Regulators are cracking down on tech, and Friends of Pivot Sheera Frenkel and Cecilia Kang on Facebook's leadership

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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, you're in Iceland. You're in Iceland.

Scott Galloway: I am, Kara. Yeah.

Kara Swisher: How is it?

Scott Galloway: I am in Iceland.

Kara Swisher: Is it icy?

Scott Galloway: No. It's light. There's no icy in Iceland and no green in Greenland. But go ahead. Have you been to Iceland?

Kara Swisher: No, I have not, but Amanda has. But go ahead. Do you like it?

Scott Galloway: Oh, it's a stunning country. You feel as if you're in one giant Game of Thrones scene. Every valley you come over, it's another natural wonder. The people are friendly. I love it here. I've been here several times, and I'm here with my boys. Every time I'm here, it cements how beautiful it is, how important it is to spend time with your kids, and how much I hate the outdoors. We finally got to spend some time indoors yesterday and watch the final of the EuroCup. But anyways, I'm in Iceland. Happy to be here.

Kara Swisher: Good, good. Fantastic. Well, I am here in New York City. I'm sorry I was a little late today. I was getting some food for Louis Swisher down in Little Italy. The subway is the first time I've been on a subway in two years, I think, or a year and a half at least. It was interesting. It's weird to be back to sort of normal-ish, I guess. Everyone's wearing masks here still in New York. So let's go through a couple of things very quickly. Richard Branson and five crewmates from Virgin Galactic Space Tourism Company successfully made it to and from space ahead of Jeff Bezos' July 20th departure on Blue Origin. It got up 54 miles, three or four minutes of weightlessness. Blue Origin is going to go 66 miles. Any thoughts? He came back down safely, Richard Branson.

Scott Galloway: I've been trying to figure out why I find this whole thing so gross. Is it because I'm jealous of these guys? Is it because it's not going to do good for the world? I'm trying to figure out what it is about this that bothers me so much. I think it comes down to this: there was a space race. Yuri Gagarin and Shepard. Was it Andrew Shepard? That was a space race. Alan Shepard. A woman who doesn't get a lot of attention is the first woman in space, Valentina Tereshkova. These people accomplished the same or more 60 years ago.

Kara Swisher: Yes, they did. So you think this is just a ridiculous thing by billionaire men?

Scott Galloway: I think it reflects something unhealthy. We've had the first Japanese citizen in space. We've had the first woman in space. We've had the first teacher in space. But we've decided we need a race. A race gets segmented by nationality, sometimes by weight class, sometimes by country. And we've decided a distinct cohort we should track with awe is billionaires.

Kara Swisher: It does feel a little untoward. But at the same time, the idea that we should be a spacefaring civilization, I'm not against that idea at all. Because then I'd be the person standing on the shore in Spain saying, "What is that Columbus guy up to?" You just don't want to be that person. Or someone on the beach at Kitty Hawk saying, "Oh, it only got two feet off the ground. It'll never work." You want to be leaning forward into exploration. I always do. But this version... maybe it felt like that back in the old exploring.

Scott Galloway: Yeah, but it shouldn't be scientific exploration. Not what I'll call space tourism bullshit. The day after it was successful, and congratulations, they did it successfully. They didn't get quite to the Kármán line. They didn't do anything Chuck Yeager did 50 years ago with cooler uniforms.

Kara Swisher: Yep, yep. And Chuck Yeager is cool. What do you know, Kara? What?

Scott Galloway: 18 hours after the successful launch, they announced a $500 million stock issuance. By the way, the stock's off 15% today. I just find... why have we decided billionaires in space is some sort of human victory?

Kara Swisher: Yeah, I would agree. I don't get it. All right, well, here we go. Speaking of which, there's continued momentum for the global minimum corporate tax rate of 15%. Over the weekend, leaders in 20 of the largest top economies endorsed a proposal that would impose new taxes on large profitable multinational corporations. This comes after more than 130 countries approved it earlier this month. So, they can go as long as they pay their taxes, I guess. I don't know. What do you think?

Scott Galloway: Yeah. This is a great thing. Global cooperation. I feel like we've kind of killed this story. I love us getting together. I can't wait till we finally set our sights on Ireland and say, "Look, Ireland. You're charming. You're charming. You're just playing, or we're going to put you out of business. Charming as you are."

Kara Swisher: Yeah, it's interesting. It is true. I think this is a really big move. A lot of these... we're going to be talking later with authors of the book on Facebook. The stuff that's happening in Washington suddenly feels very cooperative or more cooperative, even though if you watch CPAC this weekend, you literally hate the human race. But in any case, it's a really interesting time. So we'll see what happens. So we're going to start now with the big story, of course, which is related. President Joe Biden signed a broad executive order aimed at stirring competition and limiting corporate dominance. The White House is targeting sectors beyond big tech, although big tech is certainly in its crosshairs. The administration wants to go after industries including agriculture, health care, shipping, and transportation. The order comes after months of negotiations between White House officials, the DOJ, and the FTC. Tim Wu, who serves as Biden's aide for technology and competition policy in the White House National Economic Council, was a key player, which means there was a lot of thought about tech, of course. It also deals with net neutrality rules and whether there's going to be successful antitrust efforts and how quickly government agencies push to implement policies which are likely to face court challenges, as we talked about. What do you think of this? This was a stunning piece of executive order after years of Trump-Dodo executive orders, which were badly written and full of mistakes. This was really quite sweeping. What do you think?

Scott Galloway: As absolutely uninspiring as the billionaire space race is, I find this really moving. The son of a British-Canadian immunologist and a Taiwanese independence activist goes to law school, Tim Wu, teaches at law school, becomes the premier thought leader on antitrust, is drafted into the administration. And literally six weeks later, if you go back to the podcast, The Pivot, where we interviewed Tim Wu, he basically laid this out word by word. When we asked him about big tech, me blathering on about breaking up big tech, he goes, "Scott, it's not just big tech. It's big ag. It's big health." Senator Klobuchar talked about this too, remember? She was talking about caskets and things like that. This is literally Tim Wu putting on... I mean, this guy has gone gangster. I read this thing and I'm like, "Oh, my God." I think it's just inspiring that we draft these incredibly impressive people into the government, and within six weeks, they can be outlining such incredibly impactful legislation. They had this ready. The good thing about the Biden administration is they got things ready. I think Tim has been thinking about this for a very long time, along with a lot of people, and they've just been waiting for the opportunity. But it's across the board. It's quite breathtaking in its scope.

Kara Swisher: So what pushbacks do you see coming? Because that's the inevitable thing is how they do it. These things soar up, and then people take a shotgun to it and they soar back down.

Scott Galloway: I see housing prices in the D.C. area continue to skyrocket because every lawyer in America is going to get... every decent law firm in America is going to be working for one of these industries. This is really smart because instead of this becoming an argument around whether tech is good or bad, and there is an idolatry of technology, it's whether competition is good or bad. The majority of Americans will come down on the side of competition. They're smart to broaden the argument beyond big tech and trying to decide whether you like Amazon because the majority of consumers like Amazon, to whether one manufacturer manufactures 70% of all chicken and your chicken prices are too high.

Kara Swisher: Or healthcare. Pharma is another big area.

Scott Galloway: That's right. A study just came out saying that a lack of competition in the U.S. costs every U.S. household an additional $5,000 a year because they have too much pricing power.

Kara Swisher: Yeah, yeah. So, like everything, I just think people in the Biden administration are very smart, thoughtful, shrewd people.

Scott Galloway: Yeah.

Kara Swisher: But tech is still going to be the sharp end of the stick. Tech is going to be the place that goes first because I think this is something most people agree on. We'll see how far it gets and whether things get pushed back, as we've talked about over and over again. But it certainly was a breathtaking move, especially when they're in the middle of the infrastructure bill at the same time. The amount of surface area this group has is really interesting.

Scott Galloway: You love that term, surface area.

Kara Swisher: You love that term.

Scott Galloway: That's because I'm a general. That's your gestalt.

Kara Swisher: That's my gestalt. The gestalt of your surface area.

Scott Galloway: Oh, like you don't have words, boom, et cetera. Yeah, I love it. Chipotle, penis, things like that. That's great. At least I'd pick a better word. Where'd that come from?

Kara Swisher: Coming up. It was hot in the subway. It was sweaty. I was carrying prosciutto for a long time for my son.

Scott Galloway: You were on the subway. I like that. I have not been in the subway for a long time.

Kara Swisher: Yeah, but that felt pretty good. They're masking in the subway. Everyone's masked in the subway, but it was hot. It's a hot day here in New York. Anyway, let's go on a quick break, and we'll be back to talk about the regulations coming out of China and a friend of Pivots with New York Times journalist Shira Frankel and Cecilia Kong to hear about their new book, "An Ugly Truth: Inside Facebook's Battle for Domination."

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Kara Swisher: Okay, Scott, we're back. China again. We talked about this briefly last week. China is cracking down on tech and calling for data-rich companies to undergo security reviews who are listing overseas. Early this month, just two days after Didi, the Chinese ride-hailing service, IPO'd, Chinese regulators announced an investigation of data security concerns and did all manner of things to slow them down. The goal of the investigation was, quote, "to protect the national security and public interest." As of Monday, ByteDance, the Chinese company that owns TikTok, announced that it's putting off its IPO intentions because of the country's heightened attention on data security risks. This includes location data, things when people are uploading. It especially worries about it being leaked to the U.S. government. In addition, the Chinese Ministry of Industry and Information Technology released a three-year plan draft to develop the country's cybersecurity industry, saying the sector may be worth roughly $40 billion by 2023. So anyway, it's a big crackdown. According to Nouriel Roubini's reporting, there are currently 244 U.S.-listed Chinese firms with total market capitalization around $1.8 trillion. That's the equivalent of around 4% of the capitalization of the U.S. stock market. What do you think is going on here? I've just written a column about this, but it's not out yet. But tell me what you think.

Scott Galloway: So there's what I think is going on and then what I think the opportunity is. I would rather you take what you think is going on and I'll talk about what I think the opportunity is.

Kara Swisher: Well, obviously we talked about this a little last week. There are the issues around whether you're an investor or a new investment in China, which has always been difficult for U.S. companies to get in there, period, and then difficult for U.S. investors. But certain companies like Apple have real exposure in China. Not Facebook, not Google, but some others in tech. I think this idea, as we've talked about it, it's as if you took Josh Hawley and Amy Klobuchar and gave them unlimited power and made them insane. I think they've just decided that these companies are not going to be more powerful than the government. They did the same thing with Bitcoin. As you said, quite intelligently, they saw what's happening here and they're not going to let it happen there in China, which is a much more autocratic thing. The last thing is that autocracy is really important to this country to keep it under control. There was an enormous amount of money spent on internal security within China. They have to keep a lid on that country. The government has to keep the lid on, and they are not going to let tech companies have the power that they feel they should have to be running this country. So I keep saying "company." It's so interesting. Go ahead, Scott.

Scott Galloway: Yeah, I mean, you want to talk about people's hair being on fire right now. There are so many venture capital firms that are worried that they've invested literally billions in Chinese companies that are trapped. You must have heard from them. Because there's a chill around the prospects of any Chinese company going public on U.S. exchanges. It's like, "Okay, is that debt equity? How do I get that money out? How do I monetize it?" I think this is an incredible opportunity as an investor. I went through for our predictions episode all the stocks we've talked about. I found five stocks that I've recommended over the last year: Restoration Hardware, Sonos, Twitter, Alibaba, and Peloton. Four of the five are way up. The only one that's down is Alibaba.

Kara Swisher: Yeah, they've sidelined Jack Ma for those who run that. But go ahead.

Scott Galloway: Alibaba in the last 24 months, its revenue is up 144% and has much higher margins than Amazon because it relies more on its third-party marketplace. Its cloud business is up 34%. It has an incredibly robust payment system. Amazon's up 58% of their top-line revenue. And get this: Amazon's stock has doubled and Alibaba's is up 26%, resulting in a P/E ratio of Amazon at 60 and a P/E ratio of Alibaba at 20. I think Alibaba just looks incredible.

Kara Swisher: Can I ask you a question?

Scott Galloway: Let me go. Go ahead. Let me go. It's incredibly cheap. And it's all around this one question: Is this... they've gotten angry, they've punished the kid, the kid has learned its lesson and now everything's fine? Or is this a new China? I think it's the former because I don't think China can meet its ambitions around sustaining a middle class and the economic growth it needs to without supporting its global champions. These are its global champions. So I actually think this is an incredible buying opportunity.

Kara Swisher: Interesting that you said that because last night, what did I do? Text you and ask you for stock opportunities because I'm testing some apps, and you said "buy low and sell high." That is the only tip you gave me, and now you're giving a tip right here, quite freely to the people. Just pointing out.

Scott Galloway: Well, if you look at Alibaba, I mean, I just look at Alibaba and go... I don't own any Alibaba. But the question is, the geopolitical risk here is so severe and shocking.

Kara Swisher: It is, indeed.

Scott Galloway: That the market is running from it. But if you look at Alibaba just next to Amazon on a valuation level, Alibaba is basically Amazon for 70% to 80% off.

Kara Swisher: All right, what else? In terms of the stock. What else in terms of opportunity then? So Alibaba and the others, even though they're under the scrutiny of this country.

Scott Galloway: I hate ride-hailing, but there's a ton of great companies. There's Tencent. Every major internet company in China has experienced this chill. I just can't imagine this. I think we have a precedent for this historically. It's what happened in Saudi Arabia when they sat everyone down and said, "Just FYI, we're in charge." And everyone said, "OK." And they left and got back to some sense of normalcy. I can't imagine China is going to decide to prohibit their internet companies from going global. I can't imagine they're not going to decide to let these companies access the equity markets in the U.S. I think they've made their point. They've made it a very pointed point. But I can't imagine they've decided, "All right, we're going to go inward and start kneecapping our best companies."

Kara Swisher: No, you're correct. What do you think? I think you're right. I think "we're in charge here" is the kind of thing they're doing. This report about the cybersecurity industry... the U.S. has been wracked by ransomware attacks across the globe, not just in the U.S. I think they've decided this is a really important area for them to protect their country and at the same time to dominate. And that's dangerous for our country. We really do need to be out front of cybersecurity, period. With China, with the facial recognition and everything else, this is not a country I want to be excelling in cybersecurity over our capabilities. That's my nervousness. They do these planning draft release things, and we've got to have one. We've got some very smart people in the U.S. government, like Anne Neuberger and many others working on these things, but they're putting out fires, very severe cybersecurity fires. So that's a really smart thing. Alibaba, you're right. But it'll be interesting to see when Jack Ma reappears. That'll be... I'd love to talk to him. I'd love to see his mood. He used to say a lot. All of them did. So did the Didi, Jean Liu, and they all did. When you get disappeared for two weeks, I think you come out with a different view of the world.

Scott Galloway: I would agree.

Kara Swisher: Anyway, it'll be interesting to see. He will emerge, but we'll see how he emerges. That'll be interesting. Okay, Scott, next up, let's bring on our friends of Pivot. Shira Frankel and Cecilia Kang are journalists at The New York Times and co-authors of "An Ugly Truth: Inside Facebook's Battle for Domination," which is out this week. You may have heard of it. There's a huge excerpt in the Times, and everybody is talking about it. Shira covers cybersecurity, and Cecilia covers technology and regulatory policy. Welcome to Pivot.

Shira Frankel: Thanks for having us.

Cecilia Kang: We're excited to have you here.

Kara Swisher: Scott is in Iceland, as we've said before, but he will have lots and lots of questions. But first, I'd love you to walk us through the book to start with. Why don't you read a section to get us all prepped? I think you pick the section.

Shira Frankel: [Reading] This is a chapter called "Company Over Country." "Oh, fuck. How did we miss this?" Zuckerberg asked, looking around at the somber faces in the aquarium. In silence, the group of nearly a dozen executives stared at Alex Stamos, hoping he had the answer. Stamos, clutching his knees as he perched on the end of Zuckerberg's couch, was perspiring in his merino wool sweater. It was the morning of December 6, 2016, and the group had gathered to hear a briefing by Stamos outlining everything the Facebook security team knew about Russian meddling on the platform. Due to security concerns, Stamos had not emailed his findings to the attendees ahead of time. Instead, he printed out handouts for each person in the room. "We assess," the summary read, "with moderate to high confidence that Russian state-sponsored actors are using Facebook in an attempt to influence the broader political discourse via the deliberate spread of questionable news articles, the spread of information from data breaches intended to discredit, and actively engage with journalists to spread said stolen information."

Kara Swisher: Okay. So, "Oh, fuck, how did they miss it?" Because a lot of people did notice these things going on. I remember having a very vivid conversation with Sheryl Sandberg about the issues. Hillary Clinton was depicted as a lizard person on Facebook and my relatives read that stuff in their feeds. So tell me, each of you, starting with you, Cecilia, how did they miss it?

Cecilia Kang: Well, in fact, the security team had been warning them for some time, and they found out some of this information much earlier than had been reported. Interestingly, Shira and I had the same experience. When we were talking to Facebook at the time, they were really downplaying what was happening. They will say that they were looking for conventional cybersecurity problems at the time, like phishing attempts, hacking in the most conventional ways, and they weren't looking for foreign interference. But Shira can talk a little bit about how much they actually knew so much earlier on than previously disclosed. The reports were there. The security team had been filing reports. They'd been sending them up the chain. They didn't miss it. They just didn't look.

Shira Frankel: Mark Zuckerberg himself was just not very interested in what the security team was doing. Had he asked at any point for an update, he would have been told, "Yes, we are seeing Russian activity on the platform. We are seeing things that are concerning to us. And the Russians are, in fact, getting ready to do something ahead of the elections."

Kara Swisher: Now, one of the things he said at one of the interviews with David Kirkpatrick, I think, was that there was zero. I think "zero" is the word he used. I recall writing them saying, "How do you know this? Do you have statistics? Can you give them to reporters? How do you know the number zero?" So talk about why they were actively pushing against it for a while.

Shira Frankel: In the days right after the election, when it really came out, Facebook understood that Trump had won. They understood that there was going to be a backlash against them as a company. Mark Zuckerberg asked his own executives to come up with statistics for him. He said, "We know it's tiny. It's got to be less than one percent. Whatever fake news, conspiracies, it must be less than one percent." And they couldn't because they weren't even quantifying it at the time. They were running in and out of conference rooms, going back to him and saying, "Look, even if we tell the public it's 0.5%, we're talking about millions of pieces of information. It's not going to go over well with the public that we missed even that."

Kara Swisher: Right. And not just that, but how did they come up with a number? I was like, "Don't come up with a number if you don't know it, if you don't actively know it and know exactly what it is." So, Scott, question?

Scott Galloway: Sure. First off, Cecilia and Shira, congratulations. I'm seeing this everywhere. You've pulled off what every author wants, and that's regardless of the content, everyone wants your book. I'm sure it's fantastic. They pay you to market the thing, not to write it, and you're earning your money.

Shira Frankel: Thank you.

Scott Galloway: Look, I'm famous for bringing all these questions back to me. I wrote a book on big tech, and it started out as a love letter and ended as a cautionary tale as I got to know these folks. I would just love to know how your view of Facebook and specifically of the leadership evolved or didn't through the course of writing this book.

Cecilia Kang: There was a lot that surprised us in this process. We discovered a lot about Mark Zuckerberg and Sheryl Sandberg through the process. One thing that really should not have surprised us, but that we were able to get quite in detail, was how important Sheryl Sandberg was to really creating this business model of behavioral advertising and growing it and scaling it, and how integral she was to the success of Facebook. That partnership for so many years was such a yin and yang, if you will, where they needed each other, Mark Zuckerberg and Sheryl Sandberg. The relationship, I hate to say it, but it's kind of like a marriage. It really evolved. As Mark Zuckerberg took more control of the company and the aspects of the business that he previously didn't care that much about, their relationship changed. We got up really close to the executives and talked to people who are close to them as well. I think in some ways we found that they are very human, but they also displayed quite a pattern of ignoring warnings, of being very concerned about their PR message and not necessarily fixing problems that they're warned about. Patterns was really a big theme in this book, the patterns of this leadership.

Shira Frankel: You've both written books. You know, you go into writing a book and you're like, "I'm going to figure out the deeper thought process. I'm going to find what the real thing was that was motivating them and uncover all that." As a writer, it was startling to both of us to find how ad hoc so many of these decisions were. You want to think that Facebook, now a trillion-dollar company, has got some really sophisticated, nuanced thinking behind every decision they make. And no, they don't.

Kara Swisher: No, I don't think they do.

Shira Frankel: No, and that's what our book shows. 400 interviews later, 400 people, multiple interviews with many of them, they don't.

Kara Swisher: So why is that from a perspective? Because this is very serious business. One of the things that they tended to do, I think in all our experience, is downplay everything and call you whiny, annoying. It's really interesting. You just mentioned focus on the press, like focus on not just press but PR and how it looks. Can you talk a little bit about the difficulty of writing a book like this?

Kara Swisher: There's so much written about this company, and a lot of it is out there. And some of it is unfair—very little, I think, but some of it. Some of it used to be sort of slatheringly positive about it. I'd love to know how you think about how you cover them fairly and what you think about the kind of things they should be focusing on over PR.

Shira Frankel: There's this perception in Facebook, I think, that we only spoke to people that are disenfranchised or who left the company or disgruntled or whatever. We didn't. I'd say the majority of those people that we spoke to still work at Facebook and love Facebook. And those were the people we wanted to hear from most because these were people that were speaking to us, not from a point of view of disgruntlement or anger, but sadness a lot of the times. They wanted to make the company better. They were disappointed in something they themselves had done or something they had seen with their own eyes. I had multiple people who in interviews said, "God, this feels like therapy. This feels like I can finally get off my chest what I've been feeling and what I've been thinking and the things that have bothered me. And I hope my own executives read this book because I don't know that they've fully come to terms with what we did and the mistakes we made."

Kara Swisher: Can I ask a question? And then Scott can jump to it because this is something he and I argue about. I often say Mark gets most of the responsibility. You mentioned Sheryl did build it, and Sheryl worked at Google, that's where she came from. And before Sheryl, there was a series of men that Mark kept leaving, if you want to keep the marriage thing going. And then he settled on Sheryl and that became a really important relationship. I feel like as much as she deserves the blame here, he deserves the most blame. Scott and I go back and forth about that a lot. When you think about that, talk about this structure of who—not who's to blame particularly, but who is the one that's created the most problem here in terms of solving problems?

Cecilia Kang: This should be no surprise to people who have followed Facebook closely. Mark is in control. He is absolutely the king of the castle there. And our reporting only confirmed that even more, with really great detail. When it came to really tough decisions—like after Mark said on your podcast that all denial should be accepted—that really, really upset Sheryl. And there is little that she could do. It actually showed the limits of not just her power, but anyone else's influence within the company.

Kara Swisher: She could leave. She could leave. Absolutely.

Cecilia Kang: So if anything, we think that her story is much more complicated. We see an evolution of her as a business leader and her power waning towards the end. But more importantly, we see Mark seizing more control, and more recently, even more control.

Scott Galloway: So just going with the marriage metaphor, I find, based on what I know—and I want you to push back—that these two, as a husband and wife, are less menacing than Woody Harrelson or Juliette Lewis in *Natural Born Killers*. Let's just talk about him. I'll put forward a thesis, and you tell me if you nullify or validate it. Mark Zuckerberg is the most dangerous person in the world. Your thoughts?

Cecilia Kang: If power equals danger, then there may be truth to what you said. Mark Zuckerberg is one of the most powerful people in the world because he's created a company in which there's no real oversight of his power. There's no oversight of his control. It's all at his will and his discretion. And rather than, as he ages and matures, perhaps seeing that that's not wise—that in life we all need checks and balances, we all need someone who can tell us, "Hey, you really messed that up. You're not qualified to make a decision on this thing because you're not a thought leader in it and you're not an expert in it. This is a time to bring in someone else who is"—rather than that, as we document in our book, he becomes a wartime leader. He seizes more control.

Kara Swisher: He's obsessed with *The Godfather*. He is. I've had discussions with him about it.

Scott Galloway: Oh, you have?

Kara Swisher: I happen to be obsessed with *The Godfather*, but it's also a movie, Mark. It's an intentional movie. Go ahead.

Scott Galloway: I want to press you on that point. It's obvious that it's an incredibly powerful platform. I'm arguing that a sociopath, the wrong person, is running this very powerful platform. Did you find that? Or am I being incendiary and not thoughtful?

Shira Frankel: Well, you know what we're seeing? We have watched, all of us have watched Mark Zuckerberg grow up in front of our eyes. From somebody in their early 20s to somebody who's now not a young guy anymore—he's in his late 30s. And we are all just watching him make ad hoc decisions. We're watching him grow up and figure out the world in front of our eyes. That could be dangerous. I think people within our book would say that, and they have said that. There's nobody on the board who really holds him to account. There's nobody in government that really necessarily holds him to account. There is no regulatory pressure on the company right now as well. So as far as who he is, we're watching a boy grow up into a man who's making huge decisions on the exchange of information.

Kara Swisher: Yeah, I think so. That was my first column for *The Times*: the expense of education of Mark Zuckerberg. I didn't mean for his expense. It was at our expense, which is interesting. I wonder whether a big problem here isn't the entire Silicon Valley ethos, which is the founder is king and worship the founder. He came to Silicon Valley in his early 20s and he was immediately told that he was a boy wonder and a genius. And no one really tells him otherwise to this day. He is surrounded by people who fawn over him and his inner circle. Talk about that. Talk about the inner circle because it's really one of the things—we had Sheryl and Schrep on stage, Mike Schrep. And they were bragging about "we've been together 10 years." And I said, "I don't think that's a good thing. That's a bad thing." I said, "You need irritants in the system to create good quality." But they celebrated it, that they know each other so well and they're pals and they socialize. They vacation together. They send their kids to the same summer camps together. So talk about that. Who is in this circle now?

Cecilia Kang: Yeah. Isn't it unusual, even in Silicon Valley, to have two people there for more than a decade in the top two positions? In many companies you see the CEOs. There's some people you don't know beyond them.

Kara Swisher: Exactly.

Cecilia Kang: There is Chris Cox, who left for a little while and came back. There is Andrew Bosworth—he is a very trusted ally of Mark Zuckerberg. There are Schrep, Michael Schroepfer, who is the CTO, and he's been there for a long time. Justin Osofsky, who's the head of advertising business. And there are some people who have left recently, like David Fischer, who was in charge of ads, as well as Carolyn Everson. Also from Google. That's another thing to add. So that's just a Mark side. Let's take out David Fischer. The other people who I just mentioned are all on Mark's side of the business, the Mark team, let's call them. Then Team Sheryl are people who, as is well known, are known as "Friends of Sheryl Sandberg," FOSSes. There includes Marnie Levine, who has a very similar resume to Sheryl—coming from Washington, working for Larry Summers as well in the Obama administration. And she was surrounded by Carolyn Everson and David Fischer until recently. And Elliot Schrage. Elliot Schrage, until 2000—and I guess he eventually left in 2019, but he announced his retirement in 2018—had been a very, very close lieutenant and advisor. Sheryl also has what's known as—I think people call them her little cabinet that surrounds her—people who are paid from the outside, who have a lot of political expertise, who give her advice. They've all created, as one ad executive described, exactly, courts. They're in these hermetically sealed boxes of agreement of the people that they surround themselves with. I would also mention that they all are very similar in background, demographics, and experience.

Shira Frankel: To Scott's question about Mark, one thing that I think is really important to understand is he's not lived a lot of life outside of Facebook. He went from Dobbs Ferry, Upper Westchester County, to Exeter, to Harvard for a few years, to Silicon Valley, to funding. Not a lot of life experience. And he runs a global platform. I think that that is, to your question about danger, what a lot of people find dangerous—that he doesn't have a real sort of natural impulse to think about... Well, he doesn't have the experience. He doesn't have the education. When he was giving that famous speech at Georgetown, which he's now gone back on, I literally almost ran into the stage and said, "Stop. I need to explain the First Amendment to you and then you can continue, sir." It was kind of fascinating and everyone was sort of lapping it up, which is interesting.

Kara Swisher: So let's talk about, speaking of Washington, the regulatory environment for what's happening now. Since you were writing this book, it must have been like a moving target, like a crazy moving target, right? So the Trump decision. Talk a little bit about that—that was fascinating because they tried to push it off, which is what they tend to do: try to take away responsibility from themselves and push it on to someone else. The Facebook board, which we call the UN, pushed it back at them. So talk about that a little bit.

Cecilia Kang: It was a really smart move on the part of the Facebook board. It was the equivalent of the Supreme Court saying, "How do you want us to decide a case when you haven't given us laws, when you haven't even formed the foundation of an understanding on which we can make a decision?" The Facebook Oversight Board said, "We're not going to be your fig leaf. We're not going to make a decision for you. You have to go back and actually craft policies and create policies to justify why you A) kept Trump on the platform when he repeatedly broke your rules, and B) finally decided to boot him off." Because right now what we're looking at is arbitrary. And I think that was really difficult for Facebook because they know that it was.

Kara Swisher: Why did they sidle up to Trump so much?

Cecilia Kang: It depends who you ask. If you ask, the PR line is going to be that Trump is a public figure and that it's important for the public discourse to hear what Trump has to say, and we're a neutral platform which has to give everyone a voice. I think that there are people within the company who admit that also it was good politics and it was good business. Trump had almost 30 million followers by the time he was booted off Facebook. There are people who went to Facebook multiple times a day and joined Facebook and joined groups because they liked Trump and they wanted to be there for him. And it was great keeping Facebook in the news. It was great to not have to deal with pressure from Trump tweeting out, "Ban Facebook and I'm going to..." Like with Amazon.

Kara Swisher: It hasn't hurt any of them, by the way.

Cecilia Kang: It hasn't, but Facebook didn't want into that fracas.

Shira Frankel: I think a lot of this started with this thing called Trending Topics in 2016, when there was a Gizmodo story that landed that showed that there was bias—or at least alleged anti-conservative bias—in what was then known as this curated list of stories that Facebook would put out. Facebook internally was completely frightened about the reaction to this because a lot of conservatives pointed to that as evidence that they're still out there. And they could see that that would snowball, that this claim of anti-conservative bias would snowball. And it has, as you know, right now in Washington, even though it's completely debunked, the idea of anti-conservative bias and censoring and shadow banning or whatever you call it. But they knew that this would be a political force, that that would be a huge problem for them. And so that's why you have people in Congress right now running on this plank that big tech is censoring us. I don't know if they saw that far out that that would happen, but it was for the first time a completely terrifying new environment for them to have political pressure. Because remember, before that, during the Obama administration, Facebook was a darling, as well as a lot of big tech companies. So it was a complete shock for them.

Cecilia Kang: The irony here, and we've all written about this so much, is that Facebook keeps bending over backwards to appease conservatives and to not look as though they have any kind of liberal bias. We documented in the book and in *New York Times* reporting how just before the elections, when they banned militia groups, when they banned people on the far right and QAnon, Joel Kaplan and his policy team sent the group back and said, "You've got to also ban Antifa. We can't ban one without the other. Otherwise, the conservatives will jump on it." And the Facebook team is sitting there scratching their heads and saying, "Great, now we've got to go find some Antifa groups we can also ban and drag this out for another couple of weeks just so that we can look even-handed." It's ridiculous.

Kara Swisher: It's ridiculous.

Scott Galloway: I think I've come around to more of Kara's point of view. I 100% agree with you. Mark Zuckerberg is in control. From a government standpoint, he has the voting shares. And really thoughtful people come on this board with tremendous gravitas and character that we keep hoping are going to help level up Mark's character. And within several months or a year, they all leave. So it seems to me—you brought up Trump—and I'm curious, again, if you saw evidence of this or evidence against it, that Mark Zuckerberg, like Trump, is outstanding at sort of sucking the life force and reputation out of people, using them as his heat shield. And when they're no longer an effective heat shield, they leave. My sense is he's very Trumpian, very good at throwing other people to the wolves. Your thoughts?

Shira Frankel: You know, it's interesting. Mark Zuckerberg always wanted to be a historical figure. He was, as people have talked about, fascinated with Augustus.

Kara Swisher: Exactly. For those who don't know, he loves Augustus Caesar.

Shira Frankel: But if I was going to pick an emperor, I suppose that's the one I would pick.

Kara Swisher: But how scary.

Scott Galloway: Maximus Kerasus.

Shira Frankel: Yes. He sees himself as needing a place in history, wanting a place in history. And if that's your point of view, if that's your jumping off point, what is a little human sacrifice?

Kara Swisher: Oh, dear. She just answered your question, I believe. Boom.

Scott Galloway: Go ahead.

Shira Frankel: Damm-a-damm-a-ding-and-damm. I think Sheera answered it well.

Kara Swisher: That's a good one. All right. So I'm going to ask two more questions. One is going forward. There's a consumer part. There's a stock part. It's never done better, right? It's doing really well. It dominates. Where is it now, Cecilia? Start in Washington, and then I'd love you to talk about product and technology and security because we're getting hit with ransomware attacks. So first, start with the regulatory environment right now. Obviously in China, they've just decided to go all—they're going up to Tencent today.

Cecilia Kang: Yeah, Tencent is where they went today and ByteDance.

Kara Swisher: So what is going to happen here? What is the strength of the opposition to Facebook, at least the regulatory opposition? You have Lina Khan, you've got Tim Wu, you've got this executive order. Give us a sense of where it's going to go and how it's going to affect them.

Cecilia Kang: I've been covering this for a long time, regulatory policy, and I've never seen the kind of energy that I'm seeing right now in Washington. There's so much interest in regulating and reining in Facebook and big tech. That said, we are seeing the limits of laws right now. We're seeing the limits of how far enforcement actually could go with the court recently throwing out the Federal Trade Commission's lawsuit and also the lawsuit by more than 40 state attorneys general recently to try to break up Facebook. So it's going to take some time. There's a lot of energy. I think the Biden administration's pick of Lina Khan to run the FTC and already the action she's taken—she's trying to actually create regulations in some ways at the FTC. And you're seeing a whole suite of antitrust bills going through Congress and passing. They're really tough. I think two years ago, one year ago, even they wouldn't have passed. There's a lot of energy, but—this is where covering Washington for so long has gotten to me—I feel like it could take a really long time and it's hard for me to get too excited about it. I think there's going to be a lot of other action for other tech companies as well, but definitely I think you're going to see the FTC. They're not going to roll over after that court decision. They're going to refile, I imagine. I mean, how could they not? So there's a lot of energy. Figuring out how to execute that and the nuts and bolts of that is really the question going forward.

Kara Swisher: What about you from a product point of view? The stock is doing well. All the tech companies have done very well in the pandemic. What do you imagine is going to happen from a product and technology point of view for this company? I wrote a book on AOL. It was ascendant and then it was not. Is that what happens here?

Shira Frankel: I think it's actually very hard to get them out of ascendancy at this point.

Kara Swisher: Yeah, I mean, I think that's what scares Mark Zuckerberg more than anything else—that he's not the hot new it boy anymore. I mean, you've seen them try to—

Scott Galloway: He never was, but go ahead.

Kara Swisher: There's always—whenever I used to go see him, I go, "That MySpace guy is handsome." I've been hot in a different way. But no, I think that—I feel triggered. I'm sorry. Go ahead, Sheera.

Shira Frankel: I think Mark is terrified of TikTok. I mean, I've seen Instagram obviously try to clone TikTok. I would say it doesn't seem to have worked. I don't know many people that are using the Instagram version of TikTok. We're seeing him look at other companies on the horizon and realize that he's not able to put his finger on the pulse the way he once was. And he can't make those big acquisitions perhaps the way he once did. And that's incredibly threatening for him. That being said, in much of the rest of the world, Facebook, Instagram, WhatsApp—hugely dominant, hugely successful.

Kara Swisher: Right. And so he knows he can rely on that. He knows he can rely on being first, on being global. It's like Microsoft. It's a Microsoftian kind of attitude. And does it become as boring as Microsoft is at some point? But the most valuable company in the world is Microsoft and Apple, or Amazon and Apple. So it's an interesting thing. So what do you imagine is next, each of you? And then Scott will ask a final question.

Cecilia Kang: On the personal level, it'd be really interesting to see what happens with executive leadership. I can imagine Mark Zuckerberg wanting to continue to stay at the helm of the company and to introduce new technologies. He's very competitive and he wants to stay ahead. So not pull a Bezos. But he also really admires Bill Gates. And I think he's really interested in the Chan Zuckerberg Initiative and taking more role in that. So we can see that as well.

Shira Frankel: When you think about the future of Facebook, there are some things that are so core, that are so part of its DNA. One of them is the structure and Mark Zuckerberg's leadership. And the other is how the technology functions and how it surfaces emotive content and engagement and prioritizes engagement in the News Feed. Until some of these core things change, I can't see the trajectory really changing at all at the company.

Kara Swisher: Yeah, I find them very un-innovative. I mean, you just saw the executive who left for Instacart who is really interesting. A lot of people are leaving. It's a very Google-like situation that happened to them too.

Scott Galloway: Tell, what do you think?

Cecilia Kang: I think as we show in our book, Mark Zuckerberg and Sheryl Sandberg have drifted apart and her relevancy and importance in the company has been called into question. I'm curious to see what happens next for her. And I'm curious to see what happens next in terms of who ascends to be the next Mark at some point.

Kara Swisher: Anyone? Give me a name.

Cecilia Kang: Chris Cox probably came back for a reason. I can't imagine that that wasn't part of the discussions with Chris Cox when he decided to return to the company.

Scott Galloway: Hamlet. So Hamlet's going to take over.

Kara Swisher: I once had Scott a copy with him that literally he's like, "I feel bad and yet good." People see him as this—they call him the moral compass of the company. I would point out that while he is certainly very thoughtful about these things, many of the problems happened under his watch.

Cecilia Kang: That is correct. He was the head of News Feed when News Feed made those decisions. His own employees—we have this in the book—were coming to him and they were saying, "What's going on with News Feed? Why is all this crazy stuff about Hillary Clinton being in a secret coma? Why is this at the top of News Feed?" And he kind of patted them on the back and did that Facebook thing of, "I hear you. I hear you. I hear what you're saying." I'm sure that made the employee feel really great, but it didn't change anything when it came to American democracy.

Scott Galloway: All right. Last question. Moral compass. That's a pretty fucking rusty compass. Look, let me ask you this. The Biden administration called you and said the two of you are thoughtful people. You've seen a lot of companies. You know this one as well as any outsider right now, at least for a moment. What should we do? Is it regulation? Do things not change unless management leaves? Is it severe punishment? Magic wand, what would you do to make Facebook a healthier part of our ecosystem?

Shira Frankel: I would say your problem is not Facebook. Your problem is social media. Your problem is that Americans don't know how to use the internet, despite probably we should be better than any other country. We should be able to teach our kids media literacy. We should be able to teach Americans how to find valid sources of information online. We're not doing that. There are countries all over the world, including Singapore, Estonia, that are doubling down and saying our democracy is going to break down unless we start teaching people media literacy. America is not doing any of that. And I would tell the Biden administration, this is not a Facebook problem. This is a problem that is going to persist. It's going to get worse. Deep fakes and AI are going to make it worse for all of us. And unless you do something now, where does democracy sit in 20 years, 30 years time?

Cecilia Kang: I can tell you what the Biden administration is telling themselves, actually, which is that we've done a lousy job as a federal government of enforcing our own laws. And there are so many examples of violations from Facebook and other companies. But let's just stick on Facebook for a second. They say that the privacy settlement of 2019 was so long overdue. There are so many other examples of violations. This is what I'm hearing from people in Washington: there needs to actually be a real cop on the beat. The federal government allowed more than a thousand mergers by big tech companies over the last decade, and they never challenged any of them. So I think that what I'm hearing from them themselves is that we actually have to be bolder.

Scott Galloway: I have one more last question. Joel Kaplan, will he stay?

Cecilia Kang: Yeah. It's curious. This is the guy who did a lot of the Trump petting, I would say. From everything we know, he is absolutely in Mark's inner circle, and Sheryl absolutely trusts him. And remember, Sheryl brought him in, and Mark has brought him into his circle. So he is incredibly powerful. He's still powerful. He's incredibly powerful post-Trump as well, even with the Democratic administration. I think people really value, especially Mark, his political instincts. He apparently gets along really well with newcomers like Nick Clegg. So as far as whether he wants to stay, I don't know. Whether he is in danger of leaving, of being kicked out? No way.

Kara Swisher: So if the Trumps didn't hurt him.

Cecilia Kang: No. No.

Kara Swisher: All right. Okay. Well, this is a great book. Everybody should read it. They're going to be all over the media, but you should read the book anyway. It's called *An Ugly Truth: Inside Facebook's Battle for Domination*. Sheera, Cecilia, thank you so much.

Shira Frankel: Thank you.

Cecilia Kang: Thank you. Congratulations.

Kara Swisher: Thank you. Thanks so much, Scott.

[Discussion continues after a break...]

Kara Swisher: All right, Scott, one more quick break. That was fascinating. Didn't you find them fascinating? They're fascinating ladies.

Scott Galloway: I did. They're thoughtful, thoughtful, interesting people. I got the sense you're all good friends. By the way, you're having a book party without me.

Kara Swisher: No, I invited you. Did you previously do it while I'm in Iceland?

Scott Galloway: Yes, sir.

Kara Swisher: Okay, all right. So let's get—we'll be back with wins and fails.

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Kara Swisher: Okay, Scott, wins and fails. I'm going to start by being first, but fail once again. There's a great story in the *New York Times* today about how much Rupert Murdoch—that Uncle Satan, that toxic man—is doing stuff around anti-vax stuff, about this door-to-door stuff. They continue to double down on ruining this country. I don't know what else to say. And it's a great story about what they've been doing. They did the same thing at the beginning of COVID. Now they're doing it at the end. This group of people just really—I don't know how they wake—I know how they go to sleep at night. They have no soul. Anyway, go ahead. Sorry. That's my fail.

Scott Galloway: Well, I mentioned it, so I'll start with my fail. My fail is that I think this quote-unquote billionaire space race diminishes the bravery of people like Yuri Gagarin and Alan Shepard and the Apollo programs. I also think it diminishes—do you realize that in the space station, to keep six people alive, there was this incredible tweet storm from a woman—oh, God, we'll look her up next time—just talking about how basically space wants to kill you?

Kara Swisher: Yes, yes.

Scott Galloway: That was one of the people up there. I think her first name's Jen. Anyways, for six people in the space station, it takes 1,000 people on the ground to keep them alive. And when you think about what we accomplished and what other nations accomplished and the risks that people took 50 or 60 years ago, and now we have a billionaire showing up and saying, "Hey, watch me"—it strikes me that our priorities seem to be all fucked up. My win is, again, we adore and there's this incredible idolatry of American universities, American athletes, American companies. But there isn't enough respect afforded to our government and our public servants. And my win—and this fits in with your lost round, vaccine hesitation—is Jen Psaki. Is that how you name it?

Scott Galloway: Psaki, yes. Jen Psaki. And here's a woman. Okay, so parents, Polish and Greek immigrants, or I'm sorry, Polish and Greek descent. I don't know if she's second generation. She's a competitive swimmer at William & Mary, and she decides to go to work in the government. At the age of 31, she's the deputy press secretary for the Obama administration. And then 10 years later, she's the press secretary. I think she perfectly summarizes the code for someone in her job, and that is she is forceful yet dignified.

Scott Galloway: What I'd like to do is I'd like to play a clip where she responds to a question about their attempts to educate people around vaccine hesitancy in South Carolina. The failure to provide accurate public health information, including the efficacy of vaccines and the accessibility of them to people across the country, including South Carolina, is literally killing people. So maybe they should consider that.

Scott Galloway: OK, so I find it just heartening that such an impressive person. We talked about Professor Wu, but Jen Psaki. I hear her and I think I contrast that with four years ago, Sean Spicer. Oh, my God. But America has some of the most talented people in the world who want to do something and realize that greatness is in the agency of others. And they decide to join the most impressive, noble organization in the world, and that is the U.S. government. So my win is Jen Psaki. I think she's fantastic. And I think this government – I think there are a lot of heroes here. She's good. She's my win.

Kara Swisher: That's good. She's my win. I'm going to give a win. I go between this recent thing where Nicole Hannah-Jones was going to go to UNC and then they wouldn't give her tenure and then they did. And then she went off to Howard University with a donation, which is in part by tech people, I think, and some others. And also Ta-Nehisi Coates is going there too. I would say Wayne Frederick, who we've talked to, who is the head of Howard. I think I'm hoping to interview him soon on Sway at some point. We've interviewed him on Pivot. I think what he's doing there at Howard is really, you know, another doctor who we talked to him about COVID. I just think I love what he's doing there. I think what a win this week to get those two there to teach those students. I just wish him all the best. I think that was really a great win for them to get these people to teach their wonderful students there. So I would give them a win.

Kara Swisher: Okay, Scott, that's the show. We'll be back Friday for more. Go to nymag.com slash pivot to submit your question for the Pivot podcast. The link is also in our show notes. Scott, enjoy Iceland. I will see you soon.

Scott Galloway: Yeah, I look forward to it.

Kara Swisher: So today's episode was produced by Caroline Shagrin. Ernie Endertod engineered this episode. Thanks also to Whitney Jones and Drew Burrows. Make sure you subscribe to the show on Apple Podcasts or if you're an Android user, check us out on Spotify or frankly wherever you listen to podcasts. If you liked our show, please recommend it to a friend. Thanks for listening to Pivot from New York Magazine and Box Media. We'll be back later this week for another breakdown of all things tech and business. Big shout out. Congratulations to Team Italy. And also, thank you, Team England, for bringing England together. That was such a wonderful tournament. You have so much to be proud of.

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