Pod Insights The Prof G Pod with Scott Galloway State of Play: Supply Chain & Logistics — with Hamid Moghadam About this episode Hamid Moghadam, the CEO of Prologis, a logistics real estate business, breaks down how warehouses have evolved to meet the demand for speedy deliveries, how the pandemic expedited trends in the supply chain space, and how a booming era of e-commerce is driving this sector. He also reflects on his career path as an Iranian-American and a leader of a nearly $90 billion company.
Scott opens with Snap’s investments in augmented reality and explores how the broader social commerce space is shaping up as social media companies battle it out for shoppers’ attention — and wallets.
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Transcript 10,606 words · 8 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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1:32 Scott Galloway? Episode 71. The atomic number of lutetium, a silvery-white metal which resists corrosion in dry air but not in moist air. On October 1st, 1971, Disney World officially opened "I'm Taking My Kids to Galaxy Edge." Huge Star Wars fan. In fact, I named my dog Leia. My daughter Chewbacca loves the name. She loves the name. Go, go, go!
2:03 Scott Galloway? Welcome to the 71st episode of the Prov G Show. On today's episode, we speak with Hamid Moghadam, the CEO of Prologis. Prologis, Prologis, Jesus Christ, Hamid, get a better fucking name, a logistics, real estate business. By the way, Hamid Moghadam, I have known Hamid for 25 years. He was one of my clients when I started a company called Profit, a brand strategy firm in San Francisco. And this guy is literally one of the biggest brains, not only in real estate, but in business, and also a very soulful person. He's really thoughtful and I've always thought of him as someone who's just exceptionally, I don't know, in touch with his feelings. I don't know what the term is. Anyway, someone we can all learn from. He captains a company that is a juggernaut.
2:45 Scott Galloway? Currently, the flow of goods flowing through their buildings or their warehouses represent 2.5% of global GDP. There's a stat, there's a stat. We discussed with Hamid the state of play in e-commerce, supply chain, and logistics, including the value of office space obstacles that big box shopping centers face and big tech's role in this sector. Okay, what's going on out there? We're taking a look at Snap and more specifically, all of the commotion around augmented reality and social commerce, which by the way, the global AR retail market size is expected to reach 12 billion by 2027. What's happening with Snap? First, let's look at the user base.
3:26 Scott Galloway? The company announced that Snapchat attracts a half a billion monthly active users. Previously, the company has only ever released data on its daily user base, which was up 22% in April compared to a year earlier. Just for context, a half a billion monthly active users is less than Facebook's 2.9 billion users each month and TikTok's 690 million, but more than Twitter's 350 million and Pinterest's 460 million active users. So it's sort of the tallest of... I don't even call it a tier two. If you think of Twitter and Pinterest and Snap, Snap's kind of the best of the sorry lot, tallest midget. Sure, somebody's triggered. Anyway, speaking of Pinterest, the company said that the platform conducts 5 million
4:11 Scott Galloway? searches per month. That's 150% increase over the last five years. In addition, in addition, the number of searches by Gen Z pinners, Gen Z pinners, I'm starting a band called the Gen Z pinners, has increased 31% over the last year. So, back to Snap. Last week, they announced a number of new product developments and tools for creators, including its fourth gen spectacles, or as I like to refer to them, a prophylactic, as no one will get near you, which have built in augmented reality displays, cameras, and microphones. The Verge reported that the glasses are only available to an undisclosed number of AR effects creators through an application program online. So this is interesting. They're not going to be on consumer with these glasses. They're trying to create something
4:55 Scott Galloway? interesting or a tool to enhance their creators' creativity, I guess. Snap CEO Evan Spiegel said on Kara Swisher's podcast, Sway, that's right, she has another podcast, she has another podcast. Anyways, Spiegel explained that the spectacles are tailored towards creators who are, in his words, more forgiving when it comes to wearing clunky glasses in exchange for better battery life, better processing, or hand tracking. You hand track with your glasses? I'm not sure what that means. I don't know. He said he thinks it's another 10 years before the technology is advanced enough for consumer adoption of AR glasses, or put in other words, before the glasses don't make you look like you're cosplaying a Star Trek character. Remember LeVar Burton? Good to see that he was working. I never,
5:38 Scott Galloway? never really got into Star Trek. Once Star Wars came along, boom, Star Trek kind of became secondary. Sort of like dogs. I love dogs, but once I had kids, a lot of that affection kind of got wrapped up in the little humans and the dogs had to take a backseat for a little while. When I say a backseat, I mean, they still sit in the front seat. They just don't get to control the air conditioning and the radio. The kids get to do that now. Snap also announced various developments around social shopping taking place within the Snapchat app, and the company is staying on the trend of AR. They're introducing AR Tryon experiences and API-enabled shopping lenses. It seems like Snap is doubling down on AR. The virtual fitting room market size is expected to reach 15 billion by 2028. So what's going on here?
6:21 Scott Galloway? We're essentially entering the shopping wars and the companies who can capitalize on the AR, VR modes of commerce are going to take the lead, or at least they're going to signal innovation, which gets them a cheaper access to cheaper capital and then they can then reinvest that capital and pulling the future forward. Shopify said last September that interactions with products having 3D AR content showed a 94% greater conversion rate than for products without AR and 3D. I find that data suspect, like frankly, I find it suspect. Anyways, in addition to AR and VR leading the way in the shopping wars, the fast fashion and secondhand markets are also major accelerators in the retail space. I've said before that secondhand retail is likely going to blow past fast fashion and
7:06 Scott Galloway? we've been seeing that play out for the past few years. Think about second wealthiest family in Europe is the, is the folks that started Inditex or Zara. So think about there is going to be incredible wealth created in the resale market or the used or secondhand, whatever the right term is. According to Thread Up, the total secondhand market is projected to grow to almost twice the size of fast fashion by 2029 and reach a market size of 80 billion. Oh my gosh. So it seems like getting into the secondhand market, if you're one of these people that's sort of destined or cursed to be in retail. I love retail. I'm on the board of Panera now, I was on the board of Urban Outfitters, I started a company called Red Envelope. I just love retail. God, what a shitty business. It's like, instead of calling it retail, they should call it a million ways to fuck
7:51 Scott Galloway? up. You got real estate, you got people which are messy, you got, it's capital intensive and then you have to merchandise and have the right stuff and the stuff has to come together and connective tissue to communicate a voice. There's just a million ways to screw up in retail. Anyways, supposed to reach 80 billion by 2029. If you're going to be in retail, I would say, I would say the secondhand market is kind of where you want to be, or the sector of that sector you want to be thinking about. It's evident that Snap recognizes this trend, given their new partnership with Poshmark, a popular buy and sell fashion platform. Poshmark currently has a market capitalization of 3 billion and the new shopping experience on the Snapchat app will be called Poshmark Mini. Well, isn't that precious? Isn't that just, isn't that just adorable?
8:36 Scott Galloway? Anyways, Poshmark Mini. P-men. P-many. This will essentially allow Snapchat users to shop on Poshmark without leaving the app and attend posh parties, which are virtual shopping events. Okay, so in sum, in sum, I've always thought that VR was a giant head fake. It's one of the technologies I hate, along with wearables, 3D printing. That's my favorite. That's my favorite, right? We won't have manufacturers anymore. We'll just pour some goop into something and make a propeller or make a refrigerator. I've just never bought it, other than outside of some very niche application. I was at the dentist this morning. I'm thinking about getting new veneers. Too much information? Too much information? Why? Why?
9:19 Scott Galloway? I'm on a desperate mission to be less likely. I just signed up to do a TV show, and whenever I'm on TV, I can't focus on what I'm saying. All I can focus on is, Jesus Christ, when did I get so fucking ugly? And I think that new veneers are going to solve that problem, although we may be, we may be taking a BB gun to a gunfight when we're talking about improving this hot mess. Anyways, don't know how I got here. Don't know how I got here. In sum, let's back to AR, VR. VR, that still doesn't make any sense to me. My kid has that Facebook thing, whatever it is. He's tried, does it a few times. I do it, I get sick, it ends up in the closet. AR, though, AR, though, it feels to me, holding up your phone to an apartment building that looks cool when you're looking for an apartment and seeing which apartments are
10:02 Scott Galloway? available and how much they cost, feels to me like AR could do a lot of interesting, a lot of interesting applications, and this might be one of them. But VR, anything that involves a distinct piece of hardware, there's only, at the end of the day, there's only one wearable that works. Only one. It's called your iPhone. And people will say, what about the Apple Watch? That's not a watch. It's a second screen for the most successful wearable in history. You guessed it.
10:30 Scott Galloway? Your iPhone. So some other bigger trends in social shopping in the e-commerce market. The pandemic obviously served as an accelerant here. According to Statista, global e-commerce sales reached more than $4 trillion in 2020. Oh, that's serious cabbage. And guess who's leading the e-commerce space? You're probably gonna say, oh, Amazon. Nope, China. Sales through mobile devices make up 60% of the e-commerce market in the country. With all these transactions taking place on phones, social commerce is booming, and not just in China. Bloomberg reported that social commerce accounted for 44% of Southeast Asia's $109 billion e-commerce market last year. In Vietnam, social commerce made up as much as 65% of its $22 billion online retail economy.
11:15 Scott Galloway? And back to our point about fast fashion, serving as an accelerant. Shein, a Chinese B2C fast fashion e-commerce platform, recently surpassed Amazon, that's right, bigger than Amazon, as the most downloaded shopping app in the iOS App Store. The larger learning here is we're seeing a battle play out for shoppers' attention, especially among the social media apps. How do you incorporate commerce into social? How do you incorporate it into AR? It does seem as if there's a war on the store, that the store is either going to turn into some sort of a warehouse, or a place where you go to get customer service. I've said for a long time that people no longer go to the store for products, they go for people. So unless you're offering some sort of crazy experience, or great customer service, someone
12:00 Scott Galloway? in a blue shirt who can help you navigate to the right flat-screen TV, or you're going to Sephora when you're bored and they put on Tea Tree oil that gets rid of those dark circles under your eyes, not that I know anything about that, not that I know anything about that, you're kind of screwed, because eventually AR and social and all these other things are going to somewhat replicate the in-store experience and add other features that allow for anonymity. I bought my first thing off of Instagram. They served me up some of these cool on-tennis shoes that make me feel, I don't know, European, kind of sexy. By the way, I like both those things, and I'll pay a lot of money to fill those things, because it's not easy to make the dog feel either of those things. Anyways.
12:45 Scott Galloway? So we got a battle for the shopper's attention. It is a gross attention economy. ByteDance is expanding its in-app purchasing capabilities and plans to handle more than 185 billion of e-commerce annually by 2022. That would include transactions from Douyin, its Chinese-only version of TikTok, which brought in, get this, 26 billion of e-commerce transactions in its first year of operation alone. The company's international version of TikTok, the one that traps us on our phones for hours, I just, I just, I gotta admit it, I'm just addicted to TikTok. I'm more addicted to that algorithm, which knows me better than I know myself. I like to see other people getting adjusted by chiropractors. I did not know that. I did not know that. Anyway, TikTok is currently testing in-app sales in Europe before launching a global
13:30 Scott Galloway? e-commerce service. Oh, gosh, that could be crazy. Think about that. Global, Algorithmic Commerce, Acom, Global, TikTok. Gosh, can I buy stock? Can I buy stock in the talk and the tick? Okay, what does all this mean? All this talk around social commerce and AR? Consumers don't want choice. What they want, what they want, is what they want. Success will be defined by taking the friction out of helping consumers wade through choices and get to what they want. And this is a form of merchandising. It's a form of making it easier to accessorize and bring voice to things and get recommendations. That's why we're seeing soaring numbers around virtual fitting rooms, live shopping experiences, and the creative partnerships coming from Snap and TikTok, tools that take the friction out of the shopping experience. And we're also seeing companies take advantage of the gross attention economy.
14:15 Scott Galloway? And that is if Snap can capture a ton of your time, it can forward integrate into e-commerce, as can TikTok. I think it's only a matter of time, something I've been very excited about, and I tried to brand it Acommerce or Algorithmic Commerce. I think at some point, the TikTok algorithm is going to be able to merchandise products and video of those products, videos of my favorite new bathing suit, or I'm thinking about buying another surfboard. And I bet the TikTok algorithm is going to figure that out before I do and then start merchandising cool videos of people who are my age but look much younger and cooler and happier on their new surfboard available here. Just click and it's on its way. In sum, all of this will mean more goods flowing through e-commerce and increase the
15:00 Scott Galloway? demand for same day and next day delivery for easy returns and other logistics capabilities. You are seeing, you are seeing, and this is why I wanted Hamid Mogadon, the CEO of Prologis, to come on the show. Supply chain, supply chain is where the needle gets moved the most in terms of stakeholder value. And what I want you to do is think about your product, your service, and map it out from the moment the client or the customer, the consumer is drawn into the store or the website, if you're B2B, and what happens across every moment of the supply chain. And we have a tendency to focus on the moment of interaction with the consumer, the delivery of the product, the in-store experience. But where a lot of the value has been added is around the supply chain, whether it's Apple opening new forms of distribution stores.
15:45 Scott Galloway? Amazon, I think, is mostly a victory in supply chain, in addition to turning all their expenses into revenue sources. But supply chain, the boring stuff, it's amazing how much stuff has changed. When I started Red Envelope in 1997, it was just a cost center, it wasn't an opportunity, it wasn't a place for innovation. And we rented a warehouse on the Kentucky-Ohio border where we could pay people nothing and they were drug tested. And the idea was what is the cheapest per package cost we could manage without thinking, all right, get off your heels and on to your toes, which is what the better e-commerce players have done and said, how do we surprise and delight consumers by getting them their products two weeks, a week, four days, two days, 48 minutes? And how do we create more sophisticated supply chain?
16:30 Scott Galloway? How do we offer them greater selection, greater speed? But map out the supply chain for what you do or your core business and say, where are the opportunities that no one's looking at? Where can we zig and zag? Where can we make investments that will ultimately benefit the end consumer but might not be as obvious? Anyways, we'll be right back for our conversation with Hamid Mogadon. Stay with us.
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19:31 Scott Galloway? Welcome back. Here's our conversation with Hamid Mogadam, the CEO of Prologis.
19:40 Scott Galloway? Okay, Hamid, let's bust right into it. So I've always said, or I think that it's the boring stuff that moves the needle in terms of shareholder value. And it feels like it's been supply chain. It has really added a ton of shareholder value in logistics. Walk us through some of the importance of location, the demand for space, and how technology and demographics are transforming retail in the supply chain.
20:04 Speaker 03 You know, supply chain has come from the bowels of corporate America in the last couple of years into the forefront for two important reasons. One, there's been some unexpected disruption because of COVID and other geopolitical and physical phenomena, earthquakes in Japan, et cetera, that have created disruption in the supply chain. And that's sort of reinforced the importance of supply chain, and particularly strategic importance of supply chain for leaders of businesses. And the other thing is the emergence of e-commerce that has really accelerated and has made issues of service levels, time,
20:45 Speaker 03 choice in products really important. So it's increased the complexity of supply chain as a discipline. And those trends, we're just seeing the beginning of those trends. I think they'll continue for a long time. So all of a sudden, supply chain is at the forefront of everything. And our business is the real estate that supports the supply chain. So as a result of that, we've been pulled into this whole discussion. And frankly, 10 years ago, nobody really cared about warehouses or distribution facilities or anything like that. In fact, even real estate people didn't consider it a legitimate asset class. But of course, it was because if you look at
21:28 Speaker 03 Productivity gains in the economy in the last fifty years, most of them can be attributed to improvements in supply chain. But again, it was in the background. It's sort of like the processor on your computer. That's the last thing you think about until it stops working and then that's all you think about. So that's what we've really been through, just to look at the recent history. Now, what are the important trends? There are two, and I think I would argue there are only two important trends. One is, everybody wants their stuff faster and faster, and certain companies, Amazon included, have really raised the bar on that dimension and other people have had to chase them.
22:12 Speaker 03 And the second is a choice and variety. I mean, you may have wanted your blue jeans in one size and one color, or at least in one color or one type, ten, twenty years ago, but now there are fifty thousand varieties and choices that you can have. And all of, and those two things, the need for speed and the desire for lots of choice has created a lot of complexity and a lot of ways of actually creating competitive advantage through supply chain. That's why it's important.
22:43 Scott Galloway? So talk about, loosely speaking, if you were to use the term warehouse, talk about how warehouses have changed in the last two decades in terms of where they're located, the size of them, the technology inside, what, you know, how have warehouses evolved?
22:58 Speaker 03 So the word warehouse is where you wear your goods historically. And I actually have had a different way of thinking about it. It's where you store your mistakes. If you really think about it, you have things being made in a manufacturing facility and they're being consumed by the end consumer and in between there are a whole bunch of other things, including many warehouses, retail stores, all trucks, you know, trains, boats, all kinds of things. But ultimately, if you had perfect knowledge about where things were going to be consumed and when. And how things were going to be produced, you would never have a warehouse because you wouldn't have any mistakes. The warehouse would be always moving.
23:44 Speaker 03 It would be on a ship, on a boat, on a train, on a plane. So really warehouse was a concept for buffer. Uh, and um, that role has really, really changed because now uh warehouses are really not tied that much to the manufacturing side of the business, but to the consumption side of the business. So location of where your warehouses are located becomes important all of a sudden because you're not optimizing for cost of putting your warehouse in the middle of nowhere in a low cost location. But you're really optimizing for service levels by being near consumers.
24:23 Speaker 03 Locations of manufacturing move all the time, uh, based on tax policy, trade policy, you know, labor costs in various markets and the like. But the thing that doesn't really change is where the consumers are and where the ultimate consumption uh takes place. Those things are very slow changing. Uh, you know, the population of the L A basin at around, uh, you know, whatever, thirty million people, twenty five million people is gonna be there for a long time. So being located on a near sources of consumptions is what uh the new warehouse is all about. So that's the most important characteristic is uh, is the location.
25:02 Speaker 03 And not so much from a traditional real estate point of view, but from accessibility point of view to the, to the end consumer. Obviously warehouses have gotten bigger because now you don't have to have a bunch of warehouses that are in every corner or every neighborhood, at least not until five or ten years ago. That's changing because of e-commerce, because inventory is coming closer in. So warehouses are sort of becoming bifurcated. You've got the really large ones where you store a lot of units, a lot of variety and choice. And then they're coming in close, uh, the so-called last mile. We call it last touch actually because it's not the last mile. But that's the functional equivalent of retail stores.
25:47 Speaker 03 So basically, the middle is falling out, things are getting really big, and then things are getting really small, and what we call infill. And that's how you maintain service levels and choice. You get your choice through the big warehouses, where you can carry a bunch of different goods, and you get your immediacy and access to consumers by having these infill last mile locations. That's how the business has evolved. And of course, over time, there's more and more technology deployed in these warehouses because knowing where something is is really, really important now. Knowing where it is in the warehouse, so you can pick it, knowing where it is on the truck when it's being delivered to you, so you can track it.
26:31 Speaker 03 So it's much higher information content than the old traditional warehouse of the past.
26:39 Scott Galloway? And how has the inside changed? In terms of the ratio of technology to people, are there fewer people, more people? Technology-enabled people? Is the cost of building the warehouse of the future much greater? I used to think of it as just kind of a tilt-up, where you just kind of store things for a little bit. But the warehouses I've been in recently seem pretty sophisticated. They feel more like something out of a Blade Runner movie.
27:04 Speaker 03 Yeah, there are more people working in warehouses today, and there's more technology deployed in most warehouses today, or at least in the cutting-edge warehouses. Now, more people is kind of the opposite of everything else, right? Everything else is getting automated, and there are fewer people. And technology usually goes against more people. But the nature of stuff moving through a warehouse is very different, whether it's going to a store or whether it's coming to your home. So just imagine this. If you're buying the headsets that you're wearing, and you're buying them through your favorite electronics store, those headsets were in a bunch of boxes. Those boxes were stacked on a pallet.
27:47 Speaker 03 That pallet would get loaded into a truck. That truck would go to your favorite electronics store and drop off a case of these headsets. And that meant that there weren't that many people required to work in the warehouse, because they had to move pallets around. Today, if you want to buy that warehouse and you buy through e-commerce, that individual box with that individual headphone has to get packed in a box that comes to your home with a lot of packaging material, one at a time. So instead of pallets, you're talking about parcels. And parcels are much more people and space intensive.
28:30 Speaker 03 Because you gotta, again, pack them up in boxes, send them around. You need a lot of conveyors to get them around to people who are going to pick and pack them in the warehouse. And you need to handle returns. Because a lot of stuff that's being bought through e-commerce is returned. It's the wrong size, it's the wrong fit, you don't like it. All of that stuff needs to get processed back into the warehouse. And that's a very space-intensive activity. So your headphones going through, and I'm using your headphones as an example, you can almost take any product, but your headphone going through a bricks and mortar channel, if it takes one unit of warehouse space, the same headphone going through e-commerce channel takes three units of warehouse space.
29:14 Scott Galloway? And so we talk a lot about the dominance of the tech platforms. How does Amazon's dominance, one and two e-commerce dollars, how does that ripple back to the supply chain? Is it, is it difficult to have one player in the ecosystem that's so powerful negotiating for a warehouse or logistics? Or is it that rising tide, they've grown the market and it's just good for everybody and there's a diverse ecosystem? What's the impact of Amazon's dominance on another key player in the ecosystem such as Prologis?
29:47 Speaker 03 Well, the warehouse business has gotten much better in the last five years. I don't know if it's directly attributable to Amazon or anybody else, but the fact that e-commerce has become an extra tailwind on warehouse demand has been a, has been a really good thing for the industry. But there's another thing going on that's been really good for the industry too. And that's been supply limitations. Today, if you want a warehouse near a population center in LA, and that warehouse is a giant, call it a million-foot, half a million-foot warehouses, warehouse? You need forty to eighty acres of land somewhere near L.A. Where are you going to get forty to eighty acres of flat ground in L.A. to build a building on?
30:30 Speaker 03 So there's a real limitation on how many of these you can build. So you have not only the demand curve shifting up, but the supply curve shifting down. And that's created improved pricing. And e-commerce has had a lot to do with it. And as a big player in e-commerce, obviously, Amazon has had to do with it. But at the end of the day, they don't make more real estate in the middle of population centers. So locational differences between warehouses has become much more important. It's almost the warehouse has become the shopping center. You care about the number of people within a certain radius and the number of dollars within their pocket, because that's the way it functions. So it's been good from both the supply and the demand side.
31:14 Speaker 03 And as these communities are getting more and more affluent, they are becoming more and more anti-growth. So it's harder and harder to get the entitlements necessary to build these warehouses. So you have land limitations. We talked about that. You have entitlement limitations. And you've got economic limitations, because the price of land and steel and concrete and everything else is going up. So there's a lot of pressure on the value or on the rent that warehouses need to generate to justify the construction of the next warehouse.
31:52 Scott Galloway? So I think of the first building I ever worked in was 1251 Avenue in the Americas. I was an analyst at Morgan Stanley right out of UCLA. And it was this eighty-story building, very nondescript. And as you think about the value and the valuation of warehouses continues to accelerate. And it strikes me that the value of certain retail and certain commercial real estate or office real estate continues to decline. At some point, do those lines cross? Can you envision a day where at some point the cost of converting to residential is just too great? And if the destruction in office space continues or lives up to half of what people think it might be, can you see someday a big building in Midtown or in some of these urban centers being converted to kind of a, quote-unquote, "smart" warehouse?
32:38 Speaker 03 Yeah, but not not in a huge way because there are a couple of lines that you need to cross before those economics make sense. I'm not the best person to talk to about what's going to happen to the value of office space. I have my theories, but they're uninformed theories. But let's assume that they're not going to be.
32:56 Scott Galloway? That was so politically correct. You probably are the best person to talk to. You just don't want to insult your colleagues at your big REIT steak dinners. Come on.
33:05 Speaker 03 I don't remember when the last big steak dinner I had, much less with a REIT peer. But anyway.
33:13 Scott Galloway? Let me hear Hamid Moghadam say it. Office space is fucked.
33:18 Speaker 03 I think some office space, I think some office space is in big trouble, but I think some other office space will actually do pretty well. So I don't think, I honestly, I'm not, I'm not trying to be diplomatic here. That's the last thing I would do. But I really think it will, it will matter. I mean, the office space, the commodity office space will be, will be in trouble. But my own theory about office space is that I think instead of working five days a week at the office, most people will end up averaging three to four days a week at the office. And that, that argues for maybe a 15, 20% reduction in demand. And for a business that's growing one and a half percent a year, one, one and a half percent a year, that's 10 years of demand. So it can't be good for the average office building,
34:01 Speaker 03 but it can be good for certain kinds of office buildings in certain locations. Here's a, but here's the answer to your question. I, I think if the office building value is up here somewhere, and I know you can't see me, but up here somewhere, and the value warehouse is down here somewhere, the value appreciation is in the warehouse is going to be upward sloping to the northeast at the pretty steep curve, at least if it's located in the right place. And the value of the office building that is not located in the right place is going to decline in the southeast early direction. And those lines will cross somewhere. Okay, depending on the market. But those are not the two important lines.
34:41 Speaker 03 The important line to watch is what is the line of the value of the office space plus the capital you need to put into it to make it work as a warehouse? And there are some office buildings, like your 80-story example, that by the time you get to the 80th floor, you waste too much time. So that's never going to be a warehouse, or at least the top of it is never going to be a warehouse. Too expensive, too inefficient. And there are going to be some offices that can very easily be converted to warehouses.
35:15 Scott Galloway? Is there a chance that Sears or some of these bigger, big-box retailers could, that Amazon or somebody or you could just come in and just, and say, "We need to reinvent these as warehouses"? Is that a potential safety net for some of these big-box guys that are going, what, going away?
35:31 Speaker 03 The answer is yes, in theory, but there are some real obstacles that you gotta, you gotta cross. So let's take those one at a time. First of all, your Sears store is usually part of a shopping center. That shopping center is put together with a series of legal agreements called reciprocal easement agreements and called about continuous operation agreements. These are all legal understandings between the owner of the shopping center and between the various tenants that limit operations of that store within that center. And it's kind of like unraveling a sweater. If you pull on the, on the, on the string,
36:14 Speaker 03 you can't just pull that, that anchor out of there and have an intact shopping center. So it's not a matter of just dealing with that box, but it's dealing with the box as encumbered by all these agreements that define the relationship between these various boxes in the shopping center. So that's one obstacle. Obstacle number two is economic. That shopping center was worth X. The warehouse can only pay Y, Y being a lot smaller than X. And to get to Y, you've got to spend a lot of money. So the owner has to give up on the value. The lender has to give up on the value. You've got to go through a lot of pain before you can get to a value where you can convert it to warehouse space and make money at.
36:58 Speaker 03 The third obstacle, the municipalities relying on those property taxes that the retail store generates. A warehouse doesn't generate nearly as much property tax. So they're going to be reluctant to allow you to convert it to logistics industrial warehouse use. And finally, the neighborhoods. I mean, the traffic, the trucks, the diesel and all that. People don't want those in their neighborhood. So locationally, that makes sense. But there are a lot of pesky, practical limitations on how you can take one of these retail stores and convert them to an office, to a warehouse. Will it happen? Yes, we've studied this issue deeply.
37:43 Speaker 03 We think that's going to account for somewhere between 2% and 5% of incremental supply of warehouses over the next five or 10 years. Very small incremental add, but some add. We've looked at, without exaggeration, hundreds, if not thousands, of these opportunities. And we're doing three because of all these rental limitations.
38:07 Scott Galloway? Let's talk about Amazon. They've forward integrated into media. They're now producing original content. A lot of cable companies. There's been incredible verticalization across retail where a retailer backward integrates into private label or a manufacturer's brand forward integrates into retail. Is there a verticalization about to happen in your industry? Where I'm headed is why wouldn't FedEx or UPS as a defensive move against Amazon? Or why wouldn't Amazon come in and buy Prologis? Isn't there going to be just up and down? Somebody offering kind of like all of it?
38:43 Speaker 03 So Scott, you may not remember this, but you asked me that same question in 2001.
38:50 Scott Galloway? I don't remember. I don't remember.
38:52 Speaker 03 I remember because I haven't talked to you since 2001 probably or whatever. But, but you actually asked me that question. First of all, I'm not the right person to answer that question. You gotta go ask them. But, first of all, our market cap is bigger than FedEx. So I don't think they're likely to buy us.
39:08 Scott Galloway? Yeah. Okay, you buy FedEx.
39:10 Speaker 03 Why would I want to buy with FedEx? I understand my business and they understand their business.
39:14 Scott Galloway? Okay, well, I'll answer that question.
39:16 Speaker 03 I like our business a lot. I have to worry about 2,000 people and we have almost a $90 billion market cap. Why would I want to have, you know, 50,000 people and all these issues that go along with it? We got a good business, thank you.
39:29 Scott Galloway? Do you, okay, let me, let me answer that. Is Amazon an existential threat where they start going vertical, buy real estate? And you decide, I want to be in the services business. I want to be full stack and I wanted to go to the actual last mile and be a quarter. And why do you want to buy it? Because you're Hamid Moghadam. I met you when you were running a $90 million REIT. Now you're running a $90 billion REIT. You want to do a quarter of a trillion dollar REIT because we're all afraid of death and want relevance. So why wouldn't you go buy FedEx or why wouldn't Amazon buy you?
39:58 Speaker 03 Amazon would not buy us for a very simple financial reason. The ROI in our business is much lower than the way they're being valued.
40:05 Scott Galloway? That's a good point.
40:06 Speaker 03 Being valued on the street. I don't know what their multiple is, but they gotta be crazy if they can control the same real estate with leases to, uh, to use their cost of capital to substitute it for our cost of capital. I, I would say the same thing probably applies to UPS and FedEx because, uh, first of all, our size is too big. And, and secondly, uh, their ROI is, is generated or is increased by being in an asset light model as opposed to an asset, a heavy model. So it probably financially doesn't make sense for them to, to buy it. Our investors hold our stock, uh, with different expectations that they would own a tech stock with really high growth prospects.
40:47 Speaker 03 People own our stock because of, uh, dividends and a sustainable growth rate across the business cycle.
40:54 Scott Galloway? Coming up after the break.
40:57 Speaker 03 I'm a big believer in the softer side of leadership skills than in just, you know, what is the optimized decision that you make based on some linear program somewhere? The world doesn't work that way. It's all about relationships and it's all about, uh, how you connect with people.
41:15 Scott Galloway? Stay with us.
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42:58 Scott Galloway? I would love to know, when I met you, I think you were in your late 30s and it started to reek. And I would just, you know, I know a little bit about you, but not a lot about you. Can you talk about, a little bit about your story? You're now, you're now literally the king of warehouses. I don't know what the term is, but.
43:16 Scott Galloway? Can you talk a little bit about, I know you immigrated from Iran, is that right?
43:20 Speaker 03 Well, yeah, I actually, I'm an unintentional immigrant. I actually came from Iran to the US in the 70s, like a lot of Iranian kids did, to get educated here and then return to Iran, which was a very dynamic, happening economy, sort of growing 6, 7, 8% a year. And what happened is that, right when I was graduating from college, the place blew up and I decided to take a couple of years and see if the politics was going to change. So I ended up going to business school on the West Coast and ended up staying out here in the situation there.
43:56 Scott Galloway? You went to Stanford where you're a trustee now, right?
43:59 Speaker 03 I went to Stanford Business School and I'm no longer a trustee, but I was a trustee for 10 years.
44:05 Speaker 03 But I actually went to school back east originally before coming out here. So I ended up out here and started the real estate business. I always wanted to be in the real estate business. My dad had been in the real estate business in Iran and that was always appealing to me from being a young child. And that's how I got into the business, but it was a heck of a time. I mean, I graduated from the GSP in 1980 when interest rates were 22% and the economy was in a recession and they had just grabbed the American hostages in Iran. So a guy by the name of Hamid Mogadon wasn't going to have really great job prospects in real estate or any other industry at that time.
44:47 Speaker 03 And so I had to, you know, find, start my career working for, actually, one of my professors, who was in the real estate business. And then a couple of years after that, we started the company that became AMB and then ultimately became Prologis.
45:03 Scott Galloway? Yeah, and people don't remember this. I think it's worth talking about it for a moment. I remember in the 80s during the hostage crisis, there was very severe...
45:12 Scott Galloway? Bigotry or an anti-Iranian sentiment in the US. I mean, it was it was pretty severe. I remember being in Westwood and walking down and one of the entertainment establishments there, like a dance place, put out a sign that said, no Iranians allowed. And the police came and took it down. But I mean, it was a pretty ugly time to, I would imagine, to be an Iranian immigrant in the 80s. You know, we forget about that, or at least I, you know, speaking to you, brought that up. I imagine, I mean, did you feel a lot of that, starting a business? I don't mean to lead you here.
45:48 Speaker 03 Actually, you know, honestly, I didn't. I think once people got to know me and and sort of knew that I wasn't a terrorist, I wasn't going to blow them up or anything like that, and I was just trying to make my way in this country. I would say this was the most supportive country in the world that I could have possibly immigrated to. I mean, a lot of my contemporaries ended up in Europe and UK and France and other places. And I got to tell you that the prospects for those of us who were fortunate enough to end up in this country ended up being a lot better than almost anybody anywhere else in the world. So notwithstanding all our, you know, issues in this country, that we have many of, this
46:33 Speaker 03 has been a great country for starting a business, starting a life, and I'm very proud to be an American. And I'm equally proud to have been an American coming from Iran. Iran is a Iran is not what people think of Iran on TV. That's just a very small group that's creating that impression.
46:51 Scott Galloway? That's a that's a nice sentiment. It's nice to hear you say that. So you you you've had kind of, you've been in the helm of the bobsled for the economy for the last 20 years. You literally see the flow of goods. Coming out of COVID, and you can you can address societal, political, economic, real estate, any thoughts or trends you see around how the world's going to change post COVID?
47:16 Speaker 03 Yeah, I think in a lot of the habits that we picked up during COVID are going to stick, not all, but they all are, many of them are going to stick. I think e-commerce penetration is going to increase. I think logistics is going to be more about resilience and less about efficiency. I think we're going to end up carrying a lot more inventory around the system to try to be prepared for just in case as opposed to just in time, which is the way we ran our business for a long, long time. And you know, you've heard this a hundred times, so I'm sure there's no incremental value by my saying it. But I think a lot of the trends that were in place have just gotten accelerated. I, I'm, look, take our own company.
47:58 Speaker 03 I had literally drag out fights with some members of my management team about working from home. They were totally opposed to it. I really didn't care where you work from, as long as you got your job done and all that. But they've actually come around to my point of view, to their credit, because of what's happened and, and what it takes to attract really good people to the company and, and, and all that. So as long as we're pretty, as long as you're a good boss and you're clear about your expectations and you have good people, trust them, let them work from wherever they are. Measure them by not FaceTime or input, measure them by output. And I think that one is going to stick, for example.
48:42 Speaker 03 Not for everybody, not for every job, but, but it's going to stick. So I think a whole generation of people over sixty or seventy that were afraid of turning on a computer and shopping online, I mean, not all, but some, are now, you know, addicted to e-commerce. So that's a whole new cohort that's come into the marketplace that wasn't there before in, in a big way. By the way, one other thing that has changed that I, I just want to say this, and maybe I'll get in trouble with your audience for saying this, but I think it has become very fashionable for corporate leaders to speak about societal issues and political issues and all that. And again, I get pressure internally.
49:24 Speaker 03 To speak about a lot of those issues and I feel very passionately about many of those issues, but I honestly don't think it's the job of business leaders to take those kinds of political positions, speaking on behalf of their company. I think it's appropriate to do it on behalf of yourself if you want to do it. And it's appropriate to do it if there is something you can do as a company to address it. For example, hiring a certain cohort of people or creating job opportunities or whatever, which we're doing. But, but I think just to be out there using the corporate soapbox to, to convey your own political beliefs. I, I just don't think that's the right thing to do.
50:07 Scott Galloway? I feel like there's a little bit of a backlash, kind of the, I don't know if you read the Shopify CEO's memo, but it feels as if a lot of people are deciding that, okay, you know, if you're a CEO and you take a political stand, it does put some pressure on employees to take a political stand. And a lot of people just want to go to work and use it as a platform to create economic value or economic security, but.
50:29 Speaker 03 That's, that's where I am. You said it better than I would.
50:32 Scott Galloway? So when I, when I think of Ameen Moghadam, I think of you successful professionally, but I think of you as a successful person that you seem pretty, I don't know, self-aware, pretty self-actualized. So advice, advice to your 25-year-old self around professional and personal opportunities.
50:52 Speaker 03 Take more risk early in your career. Don't care about what you get paid. Care about what you learn. Don't care about the job that you have. Take, think about the quality of the organization you're joining and the quality of the boss you're going to be working with and how much you can learn from them. And if you work for a good organization and a good boss, you'll figure out the right way of wiggling, wiggling yourself to the right job. That's, that's less important. Also, I would say people, you know, we go through years and years of school and people tell us how to make decisions. It's if you really think about business school or engineering
51:32 Speaker 03 school or whatever, it's all about how do you optimize? How do you make decisions? How do you use a decision tool or, you know, decision tree or something like that? I've never done any of that in my entire professional life. I don't know why I spent so much time learning about that stuff. I think the stuff that's really important is people. I really mean it, is how do you motivate people? How do you connect with them at some kind of human level? And, you know, you know, leadership is all about building trust with people. And I'm, I'm a big believer in the softer side of leadership skills than in just, you know, what is the optimized decision that you make based on some linear
52:17 Speaker 03 program somewhere? The world doesn't work that way. It's all about relationships and it's all about how you connect with people and meeting them at their own level and whether it's higher, lower, sideways, or whatever.
52:32 Scott Galloway? Hamid Moghadam is chairman and CEO of Prologis. In 1983, Hamid co-founded the company's predecessor, AMB Property Corporation, and led it through its IPO in 97, or 1997, as well as its merger with Prologis. I'm sorry, its acquisition of Prologis into 2011.
52:48 Speaker 03 Merger vehicles.
52:48 Scott Galloway? Yeah. Merger vehicles. There you go. There's never an equal. I don't buy that. Anyways, he's been a board member since the company's inception and serves on the board's executive committee. He joins us from his home in San Francisco. Hamid, it is great to reconnect with you. Congratulations on all your success.
53:03 Speaker 03 Thank you, Scott, and I hope we can stay in better touch in the next couple of years than in the past.
53:18 Scott Galloway? So I was watching a clip from Naval on, I think it was the Joe Rogan Show, and he said that every person has two lives and the second starts when you realize you only have one life. My hygienist is dying and she really struck a chord, or this news sort of struck a chord. I find this woman just inspiring. She was trained as a classic, or classically trained in dentistry. Can you be classically trained in dentistry? And I think it was the DR and then moved to the US and became a hygienist. And I just remember, I was just so moved by the kind of discipline and light she brought to her
53:57 Scott Galloway? job. And she was just incredibly professional. My mouth is just literally a shit show. And she would literally sit me down and tell me what I needed to start doing and she would reprimand me. And she was just so outstanding what she did and brought such commitment and was such, so optimistic. And turned what was a fairly, you know, not an experience I look forward to. I started getting my teeth cleaned every three months because I just found the experience, you know, good for me. And I enjoyed it because this woman just brought so much professionalism and optimism and joy into what she did. And I've been thinking a lot about her. I think she's in her 50s and is very sick. And these things,
54:41 Scott Galloway? as you get older, you unfortunately get to know more and more people who are sick and that you lose. And it does give you a chance, it does still you. Part of the upset you feel is your own fear. And what I've been trying to do is translate that fear into perspective. And that is thinking about, okay, we all face that. The mortality rate is 100% for our species. What isn't 100% is perspective. And finally, at an older age, you know, I do realize and I recognize the finite nature of life and I credit my atheism. Atheism has been a tremendous source of perspective and joy for me.
55:25 Scott Galloway? It motivates me to take pause and recognize that, one, time is going faster than I'd ever anticipated, that that end is an end, and I believe that is the end. I don't believe I'm going to meet up with everybody. I don't believe I'm going to hang out with an invisible friend and see my mom and all my other buddies. And I don't know, I'm trying to think of famous dead athletes and hang out with Babe Ruth. And I don't think that's going to happen. I think I'm going to look into my boy's eyes and know that our relationship is coming to an end, and I find it very motivating. And the advice I would give to young people is I think it's healthy to imagine the end or imagine the near end. And that is if you found out this was it, that you were sick and you were going to be around
56:10 Scott Galloway? for three months, six months, 12 months, I don't want to say how you would change your life, because I'm not encouraging that anyone just quit their job and head off to Tulum for the next six months. By the way, I was just in Tulum and I met a lot of those people. But decide what is really important to you. Decide what you would say to people if you found out that the end was nearer than you thought. Because whether the end is in three months or in 50 years, you know, time is just a function of change. That appointment is on all of our calendars. And one thing you do get as you get older is you get perspective. And specifically, you get the courage to start telling people how much they mean to you.
56:52 Scott Galloway? You get the courage to not sweat the small stuff and realize what's really important in life. And I also think you get the courage to be kinder, to start thinking about others, realizing the greatness is in the agency of others. And that your impact here and your relevance is a function of the impact you have when you're not in the room. And you know, the greatest echo is kindness, if you will. So if you don't have that perspective, or you're in your 20s and 30s and 40s and still think you're immortal. I think it's very useful to take a moment and say, okay, what if I was that person? What would I say to people? How would I equip myself? What would change in my life in terms of my emotions?
57:36 Scott Galloway? What I would think about people? What I would worry about? Where I would devote my energies? And ask yourself, should I just get there sooner rather than later? This is an appointment we all have on our calendar, and it's going to happen for all of us. Use it to your advantage. Develop the perspective, and the perspective you get from that, it's not fear, it's liberating. And it almost involves the same things and the same decisions, and that is to be more forthcoming with your emotions, to do a better job expressing how much people mean to you, and to start living the life you want to lead, not the life that others want you to lead.
58:12 Scott Galloway? Our producers are Caroline Shager and Drew Burrows. Claire Miller is our assistant producer. If you like what you heard, please follow, download, and subscribe. Thank you for listening to the Prop G Show from the Vox Media Podcast Network. We'll catch you next week. And one quick note before we go. An upcoming Office Hours theme is innovation, and I'm going to have someone who was influential in my academic career join us to answer your questions. Dr. Sarah Beckman teaches innovation at UC Berkeley's School of Business and will be teaching an upcoming sprint at Section 4 on innovation. Professor Beckman is a widely regarded expert on the topic, so send in your questions on innovation to [email protected] . Professor Beckman was voted best professor my second year in business school and is now teaching at my online ed startup, Section 4,
58:57 Scott Galloway? which is exceptionally rewarding for me on a number of levels. Anyways, send in your questions to [email protected] for Professor of Innovation, Dr. Sarah Beckman.
59:16 Speaker 03 It became an office building. Who knows? Maybe 10 years from now it will become a warehouse if there is anybody left in San Francisco.
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Previous Office Hours: eBay’s Brand Bust, VC Geography, Public Service, and Home Buying Advice Next Amazon Unbound — with Brad Stone Page updated October 26, 2026 · transcript and summary are machine-generated
