The Prof G Pod with Scott Galloway - The Post-Pandemic World Economy

Episode Date: December 10, 2020

Dambisa Moyo, a global economist and bestselling author, joins Scott to discuss the five trends she believes will define the post-pandemic world economy. They discuss all sorts of topics like the private sector, deglobalization, and public policy. Dambisa also explains what board members can be doing better. She is a trusted advisor on macroeconomics, geopolitics, and technology themes and serves on a number of global corporate boards including 3M Corporation, Chevron, and Condé Nast. Follow her on Twitter, @dambisamoyo. (13:29) Scott opens with his thoughts on the big IPO week and how Airbnb achieves three hurdles: differentiation, relevance, and sustainability, while DoorDash does not. He also explains why he believes WarnerMedia’s decision to release its slate of 2021 films in theaters and on HBO Max the same day is a baller move.  This week’s Office Hours: the future of the podcast industry and whether CrossFit could take on Peloton’s business model. Have a question for Scott? Email a voice recording to [e-mail].  Algebra of Happiness: advice for giving care at the end of a loved one’s life.  Dambisa’s book recommendations: This Time Is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff The Art of Thinking Clearly by Rolf Dobelli Learn more about your ad choices. Visit podcastchoices.com/adchoices

Episode 39, the number of signers to the United States Constitution, the atomic number of yttrium. My son was asked to write a thousand words on the periodic table. I remember when I was asked to write a thousand words on acid and what happened? I tried, but my pen turned into a rainbow colored giraffe and then the desk melted. Let's make this podcast your melting giraffe. Go, go, go. Welcome to the 39th episode of The Prop G Show. In today's episode, we speak with Dambisa Moyo, a global economist and bestselling author. She's a baller.

She's not only a great author, but also serves on several corporate boards and sort of a clear blue flame thinker and has an incredible personal IPOs on U.S. exchanges have already raised a record $156 billion in 2020. And this week, both DoorDash and Airbnb are expected to begin trading and both have increased their target share prices. In sum, their boards have said we're sick of giving a pop or unearned return to the institutional clients of Goldman and Morgan Stanley. And we want you to raise our ranges because all these IPOs have been going out and getting huge pops, which is nothing but a transfer of value from existing shareholders to new shareholders who, quite frankly, probably don't deserve it as they have been investing in the company for very long. By the way, what a victory for humanity today. Quick tangent, first vaccine given to a citizen, a nine-year-old woman in the United Kingdom. Go humanity, go vaccines. Anyway, anyway, DoorDash,

DoorDash, in my view, does not clear all of the hurdles. What are the hurdles? Tonight is my last class of my fall brand strategy course, 280 students paying 7,000 each, 1.96 million, or about 166,000 per class. Is the dog worth it? No. But is the certification they get and their ability to have that currency of an NYU Stern MBA stamp or tattoo on their forehead worth it over the course of their lifetime? Yeah, still is. But anyways, it doesn't mean it's not morally corrupt. However, one of the gangster concepts we go through, and this is something I have held on to my entire business career, is you want to look at every strategy, every capital allocation decision, every company, product, or service through the lens of, does it clear

three hurdles? Trace hurdles, mis amigos, trace. The first, differentiation. Number two, relevance. Third, sustainability. Differentiation. Brand, the term brand, is syn Third, sustainability. Differentiation. Brand, the term brand is synonymous with differentiation. Is your product a 10X product or service? Differentiation is the

only business strategy at the end of the day that is sustainable. Differentiation two, if you're fortunate enough to figure out a way to carve out something different, does anyone care? These two are in conflict with each other. Okay, we're going to be the internet business school. Berkeley Business School, Haas School, was actually contemplating this in the 90s. That would be highly differentiated. But the problem is it probably wouldn't be that relevant to that many people.

So the more differentiated, the less relevant. A niche doesn't have that broad a distribution. So these two are in conflict with each other. I would argue you want to go differentiated or you want to offer differentiation. You want to be really specialized, develop a very loyal following and grow from there. Is it relevant? Okay. Yes. DoorDash, is it differentiated? I don't think it is. We have Grubhub and Uber Eats. I think these are substitutes. I don't think it's singular.

I don't think it's that differentiated. Is it relevant? Yes, it's relevant. Why? More and more people having food delivered. And then finally, is it sustainable? I don't know. I don't know what moats you can put around this company other than so much capital that you buy up the competition and ultimately end up in a duopoly. That's somewhat sustainable. Now let's look at Airbnb. Is it differentiated? Oh my God, get out the painted giraffe or the acid-induced business analysis here.

This company is in a word, singular. Nobody says, oh, I got a booking.com. No one says, oh yeah, we got an Expedia. Everybody says, yeah, we're just going to get an Airbnb. This brand is singular. Is it relevant? Yes. Travel, renting apartments, short-term stays, all relevant. And then finally, let's look at the sustainability. Again, I don't think there's any substitute here. I really don't. I think this company has built a moat the size of the Nile. How have they done that? Think of all the other hotel brands they compete against. Four Seasons is globally relevant, but only relevant to a luxury consumer. Singapore Airlines is not relevant to that many people. And Marriott is relevant only

to people in Europe and the United States. Airbnb is truly globally relevant, if you will. Well, what about Expedia or Booking.com? Yes, yes, they are relevant. But what does Airbnb have? It has supply, global supply and 7 million properties across 4 million hosts. You want to talk about moats? You want to talk about differentiation, singular, relevant, increasing travel, people thinking about renting homes as opposed to hotel rooms, a better value per square foot. Oh, and by the way, more COVID free and, and these ultimate network offense moats, boom, boom, boom, hurdles one, two, and three. So, so what are we going to see here? We're going to see big pops on day one, even when the increased ranges, because everybody wants into the innovation economy. And there's a ton of capital. The market is awash in capital because investors have never had more cabbage and retail investors who are the tail of the whip here have stimulus money, savings rates have never been higher. That's going to pour into the market. Long-term, long-term,

this is definitely Airbnb in my view over DoorDash. Business Insider reported that equities analyst David Treanor believes DoorDash's IPO will be the most ridiculous IPO of 2020. What does he mean by ridiculous? Holds no value beyond bailing out private investors before unsuspecting public investors realize the business is not viable in its current form. Hello, Mr. Treanor, don't hold back. What else is going on? What else is going on? WarnerMedia CEO made the baller move last week that will shake up, shake up the film business, and it's never going to be unshook. We are taking this etch-a-sketch called films.

We're shaking that bitch, and we're going to have to draw new lines. Wonder Woman 1984, which, by the way, is getting great reviews. And all 2021 Warner Media films are coming directly to our screens. That includes Dune. I think it's Top Gun's in there and a bunch of baller movies.

The company announced that all 17 films will be released in theaters and on HBO Max the same day at no extra cost. They're not pulling kind of the Disney Milan 30 bucks. They're saying, boom, it's on HBO Max for the first month of each film's release. The company said in a statement that, open quote, the hybrid model was created as a strategic response to the impact of the ongoing global pandemic. Now, why was it created? Because AT&T has lost the narrative. Stock prices used to be a function of two things, or they still are, the narrative and the numbers.

The numbers, EBITDA, growth, margins, the narrative. What is our vision for this company? What is the business model? Boom, kind of 70, 30 numbers to narrative. It has flipped. It has flipped. It's now about the narrative, right? The narrative of Tesla is dramatically better

than the narrative of Toyota, Daimler, or Volkswagen. And by the way, and by the way, despite producing 400,000 cars instead of 24 million, it's worse more than those three automobile companies combined. It's now all about narrative. And AT&T, the $180 billion firm, has lost the narrative. Why? Because it has a great $150 billion business called Dollar Communications that has been

queered by the $30 billion Time Warner acquisition. And the narrative, quite frankly, right now is this acquisition didn't work and there is no synergy. That is the narrative. They are taking back the narrative. They are taking back the narrative. And they're going to say, I know, I know we are going to become the largest subscription revenue company in the world. They're absolutely going to have to renegotiate the contracts with all their talent that they promised a piece of the backend. But think about this. Think about this. $180 billion in revenue, approximately $360 billion in enterprise value. What is enterprise value? It's your market capitalization plus your debt minus your cash. AT&T is actually the most indebted company in the world with about $160 billion in debt, plus their $200 billion market gap, boom,

$360 billion in enterprise value, $180 billion in revenue, meaning they trade at two times revenue. Let's look at other great recurring revenue companies, Netflix, Apple, only 24% recurring revenue, but it's moved from 10 to 24, so it has been recast. And then Microsoft, the ultimate recurring revenue company, B2B, through Microsoft Office, also trades at approximately nine times revenue. So Netflix, Microsoft, and Apple, nine times revenue. AT&T, two times revenue. If they can use that pulsing value and push Wonder Woman 1984 into the homes and take

their HBO Max really anemic subscriptions, and renew or recatalyze growth and start to capture back the narrative. Hi, I'm John Stanky. I am the CEO of the largest recurring revenue company in the world. I am the baller subscription firm of all baller subscription firms. There is huge headroom, huge headroom in between that two times multiple and the nine times multiple that the other subscription revenue ballers are getting. And so, okay, they give up $1.2 billion at the box office. That sounds like a lot of cabbage and it is, but it's

currently worth about $2.4 billion to the company. And if they can just get that multiple up, that multiple up on their 180 billion revenues, if they can just get it up one basis point, for every one basis point they get it up, they get another $1.8 billion. If they can go from two times revenue to 2.1, if they can take back the narrative, they get another $18 billion in stakeholder value. There's a lesson here. There's a lesson here. The most accretive actions of the last 10 years, accretive is an insecure academics way of saying basically, how do they add or increase shareholder value? The most accretive actions have been a move from transactional to subscription business model. And if AT&T can recapture, can take back,

take back the narrative and say, we are the largest subscription company in the world, not a company that made the dumbest acquisition of the last 10 years since Time Warner acquired AOL. Funny that probably two of the 10 most disastrous acquisitions both have the terms Time Warner in them, but that's a different talk show. If they can recapture the narrative and say, we are the baller subscription company, and just take their multiple from two to 2.1, much less to nine, this is an incredibly accretive move. Prediction, prediction. AT&T stock, which has been down every year for the last several years, hits 40 bucks in 2021. It has its best year in the last five years. We are not going back to the theater. We are not going back to the office. There'll be a short-term sugar high. The world has shifted. AT&T has done what

any company needs to do to move to subscription. They have crossed the valley of death. They have shown real leadership here, and it is going to pay off in spades. The baller move, there is no free lunch. A move to subscription, a move to recognizing dispersion, any big change in your life. There is no getting lucky without taking a big risk and putting yourself in a position to be really lucky. Stay with us. We'll be right back for our conversation with global economist, Dr. Dambisa Moyo. 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.

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Go to ConstantContact.ca for your free trial. ConstantContact.ca for your free trial. Constantcontact.ca. 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. Here's our conversation with Ambisa Moyo, a global economist and bestselling author. She's a huge influencer and key decision maker for strategic investments in public policy

and serves on a bunch of very high profile boards. Dr. Moore, give us five things or some things that you think will kind of define the post-pandemic economy. What are the enduring changes to our economy? So from my vantage point and really based on looking back in history, in particular to the Gilded Age and the years and decades after the period of 1870 to 1900, the five things that are going to define the macroeconomy, I believe, are really characterized by the overarching view of a more progressive world and one in which the government is more important. So first of all, I think we will see bigger government. And by that, I mean larger debts and deficits, if you can imagine such a thing, given where debts and deficits are today. Part of that is really the government's role as a

provider of welfare, I think will continue. The second point is that government will become bigger, much more important in terms of being an arbiter of capital and labor. We've already seen signs of this. And by that, I mean much more important in terms of employment, much more important in terms of supporting businesses. So, for example, the fact that the Fed in the United States have been buying sub-investment grade debt to support certain corporations. And also we've seen in the UK where there have been massive furlough schemes, which I think will be more needed over the long term. I think that's a second thing that we'll continue to see. The third thing that I'm sure to see, which is a corollary of government getting bigger, is that I think the private sector will get smaller. And in that respect, we've already

seen some of these trends over the past decade, according to Wiltshire and other data sources, the number or the proportion of publicly traded companies in the markets has gone down by about 50%. And I think that is a trend we'll continue to see, partly as there's much more consolidation in M&A in the markets, but also as many companies shy away from the sort of heavy regulatory scrutiny and burden, both from institutions and regulators, but also from society more generally. The fourth area that I think is really important is that we're going to see more taxation and much more regulation. Again, this was very much thematic in the period post the Gilded Age, followed by the crash in 1929, where you started to see much more antitrust legislation.

We've started to see hallmarks of that, especially as many of the largest sectors, banking, airlines, pharmaceuticals, technology, etc., are now dominated by just a handful of corporations globally. So we've ended up with oligopolies in many of these key sectors, essentially organically, but I think there'll be a greater push from governments to really be much more aggressive in an antitrust perspective. And then fifth, one area, a fifth area that I think is going to absolutely define the post-pandemic era, which was actually something, a trend that was happening before COVID hit in earnest in this year, 2020, is there will be greater deglobalization. And just as an umbrella concept, deglobalization is about trade. It's about the movement of capital for investment. It's about the movement of people in terms of immigration.

It's about the commonality around standards, such as intellectual property. And it's also very much about institutions that govern the global monetary and sort of trade and commerce environment, such as the Bretton Woods Institutions, which were established in 1944, such as the World Bank and the IMF. I think, in fact, I know there was already trend lines showing that the deglobalization, reduction in trade and capital, stronger and more aggressive anti-immigration policies, the risk of a splinternet that you'll have a US-led and a China-led versus a China-led type of intellectual property war in technology space, and really the rise of

alternative multilateralism. I think all of these aspects of deglobalization will gather momentum in the period post the pandemic. So those are the five things that I would say would highlight the post-pandemic era. A couple of these things. When government's getting bigger, private sector are getting smaller. My traditional capitalist DNA says that that results in lower levels of output and productivity, and that is a bad thing. Where do I have that wrong? What are the upsides and the bad sides of a shift to more resources to government coming out of the private sector? Well, I think you're not wrong on the superficial level, but I think there's an important caveat, and I should say an important assumption that you're making when you make that claim,

which is to say that government is acting inefficiently or ineffectively. You know, we have had periods, and I should say, I'm like you, I'm very much a sort of red-blooded capitalist. I really do believe that the private sector needs an important central role in driving innovation, growing the GDP pie, improving livelihoods, and really driving human progress. So that is very much what I believe. But I also think that we oughtn't forget that when you look back in history, and even recent history, in the United States, for example, the government has

been a key player in a whole host of areas that have helped to drive the success of the private sector, whether it's through the Manhattan Project or DARPA or the development of Silicon Valley, or even go back further in history. Exactly. Touche. But also going back further in history, the notion that somebody somewhere with the help of state and ultimately federal government thought about high schools developing a program or a template for education that could be broad-based. I mean, these are elements,

and of course, infrastructure are just a handful of elements where government, which acts on the data-driven, forward-leaning, measured outcomes and in a non-corrupt way can be incredibly catalytic for economic success. When I hear, so I'm going to use the S word, socialism, but I also want to acknowledge it's not necessarily a bad word. Seven of the 10 countries that report the happiest citizenship are socialist. So I want to use it just as an economic construct. It's not an insult. It's not a warning sign. I find a lot of people in the media are using socialism as some sort of cautionary tale, like, oh no, socialism. But when I think about socialism, I think it's okay. When the state controls the means of

production and how its spoils get divvied up. And it sounds like what you're predicting in a post-pandemic world is, roughly speaking, we're moving towards a more socialist construct. Well, I think it, again, really depends very crucially on how those governments operate. If you end up with a government that is not really interested in growing the pie, but is more interested in redistributive approaches, I think, yeah, that is an outcome that we ought to all be dissatisfied with. That is not to say that we should be blind to concerns around income inequality getting worse, social mobility down by 50% in the United States over the last several decades, et cetera, et cetera. I mean, those are, you know, we have to be led and policy should be driven and curated

based on the facts, which is that, you is that there are certainly losers, winners and losers in a more globalized capitalistic world. But, you know, I don't have any objections to a in this context, the notion of socialism, meaning that government is much more involved as an arbiter of capital and labor, as opposed to one in which the spoils are just, you know, they're just there to redistribute. I don't think that that is an environment that we should aspire to. One example of work that I've done, my first book, which is now over 10 years old, was really a critique of these large aid programs, which on paper seem very attractive. Oh, we want to help the poor and the best way we should help them is through the aid transfers. But what I was arguing that that is not the best way. And you actually create dependencies that are longer term deleterious for economic progress and ultimately for human progress as well. So that's where I stand on this. I'm all for government providing public goods such as infrastructure, providing public goods such as education and

national security. I have deep, deep reservations around governments that only see themselves as, you know, essentially being short term in their thinking and very focused on redistribution and not much in terms of long term thinking. So the rescue package, the stimulus, the CARES Act, PPP loans, grade our response so far, our economic or fiscal or monetary response to the crisis? What did we get right? What did we get wrong? Well, it's very hard to say. I think one of the tendencies people have is to throw a sort of peanut gallery, commentating on things that we don't have a full understanding of. I happen to serve on the boards of a number of large global complex organizations. And one thing that I can assure you is that the optics from outside of when, you know, boards are dealing with certain issues is quite different from the reality. And I'm often struck by something that President Obama said, which was by the time something hit his inbox, it means it

was extremely difficult because if it were easy, somebody else would have solved it. And I think that, you know, if it were easy to resolve the pandemic, it's in no one's interest for us to be now, whatever it is, nine months and sitting at home with the aggregate demand shock that has left the economy's global economy incredibly vulnerable. I mean, who's benefiting from that? I don't think anybody could be that short the market. But, you know, what we're learning is that this is a multi-dimensional problem and it's a multi-period problem. And I think just again, outsider peering in, I think the original approach across the world was three things. I think it was one, it was not multidimensional. I think everybody interpreted it as being a healthcare problem first, and that all the

advice came from healthcare experts. It was very little sort of, let's bring a bunch of experts around the table, whether they're economists or socio-anthropologists, et cetera, which I think that was one error. A second error is I think we didn't really view it as a long-term problem. I think there was a lot of a sense that it would be quickly resolved. We couldn't imagine that it would take on... Yeah, we just disappeared. Yeah, that we just couldn't imagine. We have not planned for something that could happen for another couple of years. And even with the evidence that Spanish flu was from 1820, excuse me, I beg your pardon, 1918 to 1920,

we still assumed with technology and knowledge, we'd be speedily out of this situation. And yet here we are. Now we have to face all the distribution issues around the vaccine, et cetera. The third thing, which I think we could have done better is this is a global healthcare problem. And yet we've all gone to our respective corners

to solve it unilaterally. So I think there, for me, especially somebody who's quite a globalist, I think that that's a failure in a lack of coordination. Very emblematic of some of the deglobalization points that I raised earlier. We're in a world where people think that the world should be more balkanized. coordination, very emblematic of some of the deglobalization points that I raised earlier. We're in a world where people think that the world should be more balkanized.

Well, say more about that because you predict a deglobalization. And to your point, Taiwan with the same population of New York that's had, I think, 28,000 deaths. And then Taiwan has, I think, 60 infections and six deaths, and it seems that we've decided that our superiority or exceptionalism or we make excuses for why we can't learn from them. Doesn't deglobalization, isn't that really a step backwards? Oh, from my vantage point, absolutely. But I mean, see, I am very much a big believer of what's offered or been proffered in textbooks around globalization. I think we should all produce in the world what we're best equipped to produce. That's the fundamental comparative advantage or competitive advantage, however you want to describe it.

And unfortunately, for a whole host of reasons, we've ended up in a world where places that should be doing certain things, and give an example of my home continent of origin, Africa, which is largely subsistence farmers, largely agricultural. It has the largest proportion of untilled arable land left on the planet. Those economies really should be at the forefront of feeding themselves as well as the world. But you have subsidy programs, which are very rational in some respects, more political respects than economic respects, because politicians want to win the state of Iowa and Idaho, et cetera. So they've got to pander and protect the markets of their farmers. And similarly, through the common agriculture policy in the European Union, they want to protect British farmers and French farmers. And so they lock out African and South

American food producers. And as a consequence, we move away from globalization. So I understand the rationale on paper, but, you know, we're all poorer for it. You know, I wish we'd be in a much more coordinated global world, but, you know, it's a far cry. The reality is a far cry. What I'd call real politic is a far cry from what is in textbooks. When you look at our economy and our policies, if there were one or two structural changes you would like to see implemented, what would they be? It's a great question. I actually published something on Lincoln recently. I won't go through all of them, but it was sort of three things we should start doing, three things we should stop doing, and three things we should keep doing.

And this is for the United States. I won't go through all of them, but it's certainly the case that for the United States, for me, the biggest vulnerability is the political environment. It's far too short term. President-elect Biden is not even in office, and yet we've already got two years before the midterms, another two years before the next presidential election. As you know, it takes two years of campaigning. So really, we're in a situation where the political infrastructure in democracies is misaligned from a lot of the long-term problems that the global economy and the U.S. economy faces, whether it's technology

and the risk of a jobless underclass, demographic shifts that are leaving people unemployed, concerns about the environment. These are all long-term. Income inequalities, these require deep thought and they require long-term solutions, but our politicians are rewarded for short-term thinking. The other thing, which is to me very obvious, and it's been frustrating to see decade after decade not really resolved with any gusto, is the sort of boosting the infrastructure. America's infrastructure is graded D plus by the American civil engineering core. You know, this is just not the sort of backbone of a successful economy for the 21st century. And similarly, you know, education remains incredibly weak. Look at the OECD PISA statistics in mathematics, reading, science, American students are now, they used to be in the top three. Now they're in the bottom 30 of the world in terms of rankings. And as you probably know, this generation of Americans for the first time in the history of the country since 1776

will be less educated than the preceding generation. I mean, this is just not a formula for success. No matter what caveats people might attach to them, I think we really have a lot of work to do. Yeah. The short-term thinking here, there's just so many examples. I think of the H-1B visas, 50% of doctoral candidates are immigrants, and we've decided to take our secret sauce and stop it at the border, right? And then I, but the ultimate manifestation, and I would be curious to get your view here because mine, I'm a glass half empty kind of guy,

is our skyrocketing deficits. We show up and we say, I know, we won't have to tax the rich more because they're my donors and we'll throw bread and circuses at the populace and we'll borrow money against future generations. I mean, at what point do my understanding is where we have the budget this year that we were projected to have in 2044, we've exploded our deficits. At what point do the deficits begin to register a toll

on our current abilities? We know that long-term it's someone's got to have to pay this money back, but at what point does, you know, it's not a problem until it is a problem. When does it become a problem? Yeah. Well, you know, frankly, it becomes a problem when the people who are holding your debt no longer want to lend to you. And as you know, China, if it's not number one, it's usually number one or two. It's sort of the vibe for the first and second position between China and Japan. China is the largest foreign lender to the U.S. government. I mean, this is just a vulnerability that to me seems so stark. How can you have your biggest lender be, in many respects, your biggest rival?

You're being very harsh in terms of trade, in terms of security, intellectual property, etc. But on the other hand, they're holding the largest amount of debt, which they can very easily put the squeeze on on the U.S. Now, some people say, well, we're a reserve currency. Well, you know, I really do think that the world is changing incredibly quickly and there needs to be a better recognition of what is at stake. And I worry that that's not the case. And the other reference to your question is have a look at the book that was written a couple of years ago, a few years ago by Ken Rogoff and Carmen Reinhart, two economists I really like a lot. They wrote a book called This Time It's Different. And they basically looked at 900 years of government debt and they concluded that when government debt to GDP ratio

goes over 60%, it becomes an incredibly dangerous, precarious place, not only because of what I just said, like who's, you know, who's lending to you, but also because your economic growth starts to slow considerably. And, you know, just as a way of thinking about growth, you need to be growing at 3% per year in order to double per capita incomes in one generation. That's a generation being about 25 years. So if you're growing below 3%, and for governments that have 60% debt to GDP ratios, you're really growing at around 2%. You have enormous vulnerabilities, which could be anything from income inequality problems, but can very quickly seep into civil unrest and more deep-seated challenges to the sort of viability and stability of an economy. Perhaps the last

thing I would just point out is, as you know, the U.S. debt to GDP ratio is now 100% debt to GDP. Globally, debt to GDP is around 320%. So yes, you know, to your question that, you know, where are we on this? I think it is a pretty precarious place, which is part of the reason I think, you know, I can see on the surface why the optics of a new president in the White House is appealing and attractive. But I think in terms of what can really be done, I think there are very few levers left, if any, for the United States if they're not really sort of embarked upon in a very aggressive way. Yeah, I think of Japan. I mean, I remember business school is the ultimate luxury item. And I remember the dominant cohort in my business school class in 1992 in Berkeley was Japanese kids. And because the economy was so strong there. And now I think about how their economy, it feels like it's just gone sideways the last 20 years. And it's to your point, it has that incredible debt to GDP ratio that it seems to have hamstrung them. What about, so if you think about, or gosh, I'm even thinking about the Suez Canal. Didn't we force the British to do what we wanted because we held their debt?

I mean, we are very vulnerable right now, aren't we? Well, it would seem so to me. I mean, I was born and raised in Zambia, Southern Africa, which is one of the poorest countries in the world. And you may have seen there, they now have the somewhat non-illustrious title of being the first country to default because of COVID. And they've been basically under, this happened in the last couple of weeks, but under immense pressure, enormous squeeze from China, who bought the government's debt in the secondary markets, and were really reluctant to engage or to do what generally happens when you

need to restructure your debt. You extend the maturity, you change coupons, and they've just been reluctant to do that, so it forced the government to default. And so, you know, do I think that the United States is going to default? No, I don't think so. Certainly not in the next period. But there are a number of other vulnerabilities that are second order effects of having a government that is so vulnerable in terms of its debts and deficits, such as the cost of capital. You probably are aware that 20% of American companies are now considered zombies. By that, I mean, they don't even generate enough cash flow to pay the interest, just the interest of the debt that they hold. You know, there are other aspects, you start to see massive trade-offs in how governments allocate capital. We've talked

about some of the weaknesses that governments have, certainly in the United States, around poor investment in education, lack of investment in infrastructure. Well, that's because something has to give. So they have to pay the debt back. Well, that means there's other areas that will suffer. So I think these things are already, the die is already cast, if I may use a cliche. I think we already are familiar with many of these trade-offs. Perhaps we haven't aligned them as being part of the debt problem, but I think they really are. And you serve on a bunch of corporate boards. I know you're interested or have written about corporate governance.

What do you think are the one or two structural changes or how would you like to see boards of directors of public companies change? So, you know, just to give some context, I do have a book coming out in the spring, 2021, called How Boards Work. I think that there is a lot of a sort of a blind spot by a number of people, even our own employees, about what the mandate for the board is, what levers boards have to influence change. Boards have been around since around 1674. And, you know, by and large, we haven't changed that much. I mean, on the margin, there have been some changes, but really fundamental change hasn't really been the case.

I say that really with part temerity and part humility, because I think there's something to be said about a good governance structure. But on the other hand, I don't want to claim or to assert that other boards didn't have challenges. I mean, try being a board member in the middle of the World War I or World War II. It must have been incredibly difficult. So, you know, it is challenging, yes. However, I do think there are some specific opportunities. I think boards need to have more visibility around ethical issues as one area. So, you know, there's some companies that are going as far as thinking

about having ethics committees on the board. And this is largely because we have a lot of ethical issues around data privacy, use of data privacy. You know, we all want a vaccine. In fact, we all want a cancer cure yesterday, basically as soon as possible. But, you know, what freedoms are we willing to sacrifice in order to speed that up? Do we want our pharmaceutical companies to do trials in a place like China where jurisdictions where the use of data is perhaps not as managed or policed as aggressively as the West? So that's a fundamental question. I mean, there are other questions such as ESG, broadly defined, and I'll pick climate as one example. How do we think about climate and ESG compliance being, you know, is it comported with being an

investor in China or is it against being an investor in China? I mean, these are questions that I think ethics committees on a board or an ethics lens on a board will have to consider. The other one, another example of something I think would need to change, I mean, is in some respects obvious, but in other ways not. And that is really, we do need to have a better understanding of trade-offs. I fear that there's a lot of campaigning, a lot of very aggressive policing of 21st century capitalism, boards specifically. I mean, there's campaigns to defend companies, but there's just a lack of understanding about the importance of corporations and their role in the world. If I may give you a very quick example, on the one hand, we are all, I mean, I think there are very few people who are climate change deniers. I think the evidence is

pretty clear that human beings are contributing to the heating of the world. But on the one hand, we have to do something about climate change. On the other hand, we can't be so reckless as to just turn the lights out when there are about 1.5 billion people on the planet who don't have access to energy in a cost-effective and sustainable, sort of stable way. This is a problem because we might solve one problem, i.e. we turn out the lights because we want a sort of more sustainable energy approach. But on the other hand, we leave a lot of people incredibly impoverished, no access to education. And you create another problem because then you have mass disorderly migration. You know, I like to encourage

people to think about right now, we spend so much time on Zoom screens and really heavily dependent on virtual and electronics as you and I are doing right now. But the truth is, if you're sitting in a place like my home country of Zambia, you know, for 17, 18 hours a day, you don't have any electricity because of load shedding. And it's the same is true in places like South Africa. So if you have, and I know this to be the case, if they have wonderful students from Africa who got into the best schools in the United States, they've gotten to the Harvards and Yales of this world and to the Ox bridges of the United Kingdom. And they went home in March because of the pandemic. And the classes have started on Zoom and they have no access to,

because of unreliable energy, have no access to the classroom and all of a sudden they're being left behind. So it's a very specific example, but it's a very generalized problem that we cannot and boards should not be in a place where they're being forced to answer questions without thinking more generally about trade-offs and broader concerns for society. So to wrap up two things, I want to do a lightning round with you, but I want to give you the ability to pass because some of these questions, someone who's thoughtful with your credentials

doesn't want to give a three or five second answer. In a decade, global superpower, China or the US or other? Could it be both of them? Or what does other mean? Somebody else. I was thinking somebody else, but say more. Oh, no. Say more.

I think that it will be finely tuned. I think that both economies will be important players in different areas, and there's going to be forced cooperation, 50-50, I think. Well, that's optimistic. I think that's actually probably a decent outcome. That's what my portfolio says. And do you, stock market, NASDAQ, up or down next, call it next 24 months? Up. Up?

Yeah. Number of households that are food insecure in the U.S., up or down over the next five years? I'd say up. I think the number is one in seven in the U.S. I fear it's going to be higher. Yeah. And do you think that we as a nation become less or more polarized? I think the number is one in seven in the U.S. I fear it's going to be higher. And do you think that we as a nation become less or more polarized? I'm afraid it's probably going to be more polarized. So let me just add to that. If there's more food insecurity, which sounds like more income inequality, if we become more polarized, isn't the risk of revolution much greater over the next five or seven years in the U.S.? Well, I would say in principle, risk of anything, yes, is rising.

But I think at the same time, the institutions in the United States are becoming more transparent, more inclusive. I think what needs to be done is greater conversation. I've been reading this book. I'm actually rereading a book called The Art of Thinking Clearly, which came out a number of years ago. But it's really interesting because there's so many fallacies and so many assumptions made about what, quote unquote, the other side think. And so I think really public policy's duty and the next, certainly generation, but certainly the next five years or so is really to try and bring people together, having proper conversations about what America means, what it's supposed to be and how it's going to get to that place, as opposed to pointing fingers. And I've talked about this. I think one of the weaknesses in the country, which I really love living in America, but one of the challenges has been it's been too easy to blame someone else. It's always China's fault or it's globalization's fault,

and there's no real acknowledgement that we've made some catastrophic errors that need to be rectified. So I'm optimistic about the US because I think they're very quick to solve problems. And last question, advice to your 25-year-old self or specifically, we have a very young viewership on the podcast here. what advice would you offer them? I would say two things. One is things take time. Don't try and be clever. We've all looked for shortcuts. They don't exist. So you've got to do your time basically. And the other one is no doesn't mean never. It just means not now, which I think is really important. People, they get told no and they think it's the end of the world when actually it just might mean that you need to work a little bit harder or differently. And so you really shouldn't be discouraged. It just doesn't mean never. It just means not now. Dr. Dambisa Moyo is a global economist and best

selling author who influences key decision makers and strategic investment in public policy, a trusted advisor on macroeconomics, geopolitics, and technology themes, and serves on a number of global corporate boards, including 3M, Chevron, and Condé Nast. She worked at the World Bank and Goldman Sachs for nearly a decade and joins us from her home. And where are you, doctor? Where are you right now? New York City.

In New York. Greatest city in the world. Greatest city in the world. It's so nice. They had to name it twice. New York, New York. We'll be right back. Think about those businesses that grew their sales beyond their forecasts. Companies like

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the show where we answer your questions about the business world, big tech, higher education, and whatever else is on your mind. If you'd like to submit a question, please email a voice recording to officehours at section4.com. Question number one. Hi, Scott. Ben here from Colorado. You mentioned placing a recent investment in CrossFit. What do you think about them pivoting to more of a Peloton-type business model? Instead of just franchises, they could also sell a home gym in a box with a TV and live stream classes. They already have the celebrity trainers with massive social followings. CrossFitters love real-time leaderboards, and it plays well with the home renovation wave in what is often the most overlooked room in the house, the garage.

Curious to hear your thoughts. Also, what do you bench? Thank you, Ben, from Colorado. It's a really interesting question. I am an investor in CrossFit and I've had one conversation with the CEO and some of the board members, but I wouldn't say I'm really informed around their future strategy or what they're going to do. And the nice thing about it being a private company is that you can talk about it openly or I'm not on the board, so I don't have any risk of going to jail by disclosing secrets or my cousin hears me on this podcast and starts

trading the stock. Anyways, connected fitness, whether it was Lululemon's $550 million purchase of Mirror or Peloton skyrocketing stock price. Absolutely, it's a trend. CrossFit has the brand equity. They have the trainers. They have the dispersed workforce. The issue is that a connected device is no easy task. I would imagine that Peloton has spent several hundred million dollars and probably a couple of years and probably has several dozen patents on their bike. A piece of hardware like that, that is connected, that is durable, is no small feat. This requires a certain level of industrial engineering technology and software talent that, quite frankly, I don't think CrossFit has right now. So the question is, do they build it? Let's assume you're right. It's

about connected fitness and something in the home or specifically in the garage. Yeah, absolutely. It's a good idea. I wonder if they'd be better off partnering and being the operating system or a branded content provider, or if they in fact took advantage of their human capital, and that is probably the 10,000 plus CrossFit coaches or trainers they have and figured out a way to get that person in your garage or helping you or doing group workouts in your backyard.

I have my CrossFit trainer, personal anecdote, I work out of the CrossFit in Delray Beach. COVID hit and I hired the guy who owns the gym. He decided to sell his stake in the CrossFit Delray because it is challenged in an era of COVID. And now he comes to my house four times a week and he trains me in my backyard. If that sounds like white privilege, trust your instincts. I'm blessed. I have the resources to have this wonderful trainer, Sean LaFlock of LaFlock Fitness, come to my house and train me in the backyard or in the garage, as you pointed out. There's got to be a way to distribute that type of expertise, whether it's through an app, whether it's through YouTube videos, but you're absolutely going to see a dispersion. I just don't know if it involves hard ore. What can I bench? I'm scared

to do max now because I'm all about injury prevention. When I was young and crazy and on creatine and thought that lifting weights was a sign of your masculinity, at one point I could bench about 315 pounds and I weighed 180. Things have changed dramatically since then. I weigh the same amount, but the weight has been redistributed. Isn't that odd? Anyways, thank you for the question, Ben from Colorado. Question number two. Hi, Professor Galloway. My name is Heather and I live in New York City. I have been following you for a while and I love your work. In light of your new podcast, I wanted to ask you about your thoughts on the podcast industry. It seems like podcasts are now competitive territory for original content. I'm curious about your thoughts on what the future of the industry looks like, especially for small independent producers. It seems like the current primary ways to directly monetize with podcasts are through sponsorships and subscriptions with a partner like Patreon. Since podcasting has a

low barrier to entry, there are tons of independent producers out there trying to release new shows. My question for you is, where do you see room within the industry for innovation and perhaps new ways to monetize? Heather, thank you for the thoughtful question and the kind words. I'm not here with a message of hope. I think almost every industry, including podcasting, I mean, so there's some wonderful things about it. There's a dispersion of creativity and you get to bypass the kind of the old guard. So it's no longer about trying to impress a creative executive who works for Jeffrey Katzenberg so that you can get budget to be on Quibi.

Fuck that. You got an iPhone. You're creative. You do a video. And boom, you're on TikTok. And ideally, there's a way to monetize it. However, however, most of these platforms do a really good job of ultimately starching out all of the margin.

And then only the biggest players really make a lot of money. And there's just an incredible crowding of the majority of spoils to fewer and fewer players. That's just a function of our network economy, whatever you'd want to call that. And the same is happening in podcasts. There are now over a million podcasts. I would bet less than 200 or 300 are self-sustaining, maybe 1,000, maybe 1,000 podcasts. So you're talking about kind of essentially a 99.99% unemployment rate if employment is defined by making your soul living from that endeavor. The ecosystem, though, is pretty productive, and that is I think there's a better future

in the technology and the engineering and the production of podcasts because a lot of podcasts are being used. They're being used to market another business which is more easily monetized. So McKinsey and Harvard will have great podcasts to promote other products. Andreessen Horowitz has a bunch of podcasts to raise their awareness and increase their deal flow. Salesforce will have a bunch of podcasts that say, hey, we get IP. Hey, small businesses, love us, touch us more so that we can sell you cloud-based CRM software. These are difficult businesses to run as standalone businesses. Is there a silver bullet? No, it's just really hard work. It's hiring really smart people.

Greatness is in the agency of others. If you have the resources, there's a reason I thank Caroline and Drew at the end of every show, mostly because it's written in the script. But beyond that, I recognize that they are the ones that make this happen. A platform or a distribution partner really helps because you need marketing, you need awareness. But more than anything else, it's about trying to do great work and have an original, distinct voice. And even then, even then, it's pretty much a shitty business economically. However, however, this is what's going to happen with podcasts. Podcasts have an asset. And the asset is when somebody comes up to me and high fives me and says,

Prop G, you're the man. I know they've seen one of my videos where I'm sort of outrageous. When someone comes up to me and grabs my hands and wants to have a long conversation with me about their mom or something that's happened to them or being a dad, I know that they've read one of my blog posts on No Mercy, No Malice. When someone comes up to me and starts talking to me as if they know me, I know they've listened to one of my podcasts. Being in people's ears creates a relationship and an intimacy and a level of goodwill that translates to something in the business world called NPS. And basically, deeper-pocketed companies that can better monetize

NPS are going through industries and buying high-NPS products. So think about this. Think about this. Hollywood has very loyal followings, the content makers. At the same time, cable companies have really low NPS. So what did Netflix do? It started creating a lot of content that had high NPS and bypassing the low NPS gatekeepers. What is going to happen with podcasts? You're seeing it now. Wondery is being acquired. Wondery, which kind of is the HBO podcasting, is being acquired by Amazon for 300 million. Joe Rogan goes to Spotify. Why? Because podcasts have very high NPS, very high loyalty, not great monetization. But if Joe Rogan can sell a few million more subscriptions to Spotify, that is worth hundreds of millions of dollars and makes acquiring him for a hundred million

bucks an incredible value. If Wondery can make Amazon music more interesting and more differentiated with original vertical content, then Amazon only needs to go up 0.0001% and boom, the acquisition was wildly accretive. So what are you going to see? Take the top 100 podcasts or better yet, take the top 10 podcasts in every category. Look at the ones that are still independent. And a third of those are going to be acquired over the next 12 months by bigger players who can monetize it by selling paper towels or handsets. What does this all mean? Podcasting, I think it's like acting. I think the unemployment rate is really high. I don't want to discourage you, but it typically needs to start out as a side hustle because it's difficult to make a standalone living in podcasting. And you're going to see a flurry of acquisitions in the podcast realm over the next 12 months. Thank

you for the question, Heather from New York City. So this is the 39th episode. And whenever I hear the number 39, I think of when I was 39, because I am a narcissist would be, it was a pretty important year in my life. Specifically, it was the year I lost my mother. I am a only child, and I was raised by a single parent, and I had, like most only children of single parents, a very strong bond with my mom. I didn't have a family. I wasn't even in a relationship, so it was basically me and my mom against the world. My mom was diagnosed with late-stage stomach cancer metastasized from breast cancer, which

she had survived twice, and she was basically given three months to live and asked me to help her die at home. And I get a lot of letters. I write a lot about my mom. I get a lot of email from people asking about advice for end of life or giving care. And so I just wanted to spend a moment providing some advice. Roughly speaking, I hear from people who are grappling with how to best balance work life with taking care of a sick parent. And there is no script here. There is no user's manual. A lot of it comes down to situational, the relationship you have with that parent, the resources you have, whether you work for an organization that will give you time off or flexibility. But a few of the things I learned, and I would advise anyone who is in the position of taking care of a parent or a loved one towards the end of her life, one of the learnings was to care for the caregivers. There were, my mom, you know, there were just certain things I couldn't help her with. And so her sisters, four of them took shifts and came from Britain to help take care of

her. Her best friend helped take care of her. And I used to spend a lot of time not just taking care of my mom, but taking care of the caregivers. And the people that are taking care of that person make sure that they have some time off and some enjoyment. Really try and embrace the media that your parent is into, whether it's music, whether it's photographs, whether it's watching. I used to watch Jeopardy

and old episodes of Frasier and Everyone Loves Raymond with my mother, but that was, it sounds kind of boring or passe, but it was really enjoyable for us. Spent a lot of time going through pictures, let him or her relive their life again. Also, a learning for me is to have your own boundaries. There were three or four times where I would hear from either my mom's sister or the woman handling her hospice care, and they'd say, it looks like this is it. That happened about four times. And when I say this is it, this was supposed to be the weekend where my mom was going to pass. And what I had decided was that I would spend Monday through Thursday living with my mom and helping manage her health care. But every Thursday afternoon, I would go back home to try and maintain some semblance of a life. And I pretty much stuck to that schedule, even when there was some difficult times or moments to leave. And I'm glad I did. Another learning, leave nothing unsaid.

I think that it is impossible to tell your mom or dad how much you admire them or how much you love them. It just, it feels good. There's no regrets. Death is final. So find that courage, try and cut through the bullshit of whatever's getting in the way of that and leave nothing unsaid. I used to sit next to my mom. I remember this very vividly. And I would hold her hand and sometimes I would just sit there and tell her how upset I was that she was sick. I know how ridiculous that sounds, but I think she enjoyed hearing it. Another learning is that a lot of people in your life will surprise and disappoint you. It was strange. It was as if some people in my mom's life thought that her cancer was contagious, and

she had, who had been very close friends, just not call her, much less come see her. At the same time, her boss from 10 years a decade earlier, who was 20 years younger than her, used to get on a plane once a month, come to Las Vegas, rent a car, drive to our house and sit with her and talk to her for an hour as she sat there on a couch every 10 minutes throwing up into a bucket. Basically, stomach cancer is just an awful illness. And he would ignore it and talk to my mom for an hour and then come back the next month. I always like to say his name is Bob Perkowitz. He's a very successful businessman and a very decent man. Another learning is that sometimes it's the

illness speaking. My mom was remarkably generous and loving through her final months, but occasionally would get mean, not terribly mean. And it was easy for me to handle because I'm 39 and I'm pretty thick skinned. But this does happen a lot at end of life. and that is people can lash out and they can be mean. And just try to, if you can, ignore it and try and remember that it's the illness speaking. Again, all of this is very situational. The one thing I do know, the one thing I do know is that where you die or where you spend your last moments is really one of the most important things, and that is most people do not want to die under bright lights surrounded by strangers. So if you're in a position to help your mom or dad die at home and around loved ones, that is an enormous victory. And that's

obviously one of the most tragic things about some of the death that's taking place across America with COVID-19 is that many can't be around their loved ones. I think at the end, I would like to think, or my experience is at the end of their life, parents want two things. They want to know that their parenting resulted in a loving, responsible, and productive son or daughter. And they want to know that they're loved immensely. And your ability to participate, be a competent provider of care at the end of their life and just providing that care checks both boxes for them and makes their exit much easier. So circling back, as we discussed, I ended up on one of those weekends when I came back home. I ended up meeting someone and having children of them, two sons.

And one of my son's middle name is Sylvia, named after my mom. when I came back home, I ended up meeting someone and having children of them, two sons. And my, one of my son's middle name is Sylvia, named after my mom. And he absolutely has her laugh. She would have just, she would have just loved that. Our producers are Caroline Chagrin and Drew Burrows. If you like what you heard, please follow, download, and subscribe. Thank you for listening. We'll catch you next week with another episode of The Prof G Show from Section 4 and the Westwood One Podcast Network. Support for this podcast comes from Klaviyo. You know that feeling when your favorite brand really gets you. Deliver that feeling to your customers every time. Klaviyo turns your customer data into

real-time connections across AI-powered email, SMS, and more, making every moment count. Over 100,000 brands trust Klaviyo's unified data and marketing platform to build smarter digital relationships with their customers during Black Friday, Cyber Monday, and beyond. Make every moment count with Klaviyo. Learn more at klaviyo.com slash BFCM.