Post Corona: From Crisis to Opportunity

by Scott Galloway

I begin with two theses. First, the pandemic’s most enduring impact will be as an accelerant. While it will initiate some changes and alter the direction of some trends, the pandemic’s primary effect has been to accelerate dynamics already present in society. Second, in any crisis there is opportunity; the greater and more disruptive the crisis, the greater the opportunities.

What opportunities await us post corona? The pandemic has a silver lining that could rival the size of the cloud. America overnight has a greater savings rate and fewer emissions.

the forced embrace of remote learning, as clunky and problematic as it has been, could catalyze the evolution of higher education, yielding lower costs and increased admittance rates,

nutrition stands on the precipice of revolution, if the dispersion of grocery via delivery creates opportunities for more efficient distribution, wider reach for fresh foods, and adoption of local goods.

Despite having longer to prepare, spending more on healthcare than any nation, and believing we are the most innovative society in history, with 5% of the world’s population the U.S. has endured 25% of the infections and deaths.

Companies with cash, with debt collateral, with highly valued stock will be positioned to acquire the assets of distressed competitors and consolidate the market.

The thing about capital market predictions is that they are to an extent self-fulfilling. By deciding that Amazon, Tesla, and other promising companies are winners, the markets lower those companies’ cost of capital, increase the value of their compensation (via stock options), and enhance their ability to acquire what they cannot build themselves.

Perfection is the enemy of the good when it comes to emergency management. Speed trumps perfection.

Flexibility around working from home may be by far the most appreciated perk you can offer.

Cash is great for survival purposes, but the real gangster move is to be capital light, that is, to have a variable cost structure.

The second an Uber car stops making the company a profit, it effectively disappears and costs the company nearly nothing. Revenue can go to zero in a crisis, and Uber can take its cost down 60–80%. Hertz, on the other hand, owns its cars and went bankrupt.

The gig economy is attractive for the same reasons that it’s exploitative. It preys on people who have not been casted into the information economy, as they didn’t have access to the requisite credentialing or can’t work a traditional job—they might be a caregiver, have a health condition, or just not speak great English. Uber preys on the disenfranchised, and offers subminimum wage work that is flexible and has few start-up costs.

The trillion-dollar question is whether tech can disperse our workforce without reducing a culture of innovation and productivity.

We crave contact, but not surveillance.

Many people don’t have home setups comfortable enough to spend eight to ten hours a day in. Do you do an audit of home office needs and buy a few people good chairs? Do those who already have chairs get a speaker? Do you buy everyone a good mic or just give them gift cards for office supply stores? The options will depend on the size of your team and your budget. The important thing is to show awareness and support.

Part of working from home is the ability to work at different hours than the rest of your team, allowing for family needs like caretaking, side gigs, or hobbies that contribute to a work-life balance.

Judge performance, not the schedule.

remote work will be a means of increased income inequality. Sixty percent of jobs that pay over $100,000 can be done from home, compared to only 10% of those that pay under $40,000. This is a major contributor to the pandemic’s disparate impact across income levels (low-income workers are nearly four times as likely to have been laid off or furloughed as high-income workers). Post corona, the benefits of increased flexibility that come with remote work alternatives will flow to the already well off.

Senior people with big houses in the suburbs have dedicated office rooms and equipment, many have even worked out full-time childcare, or their kids are old enough they don’t need constant supervision. Junior people, on the other hand, are more likely to live in cramped apartments and starter homes that don’t have dedicated workspaces.

Success in the services industry is a function of your ability to communicate ideas and develop relationships.

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.

Tivo allowed those with extra disposable income to trade it for something even more valuable: their time. Once you owned a Tivo, with just a little patience and prior planning, you never had to watch a commercial again. Advertising became a tax that only the poor and technologically illiterate had to pay.

If Tivo marks the beginning of the shift from the Brand Age to the Product Age, the summer of 2020 saw the Brand Age’s end. The killing of George Floyd and subsequent protests briefly displaced the pandemic in the front and center of our national consciousness, making obvious the passing of the Brand Age into history.

Companies who posted about their “support” for black empowerment were called out when their own websites revealed the music did not match the words. The NFL claimed it celebrates protest, and the internet tweeted back, “This you?” under a picture of Colin Kaepernick kneeling. L’Oréal posted that “speaking out is worth it” and got clapped back with stories about dropping a model just three years earlier for speaking out against racism.

social media and the ease of access to data on the internet has made it much harder for companies to pretend.

The losers in this transition are the media companies that provided platforms for the big and bold brand-building advertising of the Brand Age, and the creative-driven ad agencies that made them. If you make your living on the back of 30-second spots featuring award-winning ad copy and talented actors connecting emotions to products, this is not the future you were hoping for.

There are two fundamental business models. One, a company can sell stuff for more than the cost of making it. Apple takes about $400 worth of circuits and glass, imbues it with the promise of status and sex appeal through brilliant advertising, and charges me $1,200 for an iPhone. Two, a company can give stuff away—or sell it below cost—and charge other companies for access to its product: the consumer’s behavioral data. NBC hires Jerry Seinfeld to write a TV show, films dozens of episodes on a studio lot in LA made to look like a sanitized version of Manhattan, then beams it out for free to anyone with a subscription to watch. But every eight minutes, NBC interrupts the witty banter with several minutes of ads, for which it charges the advertisers, who are its actual customers. The product, of course, is you. Some businesses combine both. The NFL gets about a third of its revenue from the first model: selling tickets to fans at the games and selling clothes and other items with NFL logos on it. And it gets about two-thirds of its revenue from selling access to those fans to advertisers, from 5-million-dollar Super Bowl ads to the corporate logos plastered over every available square foot in the stadium. As we move into a tech-based economy, however, that second business model becomes both more lucrative and more troubling.

We used to trade time for value. Now we trade our privacy for value.

Android versus iOS offers you a choice between a decent product for low or no upfront cost, but the sacrifice of your data and privacy, versus a higher quality, better-branded product, for much more cash up front, but much less exploitation on the back end. Android phones poll 1,200 data points a day from their users and send that back to the Google data-mining mother ship. iOS phones pull 200, and Apple bends over backward to emphasize that data is not being used for profiteering. “The truth is,” Apple CEO Tim Cook said in 2018, “we could make a ton of money if we monetized our customers, if we made our customers our product. We’ve elected not to do that.”17 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

Netflix, on the other hand, operates a blue/iOS model. You pay, and you get content. You are the customer, and the content is excellent. YouTube, on the other hand, is worse in quality but free—if you don’t mind the data mining and the chance your children will be turned into white nationalists.

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

Expect to see this divide emerge in more and more industries. Low-cost players from airlines to fast food will seek to take advantage of customer data and pass the savings on to their advertising resource units . . . oops, I mean customers. Premium players will wrap themselves in the blue flag of privacy and collect a nice margin for the courtesy of not exploiting their customers’ data.

People often ask me what stocks I own. My investing advice is simple: I only invest in unregulated monopolies. They aren’t supposed to exist, but our antitrust laws were written in the era of steam engines, and enforcement has been nonexistent.

Just by buying Jet, Walmart went from 6% to 16% of sales online. Even though, in isolation, Jet.com wasn’t likely worth $3 billion, it was worth $3 billion to Walmart.

the time of the acquisition, Walmart’s ecommerce growth was slowing, but after the deal, and since it put Jet.com founder and CEO Marc Lore in charge of its entire ecommerce operation, online sales are up 176%.2 And Walmart’s stock price has nearly doubled.

whether we are paying attention or not, unchecked growth and market dominance lead to a slew of problems. Inevitably, companies without serious competition become less innovative and capture more profits and share from exploiting their position, and less from creating real value. And to protect that position, they perform infanticide on other innovators.

Microsoft was also fond of “vaporware”—announcing a product or feature to compete with a competitor, even though no such product would ever be released. In at least one notorious case, Microsoft created fake error messages that appeared when a user installed competitive software.11

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.

freedom of speech isn’t freedom of reach. Highly sophisticated Custom Audience algorithms can do a lot of damage to the democratic process when false or misleading ads can be targeted only to specific susceptible voters, rather than a large audience able to evaluate and critique them publicly.

We should stop thinking of the breakup of big tech as punishment for doing something wrong, or that it means tech leaders are bad people. Managers do what they can to raise shareholder value, that’s their job. And when you get big enough, stifling competition and exploiting your power is a great way to secure short-term gains for your shareholders, so that’s what managers do.

Antitrust is just one tool in the government’s kit for addressing the dangerous power of big tech.

But other regulatory regimes may be needed to control big tech’s abuse of our private data and its relentless promotion of misinformation and divisiveness.

Decades of success fighting wildfires leads to fuel buildups that trigger even more destructive infernos.

One of Amazon’s arsenal of gangster moves is turning expense lines into revenue lines. It’s one of Bezos’s best tricks, and like so much else they do, it is made possible by a combination of scale and ultra-low-cost capital. This is how it works. First, a company gets really good at its essential, but non-core, business functions. Amazon is an online store, so it needs a great web back end, which means a superior data center. World-class data centers are essential to Amazon’s business, but running them is not its core business. The way most companies get really good at stuff like this is they pay someone else to do it. That’s what business gurus have preached for decades: focus on your “core competencies” and outsource everything else. Amazon flips this around. It doesn’t pay someone else to run its data center. It takes advantage of its massive data center volume, and its ability to invest essentially unlimited capital, and the company builds the best data center management competency on the planet. That’s step one. Step two is Amazon turns around and starts selling that competency to other companies as a service. Thus is born AWS, the largest cloud services provider by a wide margin.

Amazon did the same thing with warehouse and distribution, first erecting the ability to deliver millions of products in 48 hours, then offering the service to other retailers through Amazon Marketplace. Now over 20% of Amazon’s revenue comes from Marketplace. Payments used to be 2% of Amazon’s costs, so they turned that into an R&D expense and spun out Amazon Payments.

Apple owns the most profitable product ever made, the iPhone, and sells it through the highest per-square-foot retail business of all time, the Apple Store.

People love WeWork and Uber as I loved Pets.com and Urban Fetch. A 60-pound bag of dog food and a pint of Ben & Jerry’s delivered the next day or hour for less than cost was awesome, except for shareholders. Value is a function of growth and margins. As they did in the ’90s, many of today’s unicorns have deployed massive capital to achieve the former while not demonstrating the value proposition to achieve the latter.

The charismatic founder speaks in a characteristic dialect: yogababble. That’s our term for abstract or spiritual-sounding language in IPO’s S-1s, a company’s formal disclosure before going public.

The cheap capital economy that offers disruptors the opportunity to pull the future forward sucks oxygen from the incumbents, who are forced to retrench (layoff, cuts in CapEx) as the new kids on the block can lean into new investments and hiring. It becomes a self-fulfilling prophecy—incumbents are forced to play defense in order to maintain profits their investors have become addicted to. This further weakens the incumbents, giving the disruptors more momentum as market share gains become easier with sector elders weakened.

Sectors that have raised prices faster than inflation, without an equivalent increase in innovation, are the sectors where disruption is more likely.