsey & Company is involved there. I have two minds here.

I think this happens all the time. I think if you're browsing or coming into a site from one site that says you're probably a certain consumer, I think they can do variable real-time pricing. There is real-time pricing based on when you buy. Think about pricing discrimination of an airline. If I want to fly Friday to Sunday last minute, I may pay four, six, eight times the price for the exact same seat as someone who booked three weeks before and is staying more than seven days, because clearly they've figured out, all right, I'm a business traveler, which means someone else is paying, which means I'm fairly price insensitive. So there's all sorts of discriminatory pricing. It happens. Prices change on hotel sites, I've noticed. The thing I really don't like, which I think is illegal, when I bought

football tickets for Premier League, I'll be shopping for tickets, I'll put them in my cart, I'll wait a minute, and they'll say, oh, as I'm about to check out, the price has gone up. I think that is probably illegal, and those companies will probably get swiftly, I don't know, punished if you will, as they should. But I believe the price discrimination should be legal. You know, I mean, to a certain extent, I used to get student discounts. Is that surveillance pricing where you know someone is a student, so you offer them a discount? Seniors, you know, they do it by age. You do all sorts of stuff that, quote, unquote, leverages your personal data to give you different pricing. I'm in favor of competition, breaking these guys up, not over-regulating how they determine their pricing. So I'm sort of on the side of businesses a little bit here that should have the opportunity to charge a business person more.

But I do think most of these problems go away if you just have more competition. And as a rule, they're charging everyone less money because they know their competitors, B, C, and D, will do the same. I think this will be interesting. I appreciate the question. Sorry, it's not a more thoughtful question. But in sum, I think pricing discrimination and different prices for different people has been going on forever and will continue to go on one way or another. What we need is more competitors in the marketplace. Thanks for the question. We have one quick break before our final question. Stay with us. Welcome back. Question number three. Hey, Scott. Mickey here from Denver, Colorado. I love listening to your show, not just because of the content, but because of the way it's delivered. You have an authentic style and it keeps the

listeners coming back for more. A few episodes ago, you mentioned that it took you a long time to find out that storytelling was one of your core competencies. I was fascinated by that because I'd never heard it described as a core competency before. So here's what I'd like to know. What was your journey like? How did you get from being a timid rambler to the expert storyteller you are today? What advice do you have for those of us who want to add storytelling to our set of skills? And finally, how do you take an abstract talent like storytelling and turn it into a practical skill for building a business. Thanks for all the inspiration. Can't wait to hear what's next. Mickey from Denver. Your voice sounds like it was generated by AI, but it's nice. You could

do voiceovers. You could do like a local dealership. You could be like, hi, this is Mickey from Ford of Basalt, Colorado. Come on in to check out our new F-150 Lightning. Anyways, you have a nice voice. Okay, what was the question? Storytelling. The first time I kind of noticed it was when I was eight. And that was my father. I just started recognizing that people seemed to gather around my father and were just enthralled by him. Whatever room he went into, a semicircle would form around him. And I remember asking my mom, why do people like dad so much? And she said, he's charming. And my dad has this Scottish accent and is funny and has a strong jawline. He's quite handsome. And he would tell these stories and these jokes and a twist of phrase. And then he would do what

is the easiest way to get people to laugh at your joke. He would bust out in laughter after he ended his joke. And he was also had a good turn of phrase. He was thought of himself as kind of a big picture thinker. And he would have people over and regal them with stories about, you know, what is the key to a successful management? It's a good job description. And I just noticed very early that kind of storytelling and being able to hold a room was really important.

And then it wasn't really storytelling, but I wasn't in kind of junior high school and high school. I was exceptionally tall, exceptionally thin, and I had really bad skin. And that wasn't a recipe for getting a ton of dates.

And I found that my ability to get a date or have someone hang out with me or have friends hang out with me was a specific form of storytelling, and that was humor. And I really spent a lot of time thinking about, not thinking about, but trying to be funny. I won Most Comical and Steve Martin, I'm dating myself in my high school poll, which is kind of a thing around storytelling. I didn't really decide, oh, I was going to be a great storyteller. And the first time I thought I might have a talent for this was in graduate school, I was selected. I love this because I get to talk about me. In graduate school from Berkeley, I was selected as the student speaker to give the commencement speech at our graduation ceremony.

Other people recognizing that you have a decent gift to give makes commencement speech at our graduation ceremony. Other people recognizing that you have a decent gift to gab makes you think, wow, maybe I could make a living at this. But I never even then thought of myself as a storyteller or someone who's going to make a living there. But what has really helped me is I would say there's really kind of, there's a few things. One is, I think to be a great storyteller, you need to be a competent writer. I think writing, the ability to write and string together your thoughts and long-form writing helps organize and kind of really strain the muscle. I think writing is the most difficult thing I do, but it damages the muscle and it grows

back stronger across all communication. I think that is the base. If you show me an incredible storyteller, I'll show you someone. Even Ronald Reagan wrote lovely notes who can write fairly well. Then the second, it sounds very passe, but getting a lot of practice. Now, keep in mind, for 22 years, I stood up in front of 60, 100, 300 consumers and told a story for 80 minutes called A Class at NYU Stern, where they were paying me a lot of money to be very entertaining and insightful and educational for 80 minutes. See above, I charged my classes at one point, we're getting $170,000 in tuition per class. And then consulting is essentially storytelling through writing, through PowerPoint. So what are we going to do? We're hopefully going to have some talent, but you can't control that. We're going to get comfortable writing. We're going to put ourselves in a position of speaking in front of others, which can be painful, but it's important to do that early. And then we're going to find a medium. And I do this in my class. There's so many mediums now to

be a storyteller. TikTok, medium, writing long form posts on medium, Substack, texting as a form of communication, obviously writing books, writing articles, speaking. I mean, there's just so many putting out YouTube videos, whatever it might be. Your ability to tell a story on a different medium is, in my opinion, the key skill. So what are you going to do? You're going to start practicing. You're going to pick a medium. You're going to say, what would it mean to be on the top 1% of people on Instagram? That means I would need this many followers and this type of engagement. I do this in my class. I task everyone with picking a medium and saying, I'm going to be in the top 1% on LinkedIn by the time this class ends. And you figure out the nuance and the subtleties of storytelling in that medium.

Be clear, this is the gangster skill. Storytelling, storytelling never goes out of style. It is enduring. That's all for this episode. If you'd like to submit a question, please email a voice recording to officehoursofpropertymedia.com. Again, that's officehoursofproftmedia.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 please follow our Prop G Markets

Pod wherever you get your pods for new episodes every Monday and Thursday.