Disney's Hulu Deal, UAW Strike Impact, and Guest Chris Krebs

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Kara Swisher: Hi, everyone. Kara here. After we taped this episode, FTX founder Sam Bankman-Fried was found guilty on seven charges of fraud and conspiracy. He was convicted on all counts that the prosecutors had leveled against him in a jury decision that came really quickly. The case, it's just as we predicted. We felt that he was a thief, plain and simple, and that the jury would see that right away. Others had thought and then made the argument that he was just a sloppy manager and seemed to have misplaced billions of dollars of other people's money somewhere else. When in fact, what he did was what the top federal prosecutor in New York, Damien Williams, said was this kind of corruption is as old as time, even if the crypto industry is new. And that is true. We'll dig into that more next week. But for now, enjoy today's show.

Kara Swisher: Hi, everyone. This is Pivot from New York Magazine and the Vox Media Podcast Network. I'm Kara Swisher.

Scott Galloway: And I'm Scott Galloway.

Kara Swisher: Scott, how much fun did you have on our trip to the White House?

Scott Galloway: Well, first of all, it was really exciting to be there. It was intimidating. All these people were coming up to us, but it was wonderful. The woman next to me, this lovely woman, Dr. Geraldine Richman, on leave from the University of Oregon to serve our country, introduced herself. She ended up being a deputy undersecretary of energy. She's this brilliant professor with a background in chemical engineering and had won a national science prize. It was just inspiring that somehow the government goes to the far reaches of our nation and finds these incredibly important people and convinces them to move to Washington. I thought Vice President Harris did well. I think this is something she can own. But also, it was lovely. You were like, I won't call you my mom, but my older sister going, that's the situation. You seemed to enjoy seeing the White House through my eyes for the first time. I was very flattered.

Kara Swisher: Yeah. Scott had never been to the White House. And we went to the lovely John McCarthy. That's right.

Scott Galloway: Thank you, John. And Ray Montoya, two people, let's call them out particularly. Ray gave us the quickest tour in America of the White House. He does advance for President Biden and is a fan of the show. And John McCarthy took us to lunch at the, who works for Steve Verschetti, who's a top advisor to Biden. Also a terrific young person, smart, engaged, working. I think you were impressed.

Kara Swisher: We had lunch and then we walked around the White House and then we went to the event, which was... What was the name of the Navy room? What was the name of the room we had the lunch in?

Scott Galloway: The mess, the White House mess. It's a naval-themed thing. Food was good. And the staff was amazing. What they were trying to show is the situation room is literally across from the... It's like next to the snack room. It was impressive yet informal at the same time.

Kara Swisher: At the same time. And I have been down there for, I won't go into the reasons why, but.

Scott Galloway: That's a flex. That's a flex.

Kara Swisher: My ex-wife worked there. And it just used to be, it's much more accessible.

Scott Galloway: That's such a flex. Jesus Christ. I'm so important I can't disclose what my meetings were about at the White House.

Kara Swisher: No, no, no, no. But yeah, I mean, weren't you amazed by how open the White House was too? Like how so many people are wandering around.

Scott Galloway: I was impressed by how many people are walking around with machine guns.

Kara Swisher: Oh, yeah, that's true. You don't need those.

Scott Galloway: Oh, my God. They could literally, they could take on an army. I mean, if aliens land, be careful. They're ready.

Kara Swisher: Yeah, well, you saw White House down. They have to. They had, we met the florist.

Scott Galloway: Yeah, they have a florist. Go, what's with that?

Kara Swisher: We saw all the flowers. And we took pictures. We took lovely photographs. And we were, well, we saw Chuck Schumer from a distance. He was sitting in the front row. Give me your assessment of the Biden situation.

Scott Galloway: Look, I've been pretty vocal. He addressed the crowd just for people. He addressed the crowd. But he's got, to a certain extent, in a situation like this, I think especially with the war in the Middle East, his age has turned into a feature as opposed to a bug. The thing I noticed about him live is that he's able to kind of laugh at himself. A couple of times he rolled his eyes when he was talking about technology. He's just very comforting. When you meet these people, and I didn't meet them, but when you're in the proximity, it's hard not to be odd and impressed by how impressive they are to pull this off and do this stuff. It's very important. The majesty and the heft and the importance of the whole event, you get very, I mean, you feel very patriotic, you feel very grateful. And you also feel a lot of admiration for these people. The thing I would say about President Biden and the reason I'll work for him and canvas for him and maybe give a little bit of money is that if there was a coach of a team and he was older than you'd like, that's bad. But if everyone around him, his trainers, his coaches, his strength conditioners, the people running the venue, the people marketing the team were outstanding, you'd want that team in place. The thing that struck me when I was at the White House is just everyone I met there, I thought, Jesus Christ, this person is impressive. So I like the team and the team with the best players wins. So it did what it's supposed to do. I came away very impressed.

Kara Swisher: Here's why I start taking you. When he's on prompter, he seems older. When he's not on prompter, when he made all those asides, he seemed like he's very likable. Pretty good shape. Very likable. Very fast on his feet. Very thinking. He gets subtlety. He's funny. I'm saying the prompter is the problem. I actually told this to one of his aides. I was like, when he's on the prompter, he seems older. When he's not, he's like a pretty witty older man kind of thing. He's also in quite good shape. I mean, especially comparatively. He's very fit. And I think he did a good job in introducing it. And then Vice President Harris also did. We also met Tony Blinken, right, walking up the street, like walking up executive.

Scott Galloway: I got to be honest, Kara, I've always mocked you for your name dropping. You are the definition of soft power. We're walking around and you see, it's like, I kept thinking they modeled this place after the set of Veep because my total frame of the White House is through the show Veep. And you see this photogenic man walking up with all of these young, impressive people trying to get 10 seconds of his time and then descending to the back of the crowd as they follow him, like something out of a movie. And the guy literally stops, looks at you, and then throws his arms up and goes, Kara! And I'm like, oh, my God, she really is powerful.

Kara Swisher: Yeah, it's Tony Blinken. But he also knew you.

Scott Galloway: He knew you. He was very weird.

Kara Swisher: Yeah, from TV. He was, but he was aware. He listens to Pivot. He's a Pivot fan. Anyways, but I was very impressed. And also, I felt very fond of you because you just seemed, it was like you were taking your nephew on a tour of the White House. You're like, look at this room, Scott. Look at this room. And you're like, isn't your food great?

Kara Swisher: Well, I was trying to give you a good time because I thought about little Scott not going to the White House. And most kids actually do, especially on the East Coast, go to the White House at some point. I'm going to take my boys. John invited me to my boys.

Scott Galloway: Good. That's really good. And also, by the way, Chris Scott's like, I got to get to my train because he's desperate to get to New York so he could hang out in his apartment. And he wanted to meet Vice President Harris. Two minutes after I left, you're basically doing shots with her. I saw these pictures of you and her.

Kara Swisher: I ran into her. I was going up to talk to Steve Buschetti. You have to stop when the president or the vice president is moving. And she comes right at me. She goes, Kara. And she says, walk with me. I was like in a West Wing. And so I walked with her to her car and we were talking about the UK Bletchley Summit, the AI Summit that she was headed to right after this. And I said, oh, Scott was just here. And she goes, anytime Scott wants to come, I'll meet him anytime. So we will.

Scott Galloway: Yeah, it was really nice.

Kara Swisher: But I was like, literally, it was two seconds later. Anyway, we had a great time. Thank you to you and Tammy Haddad for making it such a nice day for me. Tammy Haddad was also there. Anyway, we have a lot to talk about. Today, we'll talk about the repercussions of the UAW strike, Disney's move to make Hulu part of the family, and friend of Pivot Chris Krebs will join us to talk about the new AI executive order. But first, Scott, did you see the news? I'm joining CNN as an on-air contributor.

Scott Galloway: You finally are going to do that whole scratch that TV itch. You and Chris Voss. It's literally John McLaughlin is rolling in his grave.

Kara Swisher: Yeah, it's a panel show. I'm going to let Chris just tell what it's going to be about. Maybe sometime we'll have him on. Are they going to call it the four or the six?

Scott Galloway: It's basically a ripoff of the five.

Kara Swisher: No, it's the Chris Wallace show. Okay. It's basically a total ripoff. Anyways.

Scott Galloway: It's not a ripoff. You don't have idiots on the – it's all really intelligent people. Jessica Torloff is a gangster and very good.

Kara Swisher: Jessica is amazing, but Pierrot. The rest.

Scott Galloway: Okay. We don't have Janine Pierrot. Four idiots and Jessica. Or Jesse Waters, but somehow we'll survive.

Kara Swisher: Yeah. We're fancy. Anyways, tell us the – what are you doing? Tell us the format.

Scott Galloway: Well, again, it's Chris's show, and Chris is the sort of center, and it's a panel show, obviously, but it's, I'll let them announce all the various panelists. I don't know who they've announced yet, so I probably shouldn't say, but it airs on Saturday mornings. There's a lineup of Christiane Amanpour, Michael Smirconish, and us, the sort of smart Saturday, I guess. The panel is really high level, but it's also talking about issues of the day from a really smart perspective. Everyone that was involved, I was on from pretty much the beginning, but everybody who was in the tryouts, I guess, were all impressive. Speaking of impressive people, really smart. They want it to be more substantive. They don't want it to be two-second takes from people who don't know what they're talking about. I think it's meant to be like, let's lean into smart and analytical. And I think that's why I said yes. I've said no to a lot of these things, as you know.

Kara Swisher: I know, I say yes.

Scott Galloway: Well, you're so busy at the White House. Jesus Christ. Right. Blink it.

Kara Swisher: Every time you do this, I'm going to go blink it. Blink it. That was very impressive. I got to be honest. That was impressive. Anyway, I'm hoping it'll be a good discussion. It is also going on not just live because I think that ship has sailed, as you know, we've talked about, but it's going on Max. I'm sure they'll do a lot of socials. I do think they're trying to build a smarter, I think, with Mark Thompson at the head and someone I respect a great deal. That was one of the reasons I decided to sign on because I have a huge respect for Mark Thompson. And I think they could do some really smart – they're screamy. They're screamy – to remove the screamy. And I think that's what I'm hoping. That's my great hope. So we'll see.

Scott Galloway: We'll see. I'll turn in. We'll see.

Kara Swisher: Good. No, you probably won't. But that's all right. I did watch you on Bill Maher, which I really liked you on. Anyway, now on to the news. Hold on to your Krispy Kreme stock, Scott. Drugs like Ozempic and Wagovi could take a bite out of junk food sales, according to industry analysts who downgraded the stock from a buy to a hole. You were on this early, Scott. But Bank of America analysts have made similar predictions. I actually thought you were a little crazy when you said this, saying the total American calorie intake could decline between 1% and 3% by 2030. The S&P food and beverage industry index is down 10% for the year. Again, Victory Lab, tell us your thoughts.

Scott Galloway: This is an easy one. First off, Nova Nordisk is now the most valuable company in Europe. The initial research I saw on this just absolutely blew my mind. I did a quick analysis. I looked at PepsiCo and Hershey's stock since 2000, the last 20 years, are up sixfold. McDonald's stock is up tenfold. And you think, well, are they well managed? Do they have product innovation? Yeah, but more than that, the number of Americans that are morbidly obese in the last 20 years has gone from 5% to 10%. The number of people obese has gone from 30% to 40%. These companies, they will never say this on an earnings call, but they might as well. You could perfectly predict their stock price if you just weighed all Americans. And now that we might have, for the first time, not only a flattening in our obesity, but a decline in it, these companies are getting taken to the woodshed. The market has already moved on to kidney dialysis machines because if weight goes down, there'll be—

Kara Swisher: Yeah, the repercussions.

Scott Galloway: Yeah, absolutely. And next is going to be hospital networks. But the fascinating things about these drugs is they're finding that people are biting their nails less. They're consuming 60% less alcohol. This will be my prediction. The real test is I believe that as we go out the blast zone of this, what is effectively scaffolding on our instincts to try and update our instincts to institutional production in a superabundance economy, I wonder, Kara, if for the first time we're going to see evidence that people such as myself begin to address their addiction around social media when they're on these drugs. I don't think people on Bill Maher, speaking of Bill Maher, really pushed back on me, mocking me for saying this could have a bigger impact than AI. But the $1.7 trillion ecosystem of obesity is about to be really hammered. And Peter, just the other side of that, Dr. Atiyah out on my podcast and Jess Tarlow, who was a panelist, said, you haven't really acknowledged cost. It's not getting to the right people. That's a fair point. To that point, I would think every drug company in the world is trying to come up with something and eventually competition will bring prices down. But to the point of how inaccessible it is, the number one geography in terms of per capita consumption or prescriptions of this drug is also the region that is the thinnest. And it's the Upper East Side of Manhattan. Basically right now, this drug is for wealthy people looking to lose 10 or 15 pounds that can afford it. But hopefully it'll get pushed down into the people who need it most. I think stock market analysts are going to go to the outer rings and end up at a lot of different places that are going to be impacted by this.

Kara Swisher: Yeah, I agree. I sent you that Lena Wen article about the number. Like if you could this is how much it costs to treat someone with a heart condition or diabetes. And this is how much these drugs cost. At some point, I actually do believe they will, the price will go down and the repercussions. I think there's a lot of people that are in this diabetes complex, right? That everyone needs to be treated. And addiction, like it just, there's so many industries that live off of it that you could see the repercussions. But I do believe it's, as long as these are safe drugs, as they start to do more and more studies, this is something even the government should get behind. This is something that should be around. If we could move, especially with fentanyl issues, if you could start to really study this and they are obviously they done study after study around addiction. It's fascinating. It really is fascinating. And I'm not a doctor, but this is a thing that we can do. When we talk about body manipulation, this is the kind of thing you kind of hope you could do with it. That you could change people's feelings around food, especially food that's bad for you, not food that's good for you necessarily. Anyway, fascinating. You called it right, and it's going to be fascinating to watch.

Kara Swisher: Another one that you've talked about a lot, you got famous for, WeWork stock is down 45% following the news that the company plans to file for bankruptcy as early as next week. The company was once valued at $47 billion and now has a market cap of $120 million, if you can believe it. The stock is down 98% for the year. Is this the end of WeWork? A lot of companies are thinking of doing temporary offices. Maybe there's a revival for it. I don't know. You are the WeWork guy. So tell.

Scott Galloway: I actually think it's not the end of WeWork. WeWork is part, for a number of reasons, of the cultural zeitgeist. It represents this kind of hysterical, consensual hallucination, capital as a weapon, massive investment out of the Gulf. A guy who was a visionary to the point of actually being what appeared to be crazy. They've lost $10 or $11 billion, kept throwing good money after bad to try and save face and pull this thing out. The one-two punch here was one, a very charismatic founder with long, flowy hair that managed to talk people into overinvesting in a company believing it was a tech company versus just renting desks and created just a totally economically unviable model. But the second part of the punch that really put a death knell in this company as a public company was that the office market continues to decline. Their occupancy has gone from 80% to 70%. Having said that, where do we go from here? I think you're going to see someone come in and buy these bonds, pennies on the dollar, and then under the cloud cover of bankruptcy, which is one of the keys to our success in the United States, go to every bad lease, get out of it, or dramatically negotiate it down under the power of bankruptcy where you get exonerated from your obligations. Move to a franchise model where they say, hey, WeWork Barcelona or WeWork Cleveland. You're actually profitable. You get to hold onto the brand. It is a global brand with real equity. And then you get our technology platform and you pay us 8% of gross revenue, similar to a Four Seasons or a hotel model. I think the people who come in here, the distressed investors, are actually going to do pretty well because it's a global brand. I think some of the dynamics in the workplace, work from home, actually lend themselves well. I had a couple of my analysts come to London and said, you're there, we want to come hang out in London. Mia and Caroline and they're having a great time. When they think of temporary office space, they think of one thing. They think of WeWork.

Kara Swisher: Yeah. I had a big company saying, oh, we're thinking of maybe just downgrading and then using WeWork. Big companies are taking entire floors. So it's a good brand. It's a good concept. It just had a terrible capital structure and bankruptcy lets you exit all the leases that aren't working.

Scott Galloway: It's like hotels. They say the third owner of a hotel is the one who makes money. The first one is someone with a big ego. He has to give it back to the bank. The bank takes it, doesn't know how to operate a hotel. And then finally, for 30 or 40 cents on the dollar, an actual operator comes in and makes it work. I think we're at that point with WeWork. It's going to be a dramatically smaller company. But whoever comes in and buys these bonds, if I were them, I would just move to a franchise model. I think they're going to make money. But it really is the end, if you will, of an era. The impact that SoftBank had on the entire ecosystem, forcing everyone. This is a big investor of WeWork for people who don't know. Forcing everyone to dramatically increase valuations. I'm seeing it play out now. I still deal with a bunch of founders that haven't come to the realization that their $60 million company is not worth $2 billion. Masayoshi Son literally changed the entire investing ecosystem. Probably not for the better, but this is end of an era.

Kara Swisher: I would agree. I just had a memory, and I didn't put this in my book, of someone in San Francisco. We were down in an area, Pacific Heights. I was over there, which I never usually was. And they said to me, this SoftBank guy is going to fuck us all. Like, what he's doing is crazy investing. At the time, because everyone had to meet him, right? And everybody was in this, he goes, it's so non-economic. And this guy was losing his mind over it, but he had to follow. And I, it was a long time ago. And he's like, I just, and then he goes to my competitor if I don't take the money, right? If I don't take the money, he goes and funds my competitor, which fucks me. I remember them being like, this is going to end badly. And it was a long time ago. I just had this memory because we were having drinks and he was so exercised about the situation. Anyway, you're right, 100%. And what of Adam Neumann? His hair is still flowing.

Scott Galloway: Well, have you heard anything? Has anyone heard from Adam with his new concept, Flow? His Flow. Basically an apartment building that, again, he's trying to recast as a tech company. We haven't heard much about that recently. Good luck, Marc Andreessen. You keep typing those essays and investing in Adam Neumann. That sounds great.

Kara Swisher: Anyway, let's get to our first big story. The United Auto Workers six-week strike is coming to an end as GM and UAW reached a tentative agreement this week, flying forward in Stellantis. The deals are relatively similar with an hourly wage increase of at least 25 percent over four and a half years, plus the cost of living allowances. Tentative agreements still need to be ratified by UAW members at their respective companies, but it's a big win for Sean Fain. Also, Toyota is also talking about giving up some – they gave their workers in the U.S. a 9 percent raise. These are non-unionized foreign companies. We'll get to that in a second. Why do you think they were so successful? Again, UAW President Sean Fain, who was sort of a maverick there, sort of broke the cabal of people who they thought were too cooperative with the companies, brought in three 30-something labor activists to make the union more media savvy. It was a great story in the Wall Street Journal. We're learning more about their plans for the future. Let's listen to what Sean Fain said a few days ago.

Sean Fain (Audio Clip): We demanded a longer contract because one of our biggest goals coming out of this historic contract victory is to organize like we've never organized before. When we return to the bargaining table in 2028, it won't just be with the big three, but with the big five or big six.

Kara Swisher: I think he's so impressive. I have to say he's really smart. And he really did push away a group of labor people at the UAW who were sort of in with the companies. A lot of people felt they were or that they weren't doing, they weren't in the modern age. So do you think the UAW will be able to bring some of these non-union companies into the fold? Toyota, as I said, is raising wages of its U.S. factory workers, all non-unionized after pay hikes from these deals. They have to. Tesla, he said he's going to aim at Tesla. Unionizing a 20,000 worker plant in Fremont, California, currently has a UAW organizing committee, according to Bloomberg. Of course, Elon Musk is famously hostile to unions. So what do you think?

Scott Galloway: He's put on a masterclass, not only just what unions are supposed to do, but a negotiation. First off, he had leverage. The industry's strong. And he was very strategic. He went after the factories that were producing their most profitable vehicles. He only strategically had certain people strike such that the auto industry couldn't wait out the economic livelihood of the workers such that they wouldn't rip through their strike fund. He made it such that he's like, folks, I can go a long time having strategic surgical strikes against key points in the supply chain against you. The biggest ad for why unions work without unanimity here is that everyone else, per your comments about Toyota, is having to respond to these higher wages. The big white rhino here, no doubt about it, is Tesla.

Kara Swisher: You wanted to say white rhino, didn't you?

Scott Galloway: I did. I did. Okay, go ahead. The wonderful thing about this can be summarized with one piece of data, and that is as a percentage of GDP, corporate profits have never been greater and wages have never been lower. Now, I've argued that unions aren't the best way to close that gap, but you just have to give it to this guy. The leverage, the way they deployed this, the media savvy, the results, and the second order effects of other automobile companies being forced to raise their wages. Look, it's good for America. Capital has been beating the shit out of labor for 40 years. I hope that we return to a point where younger people and middle-class people can have more money, can form families.

Scott Galloway: Because I think a lot of what's going on, whether it's anger, dissatisfaction with government, being willing to cut someone off in traffic or shitpost them online or demonize people, I think a lot of it stems from the fact that society has lied to them. They've worked hard, they're good citizens, and they don't have the same quality of life their parents did. Meanwhile, social media is serving them up these images that everyone but me is on jets and has ripped abs. So we need to put more money in middle class households.

Scott Galloway: Look, I think this guy deserves a lot of praise. I think this is a good thing, and I hope it ripples out to the rest of the automobile industry. Mostly, I hope it's Tesla. Toyota responded. Tesla is making the argument that it's better for its workers without being unionized, but I think they're in for a world of hurt from this guy. He's effective and smart, and he looks substantive compared to Elon in this thing. It's going to be his challenge. Elon should be focusing on this over almost anything else rather than his Twitter, whatever he's doing over Twitter.

Scott Galloway: Elon is smart. My guess is he's going to preempt it. He's going to raise their wages or give them stock options or something and just try to block it. The only way he can block it, he can be hostile, which is not going to work. He might do that. But I think he'll raise their wages, give them options, or give them a free ride on SpaceX or something. Anyway, we'll see. He's got to act. Everyone's dancing to this guy's tune, though. Good job, Sean Fain.

Kara Swisher: Oh, by the way, it was mentioned when it was at the White House. It was announced when we were there. Gene Sperling had worked on it, who works for Biden, and he got to announce it there. It was a very wide-ranging group of people. We had a good time. It was nice to see Biden announce that there. That was a nice thing to do.

Kara Swisher: All right, Scott, let's go on a quick break. When we come back, we'll chat about Disney taking full control of Hulu. Pivot's Chris Krebs will join us to break down the new executive order on AI.

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Kara Swisher: Scott, we're back with our second big story. Disney has announced that it will take full control of Hulu, paying at least $8.61 billion to buy out Comcast's 33% stake. That is the floor price. The two companies had a 2019 agreement, giving both sides the option to trigger this deal, which Comcast chose to do. Most people thought that was going to happen. The ultimate price for Comcast's stake will be determined by an appraisal process. There are a couple of banks. If they don't agree within 10%, then another one gets involved.

Kara Swisher: Hulu had a $27.5 billion guaranteed floor value, no matter what, when Comcast and Disney entered the agreement. Ryan Roberts, who runs Comcast, called Hulu a scarce kingmaker at a conference in September. I think he's right, and he also said it's more valuable than what the deal was made. Of course, he has to say that. He wants more money. Some people think $30 billion. So what do you think about this? This will solidify Disney as the biggest player, presumably. And then I assume Comcast will want to buy Warner. But what do you think?

Scott Galloway: Well, we knew this was coming. The market is an amazing thing. When you were looking at streaming a year or two years ago, it was pretty obvious that a few things were going to have to happen. They're going to have to cut costs. They can't sustain this level of spend. There's going to need to be consolidation. And they're going to need to raise prices. All three of those things have happened. This is part of the consolidation part of the program.

Scott Galloway: It goes to capital structure. Initially they thought, as a response to Netflix, we need to create a Switzerland where all the other media players can contribute their assets and we can have a platform that everyone feels comfortable putting their content on. That did not work. It turned into a Frankenstein. When you only own 20% of ESPN, as Hearst does, you get billions of dollars of free cash flow and it makes the value of the company go up. When you're a minority owner in a company that's requiring investment, and you may not have that stake long enough to recognize that value down the road, you don't get the value for it.

Scott Galloway: For Disney to get the credit they should for being big and dominant in the future, which is streaming, and to be able to make the requisite investments that category requires, they need to own it. One of them had to own all of it, or all they were going to get was the capital requirements of a platform that requires more investment, but they weren't going to get any credit for it. This is absolutely the right thing to do as Disney moves to parks, movies, and streaming. Movies and streaming are synergistic, and the IP flows down to the parks. This was a smart thing to do for both companies.

Kara Swisher: Yeah, that's a question of price. Disney announced earlier this year that Hulu would be available on Disney Plus, with subscribers of both services getting one app experience by the end of the year. These one app experiences, so it's not confusing. We don't know what users would pay. With this in motion, they're going to have to divest. I think ESPN possibly, obviously ABC, and so maybe they could spin off ESPN to Comcast. That makes a lot more sense. There's going to be a lot of media stuff in play here, no question.

Kara Swisher: Meanwhile, Nelson Peltz is still making a play for the Disney board, and he now has an ally in former Marvel executive Ike Perlmutter, who was his ally before. He was kind of a jerk, as I understand it from those who have told me, who revealed this week he entrusted his Disney stake in Peltz's fund. Perlmutter was fired from Disney earlier as a result of what he calls fundamental differences with leadership. He's a troublemaker is what he is. A legendary executive, but not a nice person from what I understand. Nonetheless, Peltz is still over there pressuring Bob Iger. Any thoughts?

Scott Galloway: This will get solved. We made this prediction. We said that Nelson Peltz or representatives of Trian were going to get seats on the board. Bob Iger is a classic. He doesn't want to go to the board meeting and gin up a fight. He's got bigger fish to fry. My guess is both sides are talking to each other and negotiating a board seat for Nelson or a representative. That's Bob Iger's style. He just doesn't want to show up and start shitposting and show up to the annual meeting in a fight. He doesn't want to do that, even though it's not their stake. They still don't own a large stake because it's a big company.

Scott Galloway: But he doesn't want to get in a war with trying to commit to shareholders in counter communication because all the communications from Trian, if they go to an annual meeting, it's going to be just how bad Bob is and what shitty decisions they've made. Bob doesn't need that distraction. He's a smart person who is able, which a lot of CEOs aren't, to elevate shareholder interests above his ego. He's just going to say, look, this is bad for me. It's bad for you. It's bad for the stock price. Let's come to some sort of agreement. Who do you want on the board? Then let's get back to the good work of adding stakeholder value.

Scott Galloway: I'm shocked it hasn't happened already. This does not go to the annual meeting. This gets solved. They're both adults. Nelson Peltz and Bob Iger are both adults.

Kara Swisher: Yeah. And this move is important. This Hulu move is important. They've got to make a profit at this. By the way, Hulu was profitable. Was it one of the early and profitable streaming ones? So there is money here if the consolidation happens. Then you've got Paramount Plus, MGM Plus, stuff like that. But those are small, like nothing burgers that people will suck up. Anyway, interesting times. Lots of content today. Even more so, let's bring in our friend of Pivot.

Kara Swisher: Chris Krebs is the former director of the Cybersecurity and Infrastructure Security Agency and is now a partner at the Krebs Stamos Group with Alex Stamos, who we adore also. He's going to help us break down President Biden's new executive order on artificial intelligence. Welcome, Chris.

Chris Krebs: Thanks for having me.

Kara Swisher: So let's start at the top. How effective do you think the order would be? It is long. It is wide ranging. It hits pretty much every stop on the bus route. Talk a little bit about it. It's over 100 pages. It's going to address cybersecurity, global competition, discrimination. It directs federal agencies to establish rules and guidelines, includes reporting and testing requirements for AI companies tied to national security. Give me your overall.

Chris Krebs: It's a lot. You could chunk this thing up and probably get six, seven, or eight individual executive orders out of it. As you mentioned, it's over 100 pages, 111, 118, something on that order. It got pulled together actually pretty quickly. If you think about the landscape of AI and generative AI in particular, it was only really what, 11 months ago that ChatGPT was made available for public release, November 30th, 2022. So they pulled together this honking large executive order over the course of... Yes, that is a very... It's like flops and floating point operations and things like that. It's very technical.

Chris Krebs: It was spearheaded by Ben Buchanan, who is a bit of a name in the tech communities, operating out of the Office of Technology, Science, and Policy, and under the guidance and direction of the Chief of Staff's office. It pulls together all these different elements within the Executive Office of the President, a dozen or so agencies. There's a significant amount of input from industry and academia, a bunch of different listening sessions, and then they roll it out earlier this week. It's impressive in and of itself.

Chris Krebs: I'm also a little bit reminded of the AI Safety Summit in England at the same time. He who shall not be named on the podcast said something on the order of, right now AI is 80% beneficial, 20% potentially damaging. I view the executive order the same way. There's a lot of goodness here. There's a lot of benefit. There's educational tools. There's workforce enablement. But it does give a pretty quick priority rundown of the things that can be bad in the immediate future related to artificial intelligence.

Kara Swisher: So is it a win? Because there were a lot of congressional people. Obviously, everybody thinks Congress should be doing this job, not President Biden or by executive order. And you've been involved in those. It's not the way we want to legislate, presumably.

Chris Krebs: Yeah, I think it is a win, particularly when you consider the transatlantic element where you have the European Union that has the AI Act and then you have the UK that's looking at regulation. I think it sets the right tone and is consistent with the typical American approach to regulation, which is, let's let this play out a little bit and then regulate to prevent the biggest societal harms, as opposed to the European approach, which is regulate first, ask questions later. I think it will enable the innovation community in the ecosystem.

Chris Krebs: I know there's a lot of chatter about regulatory capture in the bigs that are positioning so that they have solidified the high ground in the AI wars in the coming years. This is open source versus closed systems. Well, it's a little bit of that, but there's plenty of the proprietary systems and the burgeoning VC community that wants to get into the proprietary and close side too. I think it does give plenty of opportunities and plenty of pathways for everyone to get into this ecosystem. It's not just about locking out like it looks like in hyperscale cloud battles. It's not limited, and everyone still has an opportunity to get in.

Kara Swisher: Just for people who don't know, Bletchley Park is about 50 miles from London and was the place where British codebreakers worked during World War II. It's a meeting that's going on in London. Vice President Harris went. Elon Musk is the person you're talking about, was there too. A lot of people. It's where they solved the enigma, the Nazi enigma with Alan Turing. So it's a very famous place for this, one of the first, sort of the birthplace of modern computing, essentially. Nice to meet you, Chris.

Kara Swisher: If you were to try and guess who are the winners, typically with any sort of regulation, there's winners and losers. Let's start with companies. Do you think that the big AI guys are winners? If you were to discern who are the winners and losers in the private sectors, and also from a consumer standpoint, what do you think will be the first effect that the consumer feels of this executive order?

Chris Krebs: On your first point, it's always interesting to see who comments and comes out first when there are big executive orders or regulatory movements. There are elements of regulation within the executive order. You heard Lina Khan at the FTC jump out there and say, hey, there's no AI carve out in the FTC's authority. I'll read the entire tweet. "There is no AI exemption from existing laws and the FTC will continue to promote fair competition, privacy, and honest business practices."

Kara Swisher: Go ahead. Yeah, that's a flex. There's no question about it.

Chris Krebs: But Brad Smith from Microsoft's out there. You had one of the co-founders of Anthropic out there. You had Aaron Levie from Box out there. The industry, I think, is saying, hey, this was a smart way to do it. You're not boxing us in. From a winners and losers perspective, I think that the bigs, particularly when it comes to the large language model, certainly have preserved their lanes to success. I still see the blockers as fairly minimal in terms of large language models going forward.

Chris Krebs: You look at some of the thresholds where the reporting to government kicks in, and those don't even exist, at least in large deployment right now. That's my understanding, is that the thresholds are above what's currently deployed. It's for the next ChatGPT. These are the flops that we're not going to go into. But they have to do these reporting if they get to a certain size and inform the government and testing of safety. At least at my reading, even the reporting requirements are not particularly onerous. You just have to tell the government you're about to train this model. Then as you go about it, you have to provide the results of any red team testing.

Chris Krebs: I don't see red team testing, safety testing as particularly high of a bar to clear for anyone that wants to get into the game. I think it's kind of table stakes. So yeah, for now. But then you have the government procurement side, which is pretty standard. It's like, if you want to play ball, you must be this tall. They continue to kind of adhere to power the purse requirements.

Kara Swisher: Do you think the federal agencies have resources for what's being asked of them? Because he also asked the federal agencies to do a number of things.

Chris Krebs: When you start at the National Security Community, Department of Defense, the National Security Agency, and the Intel community, I think they're...

Kara Swisher: Commerce Department.

Chris Krebs: Well, I like carving these things up. I look at the IC and DOD, and the things I'm seeing over there are smart. It's saying, hey, if we're going to bake AI into any of our workflows, let's make sure we know how it was built up, how it's getting implemented, and then we have the proper controls in place so it can't go haywire. The commerce side's a little bit different. It's setting up guidelines for watermarking and deception of AI-generated content. It's got NIST figuring out how to deploy the AI risk management framework. It's got CISA in the Department of Energy looking at cybersecurity implications of AI, but also for critical infrastructure, but also sponsoring these grand challenges or cyber challenges that say, hey, how can we use AI to our benefit in software coding to detect vulnerable code and potential bad spots for threat actors to get in.

Kara Swisher: I was shocked. Typically, when you see this type of executive order or any regulation coming off the president's desk, immediately there's talking points from the other side saying why this is going to ruin America. I haven't seen that this morning. I'm curious what your thoughts are.

Chris Krebs: There's a little bit, right? The effective accelerationists are right there saying, you got to let us go, do our thing.

Kara Swisher: Say more, comment on that. What so far are the talking points on the other side of this?

Chris Krebs: They are minimal, but you're seeing a little bit out of Sand Hill Road about, you guys are bending us in, you can't stop innovation. Generally, I agree with the philosophy that we're not going to be able to dial back or rein in technology development. But I think it is smart that you have to keep looking for where the societal impacts may be and blunt them to the greatest extent possible, understanding that in the U.S., we're not going to lose this race and we're not going to do, for instance, what the Europeans have done with cloud and some of the other software development innovations that have happened here as opposed to over there.

Kara Swisher: Right. Although there is the damage that was done by having no regulation at the beginning of the social media phase or any of the internet phases, having zero privacy regulation. That was the argument then, let's not do anything. Let's let them figure it out. And there's been damages, as you know, as you've been part of.

Chris Krebs: Yeah, of course. And we see that every day across the internet.

Kara Swisher: So what about the future of openness in AI? I want to mention a Substack that I like a lot, called AI Snake Oil, written by two Princeton academics. They published a piece cataloging the openness of the various policies in the order. The piece says it's mostly good news for those who favor openness, particularly since there are no licensing requirements, though it doesn't do much to require transparency in AI development minus the national security. So people can keep their secrets except for when it affects the government.

Kara Swisher: I was a little surprised that there were not any requirements on explainability and transparency in the training sets. The AI Act has explainability and transparency requirements. Some of the legislation that's been proposed in the U.S. Congress similarly has those requirements. That's not to say that they're off the table. I just think this is kind of the early shots and some of the subsequent regulatory movements may come.

Chris Krebs: To kind of the earlier question, I do not feel entirely comfortable that we've just left this entirely in the executive branch to determine the path forward on what the guardrails are. I think Congress is going to have to move. I think this is one of the areas where there is some uniformity across the two parties. There's a bipartisan need. But I don't think we have the technical policy chops in the U.S. Congress right now to get where we need to go. That said, these AI Insight forums are happening on a regular basis to inform the conversation, at least in the Senate. I think that's a smart approach.

Kara Swisher: Yeah. Do we feel Mike Johnson has technical skills? I do not. I'm worried a little bit. But let's not get into him. You mentioned it was a big week because there was also the UK summit where 28 governments, including the U.S. and China, signed a declaration agreeing to work together on AI risks, which is a big deal. Again, Vice President Harris was there. Elon Musk, Sam Altman were among them. Harris delivered an address on Wednesday outlining AI guardrails while also putting the U.S. forward as the global leader in innovation and policies for this technology. It was important they put this out before this event, for one. This is one of the reasons I think they got it out so quickly. But can the U.S. continue to lead the way here? Because as you noted, Europe has passed the AI Act, and they led the way on GDPR previously.

Chris Krebs: Look, to your point, getting this out before the AI Safety Summit, as well as before the AI Act goes into implementation next year, was important because it's one of what we've seen. The EU has tried to regulate U.S. companies to date, and it's not been particularly effective. GDPR in general has not been an overwhelming success. You look at some of the other tech-related regulations that they're struggling to implement a little bit. Again, I think it was effective. It was important for the White House to get out in front and in part signal to industry that there is a middle path here that will again leave the U.S. tech industry an opportunity to have some dominance in the AI industry.

Kara Swisher: Chris, how broad and aggressive do you think either cyber or disinformation using AI and deep fakes, what would be your guess in terms of what we can expect going into an election year? And how prepared or not prepared do you think the U.S. government is to deal with it? Let me just remind people you were fired from your role as director of CISA by President Trump after you defended the integrity of the 2020 election. You're the most famously fired person for being right in recent memory. But go ahead.

Chris Krebs: I think this is the key question right now. It's two parts. What are the risks and how prepared are we? I am concerned that we may not be prepared for what's coming because we haven't necessarily seen it yet. We don't have the reps on keyboard to defend against some of these threats that are out there. In terms of specific threats, we're already seeing AI show up from a cybersecurity perspective. Threat actors are using them for things like phishing emails, really overcoming some of the historical challenges that foreign cyber criminals have had with poor grasp of the English language, poor syntax. We're seeing them really clean up their act on their tradecraft.

Chris Krebs: Similarly, with generative AI for video, for voice, from my conversations with the intelligence community and folks in the national security space, they are seeing threat actors, nation state actors, China, Russia, and others that are experimenting with these tools to improve their capabilities to change and influence the public discourse. We haven't seen it so much, but we know it's out there. You only have to look at what happened in the immediate aftermath of October 7th and the Hamas attack on Israel to give you a sense of just how toxic the online discourse is, particularly in social media, and everyone's rushed to jump on the next big thing without any degree of discernment whatsoever.

Chris Krebs: I think there's a significant amount of risk. I don't know how prepared the government is because I feel like a lot of the tools that we have historically had in the toolkit have been pulled back with a bit of a chilling effect from some of the action out of Congress, the House specifically.

Kara Swisher: Right, and also the lawsuits.

Chris Krebs: And the lawsuits, of course. Alex and others can talk about that at great length with the chilling effect on academic research. All that said, I'm still not clear what the specific scenarios and use cases are where you would have the most harmful effect of AI plus disinfo around an election. I tend to think it would be time constrained and a very discreet event. The thing I can keep coming around to is election day, the morning of election day. There's some video that has a candidate getting assassinated or something else that could spin out churn and impact turnout for the election. I think everything else you could probably hit at and debunk fairly quickly. But when you're talking a matter of hours, I don't know if we have that. So speed is important here because it moves so fast.

Kara Swisher: Let me ask you, because you were director of CISA, now Jen Easterly is running it. There have been attacks now on CISA, continual, including defunding. Obviously, some Republican states pulled out of some of the good things they help people do to defend election integrity. Where's the state of play right now from your perspective?

Chris Krebs: Particularly from a cybersecurity perspective, CISA is still fully committed, as I understand it, to working with state and local election officials on protecting election systems. The Russians, Iranians, Chinese coming at our election systems and the ability to vote and count and certify. As for the broader information ecosystem, information disorder, from what I understand in my conversations with election officials, election officials on both sides of the aisle continue to express concerns about disinformation related to elections. In fact, you're seeing Republican and Democratic election officials resigning or withdrawing from office because it's just gotten so toxic. Some of these were historically those that would push the big lie and stop the steal. Yet they are kind of victims of their own bad behavior and reaping a little bit of what they sow.

Chris Krebs: In 2024, we're going to see the playbook from 2020 run again, except I think we're going to see it sooner. We're not going to see it after the election. In volume, we're going to see it before the election continuing through. With President Trump back in the election, probably going to be the candidate, this is someone who fired you for telling the truth. You don't have to attack him in any way. But what would you expect if he prevails in terms of systems like election integrity? He's got an authoritarian bent. I think that's being kind. What happens to these systems that are in place to defend the integrity? Because he's thrown enough slime on it to create, and he continues to do so. How big of an effect is that?

Chris Krebs: I think from an election process infrastructure perspective, this is where the founders got it right. This is where individual states are responsible for administering elections within their borders. The chief executive cannot put their finger on the scale, at least when all the checks and balances are working. And it worked in 2020, and I expect it to work in 2024.

Chris Krebs: I do think there are some concerns at the individual state levels. The independent state legislature case went before the Supreme Court earlier this year, and that was shot down. State legislatures could effectively pick who wins the electoral college from that state, but that didn't fly with this Supreme Court. So at least we blunted some of those approaches. But this is one of those things where democracy takes a bit of work, if not a lot. And there are a bunch of folks working to ensure we make it through this election and the next.

Scott Galloway: Chris, I just want to put forward a thesis and you nullify or validate it or tell us what your gut is on it. If you can't beat us militarily or economically, you try and divide us internally. You take porous social media networks with amoral management, or a social media network that is the dominant frame through which an entire generation gets its information, and you start dialing up content that enrages young people and divides them against their parents. There's a 50% gap in pro-Israel sentiment between my generation and the younger generation, and the younger generation is dominated by their frame on a platform controlled by the CCP. What is the likelihood we're going to find out that these platforms have been weaponized by bad actors to try and divide us internally? I realize that was a mouthful. I apologize.

Kara Swisher: It's TikTok turning them into children of the corn, I think. Let's try to keep that tight. Thanks for that.

Chris Krebs: I think it's unquestionable that our enemies are using our social media platforms as their own bullhorns to both get their propaganda points out there and subvert stability globally. There's no question about it. And this goes to Kara's earlier point about just taking the wheel on Section 230 back in the nineties. We tend to be much more technical and hard power focused on how the West dominates. But everyone else looks at it from an asymmetric perspective of the information ecosystem and the psychological impacts of warfare. They are much, much better. We do not have the societal resilience in place right now, and I think we're in for a rough go of it in the coming years.

Kara Swisher: All right. On that note, you like this. You like this. This 100-page look, I think it's a massive, we're talking a trillion plus in revenue generation in the coming years. So it's a big play and it's a big response from the administration. I'm pretty excited about where things go with AI. I'm not a doom and gloomer, Skynet's not here yet. As long as we've got the rules of the road put down, then I think everybody has the opportunity to succeed.

Kara Swisher: All right, Chris Krebs, thank you so much.

Chris Krebs: Thank you.

Kara Swisher: Thanks, Chris. All right. Good to see you. Chris is really smart, don't you think, Scott?

Scott Galloway: He's a very smart man. Yeah, very impressive. And he was awarded the Moral Compass Merit Badge, and then he was fired by the Trump administration.

Kara Swisher: Yeah, I know. I know. Well, he stood his ground. It's ridiculous, all this election denial. And they're all going to jail. Sidney Powell, the rest of them, they're all pleading and taking deals. Looks like Chris came out on top. Anyway, if you've got a question of your own you'd like answered, send it our way. Go to nymag.com slash pivot to submit a question for the show, or call 855-51-PIVOT. All right, Scott, one more quick break and we'll be back for predictions.

[Ad Break]

Kara Swisher: Okay, Scott, let's hear a delicious prediction. You've been doing rather well of late.

Scott Galloway: I don't know what the impact on the stock will be, but I think we're going to see a narrative and some evidence that people on these GLP-1 drugs that reduce your cravings are actually consuming less social media. There is a cohort of people that are on social media 24/7. Whether it's porn, Instagram, TikTok, or Twitter, it is an addiction that gets in the way of the rest of your life. I think we're going to find that people on these drugs reduce their social media consumption among other addictions. I wonder how the market is going to react to that. So I think that's coming. We're going to start to see news that in addition to reducing your nail biting, your alcohol consumption, your consumption of Pringles, you're also less likely to be on Instagram 14 hours a day.

Scott Galloway: The other one is very boring, but I believe you're about to see price increases across the streaming networks. When Netflix raises their prices—

Kara Swisher: Well, you are seeing them, by the way. They've been raising them.

Scott Galloway: That's right. When Netflix raises its prices 15%, it gives everyone cloud cover, especially as they consolidate and have beefier offerings. Disney Plus, if it includes Hulu, HBO, or whatever it's called, Max. These guys are really bulking up, and the big player has given them cloud cover to increase their prices. They're doing what they had to do. They had to cut their costs and increase their prices. So price increases across Max and the new Disney Plus are likely coming. And now that Kara Swisher is there, it is worth it.

Kara Swisher: It is worth it. Uh-huh. Yeah, that's why I'm getting Max. Chris Wallace is my new boyfriend, just so you know. Chris Wallace and his delightful red tie.

Scott Galloway: That depresses me.

Kara Swisher: But you know what I remember when I'm depressed? He has good hair, can I just say? He is fantastic. The guy looked 60 when he was 30, and now he looks 60 when he's 90. That guy has not aged.

Scott Galloway: No, he's fantastic looking. He is a handsome, urbane man.

Kara Swisher: Yeah, he doesn't. He looks exactly the same. And I'm deeply, deeply in like with him, let me just say.

Scott Galloway: Yeah. He wears a tie.

Kara Swisher: His hair is, I'm just saying, his hair. So I just want to cheer you up. Do you realize, I just found this out, at the Salzburg Airport in Austria, there is a desk that is manned or staffed full time for people who thought they were going to Australia and errantly ended up in Austria.

Scott Galloway: Not true.

Kara Swisher: Not true? It's 100% true.

Scott Galloway: It's not true. There are people every day who landed at Salzburg Airport who thought they were going to see the Sydney Opera House? Got debunked.

Kara Swisher: This will not happen on my CNN show with Chris Wallace because he likes— Where's— Shrimp on the Barbie?

Scott Galloway: No. No. Not true. AP fact-checked. It is not true.

Kara Swisher: It is AP. I have a story here. Thank you, Lara. I'm going with it.

Scott Galloway: No Australian airport. I'm going with it.

Kara Swisher: All right. You stick with it. It just makes me happy.

Scott Galloway: Debunked.

Kara Swisher: If that's false, I don't want to live a life of truth. You're just mad I have other boyfriends. That's all. I don't know what to tell you about any of these things. Work boyfriends. Anyway, Scott, that's the show. We'll be back on Tuesday with more Pivot. I'm excited. I've had such a nice time with you. I really did.

Scott Galloway: Likewise. Thanks for being such a man.

Kara Swisher: And we went to Napa, and then we went to – where's our next trip?

Scott Galloway: I don't know. My other family is asking that I spend some time with them.

Kara Swisher: Maybe over the holidays or something. Probably Europe, right?

Scott Galloway: South by Southwest.

Kara Swisher: Oh, yeah, we've got a lot coming up. Yeah. We've got a lot coming up. We're so excited. Anyway, Scott, read us out.

Scott Galloway: Today's show was produced by Larry Naiman, Zoe Marcus, and Taylor Griffin. Ernie and Ertot engineered this episode. Thanks also to Drew Burrows, Mia Silverio, and Gaddy McBain. Make sure you're subscribed to the show wherever you listen to podcasts. Thanks for listening to Pivot from New York Magazine and Vox Media. We'll be back next week for another breakdown of all things tech and business.

Kara Swisher: Wait, this isn't Australia? Love that. Love that. Debunked!