Scott Galloway's Blog, page 6

High Anxiety

I just returned from the U.S. and was struck by how tense things are. It feels similar to what I imagine the mood was during the Vietnam War. So let’s take a break and discuss something even more stressful: college admissions. Yay.

Last week I did a college tour with my son. It was a chance for us to bond and bask in the infinite possibilities that stretch out in front of him. The previous sentence is a lie. The college admissions process has kicked off (two years before he sets foot on a campus) and it’s already a flaming bag of shit, where a flaming bag of shit is a ton of unnecessary stress.  

My industry (higher ed) is corrupt and second only to poverty re: preventable stress in U.S. households. Note: You likely had the reflexive synapse fire of  “Reducing poverty is not that simple.” No, it is … that simple. It would just mean lower stock prices and a more progressive tax policy. The incumbents deploy the illusion of complexity as a weapon of mass distraction from a simple, hard truth: The U.S. chooses to let 1 in 5 households with children live in poverty. But that’s another post.

Wonder Drug

Despite the lie we tell ourselves (you don’t need college) in a vain attempt to opt out of the stress, higher education is in fact a wonder drug. A pill that extends life, makes you happier, healthier, and wealthier, and strengthens your relationships. America is the world’s premier manufacturer, producing the compound at a purity no other manufacturer can rival. No nation dominates any industry the way the U.S. dominates higher ed. Millions come to the U.S. to access this drug. In a rational world, we’d scale it. Instead, we sequester it behind ivy-covered walls and tuition that commands a gross margin of 90% . And for centuries, we prescribed this cure-all exclusively to white men. 

Despite a 6% increase in applications this year, there’s a narrative questioning the value of a college degree. I’m often asked, “Is college worth the price?” My answer: Mostly, yes. My hunch is that decades of news stories about for-profit scam schools, student loan debt, and income inequality have dinged the college brand, as those narratives speak to a sense of stagnation for people who once viewed universities as an onramp to a wealthy lifestyle. In a digital economy, where everyone has access to everything, there are more students applying to the top schools, giving the top schools access to better students, all of which creates an upward spiral of strength among the strong. Lower-tier schools, however, are struggling; since 2020, 64 colleges have either closed or merged. Meanwhile, the myth of “education always pays off” has been busted at tier-2 schools, many of which offer a Hyundai for a Mercedes price.

Luxury.edu

The strongest brands in the world — MIT, Apple, Hermès, the U.S. — are built on the artificial choking of supply via rejectionist admissions, premium pricing strategies, limited production, and rationing visas, respectively. My business intelligence firm, L2, advised nearly every luxury business. The firm was founded on a simple premise: Prestige brands trade at higher multiples of revenue due to increasing income inequality and their ability to manufacture scarcity. We sold the company in 2017 for 8x revenue. Mirroring our client base, we were disciplined about pricing and said no to many potential clients. My first consulting firm, Prophet, said yes to every client, and it sold for 2.8x revenue. It was the right decision at the time, as I didn’t have the capital to utter the sexiest word in the English language: no. Saying no is the correct strategy for a consulting firm or a luxury brand, but not for a university. Yet the top 2% of institutions have decided they are luxury brands, saying no to more than 90% of their applicants. When I applied to UCLA, the acceptance rate was 76%; last year, it was 9%.

Throughout the second half of the 20th century, higher education was the key that allowed remarkably unremarkable kids (e.g., me) to unlock America’s promise of upward mobility. Today higher ed is a bouncer at the entrance to an exclusive club, where wealthy kids and a cadre of freakishly remarkable 18-year-olds build lasting relationships and lucrative networks with elite peers, while obtaining certification that gives them access to the greatest wealth-generating vehicles in history: S&P 500 companies.  

March of the Zombies

In my sophomore year at UCLA, I learned my limits were not my real limits (crew), realized I would not be a doctor (chemistry), became less insecure about my insecurities (psychology), fell in love for the first time, and developed resilience (heart broken). I’d like to think all these things would have happened whether or not I attended college. But they likely wouldn’t have happened in such a safe and joyous place. 

But my sense is the college experience isn’t as appealing as it once was. The University of Michigan, for example, is a world-class institution that also provides students with the college experience. Except there’s something rotten in Ann Arbor. Michigan invested $250 million in DEI programs over the past decade. The result? More conflict, a “culture of grievance,” and a 33x increase in complaints involving race, religion, or national origin. Meanwhile, Michigan’s pro-Palestinian student assembly voted to withold $1.3 million in funding for student activities until the university divested from Israel. Two months into the fall semester, the same student assembly reversed course when they realized defunding ultimate frisbee made zero fucking sense. In response, pro-Palestinian activists accused the assembly members of complicity in genocide.  

It may be this march of the zombies at elite schools that explains why Southern universities experienced a 30% jump in applicants from kids in the Northeast between 2018 and 2022. Georgia (48% acceptance rate), Clemson (51% acceptance rate), and Alabama (83% acceptance rate) aren’t elite schools, but Southern schools are generally less expensive and seen as less political. They’re also more likely to embrace the traditional college experience, i.e., football games, Greek life, and fun. State schools have registered an 82% increase in applications since 2019, as they offer a better value.

Affirmative Action

The whales of high-tuition prestige universities are international students. At NYU, they constitute 22% of our student body and likely half our cash flow, as they’re ineligible for financial aid. We claim we let them in for diversity. This is bullshit. International students are the least diverse cohort on Earth (i.e., they are the richest kids on campus). Letting in the daughter of a Taiwanese private equity billionaire isn’t helping diversity, but claiming it is illustrates just how far we’ve fallen from the original goal of affirmative action. Note: International Ph.D. students, whom we pay, are some of the most impressive young people on the planet. 

In 1960, Harvard, Yale, and Princeton had a total of 15 Black students out of a combined enrollment of 3,000. That was a problem, and shifting to race-based admissions made sense. In 2024, 65% of students at Harvard identified as non-white; the Ivy League as whole now scores high in the U.S. News & World Report diversity index. This is a wonderful thing, as Black students, along with Asians, women, LQBTQ people, and folks from other groups, have historically been excluded from elite colleges. But at this point, the cost of race-based affirmative action outweighs the utility. Affirmative action should be based on one color: green. It’s poor kids who need a hand up. Identity politics have been weaponized by a DEI apparatus on campuses that doesn’t translate to progress, but student debt.  

When the University of California system banned affirmative action in 1995, the number of Black and Latino first-year students plunged by nearly half at UCLA and UC Berkeley. But over time the numbers rebounded. By 2021, UCLA’s first-year class included more Black students — 346, or 7.6 % — than its 1995 class (259, or 7.3%). While the UC chancellors submitted an amicus brief supporting affirmative action at elite private schools, they achieved similar results by implementing an admission guarantee to top-performing students statewide, as well as an admissions process that factors in the location of an applicant’s home and high school.

Legacy

While the Supreme Court banned race-based admissions, affirmative action for the rich, aka legacy admissions, continues. (Not-so-fun-fact: Elite schools began using legacy admissions in the 1920s, along with standardized tests, interviews, and extracurricular activities, to keep out Jews.) Despite its ugly origins, more than half the schools in the U.S. continue to use legacy admissions, and 40% of students nationwide benefit from such preferences. At Harvard, legacies accounted for 36% of the class of 2022. Culture wars center the fight around race-based preferences, but elite universities are businesses, and the only color that really matters is (again) green. For loyal, wealthy customers the legacy advantage is remarkable. 

Here’s the thing: I don’t have a problem with legacy admissions. When I was at Haas, there was a student who was obviously a legacy, i.e., their billionaire father donated to get them into business school. That’s a good thing, if the money is used to expand access for other students. My problem with higher education is that we’re whores who aren’t transparent about being whores.

Many faculty and administrators forgo higher-paying careers, as they believe in the mission. Most, like the rest of us, wake up every day and ask, “How can I increase my compensation while reducing my accountability?” They’ve found the answer in the LVMH strategy. Only hitch: College degrees aren’t Birkin bags, and higher ed is not only the best path to economic security, it will also shape the view of many, if not most, of the people running the world for the next century. (The last time I wrote about higher ed I received three cease and desist letters from universities we said were likely to perish.)

DEI, Ethics, Sustainability, Leadership, and near-anything with the word “Studies” in its title is no longer about helping people … but welfare for the overeducated. Here’s the dirty secret: Using AI, software, the abolishment of tenure, and higher standards for faculty, we could cut costs 30% and tuition (conservatively) in half. We wouldn’t need student debt bailouts, because kids wouldn’t need student loans. 

Legacy Anxiety 

Five states and a handful of elite schools recently banned legacy admissions. My Prof G Markets co-host Ed Elson believes the practice will be gone in a few years, as donations no longer guarantee acceptance. I disagree. Donating isn’t entirely transactional. When I gave to UCLA and UC Berkeley, the chancellors were explicit: A donation wouldn’t make it easier for my kid to get in; in fact, it likely makes it harder. And that’s fine. I donated to give an overdue nod to the Californian and American taxpayers who invested in me. I also donated out of ego (it wasn’t anonymous). Being a provider makes me feel masculine. 

Still, Ed has a point about why many people donate. Last year saw a 2% drop in private donations to universities, despite the strong economy and the market hitting new highs. The $1.5 billion that might otherwise have gone toward donations is likely up for grabs, as parental admissions anxiety is closely correlated with the size of your bank account. Such anxiety will likely supersize the emerging college admission consulting complex. Soon it won’t be an advantage to hire a consultant, but a disadvantage if you don’t.  

I’m not suggesting we shouldn’t have elite schools that have exceptionally high standards. But embracing a for-profit business model more suited for Panerai than a public service, unnecessarily restricting supply for money and ego, is just plain wrong.  We have the pill, the miracle drug. Any university that has an endowment over a billion that’s not expanding its freshman class faster than the population should lose its tax-free status, as they are no longer a place of learning, but a hedge fund offering classes. And schools should be on the hook for 50% of bad debt from student loans. I can’t imagine the economic stress levied across American households who don’t have a spare $250k lying around. It should be noted that many schools (e.g., ASU, Purdue, the University of Illinois system) offer free tuition to students who meet minimum academic requirements. Also, 17 states provide tuition-free vocational programs via community colleges.  

If grief is love’s souvenir, then anxiety is love’s tax. I never cared much about anything until I had boys. But now, I’m anxious all the time, despite having the funds for my boys’ education. We’ve lost the script. The leadership and faculty of elite universities have morphed from public servants to Birkin bags. Whether you’re a stressed kid in high school, a family saving for college, an anxious parent, a college grad/dropout struggling with student debt that’s difficult to discharge in bankruptcy, or someone being asked to bail out someone who had opportunities not afforded to you … we’re all paying the price.  

Life is so rich, 

P.S. NYU finance professor Aswath Damodaran returned to Prof G Markets this week to discuss the road ahead for some of the “fallen angels,” including Nike, Starbucks, Estée Lauder, Boeing, and Intel, and shared his thinking, as an investor,  about the upcoming election. Listen here on Apple podcasts or here on Spotify.

P.P.S. Section has announced new speakers at its AI:ROI Conference — including ServiceNow’s global head of AI and General Catalyst’s managing director. This is a great opportunity to get into the heads of AI investors and leaders. Register free.

 

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Endorsement: Vice President Kamala Harris

The Last Swing Voters

The catastrophizing, from both sides, re “The end of America” if s/he wins is obnoxious and recognizes neither history nor the resilience of the U.S. We’ve survived much worse than her/him. However, it’s clear that, as in any election, some groups will fare better/worse with their guy/gal in the White House. And, if you disagree with me … we’ll both be fine. The group whose well-being (or lack thereof) I am increasingly focused on is young men. I believe Kamala Harris and Tim Walz offer the best way forward for young men in the U.S., who’ve been left behind in a time of unprecedented prosperity.

This election is — or should be — a referendum on two related things: women’s bodily autonomy and the future of men in the U.S. With the race likely to be decided not by a handful of battleground states but by a few battleground counties, the votes of young men could be decisive. No group has fallen further behind faster. 

Young men are more persuadable than older voters, who are more partisan. According to Data for Progress, swing voters are more common among young people. Close to half (43%) of swing voters are under 45. According to Circle at Tufts University, young male voters are motivated to a large degree by economic issues such as inflation and job stability, issues that candidates tend to shift positions on during the campaign. 

Gender Gulf

The GOP has proven smarter and more aggressive than the Democrats in reaching out to men, especially online. In recent years, young men have been trending more conservative and apathetic, while young women have become more progressive and engaged. The gender gap has become a gender gulf.

Women make up a little over half of the electorate, but they turn out in larger numbers to vote than men. This year the overthrow of Roe v. Wade and numerous state ballot questions about abortion are likely to bring record numbers of young women to the polls. Young men, most of whom support the right to choose and gender equality, are not as strongly motivated to vote on those issues. Part of the problem, I believe, is that the Democratic party has abandoned young men and failed to show them what the loss of Roe means for them, their opportunities, and their choices. 

Who We Serve

The DNC website has a page titled “Who we serve.” Listed are 16 constituencies, including African Americans, the LGBTQ community, women, veterans, and 12 other demographic groups that comprise approximately 76% of the population. When you explicitly advocate for 76% of the population, you’re not advocating for 76% but discriminating against the 24%. In this case, young men. This visibly absent group comes into sharp relief when you extract an obvious truth from the data: No group has fallen faster or further in the U.S. over the past two decades than young men. 

That neglect shows up in polls. As The New York Times recently reported about Democrats faring poorly with all men, “it increasingly seems possible that most or perhaps all of that weakness is concentrated among young men. … Surprisingly, Ms. Harris is faring no better than Mr. Biden did among young men in the Times/Siena data, even as she’s made significant gains among young women.”

Man Trouble

I receive a lot of emails from worried parents, particularly mothers, along these lines: “I have a daughter who lives in Chicago and works in PR and another daughter who’s at Penn. My son lives in our basement, vapes, and plays video games.” 

Young American men are in a crisis of underemployment and under-socialization, which is bad for all of us. Even as the costs of college have soared beyond reach of many families, many of the manufacturing jobs that didn’t require a college degree, and were a ticket to the middle class, have been offshored. Housing is increasingly unaffordable; nearly 60% of men between the ages of 18 and 24 live with their parents and 1 in 5 still live with their parents at age 30. Since 2004, deaths of despair among young men have taken 400,000 lives. Think about this: more young men in America have died deaths of despair in the last 20 years than were killed in World War II. 

Meanwhile, the whole subject of what it means to be a man has become radioactive, infected by a dialog that feels more like disdain (e.g., “toxic masculinity”) than a conversation meant to address the issue. Young men don’t know who they’re supposed to be and lack the resources to go out into the world and find out. 

Many are stuck: isolated, despairing, and unproductive, prone to obesity, drug addiction, and suicide, susceptible to misogyny, conspiracy theories, and radicalization. They make lousy potential mates, employees, and citizens. While young women have made great strides in education and earning power — which is great, and we should do nothing to stop that — young men seem stuck in reverse.

I have spent a decent amount of time reviewing the different economic policies and positions of both campaigns and feel Harris’s policies would provide young men with increased opportunities to realize their masculinity. Specifically: to provide, to protect, and to procreate.

Provide

These are prosperous times. America doesn’t need to be made great … again. As Yale management professor Jeffrey Sonnenfeld recently highlighted in Time, the U.S. economy under Biden/Harris is, by a number of objective measures, doing well: 

The unemployment rate is currently about 4.1%, the lowest since 1968. Inflation is low, at 2.2%. GDP growth is the best in the world.The financial markets are soaring, hitting 71 record highs this year.Biden has cut the deficit by one-third.

Writing about technology, William Gibson famously said, “The future is already here — it’s just not evenly distributed.” The same is true of prosperity. And the algorithms that increasingly run our lives want to convince us that everything is awful. IRL the Biden administration has an economic record to be proud of, and Harris should embrace and extend it. She is campaigning on expanding housing construction, reducing student debt, increasing child tax credits, bringing back manufacturing jobs, and helping the sandwich generation care for their aging parents. The other side’s policies are inflationary: raising tariffs and cutting immigration. The GOP’s other standby, tax cuts, adds to the deficit, and that debt is an enormous long-term tax, particularly on young people. Older people (e.g., me) aren’t going to be around to pay off the deficit; young people are. 

Historically, being a provider was a man’s job, though we now live in a world where physical strength doesn’t carry as much weight economically, meaning women can bring home just as much bacon as men. But women becoming breadwinners doesn’t mean the role is any less important for men. A guy with a decent job in a strong economy is creating wealth, paying taxes, and earning social capital, not to mention his own self-respect. He’s a more attractive potential husband and father. As Richard Reeves says “He adds surplus value.”

The No. 1 condition for the development of male providers — a strong and expanding economy — is far more likely under Harris. There is near-universal agreement on this among economists, Nobel laureates, and investment banks that have bothered to do the math.

Protect

This election is about policies, but it is also about values. 

If you’re looking for a good shorthand term for healthy masculinity circa 2024, you could do a lot worse than the word “mensch,” which in German simply means “human” and in Yiddish describes “a person of integrity or rectitude; a just, honest or honorable person.” The first instinct of a mensch is to protect, to sacrifice for something bigger than oneself, not to pick on the vulnerable. Real men don’t start bar fights; they break up bar fights. They don’t shit-post their country, they defend it.

Harris’s running mate, Tim Walz, demonstrated that instinct during his long service in the National Guard (as did JD Vance, by enlisting in the Marines). Walz also exhibited the impulse to protect as a high school teacher and football coach in Mankato, Minnesota, where he was an adviser to LGBTQ kids starting a gay-straight alliance. “I understood what it meant to be that older, straight, white guy who was coaching football,” he said recently. “It’s easy to be an ally when it’s easy to be an ally. What really matters is knowing who’s going to be at your side and stand up when it’s hard.”

The Democrats have done poorly reaching out to young men. Picking an “America’s dad” type guy for VP, somebody with gray hair who can talk to both football players and queer kids, was an important move in bridging the gap and a statement of principle. A man’s default setting should be to move to protect, in any situation.

Procreate

The third foundational element of masculinity — the third leg of the stool, if you will — is ensuring the species endures. Which starts with … sex. 

When I was a kid, my mom was worried I’d get into too much trouble. I believe today’s parents are concerned our kids won’t find enough. Peter Attia and Andrew Huberman have declared war on alcohol, where they see ill health and drunkenness. Where young people and drinking are concerned, I see togetherness. But that’s another post. 

My generation never gave up on sex. However, lately, underemployed and screen-bound young men, who feel rejected in an increasingly winner-take-all online dating market, have thrown in the towel. About 63% of young men are single, and a lot of them aren’t even trying to date. Meanwhile, young women find themselves in an intensifying competition for a shrinking pool of what they view as acceptable mates. The viral hit was “I’m looking for a man in finance,” not “I’m looking for a high school dropout who lives with his parents.” 

Guardrails

Young men need guardrails, and there are few stronger than the prospect of maintaining a romantic relationship. A decent summary of the key moments between me and several of my first post-college girlfriends went something like this: “Get your shit together, or I am going to stop having sex with you (i.e., break up).” This was motivating, and needed. 

Young men today have fewer venues where they can meet potential romantic partners. With fewer of them going to college or church, and more of them working remotely, men have less social interaction and no ability to build social capital. Less sex ultimately means less intimacy, less marriage, and fewer kids. 

Straight young men are interested in straight young women because they want to have sex. We tend to act as if there’s something wrong with that: There isn’t. Sex and the pursuit of it leads to romance and intimacy and lights a fire under young men to better themselves to be more attractive to potential mates. 

This intimacy often involves sacrifice, the forsaking-all-others stuff that comes when a pair of young people decide, “I choose you.” This often leads to children. The most wonderful things in life, in my experience, lack rationality and structure. My grandmother, re finding a mate, used to say, “You have your list, and then you fall in love and tear up your list.” The person you fall for, and how it happens, will likely make less sense than almost any other important thing in your life. And that’s one of the reasons it’s wonderful. It speaks to you on a different level. Not what society or your parents want … but what you desire. And, eventually, the answer to the most important question of your life: Who do you want to have a family with?

According to Gallup, though, only about 21% of Americans under 30 have kids. In 1980 the figure was about 38%; in 1950 it was about 50%. There are a lot of reasons for that, but the war on bodily autonomy is a contributing factor. The state laws restricting or banning abortion that sprang up in the wake of Roe’s demise are designed to limit the sexual freedom of young women (and men), and undermine their ability to get into the game and create families.

The people most vulnerable in a post-abortion America are poor women. Affluent women will be able to get hold of mifepristone or to travel for a safe, legal abortion. A pregnant 17-year-old, Black, single mother in Alabama, however, is at ground zero for an emerging gender apartheid. She’s likely already poor, and forced to carry an unwanted pregnancy to term, she and the father (if he’s even in the picture) become less likely to escape poverty. 

While Democrats have pushed hard to get young women to turn out and vote, the Harris campaign hasn’t been making the case to young men that the fight for bodily autonomy involves them, too. That needs to change. 

Harris in the White House offers a chance to begin to reclaim the Supreme Court for the majority in this country who support bodily autonomy and a national effort to roll back state restrictions on it. 

Not Heaven

I don’t think electing Harris and Walz is going to magically bring young men out of the crisis they are in. I do think, however, that it’s an important step. 

A vote for Harris and Walz is a vote for the future, a vote to continue to improve economic policies that have served America well, that can give young men a place in it. It is also a vote for a shift in the way we think about masculinity in this country. 

This is the most anxious generation in U.S. history. Action absorbs anxiety, and I hope young men will exercise their agency and support candidates who enable them to be providers, protectors, and procreators. I believe a Harris/Walz administration will serve young men well. If you disagree, again, we’ll both be fine.

Life is so rich,

P.S. This week on the Prof G Pod I discussed grit and perseverance with psychologist and UPenn Professor Angela Duckworth. Listen here on Spotify or here on the Apple podcast network.

P.P.S. Section’s AI:ROI Conference is three weeks from today, on November 14. I’ll be sharing my latest predictions — will there be an AI bubble or a growth wave? — and leaders like Moderna’s VP of AI will share how they achieved AI wins like 80% internal adoption. It’s free, register now.

 

 

 

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Tesla WTF

The most impressive, and unimpressive, product displays of 2024 occurred last week — from companies headed by the same person. The largest booster rocket ever assembled was called back to terra by gravity; then, as it approached the Earth’s surface, engines ignited that navigated the projectile into a metal cradle. SpaceX’s 20-story booster rocket catch was nothing short of remarkable. But four days before, analysts were summoned to a product launch that (essentially) didn’t happen. 

I know a woman who was engaged to a celebrity chef who, after 300 guests had assembled at a Caribbean resort, was a no-show (no joke) at their wedding. Tesla’s Cybercab was a no-show at its premiere. Specifically, there were no details that gave any analyst or onlooker much insight into the product or any idea when the rubber will meet the road. 

Why was the Cybercab a no-show? In the past two years, CEOs have added trillions to their businesses’ valuations with two letters: AI. Over the last decade, Tesla has sustained its position as the world’s most valuable car company with a one-word claim: autonomous. Tesla’s We, Robot event was a head fake that didn’t fool the market, which promptly trimmed $60 billion from the company’s market cap.

Overvalued

At its peak in 2019, WeWork was valued at $47 billion. Four years later, the co-working company was worth $44 million. In between those two valuations, investors rejected Adam Neumann’s narrative that the business was a tech company and came to see WeWork for what it was — a poorly run real estate play. Tesla is a great company with positive cash flows. However, like Adam Neuman, Musk keeps spewing adjectives and embellishments that have worn thin. 

In April, Tesla’s operating profit dropped 50%. This should’ve sent the stock down, but Musk pulled off another mid-air catch. On the earnings call, he said, “We should be thought of as an AI robotics company. If you value Tesla as just an auto company, it’s just the wrong framework.” Then he added, “If somebody doesn’t believe that Tesla is going to solve autonomy, I think they should not be an investor in the company.” The stock rose 14%. Spoiler alert: Tesla is a car company. Automotive is Tesla’s core business, accounting for 94% of last year’s revenue. There is a dangerous belief in the U.S. that if you repeat a lie long enough, it will become less of a lie. The election wasn’t stolen, and Tesla is not a software/energy/AI/autonomous firm, but a great car company that is wildly overvalued. (Note: Not financial advice — I consistently get it wrong on Tesla.) 

Hybrids

I used to own a Tesla Falcon Model X. It’s a great car from a great brand. Early adopters signaled to the world that they cared about the environment and were rich. Which is a feature that commands margin: being more desirable to potential mates … or less undesirable. At the moment, however, hybrids appear to be the bridge to a future thought to be electric. Internal combustion autos still account for 81% of new car sales in the U.S., and hybrids are selling 5X faster than EVs in 2024. 

Range anxiety and charging concerns are limiting EV sales. One consumer survey found that 80% of those considering an EV for their next car believe the current charging availability is insufficient, while 70% of current EV owners say they’re dissatisfied with the current infrastructure. That’s bad news for the EV brand, but potentially good news for Tesla, as its charging infrastructure is excellent. However, Musk’s plan to make Tesla charging the industry standard and open its charging stations to all EVs have not materialized. 

Another significant factor is price, as hybrids in the U.S., on average, cost $14,884 less than EVs. As EVs attempt to expand beyond early adopters to the mass market, price becomes more important — as the middle of the pyramid is much more price conscious. For the first time since the pandemic, Tesla saw its sales drop 13% in the first quarter and 9% in the second. Sales rebounded 9% in the third quarter, but the news across the EV sector suggests the category is slowing. Ford is scaling back its EV rollout. General Motors is delaying its electric truck and reducing investments in EV battery mining. Volvo is walking back its 2030 all-electric target. The EV revolution isn’t over, but Toyota CEO Akio Toyoda was right about its pace. Toyota bet on hybrids, and this year that paid off with a 66% jump in U.S. hybrid sales.

China

In China, though, EVs will account for 45% of new car sales this year. A growing EV pie is good news for a pure-play EV company. But BYD, the No. 1 Chinese EV manufacturer, offers cars at considerably lower prices than Tesla. The BYD Seagull sells for $9,700 and the Yuan Plus costs $16,600; a Tesla Model 3 starts at $34,000, and the Model Y costs $37,000. China also has 200 domestic EV manufacturers fighting for the EV Iron Throne. The CCP has made clear that it intends to win the EV future via competition.

Mass Distraction

The main attraction at Tesla’s We, Robot event was supposed to be the Cybercab, a two-seat, fully autonomous vehicle that’s long been central to justifying Tesla’s gravity-defying valuation. Unlike the Cybertruck, which looks like John DeLorean dropped acid with Homer Simpson and designed a life-size version of the vehicle from the ’80s arcade game Moon Patrol (google it), the Cybercab actually looks cool. Supposedly, it’ll enter production by 2026, or, as Musk jokes, “before 2027.” The Cybercab will sell for under $30,000, but Musk didn’t offer any details, as financials are a buzzkill. Also, we have no idea whether the self-driving technology will meet regulatory safety standards. Today, there was news that the main U.S. auto safety regulator said it was investigating Tesla’s self-driving system. Latin for, this tech is not ready for prime-time.  But don’t worry. For the past decade, Musk has been predicting that autonomous driving is just around the corner. 

Meanwhile, back on Earth, Tesla has only achieved Level 2 autonomy (a driver is still required). The Waymo self-driving taxi, which looks like a science fair project, has Level 4 autonomy (no driver needed), and is already providing 100,000 paid rides per week in Austin, Los Angeles, Phoenix, and San Francisco. Unlike Tesla, which is trying to go vertical, Waymo wants to be the OS for autonomous driving. The company is working with multiple auto manufacturers, including Fiat Chrysler, Hyundai, and Volvo. My prediction: Waymo’s tech coupled with several brands at different price points will bring autonomous to the masses, not Tesla. In L.A. last week, I experienced my first Waymo ride. It drives just how I’m hoping my 17-year-old drives, overly cautious. However, when we encountered an accident, with flares, cones, and a cop with a luminant baton, redirecting traffic into the wrong side of the road to pass the damaged vehicle, Waymo was intimidated. But it figured it out, which I found remarkable. The millions of (unexpected) data points collected, digested, and then acted on is staggering.

Glorious Future

Musk believes the Cybercab is going to usher in a “glorious future.” Maybe his claim that entrepreneurs will manage a Cybercab fleet “like a shepherd tends their flock” will become a reality. Maybe a future where Cybercabs are constantly on the move will enable city planners to turn parking lots into parks. If that day comes, maybe Cathie Woods, who believes Tesla will create $8 trillion in enterprise value by 2029 as a robotaxi business, will look like Warren Buffet. But at the moment she appears to be the Tesla of hedge fund managers, overpromising and underdelivering with inane hyperbole.  

Robovan

My Pivot co-host Kara Swisher called the Tesla Robovan a “toaster on wheels.” But Kara also drives a Kia Sorento, which puts an asterisk next to any view she might have on cars. My take: despite Musk insisting that they will build it, the Robovan is a concept car that has almost no chance of ever being street legal. And Tesla knows this, but autonomous was a no-show at the wedding, and the bride (Musk) needed something to get everyone to look away from the embarrassing situation in front of them. 

Peter Drucker advised business leaders to focus on your opportunities, not your problems. And Musk is doing this. SpaceX is ascending, Tesla is falling to Earth. This was obvious at the event, as Musk seemed unrehearsed, confused, and stumbled over his words. BTW, the most impressive person in tech you’ve likely never heard of is Gwynne Shotwell, COO of SpaceX.

Optimus WTF

Musk pitched the Optimus robot as a personal R2-D2 or C-3PO that can be a teacher, babysitter, dog walker, gardener, or companion. “Whatever you can think of, it will do,” Well, I can think of it actually being a robot that has autonomous capabilities. At the event, Optimus robots served as bartenders and chatted with the crowd, which sounds amazing, until you realize that they were controlled by human operators. 

Supposedly, the robots will cost somewhere between $20,000 and $30,000 (human operator not included). That’s $12,000 less than a new Tesla Model 3. But a Tesla is a product that solves a real problem — offering personal transportation without burning fossil fuel. Even if Optimus could do half the things Musk claims it can, who’s going to buy one? Tesla can’t answer that question, but neither can Boston Dynamics. Their Atlas robot requires human oversight, just like Optimus. But after more than a decade of R&D and support from the Defense Department’s DARPA program, Boston Dynamics still doesn’t have a commercial strategy for Atlas, though it has produced some great YouTube videos. This entire category defines the concept of a technology in search of a use case. However, while it may never be able to watch your kids, Optimus did provide a purposeful distraction from the introduction of a product that is not ready and (once ready) will be inferior to products already in the market. 

Pants-on-Fire Mode

Entrepreneur is a synonym for salesperson, and salesperson is the pedestrian term for storyteller. Pro tip: No startup makes sense. We (entrepreneurs) are all impostors who must deploy a fiction (a story) that captures the imagination and attracts capital to pull the future forward and turn rhyme into reason. No business I have started, at the moment of inception, made any sense … until it did. Or didn’t. The only way to predict the future is to make it.

This is not the same as lying. There’s a real distinction between an entrepreneur and a liar: Entrepreneurs believe their story will come true, as they are laser-focused on making it true. A liar, well, they know they’re misleading people with false data. Usually for money (i.e., fraud). This is where Tesla turns gray. Here’s what I see:

In 2015, Tesla was two years away from a 1,000-kilometer range … a decade later it’s closer to 600 km.In 2016, coast-to-coast autonomous driving was two years away.In 2019, Tesla said it would have 1 million self-driving cars (that wouldn’t require any human oversight) on the road by mid-2020. Also in 2019, robotaxis were one year away … until last week, when we were told robotaxis were two years away.

I believe this is the year the market looks at Tesla and sees what I see: a great car company that is a car company.

Life is so rich,

P.S. Raging Moderates is a new podcast from Prof G Media. Every Tuesday I discuss the latest political news through a centrist lens with Jessica Tarlov, co-host of The Five on Fox News. Follow us here on Apple or here on Spotify. Or subscribe here on YouTube.

P.P.S. The AI hype keeps growing, but don’t build an AI product just to have one. The Section team is giving you a free playbook for picking actual high-value AI applications for your company and scaling them. It’s running on October 29 — take the free advice.

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Origin Story

I’m in L.A., and it’s been an emotional week — on several dimensions. Many of my closest friends are celebrating our 50th. It’s wonderful. Any competitiveness, jealousy, or other petty bullshit has melted away. All that’s left is collective joy at our friendships, and adult children to boast about and cap our accomplishments. On the other end of the spectrum, my dad, who’s 94, is struggling and no longer recognizes me. I knew it was coming but still wasn’t prepared. All these emotions are colliding and reminding me that much/most of the joy/tragedy in our lives is not in our control. This is difficult for humans to accept, so we create an origin story. 

Originally posted in early 2023.

Every one of us has an origin story: We define ourselves by our background, the narrative of what made us who we are. However, people often don’t let the truth get in the way of a good story, and the narrative of “I” is often that, a story.

James Frey found no takers for his novel, so he repackaged it as a memoir, his story, which became the No. 1 bestseller A Million Little Pieces. Biographies and memoirs are America’s second-favorite book genre. Ronald Reagan tried to curry favor with Israeli leaders with a story about how he helped liberate Nazi death camps in WWII. He didn’t — did his military service in Hollywood. Fabricated military service is apparently so common that Congress passed a law against it.

People embellish their origin stories, as it’s the only thing others have to go on — from potential employers and friends to potential mates. We are the product of our circumstances, personally and professionally, and a good origin story confers meaning to our life and career. We should recognize that and embrace it … but also be honest about it.

Self-Made? No Such Thing

The most important factor in determining a person’s future is when and where they are born. Each of us, born into any other situation, would experience a different outcome. Just as the market trumps individual performance, so does circumstance. I likely wouldn’t be an entrepreneur or an academic had I been born in South Sudan. If I’d been born in 1920s Germany, I’d likely have been a Nazi who perished on a Russian field.

This isn’t just true across continents and centuries — it’s also evident at a micro level. Being born one year earlier or later can make a big difference. People who graduate into a recession earn less for 10 to 15 years than those who graduate amid prosperity. Fate also changes block to block: One of the strongest signals of life expectancy (and much else) is the ZIP code where you’re born. Within the same city, life expectancy can vary by 30 years based on ZIP code. Meanwhile, an American female whose parents rank in the bottom decile of earners has a 3 in 10 chance of giving birth as a teenager. For daughters in the top decile, it’s 3 in 100.

This all confirms a basic point: The cards you’re dealt matter … a lot. Your income is the clearest indicator of how much money your kid will make when they’re 30. Churn is increasingly a rare earth element in the U.S. Per a Georgetown analysis, “It’s better to be born rich than smart … The most talented disadvantaged children have a lower chance of academic and early career success than the least talented affluent children.”

However, the people dealt the best cards can’t see their hands. The myth of the “self-made man” is rife among U.S. citizens who’ve never faced a draft or registered a devaluation in their currency — people who are remora fish on investments made by the U.S. government. Tech has raised a cohort of people who simultaneously credit their character for their success and blame a rigged market for their failures. The real cage match in tech is entitlement vs. empathy. The former is winning, and that results in a staggering accumulation of power that’s amoral, focused only on the aggregation of more power regardless of what happens to people with less. (Side note: I hope they beat the shit out of each other. Is that wrong?)

iStory

Until 40, my story was that I was the son of a single immigrant mother who lived and died a secretary. I overcame those humble beginnings to achieve significant success because, you know, I’m awesome. After 40, my eyesight began to wane, but I could see clearer: I was born a straight white male in 1960s California, which gave me state-sponsored access to elite universities. UCLA had an acceptance rate of 76% when I applied — this year it’s less than 9%. Later, Berkeley admitted me to its MBA program with a GPA of (no joke) 2.27 from UCLA. Total tuition for all seven years? $8,000. I came of professional age in an era of processing power and the internet. I lived in San Francisco, where, in the decade of the nineties, more wealth was created within a 7-mile radius than in all of Europe since WWII.

I was given a rocket ship, built by others. To be clear, I’m talented and navigated my ship well … but I wasn’t going to soar without the sacrifice and talent of millions of others. The ship blew up several times, but I survived, and there were other vessels waiting. “Luck” doesn’t begin to describe my situation. My freshman college roommate, born gay, took his own life at 33 when his HIV progressed to full-blown AIDS. Two decades later, I’m in Los Angeles with friends finding a quiet place to FaceTime my boys and guide them through abridged Crossfit workouts.

Like others, I have faced hardship (an absent father) and tragedy (lost my mom early). But each of these losses has played a role in my good fortune. I make my living communicating, and much of this skill isn’t the result of my own hard work. My dad can captivate any room, and even though he wasn’t around much, I inherited some of his ability. My mom’s sickness, and our inability to access good care, was a hugely motivating, defining event for me. I saw the rough cut of the American story and decided to get my shit together in hopes of living a richer life and garnering the resources to take better care of the people who mattered to me. Capitalism is brutal — and motivating. Lately, the balance has swung too far to the former. But that’s another post.

Coming Home

Supposedly, each of us contains bits of every material present at the dawn of the universe. It makes sense — at least the morning after eating mushroom chocolates — that our matter will also be present in galaxies/stars/planets/organisms birthed trillions of years from now. Our stories may or may not make the journey, but the emotions they inspire will become instinct, then DNA, and this matter will disperse. So the question is, distinct from the story you and others tell about yourself, how do you make people feel? When people come in contact with you, do they feel insecure or inspired? Do you leave people cold or comforted? Do you bring joy, harmony, love?

I’m in a deficit here — I’ve taken more than I’ve given. I have a debt to pay. I’ve started with my boys and am working outward from there. Still time. It’s a comforting thought, that bits of us will live on and arrive at distant places trillions of years from now. We all have our longest journey still ahead of us. When you get there, when you show up, what will be felt? Distinct from your origin story, what was your real journey? There’s only one real journey that matters: Who did you love, and who loved you?

Life is so rich,

P.S. This week I spoke with Dr. Marty Makary about the issue of overmedication, weight loss drugs, and the food industrial complex. Listen on Apple or Spotify

P.P.S. The Section team just re-ran their AI Proficiency Report with 5k knowledge workers. They found that most of the workforce has AI anxiety, but that number goes down as they get more proficient. COO Taylor Malmsheimer is walking through the results in a free event on 10/23. RSVP. 

 

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Fallen Angels

The stock market is touching highs, but some corporate icons have seen valuations crash. I believe dispersion, China, and a changing of the guard are key to understanding these fallen angels.

Dispersion

In 1996, at the height of the brand era, I was asked to address the board of Levi Strauss & Co. on the future of brands and retail. The title of my presentation was “The Death of Distance.” The rap was that brands need to establish direct relationships with consumers (e-commerce), as digital technology would disperse products and services without regard for existing distribution channels.

This happened. Amazon dispersed retail to desktop, to mobile, to voice. Netflix dispersed DVDs to the mailbox, then to every screen as net neutrality enabled them to replicate tens of billions in cable infrastructure at near-zero cost, freeing up billions that resulted in a content/price ratio traditional players could not match. The pandemic accelerated dispersion of the office (remote work), healthcare (telemedicine), and education (online learning). What I didn’t see, however, is that AI would be steroids for dispersion, enabling anyone to leapfrog everyone.

Intel

Moore’s Law, named for Intel cofounder Gordon Moore, is an observation that the number of transistors on a microchip doubles every two years. It’s a meme that encapsulates the relentless pace of technological progress. When I graduated from the Haas School of Business, Intel was the job everyone wanted, as the firm was surfing Moore’s wave, which was doubling in size every two years. The “Intel” phenomenon could (now) be described as the ability to shed the majority of your value, despite being the leader in a booming industry. Few firms have fallen so far, so steadily, as Intel.

At its peak in 2000, Intel’s market cap was $500 billion. Since then, the S&P is up 243%, and Intel down 80%. If Intel had kept pace with the S&P, the firm would be worth 16X what it’s worth today. A stark reminder of this fall from grace: Jensen Huang (CEO, Nvidia) is worth more than Intel. The firm is at risk of being dropped from the Dow. Many icons disappear as everything everywhere ends. However, this fall is extraordinary, as leading firms usually experience this type of value destruction when they are helpless in the face of a sector’s decline. This is on Intel, as its market has boomed, with semiconductor sales increasing 18% globally YoY and 21% in China. Intel’s brand and enduring legacy of Andy Grove mask what is arguably the worst managed firm of the last 20 years. At the beginning of 2021, Intel and Nvidia commanded the same market capitalization. Today, the wizard behind the AI curtain is worth 30 Intels.

Intel missed dispersion, i.e., failed to capitalize on mobile and AI. While it remains the biggest maker of processors for PCs and laptops, Intel no longer has the power to predict the future by making it. The future belongs to Nvidia. Five years ago, Nvidia was a second-tier semiconductor firm best known for giving Call of Duty better resolution. Today, it’s the third-most-valuable company on earth, with between 70% and 95% of the AI chip market. With a P/E ratio of 99 Intel is still likely overvalued. But the game’s not over; Intel is shifting its business model to serve as a manufacturer for other chip companies, including Nvidia and Apple, that outsource the part of the supply chain that was supposed to be the ultimate moat: manufacturing. It ends up, there are a lot of moats (slack supply) that can be rented. In sum, Intel aspires to become the picks and shovels of a market they once dominated.

TSMC, which has 60% of the “foundry” market, reported gross margins of 53%, compared with Nvidia, the leading pure play chipmaker, which reported margins of 75%. The front-end, branded chip has higher margins and is a much better business. However, at $100 billion, in a market where CapEx rivals nations, Intel just needs to show a pulse to substantially increase its valuation. Their key advantage is not their brand or IP, but that they have lost so much value that they have (much) less to lose. Leveraging their brand and IP to be the best house in a bad neighborhood could result in a dramatic increase in value … from here.

Disney

Hollywood is becoming a fair-weather Detroit. Less than 50% of all TV usage is attributed to linear as streaming now dominates. Domestic film and TV production is down 40%. The year before GM and Chrysler declared bankruptcy, their auto sales were off 23% and 30%, respectively. It would be convenient, and more dramatic, to claim this is because of AI. It isn’t. The root cause is more pedestrian; content budgets are up 3% this year, but studios can find people to do the same thing for less money elsewhere. Half of Netflix’s $15 billion annual content budget is now spent overseas. Note: Los Angeles will not register similar urban blight as, you know, weather.

Disney, unlike Intel, can blame the weather … or at least the atmospherics. Despite having 10,000 screens, AMC is not known as the largest theatrical distributor but a meme stock. In the past three years, Paramount Global market cap dropped from $43 billion to $7.5 billion. Warner Bros. Discovery lost two-thirds of its value in two years. YouTube, which spends zero on content as it splits revenue with creators, accounts for 10% of TV viewership. Netflix is second with 7.6%. But even the streamers that leapfrogged legacy media should worry about TikTok, which provides quick, perfectly calibrated dopa hits for two+ hours per day.

Amid all the wreckage of Hollywood is the once seemingly impenetrable Disney castle, which has shed half its value as its P/E ratio dropped from 283 to 36 over the past three years. If Hollywood is Detroit, Disney is Ford. Theatrical is in structural decline, but Disney accounted for 42% of the global box office with only three films: Deadpool & Wolverine, Inside Out 2, and Alien: Romulus. Cable is dying, but Disney owns so much content — Hulu, ABC, FX, ESPN, Marvel Studios, Lucasfilm, Pixar, 20th Century Studios, and National Geographic — that its streaming services are becoming the new cable bundle. But even with price hikes, access to the entire Disney streaming ecosystem, without ads, costs $159.99 annually; a mid-tier cable package costs $1,380 per year.

At the parks, which accounted for 36% percent of revenue last quarter, operating profit dropped 3%, as attendance slowed industry-wide. Disney and Comcast, which owns Universal Studios, blamed competition with international travel. At the low end, a three-night Disney World vacation for a family of four costs $2,783. According to a recent survey, 45% of parents take on debt for a Disney vacation. My take: Disney parks, similar to a Santa Monica producer of reality TV content, cost too much for not enough. Disney recognizes this and announced a $60 billion investment to improve the value prop. Pro tip: Deadpool ride.

Nike

Wearing Nike makes me feel stronger. I love Nike, especially the unapologetic brand positioning: “You don’t win silver, you lose gold.” But after losing 50% of its value in three years, Nike is nowhere near the medal podium.

During the pandemic, running clubs boomed. This should’ve been great news for Nike. Instead, it was a shot of adrenaline for Nike competitors. (Hoka sales were up 27% last quarter, while Q3 sales for On were up 46%.) Meanwhile, Nike’s former CEO John Donahoe blamed remote work for the firm’s innovation slowdown. Donahoe represented a pivot to digital and direct to consumer. When Nike was my client, I advocated for this strategy, as dispersion would neutralize Nike’s best weapon (broadcast advertising). But the FuelBand never gained traction, DTC revenue was down 13% last quarter, and ultimately Donahoe confirmed that Nike leaned into digital and DTC at the expense of retail partners — a decision that hurt Nike, as retail returned stronger than expected post-pandemic and Nike lost touch with cutting-edge smaller retailers. And then China sneezed, and Nike caught full-blown pneumonia. Fourth-quarter sales in China dropped 19%, and Nike warned investors to expect more bad news. This quarter, Nike’s sales were down 10% YoY and down 4% in China.

Still, there’s nothing wrong with Nike that can’t be fixed by what’s right with Nike. Their new CEO, Elliot Hill, represents a return to the brand’s roots; the stock popped 7% on news of his hiring and then gave it back (see above: sales down 10%). And while this isn’t investment advice, Nike’s P/E ratio has dropped from a 2020 high of 73 to 23, suggesting that the stock is undervalued. It’s going to take time, as this may be a board problem. Nike, after shitting the bed on its earnings call this week, announced they would no longer be providing guidance. This is just plain stupid, and a rookie move from a great company. When things are bad, you OVERcommunicate, and if Nike’s management team is so thin the board lets them punt on key information flows to investors, then they shouldn’t be in the S&P 500.

Estée Lauder

At first blush, it’s easy to blame China for Estée Lauder’s 75% drop in market cap over three years. But Estée Lauder used that explanation pre-pandemic, during lockdowns, and post-pandemic. Meanwhile, the global beauty market has been relatively strong, growing 10% from 2022 to 2023, while China’s beauty market lagged, growing by only 3% amid heavy price discounting. Estée Lauder, L’Oréal, and Shiseido have all struggled in China recently, although Estée Lauder has struggled the most.

But a bad economy isn’t automatically bad news for luxury brands. The “lipstick effect” is a theory that says during economic downturns consumers on tight budgets still splurge on small, affordable luxuries, as such purchases give people a sense of indulgence without breaking the bank. The question isn’t whether budget-conscious Chinese consumers have soured on luxury, but whether they’ve soured on Estée Lauder? According to Vogue, it’s the latter. Proya is set to become the first Chinese beauty brand to hit $1 billion in revenue. Chinese beauty brand Florasis will open its first counter in Paris. Direct-to-consumer brand Uniskin launched its first brick-and-mortar store in Shanghai.

The HBO show Succession was a modern-day Shakespearean drama that captured the essence of power, wealth, and family dysfunction. Ostensibly, it was about Rupert Murdoch, but it also could’ve been about Sumner Redstone, or the Estée Lauder family, which owns 35% of the company and controls 80% of the voting power. Ultimately, this isn’t about China or navigating dispersion; it’s about the frailty of family dynasties. Such dynamics make for good TV drama, but they’re lousy for shareholder value. Similar to Nike, Estée has missed key trends and finds long-tail brands nipping at every appendage.

The Green Mile

Dispersion and the rise of China both began in the 1990s. Three decades later, China is the world’s second-largest economy, and it has more middle-class households than the U.S. Dispersion is no longer coming; it’s here, and AI will take it in new directions. Similar to Congress, there are just too many old people in corporate America clinging to power. One of the key problems in America is a lack of churn. Politicians, CEOs, and tenured faculty refuse to leave, creating a stasis that is bad for the economy, as our country is run by people who are out of touch, and reduces opportunity for young people. If that sounds ageist, trust your instincts. I am an ageist, and so is biology.

At 73, Bob Iger is the oldest CEO of the fallen angels I discussed here. His first, second, and third priorities need to be picking a successor. At 60, Nike CEO Elliott Hill is the youngest fallen angel boss, and like Iger, he came out of retirement to turn an iconic company around. Pat Gelsinger, 63, started his career at Intel at 18. His mentor was Andy Grove, a leading gangster CEO of the last century. Estée Lauder CEO Fabrizio Freda is 67. He’s retiring after 16 years at the helm. Maybe it’s a vibe, as my kids say, but a changing of the guard is upon us.

Comebacks

In January of 2011, Netflix was worth $11 billion. By November, the company’s market cap was just over $3 billion. The reason? As Netflix pivoted to streaming it tried to spin off its DVD business. The Qwikster backlash cost Netflix 1 million subscribers. As it turned out, Netflix was right, but early, as they ultimately closed their DVD business in 2023. In 2012, Best Buy was on the brink of bankruptcy and the big-box sector looked doomed. A year later, Best Buy’s market cap increased 3X as a new CEO led one of the biggest turnarounds in retail history. And then there’s the turnaround story everyone knows: Apple.

We’re wired to overestimate the impact of negative events, a phenomenon known as the negativity bias. It’s a cognitive distortion that makes us believe that failures have a greater impact than they actually do. At some point, every business experiences a crisis, i.e., an opportunity.

As a Professor of Brand Strategy, I can’t help but wax nostalgic and believe these firms are ripe for a comeback. They all boast global brands, talented workforces, and robust supply chains. However, the most attractive thing about these firms is just how badly they’ve been beaten down. In the first four weeks of 2024, Nvidia added the value of all four of these firms. And that’s the bull case as at some point every stock (unless it’s going to zero) is too expensive/cheap. These angels have fallen so far, redemption is overdue.

Life is so rich,

P.S. This week on Prof G Markets, Ed and I spoke with Lina Khan, chair of the Federal Trade Commission, about Unlocking Innovation Through Antitrust Enforcement. Listen and subscribe here on Apple or here on Spotify.

P.P.S. Section just confirmed Moderna’s VP of AI & Product Platforms and S&P Global’s Chief Artificial Intelligence Officer as speakers for the AI:ROI Conference. It’s free to attend on Nov. 14 – register to learn from real AI leaders.

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Unserious People

Why don’t we fix our immigration system? A: It’s too profitable.

The best marketers in the world are tobacco companies, tech companies, universities, and the Republican Party. The GOP primarily represents the wealthiest 1% of Americans and corporations, yet manages to get about 47% of the vote, because people will support reducing the top marginal tax rate, hoping they’ll someday benefit. The Democratic brand is less powerful, as they are often guilty of being correct. And ineffective. Voters prefer mendacious and strong vs. well-meaning and weak. Biden is likable, yet under his watch taxes on corporations went down and women lost their right to bodily autonomy. (Note: I realize SCOTUS had something to do with it.)

Two years ago the governors of Texas and Florida started sending detained undocumented immigrants to bastions of the Democratic Establishment, including New York City and Martha’s Vineyard. Many progressives, including myself, were appalled at the weaponization of vulnerable people. But it was a genius PR move on the part of the GOP.

Similarly, in February, Donald Trump commanded his acolytes in Congress to kill a bipartisan foreign aid and immigration bill that would have, among other things, provided funding for border barriers and enforcement personnel and given the Department of Homeland Security the power to close the border to asylum seekers. Why? Trump, like most politicians before him, is more interested in politicizing the issue than addressing it. 

The former President claims that he brought illegal immigration to its lowest level in history (he didn’t), that a large share of immigrants are coming to this country from prisons and mental hospitals (no proof of that), and that Democrats have signed “illegals” up to vote in large numbers in our elections (again … false). Then there are the claims re Haitian immigrants dining on dogs and cats and Venezuelan gangs taking over Colorado. Not happening — but it would make an awesome episode of The Last of Us.

I’d like to believe telling these campfire tales about immigration would hurt Trump, but they likely help his campaign. The sensational (i.e., bullshit) captures the attention of the media and the algorithms, which square the spotlight on immigration. So Trump is lying, but Harris then needs to explain why after four years of her and Joe Biden, fentanyl is still flowing through our ports and over our borders, and we still have undocumented immigrants crowding into shelters, schools, and emergency rooms in border towns and cities across the country. 

Arizona Senator Mark Kelly summarized the issue well: The GOP is insincere about immigration, and the Democrats don’t understand it. The immigration debate is intellectually dishonest. Again, why? Simply put, the upside of illegal immigration outweighs the downside. Illegal immigration is “a good problem.”

An Unscientific Personal Anecdote 

Twenty years ago I was renovating a house. I needed to finish the basement, but didn’t have the money to build a proper man cave, just a livable space with some built-ins. But nobody would take the job. The two quotes I managed to secure were more than the down payment on my first home. When I asked to meet with one of the sub-contractors, he was a no-show. Finally, my general contractor and I drove to a local 7-11, where several people rushed his truck. The GC asked them some questions in Spanish, and six guys jumped in the back. 

These men, each one with a different skill, worked around the clock, only taking breaks to make design suggestions. They weren’t just laborers, they were craftsmen. Skilled, hardworking, conscientious — and reasonable. Were they taking American jobs? No, as there were no Americans willing to do those jobs. Take this times 2 million (Pew estimates there are 12 million undocumented workers), and you get the scale of what is likely the most agile, inexpensive, and effective labor force in the world.

Construction, hospitality, health care, Big Ag, Big Chicken, and Big Beef all rely on this flexible workforce. Once in a while, an industrial chicken packing plant is raided for employing people without papers, but those are mostly for show. We haven’t wanted to fix this problem in any real way as we make a shit ton of money from it — these are the most profitable immigrants in history — and the people who profit from them are … all of us. Yes, there are instances of crime, and waves of migrants do tax our social services. But again, every day, we decide it’s worth it by doing … nothing.

The Ghost of Milton Friedman and Big Immigration Myths

The political “discussion” of the issue has become dominated by myths and misleading tropes. 

One of the biggest is that crossing the southern border on foot is how most undocumented immigrants come into the country. Actually, 50% or more of the people here illegally fly into the country with a work visa and then overstay their visa. No border wall is going to be high enough to keep them out. We’ve made the “border” synonymous with “illegal immigration.” It’s not. The wall is just a logo, not a serious attempt to fix the problem.

Another myth is that undocumented people take jobs from Americans and don’t contribute to the economy. Way back in the ’70s, conservative economic icon Milton Friedman, a fan of free trade and open borders, observed that unrestricted Mexican immigration to the U.S. is a net good thing — as long as it stays illegal. 

Immigration is the secret sauce of the U.S. economy. Estimates vary, but researchers have estimated that all immigrants (legal and undocumented) contribute about $3.3 trillion to the U.S. economy annually. That’s as much as 17% of our GDP. And undocumented immigrants pay about $100 billion a year in payroll, property, and sales taxes. These “illegals” are paying into Social Security, and most of them will never see a dime of it. 

To be clear, illegal immigration is an issue that warrants a serious response. Friedman in 1977 said U.S. employers and consumers were happy to reap the benefits of an undocumented workforce as long as the costs (housing, social services, health care, crime) remained low. Now, however, many believe we may be at or past the point where the strain of accommodating these new arrivals has become too high. Ask anybody who lives in Eagle Pass, Texas or Sweden.

Another myth that’s often invoked as part of the debate, however, is that undocumented immigrants commit crimes at a higher rate than permanent residents. Whenever an immigrant (here illegally or not) is involved in a serious accident or implicated in a crime, politicians jump all over it. Historically, though, immigrants have committed crimes and been incarcerated at significantly lower rates than U.S. born citizens.

Demand Problem

The economic dynamics behind illegal immigration and our collective lack of will to do anything about it are pretty simple. If, for whatever reason good or bad, we wanted to put a stop to illegal immigration, it wouldn’t be that hard. (We could also easily eliminate some of the worst aspects of social media by imposing age gates, if we were serious about that problem.)

We focus on the supply side of the equation, which is largely a waste of time. Lots of people around the world believe — correctly — that they and their families will live healthier, happier, and more prosperous lives in the U.S. We can’t keep drugs out of our prisons, yet we believe we can seal a 5,500-mile-long border?

The fix is on the demand side. If we want to stop illegal immigration, we need to decrease demand by raising the costs and enacting real deterrence. The quickest route to a solution would involve punishing employers. Create a biometric database of documented immigrants. Then levy any employer who knowingly hires somebody who’s not on it with a $10,000 fine. No restaurant is going to risk getting hit for $50,000 hiring five cooks or dishwashers without papers. No chicken processing plant is going to risk a $1 million fine for hiring 100. 

This, of course, will likely not happen. Too many of the people who employ undocumented workers also employ lobbyists and give significant money to politicians. Those politicians are happy to accommodate their backers and exploit the racism and fear of many Americans by continuing to tell lies about immigration.

Pick Your Battles

I believe one of the keys to healthy relationships and relative harmony is to not inject agita (argue, get upset, etc.) when the stakes are low. To not create disharmony where there isn’t a real problem. Yes, illegal immigration is a real problem, but why let it divide us when neither side seems genuine about fixing it, or even having an honest discussion? I believe we will have immigration reform once the perception of the problem appears to eclipse the benefits of our existing hush-hush system. And maybe that time has come.

The fix will need to come in the middle of the election cycle; the issue is too easy for politicians to demagogue when they’re campaigning. Again, if we’re serious about the issue, why was the legislation presented during an election year?

The Biggest Benefit

The biggest benefit of illegal immigration has been … love. Stay with me here. A 2018 study by the Migration Policy Institute estimates 13% of child-care workers are undocumented and almost a third of home-health-care workers are immigrants. The New American Economy Research Fund reported in 2020 that approximately 280,000 undocumented immigrants work in the U.S. health-care system, many in support and caregiving roles.

These workers often fill critical gaps in the caregiving workforce, particularly in roles that are challenging to fill owing to low wages, demanding conditions, or the lack of domestic workers willing to take on these jobs. Their contributions are significant, but their undocumented status can also leave them lacking access to many worker protections and vulnerable to exploitation.

A knee-jerk reaction taken from the fascist handbook of demonizing immigrants (e.g., mass deportations, detention camps) would have a devastating effect on the U.S. It would be inflationary and reduce the compassion millions of undocumented workers bestow on our children and the elderly. Punishing immigrants could be the U.S. version of Brexit — a self-inflicted injury. 

There is a cartoon of an undocumented worker criminalizing his way across the nation, carrying a backpack of fentanyl, stopping to dine on your cocker spaniel. A more accurate depiction is a person who keeps our costs lower, is vulnerable to exploitation, and cares for your kids and parents when you aren’t able. 

Life is so rich,

P.S. Richard Reeves, the president of the American Institute for Boys and Men, joined me this week on the Prof G Pod to discuss his latest research on male deaths and his take on the script for masculinity. Listen here on Apple podcasts or here on Spotify.

P.P.S. Section’s COO, Taylor Malmsheimer, is hosting an executive briefing on the state of AI proficiency in the workforce. If you’re a leader with a goal of meaningful AI adoption in 2025, you should join. RSVP for free.

The post Unserious People appeared first on No Mercy / No Malice.

Online / Offline

I celebrated my 50th birthday last weekend (just go with it). It’s a milestone and an opportunity to reflect, which I do … too much. In the past 50 years, there may have been more technological innovation and disruption than in the previous 500. The year my parents divorced, I spent the summer with my dad in Chicago. On weekends, we’d journey to his downtown office, where I could use the WATS line (ask a Boomer) to call my mom. Long distance calls were $4/minute. Well worth the hour long train ride.  

If the cycle time of innovation keeps contracting, we may register even greater changes in the next 15 years. The net-net of a jump to lightspeed in innovation is a mix of unprecedented prosperity and danger, as godlike technology will collide with paleolithic instincts and medieval institutions.  

Dinosaurs

Sixty-six million years ago, an asteroid the size of Everest slammed into Earth. The impact unleashed an apocalyptic chain of events that changed the global ecosystem, extinguishing dinosaurs and setting the stage for Homo habilis (i.e., us). When a natural ecosystem changes, predators and prey adapt, or they die.  

Thirty years ago, the internet slammed into our information ecosystem. The internet is bigger and more devastating than the Chicxulub impactor (note: Awesome name for a boy band). Chicxulub didn’t kill off the dinosaurs immediately; it took about 30,000 years before the last Triceratops drew her final breath. Newspaper revenue peaked in 2005 and has since declined 80%; traditional TV’s revenue has been halved since streaming began. To call legacy media “dinosaurs” is not fair to dinosaurs. The new apex predators (tech platforms) have evolved from amoebas to Tyrannosaurus rexes since the debut season of Law & Order. How we ingest and digest the information that shapes our views and actions is changing, as are we.

Asshole

I’m a better person offline: friendlier, more likely to find common ground. Online, I am defensive and angry, as I’m constantly having to battle bots, anonymous trolls, and people arguing in bad faith. And most people are a lesser version of themselves online.  

Why the Jekyll and Hyde act? The frictionless experiences created by the digital revolution make it easy to post harmful content without thinking first. Social media companies have experimented with moderation tools that warn users before they post something damaging, but the idea hasn’t caught on. We dislike the coarseness of online culture, but we hate friction. And, just as there are cues to be civil offline (e.g., traffic signs, handicap parking), the corporate titans of today have discovered that while sex sells, rage addicts. Their algorithms elevate content that’s incendiary and novel (i.e., bullshit). If only there was a way to exonerate them from the externalities of the emissions their users are belching into society, which are (in my view) more damaging than carbon? But wait, there is … Section 230.

Take Off That Mask

Halloween is my favorite holiday. Something about getting to wear a wig — and a green light for women to dress like sluts works for me. I tend to get drunk and behave more outrageously than society would accept, say, during midday on a Wednesday in February. The guys who dumped British tea in Boston harbor dressed up like Native Americans as a mis-direct to dodge accountability. The men behind the Declaration of Independence signed their names as they had the courage of their convictions.

Anonymity’s value has been exaggerated for the benefit of the tech incumbents, who don’t want to be held responsible for the damage their firms’ actions cause. We’re more likely to post inflammatory/defamatory content when we know there are no consequences. As a famous 1993 cartoon in the New Yorker put it, “On the internet, nobody knows you’re a dog.” Today the caption would read, “On the internet, nobody knows you’re the asshole.” 

Telegram

Imagine I own a hotel. The Scott boasts a California king in every room, James Perse pajamas, a decent pool scene, a dog park, and a taco truck that never closes. It’s also a nexus for terrorism, child exploitation, and illegal arms sales. In the analog, extremely offline world, The Scott would be shut down and Scott Galloway imprisoned. But our idolatry of the dollar and innovators has shapeshifted into an Iron Dome intercepting all incoming accountability hurling toward “emerging platforms.” If it’s digital, then it’s speech and immune. The least greatest generation (tech bros) have convinced the media and lawmakers that their crimes are … speech. And not subject to the same standards as similar activity in the offline world. 

Telegram is a communications platform with public channels, private chats that can be encrypted, and self-deleting messages. One billion people use it. The Russian military uses it on the battlefield in Ukraine. Activists against the governments in authoritarian countries use it. At one point, Telegram was the app of choice for ISIS. Recently, it’s become the go-to platform for domestic terrorists. It’s also a must-have for criminal networks. Telegram, which advertises itself as a free speech platform that doesn’t moderate content, was instrumental for the right-wing groups that organized race riots in the U.K. this summer.

Consequences?

Last month, French authorities arrested Telegram CEO Pavel Durov. The charges included allegations that the platform is used to distribute child sexual abuse material and facilitate drug trafficking, and that it refused to share information with investigators as required by law. These are serious allegations, and if proven, Telegram and its CEO will be punished. That shouldn’t be controversial. But as soon as news of Durov’s arrest broke, he was crowned a free speech martyr by Silicon Valley’s usual suspects. This isn’t about speech, but our decision to elevate billionaires, and the platforms that made them billionaires, to deities.  

Free Speech

Frequently, the internet’s most intractable problems hit a free speech dead end. Last week, 42 state attorneys general called on Congress to mandate warning labels for social media, citing a surgeon general report detailing the link between social media and anxiety and depression in teens. Reporters, activists, and parents, including me, have highlighted this issue for years. But it’s unlikely we’ll see a warning label, as social media companies will deploy lobbyists, lawyers, and publicists to innovation-wash (i-wash) their criminality. Tying it to economic growth, free speech, youth, and a general sense that to constrain them would be wrong — or worse, European. 

When thousands of Americans were dying every day during the pandemic, public health officials asked social media platforms to remove misinformation about Covid-19. This was immediately framed as a conspiracy to control people. Balancing public health and civil liberties is never easy. In some cases, public health officials overreached; in others, social media platforms voluntarily complied and likely saved lives. Ultimately, the Supreme Court ruled in the government’s favor, though the decision was made on procedural grounds. But what should’ve been a free society’s shining moment devolved into a melée of conspiracy theories, publicity stunts, and disingenuous accusations of censorship.

Earlier this year, sexually explicit AI-generated images of Taylor Swift went viral. One image posted on X was shared 24,000 times and received 45 million views. Deep fakes make the problem of revenge porn worse — but revenge porn achieved scale long before Taylor Swift became a victim. In the U.S., 49 states have laws against such behavior. But at the federal level — where it counts — efforts to criminalize revenge porn, or at least empower victims to seek civil remedies, have consistently stalled because of First Amendment concerns. What would happen if pornographic AI-generated images of Taylor Swift were shown on televisions, in movie theaters, or in any other lame medium run by boomers?

Responsibility

Censorship is a problem in a free society, but it’s nowhere near our biggest problem, and it’s become a mis-direct from the greater perils we face. We are raising the most obese, addicted, anxious generation in our nation’s history. But censorship … that’s the real threat? Give me a fucking break. Cries of censorship are a tell for someone who won’t shut up and is EVERYwhere. Our society has adopted a generally accepted myth that being offended or crying “censorship” means you are right. No, it just means you are offended and have become allergic to people pushing back on your bullshit.

A much bigger threat is the belief that the internet, and its zealots, is all freedom, zero responsibility. 

Perhaps that sentiment is an echo of John Perry Barlow’s 1996 essay A Declaration of the Independence of Cyberspace. Barlow, a techno-libertarian who co-founded the Electronic Frontier Foundation, wrote, “Governments of the industrial world, you weary giants of flesh and steel, I come from Cyberspace, the new home of mind. On behalf of the future, I ask you of the past to leave us alone. You are not welcome among us. You have no sovereignty where we gather.” Barlow’s essay came in response to the passage of the Telecommunications Act of 1996, or what’s known today as Section 230. 

Immunizing online platforms from third-party speech excused media platforms from the scrutiny, accountability, and citizenship we demand from other media companies. 

But it’s a false premise to suggest freedom is at odds with responsibility. It’s not. The freedoms we enjoy are a function of the responsibility embraced by people who see themselves as part of something bigger. When Durov was arrested there was a cacophony of catastrophizing from the tech set, who don’t want to give up their laminated stay-out-of-jail cards. “This will send a chill throughout the tech world,” lamented billionaire tech figures. Yes, winter is coming. And it’s a good thing.  

Life is so rich, 

P.S. Was this newsletter forwarded to you? You can subscribe here.

P.P.S. Section is hosting a free, full-day, virtual conference on getting and proving AI ROI. Speakers include AI experts, leaders, ethicists — and me. You can register now.

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Doing the Minimum

During Tuesday night’s debate, Trump and Harris discussed the economy, but neither referenced the simplest available move to reduce poverty and inequality: raise the minimum wage.

On the campaign trail, they’ve both jumped on an idea to eliminate the federal income tax on tips. This is populist bullshit that would accomplish nothing. Workers who depend on tips comprise just 2.5% of the workforce, and most don’t make enough to pay income tax. Meanwhile, one can imagine private equity firms and real estate brokers finding law firms to restructure their carried interest fees and commissions as “tips.” BTW, nearly every change to the tax code over the past 40 years has transferred wealth from the young/middle-class to corporations and the überwealthy, who are enjoying their lowest tax burden since 1939 and paying single-digit tax rates. 

The federal minimum wage is $7.25 an hour. Harris has said she supports raising it but hasn’t said by how much; Trump, who’s been stiffing employees and vendors his entire life, has flip-flopped on the issue.

Wage Warfare

There is an economic war between the old and rich and the young. And it’s been a slaughter. The federal minimum wage is Exhibit A. It was created by Congress in 1938 to serve as a floor for state minimum wages, which vary widely. A number of states have recently raised theirs. The federal minimum, though, hasn’t gone up since 2009; it’s not even been adjusted to keep pace with inflation or gains in productivity. Its buying power peaked in 1968.

A federal minimum wage adjusted for inflation and productivity would be about $25 an hour. The reason it hasn’t kept pace, and is instead 40% lower (inflation adjusted) than in 1970? A: Politicians from both parties believe their core constituency is corporations, and they’ve served them well, protecting the profit margins of companies whose business model is based on paying sub-poverty wages. In 2021, when Democrats controlled both houses of Congress, eight Democrats joined with the GOP to kill a measure to raise the minimum wage to $15. All this bitching/barking about tearing down the 756 U.S. billionaires, vs. lifting up the 34% of American households that make less than $50,000 (annual income if we raised minimum wage to $25/hour). 

Another reason the minimum wage hasn’t kept pace is that it mostly affects young people. Young people are less likely to vote than seniors and have little representation or empathy from a Congress that’s become a cross between The Golden Girls and The Walking Dead — average age 62, vs. 38 for all Americans. Two-thirds of the people getting paid the minimum wage or less are 34 or younger, and nearly half are 24 or younger. 

We have epidemics in the U.S. — depression, anxiety, high blood pressure, homelessness, obesity, and poverty — among young people, particularly men. (Though it’s worth noting here that the majority of people making the minimum wage in the U.S. are women.) The most powerful means of addressing these ills, and the “deaths of despair” that follow, is a good job at a fair wage that acknowledges the nobility of work. In addition, a good job creates incentives and illuminates a path to wealth creation and economic security. 

We’re not talking about making busboys and home health aides millionaires, but creating an incentive structure that vaccinates young people from the virus that is the largest preventable cause of death in the U.S.: poverty. And less poverty has an added benefit: It would reduce the need for expensive and inefficient government programs. 

Who loves sub-poverty minimum wages? A: The for-profit industrial prison/fast food/service/hospital/pharmaceutical sector. These corporations have figured out a way to clip a staggering commission from a social construct. It’s not unlike health care, which generates more private, corporate income from treating diseases vs. preventing them. To prevent the disease of poverty, we need to just get the money to people who need it. The most efficient food stamps/mental health/obesity/diabetes/child-poverty program is … money. We’ve traded dignity, at a lower cost, for corporate profits that weigh on society. 

Latin for “I’d Pay You Less” 

The most compelling argument against raising the minimum wage is that employers would either pass the higher costs on to consumers or cut jobs rather than raise salaries. There is no free lunch, but the downsides have been consistently exaggerated by business lobbyists. “Minimum wage” is Latin for “I’d pay you less if I could.” But we need to bury the myth that the middle class is a self-healing organism the market shapes organically. It isn’t. The greatest innovation in history, the U.S. middle class, requires a consistent investment that matches the rhetoric. Any CEO or politician who drones on about heroes, the middle class, and Jesus is usually underpaying their employees, cutting food stamps, and soliciting oral sex in airport bathrooms.

$15 Big Mac

There have been headlines lately about $15 Big Macs, and in California some fast food chains have closed since the minimum wage went up. They say this like it’s a bad thing. If we were to foot taxes to the externalities — which is what government is supposed to do — we’d have beef and gas at $20/pound and $10/gallon. Yes, fast food restaurants and many retail, hospital network, and prison system stocks would decline. And it would be worth it. 

Some restaurant, hospitality, and retail companies would fail, but most would be able to pass on the costs to customers without damaging demand. Most empirical economic data shows raising the minimum wage is broadly good for the economy, because poor and middle-income people spend most/all their money, creating a robust multiplier effect.

UC Berkeley economist Michael Reich and University of Victoria economist Justin Wiltshire recently wrote, “Outside the theoretical world, economists have conducted hundreds of studies on the actual effects of minimum wage. They repeatedly find that increasing the minimum wage raises the pay of low-wage workers, without leading to even minor job losses. Prices increase by minimal amounts that are too small to deter anyone from buying a burger or taco.”

An April 2024 study by University of Michigan and Carnegie Mellon economists found much the same thing. Co-author Nirupama Rao said, “Our results show clearly that minimum wages do little harm to independent firms and even benefit some owners while meaningfully increasing both the earnings and employment of young and low-earning workers. Of course, these gains to workers and owners are financed by consumers, who appear fairly inelastic in their overall demand for the goods and services furnished by independent businesses affected by minimum wage policies.” 

According to a 2021 study by the Congressional Budget Office, raising the federal minimum wage to $15 by 2025 would lift 900,000 people out of poverty. And a 2019 study by the Economic Policy Institute, a Washington think tank, estimated that raising the minimum wage to $15 could lead to an annual increase in consumer spending of $22 billion. 

Disunion

There is constant, inescapable tension between labor and capital. For decades now, however, capital has been kicking the shit out of labor. 

That’s why the federal government needs to take the lead on raising wages. Businesses won’t do it, and unions can’t. Unions are not only ineffective — their membership over the past 30 years has fallen by half — but they also help support the illusion that middle-class workers have robust representation and don’t need large-scale programs. They don’t and they do, respectively. There needs to be one union for all workers: The federal government. 

The traditional union construct has outlived its usefulness. Union membership in the U.S. peaked at around 33% in the 1950s and stands at 10% today. The labor movement has been crippled since its inception by infighting and corruption. Shawn Fain seems like an honest man, especially in contrast to the past two UAW presidents … who are in prison. 

Other unions are simply ineffective. For all the hype about unionizing Starbucks locations, the baristas’ union has yet to win a collective bargaining agreement or negotiate a national contract. Last year’s Hollywood writer’s strike was a disaster for the WGA, with its members taking a 100% pay cut for the five months they were on the picket line in exchange for modest concessions from the studios. And it was the catalyst for a downsizing that curbed production in Los Angeles 60%, year over year.

Social Capital Formation

Low-paying jobs, particularly first jobs, tend to be shitty. That is as it should be — almost everybody with a great job now started out doing something tedious and hard for not much money. How do you make a lot of money? A: By starting to make money … any money.

For young people, though, an early job is as much about socialization as it is about cash. Somebody working on the front lines in service or retail can’t help but learn a lot about themselves and the rest of humanity. Pro tip: The biggest tippers are people who’ve worked in service jobs and now have money.

You learn how to work on a team, how to deal with co-workers and managers and customers who can be jerks. You learn how to get people to buy something from you, which is the key skill in a capitalist economy (i.e., the U.S. and anywhere else you’d want to live). In short, you learn how to develop and deploy social capital and begin connecting work and talent with money, and money with a better life. It sounds obvious, but many never make the connection. They want success, but aren’t willing to sacrifice for it. Few things build a young person’s self-respect, sense of purpose, and willingness to buy into society more than their first paycheck. 

When I Grow Up

I didn’t enjoy being a kid. Being an unremarkable boy with a single mom, little money, and no access to public transportation meant the Wonder Years in West L.A. were mundane. However, at the same time, shows like Dynasty, Dallas, The Love Boat, and Fantasy Island outlined my escape route — money. And the way you got money was … work. Note: It still is. 

By 9 years old, I had a paper route and walked three dogs. I bought packs of Bubble Yum for 15¢ and sold individual pieces to classmates for a nickel. By senior year in high school, I graduated to box boy. I’d leave University High at noon to work in the mailroom at Southwestern University of Law and, by early evening, bomb to the Westwood Chart House where I was a barback. The summer before college, I shrink-wrapped software boxes for a firm run by Scientologists. They were nice. And strange. 

In college I was a trainer at LA Fitness, an usher at the Avco Cinemas, and changed/cleaned beer taps in bars in downtown L.A. Walking into bars in Compton at 11 a.m. mid-week was an illuminating experience. By this point, I had access to the UCLA athlete’s job board. Every weekend, I’d put on white shorts, K-Swisses, and a white polo and head to the Mondrian, where I was a pool boy. Twice a week, for $30 in cash, I’d put on a suit and venture to a posh home in the Flats of Beverly Hills. I’d go upstairs where an elderly woman would be dressed to the nines, lying in bed. I’d scoop her up and carry her downstairs and into the back seat of a Rolls Royce. Her driver would transport us to Scandia (a fancy restaurant in L.A.) where I’d (again) carry my client into the restaurant and seat her at a table with six to eight friends/admirers. The woman in my arms was Lillian Hellman (ask your parents). I sold commemorative gold coins over the phone. I was a sperm donor — $40/shot. So I have somewhere between 2 and 2,000 kids. But that’s another post.

This kaleidoscope of work paid me enough, with $5,000 in student loans and Pell Grants, to get through UCLA with little/no help from anybody. My first job out of UCLA and business school enabled me and my girlfriend, who worked at Arthur Andersen, to buy a home in Potrero Hill in San Francisco for $285,000 at the age of 28. Imagine any young person being able (today) to get through college and buy a home in San Francisco with their own earnings. 

The assault on the prosperity of the young is especially mendacious, as it’s taken place in concert with the greatest increase in national wealth registered in history. Be clear: This has been purposeful. Americans over the age of 70 are 72% wealthier than 40 years ago, and people under the age of 40 are 24% poorer. Money is the transfer of time and work. To give someone or something money is to love them. And America loved me, connecting my effort with prosperity. At an early age, I understood the assignment. 

Our youth now are depressed, anxious, obese, and broke. It’s not globalization, network effects, or some other bullshit narrative fomented by the incumbents. It’s the wealth transfer, and, like I said, it’s been purposeful. And the most elegant, effective means of reversing this lack of care/regard/love for the young in America would be a massive increase in the minimum wage. It would be costly — and worth it. 

Life is so rich,

P.S. Jessica Tarlov and I unpack the Harris/Trump debate on our newest podcast: Raging Moderates. Listen here on Apple or here on Spotify

P.P.S. Section is hosting an event on September 25 on Augmenting Human Creativity with AI, featuring SonyAI’s chief scientist. RSVP here — it’s free.

 

The post Doing the Minimum appeared first on No Mercy / No Malice.

Grief and Love

Since the recovery of six hostages’ bodies in Gaza, I’ve been pondering grief. As others have said, grief is the price we pay for love, a testament to the depth of our connection. It isn’t just about losing a loved one; it’s about losing what they represented to our family, community, and nation.

Grief, Apes, and DNA

We share 98% of our DNA with chimpanzees, including our capacity to grieve. Scientists have observed mourning in various species — cats, dogs, dolphins, and primates. Natalia, a chimp in a Spanish zoo, carried the body of her deceased infant for months. That’s grief, raw and undeniable.

Anthropologists argue that the anticipation of grief is key to attachment. Our fear of losing a child drives us to ensure their well-being. We cooperate and treat each other well to avoid the pain of loss. Paradoxically, mourning also brings us together and fosters community. On a larger scale, many wars end when the collective grief becomes unbearable, highlighting grief’s power to both divide and unite.

This capacity for mourning is deeply personal. When our Vizsla, Zoe, passed, our other dog, Gangster, retreated to his crate for days. More disturbingly, our youngest son began making his bed and following every parental instruction — a clear sign of distress.

Burial Rites

Burial rituals predate civilization and aren’t limited to Homo sapiens. In Spain, researchers found a 430,000-year-old Neanderthal burial site. The earliest known human burial, roughly 100,000 years old, was discovered in Qafzeh, Israel, where archeologists unearthed 15 skeletons — seven adults and eight children. A 12-year-old boy lay in a rectangular grave, arms folded, with deer horns placed on his chest. The care taken speaks volumes about the love felt for this child.

From Mesopotamia to Rome, Egypt to China, burial rites have been integral to preserving human dignity and fostering community. Even today, actor Nicholas Cage has constructed a pyramid mausoleum in New Orleans — his iconic performance in Leaving Las Vegas perhaps granting him some eccentric latitude.

Resilience and Coping

Our empirical understanding of grief comes largely from George Bonanno, a clinical psychologist who challenged the traditional Kübler-Ross model. Instead of five stages that are understood to be universal, Bonanno identified four distinct trajectories: resilience, recovery, chronic dysfunction, and delayed grief, or trauma. Resilience, by far the most common, is a trait Bonanno argues we’re hard-wired for. It’s messy, hence his phrase “coping ugly.”

Mo Gawdat, former chief business officer at Google’s X Development, shared his process for grieving his son’s death:

Grieve fully, allowing all emotions.Research and accept the finality of death — “committed acceptance.”Take a leap of faith, believing in something beyond the physical.

Mo’s approach, while idiosyncratic, reflects the universal human experience of seeking meaning beyond death. “Acceptance means understanding that this is your new baseline,” Mo explained. “I will never receive another hug from my son. I will not hear his voice on the phone or see him play music ever again. That’s my new baseline. I will stop pretending otherwise. Committed means I can still improve my own life and the lives of those around me.”

The Israel-Hamas War and Collective Grief

The ongoing conflict in the Middle East has caused immense grief on both sides. Israel’s trauma on October 7 likely had a wider and deeper impact than 9/11 did in the U.S., given the relative size of the populations. There has also been staggering loss and grief registered by the residents of Gaza.

The recent recovery of six hostages’ bodies from Gaza’s tunnels sparked the first general strike in Israel since the war began. Tens of thousands are demanding a ceasefire and the return of remaining hostages. This outpouring of grief might be a turning point, illustrating how grief can both drive us to war and compel us to seek peace. Note: I’m skeptical.

Packing my son for his return to boarding school earlier this week was emotional. Putting away his size 10 New Balance shoes, cologne, and first razor I thought again about a different, darker parental pain — the anguish of Hersh Goldberg-Polin’s parents. Seeing them speak at the Democratic National Convention, when Hersh was reportedly still alive, made the abstract parade of death painfully real. As Stalin cynically noted, “One death is a tragedy, a million deaths is a statistic.”

Arlington

Arlington National Cemetery, with over 400,000 graves, is a microcosm of American history. It conducts about 150 funerals weekly, with the 3rd U.S. Infantry Regiment guarding the Tomb of the Unknown Soldier 24/7/365.

From Civil War soldiers to freed slaves, astronauts to Supreme Court justices, Arlington honors a diverse array of Americans who’ve shaped our nation. It’s not just a cemetery but a place of healing for families of the fallen, a testament to national gratitude and respect.

During the Civil War, the Union seized an estate belonging to Confederate General Robert E. Lee, building a cemetery there for thousands of soldiers killed by forces under Lee’s command. Arlington was also the site of Freedman’s Village, a refugee camp for former slaves that evolved into a thriving community. Section 27 holds the graves of an estimated 3,000 Black Americans who escaped slavery.

President John F. Kennedy rests there, honored by an eternal flame. General George C. Marshall, Winston Churchill’s “organizer of victory” in World War II, lies nearby. Admiral Hyman G. Rickover, the “father of the nuclear navy,” and Ira Hayes, a Native American from the Akimel O’odham tribe who was one of the six Marines who raised the flag at Iwo Jima, also call Arlington their final home.

Desecration

The Veterans Health Administration serves 9 million veterans across 1,300 facilities. Arlington, in its way, is a health facility for grieving families. The resources and ceremony committed to it comfort those who’ve lost loved ones. It’s 355 million Americans saying to military families: We recognize your loss. Your sacrifice has meaning, and we care.

By custom and law, Arlington is off-limits for political content. Yet, during a ceremony marking the anniversary of an attack that killed 13 U.S. troops in Afghanistan, the Trump campaign saw an opportunity for content. When stopped, they became abusive. Trump advisor Chris LaCivita later posted footage of the event, hoping to “trigger the hacks” in the Army.

This desecration of Section 60 poured salt on open wounds. As Ben Kesling, a former Marine officer, wrote, “Section 60 is one of the most sacred places for this generation of troops. It is where those who were killed in Iraq and Afghanistan are buried. Those graves are visited not by tourists looking for historical figures, but by mothers and fathers visiting their fallen son or daughter. In Section 60, wounds are still raw.”

Trump’s actions dishonored not just those who served, but America itself. The man who called U.S. troops killed in combat “losers” and “suckers” has found a new low. His disrespect for America, and for those who’ve made the ultimate sacrifice in its defense, is increasingly common. However, this specific behavior at Arlington is unique in its callousness.

Grief is the price we pay for love. Our grief testifies to the depth of our connections — to individuals, communities, and nations. There’s a word for Trump’s actions at Arlington: desecration.

Life is so rich,

P.S. This week I spoke with Simon Sinek about leadership, mentorship, and the struggles men face in building meaningful relationships. Listen on Apple or Spotify

P.P.S. I’m doing an Ask Me Anything with Section on September 26 on building wealth, companies, and happiness. It’s free — RSVP here. I recommend submitting your questions early.

 

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Thought Partner

I’ve known Greg Shove, the CEO of Section and author of Personal Math, for over 30 years. We met when I was chairman of Red Envelope (e-commerce firm). Since then Greg has started and sold three companies. Section (Disclosure: founder/investor) helps upskill enterprises for AI. This week, we asked Greg to create a cheat sheet on how to register personal ROI from AI.

Thought Partner

by Greg Shove

This is the summer of AI discontent.

In the last few weeks, VCs, pundits, and the media have gone from overpromising on AI to raising the alarm: Too much money has been poured in, and enterprise adoption is faltering. It’s a bubble that was overhyped all along. If the computer is what Steve Jobs called the “bicycle for our minds,” AI was supposed to be our strongest pedaling partner. It was going to fix education, accelerate drug discovery, and find climate solutions. Instead, we got sex chatbots and suggestions to put glue on pizza.

Investors should be concerned. Sequoia says AI will need to bring in $600 billion in revenue to outpace the cost of the tech. As of their most recent earnings announcements, Apple, Google, Meta, and Microsoft are estimated to generate a combined $40 billion in revenue from AI. That leaves a big gap. At the same time, the leading AI models still don’t work reliably — and they’re prone to ketamine-like hallucinations, Silicon Valley-speak for “they make shit up.” Sam Altman admits ChatGPT-4 is “mildly embarrassing at best,” but he’s also pumping up expectations for GPT-5.

Unless you’re an investor or an AI entrepreneur, though, none of this really matters. Let’s refocus: For the first time, we can talk to computers in our language and get answers that usually make sense. We have a personal assistant and adviser in our pocket, and it costs $20 a month. This is Star Trek (58 years ago) — and it’s just getting started.

If you’re using “AI is a bubble” as an excuse to ignore these capabilities, you’re making a big mistake. Don’t laugh. I know Silicon Valley tech bros need a win after their NFT/metaverse consensual hallucination. And as you’re likely not reading this on a Meta Quest 3 purchased with Dogecoin, your skepticism is warranted.

Super Soldier Serum

For all the hype of AI, few are getting tangible ROI from it. OpenAI has an estimated 100 million monthly active users worldwide. That sounds like a lot, but it’s only about 10% of the global knowledge workforce.

More people may have tried ChatGPT, but few are power users, and the number of active users is flatlining. Most people “bounce off,” asking a few questions, getting some nonsense answers, and return to Google. They mistake GPT for “Better Google.” “Better Google” is Google. Using AI as a search engine is like using a screwdriver to bang down a nail. It could work, but not well. That’s what Bing is for.

The reason people make this mistake? Few have discovered AI’s premier use case: as a thought partner.

I’ve personally taught more than 2,000 early adopters about AI (and Section has taught over 15,000). Most of them use AI as an assistant — summarizing documents or contracts, writing first drafts, transcribing or translating documents, etc.

But very few people are using AI to “think.” When I talk to those who do, they share that use case almost like a secret. They’re amazed AI can act as a trusted adviser — and reliably gut-check decisions, pre-empt the boss’s feedback, or outline options.

Last year, Boston Consulting Group, Harvard Business School, and Wharton released a study that compared two groups of BCG consultants — those with access to AI and those without. The consultants with AI completed 12% more tasks and did so 25% faster. They also produced results their bosses thought were 40% better. Consultants are thought partners, and AI is Super Soldier Serum.

Smart people are quick to dismiss AI as a cognitive teammate. They think it can automate call center operators — but not them, because they’re further up the knowledge-work food chain. But if AI can make a BCG consultant 40% stronger, why not most of the knowledge workforce? Why not a CEO? Why not you?

AI vs. the Board

Last fall I started asking AI to act like a board member and critique my presentations before I sent them to the Section directors.

Even for a long-time CEO, presenting to the board is a test you always want to ace. We’re blessed with a world-class board of investors and operators, including former CEOs of Time Warner and Akamai. Also: Scott. I try to anticipate their questions to prepare me for the meeting, and inform my decisions around operations.

I prompt the AI: “I’m the CEO of Section. This is the board meeting pre-read deck. Pretend to be a hard-charging venture capitalist board member expecting strong growth. Give me three insights and three recommendations about our progress and plan.”.

Claude and ChatGPT-4o’s performance was breathtaking. AI returned 90% of the same comments or insights our human board made (we compared notes). They were able to suggest the same priorities the board did (with the associated tradeoffs) — including driving enterprise value, balancing growth and cash runway, and taking on more technology risk.

Since then, I’ve used AI to prepare for every board meeting. Every time, AI has close to a 90% match with the board’s feedback. At a minimum, it helps me know most of what Scott is going to say before he says it. A free gift with purchase? The AI is nicer, doesn’t check its phone, and usually approves management comp increases. Let’s call it a draw.

Think of what this could mean for any of your high brain power work. Less stress, knowing you didn’t overlook obvious angles or issues. A quick gut-check to anticipate questions and develop decent answers (which you will improve). And a thought partner to point out your blind spots — risks you forgot to consider or unintended consequences you didn’t think of. Whether interviewing for a job, admissions to a business school, or trying to obtain asylum … I can’t imagine not having the AI role play to better prepare.

Other scenarios where AI has helped as my thought partner:

Discussing the pros and cons of going into a real estate project with several friends as co-investors.Getting a summary of all my surgical options, after uploading my MRI, to fix my busted ankle — so I can hold my own with my overconfident, time-starved Stanford docs.Doing industry and company research to evaluate a startup investment opportunity.

Right now, the “smartest people in the room” think they’re “above” AI. Soon, I think they’ll be bragging about using it. And they should. Why would anyone hire a doctor, lawyer, or consultant who’s slower and dumber than their peers? Would you hire someone with a fax number on their business card? As Scott says: “AI won’t take your job, but someone who understands AI will.”

How to Use AI as a Thought PartnerAsk for ideas, not answers. If you ask for an answer, it will give you one (and probably not a very good one). As a thought partner, it’s better equipped to give you ideas, feedback, and other things to consider. Try to maintain an open-ended conversation that keeps evolving, rather than rushing to an answer.More context is better. The trick is to give AI enough context to start making associations. Having a “generic” conversation will give you generic output. Give it enough specific information to help it create specific responses (your company valuation, your marketing budget, your boss’s negative feedback about your last idea, an MRI of your ankle). And then take the conversation in different directions.Ask AI to run your problems through decision frameworks. Massive amounts of knowledge are stored in LLMs, so don’t hesitate to have the model explain concepts to you. Ask, “How would a CFO tackle this problem?” or “What are two frameworks CEOs have used to think about this?” Then have a conversation with the AI unpacking these answers.Ask it to adopt a persona. “If Brian Chesky and Elon Musk were co-CEOs, what remote work policies would they put in place for the management team?” That’s a question Google could never answer, but an LLM will respond to without hesitation.Make the AI explain and defend its ideas. Say, “Why did you give that answer?” “Are there any other options you can offer?” “What might be a weakness in the approach you’re suggesting?”Give it your data. Upload your PDFs — business plans, strategy memos, household budgets — and talk to the AI about your unique data and situation. If you’re concerned about privacy, then go to data controls in your GPT settings and turn off its ability to train on your data.

When you work this way, the possibilities are endless. Take financial planning. Now I can upload my entire financial profile (assets, liabilities, income, spending habits, W-2, tax return) and begin a conversation around risk, where I’m missing opportunities for asymmetric upside, how to reach my financial goals, the easiest ways to save money, be more tax efficient, etc.

The financial adviser across the table doesn’t (in my view) stand a chance — she’s incentivized to put you into high-fee products and doesn’t have a billionth of the knowledge and case studies of an LLM. In addition, she’s at a huge disadvantage as the person in front of them (you) is self-conscious and unlikely to be totally direct or honest — “I’m planning to leave my husband this fall.”

Coach in Your Pocket

We all crave access to experts. It’s why people show up to hear Scott speak. It’s why someone once paid $19 million for a private lunch with Warren Buffet. It’s why, despite all the bad press re: their ethics and ineffectiveness, consulting firms continue to raise their fees and grow.

But most of us can’t afford that level of human expertise. And the crazy thing is, we’re overvaluing it anyway. McKinsey consultants are smart, credentialed people. But they can only  present you with one worldview that has a series of biases including how to create problems only they can solve with additional engagements, and what will please the person who has a budget for follow-on engagements. AI is a nearly free expert with 24/7 availability, a staggering range of expertise, and — most importantly — inhumanity. It doesn’t care whether you like it, hire it, or find it attractive, it just wants to address the task/query at hand. And it’s getting better.

The hardest part of working with AI isn’t learning to prompt. It’s managing your own ego and admitting you could use some help and that the world will pass you by if you don’t learn how to use a computer, PowerPoint … AI. So get over your immediate defense mechanism — “AI can never do what I do” — and use it to do what you do, just better. There is an invading army in business: technology. Its weapons are modern-day tanks, drones, and supersonic aircraft. Do you really want to ride into battle on horseback?

Greg Shove

P.S. Last week Scott spoke with Stanford Professor and podcast host Andrew Huberman about the most important things we need to know about our physiological health. Listen here on Apple or here on Spotify.

 

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