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.

Second, in any crisis there is opportunity; the greater and more disruptive the crisis, the greater the opportunities.

Ecommerce began taking root in 2000. Since then, ecommerce’s share of retail has grown approximately 1% every year. At the beginning of 2020, approximately 16% of retail was transacted via digital channels. Eight weeks after the pandemic reached the U.S. (March to mid-April), that number leapt to 27% . . . and it’s not going back. We registered a decade of ecommerce growth in eight weeks.

It took Apple 42 years to reach $1 trillion in value, and 20 weeks to accelerate from $1 trillion to $2 trillion (March to August 2020). In those same weeks, Tesla became not only the most valuable car company in the world, but more valuable than Toyota, Volkswagen, Daimler, and Honda . . . combined.

Three of the largest, and most important, consumer categories in the U.S. (healthcare, education, and grocery) are in a state of unprecedented disruption and, possibly, progress.

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

Share buybacks have always been ticking time bombs, trading the long-term future of the company for short-term investment returns, and now those bombs are detonating.

If the strongest asset is the brand, but the business is in structural decline, think seriously about milking the brand until it dies.

In sum, the best that many second-tier players with no rainy-day fund can do is look for a graceful exit that protects employees and doesn’t leave customers in the lurch.

“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 post-corona world will prize contactless transactions of all kinds.

In terms of digital, anything you can do to save your customers time will build your NPS (Net Promoter Score) more than flowery marketing language about “these unprecedented times.” Cut to the chase, make your site as efficient as possible, save me time.

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

From the beginning of March to the middle of April, online grocery sales increased roughly 90%, while food-delivery sales melted up 50%.7 The infrastructure this shift has inspired, from warehouses to entrenched customer relationships, will survive the pandemic and change our food system.

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

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.

Home improvement purchases were up 33% in March, even as much of the country went into lockdown—if people are going to be stuck in their homes, working from home, it’s time to tackle those home improvement projects.

The normalization of work from home may help create greater opportunities for women. Women under 30 who don’t have children have closed the pay gap with their male counterparts. Once women have kids, they go to 77 cents on the dollar relative to their male counterparts.

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.

Post corona, the benefits of increased flexibility that come with remote work alternatives will flow to the already well off.

Flexible spaces where people can work alone or in teams, distributed throughout cities and beyond, sounds like the future.

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.

Seemingly every brand company did what they always do when America’s sins are pulled out from the back of the closet where we try to keep them hidden: they called up their agencies and posted inspiring words, arresting images, and black rectangles. Message: We care. Only this time, it didn’t resonate. Their brand magic fizzled.

In the Brand Age, a wealthy traveler new in town tells his cabdriver to take him to the Ritz, because that’s the brand he knows. In the Product Age, this valuable customer checks her phone as she gets off the plane, learns that the Ritz is being renovated, and that reviewers believe it’s overpriced, and she crowdsources a recommendation for a new boutique hotel in a hipper neighborhood.

The Google-Facebook duopoly’s share of the digital ad market is predicted at 61% in 2021.14

During the Great Recession, the luxury hotel brand had to cease all print advertising as revenue per room had declined 25%. And a strange thing happened when demand returned: the absence of print marketing didn’t seem to make any difference. Multiply this phenomenon by a million, and you have what will happen—thousands of the biggest advertisers globally are about to use this forced abstinence from broadcast media (with business down 30–50%) to kick the habit, and never return.

Radio advertising is projected to decline 14% in 2020.

Among U.S. media firms, the death rate will be ten times higher. Firms ranging from Condé Nast to Viacom have furloughed and laid off people as Facebook and Google have ramped up hiring.

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.

As we move into a tech-based economy, however, that second business model becomes both more lucrative and more troubling. In the old days of advertising, we only had to give up some of our time and attention to get the free stuff the advertising paid for. 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.

Google tracks your views, associates it with everything else it knows about you (quite a lot), and uses all that data to sell ads to you and the many cohorts you are part of. 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.

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

Shopify’s value proposition is simple, and powerful: we are your partner. You control the data, the branding, and custody of the consumer. Brand building is the science of building goodwill that can be monetized.

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.

We are witnessing the rise to dominance of a subset of American companies.

One sector has outdone all the others in the pandemic: big tech. Tech leaders from Netflix to Shopify, and tech-adjacent Tesla, have done exceptionally well. The biggest of the bunch are the companies I call “the Four” (Amazon, Apple, Facebook, and Google), along with Microsoft. These five were up 24% at the 2020 midpoint, with an aggregate market capitalization gain of over $1.1 trillion.

By mid-August, their year-to-date return had soared to 47%, for a gain of $2.3 trillion. Their combined heft is unprecedented.1 These five companies make up 21% of the value of all publicly traded U.S. companies.

I only invest in unregulated monopolies.

Netflix is perhaps the only other company to have accomplished what Amazon has pulled off by convincing the markets to essentially give them a blank check for customer acquisition and infrastructure investment on the strength of a vision.

Netflix likely needs to bulk up. First move is to acquire Spotify, another pursuer of the throne with great assets and potentially fatal weaknesses. Together, they snatch up Sonos, and have music and video, along with a physical presence in the home to help fend off Alexa and Siri. That would give Netflix even more daylight.

Media has become a customer acquisition vehicle vs. a stand-alone business. So, the firms with the most seamless means of speedballing the media crack will win.

One way to know when big tech is seriously threatening established players is when the established players forget what made them great and start doing dumb things. Cue HBO Max.

Luxury is about artisanship and scarcity.

But 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.

For today’s big tech, the stakes are higher, because their power and potential for exploitation delves deeper into our lives and society. 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.

When companies become “too big to fail,” they realize taking outsized risk is the right strategy, as the upside is privatized and the downside socialized—they get bailed out.

It seems big tech firms rarely if ever consider the implications of their product design and policy decisions. Or they do, and still knowingly sacrifice the wellbeing of the commonwealth for private profit.

Now, anyone can reach an audience of millions, and sophisticated actors can deliver millions of individually customized messages to cohorts biased in specific ways as to be highly susceptible to targeted persuasion. As has often been said, freedom of speech isn’t freedom of reach.

One of the biggest risk areas is that regulatory regimes meant to rein in big companies end up benefiting them, because they are the only companies with the resources to develop internal compliance teams and systems.

Every big tech firm must implicitly, or explicitly, assure investors there is a reasonable chance their stock will double in the next five years.