Post Corona: From Crisis to Opportunity

by Scott Galloway

a firm’s ability to attract talented employees is one of the most important contributors to success.

Typically speaking, margins are in conflict with growth. There are some companies that take very low margins, like Walmart, and as a result are able to grow faster because they don’t charge much additional margin for their value-add. In contrast, if a firm has high margins, it usually has lower growth and lower potential for scaling.

Benjamin Button products. Products or services that age in reverse (get more, rather than less, valuable to users over time) due to network effects.

on Spotify, more artists means more users, which means more personalization of playlists, including sharing your playlists with friends, which makes it that much more fun for you to be on Spotify, which draws more artists, etc.

Telling a compelling story unites employees and attracts top talent and cheap capital. But it’s not enough only to inspire—the firm has to actually deliver on its promises.

This is the definition of good marketing and business strategy—finding products for your consumers vs. finding consumers for your products (piling stuff high in a store and hoping people buy).

Netflix has used that capital not just to build out its streaming infrastructure (which is impressive enough), but to recast what “value” means in entertainment: For every dollar per month, the consumer receives a billion dollars’ worth of content. A $10 movie ticket to a $100-million movie gets you a mere $10 million per dollar, and you can only access it for two hours. Netflix gives you a 100 times the value with on-demand access in a theater that has captured more capital investment and innovation than any chain of multiplexes: your living room.

Buying a Tesla is the ultimate status symbol. Most products indicate one of two things: “I’m rich” or “I have a conscience.” But Tesla does what only philanthropy offers . . . both. Plus, it says: I’m an innovator. I’m ahead of the curve. Put another way, I have genes paramount to the survival of the species; you have a biological imperative to mate with me.

“Remote with Cowork Stipend” appearing on the comp line of more and more job descriptions, and companies limiting their permanent footprints drastically, relying instead on flexible space arrangements with partners like WeWork 2.0.

You could argue that at this point, the Ivy League undergraduate programs are not colleges, but hedge funds that educate the children of their investors.

Understanding the pandemic effect on higher education requires understanding higher education’s value proposition. In exchange for time and tuition, college offers three components of value: a credential, an education, and an experience.

In short, schools that offer an exceptional credential will be fine. Schools that offer a solid education at a great price are also well positioned.

Simply taking a college lecture course and putting it on Zoom is not e-learning in any but the most rudimentary sense, and students are predictably dissatisfied. That will change. Schools are putting their faculty through training programs, teaching them how to use the available tools, how to restructure their classes, how to migrate online.

“The median faculty member went from ‘online education over my dead body,’ to ‘I’m not stepping foot in a classroom until there’s a vaccine,’ within two weeks.”

online education does something else. It scales.

Scale will allow individual institutions—and individual professors—to exponentially expand their reach. This provides the potential to correct one of the great inequities of the last half century—the artificial scarcity of elite education.

The rookie move is to believe that MOOCs or stand-alone education start-ups will be the big winners. (Searches for “MasterClass” have eclipsed “business school.”) They won’t. Why won’t MasterClass be a disruptor long-term? Because MasterClass sucks. Young people don’t gain value learning from celebrities, but from teachers, who can give them the skills to become celebrities.

The second-greatest accretion of stakeholder value in business, behind Amazon’s entry into healthcare, will be big (and some small) tech firms partnering with world-class universities to offer 80% of a traditional four-year degree for 50% of the price.

MIT and Google could jointly craft two-year degrees in STEM. The myth/magic of campuses and geography is no longer a constraining factor—most programs will be hybrid soon, dramatically increasing enrollments among the best brands. MIT/Google could enroll a hundred thousand students at $25,000 per year in tuition (a bargain), yielding $5 billion for a two-year program that would have margins rivaling . . . MIT and Google. Bocconi/Apple, Carnegie Mellon/Amazon, UCLA/Netflix, University of Washington/Microsoft . . . you get the idea. University brands are the premier luxury brands globally, built over centuries,

One thing we should not do? Free college. That’s a populist slogan and a bad idea. It’s a further transfer of wealth from the poor to the rich. Only 32% of Americans go to college, and cost is not what keeps the most exceptional kids of any income level from getting to college. Improve K–12 education, strengthen two-year programs, expand the seats at the best universities, and college becomes an engine of upward mobility—without leaving behind the two thirds of people whom (better) high school serves well. College needs to be more affordable, but we don’t need to subsidize the wealthiest households in America, who send 88% of their children to college.

On airplanes, we are told to put our own oxygen mask on before we assist someone else with theirs. That captures capitalism—get your own first, and put yourself in a position to help others. It’s selfishness that ultimately benefits others as well.

Capitalism in itself has no moral compass. The problems of unfettered capitalism are all around us. There are externalities: costs (or benefits) of activity that are not borne by an actor. Pollution is the paradigmatic externality. Acting purely for its profit-seeking self-interest, General Motors would pour the toxic waste it creates into the river behind the factory. That would mean less-expensive cars, but dire consequences for those who live and work downriver. That’s not to demonize GM. If it doesn’t get rid of waste in the cheapest possible way, its competition will, putting GM out of business with cheaper cars. Marx called this “the coercive law of competition,” and it has no exceptions for Good Samaritans.

Government’s charge is to stop GM from pouring toxic waste into the river. Indeed, by outlawing the wanton disposal of toxic waste, we allow GM to process waste in a more enlightened fashion, because we remove the threat that its competitor will take the cheaper route.

The libertarian argument, which is popular in tech today, is that this form of regulation and redistribution is inefficient, that left to its own devices the market will regulate itself. If people value clean rivers, the argument goes, they won’t buy cars from companies that pollute. But history and human nature show that this does not work. On a case-by-case basis, people will almost always take the cheaper alternative. Nobody wants to see children working eighteen hours a day in a clothing factory, but at the H&M outlet, the $10 T-shirt is an unmissable bargain. Consumer purchases are purposefully difficult to reverse engineer to bad actors.

As consumers, we use our fast thinking.5 So, we need government to slow our thinking, consider the long term, and register moral and principled concerns. Keeping these forces in balance—the productive energy of capitalism and the communal concerns of government—is key to long-term prosperity.

Rather than let companies fail—a defining and essential feature of capitalism—we have bailouts.

Crisis after crisis, our rationales vary: After 9/11 it was national security. In 2008 it was liquidity, and in 2020 it was protecting the vulnerable. But our response is always the same. Protect the shareholder class, protect the executive class. Keep these firms on life support so their owners and managers don’t suffer. Pay for it with debt, a burden to be borne by middle-class taxpayers and, ultimately, by our children.

I write about tech executives, but I mostly refuse to meet with them. In part because I’m an introvert and don’t enjoy meeting new people. But also because intimacy is a function of contact. Often when I meet someone, I like them as a person, feel empathy for them, and find it harder to be objective about their actions.

I wish politicians would adopt a similar policy. It’s difficult for our elected leaders not to shape public policy around the concerns and priorities of the superwealthy when the wealthy few have much more access.

the top 0.1% now own more of the nation’s wealth than the bottom 80%.11 The three richest Americans hold more wealth than the bottom 50%.

When I sold my last company, L2, in 2017, I paid an effective tax rate of 17–18%. I paid 22.8% federal, but the first $10 million were tax free, thanks to Section 1202 of the tax code. Section 1202 is a tax break for early shareholders, meant to encourage start-ups. Only it’s nothing but a transfer of wealth from other taxpayers to venture capitalists and founders. No entrepreneur starts, or doesn’t start, a business because of the tax code. It takes a special kind of crazy to start a company and a lot of talent, work, and luck to build it to be something you can sell for millions of dollars. The decision has nothing to do with the tax code. Tax breaks for the successful are just another way we deepen inequality.

People who take their own life are eight times more likely than average to be in debt.15 For every 100 points your credit score increases, your risk of dying in the next three months declines by 4.4%.

Study after study has found that in today’s America, the biggest determinant of an individual’s economic success is not talent, it’s not hard work, and it’s not even luck. It’s how much money their parents have. The expected family income of children raised in families at the 90th income percentile is three times that of children raised at the 10th.18 Economic mobility in the United States, on a range of measures, is worse, in many cases much worse, than in Europe and elsewhere.19 Want to live the American dream? Move to Denmark.

higher education in the U.S. has morphed from the lubricant of upward mobility to the enforcer of our caste system.

My experience is that most very successful people have a few things in common: grit, luck, talent, and a tolerance for risk.

the 0.1% will use their skills and resources to ensure their firm has an advantage over others, that their children have an advantage over others, even if that means turning a blind eye to externalities (environmental standards, monopoly abuse, tax avoidance, teen depression). We all want the best for our kids, and our system gives us the option to buy a better education, to pay for better cultural development, and to provide more opportunity for our offspring. Most everyone cares about the long-term health of our society, but first we focus on ourselves and our own.

In 1990s San Francisco, between the age of 34 and 44, I raised over $1 billion for my start-ups and activist campaigns. I didn’t know a single woman, or person of color, under 40 who raised more than $10 million. And it seemed normal. Even today, white men hold 65% of elected offices despite being 31% of the population.24

When we put the 0.1% on a pedestal, we crowd out teachers, social workers, bus drivers, and farmworkers from the respect that is due to them. We tell them they are less, that they have failed. That any economic disadvantages they face are their fault, their birthright even. That’s not capitalism, that’s a caste system—and

This is why we need a strong government, to counter human nature, to balance fast thinking and selfishness with slow thinking and community.

The biggest companies are increasingly getting their profits from exploiting another fertile target—their own consumers. There’s no such thing as a free social network app. Instead, companies are increasingly using algorithms to leverage our weaknesses as a species.

Platforms including Facebook, Instagram, and Netflix have systematically eradicated stopping cues—similar to casinos, which deliberately have no hard angles, only one continuous space to keep you moving through it, on to the next wager. Netflix has become an endless show; TikTok, an endless video.

Unlike our parents and grandparents, for us dopamine release no longer depends on sacrifice, engagement, or grit, but on sitting still,

The latest industry to discover this particular form of digital crack are online trading platforms (OTPs). What does endless scroll look like on a trading platform? Download Robinhood (at your own risk):

Government—like private enterprise—can be inefficient and ineffective. But as Yale Law professor Daniel Markovits, author of The Meritocracy Trap, points out, government can also be incredibly efficient. A family with $60,000 annual income pays about $10,000 per year in taxes. In exchange, that family gets roads, public schools, environmental protection, national security, fire, and police—try assembling that as a package of private services and see what it costs you. That same family probably pays $3,000 a year to the Comcast Corporation for cable, internet, and mobile. Cable sucks, and the internet speeds in the U.S. are inferior to other advanced nations. In other words, government can be very efficient when we work together.

We don’t pay teachers enough, our schools suffer, and we lose respect for public schools. We don’t pay government scientists and researchers enough (and we don’t listen to the ones we do hire), and the best and the brightest go instead to Google or Amazon. Then we ask the DOJ and the FTC to restrain these corporate titans, but we tie their hands, allocating a fraction of the resources private companies deploy. Amazon has more full-time lobbyists in DC than there are sitting U.S. senators.

We should not rely on billionaires to save us. When your house is on fire and the wealthy guy from down the block shows up with a better hose to put out your fire, that doesn’t mean we need more rich people on the block. It means we need to fund the fire department. Philanthropy is less reliable and less accountable, and it doesn’t scale well.

Pure democracy is populism (dêmos is Ancient Greek for “ordinary citizens”). The innovation is institutions that slow democracy down and filter it through legislature, courts, and agencies. The media, too, is meant to have a countervailing effect—people with domain expertise who can say, “Let’s interrogate the issue before banning immigrants from certain countries, removing grizzlies off endangered species lists, adding a citizenship question to the census, or restricting access to birth control because people in power at that moment decide it’s a good idea.”

The most important thing we can do is also the easiest. Vote. Vote in off-year elections. Vote in local elections. Because elected officials are defining government right now, and they respond to the demographics of the voting population.

we should elect officials who believe in government, understand the threat of concentrated private power, and respect science.

start with the people and work up. Don’t start with shareholders and work down. Shareholders are supposed to lose, that’s how capitalism works. The priorities are these: Protect people, not jobs. Protect jobs, not corporations. Protect corporations, not shareholders.