Inside Davos + Understanding the Geopolitical Recession

Ian Bremmer, a political scientist and the president and founder of Eurasia Group, the world's leading political risk research and consulting firm, joins Scott to discuss the state of our global economy. We hear about his key takeaways from Davos, the war in Ukraine, and which economies will come out on top in a post-war and post-pandemic world. Follow Ian on Twitter, @@ianbremmer. Scott opens by reflecting on the things he’s gotten right and wrong lately. Algebra of Happiness: forgive yourself. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Scott Galloway?

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• 0:49Speaker 01

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• 1:18Scott Galloway?

  Episode 167. Dan Morrison released Brown Eyed Girl in 1967. The Monkees released I'm a Believer in 1967. The Graduate premiered in 1967. How did I end up becoming a trained chef? Well, I'm into ass play and I thought I was going to culinary school.

• 1:35Speaker 02

  Well, let's put it this way. Pack your [bleep] knives, get out, you're off the show.

• 1:40Scott Galloway?

  Sorry, chef. Go, go, go!

• 1:51Scott Galloway?

  Welcome to the 167th episode of The Prop G Pod. In today's episode, we speak with one of our favorite guests and the second person to make A triple appearance on the show, Ian Bremmer. Ian is a former colleague at NYU, now at Columbia, runs the Eurasia Group, just has, he's sort of one of these Doogie Howser types. At the age of like 11, he was at graduate school and has sort of lived up to the billing. Most of those crazy, smart kids either end up, I don't know, is that, is that true? I think most of them end up a little bit fucked up. Anyways, the other one that's like that, Sanjay Gupta was also in medical school at the age of 15. Anyway, Sanjay and Ian, uh, both been on the show. Uh, I, I like Ian a lot. He's got this certain

• 2:34Scott Galloway?

  fearlessness. He's not, he doesn't, I, one of the things I love about Ian is it's difficult to pin down what his politics are. I think he just kind of is like, just the facts, man. Uh, and I really enjoy speaking to him. He's got a nice sense of humor and just generally, I don't know, very likable guy. Anyways, uh, let's talk about what's happening. People constantly talk about, okay, you learn from failure. Your successes give you confidence, but your failures are the things you really learn from. So I want to talk a little bit about, uh, some of my failures over the past few weeks, or some things that I've been experiencing that haven't been great and what can be learned, uh, and what I got wrong and what I got right. Uh, I don't ever want to be one of those

• 3:15Scott Galloway?

  people that cherry picks their wins and doesn't talk about their failures. And some of the people I really dislike on Twitter, I dislike the way they approach life, is they're very good at cherry picking other people's, uh, losses or failures and constantly inflating their own victories. I don't ever want to be one of those people that takes, uh, photo of their, uh, portfolio when it's up one day, but fails to talk about when they're down. So anyways, with that, um, some of the things in the same week, I had a just a kind of like a, I don't know, how would you describe it? A ridiculously fucked up, awful, bad week a few weeks ago. After avoiding it for two years and thinking I was going to be the, the superhero that avoided the novel coronavirus and advanced in the next round of the Squid Games, I tested positive for COVID.

• 4:01Scott Galloway?

  So what I got wrong, I got invited to Formula One to some fabulous party, wanted to go out, wanted to be around people who are younger and better looking than me. I hate pretty much everybody. I was in Miami and I remember being in this party and thinking, I'm definitely going to get COVID tonight. And I think a lot of us have lowered our threshold in the sense that we've decided the pandemic is over and it appears that the virus has not received the memo. So while I'm one of these people that believes you absolutely need to take risks, life is about risk, that I do think there's smart and there's dumb risks, and that was a dumb risk. And I got it. And I want to be clear, I don't like this attitude that everyone's eventually going to get it. That's not true. There's going to be hundreds of millions or probably billions of people that never get this thing.

• 4:46Scott Galloway?

  And I think it's a good thing not to get it. And I think unfortunately, we're going to find out a lot about long COVID that is not good. So I am pissed off and bummed that I didn't maintain sort of a smarter approach to this and I got it. What I got right is that I've always been very much into physical fitness, but as a 57 year old white male, I'm not in the danger zone, if you will, around this, but not like a 24 year old that's going to get a few sniffles and just sort of move on. And there's always an X factor around this stuff. But what I decided when COVID hit the shores of America, I thought I was going to spend a lot of time working out, be much more disappointed about it, and specifically try and get myself in great cardiovascular shape. In other words,

• 5:28Scott Galloway?

  prepare my lungs for war, and that war being COVID, which attacks the respiratory system. Anyways, COVID, second thing, margin calls. It's not, it's embarrassing. At my age, and I talk a lot about financial responsibility, to admit that I got margin calls. Now, what is a margin call? If you have a hundred dollars in stock, you can, depending upon the financial institution, borrow up to 50, sometimes a hundred dollars, based on the security or pledging that stock. It's called a margin loan. And I typically run my book at what I would call a hundred and twenty or a hundred and thirty dollars gross. What does that mean? If I have a hundred dollars in stock, I will borrow or take a margin loan of twenty to thirty dollars against that stock and invest it.

• 6:09Scott Galloway?

  Now, what happens when that stock gets cut in half, as some of my stocks did? You get, the ratio becomes out of balance. And the host institution, in my case Goldman Sachs, called me and said, "Your margin, your loan relative to the underlying security that you're borrowing against is out of whack and we need you to sell some stock." That's a terrible call to get because almost always being a forced seller forces you to sell at the wrong time. It's like getting a divorce. Whenever you get a divorce, you know you're going to be selling and splitting all your assets at exactly the wrong moment. It's the same way with a margin call because the reason you're getting a margin call is because the market is down, meaning stocks are depressed and you're selling at kind of exactly the wrong moment. So I got that call saying, "All right, the ratio's out of whack, the value of your public

• 6:52Scott Galloway?

  holdings has gone down, and the amount of money you borrowed against it, the ratio's now too big for us to be comfortable, so we need you to sell some of your stock and increase the amount of cash in your account. Use the proceeds of the sale of that stock to pay down your margin loan." Fine. So what I got wrong? One, I talk about diversification. And that is, in 1999, I was wealthy, at least on paper. Why? Because I had what felt like, or what was supposedly worth tens of millions, maybe even hundreds of millions of dollars, in stock in a company called Red Envelope that was supposed to be going public. The dot bomb crisis came, 2000 came, and overnight I went from being wealthy supposedly to not wealthy most definitely. 2007, scratched my way back over seven years, got wealthy again.

• 7:35Scott Galloway?

  Again, not very diversified, all my shit in tech. Boom, 2008, got, went from wealthy to not wealthy. Both of these things were a function of a lack of diversification. So, again, I wasn't as diversified as I should have been. The majority of my public stocks are in the growthy tech stuff. My biggest holdings are in three companies: Apple, Amazon, and Airbnb. And the unique thing about, no, actually it's not true. It's not unique. What you have to realize is in war. The generals get shot and that is no one is getting out alive. Microsoft, Apple, Airbnb, all off anywhere between call it. Apple's actually held it pretty well. But Airbnb, which is kind of my favorite company in the world right now, uh, has gone from a high of 208, I believe, and it hit, it touched 104, I think.

• 8:20Scott Galloway?

  So it literally got cut in half. It's back to, I think about 120. Now, that's what I got wrong. I wasn't as diversified as I should have been. What I got right, people will say, well, you should never had a margin loan to begin with. Actually, I disagree. I was able to borrow against my stocks at a rate of 1%. If you're offered an opportunity to borrow money at 1%, putting that money to work in the markets, you are likely over the medium and the short term, going to beat 1%. So using a small amount, a modest amount of debt to diversify, I would take my margin loans or the money I borrowed against my stock, and I would use it to diversify. I invested in a services company that rehabs and leases out jet engines to cargo companies.

• 9:05Scott Galloway?

  I invested in a tech-based preventive healthcare company. Uh, I invested in a, uh, energy company, things that were sort of far away from my ballywick, which is tech and the majority of my investments. So what I got right was that I used those margin loans at a very low interest rate to diversify. And those investments have actually held up well. Okay, final thing, layoffs. My company, company I founded, EdTech Company, Section 4, laid off about 20, 24% of its staff. We grew from 30 people to about 120 people in 18 months. Raised a shit ton of capital. Capital's pretty cheap right now. And I think we got it wrong. And I've done this a bunch of times and always get it wrong. And I don't know if you can avoid this.

• 9:49Scott Galloway?

  And that is when capital is cheap and the markets are rewarding growth over all else, it's easy to talk yourself into just hiring like crazy, finding, when you find good people, hire them and keep your foot on the accelerator. And if you spill some capital and you're not as efficient as you should be, that's fine, because growth solves all problems. And then all of a sudden, we looked at our company and thought, okay, we have not registered the type of efficiency we would hope or the increase in productivity from all these additional employees. Good people, we were still growing, had some increases in productivity, but not a 4X increase in productivity despite the fact that our SG&A had gone up. Threefold. And that is happening everywhere.

• 10:30Scott Galloway?

  And that is there are companies, public and private, in the innovation, techie unicorn space, whatever you want to call it, that have grown their SG&A much faster than revenues. And that was okay for a while because our growth kind of got just such a dramatic multiple that even this kind of, I don't want to call it drunken, intoxicated, aggressive spending could be justified by an increase in valuation if you grew 60% year-on-year instead of 40%. So it made sense to throw money and people at the problem. It no longer does. So we've laid off some people. What we got right, we started thinking about this a while ago and recognized it early. That's one thing about being an entrepreneur for the last 30 years is I could just smell it. We've overhired. We're not getting the efficiencies we're supposed to.

• 11:14Scott Galloway?

  We're going to see, we're going to see a decrease in demand. We're seeing all of these ad tech firms and all of these overfunded consumer companies overspend for customer acquisition online. We saw our cost of customer acquisition absolutely explode. We're competing against everyone from Coursera to Netflix to MasterClass, who will spend 1,500 bucks on Instagram to acquire a consumer. That's just not sustainable. And we sensed it, we saw it, and we moved on it. The faster as an entrepreneur you move to right-size the company, the more generous with them you can be, and the faster you can get to being in kind of fighting shape and moving forward. So in failure, there is learning, and I am trying to learn from my failures, what I got wrong, what I got right.

• 12:02Scott Galloway?

  Stay with us. We'll be right back for our conversation with Ian Bremmer.

• 12:09Scott Galloway?

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• 12:54Scott Galloway?

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• 13:09Scott Galloway?

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• 14:30Scott Galloway?

  Welcome back. Here's our conversation with Ian Bremmer, the president and founder of Eurasia Group, the world's leading global research and consulting firm and author of several books, including his latest, The Power of Crisis: How Three Threats and Our Response Will Change the World. Ian, where does this podcast find you? I am back in New York City and happy to be home. Nice. So I saw you on Bill Maher and then I just saw that you were in Davos. So Davos, question mark. Your observations and insights about the most recent gathering where they kind of go into, or at least reportedly go into a room and redraw the maps of the world?

• 15:07Speaker 03

  Yeah, well, you know, like, like everyone says about those sorts of meetings. Um, but it, it is a confab of folks that hadn't seen each other for two years. So in that regard, people were very happy to see each other. Um, secondly, no Chinese, uh, I mean, a very small delegation because of the zero COVID problems that continue and, and literally no Russians, literally not one, uh, because, uh, they were banned.

• 15:32Scott Galloway?

  They were disinvited, right?

• 15:34Speaker 03

  Yeah, that's it. Uh, they said, that's kind of like Wimbledon, uh, without the tennis. And, uh, it was, it was weird. It was weird to attend a Davos that felt like everyone was on one side of an issue. It's not usually that. It's usually a whole bunch of different perspectives and alignment on stuff, but also, uh, I mean, not a melting pot, more like just a confab of people bouncing off each other, doing their own thing. When it came to the most important topic, uh, in Davos this year, there was only one side to stand on and the Ukrainian delegation was massive. I spent a lot of time with them. Uh, there was deputy prime minister was there, a bunch of ministers were there. I spent time with the mayor of Bucha, where all of those war crimes, uh, were committed.

• 16:18Speaker 03

  The mayor of Melitopol, who had been kidnapped by the Russians and then was let go, his hands shook throughout the dinner. I mean, this is a, this is a thoroughly traumatized group of people and spending time with them individually, um, you know, has a real impact on you, frankly.

• 16:35Scott Galloway?

  So I'm curious to get your take. When I heard that, that, uh, Klauser decided, Professor Shaba decided not to or disinvite the Russians, I thought, that doesn't make any sense to me. Uh, the, I've been to Davos three times as a, as a much younger man. And I thought the magic of Davos or the value add was it, it brings people together to try and casually or formally have some sort of dialogue. And you don't really, I mean, a dialogue amongst Western nations who are, like you said, are mostly in violent agreement. What's the point? I mean, it's, okay, I shouldn't say that. There is a point, but it seems to me the value add is when we get people who don't agree together to talk about this stuff and maybe think, okay, maybe there is some common ground. It just felt so contrary to what Davos is supposed to be. What are your thoughts?

• 17:19Speaker 03

  I, I think Klaus was very torn. Uh, he talked about it, uh, with me, uh, about the importance of bridge building and how much he hoped that the Russians would be able to come back in the future. But, you know, I think it's a combination of the fact that the actions that the Russians have taken in the last few months are just beyond the pale, the war crimes that they're responsible for, the regime is responsible for. And I think in that regard, welcoming the government, welcoming sitting government officials was just considered a bridge too far. Uh, but beyond that, I, I, I think it's that almost all of the corporate stakeholders at the World Economic Forum, CEOs that pay the bills were way out ahead of the government

• 18:04Speaker 03

  saying, we just can't do business in this place because the consumers were saying, we can't do business in this place. And I think in that regard, the level of pressure to say, sorry, we're just not letting anyone in. We're not taking any money from any Russian businesses. We're not going to be seen in any way in profiting from tickets that they're buying. Because let's, let's be clear, a lot of the Russians that have participated in Davos in previous years are very well-heeled Russians. Um, they're oligarchs that have a lot of parties and they spend a lot of money. And I think that the message that that would have sent this year would have been very, very badly received indeed. The, the, it was interesting. I mean, the, literally the first evening I showed up, I'm walking down the promenade and you'll remember that, right?

• 18:47Speaker 03

  On the way from your hotel to the Congress Center and where the Russia House has always been, where they branded, instead it said Russia War Crimes House. And it had been rented out, uh, by a Ukrainian businessman and had these Ukrainian artists narrate, um, a, uh, you know, a, a space, an experience that, uh, displayed, um, exactly what the Russians have been doing on the ground in Ukraine for the last hundred days.

• 19:18Scott Galloway?

  You know, just hearing you articulate that, I've now changed my view because as I think about it, just hearing you. Immediately described their rationale, I immediately thought, oh, I see it now. FT has an article that Lukoil party, you know, while, you know, images, contrast images of what's going on in Mariupol or whatever with pictures from Davos of these Russian oligarchs parting with Western leaders. It just would have been, there just would have been so many bad looks that would have come out of Davos uncontrollably. And just hearing you talk about it, I now see that it was probably the right decision. It would have just been the land of unintended, unfortunate soundbites, pictures, images for everyone involved. It just wouldn't have, wouldn't work.

• 20:03Speaker 03

  First of all, I completely agree with you on that point, Scott. But I mean, to do a couple of counterfactuals, if they had invited a few of the Russian business leaders and they showed up and tried to throw an event, no one would have come, number one, I think, to be clear. I think the, if you, the only move they would have had would be to invite some government leaders and try to help broker some of the conversations that Antonio Guterres, the SecGen and the Turkish President Erdogan and the French President and the German Chancellor are themselves trying to do. And of course, the danger with that is the likelihood that you invite them and they all say, I'm not showing up to your Western confab where all Ukrainians are, is fairly high. And then you have egg on face.

• 20:47Speaker 03

  So I don't think that was a good move for them here.

• 20:50Scott Galloway?

  Yeah, it seems like a hundred percent. So we'll come back to Ukraine and the Russian invasion. I'm curious, so what, outside of that specific topic, what were the major themes and observations around, you know, what was different about Davos and the general viewpoint mood mentality being presented there?

• 21:09Speaker 03

  The mood was negative. I'd say about 75% of the corporate CEOs expect a global recession in the coming year.

• 21:19Speaker 03

  Um, more broadly than that, this is, keep in mind, this is a group, Davos is a group that is almost to a person relentlessly committed to the pursuit of globalization. The idea that more goods, more services, more people, more data, faster and faster across borders is a good thing, in some ways, an almost unalloyed good thing. Um, and there is a lot of pushback against that, a lot of pushback against that around the world, and a lot of trepidation among the group that some of the challenges globalization have experienced are going to be really hard um to redress.

• 22:02Speaker 03

  And I mean, Russia's a piece of that because it's the first time in history that you're literally ripping a G twenty economy out of doing business with the advanced industrial world. And and we've seen news on that just today around the oil boycott that's coming on Europe. But more broadly than that, the United States and the Chinese and the decoupling that's occurring um in the economic interdependence between the two largest economies. And then more broadly, just this whole idea of, you know, my country first, whether it's India and grain uh exports being cut off, or it's wheat, uh or it's Indonesia and it's palm oil, increasingly, we're hearing about rice and a cartel coming out of Southeast

• 22:47Speaker 03

  Asia. I mean, uh, the the Americans and our challenges with infant milk. I mean, everywhere you look, we're finding different governments that see that there are advantages to in-sourcing, friend sourcing, and and being generally anti-globalization. And those are all messages that just rub the WEF crowd, the Davos crowd, the wrong way. So I would say that tension, that that fundamental tension and questions of where it goes, I think is uh was kind of core to every conversation you were having. Okay, maybe not the crypto bros there, who just think that government goes away and they're just going to be dominant, just a question of what time it is when it happens.

• 23:32Speaker 03

  But for everybody else, I think that was connected in some way with the global economy, um, that that was pretty core.

• 23:39Scott Galloway?

  I think the example of where Davos got it wrong so far is I remember them talking about the power of capitalism and then but country and I bought into this when countries trade together they're less likely to go to war with one another and Germany pursued this policy of getting very intertwined from an energy standpoint with Russia and it seems like it was just absolutely the wrong move. So I wonder if this if you if you will that Davos globalization narrative has just the current feeling is between supply chain interruptions between interdependence that has not lubricated alliances it hasn't brought us closer together what it's done is created more systemic risk in the pursuit

• 24:22Scott Galloway?

  of lower costs and I'm curious one is that is that an accurate depiction right now of what's going on and two do you think that that is that is a cyclical feeling that slowly but surely we will go back to globalization and recognize the benefits which are enormous in terms of I don't want to call it progress but prosperity or that in fact we are seeing a reversal this is a structural shift?

• 24:45Speaker 03

  Well, the first question's a lot easier to answer and I guess you planned it that way, right? Is is is that yeah, the Europeans definitely understand that they made a big strategic mistake the Germans first and foremost understand this in in just how willing they were to accept cheap energy and get dependent on it from Russia. There wasn't enough diversification it could be cut off and and it it allowed the Russians to feel like they had political leverage over Europe to get away with actions that the Europeans

• 25:25Speaker 03

  find intolerable. And so now they are working as fast as humanly possible to unplug that. They've largely done it on coal. On oil, the Hungarians have stuck in their heels and said, we don't want to be a part of it. But still, by the end of this year, the agreement that you've now seen the Europeans announced yesterday, 90% of European oil.

• 25:50Speaker 03

  From Russia gonna be cut off. And that's billions and billions of dollars, right? Of cost to the Europeans and of damage to the Russian economy. And then gas by next winter, by this coming winter, probably a majority of the gas will be diversified too. So, I mean, a very quick move to unwind, but an immediate recognition that this just didn't work the way anyone assumed it was going to. This is now gonna be painful because frankly, we didn't listen to the Americans. One of the things that I've heard from the Trump administration, the former Trump administration, they're very loud about is that, you know, they were the ones that were yelling hard at Merkel, saying, "Stop this with Nord Stream 2.

• 26:32Speaker 03

  Stop this with, you know, you're willing to throw your lot in with the Russians. You can't trust these people." And this is, keep in mind, this is the same President Trump that personally liked the strong man Russian leader. And the Trump administration was right about that, right? So, that's, that's an interesting point. It's definitely counter the Davos narrative. It's counter the Europeans' peace dividend for the last thirty years. That's all kind of gone away. The broader question of whether globalization is now, you know, sort of done for, I would say it's shifted trajectory. Because globalization, Scott, is one big thing. It's been for fifty years, it's this relentless driver of we're going to open markets and we're just gonna drive a lot of prosperity.

• 27:17Speaker 03

  And that, that of course, has happened. There's been a lot more growth. That growth has certainly accrued to the top one percent and to the multinational corporates and the shareholders of them. But it's also accrued to a global middle class. And, you know, one of the things I was most irritated by, Thomas Piketty, when he wrote that book on Capital, was he was talking about how the middle class was getting screwed. And and he wasn't talking about the middle class. He was talking about Europeans and Americans, who in the context of the world are actually quite wealthy.

• 27:51Scott Galloway?

  Yeah, yeah.

• 27:52Speaker 03

  Right? And he just, he just completely ignored that in his narrative as a French economist, which kind of pissed me off. Um, but leave that aside, there is not a decoupling that is now unwinding globalization. There's instead a few different places where you're unwinding some of the, you're fraying some of the ties of globalization, but they're limited. So if you look at the Russia decoupling from the advanced industrial economies, it's not a Russia decoupling from the global economy at all. We're not making Russia into global prior. We're not making them into North Korea. They're doing more business with India. They're selling more oil to China. Uh, Brazil, I mean, the developing world acts wants none of it. They want, in fact,

• 28:37Speaker 03

  the developing world largely blames the West for the food prices and the sanctions, as opposed to the Russians for invading Ukraine that led to those sanctions, in part because they're just generally more aligned with other developing countries and feel like the West screws them and only asks for help when it's expedient at the last minute. Um, on the US-China thing, there's definitely an unwind happening in areas where the US and the Chinese define uh national security interests, and those things overlap, but they're not identical. But in many areas, other areas of the economy between the US and China, a lot more business is happening and companies are investing more and they're going to invest more over time.

• 29:17Speaker 03

  And then finally, when you look at all of this protectionism, it's a tax, it costs money, but there's a real pushback from the business interests and the elites inside all of these countries that stop it from moving too far, too quickly. So I I would say that it the the trajectory of more and faster globalization that had no break on it over the last fifty years, that has definitely shifted, it's turned. But I I wouldn't say now it's the end of globalization, not at all.

• 29:51Scott Galloway?

  I'm gonna throw out some theses and I want you to tell me where I got it wrong or right here. So Marx was right, that he, he thought that if in a dollar-driven capitalist economy, that the prosperity, the well-being, the temptation of developing economic power would supersede the, the well-being of the Commonwealth and the people and would lead to bad places. And here we are, essentially, Europe is funding the war, at least until recently, sending a billion dollars to Russia while Russia invades Europe. Because at the end of the day, what Europe has decided is our economic growth is more important than what's happening in the Ukraine. That's how I see it.

• 30:34Scott Galloway?

  Isn't this an example of how the idolatry of the dollar and capitalism is failing?

• 30:40Speaker 03

  Yeah, I guess, that's interesting. I, I didn't know where you were going with that at the beginning. I, I guess I disagree with that, because I think the Europeans have gone so much further in willing to take real cost than anyone would have expected. I mean, first of all, if you had asked, if the Americans were as dependent as the Europeans are on Russian energy, would we make a decision to move us...

• 31:07Scott Galloway?

  We would have said thoughts and prayers. That would have been...

• 31:10Speaker 03

  I mean, I'd like to say we'd do something, but I'm, I'm really glad we don't, you and I don't have to ask the American public that question. And, you know, and frankly, you know, I, I write about this a fair bit in my book. I talk about the, the power of crisis. I talk about the idea that actually the Russian crisis has mobilized a much more united Europe, a much stronger transatlantic relationship, a, a willingness to spend on defense on the Europeans as opposed to just looking, expecting the Americans to do everything for them. And also a more expanded NATO than, than you ever could have done with the pressure from Biden, or Trump, or Obama, or anybody else. Like, it's Putin that finally got this done.

• 31:55Speaker 03

  And sometimes, when institutions are just eroding a little more and a little more every year, you need a geopolitical crisis that just whacks you in the face and says, "Okay, now you're gonna pay attention to this." And then, and then countries, governments, and other leaders start paying attention. I, I would give the Europeans a much better grade. So far in the response to this crisis now, whether or not that will still be true in six months' time and 12 months' time, when Ukraine is still occupied, maybe annexed, when there's a lot more pain that continues to be taken on by the European consumer, and they're sick of it, and it's out of the headlines, that's an open question.

• 32:37Scott Galloway?

  It already feels as if, I mean, based on what Kissinger's comments, that they should, that Ukraine should be, or Ukraine should be willing to give up some land. It almost seems as if the West, and I've seen some articles on this, that are, are tolerance, that we're already getting wary of this, that we just want it to be over, even if it means appeasement or acquiescing to some, or rewarding this type of behavior. Do you sense that? I, I was shocked to see in the last week, some sort of, uh, this notion that we might be supportive of some sort of negotiated settlement that quite frankly gives, gives Putin, uh, saves face, if you will.

• 33:15Speaker 03

  So, um, the Ukrainian president, of course, pushed back against Kissinger as hard as humanly possible, the Ukrainian delegation did, to a man and woman. Um, but I think that what Kissinger said publicly, a majority of Germans, French and Italians in their administration would support privately. Um, now, that's very different from saying that they would get there publicly, because the Ukrainians have won the war in information, at least so far. And that does give them agency. I mean, Kissinger's perspective is, a country like Ukraine has no agency. So it's just going to be a decision made by the Americans, the Europeans and the Russians. And Kissinger's not right about that.

• 33:58Speaker 03

  I mean, the reason that the Ukrainians are still here, the reason their government exists is because the Ukrainians fought courageously, because their president was out there making the case and convincing the hearts and minds in countries around the world, getting the, getting the corporates to all leave Russia. And that then, in turn, moved the governments more than they otherwise would have. So the idea that everything is decided by this realpolitik, hard power considerations, that was more true when Kissinger was Secretary of State, but that was 100 years ago. Right? I mean, give or take. So, um, I, I don't think Kissinger's quite right about this, but I think the issue of war fatigue.

• 34:41Speaker 03

  Is a real one. And what I see happening now, we just got forty billion dollars approved by almost all the Democrats and Republicans in the Senate. That's a lot of money. It's more than the White House asked for. The White House asked for thirty-three billion, which was basically how much is it going to take to fight this war for five months? And backfill the weapons systems that the East Europeans provided to Ukraine that the Americans said we'd pay for. And then the Republicans said, now we want three billion more for defense. And then the Democrats said, no, if you're going to do that, you have to do three billion more for humanitarian. It got to forty. So, I mean, we're tripping all over ourselves, giving the Ukrainians more. I don't see that happening again.

• 35:22Speaker 03

  You're already starting to see some pushback more from the Republicans than the Democrats saying, why are we spending all this money out there? Why do we care about it? Why are we antagonizing the Russians unnecessarily? If Trump gets the nomination, there'll be much more of that. This last round of sanctions from Europe was harder to negotiate than any of the first five, which went pretty quickly. And I think the seventh will be harder than the sixth. So I wouldn't say that we're unwinding the pressure on Russia. In fact, I think that the forcible punishment of Russia, those sanctions are not coming off, not at all.

• 36:03Speaker 03

  But I think the ability to do more, to say more offensive weapons systems from America and tougher sanctions against Europe, I think the next few months, that's going to, we may have hit the tipping point on that. And if you combine that, here's the critical point, Scott. For the first three months, the Russians have been losing militarily. Now, the Russians, they've narrowed their focus immensely. So they've given up on a lot of their big aims, at least for now, but they're starting to take more territory on the ground in southeast Ukraine. So if you combine a little bit of, not in the headlines, with a little bit of the Russians are doing better militarily. And I don't know if you read that Washington Post piece this weekend.

• 36:47Speaker 03

  About the Ukrainian military not doing so well in southeast Ukraine, some desertion, some bad morale. First piece I've read like that anywhere in the West in a major newspaper. That could start to change the way we look at the war and and could allow Putin to start to say, I've outlasted these bastards. I can now get what I want on the ground in Ukraine longer term, and I need to turn towards what I'm going to do about my position vis a vis the West more broadly.

• 37:16Scott Galloway?

  So another thesis, and I might be parroting some of your comments from our last pod, that if you look at COVID and you look at the Russian invasion of Ukraine, America is the big winner. That we're we're food and energy independent. So while we might see prices go up, we're not really going to be in a position of real desperation. We're not going to see food shortages. We're not going to, we can control our own destiny. We're a food exporter, net food exporter, net energy exporter. When it comes to COVID, we have the best vaccines in the world. People say the iPhone is the best product in the last 50 years. No, it's not. It's it's vaccines and we hands down have the best vaccines. Isn't despite our internal problems, which are enormous geopolitically, aren't our pieces

• 38:01Scott Galloway?

  on the chessboard right now better positioned than anyone else? I look at China losing power. I look at Europe. Aren't we the winners here?

• 38:09Speaker 03

  I mean, God, yeah. And by the way, so I got this, I saw this post from Jack Dorsey from Twitter yesterday, saying, when did the United States lose? When and how did we lose our global reserve currency status? What's he talking about?

• 38:26Scott Galloway?

  Dollar stronger than ever.

• 38:28Speaker 03

  Yeah, the dollar stronger than ever. Like, who's telling him this stuff? I mean, I understand people, there are a lot of people out there, they like crypto, they believe in crypto, they bought their NFTs. But but you've got to be smoking some stuff to think that the US dollar is falling apart. That's insanity. If you want to look out over the next 10 years, I can give you a scenario where I start to worry. And that scenario is if the Chinese are able to become dominant in some core technologies vis a vis the United States. Remember, ten years ago, Scott, no one thought they would achieve parity on things like smart cities and voice recognition and facial recognition

• 39:12Speaker 03

  and the digital economy. And they are at parity with many of those technological capabilities. If they can keep that going and suddenly China is the place you go for some of the core, most important technologies that run the global economy in a decade's time, and they can actually catch up meaningfully in semiconductors, then they might have some of the ability to open their economy, internationalize the R and B without risking so much capital flight, because they will have still political stability in that environment. And then the dollar might, you could see a path to the dollar starting to take a hit. There are so many ifs in that environment, and they are countered by all of the challenges of

• 39:56Speaker 03

  zero COVID, all of the challenges of massive indebtedness, of corporate bad debt, of demographic challenges, of China maxing their population by 2027. So many problems that China has with lack of productivity and efficiency because of state capitalism, because of the damage they're doing to their private sector right now. What we know is that the level of uncertainty around China in the next ten years is vastly greater than the level of uncertainty of other, any other major economy. And, and that's the only way that you could see the United States seriously with a counter. And by the way, whatever you thought about the US versus China, so many people said China was going to be the largest economy in the world by 2030. Well, I mean, given that this year, the US growth

• 40:41Speaker 03

  is probably going to be higher than China's growth for the first time in decades, you'd probably at least push that out for a few years. We'll be right back.

• 40:52Scott Galloway?

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• 42:00Speaker 01

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• 42:30Scott Galloway?

  Take us through the biggest winners and losers of the big economies, and then who are some unexpected winners and losers that we're not thinking about when we talk about COVID and invasion?

• 42:40Speaker 03

  Well, so I don't think that China is a big loser in the sense that China for the last two years has shown. That they are able to track and trace and lock down effectively. And they did grow in twenty twenty when no one else other than Vietnam did. And they have, you know, low thousands of deaths uh in their population and we have a million. And and that's something that they are proud of and frankly, to a degree rightly proud of that, you know, they respect. Uh, at least at the at the collective level, they're elderly and they're sick. At the individual level, very, very different story, given human rights and lack thereof in China. But the United States is a much bigger winner.

• 43:23Speaker 03

  Europe is a winner politically. They're not a winner economically, but the European Union comes out of Covid and Russia stronger. They come out of Brexit stronger. Um, there's just, you don't have the same euroscepticism, the same willingness to be anti-EU. Because you recognize that the most functional and strongest supranational governments that exists in the world today is necessary. It's necessary for security, it's necessary for redistribution of wealth. I mean, think about the way they responded to Covid. They basically said, we need a Marshall Plan for Greece, for Italy, for Spain, for the East Europeans. And it led those countries to believe in the EU more strongly. And they did that for vaccines, too.

• 44:08Speaker 03

  Took them longer, it was much less efficient than Operation Warp Speed. But once they got there, everyone in Europe got vaccines. The big losers here are the developing economies that aren't major commodities producers, so they don't benefit from that cash. They are getting crushed from high debt levels, crushed from higher interest servicing of that debt. Um, middle classes that are really angry because they're not living as well through the pandemic and not living as well now. Uh, I mean, as we said, the the unwind. Of globalization, uh, globalization's trajectory, the fact that you have now a lot

• 44:49Speaker 03

  angrier global middle class that have done so well for the last fifty years and now feel stressed. They are the ones that are yelling and screaming like hell, especially if they're badly run local governments. So Turkey is probably gonna have a financial crisis slash collapse by the end of this year. It's a big economy. They just can't take this. Uh, so look at the elections in Colombia. I mean, I, when's the last time in Latin America you've had an anti-establishment versus anti-establishment election like this, right? Where no matter who you vote for, it is just gonna be radical change from what Colombia has always had. Um, that's, that's gonna be very interesting to watch in the coming weeks.

• 45:30Speaker 03

  I think that there are a lot of countries like that that are gonna just get hit in the chin um, by and repeatedly, um, because you've had massive food slash commodities crisis on the back of two plus years of pandemic.

• 45:47Scott Galloway?

  So I want to touch on your book, The Power of Crisis: How Three Threats and Our Response Will Change the World. You talk about the notion that we are wildly underprepared to deal with uh, additional global health emergencies, transformative climate change, and the next technological revolution. So how did we end up here and i- if and what can be done such that we can have more coordinated global responses to these huge, uh, you know, existential threats?

• 46:20Speaker 03

  So Scott, we, we ended up here because we're in a geopolitical recession, right? And, and it's a term that doesn't really exist, but should. Because, you know, people recognize boom and bust cycles in economics. And when you have a bust cycle, we have a playbook and we know what we need to do with response. We have the, we have the, both the monetary and the fiscal tools and central bankers get together and Treasury Secretaries, finance ministers get together, say, let's give this a shot. Geopolitics has cycles too, but because they happen infrequently, because they're long cycles, we don't recognize them as such. But it's actually a very simple process. What happens is you create institutions.

• 47:03Speaker 03

  And when you create them, an architecture, they reflect the balance of power that exists in the world at the time. Now, over time, the balance of power shifts dramatically. But the institutions are sticky, they don't move. So, just a few weeks ago, you had the Secretary General of the UN say that the Security Council was broken. Why is it broken? Well, because Germany and Japan, the two economies that are most committed to multilateralism and rule of law, can't be allowed in because they lost World War II. And Russia, right, which is led by a war criminal, can't be kicked off because they won. That's a really stupid reason not to reform the Security Council. And yet it means it's broken.

• 47:45Speaker 03

  Well, that's not just true of the UN, it's true of so much of our international architecture. It's true of NATO, it's true of the World Trade Organization, it's true of NAFTA, on and on and on. So what happens is, in a geopolitical recession, your institutions are so far removed, they've become so obsolete and delegitimized, from the existing balance of power, from the priorities and desires, that the governments that matter on the global stage, that dominate international relations, now want. And so they break, they start to break. And when that happens, you get a lot more crises. And that, you don't like those crises, but the purpose, the point of my book is to say

• 48:30Speaker 03

  that in a geopolitical recession, the crises are also the tools that you use to strengthen, reform, and build new institutions. And we see that most obviously with the Russia war in Ukraine, but we also see that with climate change. And we have an opportunity for that with disruptive technologies. We largely failed with the pandemic. And we can get into all of that if you like, but that's, that's the basic architecture of the book.

• 49:01Scott Galloway?

  What would this institution or institutions look like? If we were gonna try and address those things and make real progress and get in great fighting shape, get ready for the next... The next big global disaster said, you know what? We have to just get in great fighting shape because the enemy's coming. We're going to dig the right trenches. We're going to get our armaments, the right technology, the right. We're ready. We're going to get ready this time. What would that look like?

• 49:26Speaker 03

  Well, it's not one global government and it's not one big institution. And fortunately, it doesn't need to be. I mean, I think what we're seeing is that there needs to be a lot more flexible geometry in our institutions on in terms of which actors and in doing what. That a response to climate change requires institutions with actors that are relevant for that, which is very different than a response to the Russian invasion of Ukraine. So I'll give you an example. Well, first of all, let me tell you what can't happen. So I I start the this book is not meant to be some idealist. Uh, let let's all come together and it's going to be fine. We just need to recognize that we have these problems because you've read my book. No, not at all. Um, I I I start the book with a recognition.

• 50:11Speaker 03

  Number one, that the United States is deeply politically divided and dysfunctional. We're the most powerful country in the world for all the reasons you and I just talked about. And in the next 10 years, we're not going to fix that. But I have a lot of things that I know that if we did the following things, we could become much better off as a government. We're not going to do those in the next 10 years. So let's take that off the table. Secondly, the US-China relationship is the most important globally in the world, and it is completely devoid of trust. That is not going to be fixed in the next 10 years. I can tell you things we could do that would make it more trusting. It's not going to happen. So let's take that off the table, too.

• 50:51Speaker 03

  What I'm saying in this book is that even given a persistence of a deeply dysfunctional US political system and US-China relationship, we can get this stuff right. We can actually respond, use these crises and respond to them to build more effective architecture. So I'll give you a few examples. On Russia-Ukraine, um, interesting to note that everyone says the war started on February 24th. It didn't actually start on the 23rd. Because that's when the Russians engaged in all the cyber attacks against Ukraine. And the interesting thing is the Ukrainians weren't the ones that first found out about it. Microsoft did.

• 51:30Speaker 03

  So the initial front in the war on Ukraine was actually in Seattle, Washington, Redmond. Um, and, you know, you've seen Elon Musk and Starlink and SpaceX. And you've seen Google, you've seen Microsoft and other tech companies are literally like aligned with Ukraine in fighting this war. The cyber side of this war, every bit as important as what's being done by the Germans and the French and the Poles and the Americans to provide military support to Ukraine. So, um, if you were to use this crisis to create a new 21st institutional framework to help ensure better national security.

• 52:13Speaker 03

  Well, one thing you would do, you, you'd ensure that the Europeans are spending a lot more on defense, they're doing that, check. Um, you'd want the Asians to be more involved, um, because we're talking about advanced industrial economies and this stuff is global, it's not just transatlantic. That's happening with the Japanese, the South Koreans, check, we can get into that if you want. But you'd also want multinational corporations that are core sovereign players in the cyberspace to be involved. And that's not happening yet in terms of the architecture, in terms of new institutions. But you could easily see how one could do that. And an opportunity for that, I think, exists today, especially because these companies

• 52:56Speaker 03

  are going to be seen as belligerents by the Russians and by others that are on the other side of the military industrial technological complex of the United States and its allies. So I can, there are other examples like that when you talk about climate, when you talk about the pandemic, and when you talk about disruptive technologies, get out, I, I don't know how, how deep you want to get into that, but the point is that these things are happening, they're actually happening now.

• 53:23Scott Galloway?

  Ian Bremmer is a political scientist and the president and founder of Eurasia Group, the world's leading political risk research and consulting firm, and G Zero Media, a company dedicated to providing intelligent, engaging coverage of international affairs. Ian, thanks so much, always really illuminating, and thanks so much for taking the time to do this.

• 53:40Speaker 03

  I always love talking to you, Scott, thanks so much, man.

• 53:53Scott Galloway?

  Algebra of happiness. Okay, so I've gotten a shit kicking in the market and that's the bad news. The good news doesn't really have any impact on my life. The first time I got the shit kicked out of me was in 2000 when I was supposed to, when I was literally looking at jets and overnight I wasn't. And at the same time, around the same time I got divorced, which was economically very stressful. And I went from being kind of a master of the universe, a, you know, guy in his late twenties, early thirties who was just killing it and going to Davos to somebody who was divorced, lonely and economically insecure. And that happened in about 12 months. It felt like it happened overnight, but it happened in about 12 or 18 months. The second time, as I referenced before, I got the shit

• 54:36Scott Galloway?

  kicked out of me in 2008. This time, yeah, I got beat up, but I'm fine. I was able to just kind of get up again. I'm, this correction has, you know, knock on wood, absolutely no impact on my life, no impact on my lifestyle. And so here's the lesson and something I want you to think about. Life isn't about what happens to you. It's about how you respond to what happens to you. And think about looking at paper losses or looking at thinking, oh gosh, I wish I'd invested in Doja Coin or I wish I'd sold my Doja Coin. Yeah, be bummed if it impacts your life, but don't be bummed about numbers on a piece of paper. Be thoughtful about them. Be thinking about your financial security, diversify, all that good stuff.

• 55:20Scott Galloway?

  Find talent, live below your means, all that good stuff. But don't beat yourself up too much about the shit you can't control. Markets go up, they go down. Your life most likely, based on this market correction, probably really isn't going to be tangibly much different or even any different. And worry about the stuff you can control. Forgive yourself. Yeah, you're not the genius you thought you were when Bitcoin was at $62,000, but you're not the idiot you're worried that you are right now when it's a lot less than that. Life isn't about what happens to you. It's about how you respond to what happens to you. Our producers are Caroline Shager and Drew Burrows. Claire Miller is our associate producer.

• 56:02Scott Galloway?

  If you like what you heard, please follow, download and subscribe. Thank you for listening to the Prop G Pod from the Box Media Podcast Network. We will catch you next week on Monday and Thursday.

• 56:20Speaker 03

  I think it was a Chinese company that was trying to buy Grindr, right?

• 56:24Scott Galloway?

  I think, I thought they did.

• 56:26Speaker 03

  I don't think they did. I think it was actually prevented for a national security purpose. And, you know, I expect it was like, let's make sure that they can't go after Lindsey Graham.

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