Zuckerberg does nothing about Trump, Google’s Incognito is not Incognito?, Amazon bonds and a prediction about 2020 IPOs

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

Scott Galloway: And I'm Scott Galloway. How you doing, Scott? How's it going?

Kara Swisher: This has been quite a time. I was thinking about it.

Scott Galloway: I'm learning. I find that, yeah. Professor learns.

Kara Swisher: How nice.

Scott Galloway: Yeah. I'm trying to not immediately pick a position and dig in and just fight, fight, fight. So I will start off with a couple of things that I've been illuminated to or how my thinking has changed. I thought a lot about what was going on was largely driven by income inequality. We had peace. I love military history. Essentially, at the end of World War II, the Allies dropped two inches of incendiary, basically powder, across Dresden.

Kara Swisher: Yeah, you talked about that.

Scott Galloway: And then we dropped these flammables, these sparks, and we set off a firestorm in Dresden, the firebombing of Dresden, and it killed more people than the nuclear detonations over Japan. And we don't talk about it because it's not as cool as the detonation of a nuclear bomb involving splitting the atom.

Kara Swisher: The detonation of a nuclear bomb is never cool.

Scott Galloway: But move on. Let me make my point. Actually, you know what? I think in the eyes of America, I think that set off this race towards the idolatry of technology. I think we were fascinated by that. I think it was the ultimate... That an interesting one... America has the sack and the brain to detonate the most sophisticated technology in the world. And actually I think it set off this race towards this very unhealthy idolatry of technology. But anyways, the technology around just laying the ground with two inches of gunpowder effectively, and then lighting it on fire. And most of the people didn't die in the fires, they died of asphyxiation because the fire soaked up all the oxygen and people were in their homes and were found asphyxiated. But anyways, I was thinking, okay, the powder really that is the underlying and flammable here was income inequality. And what I have discovered is that income inequality is absolutely a big part of it. It fuels the frustration, but it's really more about people of color feeling like, okay, we have just had it. And then I had Peter Henry on my pod yesterday, who's a former dean of NYU Stern, youngest dean in the history of top 20 business school, college athlete, Rhodes Scholar, MIT PhD, just kind of unbelievable, impressive. And this tall, handsome black man. And he was saying that essentially it's just different for me. He said, the place I feel most insecure is if I'm in an uncontrolled environment and run across a police officer. And for him to express that kind of fear, and you could just hear it in his voice. And this is a guy who, if Hillary had won, there was a shot he was going to be somewhere within one degree removed at the cabinet. And for him to say that, it just kind of struck me that I really don't get it. I really don't understand how bad it is out there.

Kara Swisher: I'm glad you do get it, but it shouldn't just be for a guy who has all sorts of degrees. But how did you miss it? I'm just curious.

Scott Galloway: Really?

Kara Swisher: Well, no one is safe, but some people are more safe than others. But, I mean, I think the disagreement we had is I think racism is at the heart of almost every of these issues you are also talking about because it tends to, like, when we talked about, you know, let's get to a tech thing, is these gig workers.

Scott Galloway: Well, hold on. I'm not done with my white guilt. Hold on.

Kara Swisher: All right. Almost. We've got to wrap up your white guilt.

Scott Galloway: And then also, he was talking about effectively that you have this situation. I said, look, I think systemic racism has gotten better in America. And he said the problem Scott is that our DNA is about escaping one form of oppression such that we could come to America and enslave another people and commit genocide. And effectively what this is, is the majority who are whites are about to become the minority in 2040 and just don't want that to happen. And this is sort of their last stand. And I had never thought of it that way. And he's actually spending time in Germany. And he gave me the impression that he and his four black sons just feel more comfortable in Germany than the US. And I've always kind of withdrawn to this place of comfort that, yeah, we're bad, but we're less bad than the rest of the world. And his viewpoint is, no, actually, we may be worse than much of the world because our DNA sort of began with this kind of looting of Africa, of their human capital. And I never really thought about it that way. I'd always had this sort of cold comfort or this always withdrew to this place of safety of, yeah, but we're more diverse. I started making excuses for America. And he said, this is in our DNA. This is in our DNA. I'm sorry, go ahead.

Kara Swisher: I'm going to interrupt you now because I want you to listen more, but not to me. But I'm glad that you're listening.

Scott Galloway: I'm a very good listener.

Kara Swisher: I'm glad that you're listening and you should listen more. I think it's actually about seeing with your eyes. You know what I mean? I think a lot of people...

Scott Galloway: I should see more?

Kara Swisher: Well, there's an expression in journalism where you say, believe what you see, don't see what you believe. Believe what you see. Actions speak louder than words.

Scott Galloway: Is that your New York Times liberal way of saying it?

Kara Swisher: No, it's not liberal.

Scott Galloway: Oh, God, now you're tossing out ridiculous things. Please.

Kara Swisher: Well, you made me feel ashamed.

Scott Galloway: You made me feel insecure.

Kara Swisher: Oh, well, too bad. You should be. You should be. A little shaking of Scott is an important thing. But let's just be clear who this story is about, not you or I. But you are listening for sure. Anyway, we're going to work.

Scott Galloway: That was heavy, Scott. Thanks for bringing that in. I was going to ask, talk about Snapchat.

Kara Swisher: No, I'm sorry. I'm sorry about that.

Scott Galloway: No, no, no. I'm just saying it's interesting because it's now snapped. We're going to get into it. Why don't we just get into the big story and let's get the big story. Facebook doubles down on the policy to keep Trump's racist and inflammatory remarks posted on the platform in a call with employees who protested Facebook's lack of response to Trump. Mark Zuckerberg said his decision was tough, but it was pretty thorough. He said he did research, but he did not reveal what that research was. Earlier this week, some Facebook employees participated in a virtual walkout. They did not come to work and posted messages in solidarity of protesters asking Zuckerberg to take action on Trump's consistent posts that encouraged violence and racism on the platform. It was reported that Zuckerberg had a call and then he actually said he had a call with the president last week after he decided the posts would not be monitored. And according to the New York Times, one black employee was consulted in this decision. That employee said the company's political speech policy wasn't working and needed to be changed. I wrote a pretty tough column today about that topic. And I called Mark the Susan Collins of the internet. And then had noted that he was also the world's most expensive customer service rep by talking to Donald Trump about explaining the policies of Facebook to him. So it was a pretty tough article about the difference between free speech and amplifying speech like this. And of course, the same thing today happened at the New York Times with the Tom Cotton editorial, without taking into account that he had been tweeting that protesters should be given no quarter or certain people should be shot with extrajudicial killings. So it's complicated, Scott. I don't think it's that complicated. But what do you think about this? I certainly have a point of view that Mark Zuckerberg is not doing his job, but others disagree with me. So what do you think?

Scott Galloway: Yeah, I think you almost got it right. I don't think he's the world's most expensive customer service agent. He's arguably the least expensive whore in the world. And that is anyone with a credit card who will spend two or three dollars. Mark Zuckerberg will do something. He will put all in. He does it. I think sex work should be legal, but he does these things. He will do anything as long as there's a nickel at the end of it. So it's money. I mean, it's really interesting. How much every day, every action, every decision he has ever made points to one place. How do I get the stock up? And that's why investors love them.

Kara Swisher: Yeah.

Scott Galloway: Just every decision, every policy, every individual flying to Greece to give away $2 million and prostitute her engagement party for People magazine all points to one thing. How do we cover up our activities such that no one gets in the way of the most profitable rage machine ever invented? Every single decision.

Kara Swisher: All right. Does it have an impact? I don't agree with you on this. I think there's a lot more going on there. He's been struggling with this. I finally recall the conversation. He struggled. He struggled to get away with it. He's struggling to get away with it.

Scott Galloway: Well, it's interesting. There was a post by a lot of the early Facebook people who I knew very well saying this is, Mark is ridiculous. It was then attacked by another Facebook executive who was not one of my favorite Facebook executives who was then attacked by Chamath Palihapitiya, who was another Facebook executive. What I came away with, which is what Casey Newton said to me, Facebook doesn't like other people policing Facebook. You know what I mean? They don't. But it was really interesting because it was ex-Facebookers fighting ex-Facebookers about Facebook. It was really, it's been really fascinating. And I recall the conversation I had with this guy who posted this. It was the worst post ever, I think, that I've seen from a Facebook person where he said, the people that are complaining just couldn't hack it, couldn't scale, probably got pushed out. And that's where he started his discussion, which is like, that's a typical slag. You can't scale, so that's why you don't get to have a say. And it was astonishing.

Scott Galloway: That's the ultimate insult.

Kara Swisher: I know, it is, it is. You don't scale. You don't scale. So Chamath Palihapitiya was like, this is dumb even for you. Reid Hoffman's podcast, who by the way, we dropped that bitch podcast like second period French in a web. Listen to me. Masters of scale. Oh, it's the webbing. Masters of scale. You know what? It's a pretty good podcast. Listen to me. I'm not going to insult Reid Hoffman right now, but the fact of the matter is it was really interesting that there's this sort of internal war going on at Facebook, which you never saw before. They were always sort of lockstep.

Scott Galloway: Is it really a war? It's like a border skirmish at the kombucha coffee cafe there. Is it really a war? I'm wondering if it will have impact on this company. When does it have impact? I mean, I thought Cheryl and Carolyn Everson are strangely quiet on this. Quiet. They're silent. They're silent.

Kara Swisher: Well, you know, we're going to let Mark take this one.

Scott Galloway: Yeah.

Kara Swisher: Yeah, they're like, we're over here. They should speak out. Both of those people should be doing that. It's really interesting. It's an interesting conundrum. The same thing happened over the Times with this Tom Cotton piece. A lot of people didn't feel like he could speak out. I did. Jamel Bowie did. Charlie Wurtzel did. Supporting some of the African-American staff at the New York Times who started a thing saying this is dangerous. You're posting a very dangerous point of view, a person who's called for shooting of protesters. In any case, it's an interesting thing going on, these fights going on. And one of the things that I found interesting was that it sort of degenerates into a free speech argument with these companies when it's really about what we amplify. I think Jay Rosen said that. I thought it was pretty smart by Jay. But it's interesting, what will they do next? I assume hope it'll go away. And history shows that most of the time.

Scott Galloway: And let's be honest, this has nothing to do with First Amendment. It's about Second Gulf Stream, specifically all of their pursuit of their Second Gulf Stream. This isn't a First Amendment issue. It's a Second Gulf Stream issue. And that is they throw out First Amendment as if any of them give a good goddamn about the First Amendment, as if any of them understand it. Private companies aren't subject to the First Amendment. It's just that I'm sick of it. We shouldn't even be talking about First Amendment.

Kara Swisher: I know. Mark drags it in.

Scott Galloway: That's a distraction. That's a distraction. The key is, is your profit machine, does the externality wreak so much havoc on the Commonwealth that it requires regulation? And for about 10 years, we have seen that the externality of a business model that is fueled on rage creates enormous externality around teen depression, around perversion of our democracy, around not putting in place the requisite safeguards to ensure bad actors don't weaponize your platform, and now around pouring fuel on the flames of incredible civil unrest in our society. And yet they're going to distract us, they're going to wait, they're going to delay, and we're likely not going to do anything until either there's someone else in the White House or the DOJ or the FTC get the funding they deserve. And I still don't think this is going to happen. It's just so ridiculous. What we're doing with Facebook right now is where does everyone communicate their outrage at Facebook? On Instagram. It's as if we were to say, we're so angry at Donald Trump that we're going to vote for him such that he has to listen to us for four more years.

Kara Swisher: Yeah.

Scott Galloway: Until advertisers, until customers or consumers. And they won't.

Kara Swisher: And they won't. You're right. I said in the column that Mark has been playing the long game long enough to know he never pays for anything. He's a brilliant man. He never pays for anything. And advertisers will continue to go where the only casino is. And so it's really hard to be a marketer and not be present on one of his platforms. It'll be interesting to see if Biden wins, if they have the set to do it. Because I think Mark can play the long game with them and sidle up, you know, instead of Joel Kaplan.

Scott Galloway: She's the only one with the brains and the balls to go after big tech right now. She is.

Kara Swisher: I was on a book party with her. She was speaking for Simone Sanders, who works for Joe Biden, last night. It was a virtual book party. And she was just so impressive. I had forgotten I hadn't seen her publicly. And it was really interesting. And she jumped off before I could ask her a question about tech, but I do agree with you. I think she is probably the single person who would change this in a significant way. I do think there's a business lesson in here, a brand strategy lesson in here. And I always try to taxonomize business concepts in the news, because I think there's a lot to be learned here, and I realize it's maybe cheapening what's going on. But in terms of big tech, one of the things I try and encourage my kids to do is to understand the concept of laddering, and that is saying, okay, how do you deposition a competition by saying, we're this, they're this, we're this, they're this, and what feature could you or what action could you undertake or communicate that effectively is not as much about enhancing your own image as it is about really going after the competition. The ultimate laddering or depositioning took place two years ago or 18 months ago when in an interview with you on MSNBC, Tim Cook said privacy is a, what was the term he used?

Kara Swisher: Privacy is a profound right.

Scott Galloway: He basically wasn't talking about Apple's privacy. He was talking about Facebook and Google. He was depositioning them. And I think Snap's move and what Twitter is contemplating doing with Snap deciding no longer to give free organic promotion on their Discovery Channel to Trump. I think they're basically saying, okay, this isn't as much about Snap as it is going after Facebook. And basically, everyone now is going to see a profit incentive and it will create tremendous progress. And I think Twitter's going to get there to say, okay, we need to be the anti-Facebook. And Facebook has a tough time because they're still trying to appeal to everybody.

Kara Swisher: Yeah, I think that's right. I think you're right. I think it was the right move by Snapchat. It's the right business move by Snapchat. It's the right. And it is actually also keeping in line with Evan Spiegel, who has largely created a service that is more pleasant to use and doesn't have the same problems because of the architecture of it. It's an interesting time. But here's the problem. It's too small.

Scott Galloway: That's exactly right. Coming out of this pandemic, there's going to be the mother of all consolidation and everyone from Twitter to Snap to Pinterest, they're in trouble because what typically happens coming out of these kind of economic shocks is everyone, all the advertisers, A, advertising takes a dramatic step down. I think there's so many things going on that show that advertising is the era of brand, the sun has passed midday. You're going to see big advertisers not come back to broadcast advertising. And not only that, they're going to decide playtime is over and they're going to only go with the online guys at scale. And that Google and Facebook and their experiments with Pinterest, Twitter, Snap, they're not going to have the V recovery snapback that Facebook and Google will have. They have 120th to 140th of the market cap. So they're in a position, quite frankly, to start taking bigger cuts at the ball because they have to. They have got to figure out something. They've either got to merge with each other or they have to start carving out new niches. They have to go on offense because they are not going to recover the same way these other guys are. And if you look at their market caps as a multiple of revenues, as a multiple of earnings, they look expensive relative to Google and Facebook. And there was always this notion that they would grow into these valuations, that they were the little guys. And right, they were the little guys, they were the little engines that could. And now they're beginning to look like just the little engines. And they're going to, if they're not careful, their stocks are going to collapse to just a multiple of EBITDA. So they have to start taking some risks.

Kara Swisher: Yeah, that's been your theme with the media companies too. I actually harangued Jim Bankoff of Vox Media to ask him what he was up to because you had talked about that, the idea of the consolidation of these smaller players compared to the big ones. And you're right. I think Google and Facebook have it wrapped up with themselves. But that doesn't mean things can't change, Scott. If they can wake up Scott Galloway, this can happen.

Scott Galloway: All right. We're going to take a quick break. I feel shamed. I feel embarrassed.

Kara Swisher: You should feel embarrassed.

Scott Galloway: Anyway.

Kara Swisher: I should feel embarrassed? That's just common sense.

Scott Galloway: That's just common sense. But what's really important. Like when I look in the mirror with my shirt off, I'm like, really? Really? I said that? I look that way? I look that way? You're going to get woke and then you're going to keep talking about getting woke. Anyway.

Kara Swisher: Take me to the woke spot.

Scott Galloway: No, no, please don't. Let's go to the woke spot. Hush. Hush should be your new theme. Hush, Scott.

Kara Swisher: All right. Let's go. That's my nice way of saying shut up. Anyway, Scott, let's go to a quick break and come back to talk about a new lawsuit against Google, and also a listener mail.

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Kara Swisher: All right. Welcome back. In the break, Scott and I had a little to do. I call him a big fucking baby. Joking about how ridiculously lame I am.

Scott Galloway: It's true. It's funny because it's true.

Kara Swisher: I know it's true. All right. We're not going to talk about you anymore. All right. A new lawsuit against Google has been filed. The plaintiffs are alleging the company collects user information that violates federal wiretap laws. A potential class action suit was filed in the district court for Northern California. It alleges that Google tracked and collected consumer browsing history even if users took steps to maintain their privacy. Google is disputing the claims. In a response, a Google spokesman said, "As we clearly say, each time you open a new incognito tab, websites might be able to collect information about your browsing activity during your session." I don't know what the point of incognito is if it's not incognito, and that's another question. But I do think this brings into, you know, DOJ is working on an antitrust suit. We'll see where that goes. But it does bring a question that the real game here with these companies, as they sort of fiddle around with the First Amendment, which I think is the noisy part of the discussion, is, and I did say this to a lot of people, I said, the real story is privacy and data protection. And that's where they are. It doesn't matter what. The reason they're so strong to be able to make pronouncements on First Amendment is because they have all the data and they have all the power there. And so I think the real legislation that will get them right where it hurts, I think I know where that is on someone like you Scott, is in this area. So it's interesting that the focus is not on regulating this. It's all on Section 230. It's all on liability and stuff like that. To me, this is the heart of their... it's the spot in Star Wars where they have to hit that tiny little hole and that will blow them apart. Thank you very much.

Scott Galloway: Yeah, I'm beginning to think that the real arbiter of all of this, and it impacts CNN, Fox, all the way down to Facebook and Google, aren't doing anything that CNN and Fox aren't doing. They're just doing it much, much better. And that is, social media and media is nicotine and that it's addictive and it's not great for you. But the cancer, the tobacco is the ad model. I just think that the best legislation right now or the most elegant legislation would be to start taxing revenues on advertising. And I don't know if you could legally do that. But the reason why CNN and Fox divide us is because they're just going to show over and over and over that police car driving, accelerating into a crowd and they have no... Or Fox will show you something else.

Kara Swisher: Yeah, or Antifa. These ridiculous claims that it's Antifa at these protests causing trouble. And they won't show you the peaceful protests of hundreds of thousands of young men and women peacefully protesting walking across the Manhattan Bridge. That just doesn't sound more Chobani.

Scott Galloway: And so, and then you go to Facebook and Google at the end of the day, it's just the ad model. And so I wonder, I wonder if, and I wonder if Elizabeth Warren, I'd love to speak to someone in her office. I wonder if there's a way, remember back when Bill Gates said the way to get rid of spam would be just to charge everyone one penny for every email they sent out. And that way all the spammers would have to go away. And I think, is there an elegant solution here to figure out a tax on communications or advertising such that these massive trolls, these bots, these organizations that use thousands of bots to get across a message, usually a message that is really uncomfortable or really unpleasant or wrong, begin, in other words, price advertising to its externality the same way we try to price...

Kara Swisher: But it's interesting, you know, I agree. That's an interesting idea. I do think the idea of what they collect and the inability to collect is really at the heart of it because no matter what you do, the ability for them to collect and confuse you and confuse legislators and everything else is really how it works for them. This is how they get away with it because you don't understand it. It's confusing. They flood the zone with lobbyists. And so it creates a situation where I don't think it's about the money with Mark Zuckerberg. I think you are wrong in that. I think that it's not necessarily, but why not that, why not anyway hit all these companies where it hurts, which is in the money, right? This is how you restrict them, which is to give them less ability to monetize people. And it's sort of like they're, I was thinking that you're saying cigarettes, but I actually think it's more like food. They're allowed to flood the zone with shitty food and then we eat it, right? And it's not regulated. It could be tainted. It could be bad for you. It could be full of sugar, whatever. And tainted is a lot of it, like makes you sick. And nobody's watching that. And we like it and it's hard to get away from. It's a little bit different than cigarettes, which I think are adjacent, I guess. And so I think getting them not to be able to do that, get them in their money making machine is where we will be able to have the impact. And then all this other stuff goes away. We don't have an argument about their ridiculous, nonsensical arguments about the First Amendment. We don't have any of this if they clean up the platform, take away their money.

Scott Galloway: I don't know. Food, tobacco, you say adoption, I say abortion. Let's call the whole thing off.

Kara Swisher: Oh, God, Scott, really? In any case, I think it'll be interesting to see as these things discover, but it's going to take, it's not going to be these lawsuits, it's going to be legislators actually doing substantive data protection and privacy protection with teeth. I just think that is at the heart of it, and that's what they fear most.

Scott Galloway: But I feel hopeful around, or more hopeful than I felt in a while. I feel like the worm has turned against the president and Republicans. And when you have Republicans, you know, the way you defeat an enemy is you atomize it. And they've done a much better job, they being Republicans, and Russians and the Chinese have done a much better job of atomizing the Democratic Party in the U.S. to make more progress against us or gain ground. And the Republican Party has held pretty firm. And when you have Republicans, including the Secretary of Defense, it just feels like they're being atomized. I feel as if people now believe, all of a sudden, they're finding their backbone. Just as Republicans tend to find their backbone about the time they announce they're no longer going to pursue re-election, you're seeing a lot of people find their backbone against Trump because I think people are starting to believe that chances are that in six months he's gone. And they want to be seen as having gone on the record.

Kara Swisher: Well, the defense secretary who was a quisling then said no, but then became a quisling again.

Scott Galloway: He seems to be.

Kara Swisher: Yeah, but that's something, right?

Kara Swisher: That is something. It's an indication, I guess. Yeah, it's a signal. And I, you know. He should quit. He should quit. That's more than most of them. Most of them.

Kara Swisher: Anyways, I think that it feels as if the tide has turned and that the president is definitely on the defensive now and holding up Bibles upside down. And, you know, just it is the other thing that was the frightening thing this week. And I apologize. I'm jumping all over the places.

Kara Swisher: I've always compared. I used to compare Donald Trump to Hitler. I found the demonization of immigrants. Which James Mattis did. But go ahead. The demonization of immigrants, the call to arms around restoring our greatness, a refusal to condemn violence against one's perceived enemies. I just, a lot of the themes, I think Donald Trump, we don't want to give him this credit, I think he's a fantastic orator and no one can rally a crowd like him. And I think that he shared that competence with Adolf Hitler.

Kara Swisher: And my dad used to get very upset whenever I compared Trump to Hitler. And he said, look, you got to keep in mind, you got to remember Hitler had his own police force. And now it appears that Donald Trump has his own police force that he has these unmarked, unregulated militias and that takes us to a very dark part in history.

Kara Swisher: And I've always thought that American exceptionalism, that we've always had this strange unearned cold comfort that somehow we're better than that. I'm guilty of some of that, but I think we saw some of that come due in a very ugly way around the virus. There was a general feeling, and I think I was guilty of it, that for some reason our exceptionalism, our innovation was going to protect or turn away the virus at the borders for some reason. And that was just so arrogant and stupid.

Kara Swisher: And I also believe that the notion that what happened in Europe in the middle of the 20th century couldn't happen here. I don't believe that. I think it could happen here. We put Japanese people behind barbed wire when our parents were still alive. This country has a memory drop, the biggest memory drop of any group of people. And now we have militias, unregulated militias, taking orders from a guy who demonizes immigrants.

Kara Swisher: So I just – I think we have to be – I think there's a lot of lessons. And I'm back to comparing the orange man to Hitler again. And I don't care how offensive it is. I think there's a lot of parallels here that are very, very dangerous.

Scott Galloway: I will allow it. I will allow it since James Mattis did it. You're on board.

Kara Swisher: I will allow it. Oh my God. James Mattis did it. I interviewed General Mattis in front of the NASDAQ. That guy is such an impressive man.

Scott Galloway: Yeah.

Kara Swisher: And I immediately, you know, he kind of. Trump called him a loser.

Scott Galloway: Oh yeah. What a loser.

Kara Swisher: A guy who puts on uniform, devotes his life, the guy who's called the monk warrior, because he's so thoughtful. And anyways, that guy, wow. I wish he had run for president. He should have done it sooner, but a lot of people are complaining he didn't do this. I don't care. Better late than never. Most of them are in the never camp. He has it baked into him not to say a word as a military person. I have a lot of military relatives. He resigned. He did what you suggested he did. He resigned. He got out of that. He has it baked into him not to say anything. But boy, was that a corker of an interview. I'll tell you, everybody should go and read that. And he's certainly not a loser.

Scott Galloway: It's in the Atlantic, right?

Kara Swisher: Yeah. Yeah. It's all over the place though. It is something else. I'll tell you that.

Kara Swisher: Anyway, we've got a listener mail.

Scott Galloway: It's a good book too, by the way.

Kara Swisher: Yes, it is. It's a good book. Excellent.

Kara Swisher: Okay. Scott, pivot. Listener question. Roll tape, Rebecca. You've got mail.

[Listener voicemail plays] Listener: Hi, Kara and Scott. My name's Bobby and I'm from Philadelphia. This week, it was announced Amazon raised $10 billion in corporate bonds, including a billion dollars in debt at a U.S. record low interest rate of just 0.4%. Is this just a crazy gangster move by Amazon to raise capital at extremely low cost? I don't have a deep background in corporate finance, so can you explain why only very few companies have access to cheap capital like Amazon does? How does this strategy play into their continuing dominance? Thanks. Love the show.

Kara Swisher: Oh, that's a good question. I'm going to start with this. Of course, they get better rates. They're bigger. You always get better rates if you don't need money. And so this interest rate is amazing. It's an amazing interest rate. And why shouldn't they take free money? Scott, why do you think they're borrowing money?

Scott Galloway: Why not? Like, right?

Kara Swisher: They're going to buy something? They did it last time and then they bought Whole Foods. So what do you think?

Scott Galloway: Well, every company has a cost of capital. And Amazon still needs to fund projects. And they are at a point unlike any other company in the world where they invest more or they are not cash flow positive sometimes. They could be cash flow positive at any time but they make these big staggering bets. So even if they don't use the cash, they can use it to buy back stock. But your cost of capital and your CFO's ability to manage your cost of capital is an incredibly important feature of your business.

Scott Galloway: So in your household, the way I would equate it to a household is if you have credit card debt at 13% and then you go to the institution that holds your stocks and says, can I borrow money against my stocks at 2% or 3%, which at Interactive Brokers, you can borrow money against your stocks at 2% to lower the cost of capital funding the debt to keep your house going. So this is just nothing but trying to lower the cost of capital. It's a great move.

Scott Galloway: And interest rates are at historic lows. So the ability to fund projects at a low cost of capital, or even some companies are taking out debt to buy back stock if they feel really confident in their stock. I think that's a bit of a dangerous move because all you're doing is substituting equity. But at this point, issuing equity, they think that's more expensive than issuing debt.

Scott Galloway: I'll give you an example, and it's not just big companies. When I started L2 and we took venture capital money, there are banks that follow tier one venture capital firms. And if they invest $15 million, the bank shows up and says, we'll give you $5 million of what's called venture debt. And the attribute of debt is it sits on top of the cap structure, meaning that if the company goes under, they're first in line to get the asset. So technically, it's the most secure thing. Debt is the most secure. It feasibly gets a lower return.

Scott Galloway: But these companies, in this case, I think it was Comerica, came in and said, we'll give you venture debt. And I said, I don't need any more money. And there's something about most of us, we're a little bit weary or wary of debt. And debt is a fantastic tool if you get it at a low cost. And they said to me, I said, just for fun, what are the terms? And they said, no covenants, no warrants, and three and a quarter percent five-year term.

Kara Swisher: Oh, free money.

Scott Galloway: Literally. If you can borrow money as an entrepreneur for what was, at the time, a great company, but still risky, at three and a quarter percent, I said, send it over and I'll sign and fax it back today. Even though I didn't need the money, because I thought having that cash on the balance sheet, even if I didn't use it, the COD...

Kara Swisher: You had the ability. You had the ability. Like in that case...

Scott Galloway: It makes you more bulletproof. And also people will find it a good investment too. So it's a good move.

Kara Swisher: This has so many opportunities for us and so many dangers. Interest rates are so historically low, but if interest rates spike, the amount of money we have to spend on our interest, which is now greater than what we spend on national defense despite record low interest rates... Should municipalities or even the federal government think about taking on borrowing?

Scott Galloway: Yeah, to build infrastructure, right? So debt is a powerful tool, and I've always had a natural aversion to it.

Kara Swisher: Get everything. Debt used well is a powerful tool. You're 100% right. And interestingly, Silicon Valley doesn't like to use it that much. But Brian Chesky just did it. A lot of them are doing it now. Airbnb just did it.

Scott Galloway: A lot of them don't. I think he had tougher terms.

Kara Swisher: It was expensive. It was 900 points above LIBOR.

Scott Galloway: It's a great piece of paper for the investors.

Kara Swisher: Yeah. So I think it's really something Silicon Valley doesn't think about a lot, but it certainly is a good idea for companies to consider. And I think you'll see a lot more of it, especially right now.

Kara Swisher: In any case, we have to take a quick break now and we'll be back with predictions. We predicted AMC would be in trouble and it is. We'll be back after this.

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Kara Swisher: Okay, Scott, as I said, we predicted AMC would be in trouble. Good job.

Scott Galloway: Good job all around.

Kara Swisher: That was a pretty weak flex.

Scott Galloway: I know. AMC will be in trouble.

Kara Swisher: I know. It's like saying...

Scott Galloway: I think MySpace's days are numbered.

Kara Swisher: I think MySpace's days are numbered.

Scott Galloway: And not only that, I think, Kara, I think Ask Jeeves is in real trouble. I think Ask Jeeves is going away.

Kara Swisher: Didn't you like that butler? He was one sexy butler.

Scott Galloway: That was an IAC property powered by Google. Let's have the metaphor of a butler on top of Google.

Kara Swisher: I know, but you know, Google was a little baby then. Let me just tell you, you didn't know it was going to turn into a giant monster. More like Chucky than a baby. You know, I told you that story of Larry Page where I'm like, do they know what you're doing? He's like, no. Like he was always like he knew what he was doing. Same thing with Yahoo. He's like, don't tell them. You know what I mean? He's a very savvy customer, I'll tell you that. He's gone, has disappeared off the face of the earth, by the way. I don't know what he's up to.

Scott Galloway: He's probably moved to another dimension is my guess.

Kara Swisher: So what is your prediction, Scott? We need a prediction from you, a good prediction. You know, we've been doing a lot of political stuff. I'd love you to do a business prediction.

Scott Galloway: Oh, I have a communications prediction. I think the most interesting statement... I think there's been a couple just fantastic, in retrospect, I'm trying to think what are really the seminal moments or the people who showed tremendous leadership here. And I think Killer Mike's statement in Atlanta talking about his background, his family, he has a lot of family in law enforcement. And I thought his, I just thought he struck such a fantastic tone. And I think that statement is going to age really well.

Scott Galloway: The other statement that I think is going to age really well, and I think a lot of, I'll call it young men, should take pause and really learn from. I thought one of the more interesting statements of this entire crisis was the 21 seconds of silence from Justin Trudeau.

Kara Swisher: Oh, that was fantastic.

Scott Galloway: I thought that was so powerful.

Kara Swisher: For real.

Scott Galloway: And as a young man, and again, I'm turning this back to myself. Especially with the beard. I recognize that.

Kara Swisher: Oh, he's just so buck and dreamy. That guy is like, Jesus Christ.

Scott Galloway: Not many people can afford a beer.

Kara Swisher: Make him president of the world.

Scott Galloway: Yeah, go ahead.

Kara Swisher: Anyways, by the way. He's got his issues. And by the way, he had his issues with blackface, as you recall, and everything else. So keep going.

Scott Galloway: Okay.

Kara Swisher: Does Canada likely think it's in an apartment above a meth lab right now?

Scott Galloway: They do. I think he kind of said that. The apartment above the meth lab. I think he kind of was like, what the fuck is going on? He's like, okay, what's going on down there?

Kara Swisher: I literally was like, Amanda, pack up your things or move to Vancouver. I really was.

Scott Galloway: But there is, I think there's a lesson here. I don't think that was planned. And I think young men need to really register the importance of thinking about a question and being silent before you respond and choosing your words carefully. Because I know as a younger man, up until about six months ago, I had a position. And as soon as someone disagreed or asked me with a question, I thought it was leadership and showed strength and masculinity to immediately respond forcefully and have an answer. And I think there's a real grace and a leadership ability in having the confidence to just sit there and think before you speak. And I thought that was really...

Kara Swisher: Anyways, my... we're not doing wins, but I think one of you just want to talk about dreamy Justin Trudeau, but go ahead. Wasn't that a gangster move though?

Scott Galloway: It was.

Kara Swisher: Prediction please. We gotta get out of here. I have a date with Andrew Ross Sorkin and you're trying to keep me from it.

Scott Galloway: Don't rub that in my face. Don't rub that in my face. By the way, I am pissed off at that Canadian spy Andrew Ross Sorkin.

Kara Swisher: He's not Canadian and he's not a spy.

Scott Galloway: That guy would be the most effective spy in the world because he's so likable. Anyways, I texted him and said call me, I have an idea I want to bounce. I have not heard from him. I have not heard from him, Andrew.

Kara Swisher: Maybe he gave you, you know, like how women can give men the wrong selfie.

Scott Galloway: I'm used to that. Trust me, I am used to that. Maybe that's what happened to you.

Kara Swisher: The Canadian spies are supposed to call me back anyways. Anyways, who asked for a prediction?

Scott Galloway: Yes, prediction. The IPO class of the last half of 2020 and the first quarter of 2021 will be the best performing IPO class of the last decade.

Scott Galloway: You're going to have, we have this anomaly right now in the markets where the markets have totally disconnected from Main Street. The economy has taken a huge hit. You have 40 million unemployed. You're going to have discretionary spending go down once the helicoptering goes away. But at the same time, you have a ton of institutional capital because their stocks have not gone down. And if they're in the NASDAQ, if they have a tech-heavy portfolio, they're actually up for the year.

Scott Galloway: And as a result of the real economy getting hit hard, there are a lot of companies that were kind of lining up for direct listings or IPOs that aren't going to get out. And the companies that do get out are really the best of breed disruptors, the Airbnbs, the Lemonades of the world. And I think these guys are going to just go crazy.

Kara Swisher: Are you investing? Are you going to be investing?

Scott Galloway: Yeah, I'm actually contemplating, and I want to do a longer show on this, but I'm actually, for the first time in a long time, contemplating getting out of big tech. Not because they're not great on a risk-adjusted basis, but because the numbers have just gotten so big. And I'm thinking about getting into what I'll loosely call the disruptor class, and that is the Airbnbs and the Lemonades. Because what you're going to see coming out of this recession is a lot of old industries weakened. The insurance industry is going to be weakened, right? The hotel and hospitality industry is going to be weakened. And here come these fists of stone called Airbnb and Lemonade and other disruptors.

Scott Galloway: I think there's an interesting company that I'm contemplating getting involved in called Public, which is sort of the more woke, more kind of interesting Robinhood investing app. Anyways, I think the IPO class of the next 12 months is going to be the best performing IPO class of the last decade.

Kara Swisher: I like it. I think that's a really smart thing. I think you've mentioned it before, but it's absolutely true. I think Airbnb is in a much better position than hotels. They're going to go through a rough period. And I would recommend the interview I did with Brian Chesky last week. It really is not about tech. It's about how to manage your way through a crisis and the insecurity and difficulty of doing so. And I thought he did it with a lot of humility, a lot of honesty. I thought it was a really interesting thing, but I really, I agree.

Scott Galloway: My question is what interviews have you done would you recommend we skip?

Kara Swisher: I didn't think my Sam Harris.

Scott Galloway: Come on, that's good.

Kara Swisher: No, it's true. I thought my Sam Harris was the one.

Scott Galloway: What should we skip? What should we ignore?

Kara Swisher: Sam Harris.

Scott Galloway: The Sam Harris one.

Kara Swisher: I know you're...

Scott Galloway: Oh my, are you nuts? That hurts. Sam Harris is a gangster. That guy is so thoughtful just because he doesn't like hold hands with you on the way to the woke spa.

Kara Swisher: No, no, listen to me. Listen, woke man.

Scott Galloway: Don't even start.

Kara Swisher: You started off this thing saying, I just realized that people of color have a problem in this country.

Scott Galloway: I'm flexing. Anyone on YouTube, little gun show in town.

Kara Swisher: Little gun show. Okay, listen to me. I thought I did a bad job. I thought I did a bad job.

Scott Galloway: With Sam Harris?

Kara Swisher: I think I did. I thought it could have been a better conversation. I think I should have prepared. I think he's one of the more interesting thinkers of our age. And I think he's fearless.

Scott Galloway: He's an interesting thinker. Interesting is the only word I would use.

Kara Swisher: But I would agree. I think I didn't do – I am blaming myself in that one. I think that almost all of them are pretty good.

Scott Galloway: That's the best interview I've ever done on the Pivot podcast.

Kara Swisher: All right. Okay. There we go. We have a different thing. Or the best interview I've ever had. It's a really good one. I'm interviewing a lot of people in the next month because Recode Decode is coming to an end. I have some really amazing people.

Scott Galloway: What's he like? What's Brian Chesky like? I don't really know him.

Kara Swisher: He's lovely. He's lovely. I have to say, I wish he was running Facebook. I don't know how else to put it. I wish he was running Facebook. He's a really interesting person. He struggles with things. I know there's all kinds of controversy around him, but he addresses it. He doesn't shirk it and he doesn't do mumbo jumbo intellectual nonsense that others do. Talk about learning. There's someone who learns. There's someone who really does try to learn.

Kara Swisher: Last round private valuation was $40 billion. And most recently there's a secondary sale. Oh no, you can now pick up shares in the secondary market for $19 billion. I think it goes public at $40 to $60. He talked about that a lot. The whole debt thing and what he had to do. So I would listen to it. It's really interesting.

Kara Swisher: All right. You got to read us out, Scott. That was really great. Don't forget, if there's a story in the news that you're curious about and want to hear our opinion on, email us at [email protected] to be featured on the show. Scott, read us out.

Scott Galloway: Today's show was produced by Rebecca Sinanis. Fernando Finete engineered this episode. Erica Anderson is Pivot's executive producer. Thanks also to Drew Burrows.

Kara Swisher: What a fantastic team we have.

Scott Galloway: What a fantastic team. Thank you. I want to just a quick out. Thank you for saving me from myself often. They're really, they take, you know, I think they take both of our voices and give them flight, if you will. So thanks to the team.

Scott Galloway: Make sure you subscribe to the show on Apple Podcasts. If you're an Android user, check us out on Spotify or wherever you listen to podcasts. If you liked our show, please recommend it to a friend. Thanks for listening to Pivot from Vox Media. We'll be back next week for another breakdown of all things tech and business. Have a great rest of the week.

Scott Galloway: The Canadian spy needs to call me back, Kara.

Kara Swisher: He will not.

Scott Galloway: He needs to call the dog back.

Kara Swisher: I don't think he knows who you are.

Scott Galloway: That hurts. That hurts.