The Prof G Pod with Scott Galloway - Why China Dominates the EV Market, How We Operate the Prof G Media Business, and How to “Rich”

Episode Date: July 10, 2024

Scott speaks about the Chinese EV market, specifically how China has an advantage in the EV race due to costs. He then discusses Prof G Media’s business model and why he hasn’t moved the show behind a paywall. He wraps up with advice to someone who has suddenly come into a significant amount of wealth.  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 PropGPod'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, PropG. Hey, Scott and team. Hey, Scott. Hi, PropG. Hey, PropG. Hey, PropG. Hi, Professor G.

In last week's Office Hours, we answer your questions surrounding the defense industry, why greatness is in the agency of others, and how to act if your partner makes more money than you. The world is becoming, it feels like, increasingly insecure, and all of that leads to increased military spending. I also think you're going to see Japan and Germany dramatically increase their military spending. I've always thought my confidence is storytelling, but my superpower is the ability to attract and retain talented people who bring scale to what we do here. More women are attending college now than men.

And two-thirds of jobs now require a college degree. The highest-paying industries generally want someone with a college degree. And you do acquire certain skills and contacts in college. So women, quite frankly, deserve to be making more money than men. Today, we'll speak about the Chinese EV market and how we run our profit-geeking media business and how to rich. So with that, first question. Professor Galloway, this is Jonathan from Philadelphia.

I'm a long-time listener and first-time caller. Thank you for all your thoughtful and fun insights in the podcast. I recently visited Shanghai, China for the first time in the last 10 years. One thing that kind of shocked me is the number of EVs on the road. I see two or three times more Teslas in Shanghai than in Philadelphia or New York City. Furthermore, there are many domestic EV brands that I never heard of. I talked to the drivers and seems like EVs are just much cheaper there. Tesla Model 3 costs maybe 30k and the domestic ones cost close to 20k. Combined with the high

gas price there, it just makes more sense for people to get EVs. What are your thoughts on this? Do you think US will be able to keep the lead in the EV market without government help? I know we have tariffs against Chinese cars, so we probably will not see any of their costs here. But will that also make our market less competitive and stagnant? Looking forward to your answer. Thank you. That's a really thoughtful question, Jonathan, from Philadelphia. So first off, just some data. IEA's Global EV Outlook 2024 report shows that China accounted for 60 percent, 60 percent of all EV sales last year. So let's be honest, China is dominating EV production. EV growth in China is projected to continue, with one in three cars on Chinese roads expected to be electric by 2030.

According to the Center for Strategic and International Studies, China invested $231 billion in its EV industry from 2009 to 2023. Data from CounterPoint Research reveals that in Q1 of this year, China continued to lead globally in EV sales, growing sales by 28% year-on-year, while U.S economy is growing faster than theirs. They're supposedly in sort of a low growth part of their history with huge unemployment, and they're growing that industry by 28% versus 2% in the U.S. Now, if we branch out a bit, the EU plans to impose tariffs on Chinese EV imports due to subsidies, while Biden announced a 100% tariff on Chinese EV imports. What about the U.S.? Currently, the U.S. is pumping up support for EVs through government regulations, including the Inflation Reduction Act, which will offer certain EV car buyers a $7,500 credit. For comparison, China offered a $4,600 credit per EV purchase in 2023. So why does China have an advantage in the EV race? Simply put, the same reason they have an advantage across anything else, cost. The IEA report that we previously referenced estimates

that more than 60% of electric cars sold in 2023 were already cheaper than their average combustion engine equivalent when compared to Europe and the U.S. As a consequence, Chinese consumers are largely inclined to purchase a domestic model, as you mentioned. So where does this go? China, when you're talking about bringing together products and then assembling them and creating a complex supply chain that sources materials, brings together competent labor at a reasonable price, No one does China like China. And so I got to think that they're going to dominate the low and mid-range EV market globally unless we put up even more tariffs, which I just think is a bad idea, which is nothing but a tax on consumers, especially EVs. Young people, I think, need EVs. And the BYD EV that's supposedly a pretty good

car that could sell for $12,000 if it didn't have tariffs on it, I think that's an enduring company because of one thing, and that is America still has the best brands in the world. Name a global brand, an aspirational global brand that's come out of China. I'm still waiting. For whatever reason, the American culture, European culture still produces the best brands in the world. And when you start paying $40,000, $50,000, $80,000 for a car, you're not buying steel wrapped around four tires with a battery. You're buying something that says something about you. You want people to know that you're wealthy and care about the environment, which means you should have sex with me. That's effectively what you're saying when you buy a Tesla, and that's why so many guys in midlife crises were sort of the first owners of Tesla. When you buy the first electric Ferrari, you're going to say, I have a very small penis and a lot of money. self-expressive benefit aspirational brands. And the reality is the US and Europe pretty much have

a monopoly on everything from, you know, Bottega Veneta to Nike. We're just better at it. But there's no doubt about it. When it comes to really hardcore, deep manufacturing, supply chain driven manufacturing, it's China and the seven dwarves. And that's including in the EV market. Thanks for the question. Question number two. Hey, Scott. It's Ed from Hampshire in the UK. I've been following your content since the early days of YouTube back in 2017. At that stage, I was leaving the army, and I found the work that you were producing really helpful

at educating me on the world of business that I was moving into. To tackle the question, which is about the Prof G Show as a business itself, I'd be fascinated to understand a bit more about how you operate the business. How do you select the content you're going to be talking about? How do you pick the advertisers that you're going to work with? What role does Vox Media play in things? And why, for instance, have you not moved to a freemium model or even a subscription-based, given your well-known views on the ad-supported economy. Again, thank you for all of your work. I'm really flattered as a Brit that you've been willing to endure the mediocre food and even more mediocre weather that London has to offer. All the best

to you and yours, Ed. Ed, thanks so much for the kind words. I disagree. I think actually London has finally world-class food. I think anytime you have this level or this concentration of wealth, you're going to attract good food. I do agree with you, however, on the weather. Go Team England. Let's start there. Go Team England. Okay. So Prop G Media. I sold L2 to Gartner in 2017, and I kind of hit my number and I sat down and I was planning to raise a private equity fund. And I thought I'd really like to be wealthier, maybe even someday aspire to be a billionaire. And then I thought, why the fuck do you have to take tremendous risk to have to register that kind of wealth appreciation because I am far from being a billionaire. But I was about to just ramp up and get off the hamster wheel long enough to take some performing enhancing drugs and get back on the hamster wheel. And I made a conscious decision

that I was going to slow down. I still have a lot of tread left on my tires, but I thought, I want to spend the rest of my life, at least professionally, having more of a positive influence on issues I'm really passionate about, or that's the wrong word, that I think I bring some talent to and that I think are overlooked, specifically struggling young men, teen depression, some of the externalities around big tech. And at the same time, I want to make good money. I want to work with a group of people that I really enjoy. And I wish I had figured out earlier that my core competence is storytelling. So this all sort of bubbled up to a media company, but I didn't want to take outside capital because I didn't want to have the pressure of trying to get a return on other people's capital. So I started PropG Media. PropG Media is a small niche

media company. We have several lines of business. For me, it begins with writing. That's home base for me. I think writing is really, really hard, but I think it creates a certain halo, a certain heft of intellectual rigor and intellectual capital. So for me, it starts with the newsletter we put out every Friday, No Mercy No Malice, which is free. It goes to half a million people. I think of the Fortune 190 of the Fortune 100 have at least 100 subscribers. That is sort of a Petri dish for chapters and themes and a narrative arc around the books. I try and write a book every 18 months. I make money there.

I average between $1 and $1.5 million per book. That is the hardest thing I do, writing books. It's also probably the most rewarding. And then that feeds into some very profitable businesses. Specifically speaking, I do between two and a half and five million dollars a year in speaking fees. So that's an incredibly lucrative business. I enjoy it. It is a perfect example of greatness is in the agency of others, and that is people think that I just get up there and talk for an hour. I don't. I have a great team of analysts that will assemble 100, 120, 140 slides. We spend a ton of time thinking about narrative arc and

humor and visuals and the pace and the flow. I see it as almost like a one-man, 57-minute Broadway show, and I try to bring that level of production value to it because no one's going to pay that kind of money just to show up and talk about how fucking awesome you are, which is what I see the majority of speakers doing this day who just left an office or a job in Hollywood or in the corporate world and think they can just get up there and tell war stories about how awesome they are. And then the core business from a revenue standpoint is the podcast. And I kind of fell into this. I have a face for podcasting. I had five TV shows that are all canceled. The podcasting just took off. And been doing that about seven years. These podcasts combined will produce somewhere between

call it three and a half and five million a year so call this about a 10 million dollar business uh 12 or 11 or 12 full-time people three or four contractors that's exceptionally high revenue per employee for a media company i purposely want to keep it small i love the people that i work with it's a group of kind of island of misfit toys of people i've worked with in the past kind of my rock or my anchor is a woman named Catherine Dillon, who I've worked with for the better part of 15 years and brings real creative depth and really great management skills. So I can just focus on what I'm okay at, which is storytelling. And these things are all a flywheel, right? You sell more books, you get more speaking gigs, more speaking gigs, more podcast revenue, more podcast revenue, or more people listening

to the podcast, more newsletter downloads. And so the wheel spins, if you will. Now, Vox is essentially our content and distribution partner. They're more a distribution partner for me because we produce everything at ProfG. There are employees at Pivot that produce it. But for the most part, it's pretty much the ProfG show. We do all the production and we throw the podcast over to Vox and then we pay them a fee to sell the ads and work on audience development. Although I've never quite figured out exactly what that means

other than we're supposed to be great at what we do and create word of mouth. But they're a good partner. They have a great ad sales team. The reason why we didn't go behind a wall, and this is a conversation we have seriously about every 24 months, is that money is meaningful to me, but it's not profound.

What's profound for me is I want to have reach and impact specifically on young men. I want people, especially men, to feel more in touch with their emotions. I want to educate people about business. and to go behind a wall, if you're really successful, you get four to 8% of your listener base to go subscription, meaning that I would immediately lose a minimum of 90 to 95% of my reach. Also, I kind of like the ads. I don't mind the host readovers. I meet advertisers.

I like them. It doesn't really bother me. And if you want to press skip, you can get through the ads. But this is the most fun I have ever had professionally. But it's a niche media company. The specific crowds out the general and finally figured out a flywheel. And I'm doing something I absolutely love and making good money at it. So thanks for the opportunity and the excuse to talk about my favorite subject, me. Thanks for the question.

We have one quick break before our final question. Stay with us. Welcome back. Question number three. Hey, Scott. First of all, I love the pod, of course, but more importantly, I love how transparent you are about your finances, both practically and let's say psychologically. So here's the question, how do you rich? And what I mean by that is, what would you do if you had a sudden influx of wealth or what advice would you give to someone who has a sudden influx of wealth? And I want you to break that down based on how old that person might be and how much money they might have gotten in that sudden influx. So, you know, someone in their 20s to 30s, someone in their 30s to 40s, someone over 40 or something with whether they got 5 million, 10 million,

50 million, 100 million, whatever numbers you think are most interesting for how you would break that down with different advice for different people, different age groups, different amounts of money. Thank you, thank you. Keep up the fun work. It's a really thoughtful question.

I'm not sure I'm gonna have time to go through all those segments, but let's assume you're in your 20s, 30s, or even, so 20s or 30s and you come across $5 or $10 million. So, for example, one of 10,000 NVID, if not all of that, off the table, pay your taxes, and invest in low-cost index funds, such that when you're my age, you're just done all debt. If you have good debt, you have student loan debt at 3% or you were smart enough to get a mortgage when rates were really low, you don't pay that off. But any debt that is, say, higher than 6% or 8% or what you could get in the market, I want you to go and pay off that debt. You just don't want this haunting you and following you around. And then you're not going to buy anything. I mean, maybe go out for a nice dinner, maybe take a vacation, fine. If you're in striking distance of a home

and you need that for a down payment, okay, but be thoughtful about what is the monthly payment going to be. But what I really want you to do with that is I want you to put it into a low-cost index fund because even 150, 200 grand, if you're in your 20s or 30s, that is literally, if you're smart enough and

disciplined enough to put it away, diversify it in an index or an ETF, and never look at it again until you are my age, you're going to be fine. You're going to really be happy that you demonstrated that kind of character and the kind of discipline and maturity that I didn't have. If you get real money, I mean, if you get really lucky, and I got really lucky later in life in my kind of late 40s, say 50, 70, 100 million, I think you do two things. One, I think you spend like a fucking 50s gangster that's just been diagnosed with ass cancer. You spend a shit ton of money. Mostly, I think, and most of the research shows that the greatest happiness return you're going to get is spending it on experiences. And then anything above that, I think you just give it away. I think it's really important that we maintain this wonderful American brand of generosity. little transfer of your time and work to them in the form of money just makes them so much happier.

There's so many wonderful causes that need, that can do just incredible good with a little bit of resources. So this is what you call a great problem. When you're younger, put aside capital, stop, don't fall into the delusion that you making that money meant you're really talented. Yeah, maybe that means that, but more than anything, you're really talented and really lucky. Take some luck off the table, deconcentrate, put it into low-cost index funds. And if you're my age and you come into money and you have more money than you need, then brother, spend it all or give it away. 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. Again, that's officehoursatpropertymedia.com. 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. The Prop G Markets Pod is literally number one in business right now, so please subscribe. It comes out, new episodes, every Monday and Thursday.