Just the SPACs, Ma'am

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Scott Galloway: Rinse takes your laundry and hand delivers it to your door. Expertly cleaned and folded. So you could take the time once spent folding and sorting and waiting to finally pursue a whole new version of you. Like Tea Time You. Mmm. Or this Tea Time You. Or even this Tea Time You. Said you hear about Dave. Or even Tea Time Tea Time Tea Time You. Mmm. So update on Dave. It's up to you. We'll take the laundry. Rinse. It's time to be great.

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. How you doing?

Kara Swisher: I'm back from my European travel.

Scott Galloway: No, I think the question on everyone's mind is how are you and Maverick doing? How was the premiere?

Kara Swisher: I got to say, it was fantastic. It was really well done. Some people call it dad cinema, and I guess it is. It's very traditional. I think a lot of people are going to be surprised by it. It's updated, but it looks a lot like the old one, just a better looking version of it. People loved it in the movie theater. Tom Cruise did the whole movie star thing. They did the red carpet. I watched it in Leicester Square in Britain, where a lot of the premieres are. He had some of the royals there, Kate and William. But the movie was excellent. Look, whatever you think of Tom Cruise, every movie he makes is well done. He's a movie star. But he also has quality. It's hard to find a shitty Tom Cruise movie. They're really well done, beautifully shot. They used very little special effects. They filmed a lot in the planes themselves. He had all the principles in planes shooting so you could see them getting the G forces. It's still like a big ad for the Navy aviators, but I'm fine with that.

Scott Galloway: Yeah. I think that's fine.

Kara Swisher: They had a woman aviator who was terrific. Jennifer Connelly was gorgeous.

Scott Galloway: Yeah, she's beautiful.

Kara Swisher: She's the love interest. And smart. She had a lot of smart parts in it. And he was great. One thing, when you were at Leicester Square, every single picture was of Tom Cruise. There were no other cast members in any of the posters. And I got to tell you, he looks frigging fantastic. They had a plane in the square, I think it was an F-18 or F-14. So it was good. I think you will like it. As dad cinema goes, what's interesting is a lot of the reviews are, surprisingly, this is a very good movie. And I'm like, surprisingly, the original movie was a very good movie. So I think it'll do very well. We'll see how it does in the theaters.

Scott Galloway: Oh, it's going to be huge.

Kara Swisher: Well, it's going to be there 145 days. The only movie that's going to be in theaters longer than 45 days is this movie. He has insisted that it stay and it does not move to streaming for 145 days, which is unprecedented. So we'll see.

Scott Galloway: I think Tom Cruise is the best actor. I'm sure people will remind me of other ones. But in golf, they always say, the best player not to win a major championship. I think he's the best actor. I don't think he's ever won best actor. Now that Brad Pitt has won, I think he's most deserving. Rain Man, Dustin Hoffman got it. Born on the 4th of July, I thought he was outstanding. A movie that not a lot of people saw, but I thought he was incredible, was Magnolia.

Kara Swisher: Yeah, he was great in Magnolia.

Scott Galloway: I think his Mission Impossible action stuff, some of his weirdness off camera, and quite frankly, just his good looks, make it so he's not taken as seriously as an actor.

Kara Swisher: Wow, he certainly makes the dough. He's a movie star.

Scott Galloway: And by the way, a Mission Impossible trailer leaked this weekend and then they put it out because it had already leaked. And boy, is it good. It looks so good. In any case, fantastic. I give it two thumbs up.

Kara Swisher: Oh, by the way, may I just say one more thing? At the movie, I sat next to... we have a lot of fans in Europe.

Scott Galloway: You've said that before and you say it again. And I still like hearing it.

Kara Swisher: I don't know if our fans... I just need to hear it over and over. This woman, Megan, sat down next to me. The reason I'm remembering everyone's name is because they're named after either exes or wives of mine. So Megan was sitting next to me and she was like, "Oh my God, I'm sitting next to Kara Swisher." Where Scott? She was a huge fan of Pivot. And then her friend Amanda, who wasn't there, I had to take a picture with her. She texted with Amanda. So Megan and Amanda are our biggest fans. And I just want to put a shout out to them because I said I would. And everyone wants you to be with me. And they were really good fans. They asked about everything about your dog and my kids and this and that. It was very nice.

Scott Galloway: I had a sense... I'll share, as our favorite topic, talking about us.

Kara Swisher: Yes, that's true.

Scott Galloway: I spoke to a private equity conference last Friday in Miami. They had time for one question, and the question from the audience was, "Tell us something about Kara Swisher that we don't know." That was the one question I got.

Kara Swisher: What did you say?

Scott Galloway: Well, I'm desperately trying to find something snarky. I said that the thing I learned most from you is I think you're a wonderful parent. And you thread the needle between letting your kids fail but also being very involved in their lives. I have a tough time with that. I'm a little too much of an enabler. I think I'm spoiling my kids. And I like your balance between letting them flail around a little bit, which I think is good for them. I love how you said, "Well, that's a problem. You're going to have to figure it out." In our household, we don't say that. We're like, "We can hire a specialist to figure it out."

Kara Swisher: But I help them. Louie's got to find a place in New York in the coming year because he's coming back to NYU. And I was like, "Yeah, you should find one." And I gave him links and everything else. So I'm going to go with him to look at them. But he's doing it himself.

Scott Galloway: But anyways, that's the question they asked. "Tell us something."

Kara Swisher: Oh, I thought you were going to say, like, she's secretly straight or something like that. I thought you'd say something... I get some text from someone. Anyway.

Scott Galloway: I told them about the time I offered you a horse to touch my rocket. And you said no.

Kara Swisher: Sorry. Sorry, you knew that was going to work out.

Scott Galloway: Oh, good God.

Kara Swisher: Okay. You know what? I don't know what he's doing. All I want... I'll touch anyone's rocket for a little horse. This is about Elon and the horse and the massage. Allegedly.

Scott Galloway: First off, massage on a plane? That's the real world.

Kara Swisher: We will not talk about it. Allegedly. Let's use it as inspiration.

Scott Galloway: I'd like to sit in front of my house with one of those miniature Scottish ponies and maybe like Richard Simmons, like dolphin shorts, and have a sign that says, "Free photos on my pony." And just see what happens. See what the chatter is at the school where my kids go to school.

Kara Swisher: I want you to stay away from ponies and Richard Simmons shorts. I think that's best for the both of us.

Scott Galloway: He's an idol of mine. I love Richard Simmons.

Kara Swisher: In any case, today we talk about Apple trouble in China. Also, the market cools on SPACs, as we said it was going to happen. We'll speak with author Matt Richtel, an old friend of mine, about creativity, where it comes from, how to harness it, and how the pandemic has helped people embrace their creative sides. Matt is very creative. But first, in Meta News, the company finally let researchers access data about political ad targeting on its platform. Meta previously argued that sharing the data would be a violation of user privacy and even shut down the ad transparency project at NYU, which was dumb on their part. There will also be more information on political ads available in the ads library, which anyone can access. Meta is also drawing attention for reminding employees last week that discussions of abortion are not allowed in the internal chat system. That was interesting. Rules include not being able to share personal experience with abortion. Employees are allowed to discuss other controversial topics like immigration, gun control, and vaccines. I'm not really sure what that's about. But let's talk about the first one. Meta is struggling as a workplace like other workplaces. So I'm not sure this is any different. But talk about this letting people in. What do you think about that?

Scott Galloway: When you say letting people in, you mean providing data?

Kara Swisher: Yeah, data. That's right. And not using their excuse that they use.

Scott Galloway: The thing I took from this, and I find it a scary trend, is that there's so much power. I've had several of my companies be acquired. The first thing that happened when one of my companies was acquired was the company immediately started making noises that if I ever start a competitor, they're going to sue me into oblivion. That was the focus of our relationship post-acquisition. Them, in as polite a way as possible, saying, "We're going to sue you into oblivion if you ever even think about starting a competitor." There is a chill around this, and it's continuing. Companies now have so much money that rather than compete, and the people who typically are the biggest intimidators are the ones that advocate for free speech. I'm taking over a platform, I believe, in free speech, but I'm also going to tweet to 82 or 92 million people that I'm assembling a hardcore litigation department. That is meant to scare people who are engaging in free speech.

Then you have Meta, which has an unlimited budget for lawyers to go after academics and send them cease and desist letters. I don't know the veracity or the legal substance of these letters, but I do know the quality of research that comes out of NYU. I have NYU profs call me when I've said stuff and say, "You shouldn't say that. I've done research." They take peer review and the veracity of their research very seriously. If there was a group of people at NYU making statements around the data and elections, it's likely there was a lot of "there there." The fact that it got shut down after Facebook said, "Hey, we have billions of dollars and thousands of lawyers," we are headed in the wrong direction around this stuff. Then we have another billionaire who was able to sue a media company into oblivion, but at the same time pretends they're libertarians and that it should be about free speech.

Most of these cases get dismissed outright. But what happens is, as happened to me, I called my lawyers and said, "How could they sue me for violating my non-compete? I haven't done anything. I'm going to start a business, but I don't know what it's going to be." And they're like, "Oh, they'll lose, but they'll create a ton of nuisance and costs for you, and they know that." This is yet another example. I think it's very frightening, especially with academic institutions. Now they've let them in. They've let them use the system, meaning they didn't shut them down. Now they're trying to say, "Come in and look at..." Let me see the glass half full. Good for them. If they want to start their hat white, give them data, see what they find. Maybe they've figured out that what we're doing isn't malicious. Here's our data. Open it up. What do you think?

Kara Swisher: I'm a bit of a woman. I think they were on the right. They used dumb excuses to say why about privacy. This is their first. I could see a bunch of lawyers saying we can't give out this. Lawyers are there to tell you what information you can't have, like why and how dangerous it is. In this case, things had become so... these are academics asking for them. I think it's always good to allow academics access to all of this stuff. I think everybody is better off to understand it. Obviously, when you let... I can see that room where they go, "Let's not give them information to use right because they twist it against us." But I think one of the important things is to allow people to study all these social media sites. I think all of them should open up. I think they should say, as best as they can to protect privacy. That was just a canard. I know what they think it's not, but it is. To give people insight into, even around the teen girls thing, I think probably it's not as bad as was reported. We don't know. Let's see it. Let's have a look at it. I think they're better off showing the stuff unless it's just so bad that someone's going to get it anyway. Someone's going to leak it anyway, and then it's going to be twisted. For example, even Frances Haugen said the teen girl story was overblown compared to foreign elections where it's a real mess. It's the thing that draws attention and possibly is not quite true and deserves more study. I think it's always good to open up. If I was the CEO, I'd just open it up for them.

Scott Galloway: This is a basic tenant of crisis management and trying to inoculate or vaccinate yourself against crisis. It's never the thing. It's the cover-up that gets you in trouble.

Kara Swisher: Or just a tiny bit of information, not enough information.

Scott Galloway: Dribbling and drabbing it out. If they had released all of the studies on youth and said, "These three things we find most troubling, and we've assigned task forces, and we're trying to address this, and we're working with regulators." Because also what they found in some of that data is there's just no getting around it. There are some positives on youth interaction with social media. Especially in a time of COVID where they had trouble... we let our youngest go on his phone at night and talk with his friends. He likes to catch up with his friends. I think it's a good thing. We limit it. But instead, when they kind of hide it, it creates the notion there's something sinister going on.

Kara Swisher: Yeah, I would agree. You get it out there, you just vomit it out as much as possible.

Scott Galloway: You do show what Facebook has not done. My favorite lie or mischaracterization of data is when they have Nick Clegg say, "We spend billions of dollars on moderation." Well, actually, you're a billion-dollar firm. The fact that you spent billions on moderation means you're spending about 1% to 2%.

Kara Swisher: That's an old Facebook thing. They always give some giant number and then you don't understand what the denominator is.

Scott Galloway: That's right. That's their favorite thing. "We're spending 1.5% of our budget on content." Or they give some number that seems like a lot, but it isn't a lot.

Kara Swisher: Anyway, I think it's better that they open this up. They should open up lots of stuff and people should be able to study this stuff. This is important for our society. I understand there's certain things... the head of YouTube was saying, "Why should I have to give stuff out if TikTok doesn't?" That's an excellent question. Some of it is for doing your business better, but some of it certainly can be used to help society. These are real-time experiments on the human race. So it should be out there. Anyway, what do you think about them reminding employees last week that discussions of abortion are not allowed?

Scott Galloway: I'm sort of... eh, not a bad idea given how crazy things are. At the same time, I don't know how you get people not to talk about it after you've invited them to share everything about their lives as your business. I think these guys made a mistake saying, "Bring your full self to work." I think it was politically expedient for them to pose for the cameras and be really woke or pretend that they cared about their employees' views on social stands. They just sort of invited in this monster, and they were shocked when the monster showed up. I do think there's something to the notion that there are certain topics... if you want to show up at a Marjorie Taylor Greene protest, if you want to be a January 6th peaceful protester, I don't think that should impact your standing at work. At the same time, I don't think you should bring that shit into work. This is a tough line. I get it. But I guess I empathize with them saying, "Look, this probably just isn't the place for these types of discussions. They're going to do more harm than good."

Kara Swisher: Right, but the thing is, how do you pick and choose? Because they didn't... they're allowed to discuss other stuff. I think the difficulty is...

Scott Galloway: And when does it violate people's rights or silence it?

Kara Swisher: That's correct. And also, by the way, it's what their business does. They want people to talk about abortion on the website.

Scott Galloway: A hundred percent. That's a great point.

Kara Swisher: So a very difficult thing for all. I've been talking to a lot of managers lately, a whole bunch in Europe, and they're like, "Oh, managing now..." I forget who I was talking to, but it was a pretty big person. I was like, "What is managing now?" And they're like, "You just don't know what to do now. You honestly don't know what to do, because no move is good in the workplace at this moment, especially including bringing people back." So we'll see how it goes.

Okay, let's get to our first big story. SPACs could be looking for an easy A as an acquisition. Many SPACs are running out of time to find companies to take public, and some private companies are opting out of SPAC deals altogether. The company behind the investing app Acorns previously said it would merge with a SPAC. Now it's called off the deal. About 90% of the companies that merged with SPACs, they're called de-SPACed, since the 2020 boom have lost value, according to SPAC research. So talk a little bit, Scott. Are you in any SPACs? Are you still in SPACs that are looking for marriages?

Scott Galloway: My experience with the SPAC was the following. One close friend and another what I'll call business associate both run hugely successful funds. One is a credit hedge fund. The other is a growth hedge fund. They said the three of us should do a SPAC, and we're going to look for European consumer tech companies. We had the two premier investment banks lined up to take us out, raised between $300 and $500 million. We were ready to go, all the paperwork together. Then, to his credit, one of my partners, a friend of mine, called and said, "Real quick, let's jump on the phone before we press go on this." We had spent a few hundred thousand dollars on legal fees, ready to go. This was like Q2 last year. He asked a really interesting question. He said, "We're all on boards. How many calls have you received from SPACs looking to de-SPAC?" We went around the table. I'd received like five calls in the last two weeks as a board member of two unicorns. One guy said, "I've gotten seven." The other guy's like, "I've gotten 11." And it's like, "Do we want to be one of these people calling every CEO we've ever met and trying to de-SPAC?" You could just hear the silence on the line. At that moment, we knew we shouldn't do it. We called the banks back and said, "We're not doing this." Can you imagine if I were sitting on a 12-month-old SPAC right now, the amount of shit posting I would be getting trying to de-SPAC? Trying to find a mediocre company that you would have to promise a ridiculous valuation to, find people to market to, and then watch the thing go down 40 to 80% in the first 30 days.

Kara Swisher: Yeah. Just for people to know, in February 2021, the value of announced SPAC mergers was over $100 billion. A year later, it was less than $5 billion. So you got out of it, but many people didn't. What happens when you don't? Would SPACs have to merge with low-quality companies to get the deal done, or how do they have to give the money back?

Scott Galloway: Basically, every good company that has any desire to be a public company has either been taken public by the premier investment banks to do the best job marketing, and it is a better good housekeeping stamp of approval. You'd much rather go out with JP Morgan or Goldman than go out with a SPAC. It says that you're premier if you can go out with one of these firms through a traditional running process. The folks that did SPAC when the markets were crazy frothy and there was insatiable demand for equities and growth economies did really well. What investment banks do is they find a company, they say, "We can raise you capital, we're going to market it, position it, get all the legal work done, and then we're going to go out and market it to institutional investors, then we're going to take our 7% and God be with you." They make money no matter what. They're not operating. They're not sticking around. And that's what Chamath did. He was the most innovative investment banker in 2020 and 2021. My guess is he's already sold the majority, like investment banks do. He's out. He doesn't have equity positions.

If you can't find a company, and no one's been able to find... there are very few companies that are good, that want to go public, that haven't been able to in the last two years. So you find a mediocre company, try and take it public. Then a couple things happen. One, the people who bought into the initial SPAC, the blank check, have the opportunity to redeem. What you're seeing is a lot of these shareholders go, "No, I don't want to own the SPAC of Rent the Runway or whatever it was." I forget the one that had like 90% redemption. They can get their money back. No harm, no foul. They get their full money back. Who doesn't get their money back if you're unable to de-SPAC is the principals that have to put up 2% to 3% of the principal. In my case, the three of us were going to have to come up with a million. And we get it back in more if it SPACed because we own somewhere between 10 and 20 of the equity. But if you don't de-SPAC, you lose that million.

Kara Swisher: And where does it go? You have to pay it back to the original?

Scott Galloway: There are underwriting fees. The banks made money regardless. And you paid for the legal fees. You basically paid for the investment bank to take you public. You paid for all the legal fees, and the investors get all of their proceeds back. So the cost of raising the capital, the cost of legal administration, the cost of compliance are all borne by the principals.

Kara Swisher: By the principals. And what was interesting, a lot of the money that they raised, they put it into low-yield bonds or whatever. There's a really long story I read from The Economist. The money that is waiting to be de-SPACed usually sits in very low-risk areas, correct? And then you just have to return that money.

Scott Galloway: The last thing you want to do is say to your investors, "We were poor fiduciaries and we put this in risky assets." So they put it in, as they should, low-risk items. But you're going to see a ton of money returned to investors. What you're also going to see is a lot of Hail Marys where a company says, "Oh, we found Joey Bag of Donuts, fried donuts chain, to take public." And the investors are going to go, "No, that's just stupid." And we had to promise them a ridiculous valuation and they're going to redeem. They'll probably have to cancel the SPAC or find a PIPE that will give them the money to go public. But SPACs right now... it's an innovation. It has gone through incredible mania, and the fall here is dramatic. It's just dramatic.

Kara Swisher: Yeah, and the companies that have SPACs are really not doing well, many of which might go private again. Grindr is still planning to go public via SPAC. But that's a great company.

Scott Galloway: Grindr is a great company.

Kara Swisher: Yeah. If you look at the economics. Why couldn't they just go public?

Scott Galloway: It's a great company. Quite frankly, that's a perfect analogy for where SPACs are an innovation. I don't think J.P. Morgan wants their name next to Grindr.

Kara Swisher: Oh, okay. All right. Now, Bill Gurley was pushing SPACs as a way to get control away from investment bankers. So it looks like investment bankers are still in control.

Scott Galloway: It's same dogs, different fleas. It's different marketing and you get to just add water and it's a faster process. You get less looked at. It's people that have a harder time going public. The principals of a SPAC will position themselves as operators. We were trying to position ourselves as thoughtful people that could help add value to a company. That's mostly bullshit. What SPAC principals are is investment bankers that do all of the legwork up front, all the compliance, get the documents ready, and are ready to press go and take you public faster than you would with an investment bank.

Kara Swisher: And with less scrutiny and with less... you can do forward-leaning revenues, correct? Something like that. You can be a little more frothy about yourself.

Scott Galloway: Not only that, the investment banks just have a higher bar. They get the best of the best, and that's the right positioning. From a regulatory standpoint, you don't have to say as much, but that's all going to be reformed. You don't have to say as much, and you can make future projections that are more... if the SEC had the staffing that its position requires, and it's coming, there would be more regulation. Because the reality is it's very unusual to find a SPAC that is not only well below its offering, but... I have two friends. One took two SPACs out. Another that you and I both know took a SPAC out. They're each 70 to 90 percent below their offering. When you have that sort of destruction in value across an entire asset class, the SEC needs to say, "What investor protections were not put in place here?" There is a, call it paternalistic, call it whatever you want. But SPACs have just been... it's so funny. It's like we all saw this coming.

Kara Swisher: Yeah. And yet for a while. When Paul Ryan had one, I was like, "And we're done." Remember? I don't know what happened to his SPAC. Remember he had a SPAC?

Kara Swisher: I doubt it de-SPACed. I probably did not. It's probably one of those that will have to return its money. Probably.

Scott Galloway: Oh, I feel bad for Paul Ryan.

Kara Swisher: No, I don't. And by the way, I think if you're sitting on top – I've gotten calls from several people looking for a thing in the consumer space. I'm like, return the money. It's not as bad to return the money as it is to convince people that it's a good idea and have a shitty company that's public and everyone's upset and they lose money. I get it. They all thought – listen, a lot of the people we know that were doing it thought they were going to make a killing.

Scott Galloway: They did.

Kara Swisher: Well, and some did. The ones that got out early.

Scott Galloway: Yeah. The ones that got out early.

Kara Swisher: Then the middle group was like, oh, I'm into it. Everyone was like, you should just back here. I'm like, no, it feels dirty. I don't know what else to say. It feels dirty. I felt dirty when I saw the original ones going.

Scott Galloway: Felt dirty the whole thing.

Kara Swisher: The whole thing.

Scott Galloway: Yeah.

Kara Swisher: But it is an innovation. It'll still be around for a while. It's still a way to get out.

Scott Galloway: Yeah. It's appropriate for some things. I'm an investor in a company that's SPACing with SoftBank or de-SPACing with SoftBank.

Kara Swisher: De-SPACing. I wonder why it's de-SPACing versus SPACing, but okay.

Scott Galloway: Well, you create a special purpose acquisition core, which is a blank check, and then you turn it into a public company. You de-SPAC.

Kara Swisher: Yeah, you de-SPAC. It just feels wrong. You know, next week, we don't have enough time. We're going to talk about crypto, too, because I went back and forth with someone who said that we shouldn't be doing ads for crypto, which we'll talk about on Thursday.

Scott Galloway: Yeah, I saw that, too.

Kara Swisher: But crypto market.

Scott Galloway: Yeah, but you know what? I read the ad.

Kara Swisher: Yeah, yes, you did. But we were talking about people able to buy crypto, and that was what the ad had in it. It wasn't like crypto's the best thing. In the retirement fund. And I got to be honest, when I read the ad, I felt funny about it. I'm like, this felt awkward. But your points were good, too.

Scott Galloway: My point was like, we don't know what's going to happen. But there's a lot of people who we're going to invite one of these people on, not the guy who yelled at me like ridiculously and then wondered why I was irritated. But we should talk. What I noted was we're very tough on crypto in the show. And it's fine to let people, if they want to get into crypto, they're adults and say it's speculative. And that is what we have said over and over and over and over again. Nobody's forced to do these things. And but nonetheless, crypto is undergoing a really pressured time. Some people think it's completely a scam. Some people think it's not a scam at all. And some people think, let's wait and see, which is where we are, I think, in a lot of ways. But it's definitely a speculative thing. But let me talk about some of my.

Kara Swisher: Sure.

Scott Galloway: I spent a lot of time lecturing to young men about the algebra of wealth. And a lot of that is about diversification, living below your means, letting time take over. And for me to be reading an ad in an asset class where a lot of players, I think, have been preying on young men's boredom and instincts to take outsized risks and hope that they can get rich fast. When I read it, like his point, he basically went after me and said, Scott, you lectured me, young man, on being responsible financially, and then you're pushing this shit on them. And you know what? When he said it, it really upset me because I think some of it's true. And I've been thinking a lot about what kind of financial services ads we should read, because I'm not sure I would put my foot... Look, at the same time, you don't want to be the boomer. If you look at, I'll give you an example, Bitcoin. Everyone's saying, oh, Bitcoin's crashed 50%. If you bought it two years ago, you're up 60%. That's correct. And I mean, there's just too much innovation I'll give you an example. I'll give you an example. Bitcoin. Everyone's saying, oh, Bitcoin's crashed 50%. If you bought it two years ago, you're up 60%. That's correct. And, I mean, there's just too much innovation here not to believe some of this isn't going to be enduring.

Kara Swisher: Exactly. That was my point. My only point was making, I get this guy's point. His name's Alan Graham. He's like, you shouldn't be testing. I'm like, well, you're just like saying the whole thing is just a scam. The whole thing is a scam? Come on. Like, let's have a more measured discussion. I get it. And then he would like experts who really know, know the whole thing's a scam. I'm like, all right. I thought his pushback was pretty, hey, given most of the pushback, I can't care. That was fairly civil.

Scott Galloway: Okay. It was, well, I, my point being is that the only point I have is we're very tough on them in the show. We also say it's very speculative. And if you have extra money that you just, and we've had people on talking about this and we've talked about the decline and that you better be careful at these numbers, but in the end, people are adults. And if they want to put $20 or $200 of their money in something and understand this as the speculative misadventure, I am not their mama. I'm not, I wouldn't do it. I didn't do it. So, you know, that's my only thing. But wouldn't it be nice? And this is like, wouldn't it be nice? We have a lot of ads like for investments. I believe you're best off, take 20, 30% and have some fun. Invest in companies you like, that you enjoy. Weird things and asymmetric upside and it's fun and you learn and there's nothing wrong with fun. But take the majority of your wealth and put it in low cost diversified ETFs. It just, that's what the smartest people I know in the world around money and finance all do the same thing. They take about a third of it and put it in exotic crazy shit where they convince themselves they can beat the market, and two thirds they put in Vanguard ETFs, low cost, diversified. For them, smart people.

Kara Swisher: That's Kara Swisher's. I don't even do the second part. I just cause I'm too busy. Nonetheless, I also have a mattress full of gold, of course.

Scott Galloway: Do you?

Kara Swisher: No, I don't. Do you?

Scott Galloway: I remember that Billions where they had, remember they had that safe full of gold?

Kara Swisher: Yeah, all their stuff, their go bag.

Scott Galloway: That was kind of nutty.

Kara Swisher: I don't want to live a life where I have a go bag. That's how I felt when I looked at that.

Scott Galloway: I agree.

Kara Swisher: I was like, how sad. Let's spend all our time trying to figure out ways we don't need a go bag.

Scott Galloway: Yeah, I know. Someone was talking about it. That's what happens when you get super. Someone was talking about money to me. I have known several people that when they get super rich, they start buying places in New Zealand and planning their escape. Like down to like how they get to Teterboro and leave the nuclear the radioactive cloud. I like, Jesus, that nihilistic.

Kara Swisher: Right. Yeah, it is.

Scott Galloway: When Trump Civil War thing comes, they coming for me.

Kara Swisher: That's the way it's come. There's no escape for Kara Swisher. In any case, that was repulsive what he did, tweeted Civil War thing. Whatever, he doesn't give a fuck. Anyhow, we will discuss more. And Alan, we will have someone on to talk about this. Let's go on a quick break. When we come back, Apple weighs its options in China. We'll speak with a friend of Pivot, Matt Richtel, about creativity.

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Kara Swisher: Alone. One of China's own homegrown billionaires seems to be venting online. Tencent founder Pony Ma shared a viral op-ed by a Chinese author who decried the economic impact of lockdowns. This is something everybody in Europe was talking about, by the way, which is really interesting. Is Apple serious? Or are they just trying to get a better deal with Chinese regulators? I think they're quite exposed there. In 2016, Tim Cook signed a secret $275 billion deal with China that's set to expire this year. What do you think about this?

Scott Galloway: I think they're quite exposed here, as are many companies. This lockdown that China's doing seems... Everyone was talking about it last week in all the different business places I went. There's so much here. The rights, I think the Chinese got it right initially with COVID, when you had something that was more lethal and less infectious, a total lockdown, there was some logic to it. Now that it appears the virus may be less lethal but more infectious, a lockdown doesn't make sense. And they haven't adapted their strategy to what I would argue is the current reality. And what has happened to all of us? Supply chain used to be this cost center where the whole point of your chief supply chain officer was to get shit to the factory or get it to the consumer for the lowest cost possible. And then Amazon said, wait, it could be a profit center. If you differentiate on supply chain and get things to people within 48 hours, you can actually charge more. If you have uninterrupted supply chains like Tesla and you make your own chips and you have more control over your own supply chain, you can charge more money. And what we have all dealt with, and this happened, I was on the board of a specialty retail apparel company that had 550 stores, 5 billion in sales. And we woke up in COVID and said, oh, wait, 93% of our tops are manufactured in like a 50-mile radius in Shenzhen, China. And this thing has totally gone into lockdown. So supply chain heterogeneity has become a huge topic for people. And that is it doesn't make sense to be reliant on any one supplier for a critical – what every assembler, home builder, manufacturer is realizing right now, and it's fascinating but frustrating, is where does exactly does everything come from? And they're like, oh, did you realize that winch comes from Turkey? Even Ukraine is slowing down automobile manufacturing because they make certain materials. And the supply chain, the global supply chain has come to a grinding halt, but it has slowed down dramatically. So I think everybody is rethinking their supply chain. And I would argue that the big winner is going to be, in my view, Mexico. Because it's lower cost and it doesn't have the geopolitical strains. Proximity. Pankaj Ghemawat, my colleague at NYU, has done great research showing that as much as we talk about globalization and we have globalized, proximity still matters. Almost every country's biggest trading partner is usually the ones they share borders with. And we're having sort of a deglobalization of the supply chain because of proximity and also just geopolitical relationship. But I would argue most of it, or two-thirds of it, is positioning to say, look, China, we made a huge investment here and we are willing to diversify. But I also think they will do a little bit of diversification.

Kara Swisher: Have you heard anything? You know these people.

Scott Galloway: Yeah, I think that Pony Ma said this. He's been sort of a good soldier, so to speak. He's not spoken out like this. The economic impact of lockdowns is they've got to make a choice here.

Kara Swisher: What they did, the big mistake they made, I was talking to a lot of pretty well-known medical people at some of these events I went to, is they did not vaccinate their older population. And so they've kept deaths very low, but they're so exposed with their older population. Our older population is really vaccinated. And our deaths are down now because a lot of people either had it or gotten the vaccine. I think we're at 79%, 76%, something like that. But nonetheless, we're seeing more and more iterations of this stuff, but it's not fatal. They have made a very fatal mistake not taking that time, not using the right vaccines, not using Pfizer and others that are more effective, developing their own vaccines. And so they're really in a jam here. And so that's going to cause everybody else to say, we're going to go to, I think India probably is the one country that'll probably benefit the most despite some of the political issues there. Apple announced that it's manufacturing the iPhone 13 in India, mainly for the Indian domestic market. But if you're watching Apple, it's the company you've got to watch here because they've been very close to China, much criticism in many times. And they will be watching what they do is where you want to watch everybody else. And I think it's very hard to move a lot of this global manufacturing given, you know, whether it's Shenzhen or Shanghai or other parts of China. This is where everything is made.

Scott Galloway: Everything is made. And so it'll be a big move to move it elsewhere. We'll see. It's certainly not moving to the U.S. though, I'll tell you that.

Kara Swisher: So interestingly, in China, online searches for emigration increased 440% last month, meaning people want to leave. President Biden said last week, by the way, this week that U.S. would defend Taiwan in a military conflict with China, which was a big thing to say. Usually, we have strategic ambiguity with respect to Taiwan, but obviously, he was putting a lot, that's the line in the sand, as they say, which is, I think, a pretty good line to have, but very dangerous in lots of ways. I can't imagine the Chinese will do that, but you never know. But anyway, it'll be interesting to watch where this is going in terms of, do you think there'll be any manufacturing brought to the US? They have advanced manufacturing here for Apple, but not a significant amount.

Scott Galloway: I actually do think there's going to be a lot of on-shoring. The dollar, look, I think that wages in the U.S. and robotics and supply chain concerns and proximity are actually, I'm on the board of a consumer company that's actually pulled manufacturing out of China and is on-shoring, or reshoring it, I don't know what the term is, on-shoring it. We're bringing it back to the U.S.

Kara Swisher: De-spacking is the word, but go ahead.

Scott Galloway: That's right. But the thing that struck me about all of this, when I read that stat about China, about people wanting out, for a long time, supposedly, two-thirds of people who have more than a million dollars in China qualify one of two groups. They either have left or they're planning to leave. And what economies tend to focus on is how do we create the infrastructure and the investments such that you can make money here. But what people, I think, sometimes fall short is the right long-term strategy is not just where's the best place to make money, but where's the best place to spend it. And that is the reason why I believe New York and London and essentially the U.S. and Europe will have more robust economies and will never experience the same level of brain drain is they're wonderful places to live. And we constantly reinvest in the arts. We appreciate people who get degrees and weird things and then go on to do art installations and do the museum of ice cream. We just appreciate art and culture and joy. And I think that is underrated as an economic attribute. That at the end of the day, the moment all these oligarchs make their billions by stealing from the Russian economy, they don't want to spend it in Russia. The Chinese don't want to spend their money in China. They want to spend it in Milan and Los Angeles. And because these are places that have such an appreciation for art and the arts, and it feels like we should be subsidizing our culinary academies and our film schools and entrepreneurs that if they go into the arts, I mean, it's just an unbelievable boom to our economy. People want to come live their lives once they have money in the West. It's a huge asset for us.

Kara Swisher: It's nice there. It's beautiful in lots of parts. But nonetheless, we'll see what happens there. This is a big story. It's going to continue what's going to go on with China. But now, speaking of creativity, let's bring in our friend of Pivot. Matt Richtel is a Pulitzer Prize-winning science reporter for The New York Times and author of *Inspired: Understanding Creativity, A Journey Through Art, Science, and Soul*, in which he looks at the science behind creativity and the effects of the pandemic on creative lives. Welcome, Matt Richtel.

Matt Richtel: Hi, Kara.

Kara Swisher: And for those, Scott, you don't know this, but Matt and I go way back. We're old friends from San Francisco, et cetera. And I just, it's good to see you.

Matt Richtel: It's good to see you. I'm excited to talk about this topic because we were just talking about creativity and how the pandemic affected people's creativity and where people are moving and going and stuff.

Scott Galloway: Wait, hold on. Can I interrupt already?

Kara Swisher: Sure.

Scott Galloway: Yes, please. Because I have a Kara story.

Kara Swisher: Oh, no.

Scott Galloway: All right. Go ahead.

Kara Swisher: It's about creativity.

Scott Galloway: All right. Okay, then. Perfect. Okay. So when I realized that I was a madcap creator, I wrote a book. And then Kara graciously, first book, there have been like 10. So we thought at the time it was special. It turned out it wasn't going to be special at all. And you invited me to your house and we had a book party. You remember this?

Kara Swisher: Yes, I do.

Scott Galloway: And then you say, Matt, you got to go thank people. And I stood on the top of those spiral stairs and I give my whole thank you. And I think I'm killing it. And then Kara, I start to like, there's a little applause. And then Kara says, hey dumbass, you forgot to thank your wife.

Kara Swisher: Yes, that wasn't very creative of you.

Scott Galloway: Well, you should be thanking your wife.

Kara Swisher: All right. Thank you for that lovely Kara Swisher story. But in any case, I was correct. But let's talk about the idea of pandemic effect and creativity because I think one of the things, you know, there are a lot of jokes that people had time to learn to bake sourdough, et cetera. Talk a little bit about the impact of the pandemic on creativity. And then I want to get to the broader story. This is something Scott writes about a lot, too. So talk a little bit about what's happened.

Matt Richtel: Well, first of all, I'm going to say broadly, and I am connecting this to creativity, I mean, to COVID. I consider this to be the most creative moment in human history. I can cite stats to back that up. The number of patents applied for across international borders in 2018 was about 200,000, which was astronomical compared to prior. That was before pandemic. Then you bring pandemic in and you add in a couple of factors. One, you create necessity. So an immense amount of need to collaborate, cooperate, compete. Two, you have technology blossoming. And if you look at the history of creativity, there's a reason it happened in Jerusalem. It's where I start this book. It's because you had a population of 500,000. Florence, Harlem, Rome, go down the list. These are population centers. And with technology, things are population-centric. And finally, Kara, at the risk of being, and Scott, at the risk of being long-winded, COVID itself was insanely creative as a biological organism. It was just novel enough to catch on and flummox our immune system and just alike with what we have inside our bodies to become a mass market success as evil as it was.

Kara Swisher: Interesting. That's an interesting calling.

Matt Richtel: It is creative. It was certainly good at what it did, let's just say.

Kara Swisher: But talk about that idea of creativity as learned and innate, because a lot of people don't tap into their creativity, right? Or it's not a skill that's taught.

Matt Richtel: Yeah, they don't. And it's too bad because in point of fact, we're just filled with misconceptions. One, intellect is not the same as creativity. The research will bear out. First of all, IQ, not the same as intellect, but just for the purposes of research, that's where a lot of it is. IQ between 100 and 120 seems to be sufficient to be wildly creative. Over 145, 147, it actually seems to go down. What does that suggest? That creativity isn't about finding the right answer. In some ways, the way I describe it is a creator isn't someone who answers the question, it's the person who comes up with the question in the first place, then answers it.

Scott Galloway: Nice to meet you, Matt. So I love this topic. I think a lot about it. And I'm curious. So I always look to Wallace, one of the great theorists around this, kind of the four stages: preparation, incubation, illumination, and verification. And I've tried to disarticulate those in terms of my own creative process. Do you have any sort of process that you can articulate for how people who think, well, I want to just get better at this and to say I want to be more creative, isn't that useful? Do you have any steps that you can share around trying to become a more creative professional?

Matt Richtel: I will, and I'm going to package them in a homily first. I think that what you hear is necessity is the mother of invention. I don't agree with that. I think authenticity is the grandparent of invention and necessity is a subset of that. And I think that where a lot of people run into trouble, and I've actually had this conversation across Silicon Valley with people who are included in this book. When you set out to solve a problem, you in effect are within the confines of that question. And where when you talk about preparation, Scott, I think I think about it a little differently than you do. I'm actually thinking of the preparation of understanding your subject and then letting it go and giving yourself permission to participate in a kind of non-judgmental mind-wandering that doesn't happen in the active pursuit of the idea. May I cite some science to back that up, please? Out of the University of California, Santa Barbara, researchers looked at a bunch of wildly creative physicists and writers and artists and asked them, when that aha moment came, what were you doing? And determined that 20% of the time they're having their big discovery, it is when they're focused on something mundane or entirely other than the thing they're focused on. Here's the neurobiology. I just want to stop, Scott, because I'm not sure I'm answering your question enough.

Scott Galloway: So I'll push back a little bit. I think that there's a strong basis in evolutionary anthropology around creativity, that the most adaptable societies are the ones that, they use the word adaptability, right? The seals are dying, so we're going to move to where there's goats that we can feed off. But I think of that as creativity, that you're given permission, and I think you're getting to this, to say, take the conventional thinking and park it and say, give yourself permission to take the exact, to zag when everyone's zigging mentally and go with it. And I find people are drawn to those people. People want to have sex with creative people because it serves an evolutionary purpose, that the most creative people are good for the species.

Matt Richtel: I agree on all fronts with this nuance. I don't think this is an act of will specifically. And we may be saying the same thing, but when you say park the conventional thinking, that sounds a lot to me like I'm going to think differently. I'm talking about a raw emotional experience. I think the aha moments, and this is the neurobiology I'll cite to back this up. I think those aha moments come from allowing your subconscious to roam without judgment. And you often don't wind up with a solution to the problem you were seeking. You wind up with a solution and then you realize there was a problem that that was referring to. And so the distinction I draw is the permission to think and wander, not even think, to wander without judgment. The prepared mind is one who understands the field, but the permission I'm talking about is not an act of willpower. And I think those aha moments are a function of subconscious dots collecting and you recognizing them. And then secondarily, you run those ideas over the analytical part of your brain, the prefrontal cortex, and they get assessed based on their validity.

Scott Galloway: So I love this. I love this stuff. So, Matt, and as always, and you've probably figured this out, I use these interviews as just a vehicle to talk about me. But when I'm writing, I find—

Kara Swisher: Everybody realizes that.

Scott Galloway: I thought we understood that.

Kara Swisher: Does that now have to be disclosed?

Scott Galloway: Yeah, that's a given.

Kara Swisher: That's a legal disclosure now.

Scott Galloway: Legal disclosure. Okay. Thank you both. Anyway, so the content I write that resonates the most with people is when I talk about relationships in my family. And I have an easier time doing it when it's really late at night and I have a couple drinks and my filters around what is acceptable, what might be embarrassing, might reduce the perception of my masculinity go away because of the oxygen that's denied to my brain from alcohol. And this is a long-winded way of saying, what is the role that flow and substances play in the creative process?

Matt Richtel: Well, I went to the mountaintop on this, Scott. I went to the mountaintop, Carlos Santana. And I'm going to back up with science, what I'm about to tell you. He told me that weed works and substances work, but meditation works better. And that he gave up weed for a period. And the science bears out that substances actually are not affiliated. And I can tell you as someone who gets into that flow state a lot, it's not necessary. It is a short-term crutch, but there are better ways at it.

Scott Galloway: Yeah, I agree.

Matt Richtel: And what I most appreciate, Scott, about what you said is we were talking about your masculinity. That's the kind of authenticity that if the audience wants to understand what we mean here, that's the kind of authenticity. Can I give the audience and you guys an exercise that might explain what Scott and I are talking about?

Kara Swisher: All right, great.

Matt Richtel: Just understand, when I talk about an exercise, I'm only talking about Scott. We are, Kara and I are talking about Scott exclusively.

Kara Swisher: All right.

Scott Galloway: Okay.

Kara Swisher: All right. Go ahead.

Scott Galloway: Go for it.

Matt Richtel: So when I was a kid, I used to go to sleep and for probably two years, I'd have this fantasy where I was in a sporting goods store and I had a shopping cart and I would fill it with stuff that I couldn't afford. And I would go down the aisles and have this flow state fantasy. And then before I met Meredith, the woman I forgot to thank at Kara's party, I would have fantasies where I would be in a bookstore and I'd meet a woman buying a book. Okay. Now, I want to ask you guys each, if you have a fantasy or thought before bed that sort of carries you through that you don't judge yourself at all, you just flow with it. Does any come to mind?

Matt Richtel: They can be as filthy as you like. Scott, go ahead on that one.

Scott Galloway: It's strange. My fantasies are physical. I imagine playing a sport and having real flow in terms of physicality and strength and grace physically.

Matt Richtel: Interesting.

Scott Galloway: The things I think about are me running at a certain speed, I all of a sudden have the ability to be a great diver, a great gymnast, and I have flow physically between my coordination and my physicality. That's kind of like my fantasies before I go to sleep. Now, I fall asleep in 14 seconds every night. I can sleep with coffee. I can sleep with everything. I never fail. I don't have a minute to think before I fall asleep. Where I do get creative is when I clean. I clean obsessively. I love cleaning and I'm quiet and I think. And that's—I don't think at all. I just, things come to me, big ideas come to me when I'm cleaning.

Kara Swisher: Okay. A hundred percent.

Matt Richtel: So I want to seize on both those things. I'll tackle Scott's and then come to Kara's in a second and hit you with a little science to back up what each of you is describing. I mean, the reason I go through this exercise is I think for many people, when we talk about mind wandering without judgment, as you're doing, people don't really know what that means. The one time I find people do that is before sleep. They feel no need to be productive. They don't censor themselves. One of the things the mind wandering research will bear out is that when people's mind wanders, they either worry or they feel nonproductive. So they stop letting it happen. And what's happening before you go to bed is it's like borrowed time. You're with the house's money right there. So to the extent you can get in that state—I know when I'm in it, when I start to have all kinds of stories pop into my head and ideas, and I let them go without judgment. They're the kind of things that sometimes would seem immoral or things you wouldn't want to think like, "I really don't like that person. I'm going to imagine hitting that person," or "I really like that person," or "What if I want a bunch of money?" And sometimes we censor ourselves around those things because we don't want to acknowledge that it suggests wanting in our lives or pain or longing. But that's where truth comes from. Wandering.

Kara Swisher: Interesting.

Matt Richtel: So one of the things that's interesting about that is sometimes you are creative around other people, right? And supporters of going back to the office say that in-person groups help creativity. What does the science say?

Kara Swisher: Yeah, I'm going to hit you with science a little bit and then I want to give you an example from Judd Apatow that I talked about this with. So the science goes back to the thing I described earlier about why we're so creative right now. There's a big misunderstanding that there's this isolated creative genius. I blame Hollywood for that. And I specifically blame Hollywood writers for making up—I think they secretly want to be that person. And so they've created this icon. It doesn't really exist for a couple of reasons. One, almost every invention we know about came from the shoulders of giants. In fact, it might have been Galileo who first said, "This came on the shoulders of giants." All those little creations along the way led to the isolated genius. Number two, population leads to more creativity. Why? Collaboration, competition, cooperation. Cities, full stop, Scott. Full stop. And there's a great guy from the Santa Fe Institute who can show this algorithmically, and he's in the book. This was interesting what Judd Apatow told me, and it's not science, which I've just given you, but it's an interesting anecdote. He talked about writer's rooms, and he gave me the example of two writer's rooms. One was the Larry Sanders show. Great show, but it had a problem. Everyone was so—the way a writer's room works in Hollywood, if it's good, is people sit down and almost like the subconscious that we were talking about earlier, they start throwing out ideas and there's no filter. And then along comes the head writer who acts like the prefrontal cortex and says, "Not so good. Let's follow that one." It's like the analytical part of the brain. Interestingly, Judd said in the Larry Sanders show, people were so intimidated by Larry and trying to mimic him that the subconscious part didn't work. And the show was very tense as a result, even though the results were good because Larry pulled it off. The writer's room didn't have the flow state. And then he compared that to a show—I'm terrible with these things—about a standup comedian in New York who's always sleeping on people's couches, crashing. It's called Crashing. He said the head writer of that, the main guy, is so embracing, so open. And he said people would start to share the most humiliating stories, the most authentic ideas, and a beautiful show came out of it.

Scott Galloway: People will say our greatness is in the agency of others. I agree with you. Creativity is in the agency of others. And that is, you might have the germ of a thought late night. And I do believe, and I'm curious, I have a couple of questions. One, I've always found morning people are more productive professionals, but creatives are more nocturnal. I don't know if there's any truth to that, but most of my creative thinking comes at night. In the morning, that's all I can do just to get shit done. But also where I think most creatives find real inspiration is they get on the phone with a bunch of interesting people who have permission to push back and shape and craft things. And you've got to surround yourself with muses. You've got to surround yourself with people who—I mean, the movie Queen, right? When Freddie Mercury went solo, his creativity went away because what he found was no one was pushing back on him. No one was inspiring him.

Matt Richtel: Well, look, our time is a little tight, I recognize, but there's a whole section of creativity that we didn't get into about broadened perspective. And the other value of having those voices there, it may not be creative in that moment, but as you learn more from other people, it plants the dots that you ultimately connect in your subconscious. My favorite study in this book is that that winds up yielding people who physically see more through their eyes. Eye tracking software on creative people will show that they see more things and spend more time on them. And that is an act in part of training your perceptions to bring in more information. The more rigid the worldview, the more you put stuff outside your scope and say that's not allowed, the less you're going to be able to tap into.

Kara Swisher: Interesting.

Scott Galloway: All right, we gotta go in a second, but very last question. What can people do to help creativity in everyday lives? One thing.

Kara Swisher: One thing.

Matt Richtel: One thing is to give yourself permission not to judge and to do that outside the scope of your day job. It is very hard in a world with rules that you must participate in to do this. Allow yourself to do it on the margins and it will squeeze its way into the rest of your life.

Scott Galloway: Matt, please sing your song about sex.

Matt Richtel: So here's the thing. I write a lot of music, okay?

Kara Swisher: You do. I recall this. Go ahead.

Scott Galloway: Oh my God. That's so mocking. Sing your dirty song.

Matt Richtel: This is a song I'm only going to sing the first two verses and the chorus. But the reason I sing this is this is one of those ideas that hits. You know how everybody talks about friends with benefits? I think the real marriages survive. And I got a good one. Because we have sex with benefits. Sex with friendship. This is called "Benefits."

[Kara Swisher laughs]

Matt Richtel: Don't you laugh yet, I haven't even—

Kara Swisher: [laughing] I'm already laughing. Go ahead.

Scott Galloway: God, even I'm turning red.

Matt Richtel: [singing] I know Casanova, but I started to smolder when you walked over and— Bye. I know I'm getting older and I know I'm getting bold to tell you why. I am selling the shit. Sex with benefits. Sex without is the pits. Uh-huh, uh-uh, uh-uh, uh-uh. Sex with benefits.

That's not the whole song. What do you think?

Kara Swisher: Oh, God.

Scott Galloway: Wow, well done, Matt.

Kara Swisher: Don't quit your day job is my—

Scott Galloway: I'm in, baby.

Kara Swisher: Don't quit your day job. Very creative in any case.

Matt Richtel: That was inspiring yet uncomfortable.

Kara Swisher: That was very—

Scott Galloway: Exactly, awkward.

Matt Richtel: That's usually true.

Kara Swisher: All right. The book is called Inspired But Uncomfortable: Understanding Creativity Journey Through Art, Science, and the Soul. It's out now. Thank you, Matt Richtel. We appreciate it.

Matt Richtel: Thanks, man.

Scott Galloway: Oh, man. White guys who sing. I always love it.

Kara Swisher: Wow. That puts a new spin on the carob ball. So are you sure you don't smoke a lot of pot?

Matt Richtel: I don't smoke any.

Scott Galloway: How do you be friends with that guy and not do edibles?

Matt Richtel: I don't know. Someone handed me mushrooms in Germany and not the good kind that I like to eat, the druggy kind.

Kara Swisher: Yeah. And how'd it go for you?

Matt Richtel: I didn't take them. I just left them there in the hotel.

Scott Galloway: I actually think that'd be good for all of us. Have you had a little shroom?

Kara Swisher: I don't think so. It's not a little shroom.

Scott Galloway: Okay.

Kara Swisher: One more quick break. We'll be back for predictions.

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Kara Swisher: Okay, Scott, I want to hear some predictions, but I actually asked you to talk about this layoffs thing this week. So one of the things you had talked about was more and more layoffs among the fleece collar people. And you've done some layoffs at L2. So I want you to illuminate me on that prediction a little bit more and explain what you guys went through and where you think it's headed.

Scott Galloway: Actually, I sold L2 five years ago, but I'm glad you're so invested in my career.

Kara Swisher: No, Section 4.

Scott Galloway: Section 4. Yeah. So I'll tell you what we—I think we got wrong and we got right. I made the same rookie mistake over and over. And I'm not in management here. I'm just on the board and I teach on the platform. But I'm in a position where I've had a few wins, so I can raise capital easily.

Kara Swisher: Yep.

Scott Galloway: I think we probably raised too much capital and I'd made the same—I won't say "I"—the board and management made a mistake that management makes a lot. And that is we conflated macro conditions for our own talent. And that is an online ed firm in COVID had unnatural gale force wins in our sales. Last year, we had like 13,000 students. We just kind of flipped the on switch overnight. I mean, to give you an example, Kara, we were charging people a thousand bucks in the beginning and I would do a class with 1,400 people. So $1.4 million for an online class that went three weeks. So the margins were crazy. Raised a bunch of money. And the general viewpoint was you can't hire fast enough. So just hire everybody. COVID begins to wane, demand falls, people don't want to be behind their computer. And I think one thing I noticed about remote learning: if you have a team that worked together before, you can maintain 90% of productivity remotely and give people time back. It's a wonderful thing. I think going from 30 to 120 people, which is what we did over 12 months, it is difficult to maintain a culture and productivity in person, much less remotely. And we found we had diseconomies of scale. And that is we quadrupled the workforce not to get a commensurate increase in productivity. I think what we got right was we started seeing this six months ago and said the sooner we do layoffs, the better. I've always thought—I've always said on any board when they're thinking about cuts, I'm like, go deeper than you think you need to because you don't want to do this more than once. But yeah, we laid off about 30 people, which was always really painful and difficult, especially for the people who've been laid off. I believe, and I'm seeing this across everywhere, I think it's just getting started.

Kara Swisher: Yeah, this is what—this dovetailed into your prediction. So I wanted you to explain.

Scott Galloway: Yeah, so the reality is we screwed up. I've made the mistake over and over, which is the difference between making a mistake and being stupid. I've been stupid. I keep finding firms, finding reasons why we're just awesome and probably overhiring as opposed to measured growth. But you're seeing across basically all the winds from the pandemic in businesses, anything remote, have really subsided. Zoom, Peloton, yeah. And then you have companies—we look modest. The majority of the feedback we've gotten from people is you were ahead of the curve. Because we did start thinking about this a few months ago. I'm like, we're just overhired here. We're not getting the same.

Kara Swisher: So how does that dovetail into your prediction? Because a lot of people took notice of your fleece—the fleece layoffs, essentially, if you're wearing a Patagonia vest and this and that. How do you—it's going through this process yourself. Where does it go from here? While people not returning to the workplace may be returning to the workplace, it's still—we're still in this sort of weird nether period, I think.

Scott Galloway: I think you're going to see a lot of layoffs. I mean, if you're an engineer, you're pretty safe because those skills are just—the demand is so extraordinary for engineers. But the reality is 80, 90% of a tech company is not engineers. It's people doing other stuff. And I think there's going to be a lot of layoffs. I think it's going to be the biggest layoff we've had across what I'll call information age companies since probably 2008. I think over the medium and the long term, it's really good. I think that tightening, sending signals to people, it's really good. I think that tightening, sending signals to people who are good—if you're not good, I believe in strategic firing. And I know that's not aspirational, but I think people need to look left and right at a company and say, "I get it. Maybe I don't like this person, but I understand why they're here." And I think that the hallmark version of companies that everyone has a role and it's not the person's fault, it's the organization's fault—I think that's bullshit. That's not capitalist. And also, people who get fired—I've been fired—need to recognize that that's okay, that your human capital is going to be better served somewhere else. Now, having said that, it's easy to say when you're economically secure. So I've always said, do it sooner rather than later and try and err on the side of being generous. But you're not doing anyone any favors wallpapering over a shitty business and keeping people employed when you know eventually you're going to have to let them go.

Kara Swisher: Right, as things change.

Scott Galloway: But I think we're going to see just—I think we're going to see a lot of this over the next six to 12 months. And then in 18 to 24 months, I think the entire tech ecosystem is going to be stronger. I think occasionally you've got to—like intermittent fasting, I don't know what the term is, but I think it's healthy. I think this recession is going to be healthy for us as long as it's not a depression.

Kara Swisher: Right, a depression. So now I'll let you make a regular prediction. I thought it was just important to illuminate on a prediction you made last week.

Scott Galloway: Yeah. So my prediction—it was going to be a story. I didn't have a prediction, but I'll—I think ESG is going to be—I don't know what the term—I think it's just total bullshit. I think these metrics have been weaponized by people to try and use it as some sort of marketing technique to pretend that somehow they should tap into these ESG funds. I think Elon Musk was actually correct in calling out—

Kara Swisher: Correct. Just for people who don't know, Tesla was kicked out of the S&P 500 ESG index. This is environment, social, and governance. I'm sorry.

Scott Galloway: It's the do-gooders, essentially.

Kara Swisher: ESG index because it doesn't have a climate plan. Tesla's, quote, "lack of low carbon strategy, codes of business conduct, and accusations of racism and poor work conditions were also to blame." Amazon, Apple, and ExxonMobil still made the list. Naturally, Elon tweeted that the S&P had lost their integrity.

Scott Galloway: I don't think they ever had it. It's like some of these dumb awards that you get for—I hate awards in general. I think Elon was correct here. He acted like a big baby about it. But nonetheless, he's correct.

Kara Swisher: So go ahead, ESG.

Scott Galloway: Well, it's basically someone sitting back and saying, "I'm going to decide whether I like you or I think you're good based on my criteria. And I can shove any criteria into three letters, ESG." And what they need to be is they need to be—okay, environmental and very straightforward, non-emotional metrics, whether it's carbon emissions or carbon emissions for economic growth because there is a tradeoff. Carbon emissions are worth it in some instances. But this has become just so—ESG has been so weaponized as a marketing vehicle for non-ESG firms. I think it's become meaningless and it's almost become damaging. And I think you're going to see a lot of warranted scrutiny of firms claiming to be ESG and we're going to realize it's all bullshit. It was nothing but marketing to try and create another weapon of mass distraction from shitty businesses because they quote ESG. And I think Elon got it right here. I think this whole ESG thing has become a useless, weird term.

Kara Swisher: But there's got to be a way to do—I read a really good story on carbon trade-offs, buybacks and stuff like that on the plane, again, in The Economist, which is such a good publication. I've forgotten most of the article, but the whole area is still not—there should be companies that are thinking about their carbon footprint and how they can become better. And I think that getting rewarded with a little plaque seems to be the stupidest. It should just be at the heart of these companies rather than to be on a list. I can't stand it. I'm the same way about journalistic awards or Oscars or things like that. I find them exhausting and tend not to show up at most of them. But I agree with you on this one. This is a great thing to think about. But how do you get metrics where companies just stick to them because it's the right thing to do for the society and for their business? I think that's how do you force them without giving them a plaque or something.

Scott Galloway: Yeah, but there's basically—I mean, there were some households trying to be carbon benign, right, or carbon neutral. Your emissions relative to your shareholder value or relative to the employment or whatever it might be. There's got to be third parties who don't have a for-profit motive coming up or governmental agencies coming up with real metrics. The problem with metrics—there's been a lot of studies now on metrics. And that is the moment you start studying to the test, the metric not only becomes useless but it becomes damaging. And the metric I always use is I think one of the worst things that happened to higher ed in the US is these rankings. Because we all started studying to the test and we figured out if we reduced admissions rates, we'd go up in the rankings. And it ended up being anti-American to become rejectionist. But this is so important. This field is so important that some sort of agreed upon metrics around how environmentally damaging or—I mean, one of the nice things about these tech companies is they are, relative to their economic output, they are not harmful to the environment. But there's different types of environmental damage, right? So this is an interesting field, but ESG—God, it's been weaponized and perverted.

Kara Swisher: Yeah, I would agree. I think we're in agreement. I was going to note we were in agreement with Elon on this, but it still goes—these things go on all the time. Anyway, that's the very long show. We'll be back on Friday for more.

Scott Galloway: That was a long show.

Kara Swisher: That's okay. It was full of interesting things. And Scott, read us out.

Scott Galloway: Today's show was produced by Lara Naiman, Evan Engel, and Taylor Griffin. Ernie Andretat engineered this episode. Thanks also to Drew Burrows and Mia Silverio. Make sure you subscribe to the show wherever you listen to podcasts. Thanks for listening to Pivot from New York Magazine and Vox Media. We'll be back later this week for another breakdown of all things tech and business. Kara, have a great week.

Kara Swisher: Thanks. You too, Scott.

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