SCOTT GALLOWAY: Colleges in the US are enforcing an emerging caste system that could have disturbing consequences

College graduate sitting outside
Galloway says colleges are becoming increasingly out of reach for the average American student.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway says college education and its benefits need to be expanded to more people – including men.

Each of the following trends, in isolation, is perplexing. In concert, they are disturbing:

Scott Galloway

I’ve mentioned this topic before, highlighting an emerging crisis among young men, and it elicits a range of emotions and responses – especially in the reductionist world of social media.

Scott Galloway

Thanks, Roxane.

Neither the sex lives of young American men nor their relative rate of college attendance is that striking by itself. Except to the men involved. What should trouble all of us is what these statistics portend.

Family matters

Families are the foundational element of society, and most successful families are the product of an intimate relationship between two adults. The most important decision most of us make in life is whether and whom to marry, and the most important person in our adult lives is our mate. Married people are 77% wealthier than single people, and their net worth typically increases 16% each year they’re together. Married people live longer and are happier than single people. Higher marriage rates are correlated with greater GDP per capita, greater economic mobility, and a reduction in child poverty of as much as 80%.

The path to forging these relationships typically involves sex. If a young adult hasn’t had sex in the past year, it’s unlikely that person is on the path toward a long-term bond with someone. To be clear, I’m not suggesting that it is any one group’s responsibility to sexually “service” another. What we need to be thoughtful about is how our policies and attitudes ensure that the most people have the opportunity and motivation to pursue long-term, productive relationships.

Meet up (online)

We used to meet potential mates at school, at work, through friends, and out in the world. No longer.

Scott Galloway

And online dating … shares flaws with other technologies that scale our instincts. Algorithms are indifferent to social interests, and that, coupled with human nature, gave us January 6 and QAnon.

Dating apps sort potential partners into a tiny group of haves and a titanic group of have-nots. On Hinge, the top 10% of men receive nearly 60% of the “likes” – the comparable figure for women is 45%. The bottom 80% of male Tinder users, based on percentage of likes received, are competing for the bottom 22% of women. If it were a country, Tinder would be among the most unequal in the world.

Scott Galloway

What is driving this division? As with so much else online, dating apps don’t change human nature, they focus it – like a kid with a magnifying glass melting ants. Regardless of how we meet potential mates, we sort them in large part based on looks and earning potential. Algorithms magnify that effect.

Women are particularly concerned with the earning potential of future mates, across cultures and over time. A 1989 study found that in 37 countries and sub-groups, women consistently value the financial capacity of a potential partner more than men do. In the US, financial prospects were nearly 30% more important to women than to men. In a 2017 survey, 71% of American women said it’s “very important” for a man to support his family financially. Only 25% of men said the same about a woman. In sum, women mate (socioeconomically) horizontally and up, and men do it horizontally and down.

Scott Galloway

Winner take most

Marriage rates in the US have been on the decline for decades. The group that’s seen the sharpest decline? Poor men. Between 1970 and 2011, the marriage rate for the lowest earning quartile fell by nearly 35%, while that of the highest quartile fell by less than 15%.

Scott Galloway

The most powerful signal of earning potential, especially for people in their 20s who haven’t yet realized their potential, is a college degree. College-educated men earn a median $900,000 more over their lifetime than those who only graduated from high school. A college degree also increases your chances of getting married by 30%.

Scott Galloway

The result of fewer men in college? Fewer men that women are interested in.

This is good for nobody. It’s bad for women, who have fewer potential mates. Men at the top of the pyramid have access to near on-demand sexual partners, but that’s a disincentive to forging a long-term relationship, which doesn’t bode well for their long-term happiness – see the previous data about the benefits of marriage.

And then there’s the increasing number of men in the body of the pyramid, who will be left not merely without sex, but without any onramp to the intimate relationships upon which so much of their happiness, and our social capital, is built.

Second-order effects

So what? America spent its first 300 years treating women as second-class citizens – what’s wrong with young men getting the short end of the stick for a while? If this were just about fairness or feelings, then fine, let there be churn. But there are several externalities that could have profound effects on our commonwealth and the global community.

First, less partnering and propagation means fewer babies. Declining birth rates are toxic for economic health. For a glimpse at the declining-birth-rate future, look at Japan, where birth and marriage rates have fallen to record lows. There are now just 2.1 working-age Japanese for every retiree, the lowest ratio in the world. In the United States there are 3.9. The world average is 7.

At the Code Conference this week, automaker and future Martian Elon Musk said: “Possibly the single greatest risk to human civilization is the rapidly diminishing birth rate … No babies, no humanity.”

My Pivot cohost, Kara Swisher, likes to claim that lesbians and evangelicals are the only groups having kids, but at less than 5% of the population, gay couples would need to have literally dozens of children to reverse these trends … Your move, Kara.

Second, a large and growing cohort of bored, lonely, poorly educated men is a malevolent force in any society, but it’s a truly terrifying one in a society addicted to social media and awash in guns and coarseness.

Men are already more likely than women to believe in conspiracy theories. Increased frustration about their lack of life choices and greater jealousy stoked by the images of success they see on their screens will push underachieving men further toward conspiracy theories, radicalization, and nihilist politics. I say “will” because I’m focused on the future, but a preview of that future is already here. Of the 620 people charged so far in the January 6 riot, 86% are men.

Global problems, including climate change and more frequent pandemics, require a massive investment of human capital and a renewed respect for intellectualism … and science.

Third, while the forces of technology and social change are taking much from young men, it’s unlikely they will lose their political power. This may be the dark heart of the matter. Politicians will emerge from this class, and many more will pander to them. Donald Trump was not an anomaly – privileged men of wealth rising to power on the message that “this isn’t your fault,” and then demonizing other groups is a greatest hit of nationalism and the facism it often inspires.

Men have characteristics which make it easier for them to accumulate and protect wealth and power. Numerous studies have shown that candidates with deeper voices win more votes. A 25% lower vocal pitch is associated with an increase of $187,000 in annual CEO salary. People who are 6 feet tall earn $166,000 more over a 30-year career than those who are 5 feet 5 inches – even controlling for gender, age, and weight. The explanation, many psychologists believe, is increased confidence. One psychologist explains that the “process of literally ‘looking down on others’ may cause one to be more confident.” Since the advent of mass media, every president has been taller than the average American male, and the winning candidate has been on average 1.5 inches taller than his opponent. Overall, American men are over 5 inches taller than American women.

Scott Galloway

Women who run for office face substantial opposition on the basis of gender, from sexist remarks to disinformation to physical violence. Trumpism, with or without Trump, is the politics of frustration, alienation, and rage. It will only gain in power if these emotions become more prevalent.

For 40 years, more women have matriculated at colleges, yet only 24% of Congress is female. What we’ve witnessed is an explosion in elected officials who pander to a dangerous, and growing, cohort of men who refuse to embrace science – or even agree that there is “truth.” Without the connective tissue of truth and science, it will be near impossible to address future pandemics, much less climate change. There’s a link between a reduction in opportunities for young men and hundreds of millions of doses of Covid vaccine likely to expire unused by year-end.

Turning the tide

The increase in opportunities for women (and for people of color) is an important step forward. There is no justification for reversing these hard-fought wins.

However, we must do more.

While men enjoy numerous inherent and societal advantages – from deeper voices to private clubs – there are actually significant obstacles facing boys. It starts early, with small differences. For example, 80% of kindergartener parents expect their girls to attend college, while 77% of parents expect their boys to. But such small differences expand over time. The disparity in parental expectations grows by 10 percentage points by fifth grade. Boys act out more than girls and face harsher discipline, especially in single-parent homes, where boys are 13 percentage points more likely than girls to have been spanked in the past week.

Overall, one in 4 boys experience at least one school suspension in the eighth grade, compared to 1 in 10 girls. School suspension is predictive of college attendance and college completion, and boys, normalized for behavior, are twice as likely to be suspended. (Black students are also more likely to be disciplined, and black boys face even greater disparities.) Finally, in the nation with the world’s highest incarceration rate, men are imprisoned at 14 times the rate of women. And 70% of prisoners didn’t complete high school.

Scott Galloway

We must do more at every level, but I’d focus on college, because I believe it’s a transformative experience for most people.

When I applied to UCLA, the acceptance rate was 74%. I had to apply twice. After my initial rejection, I secured a job installing shelving in Ontario, California. Spending the day in closets, getting high with my coworkers after work … it dawned on me, “Maybe this isn’t what I want to do with my life.” So I appealed the decision and got in. That changed my life and set the foundation for me to become a robust citizen.

Scott Galloway

Today only 12 out of 100 kids get in. Admissions directors no longer have the capacity to reach into the homes of unremarkable kids raised by single immigrant mothers and give them the opportunities my generation enjoyed.

This reflects a conscious decision in America to sequester opportunities to the children of rich people and kids who are freakishly remarkable at 17. This plays on a collective hallucination that all of us are raising remarkable children. I can prove that 99% of our children are not in the top 1%. We managed to scale Facebook from a $63 billion company in 2012 to almost $1 trillion today, but we couldn’t increase the seats at UCLA by more than 6% in that same time?

And UCLA is better than most (the UC system overall wants to add 20,000 seats by 2030). In 2007 the Ivy League schools accepted 22,180 applications. In 2021, they accepted 22,805. That’s a 0.2% annual increase (while tuition increased by more than 4% per year). In 2007, Apple sold 1.4 million iPhones; in 2021 it sold 218 million – a 43% annual increase. We can figure out how to make more than 700 million supercomputers that run all day on a battery and fit in your pocket, but we can’t add thousands of seats to colleges with $40 billion endowments?

College has become the enforcer of an emerging caste system, abandoning promising, if not obviously remarkable young adults. And there are so many of us. We must, and we can, give them their shot. We need a grand bargain that, in exchange for additional funding, demands our great public institutions leverage technology to double the number of freshman seats in the next decade.

Extend the benefits of a college education to more women, more people of color, more foreign students, more handicapped kids, more poor kids – and more artists and engineers and poets and biologists. And more men. America is not about exceptionalism, but acceptance.

Life is so rich,

Scott

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SCOTT GALLOWAY: Our kids are falling behind at school due to the pandemic. Teachers aren’t going to fix it.

Kids in masks returning to school
“Back to school 2021 feels more like ‘Stranger Things’ than the fall ritual we grew up with,” writes Scott Galloway.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway discusses how the impact of COVID-19 on our education system will be long-lasting.
  • See more stories on Insider’s business page.

Miles of plexiglass, masks, and deranged parents. Back to school 2021 feels more like “Stranger Things” than the fall ritual we grew up with. Yet there’s an eerie sameness between this fall and the previous most-unusual-back-to-school year of our lives … last year. Classrooms are experiments on viral transmission rates, and school board meetings are proof that antipsychotic meds are dangerously underprescribed.

Scott Galloway

Whitney was right

The children are indeed our future. In my book, “Post Corona,” I offered this thesis: “The pandemic’s most enduring impact will be as an accelerant.” And that’s proving out in many areas. In health care, office work, food delivery, banking, and more, we are seeing “decades happen in weeks” as Lenin said. (Note: He didn’t say it, but attributing the quote to Lenin is gangster.)

In one sector, however, everything is moving slower. Education. Our elementary school kids are learning less, and some are nearly a full school year behind where they would have been pre-pandemic.

Scott Galloway

While their parents harass doctors at school board meetings and fight epic Facebook comment wars, our kids are not learning to read or count. McKinsey projects that this learning gap will reduce lifetime earnings for K-12 students by an average of $49,000 to $61,000. By the time the majority of these kids have joined the workforce in 2040, it’s estimated we’ll have lost as much as $188 billion a year in GDP due to unfinished learning during the pandemic.

As with most things, these ill effects are falling disproportionately on the poor and children of color. Black kids are six months behind in math and learning, whereas white kids are “only” four and three months behind.

Meanwhile, the US educational system has been losing ground to those of our international peers for years. American students routinely score lower on tests of basic skills than students in other countries, a trend that isn’t likely to reverse.

Not for teacher

Who will get these kids back on track? Don’t count on teachers. It turns out that if you underpay, under-resource, and fail to accord equal respect to people for long enough … they’ll quit. Two-thirds of our school districts face a teacher shortage, and 28% of teachers are likely to retire or leave the profession earlier than expected.

Who can blame them? Since 1980, their income relative to other college graduates has been in steady decline. Men have always taken a pay cut to enter the classroom, but it’s gone from a 17% haircut to a 30% scalping. Teaching used to be an economically attractive profession for women, relative to their other options – though I’d guess that wasn’t because we paid female teachers so well – but now a female college graduate makes 13% less than her peers if she goes into teaching.

Scott Galloway

In addition to underpaying them, we’re now asking teachers to stand in a room full of potential delta variant factories, and to referee QAnon vs. anti-vaxxer brawls on parent-teacher night.

Teaching is arguably the most important job in society. Our future is in their care. And something has gone very, very wrong. We’ll know the profession has hit a new low when we start referring to them as “heroes” or (worse) “essential workers” – the lip-service labels liberals bestow on those we exploit to maintain our creature comforts through pestilence, poverty, and war.

The ivory tower

I write often about higher education – not only because it’s my day job, but also because it’s an integral part of the innovation and economic mobility at the heart of the American dream. College has become too expensive. It’s morphed from the ultimate lubricant of upward mobility to the enforcer of the caste system. Every day, it becomes less American. I thought COVID-19 would inspire partnerships with tech firms to dramatically expand access. I was wrong. Our elite universities have doubled down on exclusivity rather than embrace the opportunity for change.

But while I and many others were worrying about rising costs, administrative bloat, and a lack of teaching innovation, another worrying trend was gathering momentum. Young men are opting out of college.

Scott Galloway

In 1970, men accounted for 60% of college enrollment. That number has decreased to 40%. This largely reflects a dwindling male applicant pool. Women now submit 35% more college applications than men, which is forcing some schools to quietly prop up male admission rates. Yes, you read that right. Men are receiving affirmative action for being men.

This decline is a Rorschach test for pundits and comment-section warriors. People who think college is too woke declare that’s what’s driving men out. People who hate video games, THC, or feminism can blame them.

Employment economics probably explains the trend to an extent. Young men without college degrees have better options than young women. Many fields that don’t require a degree are gender imbalanced, and the traditionally male-dominated jobs tend to pay better. Thus, as the value proposition of college gets worse (higher costs, worse experience), men opt out because they can. Women stick around because they have fewer choices. With traditionally male-dominated skilled labor trades in high demand, we should expect to see even more decline in male college attendance.

But is that enough to explain how far women have pulled ahead? UCLA has expanded its enrollment by 3,000 students since 2013, and 90% of that increase is attributed to women. The essence of this data is too much of a good thing. An overdue correction may have, as often happens in markets, inspired an overcorrection.

We’ve lost young men in the shuffle, made them objects of our political arguments and targets of our algorithms. It’s easy to shrug it off. “Someone else’s turn to eat,” so to speak. Sure. But hungry young men without role models or prospects are, to be blunt, dangerous. The wheel doesn’t need to turn, it needs to be broken.

Specifically, we need to dramatically expand enrollments at our great public universities and invest in vocational and apprenticeship programs (for young women and men). I’ve given up on elite private schools – we’ve become Birkin Bags posing as public servants whose arrogance and self-aggrandizement is noxious. This week, I was invited to an NYU faculty education session on the use of pronouns. If the supposedly most brilliant among us can’t keep track of he/she/they, what hope is there that we’ll ever tackle have/have nots and how we (faculty and administrators drunk on luxury) are making the problem worse?

Abandoning ship

For a rapidly increasing number of American families, the answer to the problems with our schools is not to attend them. Home-schooling, growing in popularity for years, skyrocketed during the pandemic. Today, more than one in 10 kids are home-schooled. It may indeed be a solution for some families, but it’s impractical or unappealing for millions of households who rely on public and private schools to teach critical skills.

Scott Galloway

Hope

There are real signs of hope and change, though. UK-based Multiverse offers non-college-bound kids apprenticeships at many of the world’s premier firms. Promising kids get an onramp to the American dream that bypasses the arrogance and debt of admissions departments and outrageous tuition fees, respectively. In addition, this summer, the University of California sent out more than 160,000 admissions offers for Fall 2021, a record high. And institutions like the UC system that are taking positive steps got a boost this week from, of all places, the college-ranking industrial complex. Forbes magazine changed its ranking system in a way that could inspire a huge shift back to where higher ed needs to be.

Rankings are devastatingly important to the demand a school registers. Young people are inexperienced and insecure, which are the pillars upon which margin from brand equity rests. The next time you see a ranking of the “world’s strongest brands,” recognize that it’s left off the uber brands … universities. If Apple were a school, it could have paid for its $5 billion spaceship with naming rights across the side of the building, on each lecture hall, and over every urinal. Coke and McDonald’s don’t hold a candle to MIT and Michigan. Anyway, the most insidious input to these paramount rankings is the rate of admission. More accurately, non-admission. The more people they turn away, the higher the ranking, the more apps, the more margin power, the more student debt, the higher the pay of administrators, the more incentive to reject more students … and the wheel turns.

Forbes’s most recent ranking, however, includes “access” as a factor (specifically, the percentage of kids at the school who received a Pell grant). When that essential element is taken into account … UC Berkeley is the top-ranked school in America. Four UC campuses are in the top 25, as are five other public universities. This. Is. Big.

Ms. Jensen

My iPhone keeps serving pictures of my boys from years ago. It’s very rewarding and, at the same time, heartbreaking. I feel a rush of happiness, and then longing sets in. I will never have back the 5-year-old who let me grow his curls out. Gone is the 8-year-old who’d sleep naked unless you found pajamas with Jedi Master Yoda on them. If you don’t find the preceding two sentences nauseating, it means one thing: You have kids.

Back to school, one week in, has been wondrous in our household. There’s been a step change in our 11-year-old. He left the fourth grade a boy who swore every morning he had unbearable stomach pain and had to be literally dragged out of bed. As a new fifth grader, he’s asking us to help him organize his homework the night before, as he wants “to impress Ms. Jensen.”

When he said this, I told him that a man expresses quiet confidence – we talk a lot about “what a man does” – and that one of the ways you develop quiet confidence is by being prepared, and that I’m really impressed with him as he’s clearly developing into a man. He beams … I mean beams. A feeling of reward and confidence visibly washes over him, and he lurches to hug me, only he evades my embrace, runs into his older brother’s room, hits him in the face, and screams “nobody likes you!” Everyone celebrates in their own way.

I tell him to stop (being a dad means issuing several million verbal warnings each day) and say he needs to get to bed right away. He responds, as he does dozens of times each day, with “why?” Because … we’re back to school.

Life is so rich,

Scott

P.S. Registration for my final Business Strategy Sprint of 2021 closes on Tuesday. Join us.

Read the original article on Business Insider

SCOTT GALLOWAY: Facebook has been on a mission to create a virtual reality ‘metaverse’ since 2016 – here’s why it won’t work

mark zuckerberg oculus
Facebook CEO Mark Zuckerberg on stage at an Oculus developers conference in 2016.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway discusses Mark Zuckerberg’s trek to expand Facebook into a virtual reality ‘metaverse.’
  • See more stories on Insider’s business page.

“The greatest impediments to changes in our traditional roles seem to lie not in the visible world of conscious intent, but in the murky realm of the unconscious mind.” – Dr. Augustus Napier

The Metaverse

The Zuck is obsessed with another Augustus, world-conquering emperor Augustus Caesar. But the boy-who-would-be-emperor has a problem, something standing between him and greater wealth and power. Not the Facebook board; he’s neutered that via dual-class shares. Not the government; his 900-person comms department, coupled with a massive increase in lobbying expenditures, has dispensed with that nuisance. The last remaining obstacle is the world itself … it’s distracting.

So Zuck envisions a series of virtual worlds to absorb our remaining attention. The arbiter of activity algorithms in that world would be a god – and able to serve a shit-ton of targeted Nissan ads.

Scott Galloway

Virtual fantasy

In 2014, Facebook acquired Oculus VR for $2.3 billion. Oculus was a Kickstarter-backed venture with a head-mounted virtual reality display in pre-production that was targeted mainly at immersive video gamers. The deal was controversial, but cofounder and boy genius Palmer Luckey defended it on Reddit: “I guarantee that you won’t need to log into your Facebook account every time you wanna use the Oculus Rift.”

Read more: SCOTT GALLOWAY: China’s economy is on track to beat the US in some crucial ways. Here’s what we should be learning from them.

By August 2020, Luckey and his cofounder were gone, and Facebook announced you would have to be logged into Facebook to use the Oculus headset. Luckey admitted that the skeptical responses to the deal “from people with more real-world experience than me were justified.”

VR headsets, along with similar products from Vive and Sony, will sell about six million units in 2021. A real market, but not a category that’s registered broad consumer adoption. Some heavily hyped projects have flopped, such as the notorious Magic Leap, which has raised $3 billion in venture capital over 10 years while frantically pivoting from one vaporware announcement to the next. Or Google Glass, which launched in 2013 but was pulled two years later. People swiftly realized it could do only a handful of things the iPhone could, and worse. Google won’t give up, though, as it refashions the wearable from Tron to hipster.

Wired’s David Ka rpf called VR the rich white kid of technology. “It never stops failing upward, forever graded on a generous curve, always judged based on its ‘potential’ rather than its results.”

And who loves VR headsets? Rich white kid Mark Zuckerberg. He plays virtual ping pong with the President of Indonesia and sneaks into the company’s VR demo room after hours. But Zuck isn’t pushing VR for gaming.

“You’ve known me for a long time,” he once told a journalist Steven Levy. “I don’t optimize for fun.” He sounds like the absolute worst person on the planet to roll in Vegas with – a decent proxy for any person’s true character. But I digress.

I hate sitting in the passenger seat of my British SUV, as I’m certain I can drive better than whoever is behind the wheel at that moment. I can feel my feet pressing and depressing as if I’m actually driving. Take this times a billion, and you’ll be getting warm re: understanding Mr. Zuckerberg. A guy who decided it was a good idea to hold an American flag while commandeering an e-foil electric surfboard after depressing our teens, perverting our elections, and making our discourse more coarse. Reportedly, a voice from the boat was yelling, “I’m proud of your progress – but we need to do better!”

That last paragraph has almost nothing to do with this post, but it felt good writing it.

Facebook you can wear to work

To extend its run of success, Facebook must establish vertical distribution (i.e., hardware). As powerful as the platform is, the sixth-most-valuable company on Earth rests behind five others that all have more control over their distribution (i.e., iOS, Playstation, Android, Oil Wells, and Alexa). Facebook relies on other firms, including Apple and Google, for distribution. So the company is investing massively in hardware. With Oculus, Zuck sees a way to leapfrog mobile and laptops to connect people to Facebook in a more immersive and engaging way. And, more importantly, to enable him to treat Tim Cook as he does every elected official and technology ethicist: ignore him.

Facebook has also registered limited success penetrating the world in which most of us spend the majority of our time: work. Last week, Zuckerberg unveiled an attempt to use VR to expand Facebook’s reach into the corporate world.

This is the commercial Facebook made to launch Horizon Workrooms, its VR-based challenge to Zoom, Slack, and the world of work as we know it. The promo video would be concerning if it weren’t so lame. Instead of meeting over Zoom (or just joining an easy, old-fashioned conference call), everyone puts on a one-pound plastic headband and meets in a conference room that looks like something from Peacock’s newest animated series about corporate life. A woman snaps her fingers to change the color of her virtual shirt, and then she makes a magenta swirly line around some virtual documents, causing them to pile together and … sort of … merge? Oh, and nobody has legs.

Word is, the technology is going to mate with Microsoft’s Bob and give birth to Rosemary’s Baby. I’m especially proud of the last sentence.

Scott Galloway

Broadcast media is so desperate for relevance, they will all but guarantee to be a cartoon of access journalism. Alongside the official commercial, Facebook manufactured an even more craptastic “exclusive” virtual interview with Gayle King on “CBS This Morning.” I haven’t been this grossed out by the fawning of a TV journalist (“Wait, Mark, this is so cool … I can see all your hands.”) since Charlie Rose exalted Bezos and his octocopter delivery drones. BTW, that was eight years ago, and there’s zero chance a fucking octocopter is going to deliver the edibles I’d like (check that – need) right about now.

King didn’t see fit to inform viewers about the product’s numerous glitches and bugs, and she declined to ask any of the sort of questions a … wait for it … journalist might ask, if it were an interview versus an infomercial. Like: How will Facebook protect private conversations? What’s the business model? Will Workrooms integrate with other companies’ hardware or virtual spaces?

The answers: poorly, ads, and NFW.

That’s so meta

The most interesting aspect of the announcement, however, is that Facebook is pitching Workrooms not as a 3D version of Zoom, but as something called the “metaverse.”

Defining the metaverse is the kind of thing nerds fight to the death over. (Here’s an excellent nine-chapter epic to get you started on the literature.) I can tell you two things about it. First, it’s a future vision of the digital world beyond today’s internet, in which people socialize, work, and play across multiple domains, that is socially and economically integrated with the physical world. Second, Horizon Workrooms isn’t it.

The metaverse is a concept that’s been floating around tech for decades, and it is legitimately interesting. But also, legitimately not anywhere near real. Interest spiked after Epic Games announced a $1 billion funding round devoted to its “long-term vision of the metaverse” – well-timed after a year of lockdowns and Zoom calls that have made a virtual world feel more real.

Scott Galloway

Multiplayer games are an illustration of what the metaverse could look like; they have the trappings of persistence and community. World of Warcraft is the most popular, and Eve Online is now part of MoMA’s permanent collection. Both are large online worlds populated by a mix of computer-controlled characters and human avatars who socialize, fight, create culture, and trade goods and services for (in-game) currency. (There are 10 million transactions a day on Warcraft, with some items trading for the equivalent of almost $1,000.) In the novel/film “Ready, Player One,” the hero lives in a dystopian trailer park but spends all his time going to school, socializing, and working “inside” OASIS, which is essentially World of Warcraft 2045.

The hot metaverse game of the moment is Fortnite (disclosure: investor). Once a relatively simple game in which 100 strangers fought one another elimination-style for sole possession of an island over and over again – think “Hunger Games” – it’s now a multibillion-dollar enterprise that hosts Travis Scott concerts and Christopher Nolan premieres. Its publisher, Epic, is all-in on the metaverse hype. The company opened its antitrust trial against Apple with its CEO claiming Fortnite isn’t a video game at all, but “a phenomenon that transcends gaming,” no less than the metaverse itself.

Scott Galloway

But 3D graphics and fantasy/sci-fi trappings are not what makes the metaverse. Twitter is also a virtual world, and in some ways it’s closer to the vision of the Metaverse than online games. It’s a persistent, online extension of reality, with a large and diverse community of contributors who trade in the true universal currency: our attention. Imagine Twitter, but with graphics and a currency … and you are getting there.

Cryptocurrency and its offspring the non-fungible token are tokens from the metaverse future, pieces of digital ephemera that are portable across digital spaces and can be exchanged for real-world goods.

The full metaverse lies in a distant future in which distinct virtual worlds coalesce into a single integrated online world that is in turn integrated with the physical world. Your identity, your relationships, your money are the same online and off, and among different communities within the Metaverse. It’s probably not a proprietary, branded environment, like a single website, but a linked world of multiple environments of varying public and private nature, like the Internet. Put another way, the interoperability of a metaverse is the key to becoming THE metaverse.

MetaFace

Zuckerberg has been on a metaverse kick lately, telling people that, in five years, he thinks Facebook will be known as “a metaverse company,” and mentioning the term 16 times on the company’s most recent earnings call versus once for “advertising.”

Yet the metaverse, a technologist’s dream, is Facebook’s nightmare. It would essentially render the social network irrelevant. Facebook’s most valuable asset is its social graph, its dataset of users, links between users, and their shared content. In a metaverse future, we’ll all have identities on the metaverse, and anyone can open a virtual space for sharing photos of your 10-year-old’s birthday party or arguing over vaccines. BTW, they work … really well.

There will be trillions of dollars in value created by the creators of these spaces, and the infrastructure to support them, but an open world of interoperable identities and information is antithetical to Facebook’s project, which is to keep you on Facebook. (The same is true for Twitter, of course, but two of Twitter’s great advantages are that it isn’t a well-run business, and that it has far fewer legacy assets to inhibit a pivot into a metaverse-friendly model.)

So Zuckerberg has a different vision. Make Facebook the metaverse. He told Gayle King that he saw that as a five- to seven-year project, which tells you what you need to know. The metaverse, as everyone but Zuck defines it, is decades away. The technical challenges alone are immense. Zuck’s plan is clear: He’ll build out a VR presence so Facebook looks like the metaverse, extend it into the corporate environment through Workrooms, brand the whole thing “metaverse,” and then fight off all challengers with a war chest of ad money the model generates.

Will it work? Probably not, but that doesn’t mean it isn’t a cause for concern. We’ve been having these structural arguments about the digital world since the web first emerged 25 years ago. In the 1990s, America Online was a “walled garden,” while the Internet was an “open ecosystem.” And though the market has tended to favor innovation, the trend toward consolidation and anti-competitive behavior is troubling. A single-owner metaverse is not an ideal future.

I believe Mark Zuckerberg’s passion for the metaverse stems from a desire to exit this one. A man who’s become the fifth-wealthiest person in the world before turning 40 and has more influence than any individual in history (I believe this), and yet he’s increasingly viewed as a menace. I believe he likely finds this bewildering and frustrating. And maybe unfair. We should acknowledge his achievements. We should set him free, into the metaverse.

Life is so rich,

Scott

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SCOTT GALLOWAY: Half of America has its head up its ass. It’s time for a vaccine mandate.

anti-vaccine protest
Rally goers hold signs protesting vaccines at the “World Wide Rally for Freedom”, an anti-mask and anti-vaccine rally, at the State House in Concord, New Hampshire, May 15, 2021.

I was planning on writing about edtech startups and Section4. However, I can’t focus on anything but my disappointment – disdain really – in the lack of leadership at a federal level (Biden) and the voluntary manslaughter at a state level (DeSantis).

Between 1964 and 1973, we ordered 2.2 million young men to go to Southeast Asia, pick up a gun, run into the jungle, and start shooting. Those who rejected their country’s call to service either faced imprisonment or fled to Canada (and faced imprisonment upon return).

Things have changed since Vietnam. Today, serving on the frontlines is not only statistically guaranteed to save lives, it’s also somewhat easier: You walk into your local CVS. And unlike staring down the barrel of an M14, it doesn’t kill you. But the US call to service has changed a lot since then, too. We no longer demand you do what’s right for your country – instead, we cajole … beg, even.

Enough already. Federal law should require any citizen who wants to cash a government check, use public transport, or enter a place of business to show proof of vaccination. I published the following post when we’d lost 300,000 Americans. Nine months later, we have a vaccine … and 613,000 deaths. The world suffers from a dearth of shots. America suffers from dysfunction.

Read more: I was completely against the vaccine but changed my mind after doing my own research. Everyone should do the same.


[The following was originally published on December 18, 2020.]

The 10th of May, 1940. The leaders of Britain and France watch an unfolding disaster in the east, as Hitler’s forces infect a host of weaker nations. Still, the Allies feel confident. They are wealthy, innovative, … exceptional.

That morning, the Germans attack. They sweep through the Low Countries, bypassing France’s famed Maginot line, and plunge south into the Ardennes Forest. They rout the Allies in a lightning assault and drive the retreating army up the Somme Valley, toward the English Channel. Within two weeks, the French Army has fled to the west, the Germans own the skies, and 400,000 British Expeditionary Force troops are stranded on a sliver of the French coast at Dunkirk.

Pinned down and facing annihilation, the BEF commander sends a messenger to London. The junior officer pleads with the War Cabinet: “You must send pleasure steamers, coasters, fishing boats, lifeboats, yachts, motorboats, everything that can cross the Channel.”

A call goes out.

The response of the British people has become legend. Captains of every type of ship, from river barges to fishing trawlers, sailed into the teeth of German artillery and air power to rescue their countrymen. Over the next 10 days, the British mounted a chaotic, impossible rescue. They saved 340,000 soldiers, including every surviving soldier in Dunkirk. The Allies’ first battle with Germany was a colossal disaster for them: France fell in less than a month, and had the UK lost the men at Dunkirk, it likely would’ve sought a settlement. Instead, the sacrifice and selflessness of the British people changed the course of history.

Our generation’s call

January 2020. America, too, looked east with confidence. A virus had emerged in China and was invading weaker nations, but America was exceptional. We had the world’s finest health-care system and most brilliant scientists, and the Centers for Disease Control was the gold standard for public-health institutions.

Then the virus attacked. Like an invading army, it evaded nearly every defense erected to slow its relentless march. For almost a year now, we’ve been retreating. The enemy has exposed our institutions as weak and ineffective and preyed on a deadly comorbidity: the notion that individual liberty trumps collective sacrifice.

COVID-19 has driven us not to a beach, but into our own homes and, more dangerously, into separate spheres of differing truths. The daily death toll has crossed 3,000, hospitals are reaching capacity, and more than one million people contract the virus every week. By late January 2021, it will have killed more Americans than died fighting in World War II.

Scott Galloway https://www.profgalloway.com/

COVID-19 is a web of death and disability sweeping across the country. Every day, it kills fathers and mothers, school teachers and accountants. Each newly infected person adds a fiber, making the web finer and deadlier.

What we must do

What we can do – what every one of us must do – is avoid becoming a fiber in that web. To date, we haven’t done a good job of this. Millions of us, from the president of the United States down, have refused to acknowledge the gravity of the threat and continue to cling to some perverted notion of “liberty.” And every day, we add 200,000 more fibers.

How many Americans will be snared? If the virus is left to run its course, it could infect over 200 million more people in the country before herd immunity suppresses the spread. If the mortality rate is 1%, that puts two million people on the beach, pinned down by the enemy, facing death.

But these people don’t have to die. There’s a way out. We have vaccines: two in use, a third expected soon, and more on the way. However, vaccines don’t save lives – vaccinations do.

A call has gone out.

Will we answer it? Huge numbers of Americans are saying they will not. In poll after poll, nearly half of Americans say they are unlikely to get the vaccine.

By now I’ve gotten used to reading polls saying that half of America has its head up its ass. What’s particularly distressing about the refusal to get the vaccine is that I don’t have to read polls to hear it. I hear it from friends, from business associates, from parents at my kids’ soccer league: “We’re going to wait, to ensure it’s safe.”

While it’s true that these vaccines have been developed in record time, they’re hardly untested. The Pfizer vaccine, the first to be approved by the FDA, was tested on 18,198 people; the Moderna vaccine was tested on 15,200 people. Around half of the recipients reported fatigue or chills, and one in seven reported a 24-hour fever. No serious side effects were identified in any recipient, and people who felt ill nonetheless said they were glad to have gotten the shots. Vaccines are one of humanity’s greatest accomplishments, and they’re incredibly safe. Fun fact: You’re far more likely to be killed by a dog than by a vaccine. Thanks to immunization, diseases like measles and smallpox, which once killed hundreds of thousands of Americans every year, are rare or unheard of today.

Scott Galloway https://www.profgalloway.com/

In hindsight, calling the effort to procure a vaccine “Operation Warp Speed” may not have been the best way to build confidence in the final product. But the swiftness with which the vaccines have been developed is less a reflection of haste than of commitment, resources, and new technology.

As of mid-December, scientists had published 74,000 papers related to a virus that nobody had heard of 12 months earlier. Nearly one-third of all scientific researchers around the world have dropped their prior projects to work on COVID 19-related matters. As Ed Yong recently described in The Atlantic, this pivot is far beyond any historical precedent and will have profound effects on the scientific community for years to come.

The speed of clinical trials can also be attributed to the virus’s very virulence, as it takes so little time for the control group to suffer a statistically significant number of infections. Johnson & Johnson recently cut the size of its Phase 3 trial because infection rates are so high in the US.

We moved fast because we had to, and because we could. These vaccines benefited enormously from advances in technology, data mining, and data modeling.

The technology behind the Pfizer and Moderna vaccines, which has been in development for decades, also enabled the shots to reach us quickly. Their novel deployment of messenger RNA should also quell a common concern about vaccines: that they inject a modified form of the virus itself into the recipient. Instead, mRNA vaccines provide the “instructions” our immune system needs to identify and defeat the pathogen. They do not alter the DNA in our cells. (If my scientific expertise is not reassuring on this point, vaccines based on traditional approaches are also in development.)

Still, though, I hear friends and colleagues say, “Even if the risk is tiny, why take it? I’m not at risk from COVID-19.” But the risk of suffering serious health effects from the disease, even for younger people in good health, is real. In July, the death rate among adults 25-44 was almost 50% higher than in July 2019 – that’s an additional 5,000 deaths attributed to COVID-19, among younger people, in just one month. Even among survivors, the virus has been shown to cause long-term neurological and cardiac harm in 10% of victims. Yes, the risk is small. But it’s far greater than the risk presented by the vaccine.

Whatever the risk to ourselves, however, we don’t take vaccines only to protect ourselves. We take them to protect everyone, to avoid becoming a fiber in the web.

In May of 1940, the British sailors and bargemen who set course for France did not know if U-boats, bombers, or bad weather awaited them. They didn’t need to know. They knew their countrymen were at risk, and that was enough.

Today, it feels as if we’ve lost sight of the connection between sacrifice on behalf of our country and the personal prosperity and liberties we are blessed with. But we’d do well to remember that they weren’t really blessed upon us – they were earned.

Scott Galloway

Our nation has been frayed, if not torn apart. A key component of our repair will be a renewed belief that there is a truth – one based not on ideology or opinion but on data and science.

This vaccine is our generation’s call. Let’s answer it. Let’s get two million fellow Americans off this beach.

Life is so rich,

Scott

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SCOTT GALLOWAY: Bezos’ Blue Origin trip was an empty-calories honor for an ‘egonaut,’ not an astronaut

Jeff Bezos walks with Lauren Sanchez ahead of Blue Origin spaceflight
Jeff Bezos walks with Lauren Sanchez ahead of Blue Origin spaceflight.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway shares why he thinks Jeff Bezos’ Blue Origin flight wasn’t the milestone it’s chalked up to be.
  • See more stories on Insider’s business page.

Ever since the first tribe walked out of the Great Rift Valley and crossed the Sinai into Asia, humans have been explorers. We’ve crossed continents, then oceans, and in the 20th century, left Earth itself. There’s glory in our species’ expansive nature, and as the TV show says, space is the final frontier. However, Jeff Bezos is not my astronaut.

I felt more disdain than wonder watching Richard Branson’s joyride and Jeff Bezos’s soulless flight to the Kármán Line.

Everybody gets a “For All Mankind” trophy

There was no ground broken here. In 1903, the Wright Brothers completed the first powered flight. In 1961, Yuri Gagarin was the first human in space. In 1969, Neil Armstrong was the first human on the moon. Those are milestones worthy of celebration. In 2004, Burt Ratan’s Scaled Composites carried the first people into space on a privately built spacecraft – a milestone of sorts.

What was accomplished on July 11 (Branson) and 20 (Bezos)? Well, one of Bezos’ passengers, Wally Funk (great name), became the oldest person ever in space. After the flight, she reminded us that when you’re 82 you have zero fucks to give. She was disappointed in both the view and the length of the flight, and she found the cabin insufficiently spacious for the “rolls and twists and so forth” she wanted to do.

Another of Bezos’ passengers became the youngest person ever in space. This sounds like something, except that he bought his way onto the flight – actually, his father, a private equity billionaire, paid for the recent high school graduate’s estimated $28 million ticket. My youngest has been acting up (if “acting up” is terrorizing all of us – he ​constantly assesses the household for weaknesses and then makes brazen attacks on his older brother and anything resembling domestic harmony). I don’t have any idea how to deal with this, so I bought him a $1,000 iPad. His mother told me I was sending the wrong message. I reminded her that the message could have been 28,000 times worse. So, there’s that.

Blue Origin’s reusable rocket is a real technological achievement, but that was news … back in 2015. None of the July “astronauts” were even the first space tourists. That empty-calories honor belongs to Dennis Tito, who paid $20 million for a ride on a Russian rocket in 2001. And Tito spent a week in space, living on the International Space Station – the equivalent of nearly a thousand 11-minute trips on Blue Origin.

Astronauts, my ass. Apollo 11 and Columbus travelled 240,000 and 3,000 miles to reach the moon and Caribbean, respectively. New Shepard 4 traveled 0.026% of the way to the moon. Put another way, on Tuesday we watched a man plant a flag three feet up from base camp at Mt. Everest and expect to be knighted. This weekend, I’ll be in Montauk. I plan to swim a half-mile from shore (I can do this) and declare I’ve discovered Spain.

It’s his money, and he has the right to spend it on what he wants. But if Mr. Bezos was genuine about doing something more than crashing a canary yellow T-top Corvette into a Bosley for Men franchise, he could raise the minimum wage at his firm to $20/hour.

Egonauts

In addition to vanity projects for billionaires, these pseudo-events were advertisements, promotions for the brands prominently displayed throughout the breathless television coverage.

But advertisements for what? Human exploration is about the future, and space exploration is a long bet on a very distant tomorrow. What kind of future will the billionaire space race promote? One clue: After his flight, Bezos said, “I want to thank every Amazon employee, and every Amazon customer, because you guys paid for all this.”

He’s right. We did pay for it. Eighty-two percent of American households are Prime members, and the company has 1,298,000 employees. We also paid for the Apollo program, of course, only there’s a difference. To put Neil Armstrong on the moon, we paid taxes, and elected representatives to decide how to spend them.

In the 52 years between Armstrong’s July accomplishment and the Branson/Bezos “accomplishments,” the United States has radically restructured its economy. Specifically, we’ve handed it over to billionaires. Now, rather than paying taxes, we pay for our Prime memberships. Instead of NASA, we fund Blue Origin. We’ve elected people who defund NASA so businessmen can lead us to new frontiers instead of test pilots and physics PhDs.

Historically, astronauts were the best and the brightest. The pioneers of the 1960s were war heroes and accomplished pilots who combined physical skill and courage with crisp engineering minds. Neil Armstrong, a legend among test pilots, flew more than 900 different types of planes before leaving the Earth in July 1969. When the Lunar Module’s computer conked out on final approach, he manually piloted the craft to the moon’s surface. Those that followed, in the Space Shuttle and aboard the International Space Station, were scientists and engineers of distinction.

“Astronaut” used to connote something noble, something that cemented the best of what it meant to be American: Men and women of exceptional capabilities and unremarkable origins. Armstrong was the second person in his family to attend college, and his father was a state government bureaucrat. John Glenn’s parents were a plumber and a teacher. Sally Ride, the first American woman in space, was a PhD physicist; her father was a community college professor, and her mother volunteered as a prison counselor. Former NASA Chief Astronaut Peggy Whitson, a PhD biochemist who spent more time in space than any other American (665 days), grew up on a farm in Iowa. (Kudos to the FAA, which, just before Bezos took off, issued a new policy requiring that a space crew member actually contribute to the mission before receiving astronaut “wings.”)

In the Prime Space future, we won’t have astronauts, we’ll have egonauts.

The problems of the Prime Space future go deeper than who gets to ride Jeff’s cocket to the Kámán Line. An ever-expanding array of technological innovations, businesses, and services fall under the rubric of “space.”

One of the earliest and still most important benefits of space exploration was the Global Positioning System. It’s hard to overstate the importance of GPS, which is foundational to our mobile economy. GPS was born of a US Department of Defense project in 1973; it continues to be run by the DoD, which makes it freely available to all users.

Bezos and Elon Musk are launching thousands of satellites over the next several years to enable their Kuiper and Starlink systems. There’s a lot to celebrate about these projects, which promise broadband internet for remote and underserved regions. But do we want Bezos and Musk – or shareholders in their companies – to control that access? With the number of satellites projected to grow from 3,000 to 50,000, space hauling will be an enormous business.

Bezos dreams of moving pollutive manufacturing to space, which seems both insane and amazing. Musk wants to build a colony on Mars, which seems more like space execution than exploration. But as humanity expands to become a space-faring species, who should control who gets to go and what we do up there? To whom do the benefits of all this technological innovation flow?

I know two things about Blue Origin. One, Amazon’s customers and employees paid for it, just like Bezos said. Two, the commonwealth may register progress, but there will be less public spillover from the technology and an increase in private capture. Imagine the tax avoidance that will occur in space, where nobody can hear the IRS scream.

The counterweight to market externalities is democracy. And a democracy that cedes ownership of its future to a winner-take-all market will lose control of that future. Democracy acts through governments (and taxes), whether we like it or not.

The right stuff

While Bezos was high-fiving his employees after his jaunt into space, NASA scientists were working on projects for all mankind. The Perseverance rover on Mars has its own drone, which is sending back amazing pictures. In November, NASA, along with the European and Canadian space agencies, will launch the James Webb Space Telescope, the successor to the Hubble; under development since 1996, it promises to advance human knowledge about the formation of the universe and the origins of life.

It’s unlikely these projects will attract any venture capital money or support a SPAC. Private space projects might be dressed up as achievements for humanity, but their aim is to return capital to shareholders. And when that’s the criteria, the astronauts and their efforts become limited in scope.

Mach-3 train wreck or galactic ATM

Whatever you think of space travel as a human endeavor, space tourism is an awful business. Even assuming all goes well, it makes no sense. These are vanity projects, and the only people that will make money from them will be the early investors … who bail out before impact.

Most businesses are either demand constrained (the market for its product is limited) or supply constrained (it can’t make enough of its product). Virgin manages to be both. To meet its profit targets, it has to sell about 3,100 tickets per year at a whopping $400,000 each, a 60% increase from the current price. After an ad the entire world saw, the product has a waiting list of … 600 people. My Brand Strategy class at Section4 has 1,500 people, and there’s dramatically lower odds you’re going to blow up in your chair.

But even if there were an annual demand from 3,100 people willing to pay that fee, to supply the spaceflights, Virgin would have to make two flights per day, every day, without mishap. So far in all of 2021, it has flown … twice. The true addressable market for space tourism is zero. It’s the mother of all product-market mismatches. By comparison, Google Glass and Cheetos-Flavored Lip Balm (an actual thing) were on point. Virgin Galactic may achieve great things, but the stock (Nasdaq: SPCE) is a Mach 3 train wreck.

The worst-case, and most likely, scenario? Death. Rockets to space are controlled explosions of thousands of gallons of flammable material. Re-entry is a high-speed fall into the searing heat of friction. Virgin Galactic has already lost one pilot, Michael Alsbury, who died when his SpaceShipTwo craft broke apart in the atmosphere. Five hundred and ninety people have headed into space, and 19 have not returned, meaning space travel is more dangerous than base jumping. A space tourism fatality is a question of when, not if. Exploration and innovation are worth risks, even to human life. Floating weightless for 300 seconds is not.

Richard Branson understands these risks. Last May he sold $500 million of his Virgin Galactic stock, and this April he sold another $150 million, trimming his holding to less than 25% of the company. He was able to make both sales because he took the company public in 2019 via a SPAC controlled by former Facebook employee Chamath Palihapitiya. Who also shed his entire personal stake in the company back in March. Billionaires vote with their wallets, and the two largest shareholders believe their capital will achieve greater returns elsewhere.

Sally Ride

One of 35 people selected from 8,000 applications, after receiving a PhD in Physics, Ms. Ride spent 843 hours in space aboard the Space Shuttle Challenger, where she was charged with operating the robotics arm (“Canadarm”). I wonder if, when peering down at Earth 300 miles below, she registered satisfaction from her hard work, or the reward of pursuing greatness in the agency of others. Was it freeing to be in space, on a craft judged only by her skills and character? I don’t know. What I am certain of is that Mission Specialist Sally Kristen Ride is a United States Astronaut and went to space for all mankind.

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SCOTT GALLOWAY: Colonizing Mars will not happen in our lifetime and the billionaire obsession with space makes absolutely no sense

Elon Musk space axel springer award
SpaceX owner and Tesla CEO Elon Musk poses after arriving on the red carpet for the Axel Springer award, in Berlin, Germany, December 1, 2020.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway questions the point of the billionaire obsession with exploring outer space.
  • See more stories on Insider’s business page.

People worried about starving or being eaten don’t have time to ponder the finite nature of life. But once we know we’re going to survive in the short-term, immortality begins to loom larger than mortality. Affairs, Teslas, and Ayahuasca are the accessories of a life with more money than time. Now the billionaire class has taken mid-life crises to a new level.

In the past month, French billionaires alone have cut ribbons on: a $194 million art museum in Paris; a $175 million Frank Gehry-designed “creative campus” in Arles; and a nearly $900 million, 16-year renovation of La Samaritaine department store, complete with hotel, spa, and wavy glass facade.

We do things bigger here in Texas, though.

Last month, Jeff Bezos announced he would be aboard Blue Origin’s first manned space flight, scheduled for July 20. A recently divorced billionaire on human growth hormone transported into space in a giant dildo powered by an oxygen-rich rocket engine that produces 490 kilonewtons of thrust is ground zero for everything that is right and wrong with society. Mostly the latter. But I digress.

Not to be outdone in the big bank/little d–k department, Richard Branson is rumored to be seeking to beat Bezos into space. He might get suborbital before Bezos, but he’s hardly breaking new ground. At least 570 people have sojourned in space since Yuri Gagarin made the first trip in 1961. Branson wouldn’t even be the oldest person to do it: John Glenn left the planet at 77 years old (his second trip). You do you, Rick and Jeff.

Read more: I was an early PayPal employee who joined the company even before Elon Musk. I missed out on becoming a millionaire because I sold my stock too soon after I left.

The final frontier

The desire to bravely go where no one has gone before is deeply rooted in the human spirit. Discovery must be a feeling of great wonder. At that moment, you are here for a reason. You are immortal.

Scott Galloway

Exploration can be hugely beneficial for those who follow, who get to cross Donner Pass on pavement. Yet nearly 50 years since the Apollo astronauts last walked on the moon, we’ve … not been back. Space is not the Sierra Nevadas.

Space is exponentially more expensive and dangerous. Nineteen of the 570 people who’ve ventured into space haven’t returned, yielding a mortality rate of 3.3%, versus 1.3% for climbing Everest and .04% for base jumping. Worse, by American standards, space travel is going to be a shitty business.

Even with our advanced technology, and a fawning CNBC engaging in a consensual hallucination that these billion-dollar hair plugs are for all mankind, the ROI is suspect. That last sentence is my way of saying “makes no fucking sense whatsoever.” There is 100x the return investing in technologies and systems of cooperation on a planet already perfect for human life, a mere 38.6 million miles from Mars. The billionaire obsession with space fantasy (and our willingness to go along with it) isn’t just disappointing, it’s nihilistic. Our idolatry of innovators is morphing into phantasmagoria.

More space

There are four reasons to put a rocket into space. In order of near-to-medium-term relevance (i.e. having any purpose this century), they are:

  1. Hauling stuff
  2. Scientific exploration
  3. Tourism
  4. Colonization

Hauling

There’s a real business in hauling stuff – mostly communications satellites – into orbit. Indeed, this is where both Bezos and Musk have placed their bets. Blue Origin and SpaceX are serious space-hauling companies. Apparently, it’s also a profitable business. Said Blue Origin CEO Bob Smith: “We make money on every flight.”

Scientific exploration

Scientific exploration is worthwhile, but it’s not a business. It feeds businesses (hauling, materials, communications), but this is deep science, better pursued by our commonly owned enterprise, the government.

In fact, contracting is becoming a competence for NASA. In 2010 commercial launches represented about 30% of all US launches. Last year, they accounted for 80%. Private enterprise is eliminating NASA’s need to design, build, and launch. That’s a good thing: It means they have more time to focus on exploring. Let capitalism handle the picks and shovels. NASA will handle the science.

Tourism

After that, we venture into ego and fantasy. Space tourism is a bad business that could end in a flash … literally. What’s the market for people willing to spend $250,000 to be weightless for a few minutes? What’s the repeat market? And what will be left of that market after the first tourist rocket explodes on the launch pad, killing Bob from accounting? Because the nature of rockets is … they explode. About 90% of US rocket launches were successful last year. That might sound OK until you start putting humans in them.

In human transport, superior shareholder returns will be a function of fast versus far. In my view, the most under- and overhyped transportation firms are Boom Technologies and Virgin Galactic, respectively. The market for people willing to pay $25,000 to get from NYC to London in 3.5 hours is (at a minimum) 1000x the market for people willing to pay $250,000 for a 90-minute suborbital ride to the Kármán line. Six hundred people have paid $250,000 to reserve a seat on Virgin Galactic. Six hundred people land on a private jet at Teterboro every six hours.

Colonization

As for colonization of Mars … really? The only interesting question is whether Elon actually believes any of this – whether anyone at SpaceX believes any of this – or whether it’s purely a PR stunt. Colonizing the Red Planet will not happen in my, or my kid’s, lifetime. Intense solar radiation, combined with the lack of atmosphere and low gravity, would require living (dying) quarters buried deep under the planet’s surface for any hope of survival. As astronomer Caleb Scharf told us on Pivot, “there’s a lot of stuff [on Mars] that wants to kill you.” The worst place on Earth is better than the best place on Mars.

The SPAC(e) race

The biggest trend in space over my lifetime has been the rise of the private space hauler. Who’s best positioned to win in this new market? In general, there are three ways to maximize profits: reduce costs, do more (in this case, more flights), and diversify your business.

The Big Three – Blue Origin, SpaceX, and Virgin Galactic – are all making headway on No. 1. All have invested in reusable rockets, which have reduced launch costs by 70%. On No. 2, we have a clear leader: SpaceX has launched almost three-quarters of this year’s US flights.

As for No. 3, Virgin Galactic is the clear loser, as Richard Branson is focused on space tourism. Jeff and Elon, by contrast, are investing heavily in orbital infrastructure. Between them, SpaceX’s Starlink project and Amazon’s Project Kuiper plan to launch nearly 14,000 satellites, providing continuous, high-speed Internet access globally. That should keep the space haulers busy for some time.

Scott Galloway

In sum, there’s real money to be made in hauling stuff – but satellites, not tourists. The past decade has seen more than $125 billion of investment poured into positioning, navigation, and timing (PNT), a sector that relies on good satellite constellations to feed Uber, Maps, DoorDash, and nearly every other app on your phone. This is why launch vehicles and satellites are hogging all the space infrastructure investment.

Scott Galloway

With 1,480 unique space companies competing for a place in the stars, the space economy is very thirsty. But a rocket needs more fuel than a Ford F150 – about 12,300x more. What do you do when you need fuel (capital) in exuberant excess? You either 1. find a billionaire or 2. access the public markets.

SpaceX, Blue Origin, and Virgin Galactic all have a massive head start because they were birthed by billionaires. Bezos, Musk, and Branson will pay their kids’ expenses no matter how dysfunctional or explosive. But the sector is attracting new sources of capital.

Take Rocket Lab, a 500-employee startup that also launches rockets. How will it get the capital it needs to keep up with the 9,500-employee behemoth that is SpaceX? Via SPAC. In March, Rocket Lab merged with Vector Acquisition Corp. and raised $750 million at a $4.1 billion valuation. The company has already had two successful launches this year.

A dozen other space startups have also gone (or are going) public via SPAC. Astra, a small satellite-launching company, raised $500 million at a $2.1 billion valuation. Spire Global, a satellite-data company, raised $475 million at a $1.6 billion valuation. There are hundreds of other space startups thirsty for an injection of public cash. The 2021 SPAC boom is yielding tremendous opportunity and risk for astronauts and investors.

Near versus deep space

My observation is that men are more focused on deep space, and women near space. Men are more ego driven and obsess about frontiers in business and the solar system. Women are (cue the Twitter hate) more concerned with exploring things near them, finding less reward in being the first person on Ganymede. My advice to young men, especially those with kids, is to be more focused on near space. As you get to the end of your time on the third rock from the sun, you won’t be desperate to spend more time with strangers, but the people closest to you. I spent the first 40 years of my life obsessed with getting affirmation from people I didn’t know. It came at a cost to relationships with my family, friends, and ex-wife.

Tonight the family ate at a sushi restaurant, and my 10-year-old ordered kakigori, Japan’s quintessential summer treat: shaved or crushed ice drizzled with flavored syrup or condensed milk. It’s awesome. Nobody, despite my son’s urging, would try it. I agreed and demonstrated a rare expression of joy (see above: It is awesome). My son, at that moment, felt so close to me he pushed the kakigori in front of me and sat on my lap so we could enjoy the dessert together. It felt as if I was discovering something nobody had ever felt/seen before, and all of mankind would benefit.

I am strong, here for a reason … immortal. Going where (this) man has never gone before.

Life is so rich,

Scott

Read the original article on Business Insider

The Hall of Fame of ‘Benjamin burners’: Meet the CEOs most famous for tanking their companies and losing millions – of other people’s money

Adam Neumann
WeWork cofounder Adam Neumann.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway talks about famous CEOs, from Yahoo’s Marissa Mayer to WeWork’s Adam Neumann, who cost their companies millions.
  • See more stories on Insider’s business page.

I’ve lost a lot of other people’s money. The most stressful times in my life have been when people believed in me and invested tens (if not hundreds) of millions in my company or idea, only to see their capital go up in smoke. I’ve also made a lot of people a lot of money – but only in America would someone with my (lack of) pedigree be given this many swings at the plate.

To be a truly great investor or operator/CEO, you need to be a bit of a sociopath: You have to be able to sleep at night even as you lose other people’s hard-earned money or lay people off. Working with OPM (i.e., Other People’s Money) is often phrased as a positive, but the real luxury is to be in a position to lose your own capital. If things go wrong, it’s a private failure.

The willingness to risk capital on a captain and harpoons (the 19th century whaling sector was proto-venture capital) has always been a key ingredient in the secret sauce of the US economy. But the secret is out. While the US still produces the most unicorns, and the most mega-corporations, China is gaining … fast. Interestingly, despite the rhetoric re: China challenging US hegemony, it’s European innovation that has drowned in the rising red tide. But that’s another post.

Scott Galloway  https://www.profgalloway.com/

We should celebrate billion-dollar successes, so long as they come at the risk of failure – the whaling captain and the entrepreneur earn their wealth in part thanks to their willingness to come home empty-handed, or not at all. However, there’s a new class of billionaire in America. Meet the MeWork generation, which makes their fortunes despite returning to harbor with less than they embarked with.

To help identify members of the MeWork generation (they can be any age), we’ve devised two metrics: the Daily Benjamin Burn™ (DBB) and the Earn-to-Burn Ratio™ (EBR). The first is how much money an executive lit on fire per day during their tenure. The second is the percentage of those lost Benjamins they siphoned off for themselves – think of it as a commission on destruction. In an efficient and fair (dangerous word) market, the EBR ratio would be zero. If we can measure someone’s burn in daily stacks of 100-dollar bills, they’ve created no value and should get no compensation. Spoiler: That’s not what happens.

Daily Benjamin Burn™

What does the DBB look like in practice? A lot like Quibi. That likely won’t mean anything to you, unless you’re one of the dozens and dozens of people who subscribed to the short-lived short video service. In 2018, Jeffrey Katzenberg and Meg Whitman raised $1.75 billion, launched a bad app with worse content, and shut it down six months later. Roku combed through the rubble and found $100 million, so Jeff and Meg immolated $1.65 billion in 750 days, or $2.2 million per day. If you stacked that $1.65 billion in 100-dollar bills, you’d have a pile over a mile high, about two Burj Khalifas, the world’s tallest building.

Eating my own Benjamins

In 2008, I raised $600 million from a hedge fund, became the largest shareholder in the New York Times Company, and ran an activist campaign against the Gray Lady. They put me on the Board, where I ranted about the evils of Google, advocated for the divestiture of non-core assets, envisioned sunlit uplands of subscription revenue and … lit Benjamins on fire. During my 24-month tour of duty watching the Great Recession kick ad-supported media in the groin, I managed to turn $600 million into $350 million, for a DBB of about $350,000. The stack of Benjamins I lost would have reached only to the top of 30 Rockefeller Plaza. Only. Jesus …

I. Want. To. Throw. Up.

Scott Galloway  https://www.profgalloway.com/

Earn-to-Burn Ratio™

Jeff, Meg, and I all made an old-school mistake. We failed to find a greater fool (e.g., the public markets, gullible board members, Softbank) to secure a mega payout for our Bonfires of the Benjamins. I was paid approximately $500,000 in board fees and a retainer from the fund; I speculate that Jeff and Meg pocketed more (their compensation remains private). But none of us took home millions.

That brings us to the Earn-to-Burn Ratio™ and the hall of fame for broken compensation.

EBR hall of fame

In 2012, Yahoo replaced its CEO with an executive from Google: Marissa Mayer. But the new CEO made a series of poor decisions, including canceling the company’s telecommuting policy while working from home herself and paying $1.1 billion for a porn site, Tumblr. (Note: Six years later, Yahoo sold Tumblr for $3 million.)

When Mayer took over, Yahoo (not including a 20% ownership stake in Alibaba) was valued at $14.4 billion. In July 2016 the company sold itself to Verizon for $4.5 billion, and Mayer was gone. That’s $9.9 billion turned to ash in four years (or 13.5 Burj Khalifas), for a DBB of $6.8 million. Mayer’s compensation began with a $30 million signing bonus and went up from there, totaling an estimated $365 million, giving her a $250,000-per-day commission for destroying $7 million per day of other people’s money. That’s an EBR of 3.7%. Shocking, sure, but not the gold standard.

Adam Neumann founded WeWork in 2010, but he didn’t start burning Benjamins at epic scale until Softbank began shoveling billions into the WeWork furnace in August 2017. By the time Neumann was fired in September 2019, Softbank had invested $10.3 billion; a few months later it wrote off $9.2 billion of that. That’s a $13.1 million DBB on Softbank’s money alone, or like flying a decade-old Gulfstream G450 (I browse planes at night – pathetic) into a mountain … every day. Impressive, but only half the story. Neumann’s compensation for this value destruction was complicated by his ouster and a subsequent lawsuit, but we estimate he made off with around $1.02 billion, most of it coming out of Softbank’s deep pockets. That’s $1.5 million per day during those two years: an EBR of 11.1%.

Scott Galloway  https://www.profgalloway.com/

Joining Mayer and Neumann on the podium is Randall Stephenson, who ran AT&T from 2007 to 2020, when his chief lieutenant, John Stankey, took over. If you owned AT&T stock in 2007, you’ve collected $26 per share in dividends since, but you’ve also watched the share price drop from $39 to $29, for an aggregate annual return of 2.5%. This was a period when S&P 500 companies as a whole returned 9.8% a year – much of it on the back of AT&T’s own mobile and data networks – and AT&T’s competitor Verizon returned 7.9% to its shareholders.

How did Stephenson manage this? Among other mistakes, AT&T spent $67 billion to buy DirecTV (a pending massive write-off), blew $4 billion when it failed to acquire T-Mobile, and spent another $108 billion to buy WarnerMedia, which Stankey just sold to Discovery. To his (partial) credit, Stankey may have managed to net out the Warner deal as a wash.

Scott Galloway

So while Stephenson didn’t destroy capital outright, he was a poor steward. Had AT&T eked out even a 4% return from 2007 to today, it would have made an additional $50 billion for shareholders. That’s an implied DBB of $10 million. How did the Board respond to Stephenson’s 13-year-long sideways run at the iconic firm? His total comp was at least $250 million, including a $64 million pension as a parting gift. That’s an EBR of “only” 0.5%, but still a huge payout in the face of mediocre performance.

Honorable mention

In April 2014, toward the end of Steve Ballmer’s controversial run as CEO, Microsoft closed the $7.2 billion purchase of 1999’s leading mobile handset maker, Nokia. Just 15 months later, Ballmer was gone, and the company wrote off $10 billion for the failed acquisition – the deal was so bad it ended up costing Microsoft more than it paid, mostly due to severance for laid-off Nokia employees. That’s an incredible $22.2 million per day, the highest DBB we could find. (Ballmer only made $1.65 million his last year at the company, so a minimal EBR.)

Burning Benjamins doesn’t just happen in the US. In 1998, Daimler-Benz acquired Chrysler for $35 billion in the largest industrial merger ever at the time. After nine years of culture clash and billions in losses, Daimler unloaded 80% of Chrysler to a private equity firm for $7.4 billion, valuing the company at $9.25 billion. That equates to an impressive $7.8 million DBB.

How do these corporate money losers compare to the largest and longest-running Ponzi scheme in history? Bernie Madoff ran his fake fund for nearly 30 years, costing investors an estimated $19 billion. The date his fraud began is disputed, but assuming it was 1980, that’s a DBB of just under $2 million per day. A massive, decadelong legal project has repaid most of these losses through fines and settlements, and Madoff died in prison, but only after a multi-decade run paid for by the destruction of thousands of people’s economic security.

https://www.profgalloway.com/ Scott Galloway

MeWork

Growing up, I loved to watch my dad pack for business trips. He smelled of Aqua Velva and draped his Izod sweaters over a Ram Golf bag. He’d iron the mammoth collar of his Pierre Cardin shirts, fold them around a piece of wax paper, and lay them into his Hartmann luggage like newborns. It was ceremonial, just as when he’d wear his kilt. Elegant yet masculine. During one of these pre-business-trip ceremonies, when I was about eight, my mom walked in. I looked at my dad’s stuff and asked, “How come dad is so rich, and we’re so poor?”

My dad loves this story and laughs out loud when he tells it. But it wasn’t funny. He’s been married – and divorced – four times. There was some financial stress, there was incompatibility. But the real fissure was that there were two Americas … under one roof.

https://www.profgalloway.com/ Scott Galloway

Whether we’re executives, parents, or citizens, we need to ask ourselves: Have our interests diverged from those of the people who matter most to us and society? Do our spouses, children, neighbors, employees, and countrymen win and lose in reasonable harmony? Are we part of a family, part of a nation? Or have we become the MeWork generation?

Life is so rich,

Scott

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SCOTT GALLOWAY: Elon Musk is now the most influential person in the world – whether or not that’s a good thing remains to be seen

Elon Musk
Elon Musk.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway discusses the impact Elon Musk has on cryptocurrency, the auto industry, and the free market.
  • See more stories on Insider’s business page.

I often write about platforms (iOS, Amazon Marketplace, etc.) as they are a source of value creation and power. The platform of unprecedented wealth creation is the free market of capitalism. The global adoption of markets has corresponded with the greatest expansion of prosperity in human history. But similar to tech platforms, free markets are neither naturally occurring nor immune to collapse. The “free” market can fail.

Scott Galloway

Live from New York

This Saturday at 11:29 p.m. ET, we’ll witness the latest manifestation of market failure. A new king will seize the Iron Throne from Mark Zuckerberg, whose empire has been disarticulated. (He just doesn’t know it yet.) I wonder if Professor Tim Wu or Senator Amy Klobuchar visits the Night King in his dreams? Or maybe depressed teens, the GRU, or the ghosts of people dragged out of their cars in India and hanged because of falsehoods spread on WhatsApp. OK … that escalated quickly.

Anyway, the social network’s CEO has ceded the Iron Throne to the Launcher of Dragons, Borer of Tunnels, and Father of X Æ A-Xii. The coronation will take place before a live studio audience, with Tesla long bots and adoring CNBC personalities shaming anybody who doesn’t surrender to the narrative. Elon Musk is now the most influential individual in the world – so influential, he can distort the modern world’s premier platform, our free market system.

Is Mr. Musk a net positive for society? 100% yes. It’s the word “net” that is the problem. We do basic math on a person/firm, issue a thumbs up/down, and decide (if thumbs up) to ignore the externalities. This is tantamount to deciding pesticides are a net good (they are), so we should disband the EPA.

Read more: Elon Musk personally recruited me to work at SpaceX when it was starting up. He was a relentless problem solver and taught me valuable lessons I use even to this day.

Naked examples of Musk’s influence/externality: the tweeted endorsements of his favored assets. Bitcoin is a trillion-dollar cryptocurrency that could reshape the world economic order … and Musk can manipulate it with (many) fewer than 280 characters.

Researcher Lennart Ante found “significantly abnormal returns of up to 18.99%” after Musk tweeted about bitcoin. “I believe that cryptocurrency traders are looking for role models and validation,” Ante told us when we asked him about his research. But, “we are facing a moral dilemma” he pointed out, between free speech and the protection of investors. When Musk changed the bio of his Twitter account to “#bitcoin” on January 29, the cryptocurrency rose from $32,000 to more than $38,000. Is it free speech? Yes. Does that mean it won’t destabilize the markets and end badly?

I. Don’t. Know.

Mr. Musk can even move markets accidentally. When he tweeted “Use Signal,” referring to the encrypted messaging app, shares in Signal Advance, a Texas medical device maker, increased 5,100% in three trading days.

The musk of Musk’s influence gets stronger this week. He’s established an informal alliance with Dogecoin, a functioning cryptocurrency that’s also an extended practical joke. In the week leading up to Musk’s “SNL” appearance, and following his tweet claiming to be The Dogefather, Dogecoin briefly reached $85 billion in market cap, more than Moderna or Airbus. By midweek it had registered an astounding $45 billion in transaction volume in 24 hours. Click here for a detailed, scientific video rendering of what this level of trading actually looks like.

Reality distortion field

The theory of relativity dictates that massive objects distort the space-time continuum, and light and matter slide toward it. Musk has become a similar celestial force in our markets – but in this case, the graviton particles are genius, attention, ID, and capital.

Scott Galloway

In a healthy market, resources flow where they’ll generate the best return: Workers move to cities with strong job markets, capital flows to companies with robust growth prospects. But in Musk’s case, the power of celebrity in a social media age, a rising class of retail investors with stimulus funds, and our idolatry of innovators have combined to create a vacuum that may cauterize other naturally forming celestial objects. I’m especially proud of the last sentence.

Show me the money

None of this is by accident. Despite being one of the wealthiest people in history (on paper), Musk constantly needs more cash. He recently acknowledged that SpaceX will need “to pass through a deep chasm of negative cash flow” just to launch its satellite internet service. The company has already raised more than $1 billion this year, and $7.5 billion over the course of its history, while continuing to burn billions in revenue. Musk’s other projects, including Neuralink and The Boring Company, have raised another half-billion dollars with little revenue so far.

Tesla posts an accounting profit, but in its most recent quarter, it was emissions credits (a regulatory program that rewards auto companies for making electric rather than gas vehicles) and – wait for it – $101 million in bitcoin trading profits that morphed earnings from a miss to a beat. What Tesla did not do last quarter was produce a single one of its two premium cars, the Model S or the Model X. Promised redesigns have apparently snarled production. On this topic, Musk has been uncharacteristically CEO-like (that is, discrete).

Scott Galloway

Cash burn isn’t the only challenge facing Musk’s companies. Tesla, his flagship business, now has a market cap larger than the auto and airline industries. The company achieved that value, in part, because for a decade it operated without a serious competitor. There’s never been a car like the Tesla Model S, and if you want a high-performance, luxury EV, your choice is easy … and singular. Value creation via disruption is as much a function of the incumbents as the disruptor. Imagine a world in which the only phones were flip phones and the iPhone 12. That’s the auto industry since the Model S arrived in 2012.

Scott Galloway

Or that was the auto industry. Because the Germans are coming. And the Swedes. And the Japanese. On May 2, we got a glimpse into a post-Tesla future when the New York Times ran an article titled: “Mercedes EQS Electric Sedan: The S Stands for Stunning.” The innovation gap is closing. And it’s not just car companies coming for Tesla’s fat margins. The industry’s shape-shift from a $100 billion low-margin manufacturing business to an $800 billion high(er)-margin software business has attracted some enormous sharks. The first overnight $100 billion-plus transfer of shareholder value will occur in 2022, when Tim Cook stands onstage in front of an automobile bearing an Apple logo.

What is the shark repellant for these circling great whites? Musk must keep capital and talent flowing into these enterprises while distracting us from anything regarding fundamental analysis (P/E ratios) or sobriety (it’s a car company). The embrace of crypto serves both needs: It’s consistent with his techno-utopian vibe, and it directs the conversation away from the Mercedes EQS or Apple car while providing a shock absorber for earnings misses. The “SNL” appearance, Dogecoin tweets, Elvish-letter-named kids, tickling of our senses with 420 references and suggestive emojis: It’s David Copperfield, plus 60 IQ points. To be fair, landing two rockets on barges concurrently is genius and inspires awe. But does it warrant consensual hallucination?

Carbon costs

Pumping bitcoin might buttress Tesla’s earnings, but it blows open a bigger hole in Tesla’s narrative. The narrative police demand we link Tesla’s valuation to solving the climate crisis, to reducing carbon emissions by replacing gasoline cars with electric ones. And it does that. According to the EPA, the average 22 mpg gasoline car spews out 4.6 tons of carbon every year. Powered by the US grid, an EV is the equivalent of a 68 mpg car, generating about 1.6 tons of carbon per year. (In other words, each Tesla on the road saves three tons of carbon every year.)

But bitcoin mining generates a lot of carbon, too: Current estimates put it at around 53 million tons of carbon production per year. (Yes, miners use a lot of renewable sources and may catalyze greater renewables investment – but does that compensate for incremental electricity demand rivaling that of Argentina?) Here’s some back-of-the-envelope math that’s definitely going to raise the army of the undead (i.e., TSLA longs and bitcoin bots):

In the short term, bitcoin’s carbon emissions are a function of its price – the higher the price, the more miners are willing to spend on electricity to mine. Assuming a linear relationship (a convenient if aggressive assumption), for every $1 that Musk’s pump has increased the price of bitcoin for one year, miners expel another 1,000 tons of carbon. That wipes out the annual carbon savings of 300-plus Teslas. If Musk’s bitcoin evangelism increases the price by $4,500, that effectively eliminates the ongoing carbon savings of every Tesla on the road today.

The deeper problem? Our elevation of Musk as a capitalist idol has distorted the flow of capital and talent. Healthy markets don’t take cues from the tweets of one man.

Man in the mirror

As “SNL’s” Lorne Michaels likes to say, “Here’s the thing.” Musk is going to keep tweeting, appearing on “SNL,” and ensuring he has a bigger rocket than other masters of the universe … because it works. While we’re watching the fireworks, he’s building cars and rocket ships. Is he the best person to build those things? Is the most efficient amount of capital flowing to his factories, versus those in Ingolstadt or Toyota or Detroit? A healthy market is supposed to answer that. It’s the allocation platform. It’s also hard to deny that Elon has inspired an extraordinary flow of capital into EVs and innovation in transportation.

But our idolatry of innovators and the algorithmic media ecosystem have distorted the allocation platform. In the spectacle economy, it’s about the show, the now, the short-term hit. We’re the richest country in the history of humanity, and we can’t garner the political will to fix our bridges, let alone reach for the stars.

This all raises the question: What do we expect? You only have to drive a Tesla around the block to know that Musk is not a grifter. He is a genius (see above: rocket ships landing on a pad floating in the ocean). Maybe a world-saving, visionary genius should deploy any weapon at his disposal to garner the resources, fend off the challengers, and most importantly, buy the time to achieve his vision. Maybe.

We say we want straight shooters. We say we want wealth to be fairly distributed. But 53 million of us follow Musk’s Twitter feed, and tens of millions of us are going to watch him on Saturday night, and the Elon show will go on.

If there is a glitch in the matrix, it’s us. One in five US households with children is food insecure, and we have a man telling his 53 million acolytes to purchase a digital currency so he can sell it at a profit to pad the earnings of a company that’s worth more than automakers producing 60 times the vehicles. And why wouldn’t he? When you tell an innovator he’s Jesus Christ, he’s inclined to believe you. Once we idolized astronauts and civil rights leaders who inspired hope and empathy. Now we worship tech innovators that create billions and move financial markets. We get the heroes we deserve.

Live from New York, it’s …

Life is so rich,

Scott

Read the original article on Business Insider

SCOTT GALLOWAY: WeWork may be in a unique position to rise from the post-pandemic real estate fallout

Clive Wilkinson Architects
Over a year of having to adapt to remote services has changed to way people think about work.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.
  • In it, Galloway says commercial vacancy rates will continue to rise long after the pandemic ends.
  • See more stories on Insider’s business page.

Real estate is an awesome gig.

For starters, the supply of fertile land (urban centers) is finite, but the source of demand keeps growing (more people/capital moving to cities). On top of that, we’ve granted real estate development such favorable tax treatment that it is nearly immune from taxation. Even Donald Trump, arguably the worst business person in US history, made money in real estate development, despite the serial failure of the underlying business. As one tax law expert put it, the real estate industry “thinks of the tax code as a basket of goodies to feast on rather than a financial obligation of doing business.” Imagine buying stock and being able to depreciate it as it increased in value.

Thanks to ever-growing demand and favorable tax treatment, real estate once minted more billionaires than tech. In 2019, 223 people on the Forbes billionaire list owed their wealth to real estate, compared to 214 from tech.

Then … COVID.

The third great conveyance of the modern economy (the first two being globalization and digitization) is in full swing: Dispersion, the process of value leapfrogging traditional points of distribution. Three sectors stand to register the greatest reallocation of stakeholder value (i.e., shit-kicking): healthcare, commercial real estate, and education as consumers leapfrog hospitals, HQ, and campuses.

Dispersion is enabled by both globalization and digitization. High-bandwidth communications link billions of people, and robust mobile devices render that network continuous. Now, blockchain technology is enabling the network to store value (bitcoin) and act on it (etherium). This will bring further disruption to industries low on IQ and heavy on EQ, such as insurance/asset management/central banking (wrapping my head around this is my biggest challenge for 2021).

The point is, the pandemic has accelerated all of these trends. A year-plus of forced acceptance of remote services in every sector has carved permanent change into our behavior. And, few sectors have seen a more radical transformation than office work.

Valuation

Any discussion of valuation must be set against the backdrop of a firm’s valuation. Gannett Co., Inc. faces structural challenges, but at a $2.5 billion enterprise value (0.7x revenue), Gannett is undervalued. Tesla is a great product and company, but at $637 billion (20x revenue), it is overvalued (send in the clowns/trolls). Disclosure: I am a shareholder in Gannett and consistently wrong re: Tesla.

Anyway, the office real estate in the US alone is a $2.5 trillion asset class, and it is going to leak the GDP of Switzerland to residential over the next decade. However, it’s not as easy as going short all office firms and long all residential. The fire that will rage within the office sector will raise seeds of dormancy – and create unexpected winners. One pyrophile plant that emerges from the fire may be WeWork. I’m especially proud of that last sentence.

Why We (might) Work

The wholesale abandonment of office space has been among the most striking fallouts of the pandemic, and it will have profound effects on the way we live and work, long after the virus has been tamed. In New York, new office space is coming on the market 59% leased, down from 74% pre-COVID. San Francisco went from its lowest-ever office vacancy rate to its highest in the same year, and office rents are set to decline by 15%. The worst may be yet to come. Analysts predict that commercial vacancy rates will rise from 17.1% in 2020 to 19.4% in 2021, besting the previous high of 17.6% in 2010. And, as $430 billion in commercial and multifamily real estate debt matures in 2021, lenders will be forced to reconcile the effect of the pandemic on their investments.

Scott Galloway.
Scott Galloway

These changes will endure. Twitter, Facebook, and Slack have all announced the move to a predominantly remote workforce. Pinterest recently paid $90 million to terminate its HQ lease in San Francisco. REI sold its new headquarters before even moving in, and CVS plans to cut 30% of its office space. At my New York-based education startup, Section4, we asked employees if they wanted to come back to work after the pandemic; overwhelmingly, they wanted to stay home. We paid $1 million to terminate our SoHo office lease. After decades of promise, the telecommuting revolution is here.

Scott Galloway

Back in 2017, I predicted WeWork, then worth $16 billion, would lose 75% of its value and become the “poster child of unicorn mania.” Two and a half years later, that prediction was wrong, very wrong – WeWork was preparing to go public on the heels of a $1 billion investment from Softbank that valued the company at $47 billion.

But it just didn’t pencil out. After deploying my unique domain expertise (math) I concluded: “Any equity analyst who endorses this stock above a $10 billion valuation is lying, stupid, or both.”

The ensuing meltdown was cinematic – literally. Tonight, WeWork gets its closeup, in a documentary on Hulu, “The Making and Breaking of a $47 Billion Unicorn.” I’m in it. I have not seen it, but it is awesome.

(BTW, the production company wanted me to come to a studio in New Jersey for filming. I told them I had a two hour window and that they needed to come to my place in SoHo or find another angry professor to make terse comments. They shuttled a dozen people to my place and set up a studio in my kids room, next to the climbing wall. At that moment, I realized that people tolerating you being an asshole doesn’t make you … any less of an asshole.)

Anyway, that wasn’t the end of the story of WeWork. Despite losing $60 million per week of Softbank’s money in 2020, WeWork didn’t go out of business. Instead, to the board’s credit, the company fired the Jesus of reclaimed wood and smoked glass, Adam Neumann, and brought in an experienced manager. Sandeep Mathrani shed 100 of the company’s worst performing properties along with the self-dealing arrangements foisted on the company by Neumann, and laid off 8,000 employees. A crisis is a terrible thing to waste, and if WeWork turns the corner to profitability in Q4 of this year, as it has promised investors, it will be the case study in fire intensity and germination.

Sandeep Mathrani
Sandeep Mathrani of WeWork.

The new WeWork is a stronger company than the 2017 model. It’s still not worth $50 billion, but it might be worth $9B (or more). The new WeWork will benefit from the massive investments in space and brand equity (i.e., global awareness); additionally, people underestimate the difficulty of scaling “vibe,” where WeWork has a proven talent.

Most companies aren’t going 100% remote. But when we return to the office, we will want less space that is more flexible, and more appealing to the premier asset of any firm: its ability to attract skilled, young human capital. Pre-corona, Section4 had a long term lease on 8,000 feet at $70 per square foot. Post-corona, it will probably be closer to 2,000 at $100, and on a year-to-year lease. Further out, I could see us opening offices in Miami or Austin, where great talent is migrating.

Imagine: a commercial real estate play, with properties around the world, configured as flexible office space, rentable by the hour, the day, or the month, with great community spaces, aspirational design, and strong tech. In sum, We might Work.

Pass the pipe (here we go … again)

However, Softbank has not run out of real estate opium quite yet. Now it is trying to pass the pipe to Compass investors, hoping the markets enter into consensual hallucination that a rollup of residential real estate brokerages is (wait for it) a tech company. Yesterday, Compass went public at a valuation of approximately 3x revenue. Realogy, the closest competitor, trades at 0.29x revenue. From the Compass site:

“Compass is building the first modern real estate platform, pairing the industry’s top talent with technology to make the search and sell experience intelligent and seamless.”

The firm even describes itself as “a tech company reinventing the space,” despite the fact that it spent 78% of expenses on commissions to brokers, instead of technology or algorithms. This makes sense as Compass is … a real estate brokerage.

Scott Galloway

Just before the IPO, the underwriters cut the pricing range and halved the number of shares offered. Despite a massive haircut in supply, the first day pop was an anemic 12%. I’ve worked at an investment bank taking companies public, founded companies that have gone public, and been on boards of companies going public. Dramatically reduced supply (shares) at a lower price, coupled with Goldman’s unparalleled institutional base of buyers, and Compass barely got out. In sum, the corners of this trade are beginning to collapse and could lead to a broken IPO within days. WeWork may be rising from the ashes as Compass begins to smolder.

Life is so rich,

Scott

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SCOTT GALLOWAY: Now’s the best time to start a business in over a decade. Here are the 4 industries I predict will soon explode.

Nazaré, Portugal by Getty
A surfer riding a wave in Nazaré, Portugal.

  • Scott Galloway is a bestselling author and professor of marketing at NYU Stern.
  • The following is a recent blog post, republished with permission, that originally ran on his blog, “No Mercy / No Malice.”
  • In it, Galloway explains how the post-pandemic economy will birth a new generation of leaders.
  • See more stories on Insider’s business page.

Post-crisis periods are among history’s most productive eras. London rebuilt after the Great Fire with grand new architecture, and Europe after the worst of its plagues underwent a commercial revolution. The Marshall Plan turned enemies into allies, fomenting peace and prosperity for over half a century. Leaders also emerge from crises. Ulysses S. Grant was a washed-up soldier without prospects until war broke out, but that war created the opportunity for Grant to save the Union and advance the cause of freedom. This is all to say: In the next 36 months, I believe our economy will birth a new generation of web 3.0 firms and leaders. Why?

I’ve started nine businesses. The best predictive signal for their success has turned out to be the phase of the economic cycle in which they were started. Put simply, the best time to start a business is on the heels of a recession. And while pandemic economics haven’t resulted in a garden-variety recession – in either its duration (short) or its recovery (K-shaped) – there are factors that make this the best time to start a business in over a decade. Specifically:

  • Unprecedented stimulus and savings resulting in a Nazaré-like wave of consumer spending.
  • A gestalt among consumers and enterprises to question the status quo, and be open to new products and services.
  • The emergence of new fields and the capital to disrupt traditional industries as immunities kick in and monopoles are broken up.

Nazaré

The massive waves of Portugal are a function of the Nazaré Canyon, a submarine valley 5,000 meters deep and 2,300 kilometers long that functions as a ripple polarizer. Ocean swells build up over thousands of miles and flow through this geological fault with a minimal dissipation of energy. I just read the last sentence and am wondering about the medium-term effects of edibles. Anyway, the greatest surfer in the world is just a freakishly strong swimmer with a fiberglass board – until the right wave comes along. The Nazaré Canyon generates the biggest waves, and therefore, the most potential for greatness.

Monster waves birth in the open ocean, but tectonic business waves begin with consumer spending. The combination of historic savings, government stimulus, and record asset appreciation is shaping a wave of consumer spending unlike anything we’ve seen since baby boomers decided consumerism was a virtue.

Scott Galloway

Similar to ocean swells barreling towards the Portuguese coast, the commercial opportunities powered by consumer spending will be shaped by business dynamics. And, as with Nazaré, there is a deep canyon that will convert this energy into the waves of change. That canyon is Dispersion, a fancy way of saying the supply chain, or route through which a product or service travels, is changing. Today, there are three big waves forming in the Dispersion Canyon.

HQ

Remote work will fuel massive opportunities. Over the next decade, we are going to see the most radical transformation of the American landscape since the freeway created the suburbs. This set will have two waves.

First, we will see a significant investment in residential real estate and communities. Commercial real estate is a $16 trillion asset class. If gross demand for office space declines by a third, we could see the GDP of Japan ($5.1 trillion) reallocated from office to residential real estate. Sonos, Sub-Zero, Restoration Hardware, and Slack – along with everything else that enables or enhances work from home – should benefit.

In addition, we will see a great repurposing of office real estate. Many offices will remain, but no company will need the square footage they previously did, and companies will look for increased flexibility. In New York City, the amount of vacant office space available for sublet has doubled since 2019 and, as of December, the commercial vacancy rate in the city was the highest it’s been since the Great Recession. In 2020, San Francisco went from the lowest office vacancy rate in the city’s history to the highest.

Some office towers will be remade as residential, while others will be flexed for multiple tenants (coming soon: Airbnb Office). Cities aren’t going away – young people and inherently collaborative activities will still want/need to congregate in person. But cities will be cheaper, younger, and more diverse, all of which are inputs for startups. At $47 billion, WeWork was overvalued; going public via SPAC at $9 billion, it might be a buy. Prediction: Look for WeWork to rise from the ashes of COVID.

Higher education

The world’s most powerful lubricant of upward mobility (US higher ed) has morphed into a corrupt enforcer of the caste system. It has enjoyed 30 years of tuition increases matched only by the arrogance and self-aggrandizement of its leadership. COVID is the fist of stone coming for this chin. The pandemic moved 1.6 billion people into online education, and many will stay there. India’s largest edtech firm, Byju, is reportedly closing a $600 million investment, valuing the company at $15 billion, and Coursera is expected to go public at a $5 billion valuation.

Healthtech

The largest consumer industry in history is US healthcare. It’s also the most ripe for disruption. Imagine: Walking into a Best Buy to ask for help buying a flatscreen TV, only for the salesperson to hand you paperwork, for the 11th time, and ask you to wait 20 minutes before someone will help you. Only, you don’t have to imagine it, just think about the last time you went to a doctor’s office. At the doctor, you have to put up with this BS, because your health literally depends on it. Similar to higher ed, the healthcare industries have been sticking out their chin for years, raising prices while delivering worse outcomes. Healthtech startups raised $15.3 billion in 2020, up from $10.6 billion in 2019, according to Silicon Valley Bank.

Crypto

This is a $1.7 trillion asset class that could be $130 trillion (the size of the bond market), disperse trust (eliminate the need for inefficient intermediaries), and reduce human bias in the financial supply chain. Every generation gets its gold rush (social media followed the web, which followed the personal computer). Young people have the edge when it comes to transformational opportunities, as their brains still have the plasticity needed to comprehend new models. In my fifties, it feels like the part of my brain that I need to understand this sector is dying – along with the part that can mimic my father’s Glaswegian accent. Strange, right? But that’s another post. For now, I’m taking fish oils and speaking to experts. This week on the pod, we spoke with crypto investor Raoul Pal, and a few months ago, Michael Saylor lobbied me to buy bitcoin despite its recent rise to $19,000. Note: I didn’t buy.

How can I help?

A year ago, it would have been harder to be optimistic about entrepreneurs addressing these opportunities, as Big Tech was likely to move in and dominate every open space. But at the tail end of the last administration, we registered serious movement on antitrust enforcement. And now, the Biden administration has signalled that it will double down, bringing two of the most compelling voices for enforcement, Tim Wu and Lina Kahn, into the administration. The breakup of Big Tech – and the limits on its offensive efforts – will birth new lanes the size of the 405 (yes, I’m in LA today). Thursday’s Congressional hearings confirmed what many of us have been saying for years: Big Tech is bad for society, these firms lied to us, and they need to be broken up.

Big Tech isn’t the only segment of society that has benefitted from the pandemic. If you’re in the top 10%, much less the top 1%, the dirty secret of COVID is that many of us have been living our best lives. The deadliest crisis in American history has meant more time with family and Netflix, coupled with an explosion in wealth. The top decile of Americans works with zeroes and ones, and this work has only been levered by remote technologies. Furthermore, the representatives of the shareholder class in government (435 in the House, and 100 in the Senate) have used the cloud cover of the pandemic to funnel trillions of dollars into the market, juicing asset prices.

One thing the shareholder class can do is to invest in early-stage (i.e., seed) startups. I don’t enjoy seed investing. Almost every business idea I hear, I think, “This makes no sense, and will never work” – I also find early-stage CEOs and firms, similar to infants, needy and impossible to predict. Regardless, I have made (in the last week) two seed stage investments: Measured, a platform for weight loss, and ScholarSite, a Substack for academics.

Scott Galloway

Capital

Despite the broader economic slowdown, we are awash in capital, at every level. Wealthy individuals have by and large done incredibly well over the past year, thanks to the stock market run-up, and are looking for opportunities to invest. Tech-focused investors have done particularly well, and crypto has generated new bitcoin billionaires. Tech companies are important venture investors, and have more capital than they can use for core operations. The result? A record 225 US companies became unicorns in 2020. January 2021 saw the greatest total in venture investments in history, with $40 billion invested, and since the beginning of the year, over 60 additional private companies have achieved “unicorn” status. Meanwhile, the public markets are desperate for quality companies to sate the voracious appetite of SPACs.

Scott Galloway

Los Angeles & dispersion

I’m currently in Los Angeles and I’m channeling Michael Jordan. Hear me out: Just as MJ loved baseball, but wasn’t great at it; there is nowhere I enjoy more, and am less successful, than Los Angeles. I meet with agents, producers, and box office superstars who show me their sneaker collection and, over lunch at their house(s), tell me, “You are a genius, we must work together.” And then … nothing. I know this trip to the City of Angels will yield the same business (non)results. But that’s not why I’m here.

My closest friend’s mom, who cooked several hundred meals for me as a child, pre-teen, and teen, is struggling with dementia. I had lunch with her and her husband, who I have written about, today. During lunch, I’d grab her hand, and she’d look at me with surprise and then just smile. I’m not sure if in these moments she knew who I was, but I am confident she knew I loved her, and that was enough. I’ve let so much bullshit get in the way of expressing how I feel for people – some fucked up sense of masculinity or insecurity that to this day diminishes my ability to express true emotions.

There is a meaningful opportunity in the dispersion of HQ, education, and healthcare. There is a profound opportunity to register the finite nature of life and rebel against anything that gets in the way of letting people know that you love them, and how much they’ve impacted your life. I am a professional failure in my hometown of Los Angeles. However, there are people here who were generous with me, and whom I love. I need to get to LA more.

Life is so rich,

Scott

P.S. Section4, my EdTech startup, aims to to make elite business education more accessible with 2-3 week intensive “Sprints.” Our upcoming Sprint, Product Strategy, is taught by my NYU Stern colleague Adam Alter.

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