Post Corona: From Crisis to Opportunity

by Scott Galloway

In every category, there will be more concentration of power in the two or three companies with the strongest balance sheets.

“If you need to be right before you move, you will never win. Perfection is the enemy of the good when it comes to emergency management. Speed trumps perfection. And the problem we have in society is that everyone is afraid of making a mistake.”

The trillion-dollar question is whether tech can disperse our workforce without reducing a culture of innovation and productivity. Six months ago, I still thought it could not. The virus doesn’t care about my management theories, however, and so here we are.

As of June 2020, 82% of corporate leaders plan to allow remote working at least some of the time, and 47% say they intend to allow full-time remote work going forward.

Success in the services industry is a function of your ability to communicate ideas and develop relationships. I loved the former and despised the latter—managing colleagues and being friends with people for money. The services industry is prostitution, minus the dignity. If you spend a lot of time at dinners with people who aren’t your family, it means you’re selling something that is mediocre.

The performative wokeness across brands felt forced and hollow. Systemic racism is a serious issue, and a 30-second spot during The Masked Singer doesn’t prove you are serious about systemic racism. That’s always been true, about ads on any issue, but social media and the ease of access to data on the internet has made it much harder for companies to pretend.

But when our relationships are online, the companies giving us this supposedly free stuff suddenly have all this data about us—what we read, where we shop, who we talk to, what we eat, where we live. And they are using that data to make more money off of us. We used to trade time for value. Now we trade our privacy for value.

The entire world is bifurcating into Android or iOS. Android users are the masses who trade privacy for value. iOS are the wealthy who enjoy the luxury of privacy and status signaling by shelling out $1,249 plus tax (more than one month’s household income in Hungary) in exchange for $443 in sensors and chipsets (what it costs to make an iPhone).18

In June 2020, it was revealed that TikTok scans the user’s clipboard every few seconds, even when the app is running in the background.19 The company promised to stop doing this (after a new iOS security feature caught it in the act), but if you used TikTok before the summer of 2020, you can assume that everything you’ve copied and pasted on your phone since you started using the app is now stored on a database in China under your name.

People are less awful when their name and reputation are attached.

Ad-supported platforms are incentivized to allow bots and Russian interference, and to provide more oxygen to ideas that lack merit but are incendiary. Rage equals engagement, which translates to more Nissan ads. Remember that time when Netflix or LinkedIn really pissed you off? That was Twitter or Facebook.

If there is any doubt that media is nicotine (addictive) but advertising is what gives us cancer (tobacco), compare and contrast the most successful media firms of the last decade: Google, Facebook, Netflix, and LinkedIn. Two are tearing at the fabric of society, the other two . . . are not. The difference? Facebook and Google run on rage as an engagement model; Netflix and LinkedIn are powered on a subscription model (note: approximately 20% of LinkedIn revenues come from advertising).22

These five companies make up 21% of the value of all publicly traded U.S. companies.

My investing advice is simple: I only invest in unregulated monopolies.

Defending a market is far easier than creating a new one.

The Covid-19 pandemic is an effective weapon of mass distraction from big tech’s bad behavior. No news story survives 12 hours while a pandemic coupled with a national display of incompetence renders everything else what it is, less important.

In at least one notorious case, Microsoft created fake error messages that appeared when a user installed competitive software.

In the ’90s, Bill Gates could keep a rival spreadsheet program from gaining traction. Today, Mark Zuckerberg can affect the outcome of a presidential election. Facebook is not merely plundering the technology budgets of America’s corporations, as Microsoft did, but our private lives and emotional wellbeing, and the health of our democracy.

So the shareholder-driven strategy for big tech is to demonstrate reckless abandon concerning elections, teen depression, kids with measles, radicalization of young men, and job destruction, as there appears to be little downside.

Laws written by the light of coal power don’t work against digitized monopolies. Traditional antitrust principles focus on consumer harm through the prism of prices. Low prices are good, high prices are bad. It’s not a framework well suited to companies that don’t charge consumers, like Google or Facebook, or that relentlessly lower prices, like Amazon (and Apple with Apple TV+), but that nonetheless limit competition and cause consumer harm in other ways besides high prices. Nor does the current mainstream antitrust framework account for the ability of these firms to consolidate markets and outcompete competitors through their unique access to billions in low-cost capital.

The pandemic in a business nutshell: Stuck at home Netflix Hate my spouse Starting to hate my children Jeff Bezos gets his divorce paid for in 30 days Mr. Bezos increased his wealth by approximately $35 billion in 30 days.

Bezos told investors that the $4 billion in profits they were expecting would be reinvested. The investment had a theme: Covid-19. Specifically, Bezos outlined a vision for at-home Covid tests, plasma donors, PPE equipment, distancing, additional compensation, and protocols to adapt to a new world.17 Amazon is developing the earth’s first “vaccinated” supply chain.

believe Amazon will offer Prime members testing at a scale and efficiency that makes America feel like South Korea (competent). The “vaccinated” supply chain, as tested and safe as possible, will create a more muscular and immune fulfillment organism, offering stakeholders paramount value—real and perceived.

But that’s just the beginning. Amazon is well positioned to address the financial cost of healthcare, and better positioned to reduce the non-financial costs—time, effort, and anxiety. Your son has a rash, and you ask Alexa to connect you with a dermatologist, who asks you to hold up his arm to the intelligent camera. The dermatologist is likely not an Amazon employee, because that part of the business doesn’t scale. Instead she pays a percentage of her revenues to “Prime Health,” what I think Amazon might call the most robust, liquid remote healthcare platform on the planet.

The source of this firepower (cheap capital) will arrive on the day they announce a healthcare service, and the stock increases over $100 billion that trading day.

There is only one path to a dramatic increase in stakeholder value in the face of flat/declining revenues: The rundle—my term for “a recurring revenue bundle.”

Apple

“What would you do if you were Mark Zuckerberg?” Tim Cook fired back, “I wouldn’t be in this situation.” Apple, he pointed out, had chosen not to turn its customers into products for data mining. “Privacy to us is a human right.” Facebook, you’re no Jack Kennedy, and you’re fundamentally fucked up.

Peloton riders are fanatics. The wildly popular Official Peloton Member Facebook page has over 330,000 members. This cohort posts 23 times an hour and interacts with high engagement. Just as The League introduces Ivy League socialites to each other, JDate connects Jewish singles, and Raya connects models and the social elite, Peloton could begin connecting fitness-minded singles who become more engaged, riding and swiping.

So, a tech hardware firm is devoting the same capital to content featuring Reese Witherspoon and Khal Drogo (Jason Momoa) as the state of California allocates to the 23-campus California State University system.21 If it sounds as if we’re living in a dystopia, trust your instincts.

As a result, Apple is also in a position to offer a Prime-like rundle. Just send me the latest iWhatever with unlimited media (television, games, apps) activated on the good phone at $50 a month, $100 for the better phone plus watch, and $150 for online classes on design and UX/UI and an iPeloton.

And a pandemic that keeps us home in front of our screens and leaves the professional class with plenty of unspent income is hardly a crisis at all for the companies that sell us those screens and dominate what we do on them. The Four were already ascending to dominance, and the pandemic has accelerated that trend, just as it has so many others.

College tuition has increased 1,400% in the past 40 years.1 A red flag for disruption.

Insurance comes by this naturally, as the business model consists of charging a consumer indefinitely and deploying resources to avoid ever delivering the benefit.

The pandemic has laid bare the soft tissue of sectors whose major innovation has been price increases.

our reliance on centralized facilities, emergency room services in particular, might catalyze a tsunami of innovation around remote medicine and telehealth.

Pete tjx

The T Algorithm, which I developed in The Four, and have refined since, defines some of these key qualities. The T stands for “trillion”—these are the traits that give a company a chance at a trillion-dollar valuation. The eight elements of the T Algorithm are as follows: Appealing to human instinct Accelerant Balancing growth and margins Rundle Vertical integration Benjamin Button products Visionary storytelling Likability