The Prof G Pod with Scott Galloway - Should We Be Worried About the Economy?, Scott’s Thoughts on Founder Mode, and the High Divorce Rate for Military Couples

Episode Date: October 2, 2024

Scott discusses the state of the U.S. economy, specifically how it is both prosperous and unevenly distributed. He then speaks about ‘Founder Mode’ and the evolution of how founders are seen in Silicon Valley. He wraps up with a conversation on the high divorce rate in the military and whether benefits such as Basic Allowance for Housing (BAH) contribute to that.  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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You can discover how Claude can transform your business at anthropic.com slash Claude. Support for the show comes from Fundrise. The Fundrise Innovation Fund is trying to change the landscape for regular investors. Thank you. in early with the Fundrise Innovation Fund. You can get in early at fundrise.com slash prop g. Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the Innovation Fund's prospectus at fundrise.com slash innovation. This is a paid advertisement. Welcome to the Prop G 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 propgmedia.com. Again, that's officehours at propgmedia.com.

So with that, first question. Hey, PropG. This is Steve from Denver. You've commented a number of times recently on how the economy is doing better than people are giving it credit for, including the episode with Kyla Scanlon about the Vibe Session. However, there are countless headlines just today about the latest revision to the jobs report, which is nearly 820,000 jobs downward. My question is, do the seemingly constant downward revisions give you any pause? Thanks for your time and stop being so nice to Ed. 100%, I'll stop being less nice to Ed. It's just, I feel bad for him. He's a lonely young man. Back to your question. I think a lot of it is AI. I think essentially, AI is sort of the perfect landing lights for a soft landing. What is a soft landing, you might ask? It's trying to cool the economy because you have inflation while not pushing it into recession, which is not easy to do. It's like landing an air, I don't know, it's like landing a propeller plane on an aircraft carrier. It's really fucking hard in high seas, if you will. What does AI do? It reduces costs while increasing productivity.

Who was it, William Gibson? Who was it that said, the future is here, it's just not evenly distributed? I think the same is true of our economy, and that it's great. Everyone's saying the economy's up, better GDP growth, and the rest of the G7, lower inflation than the rest of the G7, which is a Goldilocks economy. That's great, but my life just seems to be getting harder and harder. And there was this fascinating study I read the other day that said, if you look at France, which we don't kind of look to as a model for economic growth, if you were to take out the top 1% of income earners, over the last several years, the bottom 99 in France have done better than the bottom 99 in the US. And that's exactly what we have, is we have an economy that's pretty prosperous,

but it's not evenly distributed. And this is infecting every country. I saw another stat that just blew my mind. I'm here in the United Kingdom. If you take out London out of the equation, if you lifted London and all of its prosperity in very, very wealthy households in London out of the UK mix, the average household income in the United Kingdom would be equivalent to Mississippi, which has, I think, the greatest levels of poverty in the United States. So, essentially, the UK is not a very prosperous nation surrounding this uber concentration of wealth called one of the greatest concentrations of wealth in history called in London. So I would argue that the economy is actually doing fairly well. Our fiscal policy, our tax policy makes the same

mistake over and over, and that is people on the far right and economists or some economists who are these free market weirdos will claim that the middle class is a naturally occurring organism. No, it isn't. Anyone who's done anything resembling any sort of study of economic history says that the middle class is an anomaly. And typically what happens is there's a group of people who are very smart, very well-connected, very hardworking, very lucky. They get rich and they start weaponizing government. And people right now, wealthy people in America don't think they're weaponizing government, but they just happen to like, okay, just make sure that when it comes to soybeans, if I'm a soybean farmer, that we continue to tax the shit out of foreign soybeans and

subsidize my industry. And they aggregate so much power and so much money that at some point, the bottom 99% decide, you know, the fastest way to double our income would be to kill these 1% or to tell them to leave the nation, to pack their bags and they're out of here. And then they nationalize their business. That doesn't work very well. And the whole cycle kind of starts over and over again. And the question is, are we getting to that point in the United States when six people control more wealth than the bottom 50% of America? And I think you're seeing some populist movement. You might call it populist. You might call it recalibration. But unless we consistently invest or reinvest, redistribute, whatever the fuck you want to call it, money, capital into the middle class, we're going to have lower birth rates.

You have to have a middle class of men that are attractive to women and men who are not economically viable are not attractive to women. Yeah, I said it. And there's a lot of evidence that shows that. And we need a middle class that is thriving. They fight our wars. They buy our products. They are the citizens we need. They generally, we need them to be supportive of programs that provide civil rights, women's rights, you know, to basically make a society great. Circling back to your question, our economy in aggregate is killing it. The problem is the future and prosperity are in fact here in America. It's just not evenly distributed. Thanks for the question. Question number two. Hey, Scott. It's Greg calling from Nova Scotia, Canada. I'm a father of three boys, a husband, and a business owner. I would really appreciate your thoughts on Brian Chesky's comments that he made recently around founder mode. I'm curious, as you grew and

scaled your businesses, you talk openly about having a key person that was the operator for you, but how did you negotiate and manage your structure? Was it a stovepipe? Was it fairly flat? Did you do skip level meetings or did you really stay out of the day-to-day operations of the business and leave it to your ops manager? I would appreciate your thoughts on this and I appreciate all that you do. Thank you. What do you know, Greg's from Canada. The nicest, most intelligent. How do you get a hundred drunk fraternity brothers out of your pool? Hey guys, would you please get out of the pool? Boom! That never gets old, eh? Anyways, this founder mode thing, I found it fascinating. So founder mode is the idea that I think what Brian was trying to say is that he brought in all this professional management, the company got off track, and he needs to kind of take the reins and get more obsessed about the product. And there are, and the quote-unquote professional management doesn't work out. That's actually, there needs to be some nuance there.

By the way, I'm a huge fan of Brian Chesky. Airbnb is one of my biggest stock holdings. Look, there is a life cycle to companies. And as they go through that life cycle, as they go from startup to venture-backed to growth to public company to mature companies to declining companies to distressed companies, right? They require different management across those parts of your life. There are some people that are so talented that they can traverse all of those ages, if you will, or all of those components of the life cycle. Most CEOs cannot. Because back in my day, in the 90s, when I was starting companies,

founders were seen as a necessary evil. And once the company was real, you brought in some guy with gray hair from IBM or Oracle or something, and the VCs basically kicked out the founder, and if the founder was lucky, he or she could stay chairman. Then came Steve Jobs, and they brought in John Sculley, who was hugely ineffective, the guy from Pepsi, and then they brought back the crazy fucking founder, and he took the company to be the most valuable company in the world. Or actually, that's not true. He took it to $300 billion. Tim Cook has actually taken it to $3 trillion. Isn't that weird? Tim Cook has actually overseen a 10 or a 9x increase in market capitalization, but Steve

Jobs is our Jesus Christ. By the way, a guy who denied his blood under oath such that he could avoid child support payments when he was worth a quarter of a billion dollars. Hey, that's the guy I want my boys to role model after, but oh, okay, he made a great fucking phone, so let's pretend he's Jesus Christ. Anyway, what you have is the pendulum is swung the other way, and that is VCs and the community has basically decided that founders are the new Jesus Christ and that you need that DNA. And I've experienced it on boards where we put up with so much bullshit from founders because he or she was employee zero. I think it has swung back way too far, probably peaked in terms of it swinging back with Adam Newman, where his board just listened to this ridiculous bullshit where he was crashing the

equivalent of two Bombardier Global Expresses into a mountain every week. He was losing $100 million. Anyways, Greg from Nova Scotia, that's not your issue, or that's not your question. So his notion is you go founder mode, you're kind of all over everything, and professional management comes in and screws up companies. No, they don't. The best companies, typically speaking, have brought in professional managers. Satya Nadella, Tim Cook, they've all added more market cap than the original founders. Now, it's probably harder to go from zero to a billion in market cap than it is to go from one to 10 billion or 10 to 100 billion. Or in the case of Tim Cook, 300 billion to 3 trillion. Or in the case of Satya Nadella, I think he's taken it from, I don't know, $800 billion to $3 trillion, whatever it is. So I was on this panel of CEOs, and it was a CEO, I think, from Away or Rent the

Runway, this digital firm, and me. And they said, they asked us, what is your approach to management as a CEO? And one person said, well, for me, it's all about creating a culture that empowers people. Another person said, I think it's really important to identify what their roles and responsibilities are and constant measurement and feedback, but feedback that's empathetic. And then they turned to me and said, my management strategy is I am all fucking over everyone all the fucking time.

That is what founder mode meant for me. I was involved in everything. And I just don't think there's any getting around it. I think if you're serious about being an effective founder and growing a profitable company, or a company, you know, the great shareholder value, I just think you got to be all over everyone all the time, including yourself. I think you got to show that you came to play, be obsessive about the product. When I was running L2 for the first, maybe even for eight years of the company, nothing was allowed to leave and go to a client unless I proofed it first. I felt like I had the voice. I had an attention to detail. I like to write. I'm good at it. I'm like, I want to see everything before it goes out. I find that this whole founder mode

zeitgeist coming out of the valley is more basically more idolatry of innovators that founder mode is somehow, they're not talking about the founders of auto supply parts companies. They're talking about the founders of tech companies. And somehow they are smarter and know better than the rest of management, than the rest of companies, than the rest of America, than the rest of the world. And it falls into this bullshit notion that somehow these people have more insight into the happenings of the world and have more ability to fix problems. As a matter of fact, I would argue they've done more to fuck up the world than actually help it. Is that true? Is that fair? Maybe that's not fair. Definitely meta. Definitely meta. By the way, my dog is asleep here next to my desk because we went founder mode on a walk this morning. Oh my God, we chased some squirrels. We said hi to a lot of people,

hi to a lot of people, which freaks everybody out because the Great Dane, which looks mildly like a cross between a horse and an elephant just got beautiful elephant like coloring is just you know the great tans are so funny they'll like shove their hind quarters into you as a means of affection whereas the little one looks really cute and innocent it'll take your fucking thumb off they'd be like hello and like you know and then i'm following the dog around at night trying to pick up his shit to see if i can find the neighbor's thumb. Not true. Funny, though.

Funny. Anyways, don't know where I was headed with that other than to say thank you for the question. We have one quick break before our final question. Stay with us. Support for Prop G comes from Vanta. Whether you're starting or scaling your company's security program, demonstrating top-notch security practices and establishing trust is more important than ever. Vanta automates compliance for SOC 2, ISO 27001, and more, saving you time security posture with a customer-facing trust center all powered by Vanta AI. Over 8,000 global companies like Atlassian, FlowHealth, and Quora use Vanta to manage risk and improve security in real time. Get $1,000 off Vanta when you go to vanta.com slash profg.

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ConstantContact.ca. Welcome back. Question number three. Hey, Prop G. This is Natalie. I'm calling in from Northern Virginia. Appreciate you taking my question and for all the work you do on the pod. I am in my early 20s and I just graduated college with an econ degree.

I am a financial analyst at a pretty big government contracting firm, and I love my job. My boyfriend also just graduated college. He commissioned as an officer in the Marine Corps, and we've been together almost four years. We both come from military families, so I'm pretty familiar with the lifestyle I'm about to enter into as a future military spouse. So I'm not sure if you're familiar with the term BAH, but I'm gonna have to explain it for my question, so I'll give a short overview. BAH is Basic Allowance for Housing, and it's essentially a housing supplement for a soldier who lives off base. It can be used for whatever the soldier wants because it's just added into their paycheck with their normal pay. The other part of this is if a soldier is married

or has a kid, they get even more added to that BAH payment, every paycheck. An 18-year-old out of college, or I'm sorry, an 18-year-old enlisting right out of high school has huge incentives to marry the first person who shows a remote interest in them because the benefit to them is between $6,000 and $12,000 a year. Do you agree with me that this is an outdated policy that incentivizes soldiers to get married too young and contributes to the high divorce rate in the military? I'd love to hear your take on this, and thanks for everything you do. So first off, Natalie, it just makes me feel really good about America. We have people in their early 20s who are as impressive and as articulate as you, degree in economics, and are connecting and marrying someone who's going into the Marines as an officer. I just kind of want to

wrap myself in the flag right now. So back to your question. According to data from the U.S. Census Bureau, those who have served in the military tend to have higher divorce rates. In 2022, the rate for divorce among all active duty members was 3%. So that's higher than the, actually the, I think that's annually, every 3%. I don't know. Anyways, it's higher. I think you would need data to support that thesis because is it the fact they get married young? You would need to control it for things. In other words, compare enlisted people or compare people in the service

who get married at 25 or 30 versus those who get married at 18. I'm remiss to get in the way of any program that puts more money in the pockets of young people and especially young people starting families. I think the family unit, I've kind of come 180 on this. When I was your age, I'm like, I'm never getting married and I'm never having kids. I'm a selfish person. I like to work. I'm fine on my own. I do my own thing. And I'll have relationships, but I'm not interested in this construct called marriage that was invented by a

bunch of gay dudes in a church who wanted to make sure that women didn't struggle with poverty. Women are doing fine on their own. They don't need marriage. I don't need marriage. I had this kind of what I thought was evolved, hip, cool vision of marriage. I wouldn't have gotten married had I not had kids. And raising kids was a confident partner is the most rewarding thing in my life. So I was all wrong about it. Kids are becoming a luxury item. So I just don't like the idea of doing anything that would get in the way of supporting young families.

And I would imagine, and this is just pure speculation, that the stresses placed on a military family, specifically with the person serving being gone all the time, would be that is what it would be really difficult on marriages that it's not economics or it's not getting married too young although i agree that's not a great idea the idea of getting married at 18 seems just strange and like kind of i'll call it bound for failure because a lot of them stay married the rest of their lives but god i mean at the age of 23 i was different than I was at 18, much less 33 versus 18. You really are, especially men at 18, they really are boys. But this is a long way of saying I don't really know. But I think the problem, quite frankly, is not putting enough money. I think if we wanted to

lower divorce rates, we'd actually put more money in the pockets of young people. Thanks so much. And again, you just make me, hearing about you and your fiancée, it just makes me proud to be American. Thanks for the question. 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 officehoursatpropertymedia.com. Thank you.